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Operator: Good morning, and welcome to Getty Realty's 3Q '25 Earnings Call. This call is being recorded. [Operator Instructions] Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker. Joshua Dicker: Thank you, operator. I would like to thank everyone for joining us for Getty Realty's Third Quarter Earnings Conference Call. Yesterday afternoon, the company released its financial and operating results for the quarter ended September 30, 2025. The Form 8-K and our earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made during this call are not based on historical information and may constitute forward-looking statements. These statements reflect management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2025 guidance and may include statements made by management, including those regarding the company's future operations, future financial performance or investment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2024, as well as our subsequent filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of today. The company undertakes no duty to update any forward-looking statements that may be made during this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of adjusted funds from operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer. Christopher Constant: Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the third quarter of 2025. Joining us on the call today are Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will lead off today's call by highlighting our quarterly financial results, tenant performance and recent investment activity. Mark will then discuss our portfolio investments, and Brian will provide additional details on our earnings, balance sheet and the increase in our 2025 AFFO per share guidance. Getty had another productive quarter, resulting in more than 10% year-over-year growth in our annualized base rent and a 5.1% increase in our quarterly AFFO per share. This performance was supported by the continued health of our in-place portfolio of convenience and automotive retail properties, which is essentially fully occupied and producing both durable rental income and stable rent coverage. For the trailing 12 months, rent coverage for our tenants that report site level financials was consistent at 2.6x. This reflects steady performance from our convenience store portfolio and a third consecutive quarter of increased rent coverage from our Express tunnel car wash assets. The latter is being driven by the maturation of new-to-industry sites and our operators' continued focus on profitability. Turning to our growth initiatives. We are pleased with our year-to-date investment activity and the platform's ability to source relationship-based sale leasebacks at accretive investment spreads. Notably, year-to-date highlights include investing more than $235 million, which exceeds our full year activity in 2024, expanding the breadth of our investment activity, in particular, by gaining traction in the drive-thru QSR segment, where we have acquired more than 25 properties across multiple transactions. We've also diversified our tenant base by transacting with 10 new tenants in 2025, and we continue to backfill our committed investment pipeline, which currently stands at more than $75 million under contract and can be funded without having to raise additional capital. In early October, we announced a $100 million 12-unit sale-leaseback transaction in the Houston market with regional community store operator now and forever. This transaction is representative of how our platform capitalizes on our knowledge of the convenience store sector to identify established growth-oriented operators and enter into long-term unitary net leases that provide strong reliable returns. Now & Forever is a privately owned regional community store chain with a cohesive network of sites located in densely populated Houston submarkets. Houston, as an aside, is a unique market, which is largely dominated by regional convenience store operators who have established best-in-class locations. While there are some national players, none have established a significant presence or a major share of the market. As part of this transaction, we worked with Now & Forever to select a portfolio of approximately half of their locations. These stores average more than 8,500 square feet and include substantial food offerings, many featuring drive-through food and beverage windows. The Now & Forever portfolio also includes a large-format convenience store also referred to as a travel center. As we've mentioned previously, certain of our tenants have been exploring these large-format stores that have all the consumer-facing attributes that we value, including a large selection of grocery and household items, multiple fresh and prepared food offerings, branded QSRs, large coffee and beverage presentations seating inside the store and drive-through lanes and also generate additional visits and income from commercial drivers and the services they use. We've evaluated several travel center opportunities in 2025 and including the Now & Forever property, have acquired 3 assets year-to-date at an average purchase price of $11 million at yields consistent with our overall investment activity. We continue to enhance our knowledge of this growing subsector of the convenience store space while cultivating relationships with operators to partner with on future transactions. We expect to selectively add travel centers that meet our underwriting criteria to the portfolio going forward. In general, our acquisitions team continues to do an excellent job of identifying new investment opportunities that fit our portfolio and strategy. We have effectively broadened our investable universe while maintaining the distinctive advantages of our platform, including our broad network of operators, thorough underwriting process and unmatched knowledge of the convenience and automotive retail sectors. As we think about the current state of our business, we continue to be excited about the platform we've been building here at Getty over the last several years. We've evolved significantly from our days as a Northeast gas station REIT by expanding our investment thesis, adding resources to our investment team, improving our access to capital and demonstrating that we can consistently deliver strong financial results while maintaining an investment-grade credit profile. And we've achieved this during a period of market disruption, uncertainty and volatility in both the transaction and capital markets. Looking ahead, we remain focused on acquiring well-located convenience and automotive retail properties leased to growing regional and national operators and leveraging our underwriting expertise, real estate selection and lease structuring capabilities to support our investment decisions and mitigate credit risks. Finally, I am pleased that our Board approved an increase of 3.2% in our recurring quarterly dividend to $0.485 per share. This represents the 12th straight year we've grown the dividend alongside our earnings. With that, I will let Mark discuss our portfolio and investment activities. Mark Olear: Thank you, Chris. At quarter end, our leased portfolio included 1,156 net lease properties and 2 active redevelopment sites. Excluding the active redevelopments, occupancy was 99.8% and our weighted average lease term was 9.9 years. Our portfolio spans 44 states plus Washington, D.C., with 61% of our annualized base rent coming from the top 50 MSAs and 77% coming from the top 100 MSAs. We received site level financial reporting from tenants representing 73% of our ABR and have additional visibility into 21.5% of ABR that is derived from publicly reporting companies. For rents, our rents for sites where we received site level reporting continue to be well covered with a trailing 12-month tenant rent coverage ratio of 2.6x. Turning to our investment activities for the quarter. We invested $56.3 million at an initial cash yield of 8%. The weighted average lease term on acquired assets for the quarter was 18.2 years. Highlights of this quarter's investments include the acquisition of 15 drive-thru QSRs for $18.4 million, 5 convenience stores for $19.4 million and 2 express tunnel car washes for $11.1 million. We also advanced incremental development funding in the amount of $4.5 million for the construction of 2 auto service centers and 3 express tunnel car washes. These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the project's respective construction periods. Subsequent to quarter end, we invested an additional $103.4 million, including the 12-site now travel sale leaseback transaction that Chris discussed, bringing our year-to-date total investment $236.8 million at a 7.9% initial cash yield. Beyond our disclosed pipeline of more than $75 million of investments under contract, the majority of which we expect to fund over the next 9 to 12 months and average initial cash yields in the high 7% area, we continue to source opportunities that are priced at accretive spreads and will be added to our portfolio as we look to further scale and diversify our business. Moving to our redevelopment platform. During the third quarter, rent commenced on one redevelopment property located in the Philadelphia metro area that is now leased to a Take 5 Oil franchisee. We invested $1.2 million in this project and expect to generate a return on invested capital of 11.6%. At quarter end, we had 3 signed leases for new-to-industry oil change locations, one of which is currently under construction and additional projects in various stages in our pipeline. Continuing with our asset management efforts. During the quarter, we sold 1 property for gross proceeds of $1.8 million. And year-to-date, we have sold 6 properties for gross proceeds of $5.5 million. With that, I'll turn the call over to Brian. Brian Dickman: Thanks, Mark. Good morning, everyone. Yesterday, we reported AFFO per share of $0.62 for Q3 2025, an increase of 5.1% over Q3 2024. For the 9 months ended September 30, AFFO per share was $1.80, an increase of 3.5% compared to the prior year period. A more detailed description of our quarterly and year-to-date results can be found in last night's earnings release, and our corporate presentation contains additional information regarding Getty's strong earnings and dividend per share growth over the last several years. Looking at G&A expenses, management focuses on the ratio of G&A, excluding stock-based compensation and nonrecurring retirement costs to cash rental and interest income. That ratio was 8.8% for the quarter ended September 30, a 30 basis point improvement over the prior year period and 9.7% for the 9 months ended September 30, a 10 basis point improvement over 2024. For the full year 2025, we expect to see an improvement over full year 2024 and anticipate this ratio will improve further as we benefit from continuing to scale the company. Moving to the balance sheet and liquidity. At quarter end, net debt-to-EBITDA was 5.1x or 4.6x, taking into account unsettled forward equity. We continue to target leverage of 4.5 to 5.5x net debt to EBITDA and are well positioned to maintain these levels going forward. Fixed charge coverage for the quarter was 3.8x. As of September 30, the company's weighted average debt maturity was 4.8 years, and the weighted average cost of our debt was 4.5%. As a result of our financing activity earlier this year, we have no debt maturities until 2028. During the third quarter, we settled approximately 1.2 million shares of common stock subject to forward sale agreements for net proceeds of $32.5 million and entered into new forward sale agreements to sell approximately 1 million shares of common stock for anticipated gross proceeds of $29 million. At quarter end, we had approximately 3.7 million shares of common stock subject to forward sale agreements, which upon settlement are anticipated to raise gross proceeds of $113 million. We continue to be in a strong capital position with more than $375 million of total liquidity at quarter end, including unsettled forward equity, availability on our revolver and cash on the balance sheet. We have capacity to fund our committed investment pipeline and incremental investment activity as we head into next year. We also remain focused on balancing the return of capital to our shareholders through our growing dividend and retaining free cash flow to support continued growth and long-term value creation. With respect to our earnings outlook, as a result of year-to-date investment activity, we are increasing our full year 2025 AFFO per share guidance to a range of $2.42 to $2.43 from the prior guidance of $2.40 to $2.41. As a reminder, our outlook includes completed transaction activity at the date of our earnings release, but does not include assumptions for any prospective acquisitions, dispositions or capital markets activities, including the settlement of outstanding forward sale agreements. Primary factors impacting our 2025 guidance include variability with respect to certain operating expenses, certain transaction-related costs and the timing of our anticipated demolition costs for redevelopment projects, which run through property costs on our P&L. With that, and with a moment for some of the background noise to clear, we will ask the operator to open the call for questions. Operator: [Operator Instructions] Our first questions come from the line of [ Daniel Behan ] with Bank of America. Unknown Executive: 15 out of 24 acquisitions were drive through QSRs. Could you provide your thoughts around the business as it relates to the health of middle to lower end consumer? Mark Olear: Yes. So we've been gaining momentum in the quick service restaurant as evidenced by the number of properties acquired over this last quarter. We have broadened our reach into that industry, developed a lot of relationships. We feel that the quick service restaurant concept is right in with the -- some of the macroeconomic pressures across the country, the price points that they offer, the quality of food, the convenience factor that we like and the automotive experience kind of all just fit our model. And we're going to continue to press hard to grow that as part of our efforts to diversify the portfolio. Unknown Executive: And then just separately, can we get more color behind the 3Q environmental expense adjustments? Should we expect additional adjustments going forward? Brian Dickman: It's Brian. For those that may remember, about 3 years ago, I think in 2022, we had similar activity at a much larger magnitude. I think it ended up being $23 million, $24 million, $25 million. But effectively, what's happened there is we determined that whatever risk we may have previously had available for environmental contamination at some of our legacy sites that, that risk has been alleviated and that falls squarely on our tenants at this point. And so as a result, we removed certain reserves that we had on the balance sheet around those environmental potential unknown environmental liabilities. And that's really the story behind those and very similar with activity we've had over the last couple of years. Operator: Our next questions come from the line of Mitch Germain with Citizens JMP. Mitch Germain: When -- how long does the engagement with now and forever, how long did that begin? And then basically the process ending with an acquisition? Is it a several year process to learn about their business and talk about the merits of your financing options? Christopher Constant: Yes. I think each transaction, the time line can be a little bit different. If you recall the last year, we spent some time down in Houston and did another portfolio transaction down there. So we spent actually a lot of time in that market. So we've got to know them as an operator. And this particular transaction, I think, was probably less than 6 months start to finish. But again, we've had certain opportunities, Mitch, just to be honest with you, where it's been years of getting to know somebody and underwriting potential deals, and we finally get one done and others that can be maybe faster like than now and forever team. So it really is a range. Mitch Germain: Great. That's helpful. And then maybe, Brian, if you could talk about for the back part of the year, obviously, you've got this $100 million transaction, another $75 million behind that. Maybe -- and I know you've got liquidity, but maybe discuss the funding plan in terms of maybe for 4Q and then as you approach growing that pipeline into 2026? Brian Dickman: Yes, absolutely. I mean you hit on the major sources there, Mitch. In the immediate term, as we do each quarter, we're typically funding investment activity on the line and then settling forward equity towards the end of the quarter to manage leverage and revolver availability. That's the same process and cadence we follow every quarter, so that won't be any different here. And then as you pointed out, we have additional equity beyond that. We have capacity on the revolver. We are generating more free cash flow each year as we continue to grow the platform and expand the company. And looking into certainly the early part of next year, looking into our pipeline, looking into the timing of when we think capital needs to be deployed, we feel very well positioned. And we'll assess additional capital sources as the pipeline further materializes and we time passes as we move into next year. Operator: Our next questions come from the line of Rob Stevenson with Janney Montgomery Scott. Robert Stevenson: Just to follow up on Mitch's question. Brian, no near-term debt maturities, but if you do more deals and want to move some debt off the line, what's your best source of debt today? And where is that pricing versus the line? Brian Dickman: Yes. It's a great question, Rob, because I think it is reasonable to assume, given the constructive debt markets that there may be an opportunity to term out some of that revolver balance. As a reminder, $150 million of that is fixed at 6.1%, the balance close with the line. We've been very active in the private placement market for well over 10 years. some great relationships there. So that would be the likely route. I would put forth that right now, on a new 10-year, we're probably in the high 5s all in, given where treasuries are and where spreads are. So call that 5.9% area, plus or minus is where we see new tenure today. Robert Stevenson: Okay. And then, Chris, the Board has been increasing the annual dividend by about $0.02 a share since late 2019. This year, they decided to do $0.015. Can you talk about the thought process they went through here to retain more cash internally? And arguably, the dividend yield was already high enough, how you guys sort of went through that process on the evaluation of the dividend this year? Christopher Constant: Sure. Yes. I think it's representative of the Board's view that retaining capital to help us grow and scale the business is critical right now. And we're cognizant of the fact that we've grown earnings and the dividend should follow that. But again, if we look to grow at scale, that's an attractive cost for us to be able to redeploy that capital. Operator: Our next questions come from the line of Upal Rana with KeyBanc Capital Markets. Upal Rana: Would you like to provide some details on how you're able to source the Now & Forever acquisition? And how do you plan to source even more of some of these travel center transactions in the future? Christopher Constant: Yes. I'll take maybe the first part, Mark, you can talk about travel center. But again, I think very similar to how we've grown in other markets over the years, Upal. Yes, we did a couple of transactions down in the Texas market at the end of last year in Q4. We are constantly trying to establish new relationships and build on our network, particularly in the C-store space. It is -- it's a large market, I'd say, just given the breadth of the Houston market, there's -- these sites happen to be in the western and southern areas of Houston. So they didn't really overlap with the deals we did last year, but really just relationship building. We're down there driving the market and got to know the Now & Forever management team and are happy to get that deal done. You can touch on travel center. Mark Olear: Yes. As far as continue to source travel centers, there's a number of opportunities. One is many of our current relationships and tenants that operate traditional convenience stores are branching out into the travel center sector and exploring ways to grow their business. So we have that had a built-in relationship to kind of grow that relationship. Secondly, there's the old fashioned business development, the trade shows, dedicated brokerage networks, deal advisers that are dedicated to the space. And lastly, what I'd say is there's about 5,000 in -- what we call in our profile travel centers in United States. The top 3 operators own about 30% of those units. So it's still a very highly fragmented industry, which typically is good for sale leaseback or those type of aggregators and consolidators use sale leaseback to help grow that business. We're making a lot of great inroads with those consolidators. We've got great early returns from kind of expanding our strategy early this year, putting a few deals in the close category. So we think there's a lot of opportunity for us to be active in that space. Upal Rana: Okay. Great. That was helpful. And then, Brian, maybe you could provide us with an update on the bad debt so far this year and what you currently have baked into your updated guidance? Brian Dickman: Yes, absolutely. As you can see from the collections and I guess, the lack of any other commentary beyond the Zips situation from the first quarter, which we had fully resolved by the end of the second quarter. There has been no rent collection issues this year. In terms of what's in that number, it's the typical kind of 15 basis points or so that we roll through down the quarterly number there. So that's really just math, but nothing specific and nothing has risen to any level of concern since Zips earlier this year. Operator: Our next questions come from the line of Wes Golladay with Baird. Wesley Golladay: Sticking with the tenant health, are you seeing any more an uptick in request to substitute assets in your master leases? Christopher Constant: Well, the short answer is not at this time, Wes. We do have a few larger unitary leases that are set to expire in '27. Each of those has different notice periods. Probably a little too early for us to assess or comment on the specifics there. But again, those are profitable leases. And I'd say we expect the vast majority of those properties to remain on our portfolio for the long term. Wesley Golladay: Okay. And then when you look to go to like a new segment like the larger format centers, are you comfortable taking that exposure up to 5%, 10% of the portfolio? Or do you have a sort of governor in the first few years where you want to just monitor what you buy? Christopher Constant: Yes. And I think I said we bought 3 of these are slightly larger purchase prices than maybe a typical 5,000 square foot C-stores for us. We really view this as an extension of the C-store space, particularly as some of our tenants that we know really well are getting into them. I think we'll -- we're getting ourselves a lot smarter on some of the dynamics on the commercial side as opposed to the consumer that we feel very comfortable with. I don't think we've established a specific target at this point in time, but I think there is a bit of a learning curve before we would significantly expand the portfolio, the concentration in our portfolio. Operator: Our next questions come from the line of Brad Heffern with RBC. Brad Heffern: On the travel centers, can you talk about maybe how the underwriting is different there? I would think a traditional small format store is a little easier to re-tenant than a large one with branded food and beverage, but they probably cover better as well. I guess, is that right? Or is there anything else that you would call out about the differences in the risk profile? Mark Olear: Yes, it's Mark. So certainly, as you said, the land component of the overall value of these centers is a little smaller in relationship to the total investment than we would have in a traditional C-store. That said, though, we're developing the model underwriting as we learn more and more about these businesses to be specifically a total value approach to any acquisition. But with the risk mitigants that you highlighted there on the travel centers, these tend to be anywhere from 2 to 4 acres upwards of 10 acres versus the 1 to 2 acres we have been acquiring. The store size is anywhere from 2 to 3x the size. But that said, the breadth of the services that these operations offer. And again, think of it less about being just a stop for the professional driver. These operations attract the recreational driver, families on vacations, commuters. So the investments we'll make will be with operators that offer goods and services to all of us, not only the typical retail customer, but the professional driver. They're going to be more focused about maybe on the fringes of the MSAs because they need to leverage the high traffic count of the interstate system, so less around internal or community type centers. But yes, I think all of that being considered, -- we are -- we have developed and we'll continue to perfect our underwriting model for a total value approach to get comfortable with the higher value per unit investments. Brad Heffern: Okay. Got it. And then, Brian, can you walk through the puts and takes on the new guide? Obviously, you have a lot of deal activity that probably wasn't in the old guide, but it's also pretty late in the year for that to move AFFO much. So just wondering if there was anything else that contributed. Brian Dickman: No. I mean I think you hit it, right? We're still a relatively small company, small denominator, $100 million deal at the beginning of a quarter that wouldn't have been in our prior guidance, right? That alone could actually have that kind of impact even in only a quarter, just given the relative sizing. We also had a fairly active third quarter overall. So I think if you look there's probably upwards of $140 million plus or minus of acquisition activity that's in this guidance that wouldn't have been in our guidance 1 quarter ago. That's the big driver. And then obviously, just crystallizing any expenses, right, that had estimates around them, had ranges around them coming in at the mid or lower end of what those estimates have been. But really acquisition activity driving earnings growth given the magnitude of it relative to the size of the whole. Operator: [Operator Instructions] Our next questions come from the line of Michael Goldsmith with UBS. Michael Goldsmith: First, just given the moderating tenure in the last couple of weeks, is that impacting the cap rate discussion in any way? And do you think there's been enough of a move that it may shake some sellers loose and want to come to the table to deal? Christopher Constant: We haven't seen a big move in cap rates, I'd say, over the last several quarters. And my initial reaction, Michael, is that this move is a little too quick to say it's going to have a Q4 impact on cap rates. I think, a longer-term shift. And you're correct, you may start to see some different asks. Michael Goldsmith: Got it. And then another question we had is just how do you think about transacting in volume versus acquisition cap rates and just trying to think about the trade-offs between how much -- how accretive a deal is versus kind of the volume of transaction activity that you're completing? Christopher Constant: Yes. I'd say our mandate has always been about selecting the right assets for this portfolio in the sectors that we like. I don't think I would categorize Getty as a "volume shop. And to the extent that we do close more volume, we're certainly looking to grow and scale the business, but it's got to be transactions that are priced accretively for Getty. So I think we'll continue to be focused on the sectors that we like on the sale leasebacks where we can drive a little bit of incremental price, and you'll continue to see us deploy capital in around the same range that we indicated for our pipeline and that should produce future earnings growth. Michael Goldsmith: And maybe one more for me. We've gotten this far we haven't talked too much about Car Wash, which I presume is a good thing. But can you just talk -- I think in the prepared remarks, you talked a little bit about some of the newer car washes and they've kind of stabilized as they've ramped up. So maybe you can provide a little bit more color about what you're seeing in the car wash industry more recently. Christopher Constant: Yes, sure. We feel good about the increase in rent coverage in Car Wash this quarter. Many of the sites that we've acquired were new builds, which requires a ramping period, right, to get up to what we'll call a stabilized level of profitability. We generally underwrote those on a 3-year basis where we say it would take the operator 3 years to get to a fully mature site. And what we've seen to date is they're kind of trending ahead of schedule as they reach stabilization. But to the extent these assets continue to come online, we're always going to be monitoring the trend, right, in terms of whether it's visits, memberships and how much time it's taking them to stabilize. But again, for the last several quarters, what we've seen is a very healthy ramp for those new builds that are coming online. And obviously, that's good for our portfolio, and it's great for the health of our tenant as well. Brian Dickman: And Michael, I'll just add one thing or perhaps clarify. The operators project 3-year stabilization period. As Chris just said, we underwrite a 3-year stabilization period, but we do put them in our reporting after 12 months. And so to some degree, the car washes can act depending on the particular point in time as a little bit of a drag on coverage. But what we've seen over the last 3 quarters, in particular, and that's what we're really emphasizing is as these car washes have been ramping up, as they've been stabilizing, many of them not at that 3-year period yet. right, you're starting to see that impact in a more material way to the point where the car wash side of the business is actually covering greater than the C-store side of the business, although it is a much smaller weight on the whole. So even as we go forward and we continue to bring more properties into the coverage calculation into the presentation that we put out there, you'll continue to see that dynamic. If there's things that are open a year that are on the lower end, that will come into coverage that way. We'll disclose that as it comes in. But the expectation even for those assets to the extent there are any, is that as they move into year 2 and 3 and beyond, that it will match the performance we've been seeing from the other facilities and closer to where we're underwriting them. Operator: I'm showing no further questions at this time. I would now like to hand the call back over to Christopher Constant for closing remarks. Christopher Constant: Great. Thank you, operator. I just want to thank everybody for joining us this morning, and we look forward to speaking with everybody when we get on the phone in February and report our fourth quarter and full year earnings for 2025. Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good day, and welcome to the ARMOUR Residential REIT 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 Scott Ulm, Chief Executive Officer. Please go ahead. Scott Ulm: Good morning, and welcome to ARMOUR Residential REIT's Third Quarter 2025 Conference Call. This morning, I'm joined by our Chief Financial Officer, Gordon Harper, as well as our Co-Chief Investment Officer, Sergey Losyev and Desmond Macauley. I'll now turn the call over to Gordon to run through the financial results. Gordon? Gordon Harper: Thank you, Scott. By now, everyone has access to ARMOUR's earnings release, which can be found on ARMOUR's website, www.armourreit.com. This conference call includes forward-looking statements, which are intended to be subject to the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. The Risk Factors section of ARMOUR's periodic reports filed with the Securities and Exchange Commission describe certain factors beyond ARMOUR's control could that cause actual results to differ materially from those expressed in or implied by these forward-looking statements. Those periodic filings can be found on the SEC's website at www.sec.gov. All of today's forward-looking statements are subject to change without notice. We disclaim any obligation to update them unless required by law. Also, today's discussion refers to certain non-GAAP measures. These measures are reconciled with comparable GAAP measures in our earnings release. An online replay of this conference call will be available on ARMOUR's website shortly and will continue for 1 year. ARMOUR's Q3 GAAP net income available to common stockholders was $156.3 million or $1.49 per common share. Net interest income was $38.5 million. Distributable earnings available to common stockholders was $75.3 million or $0.72 per common share. This non-GAAP measure is defined as net interest income plus TBA drop income adjusted for interest income or expense on our interest rate swaps and futures contracts minus net operating expenses. Total economic return for the quarter was 7.75%. Quarter end book value was $17.49 per common share, up 3.5% from June 30 and up 2.8% from August 8, the last date which we have reported book value. Our most recent current available estimate of book value is as of Tuesday, October 21, and was $17.50 per common share, which reflects the accrual of the October common dividend of $0.24 per share payable on October 30. During Q3, ARMOUR raised approximately $99.5 million of capital by issuing approximately 6 million shares of common stock through an after the market offering program. In August, we completed the sale of 18.5 million shares of common stock for proceeds of approximately $298.6 million, net of underwriting discounts and commissions. And in September, we repurchased 700,000 shares of common stock through our common stock repurchase program. ARMOUR paid monthly common stock dividends per share of $0.24 per common share per month for a total of $0.72 for the quarter. We aim to pay an attractive dividend that is appropriate in context and stable over the medium term. On October 30, a cash dividend of $0.24 per outstanding common share will be paid to the holders of record on October 15. We have also declared a cash dividend of $0.24 per outstanding common share payable November 28, to holders of record on November 17, 2025. I'll now turn the call over to Scott Ulm to discuss ARMOUR's portfolio and current strategy. Scott Ulm: Thank you, Gordon. The third quarter unfolded against the backdrop of shifting macroeconomic currents. Downward revisions to employment data confirmed that the U.S. labor market had been softer than earlier reports suggested. In response, the Federal Reserve resumed its easing cycle, implementing a 25 basis point cut in September. Chair Powell described the move as a risk management cut, reflecting growing caution around labor conditions. Updated projections now signal 2 additional cuts by year-end, setting the stage for a constructive environment for Agency MBS as financing conditions continue to improve. Markets responded positively to the Fed's pivot. Treasury yields declined, Agency MBS spreads tightened by roughly 20 basis points and volatility fell to its lowest level since 2022. These dynamics produced a total economic return of 7.75% for the quarter, as previously mentioned by Gordon. Following this strong performance, MBS spreads are now near the tightest levels of the year. Near-term consolidation is possible valuations remain compelling on a medium-term horizon. As we entered the fourth quarter, macro and political visibility became more clouded. The federal government shutdown that began on October 1, delayed key data releases and introduced incremental uncertainty to growth forecast. Even so, the market continues to expect an easing bias through year-end that's likely to redirect liquidity from the short end of the rates curve into Agency MBS. Chair Powell's recent comments also indicated that quantitative tightening may conclude in the coming months. Although details are still evolving, the Fed's MBS runoff is likely to continue with paydowns from MBS and treasuries expected to be reinvested in the treasury market. Together with a broader push toward banking deregulation, these shifts are aimed to ease balance sheet constraints and reinforce demand for treasuries and Agency MBS. Notably, SOFR treasury spreads have turned more positive in recent weeks, strengthening the effectiveness of pay fixed SOFR swaps as portfolio hedges. On the policy front, reports suggest that major banks are positioning to lead potential IPOs for Fannie Mae and Freddie Mac, collectively estimated around $30 billion. Although the process has been delayed by the U.S. government shutdown and the absence of a formal road map for privatization, administration officials have reiterated support for retaining an implicit government guarantee, an outcome that could transform GSE reform from a potential headwind into a tailwind for MBS investors. An additional and somewhat unexpected source of demand could come from GSEs themselves. After years of balance sheet contraction under conservatorship, Fannie Mae and Freddie Mac now have roughly $250 billion of combined capacity to invest in mortgage loans and MBS should it align with GSE's earnings and valuation objectives. While no formal plan has been announced, recent disclosures point to greater flexibility within their investment mandates, hinting at a more dynamic approach to managing their portfolios than in the prior cycles. I'll now turn it over to Sergey for more detail on our portfolio. Sergey? Sergey Losyev: Thank you, Scott, and good morning. ARMOUR's most recent net duration and implied leverage were 0.2 years and 8.1x, respectively, a balance stance with a bias towards further Fed easing. Roughly 87% of our hedges are in OIS and SOFR pay fixed swaps with the balance in treasury futures. Our liquidity remains robust at approximately 55% of total capital. The portfolio is invested entirely in Agency MBS, Agency CMBS and U.S. treasuries. Our recent activity has centered on par to slight premium coupon mortgages where levered and hedge ROEs range from 16% to 18%. Higher premium pools continue to offer up to 19% returns, though with greater sensitivity to prepayment risk. Diversification across 30-year coupon stack, Ginnie Mae and DUS securities whose positive convexity and shorter duration provide relative value remain a key advantage. During the second half of the year, 30-year mortgage rate briefly reached 6.15%, lowest level of this year. While rates remain just above 2024 lows, refinancing activity has already exceeded last year's pace, elevating prepayment concerns for TBA and generic premium MBS. This reinforces our long-standing focus on specified pools, which represent over 92% of the portfolio. Aggregate portfolio prepayment rates rose to 9.6 CPR in October compared with the third quarter average of 8.1 CPR, a 19% increase and consistent with our expectations. We anticipate a similar uptick in November before prepayments stabilize towards the year-end as refinance volumes moderate. Should mortgage rates move down below 6%, levels we've not seen since early 2022. The MBS coupon stack offers a deep market of lower-priced coupons as a hedge against higher prepayments. Roughly 40% of our assets are already positioned in prepayment of protected Agency CMBS pools and discount MBS. As usual, we financed 40% to 60% of the MBS portfolio through BUCKLER Securities, distributing the balance across 15 to 20 additional repo counterparties. Average gross haircuts stand near 2.75%. Repo market liquidity remains healthy with only a modest 2 to 3 basis points increase in repo SOFR spreads versus Q3 average. More meaningfully, the spread between SOFR and Fed funds widened from 3 basis points in Q3 to roughly 10 basis points through October, muting the transmission of the Fed's recent cut to funding markets and by extension to broader economy. An increase in treasury bill issuance and a gradual decline in banking reserves means banks can lend cash at higher prices. This makes repo funding a key area of focus heading into year-end, yet despite a recent bump in SOFR rates, we view funding conditions as stable with standing repo facility to supply liquidity if needed. Looking ahead, we expect structural demand for Agency MBS to continue to strengthen. Regulatory clarity around banking reform and resumed easing cycle have historically been a powerful catalyst for high-quality liquid assets like MBS. While spreads have compressed, underlying fundamentals and market dynamics remain favorable. Back to you, Scott. Scott Ulm: Thanks, Sergey. We executed a $300 million overnight underwritten bought deal in August, first one we've done this decade. While it was somewhat more expensive than our ATM execution, it allowed us to put a significant amount of capital to work at attractive spread levels. In fact, we estimate that the spread tightening from the newly purchased assets alone contributed about 0.6% to our increase in book value this quarter, along with a meaningful reduction in operating expenses per share. We saw some weakness in our stock in mid-August. And as in the past, we repurchased some shares in the open market. We will continue to look at both sides, selling and buying in our equity account. As you know, we determined our dividend based on a medium-term outlook. We view our current dividend as appropriate for this environment and the returns available. ARMOUR's approach remains unchanged, grow and deploy capital thoughtfully during spread dislocations, maintain robust liquidity and dynamically adjust hedges for disciplined risk management. We are confident in our positioning strategy and ability to deliver value for shareholders. Thank you for joining today's call and your interest in ARMOUR. We're happy to now answer your questions. Please open the line for some questions, please. Operator: [Operator Instructions] Our first question comes from Doug Harter with UBS. Douglas Harter: Hoping you could talk a little bit about where you see current returns on incremental investments and kind of the importance of the hedge choice you make in that and how that factors into your view of the attractiveness of the market today? Desmond Macauley: Yes. Doug. So expected ROEs, hedged ROEs are in the 16% to 18% range. Obviously, a touch lower than where they were at the end of June, given the tightness in mortgage spreads. So over a short-term basis here, you can assume 8 tons of leverage and hedge to swaps. So that's also picking up the swap income. Now we are still constructive medium term, given the resumption of the normalization cycle and also because of spreads, while local types are still attractive over a longer time horizon. So if we see another 10 basis points of tightening, that could add about 4% in return on equity to that base case of 16% to 18% range for production coupon. Douglas Harter: I guess how do you think about what the outlook is for swap spreads? And then how do you think about the attractiveness if you looked at mortgage spreads on like an OIS basis? Sergey Losyev: Doug, this is Sergey. Yes. So swap spreads have also had a big move since September meeting. We think swap spreads will continue to normalize. If you look at some of the average prior to Liberation Day, we see 10-year swaps somewhere in the mid-30s, currently trading around 44%. So we've gone a long way from minus 60 earlier in Q2, and we feel like this is going to continue to be a tailwind for the portfolio as effect of more effective hedges to hedge MBS. Currently, we have about 87% notional allocated to SOFR and OIS swaps. So that's a good positioning. We will probably tailor it if we do get back to those averages, but a lot of things have been lining up to see balance sheet expansion as well as potentially the Fed looking at changing the target policy rate from the Fed funds to SOFR or another repo measure, and that will provide lower volatility to funding rates and potentially wider SOFR spreads as well. So a lot of tailwinds are lining up there. Operator: And the next question comes from Jason Weaver with Jones Trading. Jason Weaver: Scott, along with your prepared remarks, if the administration is actively looking for ways to reduce borrower rates via GSE deregulation, do you have any thoughts on what the actual implementation looks like, whether that's GP manipulation, changes in LLPAs, underwriting guidelines? Scott Ulm: There are a lot of levers they could pull. And what knows we get a lot of levers pulled these days that we may or may not expect. So I think -- and I think that probably fits somewhere on their agenda. So the broad answer is yes. I think we could see a lot of things move around here. And particularly, if -- but particularly, I think you have to put it through the lens if they are thinking about a capital raise here for the GSEs. They're going to want to configure the GSEs to be as attractive a proposition as they can. So that may put the brakes on a couple of things as well. So there's a balance there I have no further insight into it other than just note that there are 2 competing things going there. One is undoubtedly, they'd like to see lower mortgage rates, but they also want to see the GSEs as an attractive investment proposition. Jason Weaver: Agree. That's helpful. And then noticing the hedge ratio ticked down quite a bit from Q2. Is that more of a timing issue? Or just along with the greater confidence in the pace of easing activity, you can be a bit more directional here? Scott Ulm: There are a lot of things going on in that. Sergey, Desmond, maybe you want to give a little more color on that, but there's a lot that goes into the way that, that ratio in itself works. Sergey, Desmond, do you want to give a little more color on that? Desmond Macauley: Yes, Jason. So I mean, the way we kind of look at hedges, it's really to hedge our duration across the entire curve, right? So as we said earlier, our duration of 0.2, we are taking a balanced view with a bias towards more Fed easing. So our goal is to -- most of that 0.2 duration is actually in the front end of the curve, whereas in the back end, we aim to stay flat. And ultimately, we move our hedges around to accomplish our duration targets across the curve. Operator: And the next question comes from Trevor Cranston with Citizens JMP. Trevor Cranston: All right. There was a pretty significant drop in interest rate volatility in the third quarter, which had a carryover impact to MBS, obviously. Can you guys share your thoughts on kind of how you think volatility evolves going forward? And since it's being priced significantly lower today, how that factors into your -- the potential to maybe add some swaptions or options into the hedge portfolio? Desmond Macauley: Yes. Trevor. So in terms of volatility hedging, you can think of 2 approaches to it. One, obviously, is you can use swaptions. We have used swaptions in the past. We continue to look at hedges even those that are not in our balance sheet. But the other approach is actually through asset selection, right? So you can pick assets that have low optionality. About 40% of our book, as we said in our prepared remarks, is in shorter -- lower coupons and also DUS securities. And these actually have very low optionality and another benefit of these securities is that their convexity in some cases, is even positive. So they act as a good offset to the negative convexity that you see in our production coupons. Now one more point on volatility is that, yes, volatility has come down a lot so far this year. But if you expand the time scale if you go back and look at other periods that are similar to this one, you can pick 2019. That was a period when the Fed had resumed normalization. They had started [indiscernible] back -- not buying mortgage-backed securities. That period of time, volatility was actually lower than where they are right now. If you take, for example, obviously, it's an entire volatility surface, but if you look at the swaptions for 1 year by 10-year, today is about 82 basis points. The average over that period was about 64 basis points. So still we are still about 18 basis points higher. If the Fed continues normalization, we can expect that the tail risks around rates will become compressed. And for that reason, we can see volatility in the medium term continue to decline, right? Now that's not going to prevent short-term bouts of volatility. But over the medium term, we can see volatility decline. And if you are long options, then the valuation of options would decline if volatility declines. So yes, I mean, we always -- it's a very dynamic position. We're always looking at our hedges. But for now, we think just keeping low optionality assets is the better approach. Operator: And the next question comes from Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Just one for me. Regarding economic net interest margin, it seems like it widened about 1 basis point quarter-over-quarter. Looking forward to year-end and maybe to halfway through 2026, what would we need to see for this trend to kind of continue and if not pick up pace? Gordon Harper: Well, I guess you're going to -- it really depends on our portfolio and where continued cuts in the Fed rate, and that will imply how it impacts on our financing costs. And we think we've constructed a very good portfolio. And I think the returns that we're generating, I think, are reasonable under the circumstances. I don't know, Sergey and Desmond have other things to add to that what they think on the horizon, but we don't normally give too much forward-looking statements on where we think earnings are going to be in the future, but it's really going to be dependent on how fast the rates cut and also how the market reacts to that. But we think we've constructed a very good portfolio for the future. Desmond Macauley: Yes. Yes. So just on that to continue God's comment there. Yes, so we kind of typically just look at forward ROEs as well, another way to look at the same way of looking at things. So 16% to 18% in production coupons. Our dividend yield, weighted average dividend yield, both preferred and common plus operational expenses all in is about 18%. So that could be sort of as a hurdle rate. We already have assets we are buying that are at 18%. There are others that are slightly lower than that. But as we said, we're still constructive medium term here. So just a few more basis points of tightening and those assets would meet or exceed our hurdle rate. Operator: [Operator Instructions] Our next question comes from Eric Hagen with BTIG. Eric Hagen: Maybe following up on some of this conversation here. I mean what do you think is priced into MBS spreads with respect to the Fed cutting rates? Like right now, it looks like there's 125 basis points of cuts priced into the forward curve through the end of next year. Do you feel like spreads would widen if those expectations got walked back for any reason? And do you feel like spreads would actually have room to tighten once they actually deliver those cuts? Sergey Losyev: Eric, this is Sergey. Yes, to both. Definitely, a pause in the easing cycle or something that would cause them to walk back their projections would be a potential source of volatility in the market. But in terms of delivering cuts to the market, I think a lot of the bank demand will get unlocked there. If you look at the current coupon mortgages versus yields on money markets or T-bills, it's compressed again over the course of the year, closer to 100 basis points. So I think as we get closer to 152% on the spread of mortgage yields versus cash you start to see more and more engagement from other players in the market that we've seen -- we haven't seen as much demand as expected earlier this year. So I think that kind of answers yes to both scenarios. And we note in our prepared remarks that spreads have tightened significantly over the course of the quarter. We do see upside, but I think it's overall macro picture, the lack of government economic data coming through that's given us a little bit of pause here. But over a medium-term horizon, that's a clear positive for -- to have lower Fed funds rates. Eric Hagen: Yes. Got you. That's good color. The move to raise capital and buy back stock in the quarter, can you kind of share the rough level of your stock valuation when you did those transactions? And like what's the best way to compare the value from having done each of those deals, transactions? Scott Ulm: Yes. So Gordon will maybe give me the -- if you can pull up the level where we bought back. But look, we're committed to being on both sides. And when we get a dislocation, we'll buy back some stock. And when we see good valuations, we'll sell stock. Stock buybacks are always fraught because they happen when a bunch of other things are going on, and it's always expensive to get the stock back out there as well. But we had a pretty good spread between where we executed both of those. Gordon, do you have those numbers to hand? Gordon Harper: Yes, I know offhand, we -- when we did the buybacks, it was about a couple of cents accretive on the days, and it was in the 14 -- just get you the right number. Got it. We were buying it back at -- yes, it was in the [ $14.40 ] handle around that on the days that averaged out. So you can see we've bounced back since those days and we bought back the stock. Scott Ulm: Is that useful? Eric Hagen: Yes, that was helpful. I appreciate you guys. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Scott Ulm for any closing remarks. Scott Ulm: Thanks for joining the call today. We appreciate it. Any further questions occur to you, give a ring at the office, and we'll be back to you as soon as we can. Very good. Thank you, and have a nice day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the SEB Financial Results Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Johan Torgeby. CEO. Please go ahead. Johan Torgeby: Good morning, and I'd like to extend a warm welcome to all of you today for SEB's Q3 financial results. Going to our first page with highlights. We today post a solid financial result in a quarter which is seasonally slower but we've also experienced less volatile and stable financial markets. Noteworthy is that investment banking activity has held up and showed resilience and we saw an increase in capital markets activity to the later half of the quarter. Customer satisfaction and employee engagement continue to show relative strength and it has been decided to continue the SEK 2.5 billion share buyback program per quarter by the Board as we announced today. Flipping to the next page, we have some recent events. And the first one is the infrastructure of payments which is now being disrupted to some degree by new technology coming from blockchain. We have, together with 8 other European banks launched a consortium with an initiative to see if we can launch a euro-denominated stablecoin on the chain and targeting the first half of 2027. Also, AirPlus has now been used as the new brand for our previous Eurocard. And this is an example of the marketing campaign, particularly towards the Scandinavian countries where Eurocard has been a long prevailing brand within the Corporate Card segment. It has now been rebranded under the headline green is the new gold. And if you haven't already, you will soon get an AirPlus instead of your Eurocard in the color scheme represented here on the slide. Turning to Page 4. We have, over the last couple of quarters, updated you on our progress within AI. We have shown you the internal projects that we're running, about 130, which is funneling in, in different categories of areas we think we can improve. But also gone through the recent investment that we've done together with a consortium to get compute capabilities available to us. Today, I'd like to introduce the third corner of this triangle, which is actually SEB not only working with offering better products, integrating it in the products, not only running the bank using AI, but actually enabling banking in the AI community, which is the core business we do. We speak a lot about different business units in the bank, but this is probably one of the lesser known ones. In 2022, we created a business unit called SEB Growth, where we now have an offering tailored for fast-growing companies with high innovative content and companies that plan to raise capital and/or lift or sell themselves in the future. This is an attempt to combine corporate banking with investment banking, with private banking, force entrepreneurs and these fairly young companies as they begin their journey. We've also included a few of the logos which we have recently supported such as Lovable, Sana, Modal and Legora. All these are well-known fast-growing companies in the AI space in Scandinavia. The next page, we can then look at the development of our credit and lending portfolio. As all of you are aware, we've had a little bit of a sideline movement in recent years. However, both last quarter and this quarter, we have some growth, albeit modest. Lending year-on-year for the corporate book is up 4% FX adjusted and the total lending portfolio is up 3% FX adjusted with households and Swedish mortgages just shy with half of that growth in the third quarter year. Looking on the next page on the jaws slide. We can see that the costs -- the trajectory of costs is tailing off. And we are roughly back to trend that we had prior to the elevated profits generated by the interest increase with a CAGR here represented from the time 2016 to 2021. And with that, I'd like to end this part and hand over to the CFO, Christoffer Malmer. Christoffer Malmer: Thank you, Johan. I would now like to turn to financials on the next slide. Operating income for the third quarter declined from the previous quarter, reflecting typical seasonal patterns, notably within net fee and commission income, where the second quarter performance was particularly strong. Net financial income was impacted by market valuations of our strategic holdings during the quarter, which had a positive contribution in the second quarter. This valuation effect accounts to around SEK 500 million of the delta in net financial income between the quarters. Net interest income increased slightly despite continuously downward trending interest rates explained in part by the higher day count in the quarter, some positive effects from FX, slightly lower deposit insurance guarantee fee and a lower short-term funding cost. Operating expenses declined slightly from the previous quarter, also following the usual seasonality. As the Swedish krona has continued to strengthen in the quarter, we are providing an updated FX adjusted cost target for the full year of SEK 32.6 billion compared to the original cost target of SEK 33 billion. We maintain our range of plus/minus SEK 300 million around the cost target level which is primarily related to the ongoing integration of AirPlus. Here, we see some potential scope for possibly accelerating that implementation program a little bit further. As mentioned at the start of this year and reiterated also here in the second quarter, we're now in a phase of consolidating recent years of investment, which is resulting in a lower cost growth. We also maintain our external hiring pause for nonbusiness-critical positions to facilitate this consolidation and to make room for continued investments in selected areas, notably within technology and AI. The full year cost target does imply that there are some effects to expect in the final quarter of the year. Net expected credit losses of around SEK 200 million or 3 basis points reflecting underlying stable asset quality as also reflected in the continuous decline of Stage 3 assets. We added around SEK 100 million to the portfolio overlays in the quarter, and we also had some sizable reversals. Imposed levies came down in the quarter as expected, reflecting the development of our Baltics levies and our full year guidance for imposed levies now also including Riksbank's introduction of the interest-free deposit now amounts to SEK 3.6 billion. So that's up from the SEK 3.5 billion communicated in the second quarter. Tax rate of 21%, in line with guidance. Net profit for the quarter of SEK 7.7 billion and a return on equity at 14%, and we ended the quarter with a CET1 ratio of 18.2%. On the next slide, we turn to the development of the net interest income. On a divisional basis, the NII in Corporate and Investment Banking declined by around SEK 200 million, primarily reflecting a lower net interest income within Investor Services, which was elevated during the second quarter, and that was a dividend season as we mentioned at the time. NII also within our markets business was a little bit lower as customer activity came down for the season. From a volume perspective, lending within CIB declined in the quarter as some of the event-driven financing volumes generated earlier in the year rolled off. And that, together with FX effects, explained the majority of the move in the loan book compared to the second quarter. Now year-on-year, lending to corporates within CIB increased by 3% on an FX-adjusted basis. Within Business & Retail Banking, NII declined by around SEK 100 million compared to the previous quarter, and that's primarily reflecting the impact from lower interest rates on deposit margins. Lending volumes were largely unchanged in the quarter and following 2 strong quarters of market share gains in the Swedish mortgage market, Q3 volumes grew a little bit less than the market. Now year-to-date, our net sales of mortgages represent a market share of around 13% which is in line with our share of the stock. Competition in the market remains firm and mortgage margins moved largely sideways in the quarter, remaining at historically low levels. Within our Baltic banks, net interest income was largely unchanged as the impact from lower interest rates was partly offset by higher lending and deposit volumes across both private and corporate customers. Loan growth in the Baltics remained robust with mortgage growth of around 9% and corporate loan growth at around 8% compared to last year. Within treasury, NII was positively impacted by the yield curve as well as favorable funding conditions within short-term funding. Looking forward, we continue to expect our net interest income to bottom out some 3 to 6 months after the latest or the last rate cut. Bear in mind that, that is based on how our balance sheet looks today. So volume growth and any proactive repricing could impact those dynamics. If we turn to the next slide, and we look at the fee and commission income in the quarter. Total fees and commissions declined by around SEK 400 million compared to the previous quarter. And if we look on a divisional basis, we effectively see 3 developments behind this. Firstly, within Corporate and Investment Banking, fees are seasonally softer in Q3 across most capital markets-related businesses, including issuance of securities and advisory, which was also particularly strong in the second quarter. This is also true for lending fees and combined, these effects accounted for around SEK 400 million in CIB. Nonetheless, CIB generated the highest net commission income on record for a third quarter. The second factor related to card and payment fees within Business & Retail Banking and again, seasonal patterns impacting activity levels primarily within corporate cards and AirPlus and this affects around SEK 100 million compared to the previous quarter. And thirdly, going in the other direction, we saw about SEK 100 million increase in fees and commissions in wealth and asset management as a result of higher assets under management and continued business momentum. Net new money across the group amounted to SEK 8 billion in the quarter. And on fees and commissions, when we close the second quarter, we refer to a more constructive fee environment. And while Q3 will see or should see some usual seasonal patterns, which we've seen, we said that if the market backdrop doesn't change dramatically, Q4 should see a continuation of this more constructive trend. And this comment, we think remains valid, which is encouraging going into the last quarter of the year. If we turn to the next slide, we set out the development of net financial income this quarter, NFI from the divisions was largely unchanged from the previous quarter at SEK 1.9 billion. The decline in the headline, NFI versus the previous quarter is, as I mentioned, largely explained by valuation effects related to our strategic holdings and that's primarily in Euroclear, which also paid a dividend during the second quarter. affecting that comparability. These effects were partly offset by XVA going the other way, and we continue to look at the long-term average of around SEK 2.5 billion per quarter. Turning to the next slide. We'll look at the development of the CET1 ratio in the quarter. We closed the second quarter with a management buffer at 290 basis points. And during the quarter from left to right, as usual, we received an updated SREP, update from our supervisor. And as you will have seen in our separate disclosure on that topic. This resulted in a lower Pillar 2 requirement related to lower capital impact from IRRBB, interest rate risk in the banking book. Then we had 41 basis points, reflecting the net profit in the quarter after deducting our dividend accrual while lower risk REA contributes about 14 basis points reflecting positive risk migration in the book during the quarter. Under REA other, you will find a combination of other developments on the balance sheet. So the FX effect, the overall REA size market risk REA and also a positive impact from us applying the SME factor to some of our CRE exposures. These factors in total added 22 basis points and largely evenly distributed between them. Finally, the decline of 18 basis points reflects the phasing in of the REA increase in the Baltic banks that we announced in the second quarter, and that is related to the ongoing work with our Baltic IRB models. This takes the CET1 buffer to 360 basis points at the end of September. And we also highlight that the remaining impact from the Baltic REA increase is around 70 basis points, so in line with the communication at the time of the second quarter. And we expect to phase this in over the coming 3 quarters. So that means that our buffers in effect on a pro forma basis stands at 290 basis points with the Baltic REA fully phased in. Other effects to bear in mind as we go into the end of the year is the impact from operational risk REA in the fourth quarter when we do review that level. On the next slide, we summarize our capital and liquidity position at the end of the third quarter. Our capital as well as our liquidity measures have all strengthened during the quarter, reflected in rising LCR from 130% to 136% and a higher NSFR from 112% to 116% and the CET ratio, as we just discussed on the previous slide. Finally, I would like to conclude with our financial targets, which remain unchanged, including a 50% payout ratio, a management capital buffer target of 100 to 300 basis points above the regulatory minimum and a return on equity competitive with peers with a long-term aspiration of 15%. Return on equity year-to-date stands at 14.1%. So with that, I hand the word back to you, Johan. Johan Torgeby: Thank you, Christoffer. That ends our prepared remarks, and I'll hand over to you, operator, for the Q&A. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Namita Samtani from Barclays. Namita Samtani: My first question, what should we think of funding costs related to net interest income going forward because surely, if rate is still coming down or they have come down, which is yet to be factored into our net interest income, this will continue to be a tailwind. And secondly, I just wondered, do you lend to private credit and what percentage of that is part of your book? Christoffer Malmer: Thanks for your question, Christoffer here. I'll take your first question on the net interest income. And you're right to say that we've had a positive effect from funding costs in the quarter, and you saw that also in the breakdown of the NII in treasury. And we estimate that effect to be positive for the quarter of around SEK 100 million or so. Now going forward, we'll continue to reiterate the message on 3- to 6-month lag from the last rate cut for the dynamics to work their way through the balance sheet before the net interest income would trough. So we should expect the net interest income to come down again in the fourth quarter. And then in the first quarter, and then we'll see again what happens to rates, of course, as we go into 2026. Those are broadly the effects that I would bear in mind. Johan, you want to comment on the private credit? Johan Torgeby: Yes, sure. Thank you, Namita. We have no meaningful noticeable exposure direct to any private credit. We do have a very, very small group of private equity firms that also have a private debt arm, but no direct exposure. So it is so small that it's not really noticeable. Operator: We will now take the next question from the line of Magnus Andersson from ABGSC. Magnus Andersson: Two questions, please. First of all, on corporate lending. Last quarter, you said you had an elevated level of activity-based lending. And it comes down a bit now quarter-on-quarter FX adjusted. Could you please tell us how you see the outlook for activity-based lending as transaction activity is undoubtedly picking up now? And also what you think about the more lending for general purposes when you think that will pick up? That's the first question. Secondly, on capital and risk-weighted assets. The level was significantly lower than at least I thought in this quarter, and I see that your -- I mean, risk weight comes down in corporate IRB, for example. Is this -- with the exception of the op risk coming in into Q4, is there anything else here that could be volatile? Or is this a reasonable run rate to use? Because I think you even included SEK 10 billion of the Article 3 announcement as well here. And related to capital, do you know already now if you will continue with the share buyback approval for the full year in the Q4 '25 report? Or if you would consider doing it as you did previously with half in -- half year approvals? Johan Torgeby: Thanks, Magnus. I'll start with the corporate lending. So first, I just note that you did accurately depict what we said and what happened last quarter. Those temporary elevated levels for transaction-based exposures, they have not fallen off. So this quarter with its 4% year-on-year does not have those, let's call it, temporary bridges on as there was very little transactions done into the summer. So this is a much more steady as we go. When it looks going forward, so the pipeline looks unusually strong. That doesn't mean that they naturally materialize for events and the event-driven lending that might come with it. But we did see a pickup in investment banking and also capital markets transactions towards the later half of the third quarter, which is an encouraging sign. And we, of course, always keep a close look as a leading indicator of what the Americans do. And you could see some similar signs or even more pronounced there. But I also want to say that the lending fees this quarter, even though it's a very, very quiet one is still 24% up year-to-date, the lending fees, which is, of course, what you typically -- the majority of what you earn on leases is not NII when it comes to transaction is up 9%, the first 3 quarters this year compared to last. So there is some underlying event-driven momentum, but it's -- I still want to be cautious because a lot of things need to happen, and we don't want any of the risks that have been identified to materialize in Q3 that would create volatility. So if I'm a little bit constructive and hopeful, I think general corporate purposes, that's a longer transition. So we are not seeing this broad-based, let's invest in increased capacity, then you need to borrow to invest further because the first investments, they're always done with the operational capital or cash at hand to meet the demand. So in my mind, I often come back in this discussion around the lack of demand in the economy. Retail sales and consumption in GDP. And that's kind of the last leg that we are looking for really to change the picture. And of course, looking at the economists they are looking pretty constructive for '26 and '27 on this topic, but let's wait and see. Malmer? Christoffer Malmer: Thank you. So Magnus, on the REA. If we look into the fourth quarter, you're right that we expect the op risk effect. We estimate that to around 15 basis point negative impact. The other moving parts that are subject to movements during any quarter is the FX effect, of course, you see that is positive in the quarter. That remains, of course, unknown. It's a REA size, which in this quarter is again positive contribution. And coming to your previous question, of course, I hope that we will see that be moving in the other direction. And the third one is REA asset quality, which, again, in this quarter due to upgrades of risk classes of a number of counterparts also contributed positively. So these are the moving parts and then you go to op risk REA. So when it comes to the buffer, the 360 basis points, and we look at the pro forma effectively the 290, assuming the remaining phasing of the Baltic REA, last year, at this point, we were around 470 basis points. So of course, the situation was very different. But still, there are, to your question, a number of moving parts in the REA that will play out in the fourth quarter. I will come back at that time with comments on future buybacks. Operator: We will now take the next question from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was thinking about -- there is some growth in the Baltic lending business. So I was thinking your ambitions going forward? Do you expect to grow in line with the market given your size? Or is there any reason to believe that you can capture more market shares there? Johan Torgeby: Okay. yes, we are growing clearly higher, and it's not only this quarter, it's been going on for a while. So we are actually accelerating a bit. So we're now looking to 8%, 9% growth in this quarter year-on-year compared to -- if I remember correctly, it was about 6% last quarter. We are maintaining our market share as -- the long-term picture is that it's quite concentrated as you probably know to 2 large institutions, Swedish banks in the Baltics. And there has been, of course, increased demand for higher competition from everyone in the marketplace. But right now, we have an ambition to maintain this position. I wouldn't commit as it is a very high market share we start with. So this is a little bit defend and protect, but we are not going to give it up easily. So be careful in increasing market share, but definitely it's a fast-growing market. I'd also like to point out that it is a higher inflationary market. So in real terms, it is not as impressive as these headline numbers are, and you need to also take that into account because the loan book unless you relever the economy will grow with nominal inflation plus whatever you do. Operator: We will now take the next question from the line of Martin Ekstedt from Handelsbanken. Martin Ekstedt: I wanted to focus a bit on your retail business. Looking at statistics, Sweden data on mortgage lending during first half of '25, you saw quite strong market share of net new lending. I think you took like 16% on new lending against the back book market share of 13%. But as we enter the second half of the year, this trend kind of evaporated, and you took just 1% in July and 3% in August despite similar volumes in the market overall. Is there a story behind this that you could share with us perhaps? And then secondly, on that same topic, with Sven Eggefalk now joining you as a new head of the business line, should we keep hopes up for higher volumes share -- volumes of market shares to return? Christoffer Malmer: Christoffer here, I can comment on this. I think, as I mentioned in the remarks, if we look at our market share year-to-date in net sales and mortgages, that stands around 13%, and that is in line with our historical stock level. So there is, as you point to some movement between the quarters. I think when I look at the focus that we have for winning the mortgage market share business, we think all 3 components, it's the speed, it's the availability and it's the pricing. And it's about us continuously evaluating and making sure that we are competitive along all those 3. And as you will see that we haven't moved pricing much in the last quarter, but we're continuously working around speed and availability. But I would also mention that there is a volume effect into this as well, volumes are still relatively small, which can impact movements in between individual quarters. But year-to-date, broadly in line with the stock market share. Martin Ekstedt: Understood. And then a second question, if I may, and just picking up on Namita's earlier question on private credit. I wanted to just pose this question to you a bit more broadly. I mean, the main focus around the private credit discussion has been centered on the U.S., right? And you said you don't do this yourselves currently to any large extent. But I mean, generally, you stand perhaps as the leading Swedish lender to nonbank financial institutions. So I just wanted to check with you for a Swedish take on this. How widespread is this concept in Sweden? And what are your views on the viability of the model in Sweden and also a bit on the risks perhaps. I mean if you don't do this, who should be doing it or shouldn't we be doing it at all in Sweden, and why not. Johan Torgeby: Okay. Yes, this is a little bit of reasoning. Don't take this as a fact. So first of all, this has been a development very much driven by the U.S. I hear numbers like USD 2,000 billion. It's actually surpassing bank lending if you extrapolate the current trends. It is a very, very significant deep source of debt capital for the American economy. Europe is much, much smaller as a whole. And even the things that are growing fast in Europe is typically more American firms, replicating what they've done in the U.S. rather than European firms. Then you go to the Nordics, it's even more pronounced. So private debt is not a large funding source for the Nordic where we operate. And this is, of course, very much if you look at the classic private debt, private equity firms of Scandinavia, which is our home market, that it looks very, very different in terms of the balance between equities, infrastructure, alternatives versus private debt lending. So my take on this is that, first, the leverage buyout market is very well functioning in Nordics. This means that there's much less of a free lunch to be had sourcing the money that you then refund and redeploy into a leverage buyout type of financing because this is almost like a game between the 2 different products. They are slightly different, but they achieve the same thing for a private equity firm. One is you borrow from a private debt with typically 7% to 9% yield expectations or you borrow from a bank, which in the Nordics, we are very efficient, and we've been able to price the LBOs quite differently. But if you look at the overall market of LBOs, how they're financed, it's clearly in favor of private debt funds. But from the banking system, as far as I know, Nordic is very little -- has very little exposure in the Nordic banks to this. It's other capital providers that have put the money in. Operator: We will now take the next question from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first one is your comments around the pickup towards the end of the quarter in capital markets activity. Of course, this quarter was affected somewhat by sort of lower episodic transactions debt than you'd expect. So I just want to talk about what the pipeline for the fourth quarter, what you've already seen in the fourth quarter and going forward, please? And my second question is going back to your comments on the scope for accelerating the implementation of AirPlus. You've previously, if I'm not mistaken, commented qualitatively about when you expect it to be accretive, excluding and including restructuring costs. Is there anything further you can now provide on that, given you've obviously had an extra quarter seeing the business and integrating it. Johan Torgeby: Sure. I'll start with the pickup. So the circumstances around capital markets and primary deals, M&A and IPOs is quite -- it's very, I would argue, benign. It's a good market. Markets are strong. They're not over -- they might be an all-time high on the stock market, all-time tight on credit -- recent tights in credit markets, lower interest rates and a little bit of European spurring optimism for what is going to come. It's not particularly strong here and now, but it's definitely more optimism around where Europe could go, not at least in Scandinavia and the Baltics, if you look at GDP protect -- projection, consumption, et cetera. And also, I would argue that Germany has had the biggest delta from 1 year ago, where they were very much not in favor. And now it's a little bit of, let's say, interest at least on what could Germany do with all these announcements around fiscal, stimulus, defense, security and resilience. The uptick is exactly what we would have expected. We've actually been a little bit disappointed, I would say, if you compare 1.5 years ago when we saw that the interest rate has peaked, then we had a very quiet couple of years behind us after the record years of the early 2020s. And now it looks quite constructive. And you saw that -- before summer, we did an unusually amount large deals in the Nordics, then, of course, summer dies. And I would say that the pipeline and the amount of discussions for the fall and next year, still indicates that there is a higher level of potential than there was before. Now don't take that too much, but I'll just look at issuance of securities and secondary market and derivatives, which is, of course, it's cut in, in the financial result today, we're up 29% year-to-date compared to last year on issuance and securities and services, M&A and equities. And we have 14% in secondary markets year-to-date. So there is something clearly better already happening compared to last year. And we are just saying that we feel quite constructive. We're not saying that this seems -- there are no indications right now that this would implode tomorrow, rather being quite supported of this could probably continue. Christoffer Malmer: On your second question around AirPlus, a reminder of where we are there. So as we highlighted in the second quarter, the first critical milestones around IT migration, the discontinuation of noncore markets and the rightsizing of the organization has been completed, and this process is on track. The next phase now is to increase pace of implementation between AirPlus and the rest of the SEB Group business. So what we are now reviewing is if there is reasons to try and accelerate that phase. As you will remember, we gave a range around the cost target for 2025 of plus/minus SEK 300 million as we said, largely attributable to the pace of implementation of AirPlus. So it was in that context, I made those comments. Operator: Thank you. We will now take the next question from the line of Johan Ekblom from UBS. Johan Ekblom: Just to come back on some of the comments you made earlier around AI. I guess trying to figure out what AI could mean for your business longer term. There's 2 aspects to it, I guess, that I'm interested in. One is, how do you think about the cost of AI? So we hear a lot of stories about the cost of AI being heavily discounted today and that we should expect cost to increase materially as you get on to kind of normal rate cards for what you're paying. And I guess when do you expect to see concrete benefits in terms of efficiency or revenue opportunities that will be kind of obviously visible in the financials. So that would be the first question. And then secondly, just a bit of a detailed one on asset quality. I mean we had a big green project that went belly up in Sweden earlier this year, and there's another one that's in the press now. Your corporate loan book tends to be very much focused on investment grade. How do you view this potentially higher credit risk project? And how do you manage risk around those? I realize you probably can't comment on individual exposures. But just from a more kind of top-down view. Johan Torgeby: If I start with the last and I'll hand the -- I think you asked mostly for the financial impact, I'll ask Christoffer to reason around on AI. The traditional loan book is investment grade. The really minimum rule of thumb is that you have to have 3 years of good cash flow, that has proven resilient business model, et cetera. So that's what we do. But there are, of course, also a very, very small part of the balance sheet that also gets dedicated to starting up of firms. These -- the ones you mentioned, the larger green ones, they have been unusually very unique that they are of that magnitude, but we have had very, very modest, if I say it that way, exposure that you won't really have seen even though there have been a little bit of actually blowouts in the whole green and clean tech sector as we speak, and it's continuing. The other thing is to see that the capital stack of all these projects, if they are large, are very different from the past. They are namely predominantly government guaranteed, and there are risk and offsets. So the nominal values often, if not always, exaggerate heavily what the banks actually are exposed to. But -- so there are 2 mitigating factors to any worry. And that is that the amount is very small, and it's often guaranteed somewhere between 60% to 85% by a government. Christoffer Malmer: If I reason a little bit around the AI and the financial impact, and you're right that we are at an early stage and trying to assess and quantify the ultimate impact is still difficult. But I'll make a few comments. I think in terms of the benefits that we can already see is there are certainly some areas where we do see tangible efficiency gains and productivity enhancements One is in software development, where we see the use of Copilot increasing developer productivity and output and deploys. Another area is in Wealth and Asset Management, where we can see an increase in the number of outbound customer calls as a result of AI support in documentation. So we see those productivity gains. Now how does that translate into P&L? Well, one of the comments that we made around the hiring pause that we're having consistently asked the question when we do replacement hires, if there is a technology or an AI solution that could be levered for that same activity. So we will see this gradually coming through. In terms of the cost of the actual AI. One of the reasons we decided to team up with a couple of other companies in the Wallenberg sphere to invest in the compute power from NVIDIA here in Sweden is partly to get access to sovereign access to compute, but also to ensure the cost. And to your point, we're buying compute power from the large compute providers around the world is, of course, an exposure that anyone would have if you want to grow and expand in AI. And that is also for us a level of comfort to have that cost under our own control. So those are some comments. But as you point out, it is still early days. But we are following it very closely. And the early signs that we're seeing is constructive productivity enhancements. Operator: We will now take the next question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on the fee line. The softness that we saw in fees this quarter, was that reflecting margin pressure? Or was it just less volumes than expected. So if you could kind of just discuss a little bit margin pressure compared to the volumes on the fee side? And then my second question would be around kind of capital. What we're seeing is that the fiscal outlook or fiscal spending next year is quite good for Sweden, macro-outlook is improving. Should loan growth pick up for SEB. How do you think about kind of prioritizing growth over shareholder returns. And what kind of takes priority if you look at like growth versus dividends versus share buybacks versus any potential M&A? Christoffer Malmer: Thank you, Sofie. So if I'll start with the fees, the sequential development there is really in 3 areas where we see this. First, within CIB and as Johan alluded to, a little bit, even though activity level is benign in the third quarter, it was very strong in the second quarter. So you see the drop in fees and commissions sequentially of about SEK 400 million being partly attributable to activity levels and fees in CIB. The second component you see is card fees in BRB, particularly on the corporate side. And as you know, we are in our BRB card business more exposed to corporate activity than private activity. And that being slower during the summer month is a second explanation. And the positive effect and partly offsetting this is an increase in fees and commissions on AUM-related fees in wealth and asset management. So there's no margin development impacting sequentially in the quarter, but more how the fees have fallen between Q2 and Q3. Johan Torgeby: Yes. Sofie, and nice to hear that you're back in a different role. So welcome. I would say that the reason for the more optimistic outlook, as you also pointed to, is partly driven by the monetary stimulus that we have already seen, let that bite in the economy monetary policy, typically works with 12- to 18-month lag. But also, as you pointed out, the fiscal stimulus that is expected to come. So those 2, I think, are quite important pillars for economists when they do look at it. Will this increase loan demand? Well, that's the purpose of it, both the monetary policy want the economy to pick up in pace and particularly focused on consumption. Fiscal policy tends to be quite effective on consumption. But the pattern right now is because uncertainties, high risks are very mitigated in my book, but uncertainty is still around. It means that households have been quite keen to save rather than consume. So all this is kind of part of that package to become a little bit more constructive for the future, and it should be supportive of growth. But that prediction I'm not making. I'm just reasoning around it. So it's definitely a part of it. When it comes to priority between growth and shareholder return. I assume you mean shareholder repatriation and not just total shareholder return because I think growth in SEB, having more clients doing more with them is very much aligned with total shareholder return, that's the same thing. But of course, it's not -- you might want to save more capital for the business rather than repatriating it. And there, it's pretty easy. We always try to develop the bank first. I would love to use the capital that we generate to do more business to generate even more, so that's typically not a big conflict. Otherwise, as we've had for many years now, we generate more than we can redeploy and then we'll pay it out to shareholders. Sofie Caroline Peterzens: Okay. That's very clear. And maybe just on the fee side, one follow-up. So in terms of DNB Carnegie, you haven't seen any business opportunities kind of getting any -- being able to take any market share from them? Johan Torgeby: I would say no, but I also want to acknowledge that it's a formidable competitor, and they're very good, and this is not an easy market to win in. And it's getting -- it's tough out there. Operator: We will now take the next question from the line of Tarik El Mejjad from Bank of America. Tarik El Mejjad: I just wanted to come back on Johan Ekblom's question as well on AI from a different angle. The scalability of use of AI and the benefits also, I think, is based on how your core systems can actually be plugged to these AI tools. How do you consider today your IT system ready for this, I would say, evolution in terms of using for AI, especially in your triangle on the parts on integration into the products. And also, I mean, there is a perception that the cost to achieve is actually much lower using AI versus the traditional kind of cost savings measures in the past. Do you -- would you confirm that perception? And just very quickly on the capital part, I mean, Sofie, I think addressed that partly, but the -- I think you commented in the past that to go below the 300 basis point buffer or the high end of the range, that will be used for growth rather than special distribution or buyback. Given the headwinds on CET1 coming -- on RWAs coming in the next quarters from the add-ons on Baltics, should we assume that our priorities for volume growth and the buyback would probably be secondary here? Christoffer Malmer: So if I start with the question on AI, you're right that there is a broader upgrade of core systems in general required to some extent, this reflects our ongoing work with our technology road map that has been in place for some time. But there are also opportunities in multiple areas where AI can be applied without necessarily completing all those upgrades. And there are also ways where we can work with compartmentalizing certain parts of our legacy technology and making APIs available for new applications. And the third option that is also interesting to explore is actually to have some of that legacy code rewritten with the help of AI. So there are ways both in which we can address the challenges with traditional legacy systems, but also where we can proceed without necessarily completing those investments. Now when it comes to the triangle, I think you're right to say that from a product perspective, it's probably where progress has been the least thus far in terms of introducing and implementing AI capabilities in the product. Where we have thus far seen the best impact and the greatest achievements thus far has been in running. And what we're highlighting in this quarter as well is, of course, an interesting opportunity working with a growing and exciting AI community in Sweden and the Nordics. So we'll continue to, of course, monitor this closely, but there are certainly areas where we can accelerate with AI implementation in parallel with legacy upgrades. Johan Torgeby: Yes. And if I just may add, it's interesting, we have the IMF, IAF trip to Washington, where all bankers met last week that it is a clear distinction, the one selling AI capabilities between the ones buying them and selling them and how much value has been created lately. So this third point that Christoffer made, the third leg is actually us banking the AI community, which is doing very, very well. On the capital repatriation preferences, so let's say that if we are above 300 as we have stated target board mandate to be in the range of 100 to 300, we have one type of dialogue, and that is how to best come back to the range where the 300 is the upper end. That's the discussion we've had for 2 -- 3 years when we -- from the day we had to cancel the dividends post COVID. And of course, that's kind of the new now. If we're in the range, we have a more forward-looking discussion in the Board in December, where we typically have room for both. So don't assume that you cannot do a share buyback only because you're in the range. However, there is a different discussion. It's more about lending and if we want to retain it to improve business of over and beyond 15% return on equity. If there is a reasonable degree of probability, we know how to do that in the coming years. We'd like to be able to capitalize on that. If not, then, of course, it becomes more of a question of how to repatriate capital to the shareholders with a base, 50% of profits go in the form of dividend. And as you can see in history, we've used both extra dividend in combination with share buybacks to look at, but that's the forward-looking, and I also would say, just the numbers, you need pretty significant loan growth numbers for this not to be -- for SEB not to be able to do capital repatriation in the combination of 2 or 3 types. So it would be lovely if that would happen, but that's a luxury problem. Operator: We will now take the next question from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: My first question was on the NFI line, which came in a bit below in recent quarters in Q3. So I was wondering how you think about the -- how the lower interest rate environment is impacting this revenue line. With your current macro outlook for 2026, how confident are you that your previous indication of the past 16 quarters average is a good indication where the normalized NFI line should be? And how do you think about that given the ultimate macro outlook for next year with, yes, maybe lower interest rates and possibly also lower volatility than what we've seen in the past few years? Christoffer Malmer: Thank you, Nicolas. I think the -- within that number that you have in the NFI, for us, these are, to a large extent, customer-related income. So taking aside the strategic stakes in the mark-to-market and the valuation gains that we present separately in the XVAs, we have a significant proportion of our FICC business booked within NFI. And within the FICC, we have the fixed income, currencies and commodities. And if I look at the third quarter, we had after the very high level of volatility in the second quarter, a lower level of volatility in the third quarter in FX, which resulted to a somewhat slower activity related to our customer demand. Now within fixed income, on the other hand, activity levels remained high with credit spreads at very low levels, issuance continues, and there was a clear demand to prefund during those favorable conditions. Within commodities, we are, as you know, the one Nordic bank that does offer this, and we have seen that contribution growing. But of course, there's an element of volatility, but we think that the underlying structural development there is also constructed. So as we look forward, there are effects driving this. The volatility in FX space and the demand for FX products will be impacting that part of the FICC booked in NFI. We also have the steepness of the yield curve, which impacts the treatment of the inventory and the mark-to-market of the inventory within the fixed income in NFI as well. But at this point in time, we have our range and I think that remains our best prediction for the future. Nicolas McBeath: And then I had a question on like if you have any general remarks or thoughts how you're reasoning regarding the cost growth into 2026. I mean on one hand, you have lower rates, which are a drag on return on equity. But on the other hand, as you've alluded to in the call, potentially higher activity loan growth, economic recovery during next year. So do you think 2026 is a year to expand and invest more or keep the hiring freeze and try and defend the profitability? Johan Torgeby: I'll start and ask Christoffer to add. So the current, let's call it, plan of attack on cost control is the one that we, I think, launched last quarter or 2 quarters ago, and that is to change the pathway that we've been on for some years now of increasing investments in the bank and to tail that increase off. And as you can see this quarter, it looks to be supportive of actually happening. We are in a different place now where we have a different trajectory. The purpose is to sit when we do our business plan in December and hopefully be in a position where we have freed up some operational costs that we can discuss with the Board and the management team how to redeploy. So it is still a different type of forward outlook now than we've had in the last years, and that is more cost control, be cautious and handle resources a little bit more until we have a clearer look on the income outlook because we really need to have a high return on equity and a low marginal cost of income, so profitability secure if we were to start investing more. And then there are many other things must do investments in banks. So there's no lack of holes to put all this money in order to maintain a good and solid and robust infrastructure. But it is the same tonality we've used now for a couple of quarters. There's no change in that, and that goes beyond year-end. It's actually to have a little bit of extra flexibility going forward. That doesn't mean that the decision in December where we set the cost frame for '26 will be up, flat or down. It just means that there will be a discussion to be had and we'll communicate it as always in conjunction with the Q4 report. Nicolas McBeath: And then just a detailed follow-up question. Could you please give us the AirPlus implementation costs for Q3 and how you think about the implementation costs in 2026? Christoffer Malmer: Yes. The AirPlus implementation cost in the third quarter was around SEK 120 million, which means that we, year-to-date, have taken a little bit less as a run rate, which leaves a little bit more in the fourth quarter. And we have guided to around SEK 700 million in implementation costs for the full year. Nicolas McBeath: And for next year, how do you think about those costs developing? Christoffer Malmer: Well, as I referred to earlier, we are now reviewing whether there are parts of the implementation program that should be accelerated. So we'll be coming back to that together with the cost outlook for 2026 together with our fourth quarter results, Nicolas. Operator: We will now take the next question from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: Thanks a lot for taking my questions. I have 3, if possible. The first one is on the NII indication, Christoffer, that you provided early in the call, meaning NII to bottom out 3 to 6 months after the last half. Now raising in Euro area should be done, Riksbank has cut 25, okay, I understand the impact on the equity side, but the federal reserve should cut much more aggressively and you have a much larger amount of U.S.-denominated liabilities than assets is SEK 300 billion larger amount of liabilities in dollars. So I was wondering why the rate cuts by the Federal Reserve should not have a mitigating impact or the only 25 basis point rate cut by the Riksbank. And by the way, also this quarter, what you -- this indication should have happened and did not materialize, NIIs is actually up quarter-on-quarter. So I was wondering why you keep reiterating that given the Federal Reserve cut expected in the coming quarters? The second question I have is, on the 290 basis point buffer, if I'm not mistaken, this includes the whole SEK 50 billion of RWA done -- imposed by ECB on your Baltic operations. Just to confirm my understanding correctly. And if I understand it correctly, 290 is already at the top of your range in terms of management buffer. But you are expecting to go back to that level in only 3 months. And because if that is the way I understand, it's just a matter of how you want to return excess capital rather than if you can keep the current capital return. So what is your thinking about that? And then I have a question, a curiosity that's more a curiosity. Overlays go up by SEK 100 million if I'm not mistaken. Some of the Nordic banks have actually reduced them or brought it to 0. They're using it progressively, releasing those. Why are you keep accumulating those overlays? And when do you expect this to come to an end or this to be used at some point or released or allocated. Christoffer Malmer: Thank you for your questions. I'll start, and I'll let Johan contribute as well, and we're just going to make sure we have the questions correctly. So if I start with the overlay, that is an assessment that we do every quarter. And we take into account geopolitical developments, sometimes we change our macro outlook and assumptions and it's a continuous evaluation of our various exposures across our portfolios. And you have also seen in quarters that we have released some of those overlays and in this quarter, we're adding. And it's hard for us, of course, to comment on how other banks are proceeding with this, but that is our process. For the net interest income, you're right, we are reiterating the expectation of a 3- to 6-month lag from the last rate cut until we see the trough. What happened in this quarter were a couple of technicalities that led to an increase in net interest income sequentially. One is the number of days. We also referred to the deposit insurance fee that is booked over the year. That happened to tilt a little bit more favorably for NII in this quarter. We had a positive FX effect. And we also saw some beneficial treasury contributions, partly from the funding cost and what we have been referring to as repricing effects or timing effects. So as we then look forward, we continue to see pressure on deposit margins as the rate cuts will make their way through the balance sheet. And also bearing in mind that some of our transaction accounts both for corporates and households are down to 0, which means that, of course, the further down we come in the rate cycle, the more any incremental cut will have as an impact. And finally, to your comment around the U.S. denominated deposits, those are primarily wholesale deposits. So those are priced off of market rates, and that's effectively a margin that moves with market rates rather than having an impact as they are being discretionary priced, but they are market rate linked. On your question... Riccardo Rovere: This will go down. The Fed will cut, this stuff will go down, the cost of this stuff will go down. If they does, when they cut. Of the wholesale fund -- this wholesale funding, and it's SEK 400 billion. Christoffer Malmer: Correct. And then, of course, the impact will then be on the asset side when Feds are being cut when we have U.S.-denominated loans that they are funded by. Riccardo Rovere: Sure, but it's smaller the amount. The delta is smaller. The liabilities are much, much larger than the assets in dollar, much larger. SEK 300 billion. Christoffer Malmer: Right. And I think what we have also mentioned when it comes to the U.S. denominated deposits is the fund that we're also placing with the Fed. And that is effectively us operating in the U.S. with our balance sheet, and we will collect deposits from U.S. financial institutions and placing with the Fed. And that is effectively a relatively opportunistic business that we have been running there, and that goes to an element of lumpiness between quarters, but that accounts for a sizable part of the U.S.-denominated deposits as well. Riccardo Rovere: But what I see is longer than SEK 188 billion cash at the Federal Reserve, I guess, and you have SEK 409 billion deposits, which you say is wholesale is going to go down. This one number is more than twice the other. So I don't understand how this cannot be positive regardless FX and all the other stuff, calendar days, whatever. Christoffer Malmer: No, I think this is one of many moving parts in the balance sheet. So when we are looking at the impact in totality from rate cuts, there are various dimensions moving in different directions. And this is one impact that we get from the development of the Fed funds. We have other parts of the balance sheet that's impacted by the ECB rate and others from the Riksbank. So it's taking all these into consideration together where we conclude that running this through our balance sheet as it looks today, we expect the trough. It doesn't mean that all the variables go in the same direction. Some, to your point, might be contributing positively, but the net of it all, we expect to result in a trough 3 to 6 months after the last cut. Riccardo Rovere: And on the SEK 290 billion. Johan Torgeby: Yes. Sorry, can you repeat that question, Riccardo? Riccardo Rovere: The question is that SEK 290 billion is already the top of your rating, the top of your management buffer. And that 290 includes the whole SEK 50 billion, which should be, despite, as I remember, phased progressively, not if I'm not mistaken, you got SEK 10 billion this quarter, maybe you will land another SEK 10 billion next quarter, I don't know. But the real number is the SEK 290 billion. So that is already at the top of your buffer. So how do you see this? Is this -- were you expecting it to be already basically at the top of your buffer only with the whole impact of the ECB imposed add-on after only 3 months. Because there has been, let's say, some discussions around the impact of this stuff into -- mostly 2026 is affecting your capital return blah, blah, blah. How do you see that? Johan Torgeby: Yes, I think we understand that. Christoffer Malmer: I can just start, Riccardo, with confirming that we have taken in this quarter the equivalent of 18 basis points or SEK 10 billion phase-in of REA in the Baltics, and we're showing that the remaining, what we estimate to be another 70 basis point impact would take our pro forma buffer to 290 basis points, where we have booked so far in this quarter, SEK 10 billion of that. Johan Torgeby: So just to be clear, that is pro forma today. So I think you're absolutely right. It's the 290 if we would technically have deducted all of it and it would have been over. But as we -- for accounting reasons and other things, couldn't or wouldn't do that. So we just showed it pro forma. Then you have, as I think you alluded to, now capital generation, in the dynamic analysis going forward, we'll, of course, continue to increase this number, everything else being equal. And therefore, I think we will have a better position when we get to Q4, and we will have to look at the current capital position then in a quarter to then for the board deliberations on repatriation. Was that an answer? Riccardo Rovere: Yes, yes, yes, definitely, that's an answer. So 290 before, then you start accruing the dividend, 50% payout or whatever it is. And then the rest, we'll see. But the starting point is 290. Johan Torgeby: Correct. Operator: We will now take the next question, question from Bettina Thurner from BNP Paribas Exane. Bettina Thurner: I would just have 2 clarification questions, please. The first one on NII. So you have been quite helpful over the past 2 quarters to try and isolate the temporary effect on the net interest income base. For this quarter, should we look at the effects in treasury that you mentioned before, of repricing quicker. Is that the SEK 100 million? Or would there be other parts of the NII that you would also expect to get out again or reverse partially in the last quarter of this year or first quarter of next year? And then the second question would be on the dividend. At the start of this year, you said you had the intention to pay out a semi-annual dividend next or in the next year. Is that still the plan? Or are you still deciding on that? If you could just give us more update on that, please? Christoffer Malmer: Thank you, Bettina. So on your first question on net interest income, I think the number that you're referring to, the SEK 100 million or so as a positive impact in Q3 from those timing effects is the number that you should have in mind for that effect going forward. And for the semi-annual dividend, you're right, that is something that we mentioned at the start of the year, and we have ongoing dialogues with our shareholders, and that's something we'll come back to when we report our fourth quarter results and come back to the capital question. Bettina Thurner: If I can just double check. So it's not set in stone yet, let's say, on the semi-annual dividend? Christoffer Malmer: Correct. That's correct. Operator: Thank you. That's all the time we have for questions today. I would like to hand back to Johan Torgeby for closing remarks. Johan Torgeby: I'd just say thank you, everyone, for your participation and your interest in SEB and look forward to seeing you soon. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Maria Caneman: Good morning, and thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank. Welcome to our third quarter results presentation. With me today is our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with the presentation, and then there will be an opportunity to ask questions. Jens, I hand over to you. Jens Henriksson: Thank you, Maria. Swedbank has once again delivered a strong result in uncertain times. The geopolitical situation, continued uncertainty about tariffs and trade and the increasing concerns about weak public finances across the world are slowing down global growth. Twice a year, the world's economic policy decision-makers meet at the IMF. The starting point for their discussions is the world economic outlook, which was published a week ago with the headline, "Global economy in flux, prospects remain dim." With that said, our four home markets have healthy fundamentals, strong public finances, low government debt, innovative companies, profitable banks and low interest rates. In Sweden, we see signs of improvement. Our economists forecast growth of 2% next year, while the Swedish government is more optimistic and projects 3%. In Estonia, economic development is still subdued, and we are seeing some recovery in Latvia and the development in Lithuania continues to be strong. In these uncertain times, Swedbank stands strong and is well positioned for sustainable growth and profitability. We can today report a return on equity of 16% and earnings per share of SEK 7.53 for the third quarter. During the quarter, income increased while cost decreased. Our cost-to-income ratio was 0.35. Strict cost control is producing results. We have a conservative and thorough lending process and, during the quarter, we saw credit impairment reversals. We have a robust ability to generate capital, and we have a very strong capital and liquidity position. During the quarter, Standard & Poor's upgraded Swedbank's credit rating. In their decision, they highlight the bank's improved governance, regulatory compliance and risk management. Furthermore, during the quarter, the U.S. authority, SEC, ended its investigation into the bank's historical shortcomings without enforcement. We are delivering according to our plan, Swedbank 15/27. And as you know, it focuses on three areas: strengthen customer interactions, grow volumes and increase efficiency. Our customer focus is producing results. We have further improved our availability during the quarter, and now 70% of incoming calls in Sweden are answered within 3 minutes, and we are thereby getting closer to our target of at least 80%. We consistently work to improve our digital offerings, and we see that more and more customers do their everyday banking through our app or the Internet bank. We have also increased our efficiency. Our employees can spend more time meeting customers and less time on administration using new AI tools, and the number of advisory sessions per employee has increased. During the quarter, we lowered mortgage rates due to lower policy and market rates. Mortgage loans increased by SEK 5.2 billion, and mortgages in Sweden distributed through our own channels accounted for SEK 4.2 billion. Deposits from private customers are stable, and we continue to be close to our customers and give them advice. Strengthening their financial health is an important task for the bank. Savings and pensions continued to develop positively. Swedbank Robur saw a net inflow of SEK 9 billion in our four home markets. As announced in August, we want to acquire the remaining part of Entercard, thereby, Swedbank will have the largest card business in the Nordic-Baltic region. This will develop our business and strengthen our customer offering. In Lithuania, the business climate remains strong. In Sweden, Estonia and Latvia, economic activity is improving, but from low levels. During the quarter, corporate lending increased by SEK 7 billion. Our customers are showing a high demand for sustainable investments. 36% of the bonds arranged by Swedbank during the quarter were classified as sustainable, and our Sustainable Asset Register has now surpassed SEK 150 billion. We now own 20% of the investment bank, SB1 Markets. And during the quarter, they started up in Sweden. It's an important step in further developing our offering to corporate customers. In addition, our customers will get access to an expanded range of equity research. In the Baltic market, we launched the card payment feature, Click to Pay, a secure and convenient service that simplify payments. Jon, it's your turn now to deep dive into the financials. Jon Lidefelt: Thank you, Jens. We delivered a strong result in the third quarter with volume growth across markets and increasing income. We have continued our work with focus on long-term shareholder value through business growth and cost efficiency. Cost-to-income ratio was 35% and return on equity, 16%. Lending volumes grew in the quarter and the increase came mainly from Baltic Banking, where we continue to see solid growth on both the private and corporate side. Mortgage volumes in Sweden sold through our own channels increased by SEK 4.2 billion, while the savings banks reduced their mortgage volumes on our balance sheet by SEK 1.6 billion. We see continued result of our increased efforts on customer interactions and availability as we're capturing a larger share of the market. In August, our front book market share through owned channels was 16.4%, still below the back book market share of 17.8%, but the development continued in the right direction. Also for the corporate business in Sweden, the positive development continued with increasing volumes, though somewhat offset by repayments related to a couple of larger exposures. Customer deposit volumes were stable in the quarter. In Sweden, private deposits decreased somewhat from a high level as the second quarter was impacted by seasonal inflow of tax returns. In Baltic Banking, deposit volumes were overall stable. Net interest income decreased by 0.9% compared to the previous quarter, driven mainly by lower mortgage rates. Lower deposit rates impacted NII in Q3 with a full quarter effect, while lower rates on the lending side were gradually rolled in during the quarter. Higher business volumes had a positive impact of SEK 94 million in the quarter. Wholesale funding costs continued to decrease in the quarter. Liquidity was, however, reallocated from the markets business increasing liability volumes, but also positively impacted Central Bank placements. and, hence, had an overall neutral NII effect. Day count and FX effects impacted NII positively in the quarter. The Swedish Central Bank cut policy rates effective as of the 1st of October and ECB cut rates effectively as of the 11th of June. Hence, there are further repricing dynamics in play. Reminding you that the positive effect on the funding side materialized ahead of the negative effect on the asset side, furthermore, that it takes approximately 3 months in Sweden for a rate cut to roll in and 6 months in the Baltics. We will continue with our pricing strategy on both sides of the balance sheet and maintain focus on the balance between volumes and long-term profitability. Net commission income increased in the quarter, driven mainly by strong asset management commissions. Mutual funds had a net inflow of SEK 9 billion and combined with the positive stock market performance, increased asset under management to SEK 2,471 billion. Card commissions were seasonally higher in the quarter following higher spending abroad during the summer months, while brokerage and corporate finance commissions were seasonally lower. In addition, we saw positive development in commissions from insurance products. Net gains and losses remained at a high level in the quarter and amounted to SEK 847 million. Income was strong, driven by high business activity, mainly within fixed income. Positive revaluations supported the treasury result. Other income increased by 2.7%. Net insurance decreased driven by both normalized levels of claims compared to the low levels we saw in the second quarter and the effects from revaluations of future cash flows. One-off transfer, in connection with the establishment of SB1 Markets on the 1st of September, also contributed. The results from partly owned companies supported as well as increased income from services to the savings banks. As a reminder, our collaboration with the savings banks include cost sharing for IT development and administrative services. The savings banks' share of the cost is included in Swedbank's total cost, and you can see the corresponding income as services to the savings banks here under other income. Total expenses were 1.4% lower. Fewer employees, together with seasonally lower staff costs, IT maintenance and consultancy costs contributed. As announced in conjunction to the Q2 presentation, a VAT recovery of SEK 197 million related to the year 2016 was received in the beginning of the third quarter. In line with previous patterns, costs will be seasonally higher towards the end of the year. Costs for the full year 2025 is expected to be around SEK 25.3 billion at current exchange rates. This includes the already received VAT recoveries related to the year 2016, '17 and '18 amounting to SEK 576 million. It also includes SEK 200 million lower temporary investments this year and an estimated SEK 300 million lower costs due to FX. Asset quality is solid. During the quarter, there were reversals of credit impairments amounting to SEK 398 million, which corresponds to an impairment ratio of minus 8 basis points. The reversals are mainly driven by improved macro scenarios, and we have continued to reduce the post-model adjustment, which now stand at SEK 364 million. Individual assessments resulted in a SEK 568 million increase, driven by a few larger corporate exposures. At the same time, repayments and reversals of previously written-off exposures resulted in a release of SEK 451 million. I feel comfortable with our strict origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was stable at 19.7%. In the 2025 SREP, our Pillar 2 requirement was lowered by 40 basis points, and our CET1 capital requirement now stands at 14.8%, meaning we have a buffer of around 480 basis points above the requirement. The reduction by the Swedish FSA stems from two parts. Firstly, 20 basis points are related to the new CRR3 risk weights for standardized credit risks. This has an impact on the Pillar 2 add-on that we shall hold until the new Swedish IRB models are approved. Thereby, approximately 20 basis points of the expected capital relief of at least 50 basis points from the new IRB models has now materialized. We continue to expect most of the remaining impact from the IRB model updates to materialize during next year. The Swedish FSA also approved parts of our nonmaturing deposit model, resulting in 20 basis points lower capital requirement for interest rate risk in the banking book. To conclude, we continue to focus on growth and efficiency. We deliver strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. Back to you, Jens. Jens Henriksson: So let me now sum up the quarter. Swedbank once again delivered a strong result in uncertain times. Income increased, cost decreased, and we saw credit impairment reversals. Return on equity for the third quarter amounts to 16%, cost-to-income to 0.35. Our credit quality is solid and our capital buffer is very strong at 4.8 percentage points. Swedbank is well positioned for continued sustainable growth and profitability, and we continue to deliver according to our plan, Swedbank 15/27, with a focus on strengthening customer interactions, growing volumes and increasing efficiency. We create value for our customers and our shareholders, and our customers' future is our focus. With that said, back to you, Maria. Maria Caneman: Thank you both very much. We will now begin the Q&A session. A kind reminder to please limit yourself to two questions per turn. Operator, please go ahead. Operator: [Operator Instructions] We have the first question from Martin Ekstedt, Handelsbanken. Martin Ekstedt: Can you hear me? Jens Henriksson: Yes, we can. Martin Ekstedt: Excellent. So could you just give us a bit more on the SB1 Markets initiative? You mentioned it launched in Sweden in the quarter. Is it now fully staffed up on the Swedish side? And are all the business lines up and running? That's the first one. Jens Henriksson: To be honest, I don't know if it's really fully staffed up. A lot of persons have gone over and I think they're doing some great jobs. So I think they're fully running. And the key point is that this is a partnership that offer our corporate customers a strength and offer through access to a larger set of investment banking services and sector expertise. And both corporate and private customers can also benefit from access to a broader range of equity research. So this is great. Martin Ekstedt: Okay, okay. And then second question, if I may then. I'm looking at your NII sensitivity on Page 20 of the presentation deck. So in the past, the NII elasticity, so to speak, or rate shifts have been balanced around plus/minus side. But your calculation example is now tilted towards seeing a larger impact if rates come down than if they go up. And I just wanted to confirm, this is due to some deposit rates now having reached 0 and therefore, are not able -- at least commercially able to go any lower, right, i.e., it's the floor of 0% rates that you mentioned on the page coming into effect. Is that correct? Jon Lidefelt: You're perfectly correct, Martin. That is the reason. Operator: The next question from Magnus Andersson, ABG. Magnus Andersson: My first question is how you view the prospects of potentially being able to increase the thin household mortgage margins in Sweden now that short-term rates are no longer expected to fall? And related to that, what market growth rate you think is necessary for this household mortgage margin pressure to ease? And secondly, just how -- you have lending growth now 4% quarter-on-quarter in the Baltics FX adjusted. How you view the sustainability of lending growth in the Baltics now that the deleveraging that's been going on for nearly 20 years finally seems to be over? And related to that, how you tame the inflationary tendencies, the impact on the cost base there? Jens Henriksson: Thank you for that. Two good questions. First one is, let me say a few words of the overall situation in the mortgage market, and reminding you that we are the market leader in all four home markets. And first, just me repeat that in the Baltics, we see continued strong growth in mortgage volumes. In Sweden, we've seen that the housing market remains muted, although we see some gradual increasing mortgage market growth during 2025 and you see that we're now picking up some momentum. And the reason for that is that we are more active. We have shorter waiting times and quicker to resolve questions. There is a strong competition out there, and we want to grow. And when that competition abates, we do not know. I don't think the competition will go down. I think it will be continued competition there. Then when you move over to the Baltics, we have seen quite a large volume growth in that. Reminding you that these are steady and stable economies, and we now expect Estonia and Latvia to pick off as well, while Lithuania has been doing very good. Magnus Andersson: Okay. So are you saying that you think the household mortgage margins we have in Sweden currently are here to stay? My question was whether you think there will be a potential to increase them going forward and what the trigger would be able to drive how you would be able to achieve that. Because I think it's a concern to all of us. Jens Henriksson: Well, I won't do any forecast on that. There is a tough competition. But I think when you see higher volumes, I think that we can grow in that environment. Magnus Andersson: Okay. And the inflationary impact on costs, in the Baltics? Jon Lidefelt: Magnus, I think as we've talked about before, I mean, in the Baltic Banking, we have lived with higher inflation for many, many years, even before the inflationary shock. So that is something that we are constantly working with to make sure that we can increase our efficiency to mitigate that. If you look at the societies as a whole, then I mean, our concern, as we have been talking about, generally, it's very stable and healthy. But of course, if the salary inflation continues, then that will eventually lead to a problem since it's going to be hard to pick up on the productivity in line with the current salary levels', increased levels. Operator: The next question from Andreas Hakansson, SEB. Andreas Hakansson: So first question on costs. You mentioned the three VAT refunds you had during this year. Could you tell us how many years have we got outstanding? And just to confirm that you don't assume one of those reversals to appear in the fourth quarter. Jon Lidefelt: You're correct. We have assumed no VAT recovery in the SEK 25.3 billion guidance that I gave you. If that will come, it will come as a one-off extraordinary thing that we will not take into account when we run our ordinary business. So no further VAT in the SEK 25.3 billion. We have, as I think I mentioned in the previous quarterly presentation, requested VAT return recovery for year 2019 up until 2023. It's in the hands of the tax authorities, and I have no visibility in the numbers, and we'll not speculate if and when we would get anything more back there. Andreas Hakansson: Are the cases similar? Or I mean, it seems like you won three cases. So are the other cases different? Or wouldn't the outcome be likely to be the same or... Jon Lidefelt: Sorry, I said '19 to '23. I should have said '19 to '24. But it depends a lot on the interest rate levels since this is sort of depending on the turnover that we have in the parts of our business that is non-VAT related and the one that there is VAT, i.e., mainly the leasing business. So it depends a lot on the interest rate levels for the years, and that's why I don't want to speculate in any numbers or if we would get it back before we have the answer from the tax authorities. Andreas Hakansson: All right. That's fine. Then on the Baltic NII, I mean, you talked about the 6 months' time lag. But could you just confirm that when you talk about that NII should trough 6 months after the loss rate cut, that's with a static balance sheet. And we saw already that NII grew Q3 with Q2 on the back of very strong volume. So if volumes continue at the current pace and, if anything, it seems to be picking up. Is there any reason why the NII shouldn't continue to grow even though you have that underlying pressure driven by interest rates? Jon Lidefelt: First of all, yes, you're correct. When I talk about the 3 and 6 months, then I mean the same margins, the same volumes, and then you'll have to make your own assumptions on that as well as some further central bank rate cuts. When it comes to the NII development in the Baltics, it's impacted by FX in this quarter. So underlying, the NII in the Baltics is stable quarter-over-quarter. Andreas Hakansson: With 3% volume growth, right? So those are the two components there, margin pressure and the volume growth. That's up to 0 in this quarter. Jon Lidefelt: Yes. Operator: The next question is from Gulnara Saitkulova, Morgan Stanley. Gulnara Saitkulova: So on capital, given your solid capital buffer, could you remind us of your latest thinking on how to deploy the excess capital between ordinary dividends, special dividends, buybacks or potential M&A? And how should we think about your approach to excess capital in a theoretical scenario where the AML resolution is still delayed by several years? Would you still aim to be around the midpoint of your targeted management buffer range? Or would you adopt a more cautious stance in that case? And if you were to pursue M&A opportunities, which areas or markets would be of the greatest strategic interest for you for potential acquisitions? Jens Henriksson: Well, thank you for that question. Let me be very short here. And that is that we have a capital buffer range between 100 and 300 basis points. In our 15/27 plan, we target the middle of it, i.e., 200 basis points. We now have a buffer of 480 basis points with a dividend policy of 60% to 70%. And the timing of further capital release continues to be a judgment call depending on the many uncertainties, where the long-running U.S. investigations is the largest one. And we have no intention to hold more capital than necessary. When you look into M&A activity, reminding you that we've had seen quite a lot of M&A activity during the last quarter. We want to acquire Stabelo. We want to acquire the remaining part of Entercard, and both those two are still subject to approvals. And then we've gone into SB1 Markets, which was the first question. As a CEO, I always need to look out for new opportunities. Operator: The next question is from Markus Sandgren, Kepler. Markus Sandgren: I was just going to follow up on Gulnara's question when it comes to Entercard. Can you just give some more flavor of your thinking about the acquisition? And what do you think or what's your planning in terms of asset quality for that company? Jens Henriksson: Well, straightforward, we've had a business cooperation with Barclays, and we own roughly 50-50 each. And they wanted to sell it, and we wanted to acquire it. It's that simple. And the reason we want to do that is that we want to become the largest card business in the Nordic-Baltic region with scale benefits and, of course, benefits also from increased efficiency. And I think Jon will get back later when we have more information when that's fulfilled and tell you the effects on the bank at large. What we will do is we'll do a strategic overview. And when we look on Entercard, we've seen that we think that the risk level is a bit too high, and we wanted to reduce it a bit more to a more appropriate level for Swedbank. Markus Sandgren: And what does that reduction mean? Is it getting rid of loans? Or how do you plan to do it? Jens Henriksson: We -- let us get back to that when hopefully, this goes through all the sort of processes. Operator: The next question from Shrey Srivastava, Citi. Shrey Srivastava: It's actually on the 20 basis points benefit to your sort of capital requirements that you've got from being able to model the contractual maturity of nonmaturing deposits. My question is twofold. The first is, is this all we can expect to see in terms of benefit? And secondly, does this open up the possibility of you sort of investing these nonmaturing deposits in potentially sort of high-yielding, long-dated assets going forward? Jon Lidefelt: Thank you, Shrey. First of all, we have gotten a partial approval for our modeling of nonmaturing deposits. So all things equal, if we would get the full approval, that would be a little bit more to come. When it comes to our NII -- or sorry, non-NMD hedging, I have said in previous quarters on questions from you and your colleagues that we have had some hedges. It's been an important tool for us to have in the toolbox. So we wanted to test it and try it out. But it is and has been immaterial from an NII perspective so that you can discard the impact of the hedges that we have in place when you forecast our NII. The approval that we have gotten, it still means, to make it simple, that our liability side is still shorter than our asset side. So if we would add further hedges to prolong our asset side, which is what we want to do in order to smoothen out NII when the timing is right, it would still mean that our capital for IRRBB, our Pillar 2 charge, will go up even with this approval. It might go up a bit smaller than before, but there still will be an increase. We will come back should we do more or should our hedges be material to make sure that we are transparent should that be in the future. Shrey Srivastava: And a very brief follow-up. You said you received partial approval. Should you receive full approval, what sort of capital benefit can we expect there? Jon Lidefelt: Unfortunately, as long as the Swedish FSA do not change their view on this, even a full approval will lead to the same thing, that if we prolong our asset side, our capital charge will still go up. There is a difference between the Swedish FSA's view and the view that banks under ECB supervision have. They can do this hedging much more efficiently than we can do. Shrey Srivastava: And a final one for me. Have you noticed a sort of softening of the Swedish FSA's view? Because it seems sort of that way, looking at the partial approval you received. Or is that inaccurate? Jon Lidefelt: No, I have not. Operator: The next question from Namita Samtani, Barclays. Namita Samtani: My first one, I just wondered what measures you're taking in the Baltics to bulletproof your ROE of above 20%. I saw an announcement that Revolut is now offering mortgage loans or something similar to that in Lithuania. And in time, that will probably become a full offering. And clearly, the deposit rates they offer better than banks. So what initiatives is Swedbank taking to protect itself from competitive threats? And then secondly, I appreciate the 2025 updated cost guidance. But we're almost through 2025. Could you please qualitatively talk us through the main moving parts of costs going forward or what we should think about going into 2026? Jens Henriksson: Well, the key thing about Estonia, Latvia, Lithuania, these are growing economies, and when compared to Sweden, they will grow with, let's say, 1%, 1.5% more. So it's a very attractive market. And it's also a market that doesn't have the same financial inclusion as there is in Sweden. So that means that we see many possibilities. And I think we went through very much this when we had Swedbank 15/27. In the end, it's about being close to our customers. We are the most loved brand in the Baltic region for the seventh year in a row. We want to grow volumes, continue to grow with the countries. We want to increase financial inclusion. We want to be -- have more customer interactions and want to make sure that we keep costs contained and work in an efficient way. So in that sense, it's not different from the other markets. Is the competition tough? Yes, it is tough. Will it be tougher? Yes. But that's life. Keep on and be close to your customers. Do you want to say a few things about the costs? Jon Lidefelt: I think your question was about 2026 costs, and we will come back in conjunction to the Q4 presentation on that. But principally, we tried to explain how we work with cost efficiency with the headwind and investment and so forth when we had the 15/25 presentation. But more details, I'll come back with when we present the Q4 results. Operator: The next question is from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just quick two questions, please. First, on costs. I mean you had quite impressive, good cost control here with cost/income really at very low levels. I just questioning the strategy of sustained hiring freeze, which -- how long that you can be sustained and especially in the context of potentially a recovery of growth. But also, we just had a call with one of your competitors and the approach is this hiring freeze or control could be sustained as long as we invest in AI and technology and be able to question each time, can we replace or hire or invest in some technologies that would be more cost efficient? Where are you in this thinking and these investments in AI and technology? And the second question is on the U.S. on money laundering litigation. I mean I've been following those with the German, French banks and so on in the past with the OFAC. How the conclusion from the SEC, you think are correlated to what would come for DOJ? Or is it -- because usually it's bundled within one decision. How do you read that? Are you more optimistic about the outcome? Jens Henriksson: Well, thank you. Two important questions. The first one when it comes to the personnel, we steer the bank on costs, not on FTEs. But what happened a year ago was that we saw that FTEs increased too much due to change of churn. And what we did then was that we implemented an external hiring freeze but sort of possibility for people to make exceptions. I gave quite a few exceptions but it worked. And then last quarter, we decided to take that away. And we now have a process where Jon take that sort of those kind of decisions together with the Head of HR. So we do not have a hiring freeze anymore. That's the first thing to say. The other thing is to say that we see quite a lot of use of AI. We work it both on the individual level and on a structure level. We work with AI for a very long time. And what we want to do is we want to decrease administration so that we can see more time with our customers. So to give you an example is that right now, we are seeing that the waiting lines or sort of the time waiting, if you call into a Swedish customer center, it's much shorter than before. So we've reached 70% of the call answered within 3 minutes. Why? New technology. And then we can use call summary, so that means you can have more time to meet the customers rather to do the administration, and we can do more things like that. When it comes to the U.S. investigation, first thing to say is that when it came to OFAC, that was closed quite a while ago. And as I said in my introduction, during the quarter, SEC decided to close their investigation without any further actions. That said, still have two other investigations by U.S. authorities. And now I need to sort of repeat myself. But I've told you many times when I was new as CEO, I met and called around and talked with colleagues that have been in similar circumstances. And they told me that a process like this usually takes 3 to 5 years. Now more than 6 years have passed, but the time line is fully owned by the U.S. authorities. I can just repeat what I say, and that is I still do not know whether we will get any fines. And if we do get the fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process. And when something material happens, we'll continue to adhere to that principle. Thank you. Operator: The next question is from Nicolas McBeath, DNB Carnegie. Nicolas McBeath: I had a question on the deposit volumes. So after the most recent rate cut in Sweden, your deposit rates on some of your most popular savings account like eSavings have been cut to 0. So I was wondering how are deposit volumes behaving on these accounts. Have you seen any increased tendency of withdrawals since the rates were introduced, either to your own Swedbank players or migrations to competitors' deposits with above 0 rates? That's my first question. Jon Lidefelt: Well, thank you, Nicolas. The volume or the mix has been stable in that sense. So we have not seen any mix shift. And over time, the deposit beta has been around 1 on accounts with interest rate and where the sort of distance to 0 has been enough to reduce it. So then as we have talked about before, sometimes, we have for business reasons, taking a little bit of time lag between doing different rate changes. But over time, it has been one, and we have not seen mix shifts lately. Nicolas McBeath: All right. And then I had a question on levies for next year. What's your expectation there? And could you confirm whether the cost for interest-free deposits at Riksbank, will those be taken on the levies line or reduced NII? Jens Henriksson: Well, let me start with saying that if you see overall loan demand in Sweden from both corporate and private customers is subdued. In the Baltic, demand is stronger. And just to be blunt here, but we have an appetite for healthy loan growth while sticking to our conservative lending standards and focusing on profitability. You want to follow up, Jon? Jon Lidefelt: On your question on the Swedish Riksbank, we will have to deposit SEK 6 billion for which we will not get an interest rate for now for 9 months, I think it is. I think the jury is still somewhat out on exactly how to account for that. But my assumption or belief is that, yes, it will be under the bank tax row. And then the discussion is will it be a one-off now in Q4 or will it be spread out for the period? But most likely under the bank tax rule. Yes, I think that was the answer, right? Nicolas McBeath: Yes. And then just also if you could comment what your expectations for bank taxes are for 2026? Jens Henriksson: Bank taxes, don't get me started. But let me say a few words. And then as always, I want you to remind you that banks are an important part of our societies. What we do is we channel our customers' hard-earned deposits to lending, thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. And we are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector-specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system and an investment climate that fosters growth, financial stability and sustainable transformation. With that said, I need to say that. Then let me do a quick tour across our four home markets. First, Estonia, general corporate taxes are increasing as we see, but there is a political debate on that. In Lithuania, corporate taxes are also up. And then remind you that on top of this, since 2020, there is a 5% extra tax on banks, and the extra investor tax on NII further on top will be phased out during the year. In Latvia, we will have 3 years with a similar investor tax. There are some discussions on excluding new lending from the tax. If that would materialize, it would be positive for the Latvian economy. In Sweden, the government has proposed a base deduction to the bank tax while delivering the same tax revenues. And the tax rate is therefore proposed to be raised from 6 to 7 basis points in 2026. And now there is a government inquiry of some kind that will look into the specifics. And then as Jon talked about, let's call it what it is, it's another tax on the banking system, is that the Riksbank has decided that credit institutions from the end of October this year will need to place an interest-free deposit with them. And as Jon said, it amounts to around SEK 6 billion that will earn 0 interest. Operator: The next question from Sofie Peterzens, Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. So my first question would be on net interest income. When do you expect net interest income to trough? One of your competitors this morning said that it will be 3 to 6 months after the last rate cut? Do you think that's kind of fair? Or do you have a different view to this? And then my second question would be on the VAT refund that you continue to get. It was SEK 197 million now in third quarter and SEK 174 million, sorry, in the previous quarter. Like when should we expect these VAT refunds to come to an end? Or should we expect still some VAT recoveries in 2026? Jon Lidefelt: Thank you, Sofie. If I start with the NII, then if we assume no further rate cuts, to make it a bit simple, then ECB did their last one. It was effective on the 11th of June; and the Swedish Riksbank, it was effective as of 1st of October. And then if you take 3 months roughly in Sweden and 6 months roughly in the Baltics, that means that around year-end these rate cuts will be priced in, and the first quarter next year then will be the first quarter where you have a full quarter effect. Then as I've said before, you'll have to add your own assumptions on potential further rate cuts from the central banks, volume growth and margin development. When it comes to the VAT, then I don't know. There is a discussion from the Swedish government to change the VAT legislation. And everything around the VAT recoveries is due to that there has been a clash between the Swedish VAT law and the European regulation around that. So I would expect in a couple of years that there will be a new Swedish law in place. I don't know how fast or when it will come or what it will mean. So I don't -- we don't know. We'll have to see what happens. But we have so far then asked back for '19 to '23. Now it's clear '23, I've been a bit back and forth on it. But '19 to '23, we have asked recoveries for. And then let's see for the years after how things play out. Operator: [Operator Instructions] The next question from Riccardo Rovere, Mediobanca. Riccardo Rovere: Just a quick follow-up, again, on NII. Do you think that the pickup in lending volumes in general, and also deposits could somehow offset the last leg of pricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics. It should be visible by the end of the year, the same volumes can offset that? Jens Henriksson: We lost you. But thank you, Riccardo. Riccardo Rovere: Can you hear me? Jens Henriksson: Okay. Sorry. Now we can. Do you want to... Riccardo Rovere: Can you hear me now? Jon Lidefelt: Yes. Jens Henriksson: Yes. We hear you. Okay, please repeat. Riccardo Rovere: Okay, fine. Just wondering whether you think the volume growth, deposits and loans could somehow offset the last legacy repricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics, so to say that the last cuts done should be visible by the end of the year because that is the margin part of the equation in NII. I was wondering whether the volume side of the equation can somehow offset it. Jon Lidefelt: Thank you, Riccardo. Yes, I mean you're perfectly right, but I do not sort of forecast the NII. So I can leave that to you to do your own assumptions on volume growth, margin development and so forth. But of course, there is an offsetting effect on this. I said that in this quarter, higher volumes has had a positive impact of SEK 94 million on the NII. So of course, growth do offset. But I'll leave you to do your own assumptions on how that will develop going further. Operator: This was the last question. I would like to turn the conference back over to Maria Caneman for any closing remarks. Jens Henriksson: Well, I'll take that, Maria, if it's okay with you. So thank you for calling in, and thank you for always asking tough and knowledgeable questions. I now look forward to meeting you and many of your colleagues in our dialogue on Swedbank. Thank you for calling in. Bye.
Operator: Good day, and welcome to the Blackstone Third Quarter 2025 Investor Call. Today's conference is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Weston Tucker, Head of Shareholder Relations. Please go ahead. Weston Tucker: Thanks, Katie, and good morning, and welcome to Blackstone's third quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO; Jon Gray, President and Chief Operating Officer; and Michael Chae, Vice Chairman and Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-Q report in a few weeks. I'd like to remind you that today's call may include forward-looking statements, which are uncertain and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the factors that could affect results, please see the Risk Factors section of our 10-K. We'll also refer to non-GAAP measures, and you'll find reconciliations in the press release on the Shareholders page of our website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. Quickly on results. We reported GAAP net income for the quarter of $1.2 billion. Distributable earnings were $1.9 billion or $1.52 per common share, and we declared a dividend of $1.29 per share, which will be paid to holders of record as of November 3. With that, I'll turn the call over to Steve. Stephen Schwarzman: Good morning, and thank you for joining our call. Before we begin, I want to take a moment to acknowledge the horrific shooting that occurred at our New York City offices on July 28. The random attack resulted in multiple deaths, including our beloved colleague, Wesley Lepatner. Wesley was a wife and mother and a dear friend and mentor to many within and outside of our firm. We will greatly miss Wesley. Will continue to honor her legacy. We're also grateful for the bravery of our building security team, along with the New York Police Department who responded that day and who put themselves in harm's way every day to protect others. Turning to our results. Blackstone reported an outstanding third quarter. Distributable earnings increased nearly 50% year-on-year to $1.9 billion, as Weston mentioned, underpinned by a 26% growth in fee-related earnings and a more than doubling of net realizations. Inflows reached $54 billion, the fourth consecutive quarter in excess of $50 billion and totaled $225 billion for the last 12 months. Our fundraising success lifted assets under management to a new industry record of $1.24 trillion. And looking forward, I believe our prospects for growth are strong today is at any point in the firm's history. The structural tailwinds driving the alternative sector are accelerating with Blackstone as the reference firm. More investors are being introduced to the benefits of private market solutions than ever before, with growing adoption across the vast private wealth and insurance channels. And following the U.S. administration's recent executive order, we expect the defined contribution market to open to alternatives over time as well. In these areas, the powerful advantages of our brand, scale and breadth of capabilities are even more pronounced. At the same time, institutional limited partners are increasing their allocations to alternatives in multiple areas, and they're consolidating relationships with the best performing managers who can provide comprehensive multi-asset solutions. Meanwhile, in terms of deployment, the scope of where we invest continues to expand significantly as we scale our platforms in digital and energy infrastructure, private credit, Asia, the secondaries market for alternatives and other key growth areas. We are in the early innings of penetrating markets of enormous size and potential. In addition to these secular forces, we're also now seeing the deal cycle turn, creating another significant tailwind for the firm, the combination of a resilient economy, declining cost of capital and equity markets at all-time highs is leading to a resurgence in capital markets activity, including global IPO issuance, which more than doubled year-over-year in the third quarter. Notwithstanding the current government's shutdown, more conducive capital markets should lead to greater realizations for Blackstone, which, in turn, support fundraising and deployment. In the last 3 months, we executed 3 successful IPOs. And our IPO pipeline for the next 12 months, if converted, would translate to one of the largest years of issuance in our history. Despite all these positive developments, over the past several weeks, there's been a significant external focus on the implications of certain credit defaults in the market. These events have been erroneously linked to the traditional private credit market as a result of misunderstandings and misinformation. Importantly, the defaults and focus resulted from bank-led and bank syndicated credits, not private credit. Moreover, these situations are widely believed to involve the fraudulent pledging of the same collateral to multiple parties. The traditional private credit model is characterized by direct origination in the context of a long-term hold strategy, with due diligence performed by sophisticated institutional managers and rigorously negotiated documentation. For Blackstone, our $150 billion-plus direct lending platform is comprised of over 95% senior secured debt, with low loan-to-value ratios of less than 50% on average, meaning there is significant borrower capital subordinate to our positions in nearly all cases from companies backed by financial sponsors or public companies. And in the private investment-grade area, we've concentrated our activities in multitrillion-dollar markets where Blackstone is often a leading player, including data centers, energy infrastructure and real estate, with our loans secured by underlying assets of excellent quality. Our long-term, highly disciplined approach to investing in credit is the foundation of the strong results we've produced in this area as with every business at the firm. Our non-investment grade private credit strategies have generated 10% returns annually, net of all fees since inception, nearly 20 years ago. In direct lending specifically, we've experienced annual realized losses of only 1/10 of 1%, including through the global financial crisis. And our investment-grade focused private credit platform in BXCI has experienced zero realized losses to date. Of course, as the cycle progresses, it's reasonable to assume we'll see some increases in defaults. But we believe our structural advantages will continue to produce superior results. Performance has powered our growth in private credit. And we believe it will continue to power our growth in the future. Stepping back, this month, we celebrate Blackstone's 40th anniversary. It's been, I can assure you, an extraordinary journey. The firm has grown from a start-up in 1985 to the largest alternative asset manager in the world today and one of the 50 largest public companies in the United States. Importantly, we achieved almost all of this growth organically, which is quite distinctive among large firms in our industry. We are business builders at Blackstone, not business buyers. And while it's harder to build a business than buy it, over the past 40 years, we methodically planted seeds that would grow into major market-leading platforms in nearly every area in which we operate. What we've achieved over the past 4 decades would not have been possible without the efforts of three extraordinary individuals, who worked alongside me to either start the firm or to take it to the next level. Pete Peterson, my co-founder, gave us the necessary credibility that provided the launchpad for our growth. He was joined in 2002 by Tony James, who helped professionalize the organization and led us into many new business areas. Jon Gray took over in 2018 and has done a remarkable job managing the firm and pioneering a plethora of new business lines and products. Jon also redefined our investment approach to emphasize thematic positioning, resulting in our concentration today in data centers, where we're the largest in the world; energy and power, logistics, private credit and India, among other winning areas. Jon as did Tony and Pete during their time at Blackstone, demonstrates an unstoppable work ethic and profound care for the firm, its reputation and its people. Each of them changed the destiny of the firm and have been the best partners for me that I could have imagined. I owe them all an enormous debt of gratitude. Looking forward, what's been built at Blackstone is ideally designed for the environment we see before us and to capture the generational shifts underway in the global economy and markets. In terms of where we raise capital, we believe Blackstone is the partner of choice to bring the best of private markets to a rapidly expanding universe of investors. In terms of where we invest, the future requires massive capital solutions across all forms of equity and debt capital to power the AI revolution, to develop the infrastructure needed to meet the rising global demand for energy, to fund the extraordinary advancements in drug development in the life sciences area, to partner with large investment-grade-rated corporates, who are increasingly looking to private credit to meet their objectives; to help India meet its incredible growth potential and to drive forward other transformative megatrends that will define the investment landscape for decades to come. Alternatives will play a vital role in this future. And we see Blackstone leading the way with the largest and broadest platform and the deepest investment capabilities, underpinned by the power of our brand. The firm has achieved much in the past 40 years. But I strongly believe the best is ahead. Thank you to our shareholders for joining us on this adventure. The adventure continues. With that, I'll turn it over to Jon. Jonathan Gray: Thank you, Steve, and good morning, everyone. What Steve has done to both create and continue to drive this firm for 40 years is the stuff of legend. I'd also like to emphasize what Steve said about Wesley. She was an extraordinary woman, colleague and dear friend, simply the best of the best. We will miss her a ton. Moving to the quarter, this is an exciting time for the firm and our investors. The deal dam is finally breaking, and we have a bunch of secular tailwinds driving us forward as well. I'm going to focus my remarks specifically on the growing sources of capital inflows at the firm. In corporate and real estate credit, we crossed the $500 billion milestone, up a remarkable 18% year-over-year. In private wealth, our AUM in the channel grew 15% year-over-year to nearly $290 billion. And in our institutional business, we're seeing strong momentum across numerous areas in our drawdown and open-ended vehicles. Diving into credit, private credit markets are expanding from their origins in noninvestment-grade corporate credit and direct lending to become a key mechanism for financing the real economy, including commercial finance, consumer and residential finance, fund finance and of course, infrastructure. Blackstone is tremendously well positioned to lead this evolution as the largest third-party investment manager in credit globally, alongside our continuous innovation. Notably, our infrastructure and asset-based credit business grew 29% year-over-year to $107 billion, one of the fastest-growing areas at the firm. Our scale gives us access to what we believe is the broadest set of opportunities across the risk spectrum, which we can offer holistically to clients. As a result, we're seeing robust demand for multi-asset credit solutions across our 3 I's, institutions, insurance companies and individual investors. Another important development underway in credit market -- markets is the rising opportunity to partner with large investment-grade rated corporates, which we've discussed previously. Fortune 500 companies with substantial funding needs are increasingly looking to private credit for customized long-duration capital solutions, which are difficult to replicate in public markets. Scale and reputation are key. And Blackstone has established ourselves as a partner of choice, following our landmark transactions with EQT Corp and Rogers Communications. In the third quarter, we executed another major partnership, a $7 billion investment we are leading in a venture with energy infrastructure company Sempra, to support construction of a liquefied natural gas project on the Gulf Coast. These corporate partnerships provide our clients with access to high-quality, directly originated investments in a sector where we have high conviction, as always, without taking on balance sheet risk. Meanwhile, in the insurance channel, our AUM grew 19% year-over-year to $264 billion across IG private credit, liquid credit and other strategies. Our open architecture, multi-client approach is a major advantage. Our platform now includes 33 strategic and SMA relationships, and we continue to add more. Importantly, in the past 12 months, nearly 2/3 of our clients have expanded their relationship with us, the strongest testament to the value we deliver for them. In our IG focused area overall, we generated over 170 basis points of incremental spread year-to-date versus comparably rated liquid credit. Our farm-to-table model, which brings clients directly to borrowers, is designed to produce a structural premium to liquid markets, particularly vital in an environment where spreads and interest rates are tightening. Turning to private wealth, where our platform has grown to nearly $290 billion, as I mentioned, up threefold in the past 5 years. To put our scale in perspective, a recent Goldman Sachs research report highlighted that Blackstone has an estimated 50% share of all private wealth revenue among 9 major alternative firms. To put our momentum in perspective, we raised over $11 billion in the channel in the third quarter, more than double year-over-year, to the highest level in over 3 years. BCRED led the way, raising $3.6 billion and is on pace for a strong Q4. BXP raised $2.1 billion in the third quarter, bringing its NAV to $15 billion in only 7 quarters. BREIT generated healthy sales of roughly $800 million in the third quarter, while repurchases continued on their downward trajectory to the lowest level in 3.5 years. Finally, BXINFRA raised over $600 million in Q3 with its NAV exceeding $3 billion only 3 quarters after launch. In private wealth, as with every business at Blackstone, it all comes back to investment performance. BCRED has achieved 10% net returns annually since inception nearly 5 years ago. BREIT has generated 9% net returns for its largest share class for nearly 9 years, a 60% premium to public real estate markets, including approximately 5% net for the first 3 quarters of the year. BREIT's exposure to data centers, now almost 20% continues to be extremely helpful in driving its results. And BXP has delivered a 16% annualized net return for its largest share class since inception. Our investment performance powers our fundraising along with our ability to innovate. Looking forward, we expect 2026 to be our busiest year yet in terms of product launches with a significant focus on multi-asset opportunities. We're also broadening distribution in several major markets around the world and moving deeper into key subchannels, including the RIA channel. With these developments alongside our strategic alliance with Wellington and Vanguard, our partnership with L&G and the U.K. wealth and retirement markets and the massive potential in the U.S. defined contribution channel over time, the opportunity in private wealth continues to expand for Blackstone. Moving to our institutional business, which has grown by 64% over the last 5 years and has strong momentum across multiple areas. In infrastructure, our dedicated platform grew 32% year-over-year to $69 billion, including over $3 billion raised in the third quarter. The commingled BIP strategy has generated remarkable 17% net returns annually since inception. Our multi-asset investing business, BXMA, grew 12% year-over-year to a record $93 billion, again driven by performance. Q3 represented the 22nd consecutive quarter of positive composite returns for BXMA's largest strategy. Investors are responding favorably, with BXMA generating year-to-date net inflows of over $5 billion, the highest in nearly 15 years. In our drawdown fund area, it was another quarter of fundraising. We held additional closings for our new private equity Asia flagship, bringing it to over $9 billion as of quarter end, already significantly larger than the prior $6 billion vintage, and we expect to meaningfully exceed our original $10 billion target. We also raised additional capital for our next life sciences flagship, bringing it to $3.3 billion already more than 2/3 the size of the prior $5 billion -- I'm sorry, already more than 2/3 the size of the prior $5 billion vintage. In credit, we held an initial close of $1.6 billion for our new high-yield asset-based finance strategy, targeting $4 billion. In secondaries, we finished raising the largest ever infrastructure vehicle at $5.5 billion, and we're now raising our next PE secondary flagship, targeting at least the size of the prior $22 billion vintage, with the first major close expected in the fourth quarter. Also in Q4, we expect to launch fundraising for the fifth vintage of our private equity energy transition strategy with a prior vintage already approximately 70% committed only 16 months after starting the investment period. Other drawdown strategies we are raising include opportunistic credit, tactical opportunities and GP stakes. Overall, we believe investor confidence in Blackstone is as high today as ever, which, as you've heard, is translating to growing capital commitments across many areas. In real estate specifically, investor sentiment is starting to improve following the downturn. We remain firm believers in the sector's recovery and that flows ultimately follow performance. Commercial real estate values bottomed in December 2023 and since then, have been slowly improving. We think they're now approaching a steeper point in that recovery curve. The cost and availability of capital have been steadily strengthening and transaction activity has been increasing, including by 25% year-over-year in logistics, U.S. logistics in the last 12 months. In a market driven by supply and demand, the dramatic decline in new construction starts, including to the lowest level in over a decade in U.S. logistics and apartments, our largest sectors in real estate; should be very positive for values over time. As we stated before, we believe Blackstone is the best positioned firm in the world to benefit from the recovery underway in real estate markets. In closing, the firm is in outstanding shape by any measure, a cyclical resurgence in transaction activity alongside multiple secular growth engines should be very positive for our shareholders. And with that, I will turn things over to Michael. Michael Chae: Thanks, Jon, and good morning, everyone. Over the past several quarters, we've highlighted how the scaling of the firm's platforms in key growth channels is driving robust momentum in fundraising, assets under management and FRE. In addition, we've outlined a path of accelerating net realizations over time as capital markets strengthen. The third quarter was an excellent illustration of these dynamics of work and reinforces a favorable multiyear picture for the firm. Starting with results, AUM continued to advance to new record levels. Total AUM rose 12% year-over-year to $1.242 trillion, while fee earning AUM grew 10% to $906 billion. Management fees increased 14% year-over-year to a record $2 billion, underpinned by continued double-digit growth in base management fees, including 23% growth in base management fees for the private equity segment, 18% for credit insurance and 15% for BXMA. At the same time, transaction and advisory fees for the firm nearly doubled year-over-year to $156 million, with our Capital Markets business reporting one of its 2 best quarters in history, following a record Q2. While we expect a lower baseline of these revenues in the fourth quarter, the expanding scope of the firm's investment activity is widening the aperture of activity in our capital markets business. Fee-related performance revenues grew 72% and year-over-year to $453 million in the third quarter, generated by 9 different perpetual strategies, including BCRED and multiple other vehicles across the credit complex, BREIT and real estate BXP and private equity and BIP and infrastructure. Overall, total fee revenues for the firm grew 22% year-over-year to $2.5 billion in the third quarter. Fee-related earnings increased 26% year-over-year to $1.5 billion or $1.20 per share, one of the three best quarters of FRE in our history, driven by the growth in fee revenues along with healthy margin expansion. With respect to margins, as we stated before, it's most informative to look over multiple quarters given intra-year movements. On a year-to-date basis, FRE margin was 58.6%, reflecting expansion of over 100 basis points versus the prior year comparable period. While we expect FRE margin in the fourth quarter to be sequentially lower due to seasonal expense factors, for the full year 2025, we are tracking favorably against the initial view of margins we provided in January. Distributable earnings increased 48% year-over-year to $1.9 billion in the third quarter or $1.52 per share, powered by the strong double-digit growth in FRE alongside a significant acceleration in net realizations. We generated $505 million of net realizations in the quarter, more than double the prior-year period and up 55% sequentially in Q2. The largest single realization in the third quarter was the sale of an interest in the GP stakes portfolio within our secondaries platform at the end of September. We also completed the full exit of Hotwire, sales of certain U.S. energy assets and a number of other realizations across the private and public portfolios. Looking forward, in terms of fund dispositions, we have a robust pipeline of processes underway amid the improving transaction backdrop, and we believe we're moving toward acceleration in 2026, the concentrated in private equity with expanding contribution from real estate over time. And the firm's underlying realization potential is significant. The net accrued performance revenue on our balance sheet, our store value, stood at $6.5 billion at quarter end or $5.30 per share, while performance revenue eligible AUM in the ground has reached a record $611 billion. Turning to investment performance, our funds delivered healthy returns overall in the third quarter. Infrastructure led the way with 5.2% appreciation in the quarter and 19% for the last 12 months, reflected of broad-based gains across digital infrastructure, including continued notable strength in our data center platform, along with gains in our power and transportation-related holdings. The corporate private equity funds appreciated 2.5% in the quarter and 14% for the LTM period. Revenue growth at our operating company strengthened to 9% year-over-year in the third quarter, while margins have remained resilient, supported by labor market conditions that are in balance and continuing to moderate. In credit, our noninvestment-grade private credit strategy reported a gross return of 2.6% in the quarter and 12% for the LTM period, reflecting healthy underlying credit performance. Default rates across our noninvestment-grade holdings overall ticked up slightly but remained minimal. In our direct lending portfolio specifically, realized losses were only 12 basis points over the last 12 months. BXMA reported a 2.9% gross return for the absolute return composite in Q3 and 13% for the last 12 months. Notably, BXMA has delivered positive composite returns due to the past 30 months, which is leading to strong inflows in the segment's fourth consecutive quarter of double-digit AUM growth in Q3. In real estate, values were stable overall in the third quarter. The core+ funds appreciated modestly, driven by the third straight quarter of positive performance by BREIT. The opportunistic funds declined slightly in the quarter with positive overall appreciation in the underlying real estate offset by the negative impact of foreign currency movement. In total, our real estate platform remains well positioned, 3 of our highest conviction sectors, which are supported by very positive long-term fundamentals, data centers, logistics and rental housing; comprise approximately 75% of the global equity portfolio and nearly 90% of BREIT. Overall, our investors have continued to benefit significantly from the firm's position with leading platforms to address many of the most important market opportunities globally, including the largest data center business, leading energy infrastructure platform, the largest third-party focused private credit business, one of the largest private market secondaries platforms, a leading life sciences business and what we believe is the largest alternative business in India. These platforms have powered our investment performance and our growth, and we expect will continue to do so in the future. In closing, Blackstone is exceptionally well positioned, supported by both cyclical and secular tailwinds. The breadth and diversity of our global portfolio is a source of strength, while the firm's culture of innovation continues to drive us forward, leading to outstanding financial performance for shareholders. With that, we thank you for joining the call. We'd like to open it up now for questions. Operator: [Operator Instructions] We'll take our first question from Dan Fannon with Jefferies. Daniel Fannon: I wanted to follow up just on the private credit market given all the headlines and uncertainty. Can you just discuss in more detail any changes in credit quality across your portfolio? And then potentially also just in terms of what you maybe have done differently here, given some of the news and the recent bankruptcies we've seen in recent weeks? Jonathan Gray: Well, I would go back to the idea that this really isn't private credit story that what occurred here were bank-led, bank originated, bank syndicated credits. It also was a bit idiosyncratic as it appears that there was at least according to the reporting fraud involved. So I don't think there's much look through to private credit per se. None of these are what happens -- these are not directly related to the private credit market. And given the idiosyncratic nature, I don't think it really speaks to credit overall. I'm not sure anything really changes in our model. Steve spoke about the way we underwrite in private credit, which is doing deep due diligence, underwriting, what we're doing to hold. In terms of defaults today, they remain minimal realized losses date still almost nonexistent at these levels. You would expect as you get deeper in the cycle, you could see a little more over time. But when we look in aggregate at our business and what we think we'll deliver to our investors, we think it will continue to be quite strong. So I would say, given the underlying strength of the economy, what we've seen with margins we just don't see a lot of credit issues out there. Operator: We'll take our next question from Craig Siegenthaler with Bank of America. Craig Siegenthaler: Hope everyone is doing well, and congrats on the 40-year anniversary. This is the first quarter following President Trump's executive order for privates and 401(k)s. And just last week, I saw that you launched your defined contribution business. So I wanted to ask an open-end question. What are your plans? And do you do this alone? Or can you leverage your partnership with Vanguard and Wellington? Jonathan Gray: Well, we're obviously starting to move. I think the announcement was important. We were already heading in that direction, building up our capabilities, but we thought it was important to have a dedicated group of senior people focused on it. And between Heather, Tom, Paul, the individuals we announced, we've got a great lineup of people. I think this is an area where we will work with others. It's a broad market. You've got a lot of constituents involved. Certainly, there are large corporate plan sponsors where we already have deep relationships. Some of this will be done through some of the large financial institutions, who have platforms. There's going to be a range of partnerships here. Yes, we would intend to work with some of our existing partners. But it's still early. Obviously, this has been announced by the administration. There needs to be the rule making, Of course, with the government shutdown, that's been slowed. But I think everyone's expectation is that individuals and retirement who are in defined contribution plans, should have the opportunity to invest in alternatives just like their counterparts and defined benefit plans have. And we continue to believe, given the scale of our offerings and the breadth of our offerings, we can really provide holistic solutions. So I would say it's an area we're going to spend a lot of time on. Obviously, it will take some time to build. But again, the benefits of returns and diversifications, I think will really resonate with plan sponsors with consultants once the right legal frameworks in place, we will do this. And yes, I think we'll work with others along the way. Operator: We'll take our next question from Michael Cyprys with Morgan Stanley. Michael Cyprys: Wanted to ask about your brand strategy and how that's evolving as you extend further into the private wealth channel. Globally, understand you had, I believe, your first TV advertisement in Japan. So I was hoping if you could talk about your approach to marketing, advertising, brand, how that's evolving as you pursue opportunities from 401(k) to private wealth globally? And might we see a Blackstone stadium anytime soon? Jonathan Gray: I don't expect a Blackstone stadium anytime soon. What we do is fairly targeted, of course, we did do a launch in Japan, which we think is a very important market. I think it's the country in the world with the second most in savings. And the leadership there has done, I think, a really terrific job of pivoting just their citizenry from being savers to being investors, and they've opened up alternatives, both offshore and onshore and that's really important. Because Steve, going back 40 years, has thought about Japan as a key market. We've got a really strong brand there, made a big difference. He was recently there. There's a lot of enthusiasm, I believe, for Blackstone and our products. And making it more top of mind does make sense. Doing advertising, I think, for us, will be targeted. Obviously, we're pretty focused on who we're talking to in private wealth, financial advisers and customers who these products are appropriate for. So I think you will see us with a broader footprint over time. It makes sense as we grow to hundreds of thousands of customers. But at the same time, I think we'll do it in a targeted way in markets and in sectors where we think we can have a real impact. What's promising is just the growth in the private wealth area. The fact that we had this doubling in fundraising in the third quarter year-over-year and that the number of products we have, where we're going to expand to is very promising. So when we look out, we love our positioning in this space. And yes, we're going to do it on a global basis. And yes, it will involve a little more advertising versus what we've done historically. Operator: We'll take our next question from Bill Katz with TD Cowen. William Katz: Okay. Thank you very much. I apologize for the hoarse voice here this morning and our condolences for you loss as well, tragic. Just thinking about -- maybe Michael, a question for you. As you think about the interplay between the margin outlook ahead and also what seems to be a pretty healthy pipeline for realizations. Any thoughts on how we should think about the comp within the FRE versus the comp on gross realizations? Michael Cyprys: Bill, thank you, and thank you for your remarks. No, I think in terms of what the overall FRE margin dynamics, obviously, they continue to be healthy, Bill, and I think the bottomline is, over time, we'll continue to see operating leverage. We're obviously pleased with our year-to-date performance. With performance revenue fee margins, especially it relates to carry, as you know, those comp ratios can vary quarter-to-quarter based on sort of the mix of realizations, vintages of realizations. And overall, in terms of the relationship between the two, I think we've said before that, that we're happy with our basic approach. We have the ability and some control on a year-to-year basis to allocate compensation between the two in a way that we talked about before. But so while we have that lever, I think the overall approach is one, we're going to stick with. Operator: We'll take our next question from Brian McKenna with Citizens. Brian Mckenna: So I had a question on wealth. Retail investors today, they have access to a number of different strategies within private markets. But there are some parts of the market where the risk rewards are better than others. So for example, lower base rates and spreads are a bit of a headwind for direct lending. Returns are likely moving lower there, but it's generally a positive for private equity and real estate and performance should be accelerating there, all else equal. So I'm curious, how much time is being spent with your counterparts on education, just in terms of what you view as the proper allocations within private market portfolios through the cycle? Jonathan Gray: Well, we spend a lot of time at the home offices and in the field and then large-scale Zoom calls talking about how we see the markets. What we try to remind our wealth clients is that they should think about this similar to institutional investors. And it shouldn't be, "Hey, I'm going to just flip from here to there." If you went to a large state pension fund or a sovereign wealth fund, they would have allocations to real estate to private equity, to credit to infrastructure. They may modulate them a bit, but they take long-term approaches. And we think that is very prudent. Yes, there are moments in time where certain asset classes outperform relative to others. But we think all of the areas today actually look pretty good. You mentioned private credit. Yes, we have seen -- we're in an environment where base rates are coming down, but the premium relative to liquid credit, that endures, that is a real value to investors when they think about incremental return, so valuable, the farm-to-table model. And yes, in our equity-oriented strategies, there's a benefit lower rates, no question in real estate, in private equity, in infrastructure. But I think the biggest message to our investors is take a long-term approach, have a balanced portfolio so that you get the benefit of diversification and then the long-term compounding from each of these asset classes. Operator: We'll take our next question from Ben Budish with Barclays. Benjamin Budish: One of the questions we get a lot on your investing strategy around data centers is how do we know we're not in the bubble. So just curious your response to that question. And then maybe you could help us understand a little bit, what are the key drivers of returns for that strategy? Is there a cash flow component? Is it valuations? I know you talk a lot about supply and demand dynamics. To what extent might cap rates matter? So that would be helpful just to get a sense of what is sort of driving the excellent returns we've been seeing there. Jonathan Gray: Yes. Well, I think the key thing for us in our data center business is how we do the business. The vast majority of our investing and the vast majority of return comes from building, developing, leasing these data centers. We do it now in the U.S. We do it in Asia. We do it in Europe. We have leading platforms around the globe. And the key to what we do from a risk standpoint is we make sure we have an investment-grade counterparty. Today, I would say, in general, the largest companies in the world with roughly $1 trillion to $4 trillion market cap, and we get lease terms of 15 to 20 years. And that's when you start to deploy capital at real scale. And to us, that seems like a very prudent way to do this. The returns come from the differential between the cost of doing those projects and then what their worth is stabilized assets. So when you have a high investment-grade company and a long-term leased asset, that is quite valuable. So I think this -- when you think about what's happening in AI, the demand for compute, I think this is a very good sector to be in. I think it's also worth noting that the demand for data center space continues to grow. In fact, in our portfolio, in Q3, we saw a doubling in our leasing pipeline globally versus Q2, to give you a sense of the acceleration we're seeing. Obviously, some people may be concerned about that, but compute power and compute needs are going up. The key for us on behalf of our investors, primarily in real estate and infrastructure where this exposure sits; is to make sure we do this in a prudent way, long-term leases, credit tenants, we continue to do it that way. And by the way, similarly, we're doing this at scale on our credit business. There, we're also lending to entities where there's equity, plus they have these long-term leases as well. And so this is a huge need. It's one of the reasons why private equity and alternatives as a segment are growing so much this reindustrialization, the AI infrastructure requires large-scale capital, and we as a firm who does this on the debt and equity side with real expertise has a big competitive advantage. So I think this will continue to grow, but we'll keep doing it in a very disciplined way. Operator: We'll take our next question from Alex Blostein with Goldman Sachs. Alexander Blostein: Jon, I wanted to go back to the wealth discussion for a second, and I apologize for the two-parter, I guess, on this. So on credit, totally hear your point around the relative premium to liquid markets. But how important is the sort of 10-ish percent gross return to the retail channel? So does the point you make, does that resonate or it's really viewed as an absolute product? And any sort of color you can give us on the ground today, what the response in either gross sales or redemptions has been to BCRED's dividend cut from a couple of weeks ago? And then zooming out, I was intrigued by the multi-asset comment you guys made around launches for next year. Could you maybe just expand on that, what that could look like, what parts of the market you're trying to attract with these vehicles? Jonathan Gray: Sure. So I think, Alex, the key, of course, is relative returns. When we launch BCRED now, I guess, 5-plus years ago, we were targeting, I think, 8-plus percent returns given where base rates were and the product has done very well. As we go from a 5.5% short rates to now low 4s, probably a year from now low 3s. I think what investors will be looking at is how does that size up relative to what I can get in other forms of fixed income, particularly liquid fixed income. It could have some impact. But I think generally, the key will be this relative premium. To date, we've continued to see healthy gross sales. This quarter to date on pace in BCRED in a good way. We have not as of yet seen any sort of elevated redemptions, we haven't seen material changes. And I think the key is we continue to deliver for customers, deliver that relative premium, have a healthy portfolio from a credit standpoint. I think if you do that for investors, that's what matters. And by the way, it's not just in the wealth channel. Think about our growth in insurance. There actually, as rates come down, there's some spread compression, the need for private assets, comparable risk, investment-grade comparable risk, but with higher returns becomes even more important in that context. So I think the key for us is to deliver premium returns over base rates, be they long rates or short rates. If we do that, I think our private credit business will grow a lot. Michael just about multi-asset credit. Let me just quickly hit that. Our multi-asset I would say what's happening in the wealth channel is we have a scale now where we can do some interesting things. We obviously have the collaboration with Wellington and Vanguard. And if we do something there, it would be not surprising that involve potentially multiple of our products. We have the ability, we have some of our partners who are seeking things with different mixes of products based on incoming growth. And so creating those offerings is something that's pretty unique to Blackstone because we're not just in private equity or infrastructure credit or real estate. We can offer I think, unique combinations, unique solutions to investors. And as this industry matures, those kind of comprehensive offerings, I think, will be more attractive. Sorry, next question. Operator: We'll take our next question from Brennan Hawken with Bank of Montreal. Brennan Hawken: I wanted to circle back on Alex's question. So totally get, Jon, that this is not a private credit issue that we've seen public markets have a tendency to overreact and certainly, we've seen that. But curious about, you guys just recently had a dividend cut in BCRED. What I'm really curious about is what is the feedback you're hearing from the wealth management channel, given the big reaction in the public markets around some of this? Are you seeing -- are you hearing similar things from the ground within your wealth management counterparts and partners? And what can you tell us about the flows since October began and how they're looking in the credit vehicles? Is there any sort of pullback with the dividend cuts and maybe some apprehension around credit, albeit misplaced? Jonathan Gray: Well, we expect strong flows in BCRED in November. So that's all we know as of today. I would say the reaction in the wealth channel is a realization that these products and credit are 97% floating rate. So by definition, when rates come down, that impacts yield, and they want us to be responsible managers in terms of where we set the dividend level. So I just think that's the reality of the world we live in today. And again, the key is a relative premium over what you can get in liquid credit, and that continues to be enduring. And so I think the conflation of declining short-term rates with credit issues supposedly from these three nonprivate credit-related situations is odd. And I think investors understand that with floating rate products as floating rates come down, that has an impact, but you're still getting that meaningful premium I keep talking about. Operator: We'll take our next question from Glenn Schorr with Evercore ISI. Glenn Schorr: So the big banks and brokers are all giving very supportive cover for you on the forward M&A and IPO calendar that's upon us, you were able to replace whatever you monetize with some more accrued carry. So $6.5 billion, as you mentioned, I think 80% of it is across private equity and secondaries. So I guess my question is, if the deal calendar comes to fruition over the next handful of quarters the way just about everybody is saying it's going to be, how does the maturation of your assets fit? Meaning, should we see an incremental pickup in line with overall volumes? Is it more IPO dependent? Because it's pretty spread across all your products. Jonathan Gray: I don't know if -- we certainly don't want to get in the business of forward projections here, but I would say, Glenn, just directionally that as M&A markets pick up and as IPO markets pick up, our ability to monetize a crude net carry goes up. And you certainly saw some of that this quarter, you would expect as you move into '26, you'll see more of that. So directionally healthier markets, more liquid markets, better credit markets, better IPO markets; that's healthier for realizations, and it does accelerate the time frame. That being said, it takes time to get IPO it's done, it takes time to get sales processes done. But the overall outlook, which you keep hearing from us is getting better. This deal dam is breaking, and it should lead to more realizations over time. Operator: We'll take our next question from Brian Bedell with Deutsche Bank. Brian Bedell: Great. Great. You answered a lot on the private credit, but maybe just -- Jon, but maybe just one more area. And that would be like just the competition that you're seeing with banks or seeing banks. Are you seeing banks become more competitive in the direct lending business, how is that impacting spreads? And then related to that, obviously, credit insurance has been a huge growth driver from a fundraising perspective, accounting for more than half of your fundraising over the past 2 years. Do you see that dynamic continuing? And then if I could just squeeze in one more to Michael, and that's just the outlook for base fee growth for 4Q on a year-over-year basis, just wanted to -- I think you may have talked about that earlier, but just wanted to reaffirm that. Jonathan Gray: You got a lot in there, Brian. So on banks, the banks I think, are feeling healthy. They are in the marketplace. There is this sort of constant set of choices, should you do a bank-led deal or direct lending deal. That's been going on for a long time. And even for us on the private equity side, each deal is a little bit different. So to me, that dynamic is a little more of a constant. I would point out one of the benefits of the market is getting better as deal volume goes up. So you need, I think, both the private credit and the bank market because I do expect that volumes, certainly next year in the deal business, will go up, which creates a healthier supply-demand balance for capital. On the insurance front, there, it's pretty limited in terms of the number of people with an open architecture model not competing in the insurance space and who can do this at real scale. And that, I think, has been very beneficial for us. I think that's why you continue to see our rapid growth. I would say the momentum we have in our insurance business is pretty exceptional today. Clients are recognizing that this is a favorable risk, return trade-off that they have long-duration balance sheets and getting an average of 170-plus basis points of incremental return on investment-grade credit makes a ton of sense in doing with us, with our scale and our brand and our open architecture model really works. So that is an area where I think you will continue to see a lot of growth. Michael Chae: And Brian, on the management fee outlook, I mean, I would just step back and reiterate that we've been talking for some time about how the launching and scaling of our platforms in these for key growth areas is leading to an expansion of firm's earnings power. And you certainly saw that in the results this quarter and third consecutive quarter of double-digit base management growth. As it relates to Q4, we'd expect continued top line momentum, That would note, we expect slower year-over-year base management fee growth in Q4 versus Q3, primarily given multiple private equity flagship step-ups in the prior-year period and some sequential slowing in real estate. But in terms of that and the outlook for 2026, we're very positive. Operator: We'll take our next question from Steven Chubak with Wolf Research. Steven Chubak: So I wanted to ask on the real estate outlook. The performance indicators admittedly have been a bit mixed. On the positive side, monetization revenues tripled sequentially. Performance has also improved, but the pace of fundraising has moderated and the absolute return still remains tepid despite the interest rate tailwinds. So I was hoping you could speak to the performance outlook, both for opportunistic and core+ in 4Q and looking ahead to next year And just thoughts on the timing of an inflection in real estate fundraising and what would inform that expectation. Jonathan Gray: Well, we've been pretty consistent. We said at the beginning of '24, we thought real estate was bottoming. We said it would be a slow non-V shaped recovery. That has certainly been the case. It's hard to say exactly when things turn, but a number of the tumblers are falling into place for real estate. First off, we've seen cost of capital come down pretty meaningfully. The 10-year back down here at 4%. Spreads have come down quite a bit. That is very helpful for the sector. The CMBS market, volumes they are picking up. I think they're up about 25% year-to-date. We're also seeing this very constructive decline in new supply, which you heard about in our prepared remarks, which starts to set a foundation for cash flow growth as you look out over time. I would tell you, qualitatively, we are seeing some good signs in the sense that in the last couple of weeks, we announced 2 large transactions, big office building here in New York City, and then that we were selling and then we sold some logistics in the U.K. to a public company. These sort of transactions were very hard to get done 12 months ago. And I would note that during one of a recent transaction we've been involved in, I got multiple calls from buyers asking if they could be positioned to win. And I joked internally that was the first time in 3.5 years, that has happened. So I think we're at a point here, the combination of a capital markets recovery and a sharp downturn in construction sets the groundwork for getting closer to that inflection point. And I think when you see that, obviously, it will be very helpful to our business given the exposure we have. And that's why you see us trying to deploy capital at scale to capture this before people start to feel more comfortable. I will also say the sentiment amongst global investors. I was in Europe, in Asia in the last couple of weeks; is definitely moving to a better spot. But in general, investors want to see a little more positive performance, and that will make a difference. Now in BREIT, we've had 9 months of positive performance. I think that will begin to have an impact there on flows. So it will take some time. But at some point, I think investors will recognize, "Wow, this is a sector that's been out of favor." It's not going away. People are still going to live in apartments. They're going to order logistics. These things are long-term asset classes, and I can invest in them at discounts to replacement costs at attractive prices. I think that will start to make a difference. And I definitely think we're getting closer to that point. Operator: We'll take our next question from Ken Worthington with JPMorgan. Kenneth Worthington: You talked about a greater focus on the RIA channel for wealth. Maybe to help level set us, what is -- or how much of your wealth AUM is RIA sold at this point versus the broker wirehouse channel. And is this focus about adding more in different sales personnel? Or does the product need to be adjusted as well in terms of fees and structure? Jonathan Gray: So Ken, I don't know -- I don't think we disclose or have certainly not the information here now, about where the different forms of distribution. But I would say the RIA channel is very large, but it's harder to access, as you know. I mean, at the bigger wirehouses, you can work at the top of the house, it can get distributed out. One of the advantages we have as a firm is having 300-plus people on the ground, and that enables us to go out there and talk to people. And I think for us, we recently put -- brought in a new senior person to run that area for us. And we're really trying to do a concentrated outreach. Obviously, the marketing, the advertising, those things matter when you're going to a more distributed market. But the underlying pricing of the product, that doesn't really change, but it requires a lot of effort. I will say we did create an interval product in multi-asset credit, which was our first rail interval product, which we launched in the RIA channel specifically. So I think for us, it's about going after it. It's a little bit like foreign markets, where you have to put a concentrated effort, if it's Japan or Australia or Canada, Asia, it's the same sort of thing here. And again, given the track record of our products, the performance we've delivered, the strength of our brand, if we put the right resources on the ground, I think we can build big relationships and large AUM in the RIA channel. So I think that's an area of major opportunity for us. Operator: We'll take our next question from Patrick Davitt with Autonomous Research. Patrick Davitt: A different angle on Brian's question. Maybe it's a bit too early to know, but had some wobbles in the bank loan market, to your points earlier, seen some deals pulled and/or reprice which I think you could argue was actually good for direct lending dynamics. So curious if you're seeing any signs of the banks are rethinking how aggressive they've been in that channel potentially getting less competitive because of what's happened and/or any sign new origination spreads could get a little bit wider on the back of those bank loan blow-ups. Jonathan Gray: The bank market obviously has to be sensitive because they're in the distribution business. So when you see what happened in the last couple of weeks, not a surprise, you could see a little bit of hesitancy. But I think market participants have concluded that this was pretty isolated and it is not a sign of something bigger. And as a result, I don't think we would say today, we're really seeing any sort of pullback from the banks. Operator: We'll take our next question from Crispin Love with Piper Sandler. We'll take our final question then from Arnaud Giblat with BNP. Arnaud Giblat: In credit and insurance, your dry powder has close to doubled in the last 12 months. I was wondering if that was the case as well in direct lending, private debt, given how tight the spreads have become and lose the covenants or with the competition with both in the syndicated loan market? And specifically, if I could just follow on that specific point into BCRED, how do you see capacity developing? I mean is it -- if conditions remain really hot and tight, do you start worrying perhaps a bit about capacity and the speed at which you're deploying capital, assuming that flows remain strong? Jonathan Gray: Well, I'll just comment -- Michael can comment on where the dry powder sits in credit. But I think there's a bit of mischaracterization here as to how hot the markets are overheated. Loan-to-value that we originated in our direct lending in Q3 was at 38% loan to value. That's probably half the level it was if you went back to '06, '07. So -- and spreads are sort of in line with historic levels. So yes, it's a business that has grown a lot, but it's taken a significant amount of share. And we just haven't seen sort of the erosion of credit standards. And we actually have had a very strong deployment year. I think we've had a record year this year, first 9 months in terms of deployment. So we feel good about the business. In terms of... Michael Chae: And Arnaud, I just want to point out, dry powder, as you probably know, is largely about drawdown funds. And our direct lending capital obviously sits in a lot of different vehicles, including perpetual ones. So direct lending, just sort of structurally, is a smaller fraction of our dry powder. Operator: Thank you. With no additional questions in queue. At this time, I'd like to turn the call back over to Weston Tucker for any additional or closing remarks. Weston Tucker: Great. Thank you, everyone, for joining us today and look forward to following up after the call.
Operator: Thank you for standing by, and welcome to American Airlines Group's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Neil Russell, Vice President, Investor Relations. Please go ahead. Neil Russell: Thanks, Latif, and good morning, everyone. Welcome to the American Airlines Group Earnings Conference Call. On the call with prepared remarks, we have our CEO, Robert Isom; and our CFO, Devon May. In addition, we have a number of senior executives in the room this morning for the Q&A session. After our prepared remarks, we will open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to 1 question and 1 follow-up. Before we begin, we must state that today's call contains forward-looking statements, including statements concerning future events costs, forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued earlier this morning, form 10-Q that was filed with the SEC earlier this morning, as well as in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 19, 2025. Unless otherwise specified, all references to earnings per share are on an adjusted and diluted basis. Additionally, we will be discussing certain non-GAAP financial measures, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the Investor Relations section of our website. A webcast of this call will also be archived on our website. The information we are giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest in American and for joining us this morning. With that, I'll turn the call over to our CEO, Robert Isom. Robert Isom: Thanks, Neil, and good morning, everyone. This morning, American reported an adjusted pretax loss of $139 million for the third quarter, or a loss of $0.17 per share. This result was at the higher end of the guidance provided in July and was driven by stronger revenue performance. We see that performance continuing and have adjusted our fourth quarter and full year guidance accordingly. I'm proud of the team's hard work and resilience throughout the third quarter. They executed well despite tough operating conditions. . At American Airlines, we're proud to be a premium global airline with an enduring legacy of innovation and a commitment to caring for people on life's journey. We've built an airline position to excel over the long term and are focused on delivering for our shareholders, customers and team. That said, we recognize there's significant revenue opportunity ahead of us and we're excited about the good work underway to accelerate our revenue growth and view that as considerable upside as we move into 2026. The revenue momentum we've seen and the opportunity ahead is a product of our sales and revenue management initiatives, scaling our new agreement with Citi, restoring capacity in our hubs, and using consistent improvements in the customer experience as a value multiplier to everything we do. Much of this foundation has been laid thanks to the efforts of our commercial team and Steve Johnson. Last year, I asked Steve to step in and lead the commercial organization to quickly stabilize and reenergize this part of our business. We knew we'd hire a new Chief Commercial Officer in the future, and I'm grateful to Steve for taking this on. . He and the team has strengthened our commercial position, and we're now in a great spot to make a transition. And today, we've named Nat Pieper, as American's new Chief Commercial Officer. Nat has more than 25 years' experience in leading commercial and financial teams at Alaska, Delta and Northwest Airlines, and most recently, the Oneworld Alliance. He is a seasoned airline executive who understands the complexity of highly integrated organizations. I've known Nat for more than 20 years, and he's exactly the kind of leader we want at American. He will officially join us on November 3, at which point Steve will return to his role as our Vice Chair and Chief Strategy Officer. So with that, let's talk more about some of the work that the team has delivered. Leading off with our focus on sales and distribution, we continue to build out our sales organization and are aggressively using our loyalty program to win back customers, especially in competitive markets. In the third quarter, we grew our corporate revenue by 14% year-over-year. This result is further confirmation that our sales and distribution efforts are being well received by our customers. Exiting this year, we expect to have fully recovered the revenue share that was lost by our prior sales and distribution strategy. We'll now shift our focus to growing our share beyond those historical levels, which we believe that, combined with revenue management investments and retailing optimization will produce significant value for the airline. Next, deepening our relationship with Citi and expanding our co-brand card portfolio will further the growth of our industry-leading loyalty program. We're excited for our exclusive partnership with Citi to begin on January 1. The teams at American and Citi have been hard at work, executing a successful cutover of our in-flight acquisition channels to Citi earlier this month. In addition, we've recently launched our new mid-tier Citi AAdvantage Globe MasterCard, expanding our card offerings to meet travelers at every level. Our partnership with Citi will provide more benefits to our customers and is designed to drive growth in our credit card acquisitions and penetration over the coming years. The upside is significant. As we approach the end of the decade, we expect remuneration from our co-branded credit card and other partners to reach approximately $10 billion per year. At that time, the incremental annual benefit to operating income is projected to be approximately $1.5 billion compared to 2024. On the loyalty side, active AAdvantage accounts increased 7% year-over-year in the third quarter with our highest growth in enrollments coming from Chicago, which was up approximately 20% year-over-year. AAdvantage members are more engaged, generate a higher yield versus nonmembers and are a key driver for premium cabin demand. In the third quarter, spending on our co-branded credit cards was up 9% year-over-year as customers continue to favor AAdvantage Miles as their preferred rewards currency. We remain focused on strengthening our network by scaling our hubs. We're proud of our hub network that we have with 8 of our hubs located in the 10 largest metro areas in the U.S. This year, our growth was focused on Chicago, Philadelphia and New York. American has a long history in all 3 cities with a base of corporate and premium customers that are loyal to the American brand. Our improved schedules, along with our new sales and distribution strategy and other product improvements are helping us win local high-value customers. Performance continues to track in line with our expectations. This targeted expansion will continue through the fourth quarter and into 2026 as we add more cities and more frequencies to improve our offering for customers. Our ability to grow capacity in premium markets will be further supported as we take delivery of new aircraft and reconfigure our existing fleet. These efforts will allow us to grow our premium seats at nearly 2x the rate of main cabin seats and grow our lie-flat seats over 50% by the end of the decade. Additionally, we're excited about the significant investments in airport infrastructure happening throughout our system, headlined by rapid construction of the new Terminal F and enhanced Terminals A and C at DFW. When complete, DFW will be a world-class facility and the largest single carrier hub in the world. All of this is intended to deliver a consistent and elevated travel experience for our customers, whether on the ground or in the air. And it's not just facilities. The investments we continue to make in customer experience are the value multiplier on top of everything we're doing. With the ongoing rollout of our new flagship suite designed to elevate privacy, comfort and luxury, we're continuing to reimagine and advance the premium travel experience. Customers have responded very positively to this product on our new Boeing 787-9 Ps, which led American wide-body aircraft in customer satisfaction. We will offer the same product on our 321XLRs and our 777 fleets in the coming years. We're also investing in the onboard experience of our regional aircraft, including the installation of high-speed satellite WiFi to maintain a consistent premium experience across our fleet. We're proud to offer high-speed gate-to-gate satellite WiFi on more aircraft than any other airline, keeping our customers connected while traveling. Thanks to our new sponsorship with AT&T, this amenity will be complementary for our AAdvantage members starting in January. We announced several exciting updates to our leading lounge network, including plans to open new flagship lounges in Miami and in Charlotte, and we'll expand our Admirals Club Lounge footprint in both markets as well. We also introduced several additional premium enhancements, including new amenity kits, improvements to our food and beverage offerings and a new partnership with Champagne Ballanger. We continue to explore partnerships to elevate the art of travel, like our new coffee partnership with Lavazza that aligns with our focus on refined offerings and exceptional service throughout the travel journey. Nothing matters more to our customers than flying on a reliable airline. While this quarter presented challenging operating conditions, the American team quickly recovered, minimized disruptions and maintained a resilient operation for our customers. Thanks to continued investments in technology, including the expansion of our Connect Assist platform, we've enhanced the connection experience and successfully preserved customer connections. The team is focused on investing in the right areas, and we're committed to executing on our initiatives to deliver on our revenue opportunities. Before closing, I'd like to take a moment to recognize the dedicated aviation professionals who continue to uphold the safety and security of our industry during the government shutdown. We're hopeful that action will be taken to reopen the government as soon as possible. And now I'll turn the call over to Devon to share more about our financial results and outlook. Devon May: Thank you, Robert. Excluding net special items, American reported a third quarter adjusted loss per share of $0.17, a 50% beat versus the midpoint of our prior guidance. We continue to progress on our commitment to deliver on our revenue potential. We produced record third quarter revenue of $13.7 billion, which was about 1% ahead of the midpoint of our initial guidance. Domestic year-over-year PRASM improved sequentially each month and turned positive in September. While premium continued to outperform Main cabin, we've seen improvement in the main cabin since its low point in July. That momentum has continued into October, and we're encouraged by the bookings we have taken for November and December. Our international entities performed in line with the guidance we gave in July. After a very strong second quarter, unit revenue in the Atlantic region was down year-over-year due in part to the macro uncertainty during the peak booking window and a continued seasonal shift in demand from the third quarter to the fourth quarter. That said, Atlantic was our most profitable region during the quarter, and we expect Atlantic unit revenue to be solidly positive in the fourth quarter. In Latin America, unit revenues were down year-over-year as the short-haul Latin market was oversupplied during the quarter. American's presence in the region, the premium services we offer and the scale we have in Miami and our other Southern hubs allow for profitable results in this environment and a continued long-term competitive advantage in the region. Lastly, Pacific year-over-year unit revenue declined mid-single digits in the quarter. We expect fourth quarter unit revenues to be approximately flat year-over-year off a very strong 2024 base, supported by strength in the premium cabins. Premium continues to perform well with year-over-year premium unit revenue outpacing main cabin by 5 points in the third quarter. Capitalizing on this demand, American is continuing to invest in expanding our premium offerings across the customer journey. While already recognized amongst the U.S. network carriers for having the highest rated and most consistent lie-flat product across our long-haul fleet, we are elevating this experience with the investment in our new flagship suite, which we launched with our high premium Boeing 787-9s. As Robert said, in the coming quarters, we'll expand this product further with the introduction of our A321 XLRs and the retrofit of 20 777-300 aircraft, which will increase premium seats on this fleet by over 20%. We're excited to announce that we'll continue scaling our new flagship product on our 777-200 aircraft. These aircraft, which will be receiving a nose-to-tail retrofit, will see a 25% increase in lie-flat and premium economy seats, along with new in-flight seatback entertainment system. Additionally, we continue to expand premium on our domestic aircraft. We are retrofitting our A319s and A320s, where we will grow first-class seating by 50% and 33%, respectively. With these investments in our existing fleet, along with our new deliveries, our premium seat growth will outpace our non-premium offerings. Our total capital expenditures in 2025 are expected to be approximately $3.8 billion, which includes the delivery of 51 new aircraft this year. Longer term, capital expenditures remain consistent with our prior guidance and our current expectations for 2026 are approximately $4 billion to $4.5 billion of total CapEx. We continue to make progress in strengthening the balance sheet. Total debt at the end of the third quarter was $36.8 billion, down by $1.2 billion from the second quarter. We ended the quarter with $10.3 billion of available liquidity. At the start of the year, we made a commitment to reduce total debt by approximately $4 billion to less than $35 billion by the end of 2027. Just 9 months after making that commitment, we are more than 50% of the way to achieving that goal. Now on to our outlook for the remainder of the year. For the fourth quarter, we expect capacity to be up between 3% and 5% year-over-year as we continue to build back our hubs and adjust our schedules to meet evolving seasonal demand trends. We expect fourth quarter revenue to be up between 3% and 5% year-over-year. If we achieve the midpoint of our guidance, we'll deliver flat unit revenue in the quarter after being down 2.7% in Q2 and 1.9% in Q3. Fourth quarter CASM ex is anticipated to be up 2.5% to 4.5% year-over-year, in line with the guidance we provided in July. We are continuing our multiyear reengineering the business effort to utilize technology and streamline processes to enable an improved customer and team member experience while driving a more efficient business. These efficiencies are being realized through best-in-class workforce management, efficient asset utilization and procurement excellence. These efforts have resulted in $750 million of annual savings versus 2023. As a result of the investments and process improvements we have made, most mainline work groups are operating at higher productivity levels today than they were in 2019. With labor cost certainty through 2027, American is able to focus on our long-term efficiency efforts while executing on our commercial and customer initiatives. With this fourth quarter guidance, we expect to deliver an adjusted operating margin of between 5% and 7% and earnings per share between $0.45 and $0.75, over 2x higher than the midpoint of our implied fourth quarter guidance from July. This brings our full year EPS guidance to a range of $0.65 to $0.95 per share. Based on these earnings and capital projections, we expect to generate free cash flow of over $1 billion for the year. I'll now hand the call back to Robert for closing remarks. Robert Isom: Thanks, Devon. We're positioning American for long-term success. Our commercial efforts in sales and distribution and revenue management are taking root, driving business and premium revenue outperformance. We're poised to take advantage of the new relationship being launched with Citi in 2026 to grow the world's first and largest airline loyalty program at unprecedented rates. We started down the path of restoring our network presence, further expanding our industry-leading footprint in North America, the world's most important aviation market, all powered by the youngest and most fuel-efficient fleet. These efforts are being bolstered by our focus on elevating the customer experience, evidenced by the continual announcements this year of exhilarating upgrades. Finally, we'll always remain focused on efficient capacity production. We've been a leader in this space for years, and we'll continue to make smart investments that drive efficiencies in our business. We're looking forward to closing out 2025 in strong fashion, and with this groundwork, we plan to deliver meaningful long-term value for our shareholders in 2026 and beyond. Thank you for your interest in American Airlines. Operator, you may now open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Scott Group of Wolfe Research. Scott Group: So I think I saw you said that September unit revenue was positive. Fourth quarter guide is sort of flat. So maybe just explain that change. And then within that, I think I just heard you say domestic unit revenue, you think is flat in Q4 as well. Maybe just some thoughts premium versus domestic and how that shakes out. Robert Isom: I'm sorry, Latif, I think we were on mute there. So we'll start this over. Steve, do you want to take this question? Stephen Johnson: Sure. Latif, can you hear me now? . Operator: Yes, sir. Please proceed. Stephen Johnson: Yes, Scott, thanks for the question. What we've seen, I think, is what you've heard from the other airlines is July was a really very difficult month for the industry. August was better than July, September better than August, and indeed, we did inflect positive during the month of September. October looks better than September and the fourth quarter looks strong. That has been driven interestingly, largely by improvements in -- for us, anyway, in main cabin revenues. The premium revenues, as we've discussed, have been strong all year long, really not faltering notwithstanding any of the economic uncertainty we went, but that economic uncertainty and Liberation Day and all of that has played a very -- it's been very difficult on main cabin revenue, the demand from our most price-sensitive customers. In any event, the projection that we have for the fourth quarter of being flat year-over-year is a sequential improvement -- quarterly sequential improvement. Something we're excited about is a combination of good performance, I think, in the domestic entity, good performance across the Atlantic, in the North Pacific, and in South America, and a little more uneven performance in the South Pacific largely because of capacity, and then year-over-year, not great performance in short-haul Latin America, again, a capacity issue. That entity, while down year-over-year, remains a really important part of our business and a profitable part of our business as we have real network strength from Miami and DFW and Phoenix into those regions. So I think we're excited about the sequential improvement being able to project a flat unit revenue year-over-year. Scott Group: Okay. And then I want to see if you want to provide any sort of early thoughts for next year. So if I look at Q4, right, we've got capacity up 3% to 5%, what are you saying unit cost up 2.5% to 4.5%. Is that sort of the right way to think about capacity and unit cost for next year? And ultimately, what I'm trying to figure out is what's the visibility or confidence in sort of a price cost inflection next year? Devon May: Scott, we're just in the planning process for next year as we sit here today. So we're not guiding to capacity or unit cost performance at this point. But we'll stay consistent with what we've been saying on that front is we have this fleet plan that can allow us to grow somewhere around mid-single digits. Our guardrails on capacity production are at one end, we just want to understand what sort of economic growth and what sort of demand growth we're seeing, and we like where we're at on that front. The other side is where the competition is at. And lastly, just what sort of growth opportunities we have. We're really excited about the growth we put into the market this year, primarily in Philadelphia, Chicago and New York. Those markets will continue to grow in 2026, and we're also excited about growth opportunities in Miami and in Phoenix. On the cost side, I think you see it in our numbers. We believe we manage cost and efficiency better than anyone. It's been a very formal and long-standing effort. And so next year, we look out, yes, we're looking for margin expansion as we head into 2026. Operator: Our next question comes from the line of Sheila Kahyaoglu of Jefferies. Sheila Kahyaoglu: Maybe digging a bit deeper into the capacity and premium investment comments now that you have also the 777-200 fleet going, the schedules are loaded up 5% in the first half of next year. The fleet grows a similar amount, assuming no retirements. So how are you thinking about the mix in premium versus main cabin and short haul versus long haul? Robert Isom: So I'll start. Thanks, Sheila. Well, first off, in terms of capacity mix, international, domestic, it takes a strong domestic and very strong hubs to support a thriving international operation. And so we'll keep a balance in terms of that growth. It's really exciting in terms of premium offerings. So our premium seating, we expect, especially now with the 787-9s, 9Ps, the XLRs, the reconfigurations we're making, the premium seating is going to grow roughly at twice the rate of what our non-premium offerings would grow. And even more specific in terms of our live flat international capable seating, that is going to grow by 50% as we look out towards the end of the decade. So we feel really excited about it, and it all plays into what we're seeing in the marketplace that people are willing to pay for experience. And we're going to make sure that we have a hard product that they enjoy. Sheila Kahyaoglu: Great. And then maybe if I could ask another one on just domestic hubs. You mentioned Chicago enrollments are up 20% year-over-year for AAdvantage. Lots have been said about this market. When you look across domestic hubs, where are you seeing the greatest level of unit revenue improvement, either sequentially or year-over-year? And how are you thinking about capacity next year? Robert Isom: Well, I'll just start. Look, we're pleased with our efforts in Chicago. Certainly, we've done a nice job in growing that back. And as you look towards next year, that's a hub that will be over 500 departures. And we have just an incredible base of customers that are waiting for us to really get back in the marketplace. Those AAdvantage enrollments overall, we grew 7%. But in Chicago specifically, 20%. I mean that's a really remarkable number. We're going to take advantage of that desire for our product, as I mentioned. And as we look out into the future, we anticipate that Chicago will return to its rightful places as one of our largest and more profitable hubs. So capacity, at least in Chicago, as we take a look at, we're going to fly what we can. It will be, again, over 500 departures. Capacity throughout the rest of the system, it's really focused on restoration of flying in Philadelphia, Miami, Phoenix. We've already have DFW and Charlotte appropriately sized. So we're really excited about what we're going to be able to bring back to markets that, quite frankly, because of regional aircraft and delivery delays, we haven't been able to serve as thoroughly as we'd like. Operator: Our next question comes from the line of David Vernon of Bernstein. David Vernon: I hate to bang the same drum, but maybe I'll ask the same question in a slightly different way. If we think about what percentage of premium seats are in the mix kind of as we end 2025? And how does that change? If you can put a number on that, that would be helpful as well as any sort of commentary or directional commentary on the relative buy-up from what would be considered a non-premium versus a premium seat. I think what we're trying to all kind of model out here is what kind of unit revenue lift you could get because the product mix is changing so much next year. I appreciate the twice the normal seat growth rate, but I think what we're trying to do is really kind of help handicap what kind of margin expansion should be coming from that product investment. Stephen Johnson: Thanks, David. Great question, even if it is bang in the same drum. This is a really good story for the industry, really good story for American. As I've said earlier and the guy said in the opening remarks, premium has been strong all year despite economic uncertainty. If we look back a long time, some of us have been around in the business for a long time, I can just remember discussions about whether we could ever, as an industry, find a way to get people to pay more for better products and services. And I think the answer to the question these days is a resounding yes. Part of what we're seeing is -- and I have to say it feels like a post-pandemic new normal. It's just been so consistent and so consistent through difficult economic circumstances. But it's -- premium has always been driven by -- and there remains a component of that, that's business demand. But business doesn't always let their employees fly in premium. And so really, what we're seeing is, I think, a renaissance or maybe a new beginning for premium leisure. And this goes to my comment about our customers being willing to pay more for better services and better products. Our premium cabin is now 65% load factor is -- we think is premium leisure. It's outperformed the main cabin by 5 percentage points, 5 RASM points year-over-year. Our paid load factor in premium is up 2 points year-over-year. It is now nearly 80%. And we were selling on a paid basis only in the mid-60s before the pandemic. Nearly 50% of our ticket revenue comes from premium. And in recognition of those market dynamics, our focus is on taking advantage of that and growing that. Robert and Devon talked about the additional premium seats that we're adding to the fleet. We're designing better products. We have easier ways and super simple digital ways to upgrade and lots of opportunities to upgrade on a wallet-friendly basis. It's really, I think, becoming just a really important and really exciting part of our business. David Vernon: Okay. And then maybe as you think about beyond the hard product investment, right, and that -- however that mix shift is going to change in the number of seats, Robert, when you're talking to the team or maybe and working with that as he's ramping up, when you think about the product investments or experience investments that you need to make, what are the 2 or 3 areas that you are most focused on with the team? Robert Isom: Thanks, David. Well, the good news on this is that we're really bringing to fulfillment a number of investments we made over time. And then adding to that this reimagined and reinvigorated customer experience effort here. As you know, we launched a new team that has been taking a look at just in-flight amenities and products. And so whether that's, again, relationships with great brands for coffee or champagne, whether that's getting back into the creature comforts with amenity kits and things like bedding and duvets, those things are all happening. We're mixing that on -- so that in-flight experience is then being mixed with an on-the-ground focus. And so whether it's the investment in the facilities that we're making throughout the system, notably our premium lounges, which, again, we have already the biggest network of premium lounges. We're just only going to add to that in places like Charlotte and Miami. So I'd say that that's the second thing. And look, you do need to have the hard product. And so as we've talked before, first off, no one has a more consistent lie-flat product than we do. I'm super excited about the new deliveries of 787-9s and the XLRs. But on top of that, whether it's our A320s, our A319s, our regional aircraft and how we're equipping them with satellite WiFi, that's all fantastic. And then what we announced today, the 777-200 reconfigurs, that is a big deal for us because extending the lives of those and putting those into service really gives us a capital spending holiday in terms of fleet replacement. So it's a win-win-win for our customers, for our company and most certainly our investors. Operator: Our next question comes from the line of Dan McKenzie of Seaport Global. Daniel McKenzie: Congrats on the outlook here in the quarter. Going back to an earlier question on Chicago and the response that you expect it to return to its rightful place as the largest and one of the more profitable hubs. That, of course, is pretty different messaging than what we heard from one of your chief competitors there. So just a couple of questions. One, can the airport support 2 strong competitors longer term? And what does history tell us? And then finally, with the 20% improvement in enrollments, is that enough for you to help close that margin gap there in '26 or 2027? Robert Isom: Thanks, Dan. I'll just again, restate what we've been saying all along. Of course, Chicago can support 2 hub carriers. It's been doing it forever. American has served Chicago now for almost 100 years. And so we're looking to serve it well into the future. I've talked about a hub. It's going to be our third largest hub. There aren't many 500 departure hubs out there. It's critically important to our customers in Chicago and those that connect in the region. It ensures that there is service, competitive service. And I think that, that's probably the thing that maybe a competitor doesn't like that we're going to be there. We're going to be investing in Chicago. And there aren't going to be really any impediments to us building out the network and the footprint that we need there. So thanks for the question. Really excited about Chicago and what's coming up in 2026 and beyond. Daniel McKenzie: Yes. Very good. And then, Robert, you mentioned a $1 billion cost labor disadvantage to competitors on CNBC this morning. Is it your sense that this cost disadvantage should go away in '26, at least in theory? And can the domestic supply backdrop support the higher fares needed to offset that increased cost or whether or not more capacity needs to exit? Robert Isom: Well, you'll have to ask that question of our competitor that is obviously has profits that are built off of a labor cost advantage. And it's a labor cost advantage that is in just rate. And so I can't imagine that, that is something that moves into the future. It's not -- certainly not something that we would ever contemplate at American over the long run. Now in regard to ultimately improving margins in the business, this is where American, I think, has a tremendous opportunity. So first off, we already have market rates built in. We already have labor cost certainty. And I think that, that enables us to launch the efforts that we're undertaking. And so whether that's the restoration of our network, we know that we have the pilots and flight attendants and everybody that is going to be -- are going to be situated to fly the network and to rebuild some of the places that we've, quite frankly, lost some share in. We know that we're set up well as we move into 2026 with our new Citi deal, which is going to produce a tremendous improvement in terms of net income going forward. And I mentioned earlier about sales and distribution, and I gave Steve credit for helping set the team up. We've made tremendous progress. One of the things I'm so proud of is that from a managed corporate revenue perspective that we performed 14% better year-over-year. Nobody else is doing that. And the good news on that front, we're not all the way there. We have not only some share left to catch up as we exit the year, but we're not going to stop on that front. And underscoring all of that is the work that we're doing in premium that we've talked about. And so I feel really positive about American's positioning no matter the economic backdrop. And everything that I see bodes well just in terms of what we do well. I think domestic supply and demand is coming back into balance. I think that the places that we serve are the fastest growing in -- certainly within the country, and we're poised to really take off as we go into 2026. Operator: Our next question comes from the line of Jamie Baker of JPMorgan Securities. Jamie Baker: First question probably won't come as much of a surprise, reminiscent of what I've been asking this season. So this whole idea of premium leisure yields eclipsing corporate yields, at least in some markets, is interesting to me because I think most investors still think of corporate yields as kind of the gold standard. So my question to American is, how prevalent is this across your domestic -- well, across all markets, I suppose. And does it make you think any differently in terms of how aggressively you pursue corporate share if premium leisure yields may be the future? Any thoughts on that? Robert Isom: Jamie, thanks for the question. And this is one where I think we've learned some lessons. Quite frankly, corporate travel is incredibly rich in terms of yield. And while we love what's happening from the premium space, premium leisure, we need both. And that's why we're doubling down in terms of our investment in our sales team. We like what we see, and we think that there is upside for American. Now I'll note one other thing, which is we talk about business travel, and it has not recovered in terms of passengers to the levels that it was in 2019. I think that there's a lot more room for growth. I don't know if we ever get back to the total percentage of business as a percent of total revenue, but there's a lot more that can be gained. And as we take a look at what's going on in the world right now and with even continued return to office and this desire to meet face-to-face and renew connections, I'm very optimistic on that front. Now from a premium leisure perspective, yes, we've got to be ready for it. And that's why we have a fleet that I think is tailored to meet those needs. And we're going to make sure that we have a great product offering to attract those customers, and that will be a key to margin expansion. And it's -- look, American is a premium carrier to begin with, and we're only going to become more... Stephen Johnson: And Jamie, I'd just add that while we do see the phenomenon right now where there's a lot of premium leisure demand, it's really good yields. We got to remember that business has been with us forever, and it's going to be with us forever. It's really important to remember that business travelers are very frequent travelers. Even if they're a little bit less than our premium yields now, they're still 1.5 to 2x the yields we get from other sources. They tend to be AAdvantage members and AAdvantage members give us more business. They tend to be co-brand cardholders. And the regular business travelers in an effort to accumulate miles and participate in loyalty programs tend to move their leisure travel to the airline that they fly on business. And in some ways, you can even think of our business travelers as being some of the source of our premium leisure demand. So I think a really exciting part. Robert mentioned, right now, I mean, we calculate that business travel is only 80% of what it was in 2019. And that's an absolute number, not adjusted for the size -- for the growth in the economy. So very significant upside. And as Robert said, I mean, we'd love to fill the airplane with business travelers and premium leisure travelers. Jamie Baker: Got it. And Devon, while I have you, a quick follow-up on the air traffic liability. Your drawdown from the second quarter to the third quarter was the most modest that I've seen, at least going back a decade. And it was quite a bit less than the drawdowns at Delta and United. I assume the American's domestic international balance may have something to do with that. Maybe it's attributable to some of the second quarter challenges and subsequent recovery. Whatever the case, it jumped out at me, maybe it shouldn't have any thoughts? Devon May: Well, I think it's in part due to some of the seasonal trends that you're seeing. So a strengthening fourth quarter just means there's going to be more bookings for fourth quarter travel that happened in the third quarter, so less of a drawdown on that front. Relative to United and Delta, there may be some entity mix there and perhaps just some of our relative performance in the quarter. But I think more than that, it's just the seasonal trends we're seeing in demand. Operator: Our next question comes from the line of Tom Wadewitz of UBS. Atul Maheswari: This is Atul Maheswari on for Tom Wadewitz. First, on the shape of the fourth quarter RASM or yield, you mentioned that September RASM turned positive and October looks better than September. So implicit on those points is that November and December would be a little worse than October for you to be flattish for the full fourth quarter. So the question really is the expectation around November and December being a bit slower than October. Is that simply due to American being cautious given difficult compares you and the industry have from the demand strength that you saw during the holidays last year? Or is there something in the current booking data that suggests that December or the holiday yields are tracking lower than what you're seeing for this month? Stephen Johnson: And really good question, and I'm sorry that I wasn't more clear about that. I mentioned October as being part of a sequence that we're seeing and I think that the industry is seeing. I didn't mention November and December because we just don't have a lot booked at this point in time. And so I just didn't pick up on it. We're -- I will say about November and December, I think we're getting very encouraged by the way the holiday periods are booking and seeing as we have throughout the year during trough periods seeing a little bit of softness there. But we're, I think, focused on our best estimate right now of where the quarter is going to end up is flat year-over-year. And we'll take another look at that as we see more bookings for November and December come in. Atul Maheswari: Got it. That's helpful. And then just as a quick follow-up. As you run rate the normal historical share in the indirect channel that you expect to get back to in the fourth quarter, how much revenue lift does that provide next year, especially in the first 3 quarters of the year? I guess another way to ask it would be, like in the past, you mentioned like about $1.5 billion of shortfall due to the prior strategy. How much was recovered this year and what's left to be recovered in '26? Robert Isom: Well, Tom (sic) [ Atul ], thanks for the question. we don't have a full run rate of our recovery in because it's something that progressed over the course of the year. As we take a look out into next year, it's going to be built into any of the guidance and the forecast that we give. I think a good indication, though, is just the level at which we're outpacing some of our principal competitors in things like managed corporate travel. So I feel really good about that. And as we exit the year, where I do think we'll be fully restored, then the objective is moving on to actually doing better than that. And from that perspective, what we will measure ourselves on going forward, okay, will be overall unit revenue production. And of course, we'll always break out from a corporate perspective. Stephen Johnson: Yes. And just to think about it, as we've gone through the year and improved our sales improved our share indirect channels. You've seen that sort of step up over the course of the year. So next year, we're going to have the benefit of that continued step-up plus the run rate of that, which we've already captured and returned to American. Operator: Our next question comes from the line of Catherine O'Brien of Goldman Sachs. Catherine O'Brien: I wanted to ask more of a theoretical question on CASM. So you guys have done a lot of work on building efficiency into the system. And just wanted to understand, is the fourth quarter a good example of what the business can do, like low to single -- low to mid-single capacity growth drive low to mid-single CASMex? Or there's more to go here and CASMex could ultimately be lower on that level of growth? Just really trying to get a sense of what you think CASMex could look like on the base case mid-single-digit capacity growth over the next couple of years, understanding there's always going to be some lumpiness year-to-year. Devon May: Yes. And I appreciate you kind of starting the question with -- it's at least somewhat dependent on the level of capacity growth that sits out there. Right now, we're working through the 2026 plan. What I will give some color on is just the lines of the P&L right now where you are seeing some costs growing at a greater rate than inflation and some areas maybe where we're going to see some potential goodness. But labor right now, as we've talked about, we have contracts with all of our large frontline team members. So the step-up in labor isn't much more than inflation, although we do have a couple of labor groups, pilots, for example, that will get a 4% increase next year. That's consistent with the industry. So if it's going to outpace inflation, it won't be by much. Other areas like airport rent and landing fees will continue to grow at a rate greater than inflation. Maintenance is kind of TBD at this point, but that will kind of come and go depending on the year. What you're seeing in the fourth quarter right now, I think we can do better than that longer term, but let us work through the plan for 2026, and then we'll work to get some longer-term guidance out there. Catherine O'Brien: Great. And then, Devon, probably a second one for you. You've made great progress on the balance sheet even in a tough year demand-wise. I think looking back at my notes from the 2024 Investor Day, the longer-term goal is to get to net debt below $30 billion and leverage below 3x in 2028. I guess, is that still the goal? And really, is that your ultimate goal? Or do you believe there's a benefit to taking leverage lower than that over time? I realize this is a longer-term one, but just trying to get a picture of how you're thinking about capital allocation over the next couple of years. Devon May: Yes. Well, just one step at a time. We're incredibly excited to have hit our first goal of total debt reduction of $15 billion. We did that a year earlier than planned. We completed that last year. The next goal we set out for total debt was that it would be inside of $35 billion by the end of 2027. That's another goal we brought in by a year. We're really pleased with the progress right now. It's happening because we have pretty limited capital needs right now. We talked about being able to grow the airline at 5%, but we're doing that with aircraft CapEx in that $3 billion to $3.5 billion range. That's a really nice spot to be in. And in a year like this, even where earnings aren't exactly where we want them to be, we're producing really nice free cash flow that we're using to improve the balance sheet. So that's where we're at now. We fully expect to hit our $35 billion goal. That would, to your point, put us inside of $30 billion of net debt and hopefully well inside of that. We have this goal at that point, obviously, to be within net debt-to-EBITDA leverage ratios of about 3x, which you get to that BB credit rating. To get there, we have to continue to focus on improving margins and improving earnings. And I think we're focused on all of the right things there. right things there. Where we go beyond that point, we'll see. I think a BB credit rating puts us in a really good spot with the borrowings we're going after. Operator: Our next question comes from the line of Conor Cunningham of Melius Research. Conor Cunningham: Just talking about thinking about building blocks for 2026. I think a big one is just the loyalty component. I was curious if you could just remind us what you think the incremental dollar value is from just the loyalty step-up alone. It seems like a pretty big lever for you all and a pretty massive driver for earnings in general. So just any thoughts around that would be helpful. Robert Isom: Yes. Conor, we'll just go back to what we've been saying. The new Citi relationship, I think, launches us into an opportunity to grow cash remuneration by 10% per year. Ultimately, we see -- as we go out towards achieving $10 billion of remuneration, we see another $1.5 billion of net income flowing through. So that's all -- those are all really sizable numbers. Conor Cunningham: Agreed. Okay. And then maybe we could talk about just -- there seems to be a lot of talk about just like CASMex and RASM and all that stuff. And I think that the industry in general probably needs to move more towards if we're going to invest in the product, we should expect margins to improve in general. So if you could just talk about how you're thinking about investment spend in the customer service product and what that could mean to -- are you earmarking a sizable chunk of costs associated with that, knowing that you'll get paid back for it on the customer side? Just any thoughts around the investment spend that you need to have in the product going forward? Robert Isom: So Conor, yes, the name of the game here is to grow margins, increase profitability. and ultimately increase shareholder value. So everything we do, we've been incredibly thoughtful, diligent, efficient in terms of when we deploy capital. But as Devon said in his comments, we have, look, a capital expenditure profile that others would love to have. What we are spending, I believe, is going to, number one, drive the revenue benefits that continue to drive revenue benefits that we see. And if you take a look at our guide and the outperformance or the improved performance in the third quarter and what we're anticipating in the fourth quarter, that's a result for us of revenue performance. Now again, we'll continue to be incredibly efficient in terms of how we deploy our capacity. But the opportunity for us going into next year, I think, look, we have better opportunity than most. Domestic capacity, I think, is more in balance. That benefits American. We've got catch-up to work to do from a sales and distribution perspective. That benefits American. We finally have our Citibank deal that's coming into play. That will start in January. We have a network that is fantastic, but again, hasn't been able to serve all of our customers' needs. And as we restore in places, we're going to be a more formidable carrier from the perspective of premium and business traffic and a better carrier for all of our alliance partners to deal with. So there's a lot of opportunity for American. And I think in many respects, that will benefit American more than others. Operator: Our next question comes from the line of Michael Linenberg of Deutsche Bank. Michael Linenberg: I guess a question to Devon. Just given the age of your 777-200ER fleet, how much of the decision to make the nose to tail investment was a function of just lack of new wide-body availability? And what is the cash payback period of those investments? Devon May: Michael, you know what, this has actually been something we've been planning on doing for a while. This is an aircraft we think we can run well into the next decade. And obviously, it's time to go through a cabin refresh. We have a nice product on there right now, but the new flagship suite is going to be a fantastic addition to it. We think it pays back really nicely over the useful life of the airplane and sets us up well for our CapEx requirements in the next decade. Robert Isom: And I'll just add that there's a lot of capital that has to go in this business from the perspective of aircraft, certainly facilities. And we're going to get full use out of what we buy. I think that's something that's paid off for certainly one of our competitors over time. We're not looking to have the youngest fleet forever. We like what we have. We're looking to have a product that appeals to customers and one that is -- we're really smart about in how we get full use out of it over its lifetime. Michael Linenberg: Great. And then just a second question, given that we're day 23 in the shutdown, and I know you guys have a sizable presence at Reagan, we have seen the volumes really trend down, especially the last week at Reagan. What are you seeing there? And is it just really contained to the D.C. area on the government shutdown? Robert Isom: Well, first off, I just -- I'm going to start with -- I've been in constant contact with Secretary Duffy about the impact of the government shutdown and doing everything we can to mitigate. And from that respect, a huge shout out to TSA, CBP, our air traffic controllers. For the most part, they've been keeping the air system running and airports running fairly well. In terms of the business impact, government travel, it's important to us, but it's something that is certainly less than $1 million a day in terms of revenue. So the impact, while it's there, is something that I'm quite confident when the government reopens, there's going to be some pent-up demand. And hopefully, we get back on track pretty quick. In terms of Reagan, overall, we have had some difficulties in terms of operating delays and issues with air traffic control. I'm also confident that those are things that are temporary. And that as we progress through the year, that should also be a benefit to American as we go into 2026. Operator: At this time, we will be taking media questions. [Operator Instructions] Our first question comes from the line of Leslie Josephs of CNBC. Leslie Josephs: Just wondering with the push to premium, what is your end goal? Is it to catch up to Delta United margins? And what would you be satisfied with? And what inning would you say American is in, in that transformation? And is there any limit to the amount you're willing to spend to get there, thinking of everything from onboard amenities to eventually a new plane? Stephen Johnson: Thanks, Leslie. Good question. I would just frame it in the way we frame all questions about how we think about the business and how we invest. We're interested in providing a service for our customers and meeting demand. And we're very excited about the growth in premium demand, again, because it allows us to serve our customers better and allows us to earn higher yields. And we are going to invest and provide product and grow the number of the capacity of our premium cabins as our customers demand us to do. And we'll invest as much capital in that as is appropriate and will allow us to earn a return and will allow us to provide the service that our customers are demanding. As I said earlier, we spent a lot of time way back when in the ancient days of the airline industry, wondering if our customers would pay more for a better product. And the answer to that question is a resounding yes, and we're going to respond to that and respond to it for so long and to the extent that our customers demand it. Leslie Josephs: And where do you think American is in that process? And also, if I could add about the operation, do you have any idea of the cost of improving the operation and what steps you want to do to improve reliability? Robert Isom: So Leslie, thanks. Well, the great thing about the airline business, we run every day, and we're going to run this year and for the next 100 years. So there is no end of the game. And so in terms of where we're at right now, really excited about getting the hard product up to par and beyond, love what we're doing with our lounges, you'll just see continued attention and investment. And from -- I want to talk about the investment side of things. From the hard product side of things, the reconfigurations, the new aircraft deliveries, those are built into our capital plan. So that's nothing necessarily extreme. What we're doing from an operating expense perspective is we're taking a look at where we can take expenditures today in the case of our new coffee brand. We've always provided coffee. We have a much better brand now associated with it in Lavazza. And in terms of overall expenditures, while there may be some differential in brand, it's not considerable. And so when we take a look at other aspects of our operation, we're doing things in a more efficient way and yet at the same time, able to provide our customers with a much better experience. So I'm not looking for a number specifically. I look at our entire P&L, maybe save fuel and look at the entire expense category as something that is dedicated to improving and taking care of our customers. Stephen Johnson: And Leslie, I'd just add, over the course of the last year, we've added customer amenities and improvements and responses to our customers in advance at a dizzying pace. But it's just -- as Robert said, it's an infinite game. It's going to continue. I probably have 3 dozen new ideas for customer experience improvement just sitting on my desk that I'm going to look forward to hand off to my successor here in a week or so. But this is going to go on, and I think it is a part of the business that is going to address a lot of the questions that people had here today about how we're going to afford to pay the labor bill, how we're going to afford to pay for the increased cost of operating the airlines. I think it is through these ideas of just providing a better customer service, more opportunities for customers who enjoy better products, more premium, more amenities that customers look forward to enjoying on American Airlines and throughout the industry. Operator: Our next question comes from the line of Niraj Chokshi of New York Times. Please go ahead, Niraj. Niraj, please make sure your line is unmuted. And if you are on a speaker phone, use your handset. Niraj Chokshi: Sorry about that. I was just wondering if you could talk a little bit about how you're balancing sort of the focus on kind of core hubs with opportunities to grow in sort of the non-hub markets where there might be populations and demographics that you want to -- that might be beneficial. Robert Isom: Sure. First off, we were fortunate to have our hubs positioned in the fastest-growing metro areas. And our hubs, I think we represent 8 of the 10 largest metro regions, and that's something that we're going to benefit from going forward. And then I just take a look at what we've done recently. We made sure coming out of the pandemic that DFW and Charlotte were restored as fast as we could. And we've done a nice job of that. DFW has some new capacity coming on with new Terminal F and remodeled Terminals A and C. We're going to take full advantage of that. American will continue to be the largest carrier in DFW, and we think that we're only going to grow our presence there. Charlotte, we've taken a little bit of a break in terms of growth there. We definitely need to make sure that, that operates efficiently and runs well. But then as you take a look at opportunities for growth in 2026, the near term and even right now, it is going to be focused. This past year 2025 was on New York and Chicago. As we take a look into 2026, it will be those 2, but along with Phoenix and Miami and Philadelphia. And I'll note that while Miami operated one of its largest schedules, both Phoenix and Philadelphia are far from being to the size that they were. And the cool thing about that is we're not building $100 million gates to go fly there. That's an opportunity for us and you'll see substantial increases in terms of deployment. But of course, as we always talk, we operate with the guardrails of making sure that we're paying attention to the supply and demand environment, overall GDP and also at the other side, making sure that our market share and our presence is competitive with our primary competitors. Niraj Chokshi: Since you mentioned GDP, I'm just curious, do you feel like is that relationship as steady as it's always been? There's some talk about it's maybe not as closely tied? Or I'm just sort of curious what your thoughts are on that. Devon May: I'd say for some revenue streams, it's not as closely tied. And there's some parts of GDP growth that don't drive air travel. But in general, there's still a large component of our travel that's somewhat dependent on the economic environment and economic growth. So it's a component of how we think about revenue. We obviously do a lot of other things as we go through our forecast, but airline revenues aren't completely disconnected from economic growth. Operator: This concludes the Q&A portion of the call. I would now like to turn the conference back to Robert Isom for closing remarks. Sir? Robert Isom: Thanks, Latif. We appreciate everybody's interest in American, and we look forward to getting back to work and delivering on our commitments. Thanks. . Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to Nexans' 9 Months 2025 Financial Information Conference Call. My name is Laura, and I will be your coordinator on today's event. [Operator Instructions] And now I'd like to hand the call over to Mr. Julien Hueber, Nexans' CEO. Please go ahead, sir. Julien Hueber: So good morning, everyone, and thank you for joining us today on the Nexans conference call. It's a special moment for me to be speaking with you for the first time as the CEO of Nexans. With me today, I have [ Christine Preolevi ], our Interim CFO; and Audrey Bourgeois, our VP, Investor Relations. I would like to begin by thanking the Board of Directors for their confidence. It's an honor to take this role and to lead a strong, high-performing company with a clear vision for the future. I also want to express my appreciation to Christopher Guerin for his leadership and the remarkable transformation he has led, a transformation I was proud to help drive as part of the Executive Committee. Chris leaves behind a strong company built on solid foundation that we will keep strengthening. I spent more than 2 decades at Nexans always close to operations and transformation. From my early years in manufacturing to leading our activities in China, South Korea or globally for the Industry & Solutions project, I've seen how performance is built on operational excellence, flawless execution and a deep understanding of our customers. As a member of the Executive Committee since 2018, I helped shape the group strategy on the capital markets road map. Leading our EUR 2.6 billion of PWR-Grid and Connect in Europe business reinforce my conviction that agility, execution and industrial excellence are the levers that will be key to Nexans's next chapter. Our strategy remains unchanged, and the megatrends behind it never been so strong. Electrification is accelerating and the need for secure, modern infrastructure keeps growing. These dynamics reinforce Nexans' positioning and long-term strategy. As a new CEO, I want to be very clear, we will continue to execute the road map presented at the last Capital Market Day, and we confirm our 2025 guidance and 2028 objective as well. The direction is right and the foundation are solid and all megatrends are continuing. The environment, however, has grown more complex since our last Capital Market Day, from geopolitics, supply chains disruption or shifting policy environment around energy and renewable. This makes one thing clear. It is the right time to make Nexans even stronger, stronger in execution, stronger in competitiveness and stronger in agility. I will continue to fuel our model of value creation that delivers results, combining our SHIFT program, complexity reduction, innovation deployment and vertical development. But building on that, I will also move forward and I will emphasize even more on the further complexity reduction of the organization, efficiency optimization of our industrial operations, both in terms of productivity and cost competitiveness, further mutualization of our industrial footprint and of course, keeping absolute discipline on cost and cash. All these priorities will further enhance the resilience of Nexans model. Our ambition is clear, to consolidate Nexans' competitiveness while amplifying selective profitable growth in Electrification, powered by digital acceleration and the smart use of new technologies and artificial intelligence. Nexans is entering this new phase from a position of real strength. We have a clear road map, robust financial foundations and teams that are talented, dedicated and united and proud of what we do. Together, we will deliver with strong discipline and focus, the long-term value creation for all our stakeholders. So after this introduction, let me now turn to the group's performance in Q3 on the first 9 months of 2025 on Page 4. In the third quarter, the group delivered a plus 7.7% organic growth, including a strong 12.6% in Electrification. Over the first 9 months of 2025, the group standard sales reached EUR 5.3 billion, representing a plus 5.8% organic growth compared to last year. Over the same period, Electrification, which remains the core of Nexans growth, recorded a plus 9.4% organic growth, confirming our disciplined execution across our 3 segments, which are Transmission, Grid and Connect. Our Transmission adjusted backlog reached EUR 7.9 billion at the end of September, providing for Nexans a strong visibility for the coming years. And no later than today, I am pleased to announce the acquisition of Electro Cables in Canada that will be reinforcing Nexans' position in PWR-Connect in a highly dynamic market and with approximately EUR 125 million current sales on a yearly basis. And I will come back on that on the next slide. In short, the first 9 months confirm the solid and disciplined growth of our Electrification businesses. This performance reflects our sharp focus on high added value solution and our selective approach to capture the strong underlying trends in Electrification. So before we move to our segment in details, I wanted to highlight something that is important to me. So I will move to Slide 5. Our Innovation Summit in Toronto that took place 2 weeks ago was a great platform for exchange with our platinum customers, our technology experts and our partners. Nexans becoming a pure player of Electrification. So I believe that our role is to bring together the key stakeholders of the electrification ecosystem to imagine and to build collectively the next level of electrification that is critical to our societies from powering homes and hospitals to supporting education and many other essential services. The choice of holding this event in Canada reflects our strong interest in North America. Canada is a powerful growth platform for Nexans, both for the Grid and the robustness of this construction industry in our Connect segment. So talking about Canada, I will now move to Page 6, where I will present the acquisition of Electro Cables that was signed today, this morning, in fact. Electro Cables is a Canadian player in low-voltage cable system, delivering a high performance and service-focused solution. This company represents a strong strategic complement to Nexans Canadian portfolio, offering an attractive growth perspective and a robust profitability profile. This acquisition also allows Nexans to further strengthen and complement its portfolio in Canada, enhancing its position in a very dynamic market while optimizing local supply chain efficiency. It also paves the way for valuable synergies driven by Nexans' expanded local presence and the rollout of its proven proprietary SHIFT program while enhancing innovation. This acquisition will be fully financed in cash, leveraging Nexans' strong balance sheet and is expected to be EPS accretive from day 1 and from year 1. Now moving to Page 7. Let me now comment the overall group performance over the first 9 months of 2025. Standard sales reached EUR 5.3 billion, representing a plus 5.8% of organic growth, confirming a solid trajectory for the group. The growth continues to be driven by Electrification business, which make up the core of Nexans strategy. It delivered a plus 9.4% organic growth over the period. Let me remind you that this is well above our Capital Market Day organic growth that we have announced last November of a CAGR between plus 3% and plus 5%. This performance reflects the disciplined execution in Transmission and in Grid as well as the recovery in Connect during this third quarter. Other Activities, mainly Metallurgy, a strategic segment for Nexans, posted a plus 4.1% organic growth over the first 9 months of this year. And as you know, we observed unusually high level of external sales in H1 that was driven by customer bringing forward orders ahead of the U.S. tariff. As expected, this overstocking subsequently led to correction in Q3 2025. The Non-electrification activity declined by minus 6% as expected, given the challenging automotive market. We remain very active to make this disposal of autoelectric, the last remaining activity to finalize our portfolio rotation. So overall, the group growth is at a high level and fueled by healthy growth drivers in Electrification, which remains our main engine of value creation. So let's now take a closer look at our different segments, starting with Transmission on Page 8. Performance was particularly strong over the first 9 months of 2025 with standard sales above EUR 1 billion, which is up by 25% organically versus last year and with a very strong Q3, up by 33%. This strong performance reflects solid execution, a favorable production mix and a more installation campaign carried out in Q3 compared with last year. Now regarding GSI projects, let me confirm once again that we keep working hand-in-hand with our customers. We have a very collaborative approach with them on this ongoing project that is on track as per schedule and milestones. Last but not least, Transmission pipeline of activity remained robust, supported by sustained demand for interconnection and offshore projects across our key markets. Our adjusted backlog stands at EUR 7.9 billion, which is up by 27% compared to last year, providing a strong visibility until 2028. So in short, the PWR-Transmission segment continues to deliver, thanks to the quality of the execution. I will now move to Page 9 on the following slide regarding PWR-Grid. So PWR-Grid sales reached EUR 989 million, which represents a plus 6.7% organic growth for the first 9 months, which also represents a plus 9% in Q3. This reflects solid structural trends coming from replacement of offset grids and the connection of renewables to the Grid, coming from Electrification needs in verticals such as electrical mobility and data center. And it also comes from the high development of our low carbon offers, and I will be able to comment or answer any of the questions regarding this element. Also, our Accessories business continued to be very well oriented over the period. Overall, projects in Europe and North America ramp up under the new frame agreements with major utilities. So now turning to our PWR-Connect business on Page 10. The net sales of the Connect amounted to EUR 1.7 billion for the first 9 months of 2025 compared to EUR 1.5 billion in the same period last year, representing a plus 1.4% organic growth. You know how contrasted is this segment. We have indeed some strong performing regions with a double-digit organic growth. It's the case for Canada, South America, Middle East and Africa. And so here again, our acquisition of today in Canada will further leverage on wind trend. We continue also to actively grow our tech product as fire safety product with sales growth progressions, which are higher than the market average. That was a key element that we communicated during our last Capital Market Day last year in November. In contrast, and as you know, some region remains more challenging. That's the case of Nordics in Europe or Asia Pacific, specifically Oceania in Australia, specifically on the residential market. Countries like France, Italy and Spain were quite resilient. And let me deep dive on Italy, where, as you know, we have started our SHIFT complexity reduction program on the new LTC business that we acquired last year. This SHIFT complexity program is completely part of the integration process. So we are currently exiting from low-margin products and low-margin market as per schedule. And I can tell you that the integration process of LTC is going very well. Moving on now to Page 11. And before we move to the Q&A, let me confirm our full year 2025 guidance, which was upgraded in July. We continue to execute with discipline and focus and remain on track to deliver an adjusted EBITDA between EUR 810 million and EUR 860 million, and a free cash flow between EUR 275 million and EUR 375 million. Let me remind you that this annual guidance upgraded in July is confirmed and does include only 6 months of Lynxeo. Now entering the final quarter of 2025, we look ahead with confidence. Electrification keeps powering the group performance and Nexans is well positioned to capture this growth with resilience, efficiency and focus. Also, I would like to thank all our teams in Nexans for their commitment and hard work. They are the driving force behind our success on the journey that lies ahead. I am now happy to take on the questions. Operator: [Operator Instructions] We will now take our first question from Daniela Costa of Goldman Sachs. Daniela Costa: I want to ask one sort of like more medium term and one a bit more shorter term. So I'll do them one at a time. But given the deal you've just done now in Canada, and I think in your commentary remarks on the press release, you're mentioning that you're moving from -- or Nexans moving from execution to expansion. Can you talk a little bit about how you view the balance sheet? What's an ideal positioning? Should we see this deal has sort of more of a start of a wave of deals in Electrification perhaps? And then I'll ask the second one. Julien Hueber: Okay. Thank you, Daniela. So clearly, the capital allocation is not changing. My priority will remain the same. I will focus and accelerate the M&A as per -- based on the same logic as in terms of thesis, basically, which is prioritizing M&As in countries where we are already located in order to reinforce our positions and in order to scale our innovations. And also second thesis is to focus on M&As in countries where we are not. So basically, we'll be looking for bigger acquisitions in these countries. And then the third thesis is also to grow in adjacent to cable, could be around Accessories or any other elements. Daniela Costa: And then just -- it sounded like in Q2 that the commentary was very strong regarding the outlook for 3Q on Connect. And I think sort of the market in general had interpreted that maybe more like high single digits or maybe above that, and you ended up with some growth, but relatively modest. Was it something in those countries that were weaker that deteriorated further? Or maybe people just got overexcited with the growth rates after the Q2 call? Sort of what's your interpretation of the deviation there? Julien Hueber: Yes, of course. So first of all, Connect is a very contrasted market. We have indeed meet the double-digit growth in South America, Canada, Middle East. That was completely in line with our expectation. For Europe, we were expecting a recovery in the Nordic part that did not happen. So what we have been doing is to accelerate the launch of innovation products. We are launching our more than 10 innovations both in Norway, in Finland and Sweden in order to compensate this. So we will not have any impact in terms of profitability in this area of Europe. On the rest of Europe, we start to see some -- in Q3, we started to see some signals of recovery, specifically in France, Belgium, Italy and Spain. Daniela Costa: But -- so it was as strong as you expected at the same dynamics you expected at Q2 or... Julien Hueber: So basically, you see the recovery in Q3 in Connect, it's a plus 3.6% compared to -- it's better, it's an improvement compared to Q2. And I expect that Q4 will be on the similar trend in Connect. Operator: And we'll now take our next question from Lucas Ferhani of Jefferies. Lucas Ferhani: I just wanted to have a bit more information on the North America business. So you said it's about 20% of group revenues. Can you say how much it is in Connect and Grid specifically? And also, do we still have that same split between kind of Canada versus the U.S.? And how would you characterize the EBITDA margins there? Would you say that they're higher kind of than group average? And the last point on that North America business, do you see any risk related to copper tariff in the U.S. that might redirect some volumes towards Canada? Julien Hueber: Thank you, Lucas, for this question. So I just want to remind that when we talk about North America, we are not in the U.S., we are in Canada. We are well positioned in Canada, and this acquisition will strengthen our position there. The split between Connect and Grid, it's mostly a Connect business, and we are in both, of course, markets, but it's mostly Connect business. And this Connect business in Canada is very accretive to the group. We have an extremely high level of first growth, but as well as profitability, hence, our choice to accelerate this M&A in Canada. Regarding -- sorry, your last part of the question, the copper tariff. We -- basically, we see that there is no impact for us in terms of copper tariff because we are our own brand in Canada, delivering the market in Canada. So we have no impact for that. on the H1 and the H2 will be as expected. So there will be no specific impact there in this part of the world for the tariff. Operator: And we'll now move on to our next question from Chris Leonard of UBS. Christopher Leonard: So maybe 2, if I can. And focusing on the Transmission business, obviously, a very good quarter in Q3. Can you update us on the contracts that you're still looking at in terms of the pipeline and saying that there's good growth potential here? Is there anything we should expect for 2025 so that you can reach that book-to-bill level of 1x? And within that, could you also help to give us some color on the U.K. National Grid contract again and just give us a flavor for why I believe you decided not to bid and move into the tender on those contracts. Because so far, the pricing looks very strong on those contracts for Prysmian and as a preferred supplier and NKT, it would be helpful to get any color there. And then a second follow-up question would be on your comments for GSI saying that the contract with IPTO is going well, very collaborative and on track with schedules and milestones. Is there anything more you can give on visibility of a plan B that you spoke to or your previous management team, I suppose, spoke to at first half results? That would be super helpful. Julien Hueber: Okay. Thank you for your questions. I will start and then I will hand over to Vincent Dessale, who is with me in the room today. So basically, indeed, you've seen this strong performance Transmission in Q3 and year-to-date as well. In terms of backlog, you have noticed that we are a book-to-bill of 1 in Q3, and we expect to have a similar approach during the year-end. We are active in terms of -- in the quotation at this moment. We are -- of course, I cannot disclose the number of projects, but we are quite active, and we are positive to do some quotation in Q3, hopefully, with some award in H1 next year. So that's basically the situation. And regarding the GSI project. As I said, the project is ongoing, extremely good relationship and collative work with IPTO, our customer. And for us, there is no plan B. There is only one plan A, which is keep going and working with our customers to deliver this project. And I will not -- leave Vincent to continue. Vincent Dessale: Yes. Maybe to give some color and to complement Julien answer regarding the backlog, indeed, we have a great improvement compared to last year, plus 27%. You know it. It has been mentioned with some press release, typically the award of the RTE frame agreement in March and more recently, the Malta-Sicily Project. The pipeline remains active. We have indeed -- and just to give an example because it's public recently this week, Terna has announced a new tender for a major interconnection in Italy. So it just gives an example of the robustness of the pipeline. And indeed, we are quite active on what I would call medium-sized projects and large projects, which are going to be awarded in the next 12 months. So quite active backlog and quite active pipeline in the coming months. Christopher Leonard: And is there any comment on the National Grid contracts that you guys weren't a part of? Vincent Dessale: Yes. Sorry, I forgot this point. I will answer to it, of course. But the story for Nexans has not changed. We are -- we have the SHIFT approach in the project, which means that we are very selective in the way we choose the project that we want to target. We have commented this in the past. It's a mix of technical fit, terms and condition fit, how it fits with the other projects that we have already in the backlog. And indeed, when we look at this frame agreement, it was not answering from our perspective to the different criteria. And as I said, we have other opportunity in the pipeline that we consider from our perspective, more interesting for Nexans. Operator: And we'll now take our next question from Jean-Francois Granjon of ODDO BHF. Jean-Francois Granjon: Yes. Two questions from my side. The first one concerns the acquisition of Electro Cables. Could you give us some more details regarding the current profitability of this company compared to the profit of the Connect division? And what do you expect? You mentioned an accretive impact, but could you give us some more details? And can you give us the EV and the multiple for the transaction? And the second question, I will come back on the GSI project. So you confirm the continue of the operations. Could you give us the contribution expected from GSI this year in 2025? And when do you expect next year? And I understood that probably there will ramp-up, and we expect a higher contribution in '26 compared to 2025. Could you give us some more color about that? Julien Hueber: Okay. So first question regarding the new acquisition, Electro Cables. So this is -- this business is relative to Nexans. It's on Canada for us as well. So both our business in Canada and as well as this Electro Cables is in the upper range of the -- above 20% of EBITDA. So it's extremely relative to Nexans. This business is extremely well positioned in market segments which are for us priorities and fully in line with our Capital Market Day. So the -- for example, the data center elements, the infrastructures, gigafactories and so on. So it's completely aligned with what we want to do. We also see some very interesting synergies from a supply chain standpoint between Nexans Canada and Electro Cables. So basically, that's why we decided to move on and to finalize this deal. So that's element -- first positive element. Regarding GSI, your second question. Well, you know that we have received EUR 250 million of payments the past months in different parts. So this year, we will do approximately EUR 150 million as part of the -- that was what we have communicated. So we will stay on this type of ratio. And maybe, Vincent, you want to comment for... Vincent Dessale: Yes. I think Jean-Francois, I think we will not comment in details, of course, the coming revenue for GSI. But as a matter of fact, this is -- you know the amount of this project is EUR 1.4 billion, basically. We have started in '23, so a smooth ramp-up. And after you can consider that you have a kind of linear activity in the first year and with a kind of acceleration in the last 2 years of the project, '28 and '29 due to the installation, which is usually compact in terms of activity versus the production, which is split basically during 5 years. So that's basically the profile of what you can expect in terms of activity. Jean-Francois Granjon: Okay. And just the additional question regarding that, you expect you confirm an improvement for the EBIT margin for the Transmission division next year compared to 2025? Julien Hueber: I think, yes, we will come back on you on this when we'll publish our results in February with a new guidance. But what I can tell you is that we are extremely satisfied with the execution of this -- of the different project ongoing and very proud of what the team is doing at this moment in this Transmission stream. Operator: And we'll now move on to our next question from Scott Humphreys of Berenberg. Scott Humphreys: I just have 2. The first is a very quick follow-up on the tariff topic. So one of your peers has been speaking recently about kind of increasing their purchases of scrap in the U.S. or in North America. From a kind of European perspective, has the reduction in the amount of scrap that China is importing from kind of North America. Is that having any impact on the cost of your scrap in Europe? Or was the Chinese buyer not as significant in Europe in the first place? So that's the first question. But I can -- carry on, please. Julien Hueber: No. So very clear here. So no impact at all in our scrap recycling activities in Europe, no incidents, nothing. Scott Humphreys: Okay. And the second one, just kind of a broader one on medium voltage. If you could maybe kind of remind us where you are in terms of the process of adding capacity in the medium voltage business in terms of, I guess, Morocco and then you mentioned briefly the low carbon production in France as well. So kind of how are you seeing that the level of capacity in medium voltage given how strong the Grid segment continues to be? And how does that kind of tie in with this additional layer of kind of a focus on production efficiency that you've talked about in addition to the CMD strategy? Julien Hueber: So thank you. This is a very interesting and important question. So you can imagine when we grow your business by 9% year-on-year, of course, it has an impact on manufacturing. So here, first of all, I want to remind you that what the job we have done in the past year was to increase the capacity because we anticipate this large increase in the Grid to come. I just want to remind you the acquisition we did in Reka, Finland 2 years ago with 2 civil lines, the announcement of the additional CapEx in Bourg-en-Bresse, an additional civil lines as well as the [ Safi ], which is Morocco new plant that is going to come. So in terms of capacity increase, I mean, we are completely in line with our plans to sustain this growth. Now regarding the existing footprint as well, we are -- and that's -- and you've seen in terms of communication that we have done in the past last week, basically, that in order to basically deliver our commitments and objective for 2028, industrial excellence will be key. And that's why we are really accelerating today, the efficiency, the productivity and as well as the competitiveness of our plant in Grid. So we have a full program on that, and that's extremely important to continue on this. And maybe one word because Grid is, of course, cable, but as well Accessories, and I will let Elyette to comment on the Accessories as well. Elyette Roux: Thank you, Julien. So what we can say is that we are accelerating even further away in Accessories. And indeed, as presented in our CMD, we mentioned that we had anticipated the investment in the plants with automation and robotization. So we are basically delivering at the scale that we announced in the CMD. Operator: And we'll now move on to our next question from Nabil Najeeb of Deutsche Bank. Nabil Najeeb: The first one is on GSI. I think you guys said -- you just said you had received EUR 250 million of cash for GSI so far, and that's the same amount as what you indicated at the H1 stage, which you said should keep you going until early September on GSI execution. So I'm just wondering if you have received any more cash recently? Or are you executing on GSI while waiting for a payment? And then the second question, given, Julien, you've been in charge of the Grid and Connect business for Europe, I was hoping to get your thoughts on how you see the margin potential for these 2 divisions. I think previously, your predecessor alluded to a longer-term range of around 15% to 16.5% for Grid. Is that a view you share? And what about for Connect? Julien Hueber: Okay. So I will start, of course, by the GSI. So indeed, you know the amount of cash we received, EUR 250 million. We have been completely transparent on this. Once again, what I can tell you is that we are working very closely with IPTO in a very, let's say, collaborative way. And we are in discussion at this moment in terms of the next steps of this project on the milestone and payment is part of it. So I cannot disclose anything, but that's, of course, as you can imagine, a part of our discussion. There's also ongoing discussion on political as well regarding the GSI. But on the cash payments, we are close discussion with IPTO on the -- and that's where we stand today. Now regarding your second question, indeed, the European business, there are 2 streams, Grid and Connect. So Grid, you are right with more than 15% EBITDA in terms of profitability. Here, you need to understand that in Grid, there is basically 3 parts, 3 elements. First one being the long-term agreement with utilities. And here, we are extremely satisfied with relationship with platinum customers that we're having. We have signed long-term agreement with them. In the past, it used to be 2 years contract agreement. Today, we are talking about 4, 5, 6 years contract. So we give us a very good visibility about the long term. The second part is project base of Grid, which are renewable solar or wind. Here, it's more, let's say, a project for a few months. And this business is extremely dynamic as well in Europe. I mean, Italy is one of them, Greece, or the other parts of the countries. Here, the profitability of this project are also at the right level of what we are looking for and what is in line with our Capital Market Day. And then you have the third activity, which is Accessories managed by Elyette, which is -- and we have communicated that a few times that is extremely lucrative as a business growing very fast because you know that the accessories part is, let's say, the critical element of the Grid. And our customers, platinum customers are replacing that regularly due to the climate change. And that's also giving us the reason why this business of accessories is growing even faster than the cable. So that's basically for the Grid part. Now talking about Connect. So Connect contrasted, as I said, businesses. The -- let's say, the profitability in Europe is around 13% EBITDA. And we will be growing this step by step with -- because we have growth patterns in our strategy where we will be growing in the sectors in the verticals for us, which matter the most, data center, critical building, injecting new technology of products, injecting new innovation of products. On that point, I think just for you to understand, we are -- in the past 2 months, we have launched Klaro, new innovation in Italy market with LTC. We are launching in September, ULTIMO innovations in Benelux, MOBIWAY in Norway. All these innovations are comforting the profitability of this business and are providing us also some resiliency because we try to avoid being too much exposed to residential and much more, let's say, focused to the market segments, which are going better. Vincent Dessale: And maybe to add on Julien's comment, just to remind that we have improved significantly over the last year, the performance of the Connect business, thanks exactly to what Julien comment, the SHIFT program deployment plus innovation, which are really the 2 pillars. And if you remember in the last call, we have not given any guidance on the percentage of EBITDA for Connect for very simple reason is that we have an ambition in terms of acquisition and the acquisitions that we do usually are slightly below the average of Nexans. And we have after the deployment of our integration program in order to bring them at least to the average and sometimes above the average. And indeed, we have -- we know that in the coming years, we'll continue to do this acquisition. So this is basically why we -- how we drive the evolution of the performance of Connect. But as mentioned by Julien, we are confident. Julien Hueber: And one more comment, I think what is very important to understand, in the Connect, you can grow very fast and you can take any type of business. But remember, the strategy of Nexans is to be selective. And for instance, in the Nordic in Q3, I asked the team to be extremely selective in the type of project because we don't want to consume cash for projects which are not accretive to our EBITDA. So we took always the decision to select the type of project and choose the one that really bring both cash and profitability to Nexans. Operator: And we'll now take our next question from Akash Gupta of JPMorgan. Akash Gupta: My first one is on outlook. So when you raised full year guidance in July, you were guiding double-digit growth in Grid and Connect in Q3, but we saw Grid growth in Q3 was slightly below double digit and Connect was not below double-digit level. And then we also saw some losing momentum in Metallurgy business, which was pretty strong in first half. So my question is that today, you are reiterating the guidance. But when we look at this guidance corridor and giving consensus is towards the bottom end of the range, where do you expect to end up in the year? Like how much confidence do you have in the midpoint? And how much confidence do you have on the upper end of the range? So that's the first one. Julien Hueber: Okay. Thank you, Akash, for your question. So basically, the Metallurgy tariff impact was none at the moment where we upgraded the guidance. So I think this one is -- there's no, let's say, negative impact whatsoever in terms of the guidance for the year-end 2025. Regarding the Grid and Connect, so our strategy is not always to go for volume. It's also to go for profitable growth. And typically, as I mentioned, for Connect parts, even though, as you say, the volume has been slightly below the expectation of the market. I can tell you that the quality of the growth of the 3.6% based on innovation we are doing, secure our guidance for the year-end. So I can tell you, that's why we will be securing our guidance by year-end. And I will not now comment where we'll be landing because we are still working on it. Of course, you can imagine. But the quality of the growth we have both in Grid and Connect secure our guidance. Akash Gupta: And my follow-up question is on Transmission growth. So when we look at the comps in absolute term, I think you will have a toughest comp in Q4. So maybe if you can comment about what sort of growth rates do we expect in Q4? And then when we move from '26 to '25, again, is there any unutilized capacity where utilization can be driver for growth? Or will the growth in 2026 will be mostly coming from project mix? Julien Hueber: Okay. So in Transmission growth, you have seen that -- so basically, we will be -- so you may have some spike from one quarter to another. You see a very strong Q3 numbers, 33%. I would say that our growth for the year-end will be first very well oriented and in line with the average of what we have announced in H1, this type of growth level. Now regarding the vision for 2026, maybe Vincent, you want to comment on this one? Vincent Dessale: Yes. Akash, Vincent speaking. I think you know the story very well. I mean the significant increase of this year is the result of our decision some years ago to make several investments in terms of manufacturing, testing and installation. So it's a kind of expected, I wouldn't say mechanic, but at least expected growth. Now we have a backlog, as mentioned by Julien before, for the next 4 years. So we will be in line in terms of volume with this year because now all the capacity that we have added over the last 3 years are now running and they are fully loaded for the next 4 years. So that's basically the profile of activity for the next 4 years. And as mentioned by Julien, depending on the different, I would say, planning of the execution, you can have from one quarter to another one, some differences in terms of volumes because you will have more installation, less installation. You know that we do more installation during summertime than during winter time, the usual approach of this business. Operator: And we'll now take our next question from Uma Samlin of Bank of America. Uma Samlin: So my first question is on -- a follow-up on GSI. I was wondering if you could help us -- how should we think about the progress of GSI so far in relation to your full year guidance? I think in the previous calls, you had mentioned that even if the project does not go ahead, the EUR 250 million that you have received so far would still contribute enough for the guidance to be hit in the mid-range of the guidance. Just wondering if you can confirm if that still is the case. My second question is on the PWR-Grid market. I guess we've seen a fair share of capacity expansion there. How should we think about pricing versus capacity expansion in PWR-Grid going forward? Julien Hueber: Okay. So GSI, I think I will repeat what I just explained. So basically, yes, indeed, when we -- when the guidance has been raised last July and confirmed today, we completely integrate the GSI elements of the milestone we have with customers. So having no change for that, I can [ contain ] this point. Now regarding the PWR-Grid, your second question. So it is also a very interesting question. So the growth is there. We demonstrated 9%. The capacity in Nexans -- manufacturing capacity in Nexans is also ready to sustain the growth. And we do not see any change, any pressure on price. Why? Because, first of all, we are -- we have launching low carbon innovations, which are extremely let's say, in line with the expectation of our customers, platinum customers that -- because you may know that the type of medium voltage low carbon offer that we are providing and selling to the market today, they are reducing by 50% the CO2 emission. So you can imagine the importance it has for our customer utilities. That's why we are able to differentiate from our competitors that are not offering the same thing. And as well as the strong, let's say, no pressure on price in Grid is also linked to the growth we are making in Accessories. Here again, I think you have seen last communication where we are launching innovations on new type of accessories, new joints that are also accelerating the installation phase from our electricians on the field. Operator: And we'll now take our next question from Miguel Borrega of BNP Paribas Exane. Miguel Nabeiro Ensinas Serra Borrega: Sorry to come back to GSI, which you say is on track, and there is no plan B. But it seems you're now more at risk than where you were in the first half. If the project is really canceled, what are the remedies? How can you replace the production reserves for next year? And do you think there are other projects out there with such a margin? I'm just trying to understand if the previous 17% margin for Transmission as a whole is still possible without GSI. Julien Hueber: Okay. So first of all, the project is not canceled. We are still working on it. They are extremely close discussion on relationship with our customers. There are ongoing discussion on the political side and supported by the European Commission. So I mean this is -- we do not see that as a risk. And we'll come back on that, of course, when we'll have some more, let's say, information to share. But this project is not canceled so far. Regarding now the -- we have enough pipeline of projects ongoing. Some of them already secured. Some of them are also under quotation. So here, we have so far -- we have no -- let's say, we don't forecast any problem for next year on this part. So basically, on -- maybe Vincent, if you want to add. Vincent Dessale: Yes, maybe to give you some color, I mean, just keep in mind that this project is what we call a mass impregnated project with deepwater installation. And let's be clear, on the previous projects with this type of technological content, we have been only 2 players to be qualified. So you don't have so many players able to deliver so far this technology. And basically, when you look to all the coming projects in Med Sea, for example, they will all request this type of activity. And today, both players are fully loaded for the next 4 years. So you can imagine that the other projects coming in the pipe are just waiting the available capacity. So as mentioned by Julien, there is no plan B. Today, we are working with our customers in very good collaboration. And we are already working with some potential projects after GSI, which will be '28, '29, basically. Miguel Nabeiro Ensinas Serra Borrega: Okay. And then just a high-level question as you were previously Head of PWR-Connect and Grid, what can you tell us about recent performance in terms of growth and profitability? And maybe some insights on what will be the #1 priority from here on? Is it accelerating top line growth? Is it continuing to expand margins or accelerate M&A? And then if I just can squeeze one more on Industry & Solutions. I think there's only Auto-harnesses left to be disposed. Is that still the plan? And do you see other areas potentially up for sale? Julien Hueber: Okay. So I will start by your last comment with autoelectric. So the answer is yes, it is -- there are still ongoing discussions with potential buyers. And this discussion are progressing. So that we will be able to come back to you as soon as something is a bit more concrete on that. But that's something that is part of our strategy to dispose and to become 100% electrical pure play electrification. Now regarding the -- you like, let's say, what would be the priorities. But basically, capital allocation is clear because we want to accelerate the M&A. That's really my objectives. I think the announcement of today for Canada can demonstrate it. And we have -- the team, M&A teams of Nexans is also very active with different pipeline. So we will review that very quickly to move on these elements. Growth, yes, but profitable growth, selective growth like we have demonstrated since several years. I think we will continue to do this. And also, we will be extremely -- and we explained that in the Capital Market Day in terms of innovations. We have a pipeline of innovations. There was recently a big event with one of our customers, platinum customers in France. We have seen a lot of electricians understand talking about innovation. There's a big appetite for innovations. And last but not least is the SHIFT and SHIFT AI that maybe we can also explain to you. That's one of our priority. We really want to grow in this segment. And I will give the floor here of Guillaume in charge of strategy and AI for Nexans that maybe can give some color on that. Guillaume Eymery: Thank you, Julien. Indeed, SHIFT AI is a hot topic for us. Basically, it's the platform from which we develop the Nexans AI solutions. And the choice we made is to amplify and accelerate the SHIFT program that has been very successful for Nexans. We focus on 4 axis: costing, complexity reduction, dynamic pricing, client advanced segmentation. And basically, the idea of SHIFT AI is that when a normal manager uses 5% of the data available, we moved to 20% with SHIFT. And with SHIFT AI, we will move to 90%. So at the moment, we are really in the topic of building up this platform, and we will tell you more in '26. Julien Hueber: And maybe just to finish on your question, maybe one of my other priorities, which is for me extremely important, is to work on the industrial excellence, generate mutualization of industrial footprints, both in Grid and Connect because we have here a room of improvement, productivity and competitiveness. So that will be also a key element of my priorities in the coming weeks with the team. Operator: And we'll now take our next question from Eric Lemarie of CIC. Eric Lemarié: I've got 2, the first one on GSI. I appreciate your various comments on this project, but could you confirm maybe that you're on time with the initial schedule on GSI and that the project has not been somewhat delayed as it is sometimes mentioned by the press? And could you maybe say when you expect to receive the final notice to proceed for GSI? And I got a second question on the backlog. The backlog on Transmission is flattish, is up year-on-year. I can see that, but it's flattish sequentially this year, around EUR 8 billion. Could you perhaps remind us your strategy here? Is it to properly execute and renew the backlog in good condition? Or is it more to expand the backlog to make it grow further? Julien Hueber: Thank you for your question. Maybe, Vincent, you want to comment? Vincent Dessale: Yes. I can take the backlog, if you wish, Julien. I think what we must have in mind, you have to take a kind of step back, I think. Why the backlog has increased significantly is that, if you remember, in '23, there has been this big move on the market with the Tenet frame agreement, which was basically the largest award of the history of the subsea business, which has basically catch a big part of the capacity on the market. And as a consequence of this major move from Tenet, you have seen plenty of other players placing their tender in order also to avoid a lack of capacity on the market. So '23 was indeed a peak of order intake. So I think now we are more in a normal process because basically, all the key players, we have 4 to 6 years of backlog. So it's quite logical, I will say, that you have a lower activity of tender right now, even if, as we say, it's still very active and very robust. You have the different players have announced award around this year. But if you follow my logic, you should expect potentially a new peak of order when there will be much more free capacity, which means basically probably more in '27 or '28. And that's why we have said previously that we think that the book-to-bill will be around 1 this year and probably next year due to this -- not due to us, but due to the cycle of the business. So we are focusing to answer to your question to 2 points. First, to execute properly the backlog because we have a good backlog to execute. And indeed, we are looking to the pipeline in order to on time, prepare the next generation of order, which will start basically from '29 onwards. And this means probably, as usual in this business, tendering 2 years in advance before the available capacity. Julien Hueber: And just -- thank you, Vincent. Just to answer your first question regarding GSI, yes, I do confirm we are in time with initial schedule, and we are in close discussion with our customers about the next steps. And so that's where we are standing today. Operator: And we'll now take our next question from Xin Wang of Barclays. Xin Wang: A quick follow-up on GSI, given we can't see your financial statements. Can you confirm for the volumes produced since September, are these sitting as contract assets or trade receivables on your balance sheet, please? Vincent Dessale: Just maybe a clarification because you speak a lot about the production. And I think just as a reminder, a project is not only production. I will not give you in details the detail of the scheduling of the project. But when we -- all what we have done since the beginning of this project is, of course, engineering, testing, production and so on. So when we say that we are on track, as mentioned by Julien, it means that we are on track not only with manufacturing, but also with jointing activities, with testing activities, with engineering activities, and this is basically what we are doing. So we have produced, I think, probably around 240 kilometers more or less. And indeed, we are continuing with both production and jointing and testing. That's the normal life of a project from a pure -- to give some color on the -- what does it mean from an operational perspective. It's not only production. If not, the project will not progress as planned. Xin Wang: Okay. I think my question was more on for the work you did since September, are you able to invoice them? Julien Hueber: So yes, we have been -- of course, we have been invoicing the customer as per normal, as per the ongoing project as per the milestone. So -- but that's nothing exceptional to report as usual, yes. Unknown Executive: [indiscernible] is limited so far. Xin Wang: Sorry, I didn't quite get the last bit. Julien Hueber: So it's Christine, our interim CFO, which was saying that our exposure is completely aligned with -- there's nothing special to report yet. Xin Wang: Okay. Great. And then my second one is, do you think there is a temporary regional oversupply in Canada since the introduction of U.S. tariffs? Because in H1, it was very obvious that you were exporting a lot more copper to the U.S., which was reflected in very high other activity numbers as you also commented in Q3, this was negative 6.3% year-on-year. Julien Hueber: So I don't think so for Canada. We have a very strong growth in Canada, close to 20% growth year-on-year, extremely dynamic. You know that we have 2 type of business, Grid and Connect. The Grid, it's fueled by long-term projects, long-term agreement with customers, utilities. So here, we are very well secured on the visibility. And in terms of Connect, we are -- what the team is doing is to really focus the activity on the specific verticals, data center, critical buildings. And here, again, there is no -- we don't see any specific additional competition from outside the Canada or from any other country. So basically, we are very well secured in this market, very dynamic with very long capability to grow in terms of construction infrastructure. Xin Wang: Okay. Good to know. And then final one, is the 9% Grid growth margin diluting? Because I think previously, management commented on sensitivity table between organic growth and margin. Is there a shift on how you think about the market? Julien Hueber: I can tell you that it's not diluted. This Grid business is extremely profitable. And so no dilution at all. It's -- we are completely aligned. Once again, we are aligned with the target we have communicated in Capital Market Day, both in terms of profitability and in terms of growth. Operator: Thank you. There are no further questions in queue. I will now hand it back to Julien for final remarks. Julien Hueber: So thank you, operator. So let me just finish by saying that I believe the solid performance delivered in our trading update today confirm the robustness of Nexans model and discipline with which we execute it. Now we enter into a final quarter with confidence, and we reiterate you have seen and you understood today our 2025 guidance. I'm very pleased to go now on the roadshows and to meet investors in the coming weeks. Thank you again for joining today. Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.
Odd-Geir Lyngstad: Hello, and good morning, and a very warm welcome to Elkem's Third Quarter Results Presentation. My name is Odd-Geir Lyngstad, and I'm responsible for Investor Relations here in Elkem. In today's presentation, we will go through the highlights for the quarter and give an update on the markets before we go through the outlook for the fourth quarter. CEO, Helge Aasen, will take us through this first part of the presentation before CFO, Morten Viga, will present the third quarter results in more detail. We will open for Q&A after Helge and Morten's presentations. So with that, I give the word to CEO, Helge Aasen. Helge Aasen: Thank you, Odd-Geir, and good morning, everyone. Very nice to see the turn up today. Yes, we seem to be repeating ourselves when it comes to describing the markets we operate in. The story about weak and challenging conditions doesn't seem to go away. And the market does actually remain much the same as it has been for a while now. However, despite challenging macroeconomic environment, Elkem's results are relatively good, but of course, below our financial targets. The EBITDA for the third, I'm sorry, the EBITDA for the third quarter ended at NOK 829 million, which gave an EBITDA margin of 11% for the group. If you exclude silicones, the operating income ended at NOK 4.1 billion with an EBITDA of NOK 586 million, which then represents a margin of 14%. This result is to a great extent, explained by good operational performance and ongoing cost improvements. Silicon Products was impacted by low silicon and ferrosilicon prices in the third quarter. But Specialty segment as Foundry alloys and Microsilica, which is a silica powder, delivered improved results. Carbon Solutions continued to deliver good margins, but the operating income and the following EBITDA is impacted by the lower sales. Silicones has improved on cost and market positions and delivered a higher EBITDA compared to the same period last year. The strategic review is ongoing. We gave an announcement some weeks ago, and I can just confirm that this is moving ahead as planned with an exclusive sales process, and we are still aiming for closing this transaction within the first half of next year. So before we go on to the market update and the results, I'd like to say a few words about our ESG work. It's built on two main pillars: reduce CO2 emissions and to supply the green transition with critical materials. Our aim is to reduce and ultimately remove fossil CO2 emissions from the smelting processes. Elkem supports the green transition through the supply of critical raw materials, and we work systematically to cut emissions and reduce waste throughout the entire value chain. Circularity is also playing an increasingly important role in this world. And we have introduced a new, actually a breakthrough method for recycling silicones through a mechanical recycling. And this then goes back into what used to be waste now is going back into new formulations. Our efforts within ESG are also recognized with strong ratings from EcoVadis and CDP. And in the third quarter, we received a gold rating from EcoVadis, and this puts us among the top 5% of all the companies they are assessing globally. And over the past years, Elkem has consistently received either gold or platinum ratings from EcoVadis, which places us among the top of the companies they are rating. Here, we show a couple of examples from Silicon Products and Carbon Solutions, illustrating some of our strong cost and market positions. I mentioned Microsilica initially. It's SiO2 silica powder, a byproduct from the ferrosilicon and silicon metal smelting processes. And over decades, we have developed this into a portfolio of specialty products, which go into quite a wide range of end applications. To mention some of them, construction, well drilling, cementing, refractories and also polymers. Over the past years, this product area has consistently grown and shown stable high margins. And I think it's a very good excellent example of how we are able to specialize on the basis of commodity production capacity. We're also a leading producer of electrode paste, electrodes and refractory materials coming from Elkem Carbon. This goes into the metallurgical industry. And these products are probably not very familiar to you, but they are critical consumables and lining materials, which are very important for stable operations and lifetime in furnaces and electrolyser cells in the aluminum industry. Also here, we are focusing on product development, and we have developed a more environmentally friendly product. With bio-based binders, which greatly improves working conditions. This solution has a proven performance record, and we have installed the product in more than 15,000 aluminum electrolytic cells. And we are gaining market share. Competitive cost position can, of course, be explained by many factors, operational knowledge, operational excellence, economies of scale, upstream integration, et cetera. However, electric power is another, of course, very important cost factor in the production of most metals. We have long-term supply agreements for renewable hydropower in Norway, Iceland, Canada, Paraguay. And access to long-term competitive energy contracts is a prerequisite for achieving competitiveness and also, of course, predictability in order to plan investments, et cetera. And renewable sourcing of energy also gives us a low carbon footprint, which clearly is, if not gaining or achieving premiums on end products, it gives us a preferential supplier status. CRU, a global business intelligence company, have published their analysis of the 2025 cost curve, which is illustrated on the graph here. This is for silicon 99, silicon metal. And as you can see from the chart, this puts our Salten and Thamshavn plants in Norway among the lowest cost producers in the western part of the world. Then coming to another important frame condition, which is trade barriers. That's affecting several markets and industries these days. And as you know, a highly dynamic and quite unpredictable environment. We are affected by this directly and indirectly. Two relevant examples are EU's ongoing safeguard assessment on silicon and on ferrosilicon and potentially silicon metal and also a U.S. countervailing duties assessment on silicon metal imports. EU safeguard measures could come into effect from November 19th. It's so far unclear how this is going to affect Elkem and how it will be structured. The potential measures will be aimed at raising prices, obviously, and protecting internal production within the EU, but we don't know how Norway and Iceland will be positioned in it. The regulations appear to focus on ferrosilicon and foundry alloys in this round, and there's no clear indication if silicon will be included. But most likely, silicon will be subject to another process at a later stage. The U.S. has imposed countervailing duties on silicon imported from several countries, including Norway with a preliminary rate of 16.87%. The basis for these duties are the CO2 compensation and CO2 quotas that the Norwegian companies receive under EU's carbon schemes. And our position on this is that these policies are a compensation for CO2 tax and do not constitute countervailable subsidies harming the U.S. domestic industry. We have had similar cases in the past. And each time we have been able to document that there was no injury to U.S. industry. So, we don't know the outcome of this round. It's now introduced as a preliminary measure, and then it will be followed by a permanent decision later on. Unclear when, partly because of the shutdown of the U.S. government at the moment. A few more words on the strategic review process. It's underway, as I mentioned, and it is going according to plan. We cannot say much more about the process beyond the status update that we gave during the third quarter. We are in an exclusive sales process with a major industrial player with a significant presence in the global chemical industry. The process is well aligned with the strategic review and represents an important milestone. And in a challenging market environment. But we are confident that the potential transaction will represent the best possible outcome for the silicones division in Elkem. And we're also confident that this process will be the best outcome for the rest of Elkem and as such, benefit to all stakeholders.Subject to further negotiations, final agreement and necessary approvals, the closing of the transaction is, as mentioned, expected to happen during the first half of next year. Now let's have a look at the markets. Automotive continues to be an important sector for Elkem, driving demand for many of our products. The growth in this sector remains weak with the exception of China, where the production is up in 2025. This is mainly the case for electrical vehicles. During the first half of 2025, the overall production in the EU is characterized by weak order intake and consequently low number of new registrations. Forward-looking forecasts have been revised upwards as markets adapt to ongoing trade and structural changes. Europe's outlook is up, supported by improved expected demand in Germany, France, Austria and Turkey. China's forecast has increased due to incentives and export growth. But overcapacity and price competition clearly persist, especially for electrical vehicles. North America is also seeing upgrades driven by tariff relief and higher production. In South America, the gains are so far limited by very high import pressure. So, any improvement in the automotive sector will definitely have a positive impact for Elkem. Several markets have been impacted by weak demand and various trade regulations and governmental initiatives. In the EU, the silicon reference price dropped by approximately 20% in late June. This was mainly due to low import prices from China, which suffer from, I would say, a severe oversupply. Prices in the EU then recovered modestly again in September due to improved market balance. This was a result of capacity being taken out in Europe as well as higher prices in China. U.S. silicon prices have increased in the third quarter. This is expected to continue to rise due to trade regulations. And in China, we have seen some price recovery from very low levels, mainly due to signals that the government will launch initiatives to curb overcapacity. Discussions are ongoing there regarding new energy consumption standards for the industry, which seems to be aimed at reducing overproduction. The ferrosilicon markets have many of the same drivers as silicon. Also here, we have a market impacted by trade regulations and possible safeguard measures in the EU, which have resulted in price fluctuations. The market sentiment is still characterized by weak demand and downward price pressure. However, based on the expected safeguard measures in the EU in August, we saw ferrosilicon prices jump up. This didn't last very long. It dropped back down again when it became clear that no preliminary measures would be announced. Prices in the U.S. increased towards the end of the third quarter. This was mainly driven by trade regulations. And in China, we've also seen some recovery from very low levels, partly due to this government focus on reducing excess production capacity. It's also somewhat linked to higher raw material costs in China. The market for carbon products is much smaller than silicon and ferrosilicon. We don't have reference prices to compare with here. Quite a big difference between regions when it comes to demand. But obviously, the underlying driver is the production of steel, which again triggers ferroalloy demand and then, of course, the aluminum industry. Global steel production in the third quarter remained quite stable compared to the same quarter last year. Europe experienced a 3% decline, whereas North America saw a 3% increase, largely due to tariffs again.The steel and ferroalloys markets continue to face challenges. Carbon Solutions specialized product offering and wide geographic presence is, however, proving to be resilient and creating a stability in earnings. Then moving on to silicones. Also like in silicon metal, overcapacity is significantly hampering any meaningful price recovery in the commodity part of the business. Producers are actively trying to increase the prices, and we've seen quite a lot of fluctuations in China, in particular, during the quarter. DMC prices first rose from a level of around RMB 10,400 per tonne to up to RMB 12,250. This was a result of a fire at one of the bigger players. But due to the overcapacity, that was a very short-lived price uptick and prices subsequently lowered again because other producers are ready to fill the gap quite quickly. So, the current price level is around RMB 11,050 per tonne and quite sensitive to changes in raw material costs, where silicon metal obviously is one of the big input factors. Demand in China continues to be weak, especially in construction. Demand for commodity silicones in the EU and the U.S. is also negatively impacted by changing tariff policies. But I would say, in general, there's quite good and stable demand for specialties. So, coming to the outlook. Silicon Products are still going to face quite challenging conditions and low demand on a historical basis. But as mentioned in the presentation, our leading cost position and good performance in more specialized part of the business are mitigating the negative impact. Carbon Solutions benefits from good cost positions and geographical diversity, and continued weak demand will have some impact on the results. Silicone producers are actively trying to increase prices. But as mentioned, the markets are still hampered by overcapacity. Potential trade regulations and protective measures are expected to impact our markets going forward. And of course, we are very eager to see the safeguard measures in the EU and how that's going to play out. It's not yet concluded, and very hard to say the overall impact on Elkem from this. So I think with that, I'll give the word to you, Morten, and take us through the financials. Morten Viga: Thank you very much, Helge, and good morning, everybody. So it's a pleasure to go through the financial numbers for Q3. Our operating income for the quarter amounted to NOK 7.5 billion, and that's down 7% compared to the third quarter last year. All divisions had a decline in operating income this quarter, mainly explained by lower sales prices. Elkem's EBITDA for the quarter was NOK 829 million. This was also well below the third quarter last year, but it's slightly higher than Q2 this year. The reported group EBITDA margin for the quarter amounted to 11%, which is somewhat below our long-term target of 15% to 20% EBITDA margin. Having said that, we should also emphasize that the EBITDA margin for the continuous operations, i.e., excluding silicone's was 14%. And it is important to bear in mind that these margins are generated in a situation where sales prices in key markets are at or close to historical low levels. And as such, the EBITDA is not supported by market conditions, but it's held up by good operational performance and a very strong underlying cost position. There were no particular one-offs affecting the EBITDA in the third quarter. As usual, we provide an overview of some of the main financial numbers and ratios. I will not go into detail on all of them, but it's important to note that the Silicones division has been reclassified as discontinued operations and assets held for sale. In this presentation, we mainly focus on the financial numbers, which include silicones. However, the regular financial statements, including the profit and loss statements, reflects Elkem's results excluding silicones. And in the table to the right, you can see the comparable figures for Elkem with and without silicones. Including silicones, the group EBITDA amounted to NOK 829 million. The realized effects from the currency hedging program was minus NOK 16 million reported in the segment Other. Other items amounted to NOK 78 million and the main [Technical Difficulty] of minus NOK 17 million. Net finance expenses were minus NOK 34 million. And here, the main items related to net interest expenses of minus NOK 114 million, which was largely offset by currency gains on NOK 96 million, mainly related to translation effects on our external loans. The income tax was minus NOK 96 million, and this gives a very high effective tax rate of 65%. And the reason for that is that the Silicones division had a loss before income tax, which is rather high, and there is no tax in a major part of that division. Let's then take a look at the divisions and start with the Silicon Products division. So, the silicon and ferrosilicon markets remained difficult, but the division's EBITDA for the third quarter was supported by good operating performance. Total operating income amounted to NOK 3.4 billion, representing an 8% decrease compared to the same quarter in 2024. And the decline in operating income is mainly driven by lower sales prices for the commodity segments in silicon and ferrosilicon. EBITDA amounted to NOK 389 million, representing an EBITDA margin of 12%. The EBITDA is higher than the previous quarter, but significantly lower than Q3 '24, and this is explained by significantly lower sales prices, particularly for silicon. This is partly countered by good and stable results from the specialty segments, particularly foundry alloys. And as I said, in addition, the EBITDA is supported by strong operations and good cost improvements. Sales volume increased by 13% compared to the third quarter last year, mainly due to improved sales of specialty products. So, if we look at the Carbon Solutions, this division is once again presenting a good margin, and it reached an EBITDA margin of 28% in the third quarter despite very challenging market conditions. Total operating income amounted to NOK 822 million, which was down 7% from the third quarter last year. And this decline here is mainly explained by lower sales prices. The EBITDA was NOK 231 million, which represents an EBITDA margin of 28%. The EBITDA margin is in line with the previous quarter, but it's somewhat lower than Q3 '24, mainly explained by lower sales prices and somewhat higher raw material costs. The sales volume for the third quarter was in line with the previous quarter, but is negatively affected by low steel production, particularly in the EU. As mentioned, and very well known, the Silicones division is under strategic review. The division has a good portfolio of specialty products, which provides to a large extent, stable sales and margins. But also, the division's exposure to the commodity market is still very significant. And particularly in China, we have seen strong price pressure hampering our margins. The division has, however, been able to compensate for lower commodity sales prices in the quarter through higher sales volumes and good cost improvements. Total operating income amounted to NOK 3.6 billion, which was down 6% from the third quarter last year. Higher sales volume in the third quarter was more than offset by lower commodity sales prices. The EBITDA amounted to NOK 248 million, representing an EBITDA margin of 7%, and this is in line with the previous quarter, but it is significantly 23% higher than the third quarter last year, mainly driven by cost improvements and better sales volume. Sales volume was up 10% compared to the third quarter last year, mainly due to higher sales volumes in the Asia Pacific region, where we also have introduced a new production line, higher capacity, and significantly stronger underlying cost position. Let's now take a closer look at some of Elkem's key financial ratios. The earnings per share, EPS were quite low also in the third quarter with NOK 0.05 per share, and that brings the EPS year-to-date to minus NOK 0.77 per share. And we are, of course, not satisfied with this, and we are working on further cost reductions and other improvements to mitigate the market situation. The EPS was also this quarter negatively impacted by net losses from the Silicones division, which is under strategic review. And if you exclude the Silicones division, the EPS for the third quarter would have been NOK 0.34 per share plus, and it would have been a positive NOK 0.40 per share year-to-date.The balance sheet remains very solid. Total equity amounts to NOK 24 billion by the end of third quarter, which equals an equity ratio of 50%, very stable level. Elkem's financing position is well managed, and we have a very good and robust maturity profile. However, as you can see, the interest-bearing debt has continued to increase, and the current leverage is above our target level of 1 to 2x EBITDA last 12 months. By the end of the third quarter, our net interest-bearing debt amounted to NOK 11.7 billion, and that's up by NOK 0.3 billion from the previous quarter. And based on the last 12 months EBITDA, the debt leverage ratio is now 3.1. Our target is clearly to bring down the leverage, and Elkem has a plan to deleverage the company after the strategic review process has been concluded, which we plan to achieve during the first half of next year. By the end of the third quarter, Elkem's interest coverage ratio was 6x, which is well within the covenant of 4x, which is the covenant in our loan agreements. The cash flow from operation was NOK 526 million in the third quarter. We have a high emphasis on preserving and generating a good cash flow despite underlying market weaknesses. And this was a clear improvement from the previous quarters. It's explained by lower reinvestments and also positive working capital changes. As already mentioned, the markets are weak, and we will definitely continue to focus on a very disciplined capital spending as long as the weak market conditions prevail. In the third quarter, total investments were down to NOK 312 million and reinvestments were NOK 244 million, which amounted to 39% of depreciation. Strategic investments are very much down and amounted only to NOK 68 million as we have completed all major strategic CapEx projects previously. So let me take the opportunity to wrap up this presentation by summarizing the main headlines and takeaways from the quarter. We will continue to focus on cash generation and a very disciplined capital spending in response to the challenging market conditions. We're very happy to see that Silicon Products has leading cost positions and strong performance within the specialty segments. And I think this is very important to bear in mind when the markets are really, really, really tough out there. Also, Carbon Solutions is in a very good position, and we benefit from good cost positions and a very geographically diverse customer base. Silicones, also a very tough market, but we have improved our cost and market positions based on specialization and also based on new and more modern production lines, both in China and in France. The safeguard measures for ferrosilicon and ferroalloys in the EU and a new trade defense regime for steel in the EU could lead to improved market conditions if these measures are successfully supporting increased industry production in the EU, which is the intention. The strategic review process is progressing as planned with an exclusive sales process ongoing. And as we said, we expect to have the transaction closed within the first half of 2026. So I think that summarizes the presentation, and then I hand back the word toOdd-Geir for the Q&A session. Odd-Geir Lyngstad: Thank you, Helge, and Thank you, Morten. We have a good audience here today. So I think we will start and see if there are any questions from the audience. There is Marcus? Marcus Gavelli: Marcus Gavelli, Pareto Securities. So you talked about the safeguard measures, and clearly, we have no visibility right now. But could you try to provide some color on how you think about potentially worst-case scenario with higher tariffs and with Elkem potentially not being as competitive in the EU market. What sort of flexibility do you see having to redirect volumes and do other sort of measures to fight that? Helge Aasen: I think if we are left on the outside of this and have to compete on the same basis as everybody else, EU is a big net importer of ferrosilicon. And I would claim that Norway and Iceland are among the best position to continue to supply that market. So I don't think we will have to redirect volumes. Obviously, we are very uncertain about how the price protection mechanism will be constructed or put together. But that could, of course, I would say, I don't see a big downside, but there is quite a significant upside if this is done in a way that favors us. Marcus Gavelli: And also just to follow up on the, you mentioned the cost reductions that you're currently looking at. Could you also provide some color on what sort of measures that is? Is it, we've seen some ferrosilicon production now being curtailed? Is it more trying to optimize the production? Or is it actual larger reductions you're looking at? Helge Aasen: This is a wide range of different measures. Obviously focusing on fixed cost reductions continuously, but it's also linked to a lot of optimization in production, producing campaigns where we have the best cost position in different plants and furnaces, and yield improvements. And yes, there's no one particular program that's yielding this, but a very big effort ongoing, and it's giving results over time. Magnus Rasmussen: Magnus Rasmussen, SEB. You have an improvement in the Silicon Products EBITDA Q-on-Q despite lower silicon metal prices, as you said in Q2. Our understanding is that after the decision that you were to be allocated more CO2 quotas, which you reported in early July, you have to purchase less CO2 quotas on a running basis to cover what was previously a deficit. Has that been a positive driver this quarter, and by how much? Helge Aasen: Sounds like a CFO question. Morten Viga: Yes. You're absolutely right. We have got the ruling from the Norwegian Ministry, securing equal treatment with our European competitors. And that's very important. We have not yet received any additional quotas. Such things takes a bit of time, but we are very sure that we will receive a good amount of new quotas. And of course, that will put us in a much better position. There are no particular significant, let's say, CO2 quota P&L elements in our Q3 results. Magnus Rasmussen: When you, on a running basis, start to receive quotas on equal terms as your peers in Europe, then I assume you will not have to purchase quotas to cover that deficit as you've done in the past. Doesn't that imply that you will get a cost saving? Morten Viga: That is correct that in the future, there are 2 important things about this. First of all, equal treatment that's very important as a principle. And certainly, we will have significantly lower CO2 quota costs in the future when we receive those quotas, either late this year or early next year, we assume. So for our long-term competitiveness, it's good news, very good news. Magnus Rasmussen: And also, I see that your net interest-bearing debt in silicones is increasing by about NOK 375 million quarter-on-quarter. And it seems to me like more or less half of that is driven by you repaying what you label as bills payable in your balance sheet, and bills payable has come down by more than half over the past year. So, I'm just wondering why you are repaying that working capital financing ahead of the sale of the division? Morten Viga: No, that is kind of a working capital management done by the Chinese operation. So, I'm not able to give a precise answer to that. But they're managing this position. And as you rightly say, they have decided to repay some of that and reduce some of the bills outstanding. Magnus Rasmussen: Should we expect bills payable to be repaid ahead of the sale? And/or should we look at bills payable as interest-bearing debt when the sales price? Morten Viga: You should not look at bills payable as interest-bearing debt. So, it's part of the working capital management done locally in China. Odd-Geir Lyngstad: Are there any further questions among the audience? If not, I think the questions are quite well covered from what I see here, but one additional question maybe that could, and that is how long you expect curtailments at Rana in Iceland to last, and also if any of our competitors are reducing capacity to the same extent? Helge Aasen: Yes. We had an idle furnace in Rana, and we decided to postpone starting it up again. We are closely monitoring what's happening now. It's obviously inventory management, but it's also in anticipation of what will be the outcome of the safeguard decision in November. And then we have, we're going to stop one furnace in Iceland in mid-November, and that will be idle for 2 months, approximately, and what was the other part of the question? Odd-Geir Lyngstad: Competition. Helge Aasen: Yes, competition. Interestingly enough, Ferroglobe, which is our biggest competitor in silicon products in the conference, I think a couple of weeks ago, announced that they are now stopping all production in Europe. So, it says something about Elkem's competitive position. Odd-Geir Lyngstad: Very good. Thank you very much. And that also concludes our presentation here today. So, thank you very much for attending. Helge Aasen: Thank you.
Operator: Good morning, and welcome to the investor and analyst call for LSEG's Third Quarter 2025 Trading Update. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to David Schwimmer, CEO of LSEG, to open the presentation. Please go ahead. David Schwimmer: Good morning, everyone. Thanks for joining the call. I'm here with MAP and Peregrine as usual, and we are also joined by Daniel Maguire, our Head of Markets, to talk about the Post Trade transaction that we announced this morning. For this quarter, we're going to take a slightly different approach from a normal Q3 given the intense debate in recent months around our business and AI. I'll cover some key aspects of our AI strategy and the excitement we have about the current opportunities, before MAP goes through the Q3 numbers, and Dan covers the Post Trade transaction. Then, of course, we'll be happy to take your questions. It has been a really busy quarter with great progress on several fronts. Group organic growth continues to be very healthy at 6.4%, with D&A growing at 4.9%, similar to the first half. ASV growth came in at 5.6%, a little better than expected, and we anticipate it being better again in Q4. We're raising our margin guidance to the top of the original range at around 100 basis points of improvement, reflecting strong operating leverage and cost control. As you may have seen, we've launched a number of AI-related partnerships involving our data, which is valued and relied on by partners old and new as industry standard. We've announced an important transaction today that creates a strong partnership and aligned incentives for the adoption of Post Trade Solutions while also increasing our revenue share from SwapClear and extending the profit-sharing arrangement with our partner banks by 10 years. More on this in a few minutes. And on the share buyback that we announced at our half year results, the original intention was to complete that by mid-December, but we've taken advantage of a lower share price and accelerated the GBP 1 billion buyback to finish by the end of this month. And we're today announcing a further GBP 1 billion buyback to be completed by our full year results in February of next year. Our strong cash generation gives us the firepower and the flexibility to invest organically to make important strategic moves and to be active in returning cash to our shareholders. On the next slide, we have summarized our LSEG Everywhere AI strategy under 3 key pillars: trusted data, transformative products and intelligent enterprise. We'll talk more about those second 2 at the Innovation Forum in November. But let me take a minute or 2 to dive into our data and the critical and valuable role it plays now and will play in an AI-rich world. The easiest way to think about our data is that the content itself and access to it is effectively financial markets infrastructure, something we know a lot about. It is industry standard, deeply trusted, embedded in highly regulated customer workflows and supported by processes and infrastructure that are extremely hard to replicate. And we are and always have been open. We deliver data to wherever our customers want it, their screens, their servers, their cloud and, of course, through third-party providers. Let's unpack this over the next few slides. Data & Feeds accounts for a little over 1/5 of group revenues. On this slide, we've broken down these by data type. But before we get into that, I want to remind you of the scale of our data. It is the largest pool in the industry, both in terms of breadth and depth. We have over 33 petabytes of data. That is over 3x the so-called common crawl, the data set formed from the public Internet, which is used to train many LLMs. Let's begin with the 45% of our Data & Feeds revenue derived from real time. This is a business built on physics, not probability. We've built connections to 575 exchanges and execution venues globally with our own infrastructure. In the blink of an eye, we standardize and translate the exchange outputs into a single common language and deliver them directly into the world's financial institutions. Millions of hard facts per second, not probabilistic algorithms. In a nutshell, AI cannot replicate or replace our real-time data. Then we have 25% of our Data & Feeds revenue, which is specialized and enhanced by our own enrichment. By specialized, we mean proprietary. Think Tradeweb fixed income pricing or exclusive like the Reuters News agreement or contributed like our deals database. So an LLM could not access these data sets through public sources. And then on top of that, we are enriching this data with value-added enhancements and augmentation by our data experts. That is our additional value add. And then that all comes with the LSEG curation standards, accuracy, normalization and tagging. So think of this data as protected by 3 moats. It is either proprietary or exclusive. It is enriched by our own intellectual property, and it is curated, applying the LSEG standards, which have often become the industry standard. Let me give you an example to bring this to life. Our deals league tables are highly valuable to banks, advisers and law firms. These league tables are widely considered the industry standard with LSEG data obtained daily from thousands of sources co-mingled with data sourced from nearly 2,000 financial and legal advisers actively contributing their deal flow. We get up to 25,000 of these contributions per month. This input, which is from humans, is crucial to the quality, accuracy and completeness of this data. These contributions clarify and correct deal details that appear in the press. They also add additional information to public deals and supply information on other deals that are not reported anywhere. So a data set built solely on public disclosures would be both inaccurate and incomplete. We further enrich this data with our proprietary calculation of rank value, which sets the standard for deal comps, market share and pitchbooks around the world. We refine this methodology each year through roundtables with advisory firms. So in case anyone is missing the point, no LLM can gather this data from public sources, 3 moats, LSEG proprietary or exclusive data, enriched by LSEG IP and curated by LSEG, applying the LSEG standards. Let's move on to the next bucket, representing 10% of Data & Feeds revenues. It is almost exactly identical to the previous bucket. It is specialized data, proprietary, exclusive or contributed, with LSEG standards applied. So not accessible by an LLM through public sources, our aftermarket research, for example. And to carry on the analogy with the moats, this is data protected by 2 powerful moats. Next is another 10% of revenue from data that is indeed public, but to which we apply our enrichment and analysis, similar to what I was talking about with customer contributions on the league tables. And we also applied the LSEG curation standards. Examples here would be earnings estimates and sentiment analytics applied to earnings calls and other sources. So can an LLM access it? Yes, but the data will be incomplete. Here, it is 2 moats applied on public data. So 90% of our revenue is from data that is nonreplicable by an LLM. That leaves us with the last 10% of Data & Feeds revenue, which represents the data derived from public sources for which we apply LSEG curation standards, data like company filings or economic metrics. This data is rarely sold on a stand-alone basis. Here, there is still one moat, a powerful and important one, and that is our standards, which I will cover on the next slide. Now that we've established that 90% of Data & Feeds revenue is from data that is simply out of reach or inaccessible to an AI model trawling for public data. Let me take a minute to explain very concretely what I mean by that third moat, the LSEG data curation standards. There are 5 major processes in the curation of LSEG's high-quality trusted data, which are simply nonnegotiable for our customers in regulated activities. These 5 processes are the foundations of what we call the LSEG standards. Let's look at them in a little bit more detail. We do not build our data sets on probabilistic models. We have constructed them from decades of hard data, much of which is no longer retrievable. We source them from our customer community with over 40,000 customers contributing regularly. And in many cases, our own analysts and experts generate them internally. So that is sourcing. We then extensively cleanse and validate this data to ensure quality, for example, verifying its accuracy and completeness. Publicly sourced data is not reliable without this step. The third step, normalizing and mastering means creating a single source of the truth, consistent from year-to-year and from security to security, factoring in corporate actions, for example, or restatements or perimeter changes. And then concordance and tagging, which is a critical and differentiated step. This is where the universal symbology of the RIC or Reuters Instrument Codes and our use of perm IDs to tag each piece of data are so powerful. They allow full interoperability across the data estate and create logical semantic relationships between related data, for example, between a company and its directors or a bond it has issued. And the fifth step, distribution. Irrespective of technology platform, data format or channel, the data we distribute to customers is consistent and authoritative. I'll talk more about our distribution strategy in a couple of minutes. So to summarize, for those who think AI models can scoop up so-called public data from the Internet and displace us, that just does not reflect how this industry works and fundamentally ignores the nonreplicable nature of the vast majority of our data. There's also been a lot of focus on our Workflows business. We have driven a lot of change here over the last 4 years and now have our customers on a modern, modular, customizable platform where we enhance functionality week in and week out, and we're doing more and more. As we said at H1, it is not AI or a desktop. It is AI in the desktop, fully embedded in financial markets workflow. Workspace is now integrated with Microsoft Teams. We'll be launching Open Directory in the coming weeks and the full Workspace AI platform in the first half of '26, with Agentic tools coming as well. You'll see all of this at the Innovation Forum in a couple of weeks. So let's look at our Workflows revenue, the same way we did for Data & Feeds. 50% of workflows revenue comes from traders who are deeply engaged with the platform to execute their roles. They need real-time data, a network community and integration with a range of pre- and post-trade tools. Further 20% of Workflows revenue comes from ancillary trading services, such as trade routing and order execution and management. Another 15% comes from investment banking, where we have specialized content across deals, corporate actions and research, as well as integrated productivity tools. That leaves 5% of Workflows revenue from wealth and 10% from investment management. These customers benefit from our unrivaled data, exclusive Reuters News and portfolio analytics. But in these groups, there are lighter users who are mainly doing desktop research and basic charting, perhaps like many people on this call. Whether someone is a power user deep in trading workflow or a lighter user, all Workspace users will benefit from the significant AI and collaboration enhancements coming over the next few months. They will have the full functionality of some of the newer applications out there, but embedded in their existing workflow and based on data they can trust. Now over the last couple of months, you can see the pace of execution on LSEG Everywhere, delivering our data to where our customers are working as the partner of choice for financial markets data. This is no change in strategy. We have long provided data to and distributed data through our customers -- I'm sorry, our competitors and partners. For example, we are the #1 data provider to Aladdin. The industry now has new entrants, building new applications and functionality, which we believe can expand our reach and drive additional consumption of our trusted high-quality data. The economics of these deals support our growth aspirations through data licensing, new channels and the potential for usage-based revenue over time. Rogo is a specialist provider of applications to investment banking and private equity. Customers with Workspace licenses can access certain LSEG data sets through Rogo. The construct with Databricks is similar. These are attractive new distribution channels for our data. Just last week, we took a major step forward in our partnership with Microsoft, introducing certain data sets into Copilot for any Copilot subscriber, and more valuable data sets, both into Copilot and Copilot Studio for LSEG licensees. This will allow customers to build their own agents working with our data. You should expect the list of partners to continue to grow as we look to distribute our data through other major channels. That's the fundamental premise of LSEG Everywhere. A key part of many of these partnerships has been our ongoing build-out of MCP servers as we make more and more data sets available over time. Before I hand over to MAP, it has also been a very busy quarter in other parts of our business. Just to highlight a couple of significant developments. With Microsoft, we have fully replatformed our trade routing network, Autex, in Azure with Autex now connecting 1,600 brokers and asset managers via the cloud. As a result, it's faster, has much greater capacity and is even more resilient. And we have executed the first transaction on our Digital Markets Infrastructure, which is positioned to become an important new capability for trading and settlement. We're preparing to launch our Private Securities Market. More on that at the Innovation Forum. And in Risk Intelligence, we have launched World-Check On Demand with all our critical data and insight now updated in real time. That takes me appropriately to our innovation forum in a couple of weeks. In the first part of the event, MAP and I will cover our unique positioning, our end markets and execution to date. Irfan Hussain, our CIO; and Emily Prince, our Head of AI, will cover our AI strategy and engineering transformation. And then Ron Lefferts and Gianluca Biagini will talk about product strategy and monetization in DNA. We'll then have specific product walk-throughs and demos across the group. We're looking forward to showing you both the present and the future. And just to be clear, this is not a traditional Capital Markets Day. Don't expect any new guidance or anything along those lines. So with that, let me hand it over to MAP to talk about our Q3 performance in more detail. Michel-Alain Proch: Thanks, David. So just a few words on our financial performance. We have delivered another quarter of strong growth across the group. Organic growth for the quarter was 6.4% with all divisions contributing well. We had a benefit of 30 bps from the ICD acquisition of last year and a headwind of 190 bps from FX, which together translates into our reported growth of 4.8%. Within D&A growth of 4.9%, Workflows and Data & Feeds saw very similar growth to Q2 with only a slight impact from the new UBS contract that I mentioned at the H1 results. Analytics continued to grow strongly. The competitive environment is stable, and we are excited about the product pipeline. Our expectation for pricing into 2026 is for the yield to be similar to the last 3 years in the 3.5% range. FTSE Russell, as I indicated at H1, saw slightly slower growth in subscriptions with fewer account reviews in the period. But on the other hand, asset-based fee growth was strong as we lap the loss of a contract last year. Risk Intelligence had another strong quarter, driven by both World-Check and Digital Identity & Fraud. So overall, the subscription businesses delivered 6.5% growth in Q3, ahead of our expectation of 6% for the second half of the year. ASV growth came in at 5.6%, a bit ahead of the 5.4% we had anticipated. Good sales momentum partially offset the expected impact of the final Credit Suisse impact wrapped into the new long-term partnership with UBS. As I have said before, I expect this to pick up again to 5.8% as we exit the year. The Markets business continued to grow well, though at a slightly slower pace than H1 as volatility was lower and comps got tougher. Looking at the 2 main lines, OTC derivative was up 9.2%, driven by continued strength in client clearing volumes in SwapClear, and fixed income was up 9.9% as Tradeweb continued to drive growth through its innovative trading protocols and an uncertain macroeconomic outlook. Elsewhere, we have seen the IPO pipeline pick up in the Equities business with more to come heading into 2026. And we are seeing the final headwinds to growth in Securities & Reporting from the Euronext exit. Moving now to our delivery against guidance. We are absolutely on track and in some respects, ahead of our original plan. Year-to-date organic growth is 7.3%, comfortably within our guidance range, and this remains unchanged. On margin, the natural operating leverage in our business gives us confidence to raise our margin guidance to the top of the range at around 100 bps improvement year-on-year. This is a big step-up for a GBP 9 billion revenue business, and it factors significant ongoing investment in AI and new products. We are very confident of hitting our 2026 guidance of 250 bps over 3 years, taking us to 50% plus, obviously, before the impact of the Post Trade transaction, which I will cover in a moment. On CapEx, we will invest at a rate of 10% of revenue this year as planned and expect that intensity to come down in future years. One or 2 in the market have asked whether we will need to invest more in an AI future. The answer is clearly no. We have been investing at a double-digit CapEx intensity for several years, and we are now switching the mix over time from technology debt payback towards more investment for growth, obviously, including AI. And finally, we have good visibility of hitting our free cash flow guidance of at least GBP 2.4 billion. And finally, let's look at how we are allocating this cash flow. Overall, we are deploying more this year than what we are generating. That reflects the opportunities we see in front of us. So we expect to spend around GBP 3.5 billion versus free cash flow of GBP 2.4 billion. We are financing the difference with new borrowings of GBP 1.1 billion. Total dividends for the year are just over GBP 700 million, representing a 35% payout of adjusted earnings. In addition, we are deploying GBP 700 million net on the Post Trade transaction announced today, where we expect returns to be very attractive. And finally, as David mentioned, you may have noticed that over recent weeks, we significantly accelerated the GBP 1 billion buyback announced with the H1 results, and we have nearly completed it. Given our strong cash generation, low leverage and the enhanced returns we believe we will generate at this share price level, we are today committing to a further GBP 1 billion. This will start shortly and complete by the full year result in February 2026. We plan to execute GBP 500 million of this GBP 1 billion in year. This is a further demonstration of the flexibility and optionality our strong cash flow generation gives us and our very active capital allocation decision-making. Taking all this together, our leverage at the end of this year should be around 1.9x EBITDA, so in the middle of our 1.5x to 2.5x net debt-to-EBITDA range. Let's now look at the rationale of the transaction in our Post Trade business that we announced this morning. First, a group of 11 leading global banks is taking a 20% stake in our Post Trade Solutions business. The perimeter of PTS includes the recent acquisition, Quantile and Acadia, plus businesses we have grown organically, mainly SwapAgent. This transaction deepens our partnership with institutions that can benefit significantly from PTS services and allows them to help share its future and share in its growth. Second, we have agreed to alter the terms of the revenue share paid to the partner banks from SwapClear. Historically and up to 2024, this sat at 30%, reflected in our cost of sales. We are taking this down to 15% for 2025, applied across the whole year and 10% for 2026 and beyond. And finally, we are extending it from 2035 to 2045. Again, this is strategically important, and it improves our economics at a fair valuation and extends the deep relationship with our partner banks into the long term. Daniel will cover the strategic value in more detail in a moment. But the financial effects of this transaction are very positive. The impact of reducing the revenue share from 30% to 15%, which again is retroactive across the whole of 2025, will add around 250 bps to the Markets' divisional EBITDA margin and 100 bps to the group margin this year. While obviously, there are some financing costs, overall, this transaction is 2% to 3% accretive to EPS this year onwards. But beyond these financials and even more importantly, we expect this transaction to accelerate the long-term growth in PTS. Let me hand over to Daniel to recap on the playbook that has been so successful. Daniel Maguire: Thank you, MAP. So I just want to take a couple of minutes now to highlight how and why SwapClear has grown over the last 15 years, and touch on the opportunity we see forward in Post Trade Solutions. So through partnership, both through the shareholdings a number of our key members have held in LCH and the revenue share in SwapClear that continues, we have built a deep and wide global network that delivers significant value to all of its constituents. The scale shift in 15 years is extraordinary. The number of members, i.e., the banks has increased by 3.5x and the number of clients, i.e., the buy-side firms has increased by 200-fold, clearly demonstrating the network effect. Notional value registered per annum is up 10x at nearly GBP 2,000 trillion. And we have become the global destination of choice for interest rate swaps in all currencies for clearing. And this is why we are now inviting our partners into Post Trade Solutions, because we believe we can do the same again, but for the uncleared market. We built a near GBP 1 billion annual revenue business based on cleared OTC instruments across SwapClear, ForexClear and CDSClear, all of which are leaders in their markets and all of which are built on the strong foundations and the model of industry partnership. The uncleared opportunity is basically the same size as the cleared space. Our members and our clients want to manage the whole book in one place, bringing efficiency to their capital, the margin requirements and materially simplifying and standardizing processes. We are uniquely placed to do that given the assets that we've built and brought together under one roof and with our proven track record of delivering real value through long-term partnership. Acadia and Quantile give us collateral and margin workflow tools and compression tools, respectively. And SwapAgent and TradeAgent, both developed in-house, complete the current suite of services we call Post Trade Solutions. And we've got very good momentum to build on. Revenue in PTS is growing at double-digit pace. Volumes are up 70%, and the network is expanding at pace. So bringing these 11 major partners closer and giving them a role in shaping the business as well as a share in its growth sets us up for long-term success. I'll now hand back to David. David Schwimmer: Thanks, Dan. So just to recap, we have had another strong quarter of growth with year-to-date organic growth at 7.3% and all of our businesses performing well. We're executing at pace on our AI strategy of LSEG Everywhere as the AI partner of choice for financial markets data. And we are allocating capital effectively and proactively with an attractive strategic deal in Post Trade and a further big step-up in our buyback program. And now MAP, Dan, and I are happy to take your questions. Peregrine? Peregrine Riviere: Thanks, David. [Operator Instructions] And with that, I'll hand over to Pauly to manage the queue. Operator: Thank you, Peregrine. [Operator Instructions] And your first question comes from the line of Arnaud Giblat of BNP Paribas. Arnaud Giblat: Could I start with the Post Trade Solutions? So banks are paying over 50x EBITDA, 9x sales for their stake. Clearly, as you said, that comes with a significant commitment to put more business through that division. I'm just wondering, I mean, you gave a bit of detail, but if you could flesh out a bit more what sort of commitments, the time frames, what specific milestones we should be looking at for that business to grow, and what perhaps give us an indication of the potential size of that business in the medium term, from a revenue perspective? And my follow-up would be on the distribution agreements with third-party providers. Quite a lot going on there. I'm just wondering how we should think about this? Because clearly, there is a bit of a usage model you've talked about. So probably this increases significant usage and therefore, gives revenue upside. At the same time, if clients are accessing your data through a third-party vendor, then how does pricing in the long term look like if you're being -- I mean, if it interfaces somebody else? David Schwimmer: Thanks, Arnaud. Let me turn it over to Dan to answer the aspects of your first question. We're not going to get into a lot of detail on what the revenue looks like over the medium or longer term, but you can talk a little bit about how we're thinking about the construct. And then I'm happy to talk about the distribution agreements. Daniel Maguire: Okay. Yes. Thanks, Arnaud. Look, we're very strong believers in the industry partnership model, as you know. We've been using that, building that for a number of years on different services, and I think you can see the outcomes of that. Ultimately, we build core critical infrastructure for our major customers here over a long-term basis and around the basis of trust. So we're very, very pleased that we've got our major partners around the table with us and aligned not just on economics, but also on the product road map, the governance and the product adoption, of which we have a pretty high rate of adoption for all the products we build because of this model. I can't really be drawn on revenues. What I can point to is when you look at the -- which we shared in the slide that the gross market values, which essentially is a proxy for the scale of market risk and derivatives, if you look at the -- these numbers come from the BIS independent annual surveys, the gross market value is about [ USD 17.6 trillion ] and just over half of that is in the cleared space, but over half of that is in the uncleared space. So if you think about the level of risk of derivatives being transacted and risk transferred, they are very similar size. So we see the size of this opportunity very similarly as a result of that. And then in terms of milestones, we've got, as you can see from the press release, 11 major firms and important people at those firms making clear commitments to work with us to build out and deliver and adopt those services. So I can't be drawn on specific road maps and revenues today, but very confident that we've got the right support from the right firms and the right people. And the network is much bigger than those 11, and we've already got very good momentum in that. So pretty confident on that. David Schwimmer: And then your question around these partnerships or distribution arrangements. And the first point to make is that we've been doing this for years. And we have been providing our data through partners, and in some cases, as I mentioned, competitors for many, many years. And it's key when we do that, and this is a practice that we will, of course, maintain is that we protect our own relationships with our customers. And so in these kinds of partnerships, basically, the way they work is that although the initial origination of the relationship might come through one of the partners, the customer is then directed to us to establish the direct customer relationship with us. And we do that in a number of different situations and circumstances. So that protects us from being disintermediated through these kinds of arrangements. The other really important aspect that we're very focused on in these kinds of partnerships and distribution arrangements is protecting our data and making sure that our rights, our IP are protected even through any of these distribution channels. So obviously, the AI world is a little bit different, but we're still in a position to protect our data. And let me just give you one specific, I'll say, technical example. When we're distributing our data through an MCP server, because of that construct, we can control and monitor the access to our data. So in that construct, we're not at risk of a customer downloading all of our data, training their models on our data and then not needing us anymore. This MCP server construct allows us to control that in a very successful manner. So maintaining the relationship, protecting our data and data integrity, these are the kinds of relationships that we have managed very successfully for a long time, and it's great to see these new entrants and these new ecosystems, because we think it will actually expand the market and the customer base that we will be able to access our data. So we're really looking forward to this and excited about it. Operator: Your next question comes from the line of Andrew Lowe at Citi. Andrew Lowe: Thanks very much for the color on the revenue split by product in Workflow and Feeds. My question is on the Data & Feeds business. Specifically, how much of the historical revenue growth has been driven by pricing versus volume? Could you please also comment on the historical pricing trends across these different groups? So for example, it would be great to know how pricing growth in real-time data compares to the other segments, including the 10% from public data sources. And it would be great if we could hear a bit more about how much visibility you have on future pricing? And I've got a follow-up, but I'll wait until you've answered. David Schwimmer: Yes. Thanks, Andrew. So I'm not going to break it down product by product. But as we've been pretty clear over the last few years, you've seen our pricing yield on an annual basis be in that sort of 3% to 3.5% zone. And then you've seen our Data & Feeds business grow usually more than twice that. So that gives you a sense of what's going on here in terms of pricing relative to just volume growth. And we've been doing a lot of innovation in this area as well in terms of new products, new distribution channels as well. But hopefully, that gives you a sense on that. Andrew Lowe: Great. Okay. And then as maybe a follow-up to that. So are you seeing a pickup in demand for your tick history now that you've got sort of LLMs which are cheaper and more widespread? And how important is that when you're sort of selling your forward-looking real-time pricing data? David Schwimmer: So interesting question. and tick history, for everyone's benefit, is a great data set that we have that goes back to the '90s and has tick-by-tick history for millions and millions of securities and no one else has it. It was all public data when it was released by the exchanges, but we are the only ones who have stored it, maintained it and made it easily consumable. I would say the technological changes make it easier to consume and access now than it has been over the last 20-plus years. And we certainly expect to continue to see it being a very valuable content set. Historically, it has been mostly used by quant shops back testing their algorithms. But your question is a good one in terms of recognizing that with these models, you could see a lot more potential users accessing this huge data set to look for historical correlations and help that inform their trading on a go-forward basis. Operator: Your next question is from the line of Russell Quelch of Rothschild. Russell Quelch: I'd also like to focus these questions on the Data & Feeds business. Thanks for the extra disclosure on the revenue breakdown. So you disclosed that 55% of the Data & Feeds revenues come from pricing and reference services. And I believe you've gone from #6 player there to #3 player in the last couple of years, just behind ICE and Bloomberg. So my questions are, firstly, number one, how have you done that? And what's your view on the main points of differentiation in your offering, which is helping you to take share? My second question is, do you believe you can be a #2 player here? And if so, how? And the third question is a bit of a follow-on from Arnaud's question, but asked in a bit more of a direct way. Can you talk to your expectations of the size and cadence of the growth uplift from the recent and future data distribution partnerships that you mentioned relating to LSEG Everywhere? David Schwimmer: Sorry, can you say the third part again? Russell Quelch: Yes. Sorry, a bit of a mouthful. So I was thinking about the data distribution partnerships relating to LSEG Everywhere, both the current ones you disclosed and then you said about future partnerships. So I was wondering how we should think about the size and the cadence of the growth uplift that comes from those partnerships, both the ones that have been announced and potential future ones. David Schwimmer: Got it. Okay. So your first question, how have we moved from #6 to #3. It is investing in our content and investing in our distribution. And you have seen us over the last few years do a number of, I would say, pretty significant steps in a number of different areas. So for example, when we took on the Refinitiv business several years ago, it was very clear to us that, for example, talking to customers, they made it clear, fixed income evaluated pricing was a weak area. Corporate actions was a weak area. We have invested meaningfully in both of those areas and addressed those gaps, and we're now highly competitive in those areas. And so that has helped us move up the ranks. We have added new content in terms of a number of different areas, ranging from -- I guess, a good example is our inclusion of Dow Jones content alongside our exclusive Reuters News alongside thousands of other news sources. So constantly investing in content in a number of different areas. And then on the distribution side, over the last few years, we have made our content available through a number of different distribution channels. And whether that's in different cloud providers, whether that is -- there are some of our data sets, for example, they were only available in the U.S. for technology reasons. And we have now made those available on a global basis. So it's a number of things like that. But really, if I boil it down, content and distribution. Could we be #2? Sure. And we aim not to stop there. We're continuing to invest in this business. We have great data, great content, adding to that content, expanding our distribution capabilities. And then in terms of -- I'm not in a position to give you any specific guidance on the growth uplift. What I can say is that we're not done yet in terms of the different partnership arrangements. We think this is a really exciting time in terms of new ecosystems, new AI functionality that will provide lots of distribution opportunities for us. And as I mentioned earlier, into customer segments that might not have otherwise accessed our data. And for those customers that have historically accessed our data, this AI functionality enables them to access it in a, I'll say, a much deeper way. I mentioned earlier the 33 petabytes of data that we have. Historically, our customers have really only scratched the surface of the data and the content that we have. And the AI functionality is much more powerful in really consuming substantial amounts of our data. And then as we shift further down this road, we've talked in the past about evolving our model more towards usage-based and consumption-based pricing. So you put all that together, we are excited about what this opportunity holds. Russell Quelch: Okay. And maybe just as a follow-up to that, you've just seen S&P buy With Intelligence. You've seen BlackRock buy Preqin. You've seen MSCI buy Burgiss. So just wondering how you're thinking about your competitive position in private markets data? And is this something you might look to add inorganically to the offering? David Schwimmer: Yes. So we already have a lot of private market data, and that includes what we have ingested organically. It includes what we provide from Dun & Bradstreet. The Dun & Bradstreet data, by the way, currently available on the Workspace platform, but soon will be available through a feed, which I think is unique in the industry. We have our partnership with StepStone, which is enabling us to create, again, unique private asset product in our index business. And maybe the last thing I would say is we are not done in this space, and there's more to come in terms of our ability to provide incremental value-add and, in some cases, unique private markets data. So I can comfortably say watch this space. Operator: Your next question is from the line of Ian White of Autonomous Research. Ian White: Well, there's been a lot of discussion around the accuracy of general intelligence LLMs in financial services applications. And I guess sort of what advantage can you derive here from your privileged access to your own data when it comes to the training and development of more accurate models? Or kind of put differently, is it realistic that general intelligence tool can match a model that has been trained on your specific data set when it comes to generating accurate results derived from your data? That's essentially my main question. And just as a follow-up, on the Workspace rollout, which is now complete, what's the latest evidence you have regarding levels of customer satisfaction with Workspace versus the legacy desktop products, please? David Schwimmer: Yes. Thanks, Ian. So on the accuracy question, there has been a lot of discussion in the industry about a bunch of the product that is out there really maybe having some nice user interface, but not being remotely close to what this industry demands in terms of accuracy. And so I think that's probably right at this point for a bunch of the products that are out there that we have seen. We expect them to get better over time. I think in terms of our own approach, the advantage that we have is that we have the data. We have the highest quality and broadest data set that allows us to do the necessary training. It is scrubbed data. We're not training our capabilities on the Internet. And so we avoid the garbage in, garbage out problem that you see with a lot of these other models. And this gets back to the point I was making earlier that through the MCP server construct, we are able to control the access to our data. So we sometimes get questions from people worried about the fact that our data will be made too available and others will be able to, without compensating us, train their models on our data. That's not the case in terms of the way that we make this data available for AI usage or AI consumption. In terms of the Workspace rollout, we are very pleased with the outcome there, and this was a big exercise over the past couple of years. So we are seeing really good views on the simplicity, on the kind of change in the user interface, on the speed. And there are some aspects in terms of making some of the charting even better. There are a few different things that we're continuing to work on, as I mentioned earlier, sort of week in, week out. And this is going to continue. And it's one of the advantages of this product and the technology stack that we have moved on to. We've talked about how we've implemented 500 or so changes in each of the last 2 years, and that pace is continuing. So even though we have basically completed the migration, we still have more releases coming. I think we have 2 more releases coming, big broad releases coming this year. Yes, more coming early next year. So it's a continuous improvement exercise, which I think is a great opportunity to continue serving our customers better and better and better. Ian White: Got it. If I could just sort of playback and make sure I understood the first point. If anybody wants to sort of train a model on your data, that's kind of a licensable activity that you can kind of control through MCP and a model that's not trained on your data specifically probably won't be very effective or will be less effective than something that's been specifically curated for that purpose. Is that a fair reflection? David Schwimmer: I think that's fair. I don't want to claim that we have exclusive financial sector -- in other words, I don't want to claim that in the financial markets, we're the only ones who have financial markets data. There is other data available out there. Ours is the broadest, the deepest, the highest quality. And so we are in an advantaged position. But you've seen companies train their models on public data coming off the Internet. That's on the other end of the spectrum in terms of quality and accuracy. And then there are other data sets out there that you can use. They're just not as extensive and high quality as ours. Operator: Your next question is from the line of Mike Werner of UBS. Michael Werner: And just 2 questions here, one main one and then one follow-up, please. I was just wondering, I mean, you talked a lot today and very helpfully about the new partnerships and LSEG Everywhere. Just stepping back and when we think about the partnership with Microsoft and OpenAI and what you guys are doing there, what's the level of that engagement today versus 12 months ago? I think you used to talk about the number of software engineers that were operating on site on LSEG's premises that came from Microsoft. I was just wondering if you can give us an update there. And then as a follow-on to a couple of my colleagues' questions. When we think about these partnerships, particularly with the new ones with the AI engines and AI partners, is there any delta or any difference in how you think about the pricing? I know you said you protect the IP, but when you're thinking about these new partnerships, is there any change in the way that users who want to consume that data, would they see any difference in pricing than your traditional customers? David Schwimmer: Yes. Got it. Thanks, Mike. So in terms of our partnership with Microsoft, if anything, the level of engagement is higher, and I would say meaningfully higher today relative to where we were a year ago. I know what you're referring to. We've talked in the past about having hundreds of our people embedded with their teams and vice versa. That continues and, if anything, higher level of engagement. And we talked today about a few other things that the market hasn't really focused on, but that we're building with Microsoft, our Autex Routing Network, our Digital Market Infrastructure. These are not the areas that the market has really focused on, but we are actively building them with Microsoft. And then, of course, our Data as a Service, our analytics, Workspace being embedded in Teams, all the interoperability with Excel and PowerPoint. We have lots of teams working across a lot of different areas with the Microsoft team. So couldn't be happier about the level of engagement there. And then just with respect to the pricing, in some cases, it's really simple. So for example, we talked about the partnership with Rogo. If you want to access our data in Rogo, you have a Workspace license. It's very straightforward. It can be a little less straightforward if we are providing our data sets, our Data & Feeds data sets through some of these channels, but we have standard pricing for a lot of these. There may always be some negotiations around particular data sets or things like that, but we have standard contractual arrangements for these and standardized pricing for these. Operator: [Operator Instructions] And your next question comes from the line of Hubert Lam from Bank of America. Hubert Lam: I've got a couple of questions. Firstly, on D&A, how should we think about revenue acceleration in the next year? So just given the upward momentum on ASV, should we think 6% or more could be achievable for revenue growth in D&A next year? Second question is, I guess, last results, there was concerns about intensifying pricing competition from a couple of your biggest competitors. Just wondering if you've seen any normalization in terms of pricing? Or was the competition we saw a few months ago a bit of a one-off? David Schwimmer: Sure. MAP, why don't you take the first question? I'm happy to take the second one. Michel-Alain Proch: Yes, sure. So on D&A, we indeed forecast a revenue acceleration next year. We haven't given precise numbers, but we have given one precise number, which is for our subscription business altogether, reaching 6.5% -- circa 6.5% next year. And obviously, D&A in this number is playing its part, and it will be accelerating '26 and '25. David Schwimmer: And then on your second question, Hubert, first, just to remind people, when we talked about some of the competition dynamics at the half year, that was a very small number of cases, a couple in each of the different business areas. And I would say where we are today, we're not seeing that kind of dynamic. It feels a very stable market environment at this point from a competition perspective. Operator: Your next question is from the line of Ben Bathurst of RBC Capital Markets. Benjamin Bathurst: My questions are on Post Trade. Firstly, could you help us better understand how interrelated the 2 transactions announced this morning are, if at all? For instance, how different is the list of the founding members of SwapClear from the investing banks in Post Trade Solutions? And then secondly, how significant is the decision to extend the revenue surplus share from 2035 to 2045? Was there always a presumption that, that would be extended? Or was that kind of an incremental sweetness in the deal? Daniel Maguire: Thank you. Yes. So in terms of the construct of the overall deal, there are 13 banks involved in the swap business today. And in the investment in PTS, there are 11 investing banks, just to be clear around that. Decisions to invest in the new business ventures very much down to sort of individual circumstances of each of the banks there. So not really appropriate to speak on behalf of those in the 13 that aren't in the 11. But what I'll say is super strong engagement across the industry, level of participation in this and interest is very material from all the material players there. So we're very, very happy with that. And in terms of the extension that you asked about, yes, I think may be different opinions on whether that would have been extended or not, but the fundamental point is this is something that's been in place since 2001. We're here in 2025. It was rolling to 2035. And as part of the overall structure, those 11 banks that are investing in PTS will be extended for a further 10 years to 2045. So a 44-year enduring partnership between the major players in the OTC derivatives space on the sell side with ourselves there. So I think it's part of the overall construct rather than breaking it down into the exact sort of elements of the negotiation. Benjamin Bathurst: Okay. Great. So if I understand it rightly, it's just those that are participating in Post Trade Solutions that will have the extension for 2035 to 2045? David Schwimmer: That's correct. Daniel Maguire: And just to be clear, '25 to '35 remains already existing 13. So existing 13 until the maturity of the existing arrangement and the extension of 10 years is to the 11 that are also investing in the Post Trade Solutions franchise business. Operator: Your next question is from the line of Julian Dobrovolschi of ABN AMRO. Julian Dobrovolschi: I have 2. Maybe the first one regarding the Microsoft product development such as Open Directory and Analytics API and some other things that you're trying to roll out together with Microsoft. Just wondering, are they offered broadly across all the tiers or restricted to premium users and as such as an upsell vector? And then the follow-up is on ASV growth. Just wondering how confident are you regarding the, let's say, reacceleration of this in the Q4? I think you've been hitting towards 5.8%. And can you please elaborate on the impact of the UBS multiyear contracts and the Credit Suisse revenue crystallization? And perhaps if you can see some leading indicators suggesting a bit of a rebound in ASV growth in the Q4. David Schwimmer: Thanks, Julian. So I'll take your first question, and MAP can touch on your question on ASV. So on each of these different products, some of them -- the different products that we have built in partnership with Microsoft, some of them are separate products that have separate pricing, separate licenses, separate arrangements. Some of them are embedded in existing products. And so if we talk about Open Directory and we talk about what's coming in Workspace, you'll see us charge for that over time really through price realization in the core product. I think then in some of the products that we have rolled out in analytics, the Analytics API, for example, that's a new product, and there's separate charging for that. And we've seen some of that in the uptick in the growth rates in analytics, for example. And let me just -- I'll mention one other example where you can see this very clearly. The arrangement that we announced with Microsoft 1.5 weeks, 2 weeks or so ago, where we are making our data -- we are making some of our data sets available to all users of Microsoft Copilot. So if you have a Copilot license, you can be outside the financial services sector, you have a Copilot license and you're doing something in Copilot, you will get access to certain of our data sets. And that's an arrangement that we have with Microsoft. And then we have other data sets that you can license directly with LSEG and then have access to them through Microsoft Copilot and Copilot Studio, if you are building, for example, agents using our data. So that gives you an example where some of them are embedded -- some of the pricing arrangements are embedded in existing products. Some of them are new, and we are charging incrementally for them. Let me turn it over to you, MAP. Michel-Alain Proch: Yes, sure. So first of all, before addressing your question, I'd like to point out that we have outperformed our previous guidance on ASV. And remember, in H1, we were expecting that the Q3 ASV would fall to 5.4% with 40 bps of impact of UBS. So excluding UBS 5.8%, so comparable to Q2, and we posted 5.8% in Q2, 5.4% was what we were expecting in Q3. We actually outperformed this to 5.6%. So ex UBS, 6%, an acceleration from the 5.8% we were at the end of Q2. And when I look forward for the end of this year, we're very confident into accelerating again to 5.8%. And here, it's the same thing. It's 5.8%, including of the 40 bps for UBS. So actually, excluding it, 6.2%. So 5.8%, 6%, 6.2%. That's basically the message today. Operator: Your next question is from the line of Enrico Bolzoni of JPMorgan. Enrico Bolzoni: I wanted to ask you, you now revised your EBITDA guidance a couple of times, even excluding the newly announced deal. So I just wanted to ask you, what are you doing particularly well or better than you expected that basically drove the consecutive revision in guidance? So that's my first question. And partially related to that, just some small clarification. So one, you are clearly now spending just over GBP 1 billion to in-source this additional revenue from SwapClear. Can you just clarify whether this will be capitalized and whether the amortization of that will be above or below the line? So that's one question. And another related question to numbers. You're clearly issuing some debt, you're guiding for EPS accretion in 2025. What about 2026? I know you talked about margin expansion for EBITDA in 2026. Can we say that we will also see a similar EPS uplift for next year? Michel-Alain Proch: All right. So I begin with EBITDA margin. So yes, just to remember for maybe those of you who didn't see it, we began with 50 to 100 bps of EBITDA margin guidance for this year, we then improved it to 75 to 100 bps. And finally, we are now confident to reach 100 bps. It's really an acceleration. So what we have implemented in the last 2 years at LSEG is a full cockpit of cost discipline, addressing all the different components of our cost base. So mostly people, we're talking a lot of people, obviously, but it's true for cloud costs, on-premise costs, travel expense and so forth and so on. And basically, this acceleration is coming from the fact that what we have put in place is more efficient and is producing more results and quicker, if you want, than what I expected at the beginning of the year. The second reason, which is maybe -- so that's an acceleration. Second reason which is more structural is -- and maybe you remember what I was telling you at the earnings of 2024, the different automation solution that we have put in place at different places in the company. So in QAS, meaning our customer service, in our content ingestion, we were putting it in place, and I was expecting to see the first materialization into savings next year. And actually, it's happening as early as this year. So that's the combination of the 2. Now to answer your second question about the GBP 1.15 billion, that represents the alteration of the SwapClear revenue share. So we're considering this as an acquisition. So we are creating an intangible asset exactly as we would do as a traditional acquisition. And we are going to amortize it over 10 years below the line as the rest of our acquisition. And then your final question, which is the accretion. So accretion of 2% to 3% in 2025, because I want to be clear on the fact -- I hope I was clear in my script that this revenue share alteration is retrospective to the 1st of January of '25, okay? So it means that we benefit from the full accretion in terms of EBITDA margin that I have mentioned of 100%. And in terms of EPS taking into account the financing cost. We said 2% to 3% in '25, and we'll have pretty much the same thing, 2% to 3% in '26. Operator: And your next question is from the line of Tom Mills of Jefferies. Thomas Mills: I think we've skirted around it a few times on the call. I just wanted to clarify that you are sort of reiterating you're expecting to deliver around 3.5% price increase on the 1st of January is kind of [indiscernible]. Michel-Alain Proch: Absolutely. Absolutely. We've just sent -- the price letter was sent in September. On the basis of the first reaction from this price letter and our experience, we are confident we will derive the same type of yield around 3.5% in '26 as the one we had this year in 2025. Operator: And your next question is from the line of Oliver Carruthers of Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Thanks for a lot of the incremental KPIs around D&A. I just have one quick modeling question on the FTSE Russell subscription revenues. I think you're calling out the more modest growth in subscription growth here in Q3 was to do with this mandate renewal cycle that you think is going to normalize next year. So just what's reasonable to assume in terms of the pickup in growth rate? I think you're running at around 5% on a constant currency basis year-over-year for Q3. And the reason I ask is if we go back to 2024 levels of around 10%, on my math, this adds something like 70 basis points to your ASV. So just any parameterizing of that would be very helpful. David Schwimmer: Yes. Thanks, Oliver. So you're right. This year, a much quieter period in terms of renewals during which we would typically see incremental revenue associated with either regular price rises or bigger, broader business relationships and broader engagement. I think hard to give you specific numbers as to what that's going to look like in '26 and beyond. You've seen how this business has performed in years past in that kind of higher than mid-single-digit zone. So I think I'm probably pretty comfortable, and MAP, feel free to weigh in here as well. I think we're pretty comfortable in that zone, but I don't want to be giving you any sort of specific guidance on what that looks like at this point. Operator: And there are no further questions on the conference line. I will now hand the presentation back to David Schwimmer, CEO of LSEG, for closing remarks. David Schwimmer: Great. Well, thank you all. Thanks for joining us today. As I said upfront, a little bit more substance in this one rather than a typical Q3 update. We hope you all have found it useful. And if you have any questions, you certainly know where we are. We'd be happy to take any further questions through Peregrine and the team. Thanks again.
Operator: Welcome to the conference call. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Jonas Gustafsson: Good morning, everyone, and a warm welcome to this 2025 Q3 release call for Hemnet Group. My name is Jonas Gustafsson, and I'm the Group CEO of Hemnet. With me here on my side today at our headquarters in Stockholm, I have our Chief Financial Officer, Anders Omulf; and our Head of Investor Relations, Ludvig Segelmark. As usual, we will go through the presentation that was published on our website this morning during today's session. I will kick it off with a summary of the main highlights during the third quarter and a few exciting updates regarding strategic initiatives and planned product launches soon to come. Thereafter, Anders Omulf will cover the financial details before I will come back in the end to wrap up this session. As always, there will be opportunities to ask questions at the end of the presentation. Today's session will be moderated by our operator, so please follow the operator's instructions to ask questions through the provided dial-in details. So with that, let's get started, and let's move on to the next slide, please. Despite a continued challenging property market, Hemnet demonstrated strong ARPL growth and resilience in the third quarter. Net sales decreased by minus 1.5% on the back of low Q3 listing volumes. ARPL, average revenue per listing grew by 21% in the third quarter, driven by a continued increasing demand for Hemnet's value-added services, where conversion towards Hemnet premium continues to be the main driver. Paid published listings were down with minus 19.2% in Q3, reflecting a challenging Swedish property market with continued high supply levels, extended sales cycles and continued pressure on the housing prices. Around 4 percentage points of the volume decline was attributed to a new business rule introduced in Q1 2025, allowing sellers to change agents without buying a new listing that is impacting the year-on-year comparison negatively. EBITDA declined by minus 5.9% to SEK 195.4 million as the low listing volumes lead to lower net sales and lower fixed cost leverage. Today, we announced new strategic product initiatives to strengthen Hemnet's role throughout the sales process. The aim with these new initiatives, which include a new commercial proposition where you pay only when you sell is to help sellers and agents to fully realize the value of Hemnet, which we think leads to a better chance of a successful property transaction. I will come back to these initiatives later on in the presentation. Now let's turn to Page 3 for a quick look at the financial performance. Net sales amounted to SEK 367 million, down with minus 1.5% compared to the same period last year, driven by a significant decline in listing volumes during the quarter. EBITDA decreased by minus 5.9% to SEK 195 million. The decrease was driven by the lower listing volumes, which drove lower net sales and reduced fixed cost leverage. The EBITDA margin amounted to 53.3%. We are pleased that we're able to deliver a high margin despite low volumes. Anders will break down these profitability dynamics in more details as we move on in the presentation. Now let's turn to Page 4 for a look at the property market and the listing volumes. On the left-hand side on this slide, you see a combined chart showing published listings per quarter and yearly as well as the year-on-year change between quarters. Published listings decreased 19% year-on-year in the third quarter, reflecting a property market with high supply, longer sales cycles and continued price pressure, leaving many customers hesitant to enter the market. The most recent buyer barometer from Hemnet gives further support to the sentiment, indicating that more consumers now expect prices to fall compared with last month. At the same time, lower interest rates, stabilizing inflation and the easing of mortgage regulations planned for April ‘26 could gradually help increase activity. Listing duration, the average time it took for a property to sell on Hemnet during the last 12 months increased by 18% to 52 days compared to 44 days in Q3 last year. Anders will break down the financial effect of the longer listing duration later on in the presentation. Around 4 percentage points of the volume decline was attributed to a new business rule introduced by 1st February 2025. This new business rule allows sellers to change agents without buying a new listing. It's important to remember that our published listing number follows a specific definition and differs from general market numbers. The negative listing development is challenging, but it's more important to remember that property market can be volatile, and we've been through the similar development in the past years. Just look at 2023. Let's move on to the next slide and provide some additional color on the supply situation and how that impacts the current state of the market. We do get a lot of questions on the state of the property market and how new published listings relate to transactions and total supply. Therefore, I wanted to take this opportunity to provide some color on what we are seeing and visualize it in a few graphs to eliminate some misunderstandings. We continue to see a high supply on Hemnet, but the growth rate has started to come down during the past few months. In September, in 2025, our supply grew by 2% year-on-year compared to 22% the same month last year. With that said, we're still at aggregated supply levels on the platform that is 50% higher compared to 3 years ago. The supply of Hemnet and how it moves is a function of a number of different factors. The supply increases with new listings as new listings are down the last 12 months compared to the previous year, that has a negative effect on the supply. The supply decreases with transactions as transactions are up during the same time period, that also has a negative effect on the supply. The supply follows the sales duration as average days on the platform increases, so does total supply. Average listing days on a last 12 months basis in Q3 were 18% higher compared to last year, which obviously has a significant impact. In addition to these fairly straightforward effects, there are other factors like renewals, like relistings and where we are in the new property development cycles that also impacts the overall supply levels. Now let's look a bit on how this has looked over time on the next slide. The number of new listings have exceeded the number of market transactions on Hemnet since 2022, which has built up a large supply of unsold properties during this time, which is visible on the top graph. As you also can tell clearly from the same graph, that trend has started to reverse during 2025. This is a natural correction after a few years of increasing supply. Looking at the history, we've seen the same similar patterns historically. You can also see from the bottom graph that listings and transactions over time follow the same seasonal patterns, but that the relationship between the 2 can differ quite a lot in the short term. To summarize, supply coming down from aggregated levels is positive for the property market. Lower supply signals a more healthy market where more transactions are taking place, while it is also supportive for the price development. Now turning to Page 7 to look at the ARPL development in the third quarter. ARPL grew by 21% in the third quarter. The ARPL growth was mostly driven by a strong demand for our value-added services. The conversion rate to higher tier packages continued to increase during the quarter and 3 out of 4 sellers on Hemnet now shows either Hemnet Plus, Hemnet Premium or Hemnet Max. This highlights the strength of our offering and that our customers see clear value in investing for increased visibility and impact. Our newest package, Hemnet Max, introduced earlier this year is a natural step for sellers seeking maximum exposure. The product is showing strong performance per seller. So let's look a bit on the performance on Hemnet Max. So please move to Slide 8. As mentioned, Hemnet Max continued to show strong product performance, while adoption is still at low levels. In Stockholm County, for example, homes advertised with Hemnet Max that were sold between April and August received more than 70% traffic compared to homes advertised with Hemnet Premium. Moreover, the Hemnet Max homes also got more engagement on the listing and on the average generated a much higher bid premium. We have launched a number of key initiatives to drive Max adoption going forward, including further enhancement of product features and scaling up the marketing of Hemnet Max towards agents and property sellers. We continue to work with the product, and we look forward to it being an important growth driver for Hemnet in the coming quarters and years. Now turning to Page 9 for some other exciting news. Today, we are very happy to be able to announce a set of new strategic product initiatives to help sellers and agents to fully leverage Hemnet's potential. Looking at property transactions in Sweden, we have a large opportunity as Hemnet to increase the value of the Hemnet investment for agents and sellers. We know that ensuring visibility throughout the entire home selling journey is an important part of achieving the best possible outcome. For example, data shows that listings visible on Hemnet from the start of the sales process have a higher chance of a successful sale with homes published as upcoming on Hemnet on average, selling 5 days faster than those listed as directly for sale. To help sellers and agents fully leverage Hemnet's potential, we're announcing 2 strategic initiatives today. First of all, a new success-based product offering. Since 1st of October, we have had a live pilot where we are testing a new commercial model where sellers pay only when a property is sold. Second to that, we're also announcing new strategic partnership with franchisers and brand owners that want to recommend Hemnet as part throughout the entire sales process. Now let's move to Slide 10 to talk a bit more about the ongoing pilot. So we're announcing a new commercial model to further lower the threshold for sellers to list on Hemnet. We launched a pilot test for a new commercial model on 1, October, where sellers pay only when the property is sold. The new model aims to lower the barrier for sellers to advertise on Hemnet from the start and will be a part of our strategic partnerships, and I'll elaborate a bit more on those on the next slide. This is a highly demanded model from both sellers and agents as it becomes a risk-free for the seller and easier for the broker to recommend the most suitable package for the client. We share the risk with the seller to maximize the chances of a successful sale. And we do this because we know that Hemnet works. It is still early, but the initial response and the initial feedback and collected data from the pilot has been very supportive and very strong. with sellers showing increased willingness to list on Hemnet with the new model. We plan to roll out the new model as part of the strategic partnerships during 2026. Now let's move on to Slide 11 to elaborate a bit more on the strategic partnerships. The second exciting announcement that we have to make today is our new strategic partnerships. Hemnet will offer all franchises and brand owners that want to recommend Hemnet as partner throughout the entire sales process, the opportunity to enter into a strategic partnership agreement. The aim of the strategic partnership is to help home sellers and agents to fully realize the value of Hemnet to enhance the chance of a successful property transaction. It is also a way for Hemnet to strengthen the relationship on an HQ level, meaning headquarters. The new commercial model will form a part of this strategic partnership, along with increased visibility, increased brand exposure, increased traffic and increased lead generation and new product features. We very much look forward to being able to speak more about these news and what they will mean for Hemnet and our partners as they are being rolled out over the coming months. Moving on to Slide 12 for some additional launches and product news. We continue to accelerate the pace of our product innovation. Within short, we're launching Hemnet Insights, a new AI-powered analytic tool providing agents with valuable market data as part of their Hemnet business subscription. We're confident that this will be a very useful tool, and extremely appreciated tool for agents across the country, and we're excited about the launch. During the quarter, we improved our CRM functionality, which makes it possible for us to strengthen communication and add more value to both homebuyers and home sellers on the platform. Moreover, by the beginning of next year, we will also launch a new enhanced offering for property developers that is better suited to their needs. We have also launched a marketing partnership with hitta.se, where both our listings and valuation tools are now being integrated. Lastly, our increased marketing investment during the year have begun to show results. We are seeing positive development in key brand metrics with spontaneous brand awareness increasing 11 percentage points year-on-year in Q3. And according to Orvesto survey data covering May to August 2025, Hemnet remains Sweden's third largest commercial website, reaching close to 2 million unique visitors per week with a slight year-on-year increase of 0.4% compared to last year. This is particularly encouraging given the weaker market conditions. All in all, we continue to accelerate product innovation, invest in marketing and build for the future, and it's yielding results. With that, I will hand over to Anders for the financial update, starting with Page 13. Anders, please take it away. Anders Ornulf: Thank you, Jonas. Let's turn to Page 14 directly and the financial summary. Let me begin with an overview of the third quarter of 2025. Net sales for the third quarter were SEK 367 million, a decrease of 1.5% year-over-year. This demonstrates strong resilience. We managed to maintain revenues despite published listings dropping by almost 20% in the quarter. It's a testament to our business model holding up across market conditions, much like we saw in the first half of the year 2023 before bouncing back the second half year. Key driver, of course, sustaining revenue was ARPL growing 21% year-over-year. This was supported by continued strong demand for our value-added services for home sellers, Hemnet Plus, Premium and Max. This underlines the value our platform delivers to home sellers also in a challenging housing market. In addition, our B2B segment had a strong quarter with a growth of 1.5%. We will discuss the B2B segment in more details on the next slide. Another noteworthy point is the average listing time, which on a rolling 12-month basis increased from 44 days in Q3 2024 to 48 days in Q2 2025 and now 52 days in Q3 2025. The year-on-year effect of a longer listing time is negative SEK 9 million in revenue and the sequential effect of 4 additional days from Q2 to Q3 is also SEK 9 million. To smooth out seasonal variations, we recommend tracking ARPL growth on a rolling 12-month basis as shown on Page 4 of the presentation. Turning to profitability. EBITDA came in at SEK 195 million, down 5.9% development in more detail later on. The EBITDA margin for the quarter was 53.3%, which is 2.5 percentage points lower than the margin in Q3 2024. This decline is mainly due to fixed costs that cannot be fully adjusted to offset the 9% drop in listing volumes. One important component in the margin development is compensation to real estate agents. When expressed as a percentage of property seller revenue, this ratio increases quarter-on-quarter from 30.1% in Q2 to 30.9% in Q3, driven by further improvement in both recommendation rates and actual conversion to value-added products. Looking at the effective commission compared to Q3 2024, it rises from 29.4% to 30.9%, higher commission reflecting a substantially stronger underlying improvement of our [ VAS ] products. And as always, the effective commission is a variable component and tends to fluctuate somewhat between quarters, making it more suitable to measure over longer periods. Free cash flow last 12 months was SEK 808 million, a 36% increase year-over-year. This robust cash generation underscores both the scalability of our business model and our strong profitability even in a very soft housing market. Our operations continue to convert a high portion of revenues into cash, highlighting the quality of the earnings. We continue to uphold a strong financial position. Net debt leverage ended the quarter at 0.5, an improvement from 0.6 in Q3 last year. This low leverage provides us with flexibility going forward. The reduction is particularly encouraging given our active capital allocation strategy. As you know by now, we expanded our share buyback program from SEK 450 million to SEK 600 million this year following the mandate approved at the AGM. We have been returning capital to shareholders while still maintaining a conservative balance sheet. At first glance, the headcount increase of 13 may appear notable. However, it is important to take into account the technical nuance that helps explain the development. A higher number of employees were on parental leave during Q3 '25 compared with the same period in 2024. In addition, the organization has been selectively strengthened primarily within product and tech. With that overview, let's turn to the revenues by segment and take a closer look at the Q3 figures. Moving into Slide 15, which breaks down the revenues by customer group. Since we focus the seller -- very much on our seller revenue so far, let's turn the attention to our B2B segment, which grew by 1.5% despite the continued challenging and cautious market environment. Revenues from real estate agents increased by 2% to SEK 26 million and property developers contributed SEK 13 million, up 14% year-on-year. These gains reflect strong engagement for our prioritized customer segment, and it's particularly encouraging to see both an increase in listings and an uptake in VOS products for property developers, leading to a double-digit growth. However, advertising revenues from other advertisers declined by 8% to SEK 16 million, reflecting a softer display advertising market. This was again driven by broader macroeconomic headwinds and lower impressions as a result of reduced listings volumes on the platform. Overall, an uplift for the B2B segment, marking it the strongest quarter this year. With that, let's move to the EBITDA bridge to dive deeper into the Q3 figures. On Slide 16, we show the year-on-year development of EBITDA. We have already covered what has driven the top line for the quarter, so let's turn to costs. As mentioned, EBITDA declined by 5.9% compared to the third quarter of 2024. Agent compensation increased in absolute terms, driven by strong recommendation and commercial levels despite net sales declining by 1.5%. And again, remember, ARPL grew 21% in the quarter. Looking at costs, expenses were higher than last year, mainly driven by increased marketing investments. We continue to raise our ambition in external brand building activities, and we have also increased tactical digital marketing efforts. In addition, higher pace in product development resulted in higher consulting costs. In total, fixed OpEx, excluding personnel costs increased by SEK 9 million. Personnel expenses increased somewhat, reflecting wage inflation and larger headcount. However, this quarter was -- we also benefited from a reversal of a bonus provision, which explains why personnel costs as a total were slightly lower compared to last year. The other cost category remained fairly stable, although slightly higher capitalized development costs reflect the higher product development activity. Overall, the minus SEK 19 million listing effect naturally mirrors our revenue and profit development and puts pressure on the margin. That said, taking a step back, it's encouraging to see the resilience of the underlying earnings capacity. We're not afraid to continue investing in marketing and product development, even though the total cost increase remained relatively modest at around 9%. In total, this adds up to an absolute EBITDA decline of minus SEK 12 million year-on-year. Moving on to Page 17 and some spotlight on the cash flow. Starting on the left-hand side, our rolling 12-month free cash flow continued its upward trend and exceeded SEK 800 million. Cash conversion remains strong, supporting both reinvestments in the business and capital returns to shareholders. In the middle, you can see the development of our share buybacks. During the third quarter, we repurchased shares worth approximately SEK 149 million. In volume terms, we acquired 560,000 shares, reflecting the lower share price during the period. This is part again of the SEK 600 million mandate approved in May. And finally, on the right-hand side, our net debt stood at SEK 427 million, corresponding to 0.5 leverage, well below our target of 2x. In summary, continue to accelerate investments in marketing, product development while delivering strong cash flow, gives us the flexibility to keep executing on our strategic priorities and maintain attractive shareholder returns. With that, I want to hand over to Jonas for a summary on Page 18. Jonas Gustafsson: Thank you, Anders. Let's move to the summary slide on Slide #19. To summarize the third quarter and the news that we announced today. First of all, we saw continued pressure on new published listings in Q3. The weak volumes negatively impacted both net sales and EBITDA. Second to that, we had a strong ARPL growth of 21%, and we continue to show resilience in a difficult property market. Thirdly, we announced 2 new strategic product initiatives that will aim to help sellers and agents to fully leverage Hemnet's potential, and I'm extremely excited about the impact this will have on our business in 2026 and onwards. All in all, we continue to act decisively. We're working faster. We're working smarter, and we're working with a continued focus on innovation. By doing so, we're strengthening Hemnet's position for the benefit of buyers, sellers and agents alike. With that, let's open up for the Q&A. Operator: [Operator Instructions] The next question comes from Will Packer from BNP Exane. William Packer: Three from me, please. Firstly, could you help us think through the strategic rationale of pivoting your revenue model now? You had a very strong track record over the last 5 years. Paying a bit later does bring in new risks such as arguably low inventory quality and revenue recognition headwinds. Can you just help us understand why now? Secondly, thanks for the initial details on the agent partnerships. Would you consider listing exclusivity as a part of that partnership? Or do you think the regulator wouldn't allow it? And then finally, as has been well flagged, inventory is down significantly in the quarter, 19%. Could you help us understand what cyclical market dynamics versus inventory share loss? So for example, Boneo claimed Q3 listings and the market were down high single digit for Q3. What do you think market listings are down? Jonas Gustafsson: So we'll take them one by one. And on the split ship in, and I'll start. So with the sort of the new model from a commercial perspective that we now are piloting, I think this is, to a large extent, based on discussions and feedback that we've had with agents that we've had with sellers. And it's especially sort of important, the reason for testing this out right now is the fact that we have a -- the market dynamics have changed, and we've seen them gradually changing driven by a few different factors. I mean one is related to the high competitive situation that you see on supply. Number two is driven by the fact that you have longer sales periods that we also spoke about. And I think it's one dynamic that is important and that has changed over the last 5 years is that you now see a pattern where a seller of a property typically sell before you buy. That is creating a different market dynamics. What we want to achieve is to ensure that you use the full value of Hemnet. And a way of ensuring this is that we're now testing this new model, and it's conditional to the fact that you would list directly on Hemnet. We know that we have a model that works. We know that we have an extremely efficient platform. We're the market leader. But at the same time, we need to adopt to the changing market conditions. And I think this is something that will be highly appreciated. It will help us to drive volumes. It will help us to strengthen the relationship with the agent industry that is so extremely important. So that's number one. Number two, related to the agent partnerships. We elaborated a bit on the different components as part of these strategic partnerships. And as it goes, by definition, this is a partnership. So obvious when you go into a partnership is that you want to find mutually beneficial wins. So this is a win-win partnership where we see an upside, but we're also going to help our friends out there who wants to be a part of this agreement to help them to sell more properties and help them to gain market share. And when it comes to exclusive listings, I think having exclusive listings totally depends on how you would do it, but it's obviously something where you would need to look at the regulatory dimensions very closely. And that's something that we will explore going forward. Thirdly, when it comes to volumes, so I think -- the sort of -- if you start with the minus 19%, which is our starting point, I think we clearly laid out both in the CEO letter in the presentation that we conducted earlier that parts of this 4% is driven by a business rule change that is impacting the year-on-year figures from a Hemnet perspective negatively in Q3. And it's important to remember that the numbers that was published by Boneo without knowing them in detail, I think if you look at the market and how it defines sort of the volume development, it is not like-for-like compared to Hemnet. The business rule change, I'm pretty sure that the numbers from a market perspective would not capture the relistings and the effect that the 4% had on our numbers. So that is also explaining it. Then I think there's a number of different factors, right? And it is the low demand in general. It is the duration of the sales cycles that is impacting. And also, the way I understand those numbers is not taking into consideration impact from new property developments. So there's a lot of different factors. And the most important thing for Hemnet is to ensure that we remain as the #1 player in Sweden. We want to ensure that the listings end up on Hemnet. And eventually, they do. We've seen that in 2024, and you know the numbers that we published in July, we had 89% market share in 2024. That has moved up and down. In 2023, it was 90%. In '22 and '21, it was 86%. In '20, it was 90%. So market shares tend to move with the market dynamics. So it's difficult to make a full assessment, and there are so many different type of market shares that you could define, whether it's content market share, whether it's new published listing market share, whether it's sold market share. For us, it's most important to ensure that the properties end up [ atonement ] eventually. Anders Ornulf: I can just -- maybe it was a good overview, Jonas. Maybe I can just add that of course, when it comes to our dominant position that we will -- we take that into a very deep consideration before signing any contracts. So as we have always said around that question, it's a very important question it has to be with the position we have. Operator: The next question comes from Yulia Kazakovtseva from UBS. Yulia Kazakovtseva: This is Julia Kazakovtseva from UBS. I have 2 questions, if that's okay. So my first question would be about volumes. So you said that 4 percentage points of the 19% decrease in Q3 was driven by the change in the business terms. Could you please give us the estimate of this impact for Q2? And my second question would be about the new pilot scheme where sellers only pay once the property is sold. So just thinking about the process and the mechanics of this. So if a seller lists their property, but it remains unsold after, let's say, a few months, and they decide to eventually remove it from Hemnet, will they still be required to pay for this listing? And then in this situation, if this happens and then eventually if the property is transacted somewhere outside of Hemnet after this, what's your position here? Would they still need to pay for this or not? Jonas Gustafsson: I'll start off and then Anders, please fill in. So when it comes to the volumes, you're absolutely right, Julia. 4% is connected with the change in terms of the business rule. The 4% that we saw in Q3, if you look at Q2, that number was also 4%. So you should sort of consider the same levels in Q2 as in Q3. So hopefully, that covers the first question. Second to that, when it looks -- when we look at the new product proposition, First of all, we're testing right now. So we don't know the exact scope, the exact terms and conditions of this pilot. We're extremely satisfied with the initial results that we've seen, the reception that we've had from both sellers and especially from agents, it's been very, very positive. When it comes to the specific case that you asked for, obviously, something that we need to detail out. But the current hypothesis and that hypothesis is very strong, is that if you take one listing as an example, you would use this new business opportunity, meaning that, first of all, you would list directly on Hemnet with this new proposition and just play with the thought that it would not be sold for 3 months or whatever period you decide, and it would be taken down. If it's then selling on off Hemnet, if the property has been taken down, you would still need to pay for it. So we will track individual properties and ensure that we get the money for it. The terms and conditions would be that you have used and you have leveraged the marketing power of Hemnet being the most or the leading and the strongest property platform in Sweden. So therefore, you should pay for it. So that's the hypothesis. With that said, it's one of the things that we're testing. But I think otherwise, it would be a way too large risk, and we don't want to cannibalize on our core business. That is a key component in deciding this new proposition. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: I have a couple. So just starting with this new initiative with success-based product offering, how is that going to work with the other product that you have, which is pay when listing is removed because that doesn't seem to make much sense anymore if you go live fully with this. Jonas Gustafsson: Obviously, just repeating the same message that we said before, this is a pilot we're testing. And as part of this pilot and making the full assessment of this new product proposition, we would also look at the totality and the full scope of our portfolio. Current hypothesis is that the pay later if removed, that product would remain. However, and I'm sure there will be questions going forward around this as well, is obviously what price point we would price this new proposition at. And that's something that we're testing and you could expect potentially a differentiation from PL when it comes to the new product. Hopefully, that's helpful, Georg. Georg Attling: Yes, it is. And just second question on the ARPL slowdown here. It's 14 percentage points lower than Q2. if you could just help with the components to this. I mean the price effect should be similar, if not higher than Q2. So I guess mix is really the main reason for the delta helpful for -- with any details would be helpful. Jonas Gustafsson: Please take it. Anders Ornulf: The main explanation is actually tougher comps. So last year, 1st of July, we launched a new compensation model. So a very high uptick to [indiscernible] and now we are lapping and meeting those. So remember, ARPL growth is a growth figure year-on-year, right? So -- and we called out on the call that [indiscernible] is actually growing, continue to grow. So even though we continue to grow, the ARPL growth actually slowed down, as you called out here. So the main reason to answer your question is actually tougher comps. Georg Attling: Yes. And then tougher comps in terms of mix, right, because of the steep increase in premium in Q3 last year. Anders Ornulf: So the uptake between Q2 and Q3 last year was a lot higher than Q2 and Q3 this year. Operator: The next question comes from Giles Thorne from Jefferies. Giles Thorne: The first question was back on the PO sale new commercial model. And the elephant in the room for Hemnet for the past 6 months, maybe 12 months has been buy in the free-to-list model. So it'd be interesting, Jonas, to hear you talk on how the pay on the new commercial model will directly deal with that competitive threat. The second question was a bigger picture question, and it's on agent compensation. And I suppose, Jonas, it'd be useful to hear your case with this new partnership model as to why that amount of capital being allocated to the agency base is still the best thing for Hemnet's long-term interest. I appreciate that's a much bigger, harder question to answer, but it's certainly something on a lot of people's minds. And then the final question was on the open letter that we all saw over the summer from one of your largest shareholders, which called out many things, but in particular, how you're allocating capital your shareholder remuneration. So maybe Anders, some comments on any changes you intend to make on the back of that pressure. Jonas Gustafsson: Thanks, Giles. I'll start, and we'll take them one by one. And Anders, please help me, and I think you are the best one to ask the last question, but let's take it off. So when it comes to this pay on sale, I think the most important reason for us elaborating and testing this pilot now as we speak is that there are -- the market dynamics have changed. And I think I've been repeating this message over the last months since I've had the privilege to be the CEO of this company is that there's a few market dynamics right now where you have an all-time high supply where competition in the supply segment and in the own sales segment is tougher than it's ever been before. Second to that, it takes much longer time to sell a property today than it used to do 3 years ago. If you just look at the average sales duration, that was hovering around 25 days 3 years ago. Now on the last 12-month basis, it is 52 days. That has changed the sales process, the way the agents work and the way the sellers think. Thirdly, which is important is the fact that you now sell before you buy. So what we see right now with the data is that roughly 70% of all property transaction happens in sort of in a way where you sell before you buy. That used to be the opposite. So that used to be 30%. So the market dynamics have changed. This means that we want to ensure that we adopt our product proposition towards the market rather than the competitive situation to ensure that we become relevant, we remain relevant throughout the entire sales process. We know that we have a platform that works. We know that if you list on Hemnet from the beginning, the likelihood of a successful transaction and successful transaction covers everything from finding the right buyers, ensuring that you get reduced sales cycles and maximizing the bidding premium. Those 3 factors are improved when you use Hemnet the entire way. So that is a way -- and that's our hypothesis of using this. And given sort of the market situation, we want to lower the entry barriers for the sellers. We want to help the agents from the beginning. And we think that this product is going to make the difference here. We think it's a very strong proposition that will get listings earlier on Hemnet, more listings and it will help sellers to make better transactions. I think that should cover the first question. When it comes to the second question, it was a bit difficult for me to hear. But I think the question is around agent compensation and how that is related to the new strategic partnerships. But please clarify if I misunderstood it. Giles Thorne: Yes. It was -- it's at heart, a very simple question, albeit probably quite a difficult answer, which is you pay away a lot of your value to this large pool of important stakeholders. And for a very long time, that served you very, very well. But now there are open questions about whether that is the best use of your capital. So it was a question for you, Jonas, to make the case of why this is still the best use of your capital and perhaps use the new strategic partnership as a way of illuminating that case. Hope that's clear. Jonas Gustafsson: Yes. Perfect. So I think when it comes to the agent compensation, I think that has served us well. I think it continues to serve us well. It's strengthening the relationship with our most important ambassadors in the market, and that's individual agents. I think it's fair. And I think I fully understand where you come from, it's a substantial part of our P&L on the cost side that is related to compensation, but it's also helping us to build very strong relationship and mutual beneficial opportunity for both Hemnet and for the agents. When it comes to the way you understand this, Giles, but I think -- I mean, the agent compensation and the compensation model, that is a contractual and transactional relationship between Hemnet and the franchise owners. We see large opportunities of also strengthening our relationship with the HQs, the ones that has a central role and in many cases, a very important influence. And creating opportunities also on HQ level is important. And what we haven't spoken too much today about is also the individual agents. I think Hemnet in the past has been very strong with the franchise owners. We need to remain strong there, but we should also strengthen the relationship with HQs, and we should become better friends and become more supportive to the individual agents. So it's the full slate that we're thinking about. Then thirdly, the open letter from GCQ. Anders, would you like to elaborate around our view when it comes to the capital allocation? Anders Ornulf: Sure. Of course, we saw the letter and the shareholders' input is very important for us. It's one very important piece of the puzzle. But we stick to the current capital allocation strategy that we will continue to distribute excess cash through buybacks on an arm's length basis via Carnegie. On a personal view, I think not, I think it's a good success story for Hemnet since the IPO to be consistent with the buybacks and not taking bets on share price from time to another. So that's the answer. Giles Thorne: So Anders, you won't change the cadence or the pace of buybacks depending on share price moves? Anders Ornulf: No. Operator: The next question comes from Thomas Nilsson from Nordea. Thomas Nilsson: What development do you expect for staff costs and other costs at Hemnet in 2026 and 2027? Jonas Gustafsson: Anders, would you like to take that? Anders Ornulf: Sure. We don't know since we haven't decided, but what we said in the beginning of the year is that we will continue to grow this company. We will invest in marketing and talent and the product, and we will continue with that. Last year, we had a fixed OpEx growth of 30%. We said then that you will not see that this year. And now after 9 months, we are at around 15%. So all else being equal, you should expect us to continue that. But to be fair, the details has not been decided and the best way to look at it is to look at the current run rates. Jonas Gustafsson: And I think just to kick in an open door, we like operational leverage, and that's what we're going to plan for also for the next year and after that. Thomas Nilsson: Okay. And one second final question, if I may. Looking at your growth targets of 15% to 20%, how much do you think this will come from structural price raises and how much will come from promoting higher-priced packages? Jonas Gustafsson: We remain committed, and we think that the growth ambition of 15% to 20% is important. I think what we've said is that in the past, I think the largest price hikes days for Hemnet, those days are over, and we need to work on value-based pricing. And when I talk about value-based pricing, we need to ensure that we deliver products that the customers are willing to pay for. And I think this quarter, Q3, but also what we saw in Q2 and Q1 is a testimony of that. We do see that the product mix and the BOS penetration is the main driver. It is not prices. Operator: The next question comes from Ed Young from Morgan Stanley. Edward Young: Two questions, please. First of all, you've mentioned about further enhancements of Max. Should we read that as small sort of iterative additions to the Max package or perhaps a bit more of a rebalancing of the relative benefits across the package structure, so potentially including elements like free renewals? And then you've also talked about increased Max marketing. How receptive do you think agents have been able to be to these messages about the value of Max in a sort of difficult market backdrop? Or do you think their interest and ability to upsell packages will also be reliant on picking up when the macro also picks up? Jonas Gustafsson: So on the first one, I think when it comes to the enhancement of Max, I mean, Max is still a baby. It's been around for 6 months. So it's still young. We are continuously testing new features. We're elaborating with the price point. We've been running different campaigns. There are campaigns live now in the larger cities to just learn. So we're still in data collection mode. I think we need to look at a few maybe potentially bigger things as well going forward. And per your point, classifieds. So it's all a relative game comparing the features of Max also towards premium and others. But I think -- I mean, I don't think that you should continue to decrease the proposition of premium and Plus. This is all about ensuring that you improve features when it comes to Max. So that's something that we continuously work on. Anders Then I think, would you like to take the second one? Anders Ornulf: I didn't get that to be fair. Jonas Gustafsson: Sorry, can you take it again, Ed? Edward Young: Sure. I was just saying you're talking about increased marketing behind Max. I was just wondering, do you think that agents have been receptive to those messages? Or do you think ultimately that in sort of in the difficult macro backdrop? Or do you think that you need macro to pick up for them to sort of have more space if they're under pressure? Is it really a priority for them to push that? Is the macro impact an important part of the backdrop there? Jonas Gustafsson: Thanks, Ed. I can take it, Anders, and then you can fill in sorry. So I think -- I mean, it's a very good question, Ed. I mean, I think if you look at the actual product performance, and we showed a few highlights with 70% more traffic, 50% higher premiums, 50% more lift, things and engagement up. So I think those are fantastic results. I think that when it comes to Max, obviously, it is priced at a 50% premium versus Hemnet premium. And I think that has been part of the challenge in getting a quick adoption given these current market conditions. The key -- the sort of -- the way this business works to a large extent, is the fact that conversion follows recommendations. So it's all about ensuring that the individual agents recommend Max to a larger extent. That's really the main lever that we have to pull. And I think these marketing investments that we refer to is to a very large extent, B2B marketing, so investing in communication, investing in roadshows, investing in getting the message out there. But I think the sort of the Max adoption to some extent, is held back given the current market conditions. Operator: The next question comes from Eirik Rifdahl from DNB Carnegie. Eirik Rafdal: I got a few at the end here. Just to start on the strategic partnership. Are you configuring or looking to configure the commission model as well to kind of drive more agents to push this offer with pay when sold? Jonas Gustafsson: Simple answer is no. We're not looking to adjust the compensation model. Obviously, kicking an open door, everything, you would understand this. But obviously, I mean, we would pay a commission towards the agent if the property is sold and only so. So that's the part of it. But that's also one thing that we're obviously testing. Eirik Rafdal: That's very clear. And Jonas also you stated that the initial feedback and data from the pilot has been supportive and sellers showing increased willingness to list on Hemnet with the new payment option. Have you also seen increased willingness to jump on Max on the back of this? Jonas Gustafsson: What we've seen is that I wouldn't comment on Max specifically because the numbers are still quite low, but we see that there is a willingness to recommend higher tier products and higher than we have today. So that has been part of the reason why we see a very positive response. Perfect. Eirik Rafdal: And just a final question for me, which is a bit more big picture. What's your overall thoughts right now on AI risk, particularly on the back of the Silo ChatGPT integration announced a couple of weeks back? Jonas Gustafsson: I mean if you look at AI, and I'll take the big picture answer. I mean we're actively looking at how to best integrate AI into our operations to enhance user experience and internal efficiency. Up until today, our efforts internally, we focused a lot on our valuation pool. But obviously, we follow and see what is happening. And I think the -- so and the ChatGPT integration last week are very relevant and interesting. So we continue to look at that, and that's something that the team is looking at it, and we're exploring those opportunities. We want to be part of this when this takes off and when it gets to Europe. Operator: The next question comes from Annabel Hames from Deutsche Bank. Annabel Hames: Just one from me. Can you give more color on why the Max package uptake hasn't accelerated given the data that you have on product performance and investment? Is it purely just a lack of understanding from sellers? Or is it something you eventually consider having part of the commission model for agents to help uplift that uptake? Jonas Gustafsson: I think I mean taking a step back, Hemnet Max is something that would help us in '26, '27 and '28 and will be an important component to continue to drive ARPL growth. We're still in the learning phase. Please remember the last time the Hemnet launched a new product was back in 2019. So this is not something that we do on a sort of on a quarterly basis. And I think -- I mean, sitting here today and being a part of this earnings call, the key driver of what is actually driving ARPL growth in Q3 2025 is Premium and Plus, and that was introduced in 2019. So this is a long-term bet. I think when it comes to why the adoption has not picked up faster, I think parts of it is sort of related to what Ed asked about before. There is tough market conditions right now that I think has been holding back the MAX penetration. That's just a fact. And second to that, I think the awareness, this is the numbers that we show to you guys today are very, very strong. Now it's -- we have a lot of things to be done at our communication department. We need to be out there and spread the dos. Operator: The next question comes from Nicola Kalanoski from ABG Sundal Collier. Nikola Kalanoski: So firstly, interesting news regarding the new model. I appreciate that this is just in pilot mode so far, of course. But just to understand the mechanics of this. Will the cost of the listing ad be automatically deducted during the settlement with the banks when a home transaction closes? Or will the seller have to pay as they've done previously, that is just paying a regular invoice to Hemnet? Jonas Gustafsson: So the simple answer is that what we're testing right now is that the payment method and the payment flow would be very similar to our current products, meaning that would be a separate bill. However, I mean, if you look ahead, and that's a question about product development and integration towards our partners, I think sort of having the Hemnet cost being deducted in the overall settlement, that's also an interesting opportunity. But what we're piloting right now is the first stage. Nikola Kalanoski: Yes, that's crystal clear. And just another thing to clarify. I believe you mentioned earlier during this conference call, some changed market dynamics, which I'm sure we're all familiar with. But I reacted a little bit to you saying that competition in the supply segment and -- or sorry, competition in the on sale segment is tougher than it's ever been before. I just want to make sure, does this refer to there being competition among home sellers trying to sell their home or competition between Hemnet and other marketplaces, right? Jonas Gustafsson: Thanks for allowing me to clarify that if that was unclear. What I meant and clearly meant is that if you look at the on sale segment, supply levels are at record high levels, meaning that if you're a home seller, the competition to sell your property is very, very high. So it's a question about supply/demand to put it simple. Do you follow me, Nikola? Nikola Kalanoski: Yes, absolutely. I was just looking for a clarifying Operator: The next question comes from Julia Kazakovtseva from UBS. Yulia Kazakovtseva: Just one small follow-up for me. What's the current penetration of the pay later feature at the moment? I mean, the number of new listings. Anders Ornulf: It tends to fluctuate a bit, and we've commented before that it's been around 40% to 50% since launch, and it might be -- I haven't looked at it today, but it might be a little bit lower today. Jonas Gustafsson: Hovering around 40% but it goes with seasonality. So around 40% to 50%. Operator: The next question comes from Eirik Rifahl from DNB Carnegie. Eirik Rafdal: It's Eirik again. Just a quick follow-up question because we've been kind of discussing the perception of the max value and the perception of the value you guys create overall. And one thing is the perception that the agents kind of know of your value. But do you have a feeling that they understand the relative value between you and for instance, [indiscernible], I mean, on the numbers we're tracking and looking at, you guys are reporting all-time high time on site today of 52 days, but [indiscernible], at least on our numbers, is north of 120 days, so more than 2x what you guys can deliver. Do you feel that the agents kind of understand this in this market that it doesn't really help them to go there and kind of try to avoid going on Hemnet? I mean I think obviously, it's a mix. I think we have we have more work to be done and continue to educate the market around that. And you're absolutely right. I mean Hemnet is a much more efficient and much stronger property portal when it comes to ensuring that you sell your property quickly and fastly. With that said, I think this is something that we're continuously work on. And I think I've been talking a bit about how we invest in our sales force. The main reason for investing in our sales force is that we need boots on the ground to be out there, help the individual agent to understand the fantastic value that Hemnet is delivering. And also what we did in Q3 was to lift up Marcus to become my management team. And I think becoming closer to the agent, becoming closer to the industry is it's a strong rationale of why we're doing that and not only because Marcus is a fantastic salesperson. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Jonas Gustafsson: Thank you, everyone, for joining the call today and for a lot of good questions. We ran slightly over time. But with that said, we'll conclude today's session, and I wish you a fantastic day. Thanks.
Ulrika Hallengren: Welcome to the presentation of Wihlborgs' 9-Month Report 2025. There's an old saying when you think you can see the light at the end of the tunnel, beware, it could be an oncoming train. We never know what will happen ahead, and we try to be prepared for whatever we can think of. But let us be clear, we see some glimmer here and there, maybe not the full ray of light yet, but nice glitters in the horizon. It's a very busy report week for all of you, so I will try to be short and precise. That means standard procedure about the last results of our continued growth and some new records, but also some figures regarding loyalty among our customers, how we can calculate retention rates and not at least our view on future occupancy. We start with a summary of the quarter, July to September. Rental income up 6%, a new record at SEK 1.101 billion; income from property management, plus 11%; net letting positive at SEK 6 million; net EBIT to EBITDA at 10.3x, good access to financing. And as said many times before, but this still stands, demand remains for good quality in good location, and we are proud to be able to continue with the project investment that gives continued good potential for growth. Looking at the whole period, first 9 months, rental income up to SEK 3.243 billion, plus 4%. The operating surplus increased to SEK 2.334 billion and income from property management increased by 12% to SEK 1.482 billion. The result for the period amounts to SEK 1.370 billion, corresponding to SEK 4.46 per share and EPRA NRV has increased by 10% to SEK 96.23 per share adjusted for paid dividend. A comparison of the rental income first 9 months '24 and first 9 months '25. Indexation gives plus SEK 30 million; acquisition, plus SEK 90 million; currency effect, minus SEK 21 million; additional charges, plus SEK 21 million; and completed projects, new leases and renegotiation plus SEK 8 million. And here is also a new higher property tax of approximately SEK 15 million included. So higher vacancy today than a year ago, but small improvement since last report and during 2026, the improvement from new leases will show. And the streak of positive net letting continues, plus SEK 6 million in the quarter, plus SEK 65 million for the period and in total, new leases at a yearly value of SEK 300 million signed in the period. For the third quarter, the volume of new leases of SEK 66 million is good. And maybe I expected the net letting to be a bit better than SEK 6 million, but we got a late termination of SEK 16 million from a tenant who I'm not sure if they really want to move or just renegotiate. Discussions are ongoing, but the total termination is registered. So a possible upside ahead, 42 quarters in a row with positive net letting. Here are some of the tenants that we have signed during Q3, a combination of expanding tenants and new tenants from many industries, health care, insurance, biomaterials and a company that manufactures equipment for land-based fish farms as examples. And here, we have the net letting in a historical perspective, lettings in green, termination in light blue and dark blue stacks are the net letting. And as mentioned, quite high volume of new leases for being a third quarter. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 23% of total rental income. Rental value as of 1st of October is SEK 4.889 billion per year, plus 7.2% and rental income, SEK 4.379 billion, plus 4.6%. Effects from acquisition, indexation and higher willingness to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2.4% and rental income is down 0.8%. The growth in the rental market is supported by indexation of 1.6% in Sweden and approximately 1% in Denmark last year. Indexation ahead in Denmark expects to be a bit higher, and that will be reflected in the rental levels for 2026. I think the September number was 2.3% or something. Lower rental income in like-for-like is an effect of higher vacancy than a year ago. And at least, it's encouraging to see that vacancy appears to have bottomed out in several areas. More on that topic later. Changes in the market value of our properties. We started the year with SEK 59.168 billion in accordance with the external valuation of 100% of our portfolio. We have made acquisition, which adds on SEK 2.552 billion; in investment, SEK 1.911 billion; divestment, minus SEK 114 million; changes in valuation, plus SEK 450 million. And together with currency translations of minus SEK 500 million, that summarizes to a value of SEK 63.457 billion. The valuation this quarter have no changes in valuation yields, indexation or other underlying parameters. Expectation ahead is more likely to be positive, if I may guess. These figures, the running yield show how we actually perform in relation to the valuation, so not the valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.326 billion, that gives a running yield of 5.6%. Fully let, the portfolio would give a running yield of 6.4%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Occupancy is slightly up looking at the decimals since the last quarter and at least that is in the right direction. In the office portfolio, the market value is SEK 50.394 billion with an occupancy rate of 91%, 92% in Malmö, improved to 90% in Helsingborg, 90% in Lund and 92% in Copenhagen. The improvement has started and will be clearer during 2026. Operating surplus from offices summarized to SEK 2.755 billion and running yield of 5.5%, 6.2% fully let. The demand for logistics and production continues to be good in Malmö with an occupancy of 93%, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 87% occupancy rate as a whole with a running yield of 6.4%, 7.5% fully let at a total value of SEK 8.988 billion. As mentioned before, we continue to see harder competition in the third-party Logistics segment with very quick changes in needs. That also means that occupancy can improve quickly when the market changes. But I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover that would take a number of years. But as mentioned before, still a decent running yield of 6.4% even with the high vacancy and the market as such continues to be interesting. The development of our total portfolio running yield, 5.6% brings stability, not least since the portfolio overall has a high quality and good location. As noticed before, a high increase of the running yield since 2021. Some sustainability highlights from Q3. We have been appointed as Global Sector Leader by GRESB, completed a battery storage in Lund and actually one in Helsingborg as well. We have signed more sustainable -- sustainability-linked loans, also including Scope 3 carbon dioxide performance, and we continue to reduce our energy consumption. As a new example, we have reduced the electricity used for heating and cooling by 50% at Ideon Gateway in Lund, including both offices and hotel. New cooling technology and of course, the Janne solution is the answer. And something about what our customers think about us. Our latest customer satisfaction index from now in September shows an index of 79 and a loyalty score of 82, very high numbers. Tenants are especially happy with our personal service with 88% satisfaction, our competence scoring 86 and accessibility score 85. Let me just say that I totally agree with our customers. I'm also very satisfied with my competent and service-minded colleagues. I give them 100 out of 100. A catalog of our value and properties in our 4 cities in Q3, 39% of the value in Malmö, 23% in Helsingborg, 17% in Lund and 20% in Copenhagen. The region and especially these 4 cities continues to be of high interest for future growth, both in population growth forecast, which will otherwise be a challenge in many places and in a number of new workplaces. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika. Looking at the income statement for the third quarter isolated. Are we on the right slide? There we are. Thanks. Rental income grew by 6% to SEK 1.101 billion, and operating surplus increased by 4% to SEK 790 million. There are a couple of things to bear in mind looking at those 2 numbers. First of all, we've been through a new property taxation, and we got the new taxation values this summer. The taxation values are higher, which means that the property tax also is higher. The property tax -- the new property tax is applicable from 1st of January. So we have, you could say, a catch-up effect. So we -- the changes for all 3 quarters are accounted for in the third quarter numbers. That means that on the rental income line, as Ulrika mentioned, that has been affected with plus SEK 15 million from increased property tax, and on the operating cost side, our operating surplus has been affected with minus SEK 20 million from the increased property tax for the first 3 quarters during this year. So the ongoing -- or the future effect of the increased property tax will be smaller on a quarterly basis than you can see in the Q3 numbers. It's also important to bear in mind that on the rental income line, we've had a negative effect from currencies of minus SEK 7 million, and that same currency effect on the operating surplus line has been minus SEK 5 million. The income from property management amounted to SEK 495 million. We've had a small positive impact there from FX since we borrow a lot in Danish kroner as well. Income from property management up 11% versus the same quarter in 2024. We had positive value changes in the quarter of SEK 103 million. And all in all, a profit for the period of SEK 487 million. Looking at the balance sheet. The value of our property portfolio is now SEK 63.5 billion, up SEK 5.6 billion versus 12 months previously. Equity stands at SEK 23.5 billion, up SEK 1.2 billion versus 12 months previously. And during that time, we have, as you know, also paid approximately SEK 1 billion in dividends to our shareholders. And our borrowings are SEK 33.2 billion, SEK 3.5 billion higher than 12 months previously. Translating that into key numbers, our equity assets ratio now stands at 36.2%. The LTV has gone down from the last quarter to 52.3% and the interest cover ratio for the period stands at 2.8x. Looking at some per share numbers, I'd just like to highlight the EPRA NRV value at SEK 96.23 per share, which is up 10% adjusted for dividends versus 12 months previously. On the next slide, you can see the historic development of EPRA NRV, a stable growth over many years and the average annual growth adjusted for dividend is actually 15%. Moving on to the historical development of our financial ratios. The equity assets ratio at 36.2%, as you can see, is well above the 30% that we have set as the minimum level for ourselves and also on decent levels in a long-term historical perspective. The loan-to-value in the perspective of approximately 10 years has come down from around 60% now to 52.3%. And the interest cover ratio, as we've talked about before, has been very variable, especially during the special period when we had almost 0 interest rates when we had an extremely strong interest cover ratio. The rate is now stabilized and 2.8x is a quite decent level to be at. On the next slide, you see the net debt in relation to EBITDA, also that's in a long-term historical perspective. The ratio stands at 10.3x. It varies with a couple of decimals up and down, but being at 10.3x is a comfortable level for us. Looking at our sources of financing, we still have approximately half of our loans from bilateral bank agreements with Nordic banks, about 1/3 from the Danish rail mortgage system and 17% from the bond market. I would say that the banks are definitely more proactive in their lending efforts than they have been for many years actually. And we do see bank margins gradually moving downwards. The bond market has also -- as we noted already in the Q2 report, the bond market is a lot stronger than it was a year ago, and we can issue unsecured bonds at quite attractive levels in this market. The structure of our interest rate portfolio, you can see on this slide. The average interest rate is 3.29%, 3.33% if you include costs for unutilized credit facilities. We have both in the past quarter, but also if you look over the coming couple of years, we will have some effects of attractive interest rate swaps expiring, but we also see an effect of the margins that we pay to banks and in the bond market coming down somewhat. So overall, over the coming few quarters, I would expect the average interest rate to be reasonably flat. And yes, we can move to the next slide and see the development of the fixed interest period, which has gone up a touch in the quarter. It's now 2.7 years. And the average loan maturity in the loan portfolio is 4.8 years. And lastly, from my side, looking at available funds, we have unutilized credit facilities plus liquid funds of SEK 2.9 billion at the end of the third quarter, which gives us, in our view, enough financial flexibility to manage operations and seize opportunities in a good way. With that, I hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And an update on our investment in progress and a quick overview of our largest project. During the period, we have invested SEK 1.911 billion, and it remains SEK 2.730 billion to invest in approved projects, good volume in all our cities, a reasonable yield on cost with 6% or a bit above 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. Let's start in Copenhagen with our project at Ejby Industrivej 41 in the beginning, planned as and decided for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and yield on cost a bit above 6%. Completion is planned to February 2026. The large project at Amphitrite 1 in Malmö has started off really well, a bit about 20,000 square meters for Malmö University at a 10-year lease. We have started at site with deconstruction. And during September, we got the building permission from the municipality. Completion is planned to Q4 '27 and procurement will be completed shortly. In Malmö and Hyllie, we continue with Bläckhornet 1 VISTA, an SEK 884 million investment. The mobility hub has already been completed and the office will be completed in Q1 '26 and during '26. Yield on cost, 6.2% and today, approximately 40% pre-let. The best possible product and low competition from new build in the area, but we still need more activity and more decisiveness from our customers before we are satisfied. An example of top-level refurbishment in Malmö is Börshuset 1. This is an almost iconic building right beside the train station, 6,000 square meters, offices, restaurant and co-working and absolutely top rents in a Malmö perspective. Completion in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmö, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meter zoning plan approved and completion is expected to Q3 '27. Public procurement act starts now. And at Sunnanå 12:54, 17,000 square meter logistics, 100% pre-let in a 15-year lease will be completed 1st of December '25, SEK 280 million investment and yield on cost close to 7%. In Lund, we are building a new modern office right beside the Central Station, Posthornet, phase 2, 10,100 square meter, yield on cost, 6.5% and completion Q2 '26. Pre-let, a bit above 40% today. But together with ongoing discussions, I believe we can reach approximately 70% before year-end, keep our fingers crossed, and very attractive product. And at Vätet 1, also in Lund, we continue with refurbishment and adding on areas for our new tenant, Arm, 5,700 square meters and a 7-year lease, investment SEK 145 million, excluding value of the land, and yield on cost a bit above 10% and over 6.6% yield on cost, including ingoing property value. In the southern part of Lund, we continue to develop of Tomaten. This product for BPC, completion Q2 '26 and investment SEK 79 million, 3,600 square meters and yield on cost 7%. Next to that, at former Stora Råby 32:22, now named as Surkålen 1, we have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases. In total, 14,500 square meter completion in Q2 for Note and Q4 '26 for Lund University. Investment, SEK 260 million and yield on cost 9.2%. In Hörsholm, Copenhagen, we invest in a new school for NGG, 25-year lease, 11,600 square meter and investment SEK 390 million. Completion in Q1 '26. And at Giroströget in Höje Taastrup, the refurbishment for Novo continues, 62,000 square meters. Our investment is limited to SEK 423 million and completion is expected in Q1 '26, but Novo also pays rent during the refurbishment period. That was some of the ongoing project and just to touch on future possibilities as a repetition. 4 possible projects in Lund and Helsingborg, where we can develop some 70,000 square meters in the future. Zoning plans are approved for the first few projects and ongoing at Västerbro in Lund and some of the office possibilities in Malmö in the area of Nyhamnen and Dockan. High interest for the future, of course. If you should ask me which projects of these will be the next one, my best guess today is that will be none of these. The Ideon site in Lund is developing very well, and we have building rights there that might be of high interest for the growing defense and tech industries. Early volume studies have started, but nothing I can show yet. And the summary of Q3 again. Rental income up 6%; income from property management, plus 11%; net letting positive, net debt to EBITDA at 10.3x and good access to financing. And we will continue with a focus on cash earnings and future growth. We have been able to grow every year during different economic environment since 2005. We know how to adapt, find new ways and we will continue with this knowledge and ambition. Growth and cash flow is our passion and the compound interest effect of stable growth is hard to beat from SEK 7 billion to SEK 63.5 billion without any new equity from our shareholders. We have been able to grow, thanks to continued investments. They contribute to upgraded attractiveness and new demands and what comes first, higher rents or investments, have no answer, but these factors have a relation. Here is a graph showing the market rents for prime offices in Malmö and our quarterly investments during the same period from 2010 to present. The green bars represent our investment and the green line represent rent levels. And finally, a market outlook. Employment growth in our region continues. Office rents show long-term growth. Wihlborgs' project investment increase over time. Tenants on average, stay in the premises for 14 years, which support the strong customer satisfaction score. And if we just take the largest leases we have signed, we have a volume of some SEK 320 million moving in from now until end '27 and during the same period, terminations of some SEK 190 million, a good gap. So possibilities for growth is in sight. And with that, we are open for questions. Operator: [Operator Instructions] The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So firstly, on projects. The 2 projects completed in the quarter, Galoppen and Kranen, how much did they contribute in the quarter? And how much should we expect into Q4? Ulrika Hallengren: They didn't contribute in the quarter, but will contribute for the full Q4. Oscar Lindquist: And then on the Sunnanå project, from when should we expect contribution from that project? Ulrika Hallengren: Also from 1st of October. No, 1st of December, sorry. Oscar Lindquist: 1st of December. Okay. And then the Börshuset project was moved to Q1. What's the reasoning? Ulrika Hallengren: The tenant will start moving in there. So there's no delay in the project, but it's a difference between when the building is completed and when tenants moving in. So I think the -- we will have a ceremony there in February, but the rent will be started to pay in Q1. Arvid Liepe: However, everybody does not move in Q1 of the signed leases. Ulrika Hallengren: Correct. we have moving in during the whole '26. Oscar Lindquist: Yes. And then if we move over to net letting, you mentioned a late termination of SEK 16 million in the quarter. When do you think you will know if they terminate or extend their contract? Ulrika Hallengren: We have calculated as terminated and discussions are ongoing. So I guess now during Q4, there will be a decision if they stay or... Oscar Lindquist: Yes. And if they terminate the impact would be in 9 to 12 months or what's fair to expect there? Ulrika Hallengren: Just a minute. 2027, from 1st of January 2027. Oscar Lindquist: Okay. And then -- so if we adjust for that termination, net letting was positive SEK 22 million. What's the mix here between projects and existing properties? Ulrika Hallengren: In the quarter, I don't have that figure right away. But I think actually that the existing portfolio contributed very well this year and also in the quarter and also good contribution from all our cities, at least for the 9-month period. So I would say that we see positive signals in all our 4 cities. Oscar Lindquist: Okay. So effectively [indiscernible] Arvid Liepe: It's -- in the quarter, I would say, without -- I don't have the exact figure either, but I would say that more existing properties than projects during this quarter in the net lettings. Oscar Lindquist: Okay. Perfect. And then if we look on the Bläckhornet project and the Posthornet project, how is discussions going there? You improved the occupancy slightly in Bläckhornet now in the quarter. What's your sort of ambitions closing in on completion? Ulrika Hallengren: Our ambition is to improve, of course. It's a very good product. And -- but the volume is quite large. So something tends to take longer time when you can choose of good things in many levels, so to speak. So I can't give a figure when I think it's -- but I think we will continue with the work for letting also during 2026. That's reasonable to think that. But let me also mention that we see a good -- we have signed new leases in [indiscernible] in the same area. And also, actually, we -- the portfolio we bought 1st of April, there was some vacancy at [indiscernible], for example. And that is now, I think, 20%, 30% vacancy, and that is now fully let. So there is definitely activity out there. Oscar Lindquist: And would you say sort of the outlook or discussions with the tenants has improved in the quarter and going into Q4 or... Ulrika Hallengren: Yes, I think so. But it depends. One day, you think it's slow and one day you think it's very active. So -- but overall, I would say that there's more positivism out there. Oscar Lindquist: Yes. And then on occupancy, it's essentially flat Q-on-Q, and you sort of alluded or guided to improving occupancy in the second half. Could you quantify what you expect in -- or what we could expect in Q4? Ulrika Hallengren: I especially guided on occupancy in offices in Helsingborg, and that have improved 2% during the year. And otherwise, I think that we will continue to have some improvements, but not quick improvements since we also have -- I mean, for example, SAAB will move out the 1st of January '26, and that will take some time before we have entering new tenants there. But a very good example of that is that we have already signed new leases for that building with new tenant moving in a year. So only 9 months for refurbishment. And I... Arvid Liepe: For part of the building. Ulrika Hallengren: Yes, for part of the building. So they take -- yes, [ they'll likely ] take one part of the building, and we also have good discussions for more areas there which might also end up in moving in, yes, I mean, October next year or so. So quite quick period between moving out and new tenants moving in. And not for the total volume, but at a good part of it. So... Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: Just one question from me. So on rental growth, your chart clearly shows there's prime rental growth, but can you comment on the more secondary assets? What's the rental growth you're seeing there? And is there any negative re-leasing on those poorer-quality assets? Ulrika Hallengren: I mean, of course, when you look into the absolutely best location and top rent levels, that is one area. If you just take a small step from that and still good location and good quality, the rent levels continue to develop well. If you go to more poorer area, we have not a large amount of equity there. So I can't really give a good guidance. But of course, it's harder to find higher levels of rents in poorer area. There will be a larger difference there in the market as it is today. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: I'm a bit late into the call. So cut me off if I ask a question that somebody else has already asked. But I have a follow-up on a question I heard, and that was about the occupancy rate, once again, flat in the quarter. Just to be clear, I mean, you have some 6 projects or so being completed in the first quarter of '26 and then you talked about that SAAB moving out. But based on what you know today, has the occupancy rate bottomed out? And at what point in time do you expect it to improve, at what stage in '26? Ulrika Hallengren: I would say that for the whole portfolio, I think the vacancy has bottomed out, but we can see for a shorter time or period, higher vacancy in some areas, for example, when SAAB moves out and before we have new tenants in place. But we meet that well with new rental agreements. So yes, I think we have bottomed out and will improve, but the improvement isn't a quick shift. It will take some time. And especially during 2026 and end of 2026, as mentioned before, we have a quite large volume coming in. But also now in Q4, we have good volumes coming in from Galoppen and Sunnanå, for example. So yes. Of course, we want the occupancy to be even higher, but still, it's good to see that we have flattened out and are on the up-going way on the occupancy again. Lars Norrby: Second and final question. 2025 has been a year where you're growing through projects, but also through a quite substantial acquisition. Looking ahead, '26, '27, is it very much all about projects? Or are you considering adding additional size of any magnitude through acquisition as well? Ulrika Hallengren: I expect that we will see a combination. It's good with the project volume because you can manage that and plan for that. And acquisition is harder to plan for. But we continue to be active and trying to find the best premises for us. And of course, it's an interesting period we're in. Lars Norrby: And just a quick follow-up on that. In what geographic area? Are we talking primarily about Copenhagen then? Or is it more likely to be in Sweden? Ulrika Hallengren: I think there is interesting things going on both in Sweden and Denmark. So we try to be active on both places, both countries. And as mentioned, I mean, you can't plan for transaction if you want them to be the best things for you. So of course, you can be aggressive and try to buy whatever, but we will continue to be picky on what we want to go into, of course. Lars Norrby: Sounds good. I hope you don't buy whatever. Ulrika Hallengren: We will not. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So I just had a follow-up question on the property tax you mentioned weighing on the NOI margin. So the effect in this quarter was SEK 5 million, as I understand it. Is that correct? Arvid Liepe: On the operating surplus line, yes. A negative effect of SEK 5 million. Oscar Lindquist: Yes. But going forward, will you be able to sort of pass on the full increase in property tax to tenants? Arvid Liepe: Not 100%, but the very largest part. I mean, we do have some vacancies, for example, and we have a very small proportion, but still a few inclusive contracts, so to speak. Oscar Lindquist: But then significantly lower than the SEK 5 million we saw this quarter? Arvid Liepe: Yes. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Perfect. Thank you. Have we got any written questions as you can... Arvid Liepe: Let me double check. Not that I can find. No. Ulrika Hallengren: No? okay. So of course, you're welcome to come back to us whenever with whatever asked questions. Thank you for this. Arvid Liepe: Maybe we should conclude. This may actually have been a record quick presentation. Ulrika Hallengren: Definitely, 42 minutes. It's our quickest [ version ] , I think. We try to be precise and quick, but that was part of it. Arvid Liepe: Thank you, everyone, for listening in. Ulrika Hallengren: Thank you.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce the host of this conference call, Ms. Deanna Hart, Head of Investor Relations. You may begin. Deanna Hart: Good morning. Welcome to First Citizens Third Quarter Earnings Call. Joining me on the call today are our Chairman and Chief Executive Officer, Frank Holding; and Chief Financial Officer, Craig Nix. They will provide third quarter business and financial updates referencing our earnings presentation, which you can find on our website. Our comments will include forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements. These risks are outlined on Page 3 of the presentation. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable GAAP measures can be found in Section 5 of the presentation. Finally, First Citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I will now turn it over to Frank. Frank Holding: Thank you, Deanna. Good morning. Thank you for joining us for our third quarter earnings call. During the third quarter, our business segments continued to deliver strong performance. I'll focus my comments on our earnings metrics for the quarter and how we are positioning First Citizens to achieve our strategic initiatives as we move forward. I'll then turn it over to Craig to review our performance in more detail and provide guidance on the fourth quarter. Starting on Page 5. Key earnings metrics were solid, marked by net interest income growth, stable NIM and adjusted noninterest expense at the low end of our guidance range. We reported adjusted earnings per share of $44.62, an adjusted ROE of 10.62% and an adjusted ROA of 1.01%. We achieved 2.5% loan growth over the linked quarter spread across all our operating segments, but led by SVB Commercial where global fund banking loans increased 10% sequentially, driven by increased utilization and strong production in our capital call portfolio. Deposits were up by $3.3 billion or 2% sequentially, with notable inflows from our SVB Commercial and General Bank segments. We are pleased that this marks our 7th consecutive quarter of deposit growth. We also maintained strong capital and liquidity positions supporting the balance sheet growth I just mentioned and allowing us to return another $900 million to our shareholders through share repurchases during the quarter. We recently announced an agreement to purchase 138 branches from BMO Bank and while we offer our clients a variety of different ways to interact with us, our branches continue to be integral to our franchise. Building on the scale of our current nationwide platform, we are excited about this opportunity to expand into new markets and offer our client-centered approach in even more regions. Strategically, the net deposit position is expected to enable us to further enhance our liquidity position and provide additional flexibility to support our strategic initiatives including the repayment of the purchase money note as interest rates move lower. Looking ahead on Page 6. We remain committed to deepening client relationships, optimizing our balance sheet and making investments in our franchise that underpin scalable growth. So far, we have made real progress on our strategic initiatives, including platform integration and alignment. We continue to align teams to improve client experience, client segmentation and product orchestration. We have increased outreach across our business segments to deliver more holistic solutions to our clients. Digital and operational improvements. We continue to streamline workflows through automation where it makes sense with the goal of simplifying our operating environment to make us more operationally efficient. Capital and liquidity resilience. We've maintained capital ratios well above regulatory thresholds and our liquidity profile continues to afford us the optionality to support clients, invest in our future and pursue external opportunities. As always, we remain vigilant on the macro and geopolitical landscape, which remains somewhat uncertain. While we recognize that some elements of the landscape could serve as tailwinds and others headwinds, we are pleased to be operating from a position of strength. In closing, I want to emphasize that even in volatile periods across markets and rates, we continue to believe that our diverse business model and disciplined risk posture are key differentiators. Over the last several quarters, we've delivered consistent results even as external conditions shift. We remain deeply committed to being a dependable, thoughtful partner to our clients, communities and shareholders while maintaining flexibility in a dynamic economic environment. With that, I'll turn it over to Craig, who will take you through our third quarter results and forward-looking guidance for the fourth quarter. Craig? Craig Nix: Thank you, Frank. Thanks for joining us today. I will anchor my comments to the third quarter key takeaways outlined on Page 8. Pages 9 through 26 provide more details underlying our results and are for your reference. Frank mentioned, we had another solid quarter in terms of term and return metrics exceeded our expectations. Adjusted net income of $587 million was driven by positive operating leverage which included net revenue growth and expenses at the low end of our guidance range. Positive operating leverage was partially offset by an $82 million charge-off related to the first brands bankruptcy representing our full exposure to the company. We don't believe this loss is reflective of broader issues within our supply chain finance portfolio, and we're confident in the strength of our broader loan portfolio. Tangible book value per share increased by approximately 8% over the prior year and 2% sequentially despite share repurchases totaling $4 billion since inception of our share repurchase plan in July 2024 and $900 million in the third quarter. Headline net interest income was up 2.3% sequentially and in the upper half of our guidance range, driven primarily by higher average earning assets and day count. Net interest income ex accretion grew by 2.7% sequentially. Headline NIM was 3.26%, unchanged from the linked quarter, while NIM ex accretion was 3.15%, up 1 basis point sequentially as we were able to continue to manage deposit costs down while the earning asset yield remained relatively stable. Adjusted noninterest income came in just above our guidance range, increasing modestly by 1% sequentially. The primary drivers of the increase were gains on the sale of previously foreclosed assets and higher client investment fees driven by an increase in average off-balance sheet client funds in SVB Commercial. These increases were partially offset by a $9 million sequential decline in adjusted rental income resulting from higher maintenance costs in our rail business. We continue to believe the underlying fundamentals in this business are solid with utilization close to 97% and continued positive repricing trends. Adjusted noninterest expense came in at the lower end of our guidance range and was virtually unchanged from the linked quarter. Moving to the balance sheet. Loans increased by $3.5 billion or 2.5% sequentially, led by growth in Global Fund Banking within the SVB Commercial segment, followed by modest growth in the general and commercial bank segments. Global Fund Banking loans increased $2.9 billion and quarter end loan balances were at their highest level since the acquisition in this business. New loan production was strong, and we saw increased utilization in our capital call lines of credit. The pipeline for GFB remains strong, totaling approximately $10 billion as of the end of the quarter. We are encouraged by some signs of increased market activity in GFB, which we believe may continue to be a positive driver over the medium term. General Bank loans grew by $238 million, driven by -- primarily by growth in the commercial portfolio within the branch network and our wealth business. Recall, last quarter, we saw a contraction in the commercial portfolio. So we were pleased with its performance as runoff slowed and production increased. Meanwhile, our Wealth business continued to benefit from increased originations in the third quarter. Commercial Bank loans also increased $150 million with middle market banking experienced growth offset by declines within our industry verticals as we saw elevated prepayments as deals move to permanent financing and some deals in the pipeline move to the fourth quarter. We continue to maintain pricing discipline, which was reflected in our loan yield as the ex accretion loan yield held up well, only declining by 1 basis point during the quarter despite the impact of lower interest rates. Turning to the right-hand side of the balance sheet. Deposits grew by $3.3 billion or 2% sequentially as we experienced growth across all our operating segments. SVB Commercial was the largest contributor of the increase, growing by $2.1 billion, driven by growth in both Global Fund Banking and Tech and Healthcare . Deal events led to an increase in GFB deposits, while Tech and Healthcare benefited from new client acquisition and an improving investment environment. Encouragingly, average deposit balances and average total client funds in the SVB commercial business grew by 5.9% over the second quarter. While we are encouraged by this growth and some positive signs in the innovation economy, we remain guarded on the forward-looking impact on the balance sheet, giving known outflows following the end of the quarter and the overall state of the innovation landscape. In SVB Commercial, we remain focused on winning market share that is stable and profitable. In the General Bank, growth was primarily concentrated in the branch network and wealth where we continue to focus on deepening existing relationships and acquiring new customers. As noted last quarter, we have implemented additional deposit growth tactics to help identify both near- and long-term opportunities to accelerate growth through deepening relationships, encouraging more local decision-making, and improving digital capabilities, and we are excited to see these efforts pull through on the balance sheet. We were also encouraged by our ability to grow noninterest-bearing deposits for the third consecutive quarter helping us keep our noninterest-bearing deposit mix stable at 26% despite continued strong growth in total deposits. Moving to credit. Net charge-offs increased by $115 million to $234 million and were 65 basis points for the quarter. As I noted earlier, $82 million of the increase was a result of the First Brands bankruptcy, which contributed 23 basis points or made up around 35% of our total net charge-offs for the third quarter. We don't believe this loss is reflective of broader issues within our supply chain finance portfolio, which totaled $300 million as of the end of the quarter. Outside of this loss, net charge-offs -- outside of this loss net charge-offs were within our expectations and the guidance we provided for the third quarter. Excluding the First Brands charge-off, net charge-offs were mostly concentrated in the SVB commercial investor-dependent portfolio, the commercial bank general office portfolio and our equipment finance portfolio reasonably consistent with prior quarters. While we still see stress in the equipment finance portfolio, we continue to see signs of improvement and trending toward long-term expectations. We have taken steps to mitigate future losses through tightening underwriting as well as increasing collection staff to work through earlier vintages. We expect these efforts to return this business to historical net charge-off levels in the medium term. There are a couple of larger charge-offs this quarter. And as we have noted on past calls, net charge-offs can be lumpy quarter-over-quarter, given the hold sizes of some of our credits. While we continue to monitor these portfolios, we don't see further trends that would signal wider credit quality concerns and believe we are well reserved. The allowance ratio was down 4 basis points to 1.14%, driven by improvements in the macroeconomic outlook, a reduction in reserves related to Hurricane Helene and growth in higher credit quality loan portfolios. We feel good about our over observe coverage as well as the coverage on portfolios experiencing stress. Ultimately, our strong risk management rigorous underwriting standards and diversified portfolio helps safeguard against losses. Given recent industry headlines, I want to briefly touch on our exposure to nondepository financial institutions or NDFI. While the exposure can look sizable based on our call report, approximately 85% is to high-quality, low-risk capital call lines to private equity and VC sponsors. These are backed by institutional investors with committed capital many of which have historically generated solid risk-adjusted returns and credit performance has been excellent. So while the regulatory classification may label them as NDFI, from a credit perspective, we view them as safe, well-managed assets. Moving to capital. Frank mentioned that we continue to make progress on our 2025 share repurchase plan. As of close of business on October 21, we had repurchased just over 15% of Class A common shares or 14% of total common shares outstanding for a total price of $4 billion. Note that this is inclusive of the 2024 plan, which we completed in the third quarter of 2025. With respect to the $4 billion repurchase plan approved by the Board in July 2025, we have completed approximately 7% of this authorization. During the third quarter, repurchases were at the top end of our $600 million to $900 million range -- per quarter range. We expect that repurchases through the end of 2025 and into the first part of 2026, will continue to be near the higher end of this range as we manage CET1 towards our target range. The pace will likely slow down when CET1 is closer to our target range, assuming earnings and RWA growth are in line with expectations. Share repurchases will continue to be a tool to support capital management activities, providing us with an opportunity to return capital to our shareholders and to be more efficient -- capital efficient over time. Although we expect that CET1 will remain above our target range of 10.5% to 11% in 2025, given our current growth expectations and where our capital ratios were to start the year, we believe the repurchase plan will enable us to methodically manage CET1 down to that level over time as we regularly assess our growth outlook, economic conditions, the regulatory environment and capital deployment. The third quarter CET1 ratio was 11.65%, a decrease of 47 basis points from the second quarter as the impact from share repurchases and loan growth outpaced earnings. I will close on Page 28 with our fourth quarter and full year 2025 outlook. We continue to monitor the overall macroeconomic environment but acknowledge that fluidity of changes makes it difficult to narrow the range of potential impacts on the broader economy and our business lines and clients. Accordingly, we have not made significant changes to our guidance but do continue to monitor the environment and how it could impact our performance. Additionally, as Frank noted earlier, we are excited about the recent announcement of the branch acquisition with BMO Bank, given the expected close -- given that the expected close is in mid-2026. The impacts of this deal are not included in the guidance. With those disclaimers out of the way, I'll start with the balance sheet where we anticipate loans in the $143 billion to $146 billion range in the fourth quarter, driven primarily by the same areas we have seen growth year-to-date. As I noted earlier, while we had strong third quarter growth, we remain cautiously optimistic on absolute loan levels as we head into year-end. In the Commercial Bank, we expect recent trends to abate and are projecting growth in our industry verticals. Market activity remains positive. And while there is increasing competition as banks continue to lean into the lending market, our pipeline remains strong, going into the end of the year. Credit metrics remain stable and optimism is being signaled across the industry, pointing to a strong end of the year for the lending market. We expect some pullback in global fund banking in the fourth quarter as we aren't projecting utilization to remain at the levels we saw in the third quarter. Loan outstandings in this business can ebb and flow based on client draws and repayments. And while we are very bullish over the medium term on the continued expansion in this line of business, we are realistic that quarter and snapshots of outstanding balances can be more volatile. We expect deposits to be in the $161 billion to $165 billion range in the fourth quarter. We expect drivers of growth to be continued expansion in the general bank through the branch network and wealth as we continue to focus on deepening existing relationships, inquiring new customers to help drive organic deposit growth. We expect that this growth will be partially offset by a decline in SVB commercial given known outflows from deposits into off-balance sheet products post quarter end that increased third quarter deposit balance on balance sheet. We continue to be focused on strategies to best serve our clients in this business while reducing funding and liquidity costs, which could impact absolute deposit growth levels. Our interest rate forecast covers a range of 0 to 225 basis points rate cuts in the fourth quarter of 2025 with the effective Fed funds rate range, declining from 4% to 4.25% currently to as low as 3.5% to 3.75% by the end of the year. While our baseline forecast includes two rate cuts, we believe stubborn inflationary metrics and possible impacts of macroeconomic policy could lead to fewer or no cuts. Therefore, we believe it is prudent to provide a range of expectations. With that in mind, we expect fourth quarter headline net interest income to be relatively stable compared to the third quarter. For the full year, we are tightening our headline net interest income guidance to be in the range of $6.74 billion to $6.84 billion from $6.68 billion to $6.88 billion. The revision reflects the new forward interest rate curve as well as the jumping off point from the third quarter. In either case, as expected, we project that loan accretion will be down by over $200 million for the year compared to 2024. On credit losses, we anticipate fourth quarter net charge-offs in the range of 35 to 45 basis points, in line with the range we provided in the third quarter but below our third quarter results. As previously discussed, our third quarter net charge-offs were higher than anticipated given one large charge-off. We expect losses to continue to be driven by the same portfolio as we have been discussing for a number of quarters, equipment finance, general office and the SVB investor-dependent portfolio. We remain focused on client selection and prudent underwriting and have tightened in certain sectors and asset classes for specific client profiles. In commercial real estate, while rate cuts could ease some of the pressure on borrowers in the general office sector, we do believe losses will remain elevated in the fourth quarter even as market disruption may lessen as more companies have reinstated office attendance requirements. With respect to the full year range, we are increasing our guide of 35 to 45 basis points to 43 to 47 basis points given the higher jump-off point. We also continue to see some lumpiness and losses in the portfolio and as we mentioned earlier, we have a portfolio where a handful of large deals can swing the ratio. It is important to note that our net charge-off guidance does not include an estimate for the long-term impact of tariffs given the continued shifts in expectations and the difficulty in determining the full impact on our asset quality. While higher tariffs could drive economic stress in the form of inflation and/or lower growth, we believe the credit risk is manageable. We will continually assess the potential impact on our portfolio, but we do believe that its diversity is a strength in this environment. Moving to adjusted noninterest income, we expect to be in the $480 million to $510 million range in the fourth quarter aligned with a typical quarter for us. Overall, we continue to see strength in many of our core lines of business such as rail, merchant, card, wealth and lending-related fees. Given that we have three quarters behind us, we have tightened our full year adjusted noninterest income range to $1.99 billion to $2.02 billion. Year-over-year growth continues to be driven by our rail outlook, which includes a balanced railcar portfolio in a strategic exploration ladder. We also expect continued growth in wealth and international fees, thanks to new client acquisition and an increase in flow of funds. We are also encouraged by the performance of our capital markets business as we are on target to achieve another year of record fee income. The increase in off-balance sheet client funds has also benefited client investment fees. I do want to caution that given the changing rate environment, our client derivative positions can fluctuate between quarters causing some lumpiness in our results. Moving to adjusted noninterest expense. We expect the fourth quarter to be up modestly compared to the third quarter as we continue to invest in Category 3 readiness and to help simplify and optimize our platforms to allow us to scale efficiently in the future. We also have seasonal expenses that generally pull through in the fourth quarter like higher travel, client entertainment and year-end contributions, making it a bit lumpy. Looking at the full year, we tightened our adjusted noninterest expense range to $5.12 billion to $5.16 billion. Exercising disciplined expense management while making opportunistic investments through the cycle and technology and risk management is a top priority for us given headwinds to net interest income. Our adjusted efficiency ratio is expected to be in the upper 50% range in 2025 as the impact of the Fed rate cut cycle puts downward pressure on net interest margin and we continue to make investments into areas that will help us scale to Category 3 status. Longer term, our goal remains to operate in the mid-50s. Finally, for both the third quarter and full year -- for both the fourth quarter and full year 2025, we expect our tax rate to be in the range of 25% to 26%, which is exclusive of any discrete items. To conclude, we are pleased to deliver another quarter of strong financial results, reflective of the strength and resilience of our diversified business model. Thanks to our long-term focus, continued investments in our business and strong risk management framework, we're well positioned to continue delivering value to our clients, customers, communities and shareholders. I will now turn it over to the operator for instructions for the question-and-answer portion of the call. Operator: [Operator Instructions] And our first question comes from Chris McGratty at KBW. Christopher McGratty: Craig, on the NII guide, I want to start there. It looks like you just added a cut to the guide from last quarter. Can you help us about -- within the range for Q4 if we get the forward curve, is the $1.7 billion the right number if you get two cut? I know there's a lot moving on with the balance sheet. Craig Nix: Yes. If we get two cuts, which frankly would be our base forecast, we think it's more likely than not having any cuts or one cut. So when we look at both headline net interest income and net interest income ex purchase accounting, we would expect those numbers to be down low single digits percentage points sequentially. And if we look at NIM headline. We're looking in the high 3.10%. And if we look at NIM ex accretion in the high 3.00% for the fourth quarter. Christopher McGratty: Okay. And then I guess, fast forwarding, I mean, I guess the question is, when do you assume NII bottoms? Craig Nix: Really all -- both headline NII and ex-accretion NII and headline NIM and ex accretion NIM with trough in the first quarter of '26. But let me point out that there's a little nuance there that if the interest rate forecast holds, which assumes two more rate cuts this year, with the Fed fund rate ending at around 3.75%, we do anticipate paying down the note as the arbitrage in it either disappears or becomes 0 as opposed to where we have a 70 basis point spread right now. So at that point, repayment would have a positive impact on NIM to the extent, which will be determined by the amount of our pay down. So our NIM troughs are pulled forward to the first quarter, even despite our asset sensitivity given that the paydown will be accretive to NIM, absent the paydown, which wouldn't make any sense if there's an arbitrage in it, those troughs will be pushed out to the first part of '27. Christopher McGratty: Okay. And on the $35 or so billion, are you thinking tranches? How are you thinking about repayment? Any kind of color there? Andrew Giangrave: Yes. On the purchase money note, we can pay portions of it. So we would not go out and pay off the whole things as it makes up a substantive, obviously, a portion of our balance sheet and also we do the optionality obviously carries some value above and beyond the rate we're paying on it. So it would be something we would sort of leg into but maybe make a slightly larger first payment on. . Operator: The next question is from Bernard Von Gizycki from Deutsche Bank. Bernard Von Gizycki: I know you mentioned the $82 million charge-off to First Brands and represents all your exposure there. But can you just share any information on any additional monitoring you might have conducted throughout that portfolio? I think it was called out that the allowance for loan losses, there were some higher specific reserves for individually evaluated loans. So just any color you can share on that? Andrew Giangrave: Sure. This is Andy. Just to remind, our supply chain portfolio is about $300 million across 24 borrowers. So it's, on average, about $13 million of exposure, we don't have the level of concentration in the remainder of that portfolio that we did with First Brands, certainly did a deep dive post-perse brands and feel very comfortable with the remainder of that portfolio. Obviously, there's a lot of widespread allegations around fraud there. But it's going to take some time to work through that through the bankruptcy process before we learn more there. And we don't think that it's emblematic of the supply chain portfolio or supply chain in general. Bernard Von Gizycki: And just as a follow-up on M&A, post acquisition of BMO's branches expected to close for mid next year. Just given the favorable regulatory backdrop, can you just talk about your appetite to do an additional branch acquisition or a whole bank acquisition? Craig Nix: Yes. Beyond BMO, we have no specific M&A plans. But as BMO indicates, long term, M&A will remain a significant part of our growth strategy. So we don't have -- and outside of BMO, we don't have a specific time line on when we'll be back in the market as we continue to focus on category 3 readiness and capital efficiency. But when we do enter the market, we will be the same opportunistic buyer focused on accretive M&A that brings more scale and enhances our ability to compete and makes us a better bank for our customers and clients. Operator: The next question comes from Casey Haire with Autonomous. Casey Haire: I wanted to touch on the loan growth. So the loan growth guide, I hear you that it's that you expect lower utilization in fund banking, but you just put up a 10% annualized growth and it sounds like the pipeline is just as strong. So -- but the guide introduces the possibility of loans coming in, in the fourth quarter. Just in -- want to get a little color on what you really expect loan growth because it seems a little conservative. Frank Holding: Let me -- let Marc start with that and Elliot amplify. Marc Einerman: Sure. So this is Marc and speaking specifically about the GFB segment. Totally understand your point, given the 10% quarter-over-quarter growth in the third quarter. A call out there though. And maybe going back to something, Craig, I think you said earlier, is borrowings and repayments tend swing around a lot. And with Global Fund Banking, in particular, that can happen. And it's probably best illustrated when I think about the average loan growth in that segment versus the period end, that average loan growth is sub-$1 billion over the course of the third quarter. And that obviously is quite a bit less than the plus 3% on a period end basis. And so I think that illustrates sort of the point right there. And by extension, I think hopefully explains the appearance of conservatism in that part of the fourth quarter loan growth outlook. I'll stop there and pass it to you, Craig. Casey Haire: Okay. And just on the expenses. So first off, I guess, a pretty wide range in the fourth quarter, up 10%, up 50%. Just what are the wildcards within that? And then just as a follow-up, that implies 6% to 7% expense both on the year and '25. Just wondering how much of that is Category 3 prep and when we could see a relief on the expense pressure? Craig Nix: Yes. I'll let Elliot talk about the guide, but I'll handle the last part of that question, but the escalation of expenses in '25, as we guided previously, are related primarily to that work. Large financial institution program as well as several large projects related to that work as well. So that is the reason for the mid- to upper single-digit expense growth in '25 over '24. I'll let Elliot speak to the guide a bit for the fourth quarter. Elliot Howard: Yes, sure. Craig touched on some of the script. I mean I think when you look at the fourth quarter, there are certain things that are kind of more particular plus seasonal to the fourth quarter. We see kind of elevated client entertainment, we see elevated travel, in addition, when you look at something like health insurance, a lot of employees have hit their deductibles, so we see that pull through at a higher rate in the fourth quarter. In addition, I think third quarter, we had some larger meaningful projects close out. And so the depreciation impact is now going to be reflected in the fourth quarter. So as far as what could tipped up or down, I think some of those aforementioned things and then really just the timing of kind of idiosyncratic project expenses really related to kind of the tech build-out and simplification. Casey Haire: Okay. And just Craig, the Category 3 prep expense -- is that -- can we -- when can we start to see some relief on those expenses? Is that a near-term event? Or is that further down the road? Craig Nix: I would call it medium term. I think in terms of -- we made a lot of progress there. And there's certainly a great focus within our company to continue to make progress there. Most of the Category 3 requirements are either enhancements to what we currently do or represent formalization of rules that we already comply with. But there are -- there's a lot of work around data modeling and then reporting frequency, which really has us reworking processes, systems and data delivery. So there are some expenses there. I think we're probably to use a baseball analogy in the 7th inning stretch there. So there will be some expenses pulling through there, but we may -- but I do want to mention we have made a lot of great progress on that. We do intend to be able to meet those requirements in the first half of '26. Operator: The next question comes from Anthony Elian from JPMorgan. Anthony Elian: For Marc, on total client funds, I'd like to get more color on total client funds. What specifically drove the strong growth you saw in 3Q. And I know in Craig's prepared remarks, there's a level of cautiousness on the outlook for SVB. But given the backdrop of lower rates, more IPOs coming to market and VC investments continuing at a strong pace. What exactly is causing you to believe that the strong level of activity won't continue? Marc Einerman: So I will start, others may wish to contribute as well. I think this really goes to the caution that was represented in Craig's comments and with regard to Q4 guidance. It certainly has been encouraging and was encouraging to see that growth in the third quarter. At the same time, you mentioned IPOs, and there were 7 over $1 billion or with pre-money valuation over $1 billion, or with pre-money valuations over $1 billion, I think it was in the quarter, but not yet again, a torrid pace there. And as I think we all know, thus far, in the fourth quarter, there are no IPOs, SEC, I believe, remains closed. And so, that would be 1 factor. We are encouraged by some improving exit activity outside of IPOs. And I'm speaking specifically to M&A that could potentially result in further improvement in venture capital sentiment improvement in investment. But there are so many -- again, as Craig referenced, uncertainty, headwinds, et cetera, out there that is just really difficult to predict at the moment, whether that trend we saw in the third quarter will continue in the fourth and beyond. And so that hopefully helps to explain some of our caution there. And maybe actually to pen just one last comment. While venture capital investment to, I think, another point you made is on track to have a second best year ever. That concentration in the mega round end of the segment over $30 billion going to the large AI round. The -- what's left after that really hasn't changed terribly much when you look at what that represents on a quarterly basis and early-stage investment, which is particularly important to the SVB segment. really hasn't come back yet aside from maybe deal count in certain segments having gone up a bit. And so with all of that for context, hopefully, that explains our more cautious outlook there, and I will pass it, to Craig, to you if you have anything to add there. Craig Nix: I have nothing to add. Anthony Elian: And then my follow-up on credit. I'm curious if you've done any broader reviews on policies and procedures, particularly on the CIT portfolio beyond supply chain after first grants and the other recent credit events that have happened across the industry. Andrew Giangrave: Yes. I mean, that is part of our normal course where we're continuously looking at policies, procedures, our credit standards. It goes through a regular cadence of reapproval, and to ensure that is in line with our risk appetite. So yes, that is part of our normal cadence and our risk management. Operator: The next question comes from Steven Alexopoulos from TD Cowen. Steven Alexopoulos: I want to start, go back to Casey's question. So you have elevated expenses related to LFI prep. And if we think about the work you're doing I think we're all trying to figure out how much of the expense level is sticky, right? You're just hiring more full-time people, et cetera. And once you get done with this, let's just say, for argument's sake, it's mid-2026, do expenses from that point start growing at a more normal cadence? Or are there costs in the run rate now that will actually fall out that caused expenses to step down a bit before they start growing? Elliot Howard: Yes, Steve, I think a few things there. I think while there might be some that falls out, it's ultimately going to be replaced with a lot of the investment that we're doing in tech and simplification. As we look to -- Casey referenced kind of the 6% to 7% guide kind of from the end of the year this year or '24, we would expect that to probably be in the range of mid-single digits next year. So it certainly pulled back a little bit. But I think as we look towards kind of that longer-term road map, as we look to some of the investments in the tech space are going to help scale us for growth. We don't see really the expenses pulling back and going down, but more moderating from the levels they've been at. Steven Alexopoulos: So they just get replaced with other expenses. Okay. That's helpful. And then -- which is tied to that actually. So if we look at the ROTCE, PAA is a factor, but ROTCE is down about 11% adjusted this quarter. So it's down quite a bit over the past year. Now I know you're active in repurchasing shares already this quarter. But what's stopping you from getting much more active, just given you're above your target stocks down, I don't know, 17% or so year-to-date just above tangible book. Why not get even more active here? It seems like you have a window to do that. Craig Nix: And just to be clear, you're talking about in terms of share repurchases getting more active? Steven Alexopoulos: Yes. Craig Nix: Okay. Yes. Well, first of all, the -- we lay out our plan for share repurchases in our capital plan. And we've always said that we want it to be methodical about that. And we believe a range of $600 million to $900 million, which on the time of that is aggressive is a good pace. And that's what we would intend to do going forward. We obviously have to be very cognizant of while we're doing this of our growth outlooks, internal growth, the economic environment, regulatory changes and just capital deployment options in general. So we believe that, that range is really getting after it. We've repurchased 15% of our A shares and 14% of total common since the commencement of the plan. So we believe our pace is getting after it. Operator: The next question comes from Brian Foran from Truist. Brian Foran: I'm not sure if you can speak to this, but 2026 NII is obviously such a big debate given the tension of underlying growth and rate cuts. So appreciate the comments that you think or forecast that NII would bottom in 1Q '26. Is it possible to give any bounds on the level? And then as you look to 2Q '26 and beyond, any thoughts on the directional bias would you see it as more flat do you think you can grow even with Fed rate cuts? And again, totally appreciate it's early for '26 guidance, but it's the biggest question I hear from investors. So any thoughts would be helpful. Craig Nix: Sure. I'd be glad to give you some directional color there, with two rate cuts and two in '26. We could -- we would expect both net interest income and headline and ex accretion to be fairly stable and the NIM -- headline NIM and ex accretion NIM to be fairly stable with the exit in the fourth quarter of '25. So fairly stable. If we had more rate cuts, obviously, that would change -- that could change. Brian Foran: That's really helpful. Maybe for Marc, more of just qualitative one, can you speak to the AI boom and where that's benefiting SVB? And then conversely, anywhere, it's not benefiting SVB, is it a size of deal thing? Is it a client coverage thing? Is it a your choices and selections of what you want to be involved in, just broadly, if you could speak to the AI trends that are such a big part of market right now? Marc Einerman: Sure. So starting with venture investment as referenced in my earlier remarks, there's an awful lot of capital going into the space that has been very dramatically different in terms of the investment pace valuation trends, et cetera, relative to the broader venture backdrop, that's where things have been going through a reset or whatever, we would call it, since around mid-'22. So where SVB benefits is -- and in fact, AI is working its way into all of the other sectors that we focus on in one way, shape or form, an enabler, a feature, et cetera. And that for the companies that are successfully weaving that into their offering. That is enabling them to so many words, get in on the AI boom and be more attractive to investment and there's some parsing there that I think investors are doing not too different from what happened in [ dot-com ] when suddenly everyone was [ dot-com ] , you had to figure out who really was. Some of that is going on here. But clearly, that spread of that enhancement into these sectors, again, is driving investment in helping us find those better opportunities to bring clients on to lend, et cetera. Where we don't see as much benefit is those mega rounds I mentioned earlier, those going to the very largest AI companies, LLM companies, et cetera, that really hasn't been a factor for us in terms of driving business results. And so hopefully, that color helps with the bifurcation. The very biggest ones, not really our target market, starting to see some benefit across the sectors we bank elsewhere. Jim Hudak: This is Jim Hudak. One thing to just interject to Marc's point and other places where we're benefiting in for Citizens, we have had a very good ride on the data center side. And a lot of that growth in data centers is a need for capacity -- computing capacity from AI. So on the places where we're actually financing some of the infrastructure, a lot of that has actually been driven by AI. And that's actually helped us on the loan growth side. And one other point I just wanted to make was in relation to -- looking at our loan growth, we've actually benefited from the fact that there's so much liquidity in the market. So even though we are doing quite a bit on the data center side, sometimes we will get paid out because as those data centers get built and stabilized, they'll be taken up to the securitization markets and then we will go and recycle that money. And where that shows up for us is actually enhanced capital markets fees. It may not necessarily be in quarter-over-quarter strong growth each time. But a lot of benefits to us when we're financing infrastructure, where it's -- where a lot of that is promoted by the demand for AI. Brian Foran: If I could sneak in a follow-up there, but do we know the size of this data center lending book and geographically, does that show up at SVB? Or does that show up somewhere else in your disclosure? Jim Hudak: So the data center side is on the commercial bank side, commercial finance. And our exposure is about $3.5 billion. Operator: The next question is from Samuel Varga at UBS. Samuel Varga: I just wanted to go back to SVB for one more finer point on 2026. Just based on all the commentary you've provided this morning, is it fair to say that the growth to come is more on the new client acquisition side rather than utilization uptake? Or it could be still from both into next year? Marc Einerman: I will start, and I think it could be both, right? It's early-stage venture investment, were to pick up. that would certainly be helpful on the new client acquisition side and helpful to our Tech & Healthcare banking business. And generally speaking, if investors are investing more, that is going to help with utilization of those capital call lines, but typically are how VCs fund those investments, recognizing that there is a large significant portion really more than half of the capital call portfolio that is private equity driven and not really about venture investment, innovation economy, et cetera. Though as we saw in the third quarter, that was certainly part of the utilization story as well. And so I'll try to stick the landing here in that we think in an improving environment, we would hopefully see both. But I'll end by saying, again, given our caution, the mixed outlook, et cetera, nothing I've said should be taken as a guidance for '26 at this point. Craig, I'll pass it to you if you want to add or speak on anything? Craig Nix: I think that covers it, Marc. Thank you. Samuel Varga: And then just a short one on credit, nonaccruals moved up a little bit, as you noted, Craig, in the prepared remarks. Can you provide any updates or any further color on migration trends or the mitigation trends? Andrew Giangrave: Yes. I think it was driven by a handful of larger credits. We had one in the innovation portfolio, which was a non-investor dependent transaction that migrated this quarter. We had a couple of credits in our wine portfolio migrate as well and then an additional credit in CRE. Outside of that, everything has been pretty stable. I think I would point out that our criticized and classified assets did come down for the second quarter in a row by about 4.5%. And to Craig's point, I think from a charge-off perspective, absent First Brands it's right in line with where we would expect things to come up this quarter. So we're feeling pretty good about credit. Operator: Next question comes from Christopher Marinac from Janney Montgomery Scott. Christopher Marinac: I just wanted to go back over the years as you've had other fraudulent situations. Can you just walk us through kind of how you have evolved your fraud detection in general, post CIT and now post SVB? Gregory Smith: So this is Greg Smith. I run the enterprise operations. Fraud has always been a key focus for us, and we have invested quite a bit of money over the past few years in talent and in technology I won't get into some of the details. But on a day-to-day basis, we now use AI. We have different algorithms to detect fraud. And we've really seen I'll say, stability in that market, although it is something that is a key focus, and it may grow over time, we have spikes once in a while for individual products, but we have strengthened our environment quite a bit over the last few years. Christopher Marinac: Great. And then Craig, just a quick one for you. As the branch acquisition closes next year. Does that help you become more neutral from a rate risk perspective? . Craig Nix: It certainly is net deposit based, so less asset sensitive, yes. I won't say -- I haven't really calculated the actual position. So I wouldn't say neutral because it's just relatively small -- relative to the overall balance sheet but certainly is directionally in the right place. I'll let Tom mention, he wants to say something about that as well. Tom Eklund: I think really, if you're thinking about asset sensitivity, I think the major driver is as we start paying down that fixed rate purchase money note is what's going to help get that down. And obviously, if you look at that branch acquisition, that's replacement with deposit funding to that purchase money note, I think that's an accurate statement. Operator: Not showing any further questions at this time. So I'd like to turn the call back over to our host, Ms. Deanna Hart for any closing remarks. Deanna Hart: Thank you, everyone, for joining us today on our earnings call. We appreciate your ongoing interest in our company. And if you have further questions or need additional information, please feel free to reach out to the Investor Relations team through our website. We hope you have a great rest of your day. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Have a wonderful day.
Operator: Welcome, everyone, to Telia Company's Q3 2025 Results Presentation. And with that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, Jen. Welcome, everyone, to the call. We have our CEO, Patrik Hofbauer; and our CFO, Eric Hageman, in the room, and I hand over the word to Patrik. Please go ahead. Patrik Hofbauer: Thank you, Erik, and good morning. Q3 was, in many ways, an important quarter as it confirms that we are doing the right things for our customers. Our group-wide NPS, so Net Promoter Score, continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI. And in both Finland and Norway, we had strong outcomes in the EPSI surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter. And as we talked about already 3 months ago, it was an eventful M&A quarter. The closing of TV and Media transaction strengthened our balance sheet further. In July, we also signed a memorandum of understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year-end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. And finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong CapEx discipline. And we are also now changing our full year outlook for booked CapEx from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights. Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was as expected, a bit below the ambition for the full year, but not too much, and with both Sweden and Finland continued to perform well. CapEx continued to be well below our SEK 14 billion limit. And even though we expect a seasonal pickup in Q4, we are already comfortable -- we are very comfortable, sorry, to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media divestment resulted in a lower leverage, and we ended the quarter at 1.93x. Moving now to Sweden that is performing well on customer metrics. We had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers. And in consumer, Telia again had the happiest customers among the mobile main brands and fellow came out well among sub-brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband and TV, as you can see here, the broadband intake stands out as it actually is a result of 2 good quarters rather than one since around 10,000 new customers in Q2 were registered in Q3. The late registration was related to our transition into a new system. In Enterprise, we signed a long-term partnership with Sweden's largest train operator, SJ, to deliver high-quality communication for the entire train fleet. Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2%, driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues, which is lumpier than subscription-based revenues. In Q4, we expect more project-based revenues than we had in Q3. And EBITDA growth was again strong on the back of profitable growth and cost savings driven by the Change Program. Let's now move east to Finland. That came out as the #1 in the EPSI's survey on customer satisfaction in both Consumer and Enterprise. This is promising and shows that we have good foundation in Finland to build on. Mobile net adds improved, and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband, where the market is declining. Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4%. On fiber, we are also adding customers not least from being a service provider in our Valokuitunen JV network. Financially, we saw a slight improvement in service revenue trends with growth in Consumer and a decline in Enterprise, driven in part by our choices to discontinue noncore activities and in part by a weak market. And finally, the strong execution of the Change Program continued to give tangible savings and resulted in EBITDA growth at high single digits with a margin climbing to 34.6% versus 32.5% one year ago. So in summary, we are making progress on all 3 of our midterm ambitions for Finland that we presented 1 year ago, stabilization of the mobile market share, improvement in SME and improved profitability. Now moving west to Norway, which is, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys with Phonero winning the EPSI survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. So EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3. The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, a weak performance in our fixed business is something we are addressing very actively. And on the next slide, I want to share some more information about this development. So we have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements and created a dedicated organization for fixed consumer services. Network quality has improved. And as you saw, we added TV and broadband customers in this quarter. At our investor update 1 year ago, we talked about our backbone of our network being already fully fiberized and around 50% of our broadband customers were on fiber or fixed wireless access connections. Today, the share is around 55%. And as we have said before, this is too slow. And from next year, we will see a clear acceleration in the coax to fiber upgrades, in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed, something that together with continued efficiencies resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter, Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C, 2 achievements which will help our growth journey going forward. Now let's move to Estonia. That saw both service revenue and EBITDA growth accelerating following great momentum in especially the public sector and good work on generating efficiencies. And like for Lithuania, cash conversion remained at record levels. And with that, I hand over to Eric before I come back to summarize the quarter. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue. In Finland, we also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year-to-date, we are at 1.3% service revenue growth. And looking into the last quarter of 2025, we expect an improvement related to pricing, growth in Enterprise and public sector contracts and less revenue decline in Norway. Moving to EBITDA. Growth in Q3 was somewhat below the 5% ambition for the year as we flagged 3 months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the Change Program. We're also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the investor update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing costs, both in Norway and Finland. Moving now to OpEx and CapEx. As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our Change Program continues to drive down resource costs. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OpEx as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with CapEx of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago. This shows how being focused and having clear priorities can be translated into better capital efficiencies. CapEx spend is expected to increase somewhat in the last quarter of the year, in line with normal telco seasonality. But overall, we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering CapEx resulted in EBITDA minus CapEx comfortably above the SEK 19 billion on a 12-month basis. This equals a step-up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter. Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year. And as for several quarters now, the key building block is our profitable growth. Cash CapEx increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor financing program, the latter, however, having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusual high due to phasing of interest between Q2 and Q3. Working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program. Finally, we saw a SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of our mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first 9 months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment, and we also received the proceeds from the divestment of TV and Media. The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer-term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last 2 years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like, for example, the last quarter, we announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase 2 investigation of Bredband2 has now started. And as said before, we expect to close the transaction in Q1 next year. Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the investor update about a year ago. As you may remember, we laid out a clear agenda at the investor update on how we aim to create shareholder value. And I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first 9 months of the year. And as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing. Largely, this free cash flow uplift is driven by our profitable growth trajectory and CapEx discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden, while we are working hard on securing the full exit for Latvia. Thirdly, our balance sheet continues to strengthen. Liquidity is strong. And after closing the TV and Media divestment, we are below the 2 to 2.5x net debt-to-EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. And finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment. Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik. Patrik Hofbauer: Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was in the start -- or at the start of 2024 after our Change Program and the exit from TV and Media. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers and some have been closed down. We are encouraged by the results so far. Network incidents have continued to become fewer and so has incoming calls from customers who are contacting us with issues and questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up and our people see that barriers to execution are being removed, collaboration and decision-making is improving and of course, EBITDA growth has improved. This is a promising start of first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster and more efficient than we are today. And then on the summary of the quarter, which was overall in line with our own internal expectations, we continued a healthy group EBITDA development, supported by profitable growth and efficiencies from the Change Program. And we continue to see clear signs that customers appreciate our high-quality services and see the benefit from how those improve their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. And with that, I will open up for questions. Thank you. Operator: [Operator Instructions] Our first question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's Owen McGiveron from Bank of America. So on your upgraded guidance, how should we think about 2026 and 2027 CapEx within the frame of your medium-term ambitions? Should we expect similar levels versus 2025 or more moderation? And how does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Patrik Hofbauer: I can start. It's Patrik here. First of all, we are not guiding yet on '26 and '27. We will come back to that in January. But I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. So we continue to see how we can use the capital much more efficient than we are today, and that will continue. But we will come back in January with the guidance or update or whatever in January -- in that call. So Eric, do you want to add something? Eric Hageman: Yes. I mean that would -- just my simple observation that it doesn't change so much from one moment to the next. And with regards to Norway, it's part of that. So the slide that Patrik talked about where we say we want to accelerate the rollout of fiber. That part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years, but it's firmly part of that CapEx guidance that we have just talked about. Operator: Our next question comes from Andreas Joelsson with DNB Carnegie. Andreas Joelsson: Just to follow up on your comment on further efficiency gains. Could you perhaps describe how you view the cost base currently and what else you can do? From the last slide, it seems like you have been able to do this Change Program without any basic negative effects. So are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand. Patrik Hofbauer: Andreas, I understand your question very well. It was not blurry at all. So first of all, the Change Program went obviously very well. We have delivered on basically all parameters, and we see that the operations is really much more stable, which we had, of course, the concerns about when we do this big change that we did last year. But so far, everything is running very well. Then remember, last year, we had this investor update, we gave out a 3-year plan with a CAGR on service revenues around 2%, EBITDA at 4% and then a free cash flow above SEK 10 billion in -- or at least SEK 10 billion in 2027. And that requires to continuously work with efficiency to deliver on that plan. And we are fully committed to deliver on the plan that we have put in place, which means that we will actively, of course, to improve the operations from year-to-year. So I think that is a clear answer on your question where we are heading. Well, I hope at least. Andreas Joelsson: Yes, absolutely. Less blurrier than the question. Patrik Hofbauer: Thank you. Operator: Our next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: So I have a question each on Finland and Norway, which are 2 of the areas where investors had a bit less certainty recently. Just on Finland, there's some improving -- slightly improving service revenue growth trend today and also sub-trends. Could you just talk about how you're achieving that? And also how you're thinking about the balance of not disrupting the market too much, given we've had one of your competitors basically disappointed fairly materially on their mobile service revenue growth outlook in the near term. Just comments around kind of how you're improving and how you don't disrupt the market too much would be helpful. And then secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September. I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Patrik Hofbauer: Andrew, thanks for the questions. I can start with Finland. I think, Eric, you can take Norway then, so we divide a little bit here. Starting off with Finland first. I mean, the most important part is actually the customer satisfaction, which we have been invested quite heavily in. So we have upgraded our network and then several activities that we're now seeing is paying off. Then on top, we also had some good execution here, especially in the consumer side to turn these trends around. And we are not at all disrupting the market. I don't know what that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. And then we have also a consumer operation that is more efficient every day. And remember, we have said clearly that we are accepted to lose market shares in Finland for too many years now. And we said clearly, we want to stabilize that, and that is what we're doing. So we see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. And then also on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, where we are focused on and having good also development on. So I think this is not -- I think it's a healthy operation. We are improving, and we will continue to improve during 2026 as well actually to defend and stabilize our market share. That's actually what we're doing. So I think good done by the whole team in Finland. Eric Hageman: Yes. With regards to Norway, so very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, is never to disrupt, but certainly to defend our position. So let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss, that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. So we're working on that. We've made some management changes in the organization. We're fixing fixed, as Patrik just talked to in this slide, and that will take a bit of time. So we guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps. Operator: Our next question comes from Fredrik Lithell with SHAB. Fredrik Lithell: I have two of them. You have, on earlier calls, talked about that service revenue should be a bit slower, both in Q2 and Q3 and then to reaccelerate a little bit in Q4. And I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. And then also the CapEx, the lower CapEx from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow of SEK 1 billion down and SEK 0.5 billion up. Could you sort of walk us through a little bit what movements you have that support your free cash flow raised guidance would be interesting. Patrik Hofbauer: I can start with a comment on the service revenue. And right, you said that we said that Q2 and Q3 will be a bit softer, but then we'll see an improved situation in Q4. And we do expect better growth in Q4 than in Q3 with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason. Erik Pers Berglund: It's mission-critical, as I said a few times. Eric Hageman: Yes, on CapEx, it's very simple. We sort of never felt we're going to do the SEK 14 billion, right, when we guided for less. We're very happy with the progress that we've made as an organization on a profitable growth, which ultimately drives our free cash flow growth. And then when you go through 9 months of the year, where you then feel is this the moment where we have that visibility. It's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. And on the CapEx, yes, we have good visibility for where we will land for the year and also where that will trend going forward as per the first question we got. So very happy with how that goes through. And yes, let's see where we land for the full year when it comes to free cash flow. Patrik Hofbauer: If I may add a clarification, Fredrik. We never plan to invest SEK 14 billion. It was always below, right? So it's not a SEK 1 billion downgrade as such, but yes. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So maybe a follow-up to Andreas' very clearly worded question. Just thinking of the current trends here, it looks like you will exit the year at about 4.5% perhaps EBITDA growth rate approximately and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for '26 and beyond. I mean, do you think you need to clearly accelerate cost savings to reach your targeted EBITDA CAGR of 4% between '25 and '27? Patrik Hofbauer: I think the answer will be pretty much in line with Andreas' question. So we -- I mean, when we set the plan, the 3-year plan of the 2% and the 4% then related to EBITDA, as you know, we were clear on that, okay, this is a rightsizing that we did with Project Sprint. It was an internal name on it that we did last year, the minus 3,000, and we executed on them. And then we need to continue to take out cost, and that will be in every aspect and every area of the cost base. So this is work ongoing. So I don't -- and I don't want to be more specific on how we'll do that, but we will show you quarter-by-quarter that we are able to take out cost to defend because we want to -- we are fully committed again to deliver on the 4% CAGR growth on EBITDA. Then we need to -- because that's a combination of service revenue growth and cost out to be more efficient. Eric Hageman: Yes. Maybe to add from my perspective is, as time goes on, now having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen, it gives us more confidence as a management team that we are on the right path to deliver what we promised, not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion, right? The combination of profitable growth, good CapEx discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion plus by 2027. Operator: Our next question comes from Maurice Patrick with Barclays. Maurice Patrick: For me, just a question on Sweden, please. So yesterday, it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, the dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounds probably more like grabbing headlines than reality. But again, curious for your insights in terms of how you see that in the context also of you delivering a pretty solid broadband number this quarter and last. Patrik Hofbauer: Yes. I mean, coming back then to the access cost for local networks. I mean, we have seen the high cost for the local networks access for several years. It's nothing new. So -- and that is driven basically by ourselves growing service provider in these local networks and then also higher access prices. So we haven't seen any recently that increase. This has been going on for a while. So I don't know exactly what happened there. And so yes, and also on our own networks, we have made very modest increase in our [indiscernible] business, a couple of percentage points only. So I'm not -- I don't recognize really the whole situation from a new thing. This has been going on for many years. So that, yes, around regulation... Erik Pers Berglund: Yes, regulation has been postponed as you know again -- so we'll see what happens when we eventually get there. But I think you're right, that's probably what brought the topic up this quarter. Eric Hageman: But maybe overall on Sweden, we are incredibly happy with the performance there. As you saw, very good service revenue growth, perspective of even more service revenue in Q4, as we indicated, very strong cost control leading to good EBITDA growth. So yes, we hear what others are saying, but we are very happy with our developments in the Swedish market. Erik Pers Berglund: And I think you also mentioned the broadband intake, Maurice. It's a good work over a couple of quarters. As we mentioned, this is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. So that's working. And so overall, we're happy with that. Patrik Hofbauer: And continues to perform -- TV continues to perform well and not a surprise. I mean, we have the best product in the market. And obviously, customers are appreciating it. And for the fourth year now, we have got the best feedback from the customer surveys on TV. So all in all, happy with the performance. And again, remember that we have seen a more household perspective on the consumer market in Sweden rather than looking each for the products because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in the strategy. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: My one is just around leverage and shareholder returns. So obviously, you're below your target at the moment. We have some acquisitions coming maybe in the next few months. But it feels like you'll still end up below your target range of 2 to 2.5x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media sale as buybacks or extraordinary returns? And if so, when would this -- when would you approach this decision with the Board? Eric Hageman: Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet, one, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. So that's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block, which is doing, as I said earlier today, coming right on progressively growing dividend, next year is when we'll come back to that. And the beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the Board. So we will come back to that. Maybe the last point is, we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband [indiscernible]. So it's important for us that we have the flexibility to be able to do that as well. So -- but we know it's an important pillar of our value creation plan, and we'll come back to that at the beginning of next year. Operator: Our next question comes from [indiscernible] from BNP Paribas. Unknown Analyst: I had a question, please, on Finland, where you've delivered strong EBITDA improvement over the last sort of 3 to 4 quarters. You're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? And then just a quick clarification around the Norway CapEx, I'm sorry if I missed this. Does this at all change your thinking around the FY '27 free cash flow target of SEK 10 billion plus? Or is that reflected in this? Patrik Hofbauer: So I can start with the later one with the CapEx. No, it's reflected in the figures and will not impact our 2027 target. So to be super clear, it's in the envelope of that. And then Finland? Eric Hageman: Yes, with Finland, maybe a step back, a big part, and we talked about it today in the voice over as well of the analyst presentation, which is margin expansion was a very important part of what we talked about in the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, but all other countries, you see the margin expansion coming through. And what is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary costs that we have. We have a very, very clear plan, and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda. So you should expect more margin expansion, including in a market like Finland in the coming years. Patrik Hofbauer: Can I just add also Finland? And don't -- to build on what Eric said, don't also forget to look into the ARPU development that we have in Finland, which is 4% up on the mobile postpaid, which is also very positive. And that has been driving the agenda to run price increases, but also a better mix in the portfolio. So all these activities are actually paying off at the moment. But we're still a way to go to be where we want to be in Finland, to be clear. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: I've got two questions, please. So at the CMD, you showed a target for mission-critical revenues to more than double from '23 to '27. You've been quite clear on this as a source of support for Q4. But can you comment on how we should think about the mission-critical growth in '26 compared to the growth in '25? It's obviously a bit difficult for us to model. And then secondly, on Norway, you've talked quite clearly about the moving parts. But can you comment on when you actually expect Norway to stabilize EBITDA? Patrik Hofbauer: Yes. I'm not sure I understood the first question on mission critical. But I can give you -- I mean, we have a clear -- I mean, we said it will double rightly, as you said, for the coming years, and we see that it's coming into now to our books and orders and also that's the reason why we will see a comfortable increase in Q4 in Sweden. So that's part of it. And this will continue, but they are a bit more lumpier, these revenues. So we will see it continue in the coming years as well. But we have not been explicit more than say that we will double from where we came from. And we will still stand with that. We are delivering on what we have said and on the expectations. So no surprises coming in. Eric Hageman: Yes. With regard to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4, as you heard earlier today, that will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy costs there. We typically have salary inflation in our countries as well that we have to work with. So we do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses we have on mobile. TV is back on after the outage that we had, but it takes us a couple of quarters. So as we said last -- at the half year results, we need a bit of patience before we also, from an EBITDA perspective, turn around this business. Operator: Our next question comes from Viktor Hogberg with Danske Bank. Viktor Högberg: So just a question on the new free cash flow guide. Just a clarification maybe. Given the assumption of SEK 650 million in spectrum CapEx annually included in the guide for this year, would you say that you still expect the real free cash flow that is including the higher spectrum CapEx to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question. Erik Pers Berglund: Thanks, Viktor. It's Erik here at IR. We don't guide for free cash flow, including the real spectrum cost as you might understand, simply because we're not able or allowed to speak about spectrum CapEx ahead of the auction. So we have to stick to the normalized spectrum when we talk about free cash flow guidance. But maybe it's worthwhile to add a comment to that. So SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year, we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay plus, let's see about the SEK 1,800 million in Sweden. Next year, we don't have any big auctions coming up. So it goes up and down. But yes, that's where we are. Viktor Högberg: Okay. Fair enough. On the second question, just another clarification, maybe if you were talking about the group or just Norway on Q4 group EBITDA growth, the trend being in line with Q3. Was that for the group or for Norway, so below 5% that is for Q4. Patrik Hofbauer: So Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. So that's for the group. And for Norway, we expect EBITDA improvement to take a couple of quarters, as Eric said. So we need some more patience for Norway specifically. Operator: Our final question comes from Siyi He with Citigroup. Siyi He: I have two actually. And my first question is on Finland. I mean, the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that put through by 2 of your competitors in Finland. And my second question is on service revenue growth in Sweden. And I just want to ask about how we think about 2026 and '27, given that the price is still doing quite well and have lower legacy drags and mission-critical revenues should also come through. Do you think it's fair to assume that the top line trend is next year and year after could be better than what we have witnessed this year so far? Patrik Hofbauer: So I can take the first question on Finland. I'm a bit surprised that we get the question all over and over again regarding the package, the security package. Look back in Finland, we have been driving the price increase raise there and the value creation agenda for many, many years. And remember, our position, we are the #3 mobile operator in the market. And if we look at the ARPU levels, they are very similar to each other. And we should be the challenger in the market, not the responsible leader in the market. So look at our position, I think, we are looking into different ways of driving price increases, i.e., ARPU increases. And we don't need to follow what our competitors are doing all the time. We have our own agenda that we are running and that we're looking into to make sure that we continue to grow and defend the position that we have in the market. And that you will see going forward as well. And I don't want to go into commenting on every package and price, et cetera. So we have our agenda. We are running that. We are #3 in the market. We should be the challenger. We have been too much more -- too responsible as a #3 player and acting like we were the incumbent almost in Finland or the leader. So I think we are well positioned. We have done a good quarter and good improvement during the year, and that will continue. I expect that will continue in the next year as well. Erik Pers Berglund: And to add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base cohort by cohort as certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices. And that's giving the results. You can see there. I think the 4% is roughly in line with the competition. So even though we don't do exactly the same thing on security add-ons. Eric Hageman: Yes. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first 9 months performance and what we're expecting for the full year. A little bit like our answer on CapEx, that's not something that changes overnight, right, when you have certain momentum. And clearly, we're guiding for a stronger Q4, driven by what we're doing in mission-critical, particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us. And on top of that, some price increases. So we expect that momentum to continue. Said in a slightly different way, if you think about a medium-term guidance, the 2% and the 4%, that would not be possible without Sweden delivering that, right, because it's roughly half of our business. So again, we feel comfortable with that medium-term guidance, and we're very encouraged by the performance that we're seeing in Sweden. Operator: There are no further questions. Erik Pers Berglund: All right. Thank you very much, everybody, for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you, and goodbye.
Operator: Welcome to the conference call on MTU Aero Engines AG Q3 2025 Results. For your information, the management presentation, including the Q&A session, will be audio taped and streamed live or made available on demand on the Internet. By attending in the conference call, you grant permission for audio recordings intended for publication on the Internet to be taken. The speakers of today's conference call are Mr. Johannes Bussmann, Chief Executive Officer; and Mrs. Katja Garcia Vila, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Thomas Franz: Thank you, Sarah. Good morning, and welcome to MTU's 9 Months 2025 Results Call. We'll begin today's session with our new CEO, Dr. Johannes Bussmann, who would like to introduce himself and share his first impressions. Following that, Katja will highlight the most important developments of the quarter and walk you through the financials, providing a detailed overview of our segment performance and underlying drivers. To close the presentation, Katja will summarize the key takeaways before we open the floor for your questions in the Q&A session. With that, it's my pleasure to hand over to Johannes. Johannes Bussmann: Thank you, Thomas. Good morning to everyone, and welcome to our earnings call. I have been on the Board now since mid of July, so quite over 2 months already, and it was a great pleasure to meet already some of you in person. For those who don't know me yet, let me introduce myself briefly. I've spent nearly my entire career in aviation and hold a degree in aerospace engineering. And furthermore, I was part of Lufthansa Technik for over 20 years. During my first weeks at MTU, I was working closely and intensively with my predecessor, Lars Wagner, to ensure a smooth and collaborative handover and transition. Having been in my role as the new CEO of MTU, it has been really great to dive deeper into the company, our programs and find an inspiring set of people that is well positioned to capitalize on market opportunities. It actually feels like much more than 2 months. I guess the reason is that I worked with MTU for many years as a business partner already and was previously a Supervisory Board member of MTU. My priority is now to get to know MTU really in depth. That is my current visits and journey from the production sites and of course, the shops and different products and people. And I'm truly inspired by the passion the entire MTU team shows on these visits. And you can feel that everyone is really innovative driving and has a great passion for shaping the future of this company. I will be happy to share my insights and key priorities moving forward with you at the full year's release. But today, I also have the pleasure to welcome Dr. Ottmar Pfänder in the team, who will replace Michael Schreyögg as 1st of January 2026. And I would like to thank Michael for his great contribution for over 35 years with MTU, and he did a great piece of work here. Ottmar will take over his responsibilities as Chief Program Officer and has also more than 25 years of experience in the industry and with MTU. As the new Executive Board team, we will continue MTU's growth and transformation course, and I look forward to shaping MTU's future with my team from Katja, Silke and Ottmar and how we are progressing for the first month -- 9 month of this year, Katja will explain to you now. Thanks. Katja Garcia Vila: Thank you very much, Johannes, and a warm welcome also from my side. Let's briefly review our key financials before I move on to the business highlights of the quarter. Group revenues increased strongly by 19%, reaching nearly EUR 6.3 billion, in line with our full year 2025 target. Adjusted EBIT rose over proportionately by 34% to EUR 995 million, resulting in a strong EBIT margin of 15.9%. This performance was driven by a continued favorable mix in the commercial OEM segment and robust profitability in MRO. Free cash flow came in at EUR 279 million, representing a better-than-expected cash conversion rate of 39%, a strong development despite ongoing headwinds from the GTF fleet management program. Additionally, we saw strong cash contribution in the MRO segment and effects from conscious cash flow management. Based on the strong 9-month performance, we expect to achieve 2025 sales guidance in all subsegments and raise our EBIT and free cash flow guidance. I'll walk you through the details in a few minutes. Let us now move on to Page 5. The positive market trends remain intact. We see significant opportunities outweighing existing challenges. Passenger traffic rose by 5% year-to-date in August, reflecting sustained demand across global markets. Cargo traffic also showed a robust performance with a growth of 3.3% year-to-date. For the full year, YATA projects a 5.8% increase in passenger volume, a return to more normalized growth levels following the post-pandemic recovery surge. Over the mid-to-long term, global passenger traffic is expected to grow steadily by 3% to 4%, driving sustained demand for new aircraft and aftermarket services. While the supply chain continues to recover, it still remains below pre-COVID stability. That is why the production ramp-up is slower than needed to meet rising market demand. Consequently, airlines are extending the service life of mature aircraft and engines, which in turn drives strong MRO demand and results in more extensive shop visits. This also keeps demand for spare and lease engines at elevated levels with prices remaining very attractive. Global defense budgets are rising. For MTU, momentum in the Eurofighter program remains strong with new orders from core nations and international customers. Germany confirmed the procurement of 20 Eurofighter, 52 engines for deliveries between 2031 and 2034. In the U.S., demand for the CH-53K helicopter is rising. The Marines have ordered 99 units for delivery between 2029 and 2034. MTU contributes the power turbine to the T408 engine and holds an 18% program share. Recent news flows around aircraft has been somewhat sovereign. Nevertheless, we remain optimistic that governments will find a solution to ensure the program continues, given its strategic importance for future European sovereignty. Additionally, the weaker U.S. dollar-euro exchange rate poses a challenge, particularly for European aerospace and defense companies. We are mitigating this effect through our active hedging activities. In this dynamic environment, MTU remains well positioned to capture growth opportunities across both commercial and military segments. Our diversified portfolio, strong customer relationships and continued investments in technology and capacity enable us to navigate current challenges while driving long-term value creation. Let's now move on to another topic, an update on the current tariff situation. Since our last update on the topic, there has been progress between affected countries and an agreement has been reached. This agreement follows the spirit of previous arrangements in our industry and reinstates a general exception from tariffs for aviation products. This exception does not include other products such as industrial gas turbines. Furthermore, detailed rules for the application of the agreements are still in alignment between the EU and the United States. Beyond that, we are still waiting for tariff clarification for machineries, engine stands and other items. To sum that up, significant progress has been made on the topic. To mitigate these challenges, we are continuously adapting our internal processes to meet all requirements. We analyze on an ongoing basis on how to optimize our part streams to reduce any impact. In addition to that, we are also working on contractual agreements to further reduce our exposure. With that, I will now move on to our key milestones of the third quarter. Moving on to Page 7. Let me now share the key milestones of the quarter. To start with, as mentioned earlier, Germany has now confirmed the procurement of 20 additional Eurofighter aircraft. Including existing orders from the core partner nation, this brings the total firm order book to 160 new Eurofighter engines, which are scheduled for delivery over the coming years. Let's continue with the GTF fleet management plan. We made great progress in the ongoing execution of this program. Essential aspects include the improvement of parts availability, expanded MRO capacity and better turnaround times, all of which are progressing. Additionally, we support customers and airlines by providing spare and lease engines. To summarize, we are on track. Further good news for the GTF program came just last week. In October 2025, the GTF Advantage received the EASA certification. This success is the next step in the process to allow deliveries to airline customers and an entry into service next year. Recent customer orders reflect continued strength in our commercial OEM business. LATAM Airlines and [ Avelo Airlines ] have placed orders for a total of 174 Embraer E195-E2 jets, including options. These aircraft are exclusively powered by the GTF engine, underscoring continued market confidence in our advanced propulsion technology. And our partnership with GE, we also see new opportunities. Together, we are strengthening our industrial gas turbine portfolio with focus on naval propulsion, especially the LM2500 and LM6000. The LM2500 is set to play a central role in powering German Navy's next-generation F127 frigates with growing interest also from other European nations. Maintenance will be carried out at our MTU facility in Berlin, where we're currently investing in a new production center. Over the coming years, we aim to grow our MRO services for industrial gas turbines by around 30%. A key milestone for MTU Maintenance Berlin-Brandenburg was receiving the EASA certification for full MRO services on PW800 engines, which power premium business jets such as the Gulfstream G500, G600 and Dassault Falcon 6X. This makes the site in Berlin the second certified MRO provider for PW800 engines worldwide. As part of Pratt & Whitney Canada's global service network, we are strengthening our position in the fast-growing business jet segment. MTU Maintenance Lease Services has opened a new parts supply warehouse in Zhuhai, China, complementing existing facilities in the Netherlands and the U.S. This expansion strengthens our global logistics footprint and ensures rapid access to serviceable material for CF6-80, CFM56, G90 and V2500 engines across the Asia Pacific region. Now let's move on to the financial overview. Let's take a closer look at our financial performance for the first 9 months of the year. As expected, Q3 could not fully keep up with the extraordinary strong performance from the first half of the year. However, MTU reported record results for the first 9 months ahead of the expectations. Group revenues rose by 19% to EUR 6.3 billion, driven by strong growth in both commercial OEM and commercial MRO segments. In U.S. dollar, total group revenues were up 22%. Commercial OEM was supported by strong spare lease engine sales. Adjusted group EBIT rose over proportionately by 34% to EUR 995 million, delivering a strong 15.9% margin above guidance and above our own expectations. Growth was driven by a higher share of spare and lease engines in commercial OEM and solid spare part sales. Commercial MRO also contributed significantly despite higher GTF MRO share and ramp-up costs at MTU Fort Worth. Net income adjusted grew in line with adjusted EBIT and reached EUR 720 million. Free cash flow came in at EUR 279 million, an improvement of 31% compared to 2024. This figure was impacted by compensation payments related to the GTF fleet management plan. These were partially offset by higher cash contribution from our MRO business and effects from conscious cash flow management. All in all, a great set of results. Let's now take a closer look at our business segments, starting with the OEM business on Page 9. Total OEM revenues rose by 15% to EUR 2 billion, impacted by a weaker U.S. dollar. While commercial OEM revenues grew 20% to EUR 1.6 billion, military revenues declined by 2%, mainly due to delayed deliveries in new engines as well as back-end loaded repair activities. However, Q3 2025 saw a 3% increase. We expect a strong fourth quarter in revenues to achieve our full year guidance on growth in our military business. Adjusted EBIT increased over proportionally by 44% to EUR 640 million with a strong margin of 31.1%. This is higher than initially anticipated, driven by a favorable product mix in new engines and robust spare parts growth. Let me now share with you the organic commercial growth rates. Organic commercial OE revenues in U.S. dollars increased by a high single-digit percentage, driven by GTF and GEnx engines with a strong share of spare and lease engines. Q3 2025 showed similar growth compared to the first quarter of the year, but with a higher share of installed engines. In Q4 2025, we expect a higher output of new engines supporting our full year guidance. Organic spare parts revenues rose by low teens, supported by narrow-body engines and mature platforms. In Q3 2025, growth was up mid-to-high teens, in line with expectations and our full year guidance. Let's move on to the commercial MRO segment. Reported MRO revenues increased by 20% year-over-year to EUR 4.3 billion, while U.S. dollar revenues were up 24%. Major revenue drivers were narrowbody engine programs, mature widebody platforms and our MLS leasing and asset management business. The GTF MRO share reached 40%, in line with our full year expectations. In Q3 2025, we observed an increase in shop visits and higher material content, resulting in a GTF MRO share of 48% for the quarter. Adjusted EBIT increased by 18% to EUR 355 million with a stable margin of 8.3%. The margin was supported by a favorable independent business mix and strong contribution from equity accounted joint ventures and impacted by the higher GTF MRO share and ramp-up costs by MTU Maintenance Fort Worth. So before heading to the guidance, let me share an update on our current hedge book. As you can see, we were quite active in the past quarter, further expanding our currency protection for the coming years. For 2025, we are now basically fully hedged, protecting our results from currency impacts. Also, looking at the following years, we have made progress in managing our exposure in line with our hedging policy. Looking ahead, we are following the targeted hedge coverage rates as set in our hedge policy. In addition to that, we are currently updating our exposure assumptions to have the latest developments incorporated into our hedging strategy. After that, we are now coming to the outlook for the year 2025. We are upgrading our outlook based on the strong performance of the first 9 months. The Q3 results and the strong outlook for the current quarter allow us to lift our EBIT adjusted guidance. Coming from an estimate for EBIT adjusted growth in the low to mid-20 percentage range, we are now able to lift that to a mid-20s percentage number. Adjusted net income is expected to grow in line with EBIT. This substantial upgrade in EBIT also translates into a stronger cash flow. We now expect the free cash flow to reach a range between EUR 350 million and EUR 400 million, up from the previous range of EUR 300 million to EUR 350 million. We can reaffirm our revenue outlook with expected group sales between EUR 8.6 billion and EUR 8.8 billion based on an average U.S. dollar exchange rate of USD 1.13 per [ Euro ]. Within this, we anticipate growth in our military business in the mid- to high single-digit percentage range. Commercial OE is projected to grow in the mid-teens. Within that, the share of spare and lease engines is higher than initially anticipated. Aftermarket demand remains in line with our latest expectations, resulting in a revenue growth outlook of up low to mid-teens. Lately, we also reaffirm commercial MRO revenue growth outlook to mid- to high teens, supported by heavier shop visits and rising demand for GE90 engines. The GTF MRO share should remain at around 40% of the segment revenues. This upgrade again highlights the strong underlying business and our ability to generate highly attractive margins as well as our progress in generating free cash flow. Let me summarize our achievements in the third quarter 2025. The excellent first 9 months performance leads us to upgrade our guidance again. Revenues are expected to reach the previously communicated levels even in a weaker U.S. dollar environment. At the same time, we see profits and free cash flow generation well ahead of our previous expectations. The market environment for our industry and MTU remains very supportive and underpins our positive outlook. The impact of the tariff environment has been limited as described earlier, and we continue to adapt to the remaining challenges. Great business in a great industry. And finally, already as a heads-up for next year. We are planning to release our first guidance for 2026 with our preliminary full year results in February 2026. With a couple of market decisions happening towards the end of the year, like the political discussions on FCAS as one example, it will take slightly longer than in previous years before sharing our view on the year in line with most of our competitors. Now this concludes our presentation. We are now happy to take your questions. Operator: [Operator Instructions] Will go ahead with our first question. This is from Chloe Lemarie from Jefferies. Chloe Lemarie: The first one would be on the OEM performance in Q3. So Katja, you mentioned that the OE mix has started to normalize in the quarter. But could you add further color on this? Like how much of the way are we towards a normalized OE mix in Q3? Second part of that question is we've obviously seen record margin in the division this quarter. So could you help us understand the key moving parts driving that? And in particular, because it looks like spare parts accelerated, but probably not enough to explain the 450 bps of sequential increase in margin. Second -- sorry, last question for me would be on the GTF compensation payment. Could you quantify how much was paid in the quarter? Katja Garcia Vila: Thank you, Chloe, for your questions. I will try to answer them exactly as you've posted them. First of all, as elaborated in the Q3, we saw an elevated level of installed engines coming in. We don't quantify exactly the numbers, how much spare and how much installed. Anyway, what I can also state is that we have still seen a reasonable share of spare and lease engines also in the quarter, and we expect that also to move on further. What we have, in addition, seen definitely during the course of this quarter is a strong increase in our spare parts business, and this has also helped and supported the guidance expansion, not the guidance, the revenue expansion and the returns expansion. On the GTF, I can share the figure that we have paid this quarter. It was around USD 100 million for MTU, which has post, so to say, the headwind to our free cash flow generation, but which is in line with expectations. If you remember, we expect for this year in total, a compensation payment quite similar to what we have paid in 2024. That was around USD 390 million. In the first 2 quarters of the year, in total, we had paid EUR 150 million. So overall, we stand at USD 250 million right now, expecting further payments to take place in the first -- in the fourth quarter. Chloe Lemarie: Can I actually follow up on this because on the payment last year, it was all in Q4. So you have a very easy comparison based on Q4 free cash flow. So how should we think of the conservatism based in the upgraded free cash flow guidance? Because on my math, you should be having a pretty significant year-on-year tailwind in that free cash flow performance? Katja Garcia Vila: So we also had some payments during the course of the third quarter last year. I would not consider that to be now a conservative approach. As I said, we will still need -- or we still expect around USD 140 million more or less to be paid in the fourth quarter. And this is what we have also baked in when we provided the upgrade of the guidance. Operator: We will now take the next question. This is from David Perry from JPMorgan. David Perry: Yes. I guess my question was the same as Chloe, so I haven't thought of another one. But I think it is worth just repeating it. As Chloe said, the margin is just exceptional in OEM in Q3. And you seem to have said unlike in Q2, it's not because of the spare engines, but it's because of the spare parts, which is great. But just maybe if you have a bit of color about why the margin on the spares, the spare parts is just so strong in Q3? Or is there anything else at all that would explain the really good performance? Katja Garcia Vila: Thank you very much, David. And as you have stated correctly, the big driver of the margin in the third quarter are not over proportional spare and lease engines, but rather the strong performance on the spare parts. And driving the spare parts compared also to the first half of the year. In the first half of the year, we were at a high single-digit rate, growth rate, now that rate has definitely significantly expanded to a mid- to high double-digit range, which also means then strong impact on the margins. And in addition to that, we also saw pricing effects kicking into place now also in the third quarter. David Perry: I guess if I can just have one follow-up. The obvious question is, do we or don't we extrapolate this forward? I mean, is there some kind of -- is it about maturity of the mix? Is it you're taking more margin on GTF or something? Because clearly, we've never had a margin this high. I don't think you've ever had one that high in a quarter. Katja Garcia Vila: So if you're referring to the overall margin of the OEM segment, I would still not say that this is exactly the new normal that you should anticipate. You remember what we gave as guidance at the Paris Air Show, which is a little below what you've experienced now in the third quarter of this year. So the maturity definitely plays a role with regards to the mix on the spare parts. And what we will also see in the fourth quarter then on the OEM margin overall is that we will continue to see strong new deliveries. Operator: Next question is from Ian Douglas-Pennant with UBS. Ian Douglas-Pennant: I've got a few, but let me prioritize. So about your OEM EBIT guidance, by my math, it implies something like a mid-single-digit growth rate implied for Q4. Can you help us understand any kind of seasonality patterns that we should be looking for in Q4 to explain why the growth rate is going to slow down? Secondly, Pratt & Whitney on Tuesday gave a comments on the call that they revised down their expectation for how many GTF deliveries they're going to make this year. Can you help us understand why then your series growth guidance for this year is unchanged. I've got a few more, but I'll respect the 2-question rule. Katja Garcia Vila: Yes. So far, looking at the sales guidance that we have out, I cannot 100% record how you come to a limited growth guidance now on the OEM program. I think our expectation is that we will have on the OEM segment also a strong sales performance in the fourth quarter, supporting us in our full year's guidance expectations. Looking at the GTF, I think for the GTF itself, we do see better supply chain helping us also to ramp up further new output on new engines. And I think there, we are also making progress supporting also the ramp down of the situation in the market with regards to the GTFs. And also keep in mind, we do provide more than just the GTF engines in the OEM segment. We also have widebody engines where we do see good business moving forward. Ian Douglas-Pennant: I'll jump back in the queue and follow up with IR on the first question. Maybe I made a mistake somehow. Operator: We'll take the next question. Next question is from Robert Stallard, Vertical Research. Robert Stallard: I've got a couple for you. First of all, on engine leasing. This has clearly been doing very well at the moment, but these are particularly unusual circumstances. The market is very tight, very strong. How are you looking to manage this risk going forward when we do see a conditions returning to normal, particularly with regard to residual values? And then secondly, on the defense side of the business, you mentioned the strength in Eurofighter orders and backlog. How do you expect Eurofighter sales to progress and ramp from here? Thomas Franz: Rob, it's Thomas. I'm taking these 2. So engine leasing on the one hand side, yes, the market is very strong at the moment. But as you know, we have not a remarketing risk like other companies in the place that we are having a direct correlation between our leasing business and our MRO business, where we can always move things back and forth supporting the one to the other. So we feel pretty good with the outlook we gave at the Paris Air Show as well as the current situation we're in. On the Eurofighter, that's a little bit of difficult question. Yes, the order momentum is accelerating. We see a high level of interest, and we also hear and discuss with our partners and also with the OEMs, the ramp-up of manufacturing. But at the end of the day, there are some lead times in the programs, and we need to see how we can -- we can develop there further. So this is nothing that accelerates significantly in the next 1, 2 years on a revenue perspective. So we need to see how that plays out in the years thereafter. Operator: We'll take the next question. This is from Ross Law, Morgan Stanley. Ross Law: So first, just coming back on the OEM margin. The implied Q4 step down is quite material. On my math, it's something around the high teens, which would probably be the lowest Q4 margin in OEM for about 5 years. So assuming spare parts don't fall off a cliff in the fourth quarter, is this implied sequential change all driven by this variance in mix? That's the first question. And then secondly, just on FCAS, if this does get canceled, what would be the potential impact to your 2030 guidance? Katja Garcia Vila: Okay. Let me first take the margin question on Q4. As we had said already during our H1 call, we do expect not an as strong spare in these engines business moving forward in the second half of the year. And if you do the pure math there, we do expect some impact also due to the fact that the installed engines are increasing. Now, so that is the reason for the lower expectation on the margin for the Q4. With regards to FCAS, I think we are very confident that there will be a solution found to move on with the program. The politicians at the moment are in talks. So maybe, Johannes, you've been to Berlin a couple of times. Maybe you want to say something about FCAS? Johannes Bussmann: Yes. I think we are in phase IB, which is still lasting until September, so third quarter next year. And that's what we still need to work on and deliver. And that's what we also will do together with our partners in the Engine segment. And the decision time line that we hear from the political side in Berlin right now is still the end of the year. And that's, of course, something we are looking forward. And we as MTU and also with our partners, Safran and ITP are fully committed to extend and continue the program. And if the time line by the end of the year is met, we are in fine shape, and we are concentrating at the moment on delivering on the first parts that we are still working on. Ross Law: Okay. Just a very quick follow-up. Can I just check in your 2030 guidance, is there a contribution from FCAS included in that? Katja Garcia Vila: Yes, there is a contribution of FCAS included in our 2030 guidance. Operator: We'll now take the next question. This is from Sam Burgess, Goldman Sachs. Samuel Burgess: Firstly, just on the stable margin in commercial MRO. There's clearly been a shift to more GTF MRO. But can you just help us disaggregate the drivers there of that stable margin? What was work scope versus pricing versus the MLS contribution? Any color there would be really helpful. And the second one, just on the OEM side, you mentioned the pricing effects impacting in Q3, Katja. Can you just remind us in terms of in 2024, whether those pricing effects impacted at the same point? Katja Garcia Vila: Okay. Let's start with your question on the MRO business and the MRO margin. So as we have elaborated already, in the third quarter, we had really a significantly higher share of GTF MRO works compared to the first half of the year. We were short, so to say, with regards to MRO throughput in the first half of the year also due to missing parts. The supply chain has now stabilized on the GTF materials, and this is why we were able to ramp up the share of work in our shop, which then also will help to drive down the AOG situation during the course of the next coming months. With regards to pricing effect, pricing effect kicked in a little later last year in 2024. So some of the pricing was a little pre-pulled this year into the third quarter. Samuel Burgess: My question actually on commercial MRO was more about how you've maintained a stable margin given GTF is a significantly bigger share. Can you just help us think through what's been really strong there? Is it just more material intensity on widebody? Any color there would be very helpful. Katja Garcia Vila: Okay. Yes. Sorry, I didn't get that point with my first answer. Yes. So overall, what we do see is that the work scopes on the mature engines are increasing. That is one definite driver for margin expansion in our MRO shops. You know that the airplanes are flown longer. So we have more shop visits and with higher contents in the time. And on the MLS side, you know that we've provided a guidance moving forward to achieve EUR 1 billion in sales until 2030. And this business is continuously expanding also supporting our margin expansion on the MRO segment. Operator: Next question is from Christophe Menard from Deutsche Bank. Christophe Menard: I had two as well. Trying to understand the very strong OE margin in Q3 as well. The question is, is IGT also part of the strong performance? I mean you highlighted this in your presentation. So I was wondering whether that was a contributor to this. And the second question is on GTF Advantage. I mean, you will start delivering by the end of this year, if my memory is right. Has it any impact on the OE margin business first? And the side question is, there is also an upgrade program around GTF Advantage. Are you seeing some customer acceptance of this or interest? And when could it have an impact on your MRO revenues and profitability? Katja Garcia Vila: Okay. Let me take the first part. Let me take the IGT topic. IGT is part of the spare parts revenues. So there, we also do see a good business moving forward. And as I said, we will expand the business going forward in our facility, the MRO work going forward in our facility in Berlin-Brandenburg. With regards to the GTF Advantage, you want to take it Johannes? Johannes Bussmann: Sure Katja. No problem. Entry into services next year, so 2026. We're, of course, happy that we have all the approvals now under our belt and the production is now expanded and entry into service, I mentioned next year and then ramping up over time to the full load that we think is required. And of course, there is interest from a customer side for a better performance and longer on wing time for the engines. So we are quite confident that we achieve the targets and the entry to service level then is increasing, of course, over the time. Operator: Next question is from George Mcwhirter from Berenberg. George Mcwhirter: I've got two, please. The first one is just following up from Sam's question on pricing. How do you expect pricing of spare and lease engines to trend in 2026? And the second question is on the industrial gas turbines business. You mentioned that you plan to grow this business in the coming years. Can you just remind us of how big this business is in revenue terms, please? Katja Garcia Vila: Thank you, George, for your question. So the first question on the pricing, I'm sorry to say that we don't give guidance on these detailed levels and also not for 2026 now. So far, we've seen supportive pricing in the market, which has also helped us this year on the margin expansion. Depending on how the market overall will develop, pricing will be determined. With regards to the IGT, I don't -- I'm not fully aware of a share that was ever to communicated. So this is a business that we find very attractive, and this is also the reason why we are investing in our Berlin-Brandenburg facility to expand our IGT business now going forward. Operator: We'll now take the next question. This is from Rory Smith from Oxcap Analytics. Rory Smith: It's Rory from Oxcap. I wanted to follow up on Sam's question on MRO profitability as well, please, but maybe asking it in a slightly different way, given that you've talked about USD 10 billion to USD 11 billion in MRO revenues to 2030 and then that doubling of the MLS to about EUR 1 billion to 2030. Maybe if you could help point us in the direction of the split in commercial MRO profits in 2030 or thereabouts between those buckets that you've called out today, the narrowbodies, the mature widebodies and the MLS, just to give a sense of direction of travel stepping back from the sort of the particulars of the quarterly movements, that would be really helpful. Katja Garcia Vila: Yes, Rory, thank you very much for the question. So I'm sorry to say that we don't break down individual profitabilities of subsegments like this. What I can say is that we do expect a positive development in all areas of our business. So with the GE90 and also the contracts that we have moving forward, also the GEnx, I think on the widebody side that we do see continuous demand for MRO services. The same accounts for the narrowbody fleet, which still continues to grow and will continue to grow during the course of the next couple of years. And we have provided you at least with an outlook on the revenue side for the MLS business saying that it doubles its contribution to our 2030 sales figures. Rory Smith: And just a follow-up on near term, the ramp-up impact of MTU Fort Worth. Apologies if you've given this already, but have you given a sort of guidance on the dollar impact of that and when that rolls off? Katja Garcia Vila: What we have provided you with was an outlook on the expected investments in PPE that we do see connected to this ramp-up, which was USD 120 million over the course of the next coming years. MTU Fort Worth will have a first induction of an engine by the end of next year. And this will be the LEAP engine where we've invested into the license. There will be another program starting by the end of the decade. But you need to take into consideration that this will not be a material impact, for example, in the near term for 2026 with regards to sales. Operator: Next question is a follow-up from Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: I have a couple of follow-ons, please. So we saw some headlines in the press, I think, from a call that you may have done earlier in the day saying that tariff costs are ahead of your initial expectations. Could you update us on what you think the number is that tariffs will cost you and whether that number has changed since earlier in the year? And my second question is, so this year so far, we've seen 13 A320neos, at least with GTF engines and at least one A220 being retired. And obviously, they're being retired very young. How do we explain that it's A320s with GTF engines and not with LEAPs that are being retired? And secondly, how do we expect -- how do we explain that those aircraft are being retired quite so young at this point. Does this put a ceiling on your ability to increase price at some point? Katja Garcia Vila: Okay. Let me start with the tariff question first. I think this must be a misunderstanding. When we started to talk about tariffs, our original assessment was that we expected the gross impact of tariffs in the high double-digit million range. That was prior to any mitigation measures, which we said we would elaborate on. When we had our H1 call, we spoke about high single to low double-digits impact that we do expect on our EBIT after mitigations. And this is also the figure that we still confirm. So the low double-digit million impact on tariffs this year is what we have currently foreseen. So there is no change in our assumptions with regards to tariff implications. With regards to the retirement rates in general, I would say that we still see very low retirement rates overall in the market. And what we also have is that we do have a very strong order book on the GTF still moving forward, which was also pointed out with the order wins that we had at the Paris Air Show. So I cannot give you a detailed explanation on specific aircraft, I have to admit. But overall, our order book on the GTF remains very healthy, also due to the fact that this engine really performs well with regards to, for example, fuel consumption, which is a significant improvement compared to prior generations. Operator: We will now take the next question. This is from Olivier Brochet from Rothschild. Olivier Brochet: I have a couple of questions, please, for you. RTX indicates that on the GTF the shop visits are heavier in -- as we get closer to the year-end. Am I right in thinking that with the 18% share that you have on the A320 engine, it helps sales, but also profit rate in OE? The second question is on FCAS. Do you have any assets that are at risk if the program is dropped? And then the follow-up on the comment you made, Katja, on the new program in Texas by the end of the decade. Do you expect a material fee to be paid at some point between now and then on that, please? Katja Garcia Vila: Okay. Let me start with the RTX shop visits or heavier shop visits. You're totally right. Our share in the program is 18%. So there might be some impact coming from more heavy shop visits, but that is also what was expected in general during the course of the program that after a certain time, shop visits will become more heavy as we've also moved away now with better material availability from quick turns, which we had to do for a certain period of time now moving to more heavy shop visits with respective impact. Assets with regards to the FCAS program. So what we have done so far in the FCAS program as we're -- and we are still doing as we deliver on the phase IB, which was ordered by the government. And this is what we're currently following on until late Q3 next year, waiting for clarification on the program to move on in the next -- in the next phase by the end of this year. And with regards to fee, Ian, what we have paid was, so to say, the entry fee into the program that was around USD 100 million that was late last year. So that has already been paid. What we have also done is we have put additional payments when the program runs that we have to do into our net debt figure in the second quarter of this year. This was EUR 100 million, but these payments are not due in the near term. They will come when the program will ramp up to certain levels. There will be some more payments. Olivier Brochet: If I may follow-up on the FCAS topic. You don't have any assets that are on the balance sheet and that would be at risk if the program is [ drop? ] Katja Garcia Vila: No, there is no relevant asset on the balance sheet. Operator: We have no further questions at this time. So I will now hand back to the speakers for any closing remarks. Thomas Franz: Yes. Thank you, Johannes. Thank you, Katja. Thank you all for the participation in this call. As usual, the IR team is online for further clarifications or questions for the coming days and weeks. Thank you. Have a great day, and see you next time. Operator: Thank you. We want to thank Mr. Johannes Bussmann and Mrs. Katja Garcia Vila and all the participants of this conference. Goodbye.
Steinar Sonsteby: Hi, and welcome to the Q3 presentation of the Atea numbers here from rainy Oslo. In this presentation, we will update you in more details on both the 2025 guiding and as promised, the development in Denmark. We will give you much more details than normally, not only to Denmark, but also more insight in our business model. In the future, we will not go as deep. So see this as an opportunity to understand more rather than a new way of reporting. So to the numbers. Gross sales came in at NOK 12.3 billion, up almost 10%, and EBIT at NOK 348 million, up 13.3%. Net profit grew by almost 18%, another record-breaking quarter from the place to be. But as always, I leave it to Robert to give you all the good news. Robert Giori: Thank you, Steinar. Atea reported strong sales and profit growth in the third quarter of 2025 with high demand across all lines of business. Gross sales in Q3 were NOK 12.3 billion, up 9.2% from last year. After adjusting for changes in currency rates, organic growth in constant currency was 7.0%. Hardware sales increased by 5.7%, driven by higher shipments of PCs and other digital workplace solutions. Software and cloud sales increased by 17.1% with high demand across all product categories. Services sales increased by 6.0% from last year based on higher sales of consulting and product support services. Group revenue according to IFRS was NOK 8.4 billion, up 5.6% from last year. And gross profit increased by 6.7%, to NOK 2.5 billion. Gross margin increased from last year due to an improved hardware margin and a higher proportion of software in the revenue mix. Operating expenses grew by 5.7%, to NOK 2.2 billion. After adjusting for changes in currency rates, OpEx growth in constant currency was about 3.5%. With strong demand across all lines of business, EBIT in the third quarter increased by 13.3%, to NOK 348 million. And net profit after tax increased by 17.7%, to NOK 226 million. We'll now take a closer look at sales and profit development across the countries in which we operate. Atea's strong sales and profit performance was spread across nearly all countries in the third quarter of 2025. In Norway, gross sales increased by 11.2%, to NOK 3.1 billion based on very high growth within hardware and services. EBIT grew by 8.1%, to NOK 123 million. In Sweden, gross sales increased by 7.7% to SEK 4.6 billion with high growth in sales of software and cloud and services. EBIT grew by 18.3%, to SEK 154 million based on higher sales and relatively low growth in operating expenses. In Denmark, gross sales increased by 13.7%, to DKK 1.8 billion, with rapid growth in sales of digital workplace and networking products. EBIT grew by 25.8% to DKK 15 million. In Finland, gross sales fell by 9.5%, to EUR 95.8 million. EBIT was EUR 1.7 million compared with EUR 1.8 million last year. The Finnish market environment remained challenging in the third quarter with weaker demand from the public sector. In the Baltics, gross sales increased by 9.6%, to EUR 46.2 million, with very strong growth in sales of software and services. EBIT increased by 27.8%, to EUR 2.2 million. Atea Group functions, which includes shared services and group costs, was a net operating expense of NOK 8 million compared with an expense of NOK 2 million last year. The difference was mainly due to higher corporate SG&A costs. Now a word on our cash flow and balance sheet. Atea's cash flow from operations was an inflow of NOK 220 million in Q3 2025 compared with an inflow of NOK 112 million last year. This cash flow improvement was driven by solid growth in earnings and by a reduction in inventory during the quarter. This offset lower sales of receivables into the securitization program and a seasonal increase in other working capital balances during Q3. Looking ahead, Atea expects a very strong cash flow from operations in the fourth quarter with seasonal working capital reductions in line with historic trends. At the end of Q3 2025, Atea had a net debt of NOK 438 million as defined by Atea's loan covenants. This corresponds to a net debt-to-EBITDA ratio of 0.2. Atea's net debt balance at the end of Q3 2025 was NOK 4.6 billion, less than the maximum allowed by its loan covenants. Atea has a strong balance sheet and significant additional debt capacity before its loan covenants would be reached. With Q3 now behind us, we want to provide an update on our financial guidance, which we gave earlier this year. Atea has guided for gross sales of between NOK 57 billion to NOK 60 billion for the full year 2025. We now expect to deliver gross sales in the top end of this guidance range. Atea guided for EBIT of between NOK 1.33 billion and NOK 1.45 billion in 2025. We now expect to deliver EBIT in the middle of this interval. Our guidance is based on a solid order backlog and a healthy market and competitive trends as we enter Q4. We expect that our businesses in Norway, Sweden and the Baltics will continue their solid earnings momentum. Furthermore, we expect that our business in Denmark will progress in its turnaround and that our business in Finland will return to sales growth in Q4. And that concludes the presentation of our third quarter financial results. I now hand the podium back over to Steinar to provide additional information on the Danish business and to summarize Atea's position as we exit Q3. Steinar Sonsteby: Thank you, Robert. So as promised earlier this year, we would deep dive a little bit in Denmark after Q3. I have now spent a little bit more than 6 months in my new home. And I will, as I said in the beginning, dive a little deeper than we normally do. And I will first provide you with some of the issues and then talk about what we are doing about it. Denmark has, for years now, underperformed, and we have not been able to really make a turnaround. In this presentation, I'm comparing Denmark to Norway and Sweden as that makes the most sense compared to size and where we want to go. So first, if we look at hardware, Denmark has had a falling margin curve for the last 5 years. The last 12 months rolling LTM gives us a margin in Denmark at 9.1%. And you see Norway and Sweden on the slide coming in much higher at 12.8% and 12.6%. The margins in Norway and Sweden have been constant for more than 10 years, and the margin in Denmark is falling. So you might think this is because the Danish market is different, pressure on price is harder, but that is really not the case. Because if you dig a little deeper, as normally with Atea's business model, and this is not only for Denmark, it is all about mix. And in this case, it's all about customer mix. If you look at the slide, you see that hardware from SKI contracts. And I just want to say that not all public business in Denmark are done through the SKI contracts. But through the SKI contracts have been growing fast over the last couple of years, and the margin on some of those contracts are low, we have that type of frame agreements in all countries. There is nothing wrong with having large frame agreements. They will have lower margin. The thing is you have to balance the mix. And if you look at this slide, you see that non-SKI business had been falling in revenue. The balance becomes unhealthy. We will keep on serving SKI and the customers that want to buy on the SKI contracts. Of course, it's a big part of our business, but we need to focus on non-SKI also and make that grow. If we look at software and cloud, the margins are slightly falling. And you could think that has to happen because of the Microsoft EA incentives being lowered. But you can see on this slide again that Norway and Sweden are higher. And again, the answer is not really in lower margin in general or price pressure overall. It's, again, a case of mix. So you see total software here, which are the numbers we report. And then you see the EA, which is growing fantastically in Denmark and at hardly any margin. The CSP business is also growing but not as fast and from a much smaller base. That should have been turned around much earlier in the last couple of years. And then other software, so all other software and cloud than Microsoft is hardly growing. Both CSP and other software has very healthy margins. It is the balance of in hardware -- in the case of hardware, customer mix and here, in the case of software and cloud, product and services mix. One way of balancing the revenue and the margin is services, but services is much more important than that. Services is a very, very tough part of our strategy. If we don't build services and added value for the customer and our partners, the margins will be low. That is how the business model for some in the industry are, very high volume, very low margin and very, very low cost. We don't think that is a sustainable business model. Therefore, services is important. In this case, on the slide, you see consulting. So first, the number of system engineers. Norway and Denmark has about the same total revenue, but not so on the number of system engineers. Norway have about 530, Denmark, back when I came, about 130 system engineers. And some of those system engineers have to spend time helping sales, taking certifications, give keynotes or work on customer events and vendor events. So our target for their invoicing rate is around 75%. But when you are below critical mass, it's very difficult to get there. So we need to address the issue. It's the same thing on managed services, one of the more important parts of our strategy -- because we want to be our customers' partner no matter how they want to consume IT infrastructure. Some want to buy and build themselves. Some want to buy and have us build. And some want us to run it all for them. So when Denmark is not growing on managed services, it becomes a strategic as much as a financial issue. So what we have done over the last 6 months? First, we have reorganized sales so that we have a strong account management that can carry the whole breadth and width of our service and product portfolio. We come from a two-siloed sales organization within certain areas. We have now changed. It was done before the summer, and it starts to give effect. It also gives us a much better tool to be able to put new services or products into the sales machine. It's a change that was supposed to have happened a long time ago. We've now done it, and I'm very proud and happy about how smooth this has worked out. And you can see from the numbers in Q3 that we are making progress financially as we are doing the change. Six months ago, we introduced a program, an improvement program called Act as ONE. We need all the force behind one arrowhead, as Scott McNealy once said. The program has five projects, and they all have leads, they all have activities, and we follow up on these weekly. We need to, as you've seen, address the hardware margin. We have gone out and said we'll increase the price, but mostly we'll have resources put on private customers. It's starting to yield, and you will see that already in Q4 as you have in Q2 and Q3. On the software margin, it's important that we put resources and pressure on selling CSP and all the other software vendors that we are carrying like Cisco, IBM, VMware and others. On the AMS side, we have done some changes to the organization and the players that play in AMS. We have increased the pipe, and we need to increase the hit rate, the win rate, which we see are going up. This is a slower part of our business to turn around because there are longer sales cycles and longer implementation processes. But we are moving in the right direction. And then consulting. As some of you might have seen, I have gone out in Danish newspaper saying that we will hire within the next 12 months. This was back in July, 100 system engineers. We are now at about 25 more than what we were at that time. Many of them come with customers, and we are looking forward to, during the rest of this year, to address them with our account management to upsell from consultancy to products and managed services. The culture is something that I have addressed to get turnover down and efficiency up. And I'm happy to say that Atea Denmark today seems like a different company. All in all, I'm very happy with what we have addressed and the results. And the forecast for Denmark in Q4 is an EBIT of DKK 40 million. When that is in the bank, EBIT in 2025 will have grown by 50% as we are doing as much investments into the business and into the company and the people as we see fit. It's a good journey. Within Q1 or the end of Q1, I would have been in Denmark approximately a year. And I will start recruiting a new country manager in November and hopefully spend the spring to get the person into the organization and to take over before summer. So that gives you more details on how we see business, how we see Denmark, and we are very optimistic on what's going to happen in Denmark, but also in the company as a whole going forward. So far this year, we have had a gross sale of NOK 42.3 billion and an EBIT of almost NOK 900 million. We are very satisfied. With that, I'll leave it to you, Chris, to see if we have any questions. Christian Stangeland: Thank you, Steinar and Robert for the presentation. I do have some questions here. First question: Thank you, solid quarter, but can you give some more -- what is happening in Finland? Steinar Sonsteby: Yes. So Finland has been a little bit of a surprise to us this year. We saw some signals to this already in the fall of 2024 that business in Finland was slowing down a little bit. And so we have followed this very closely. It is not Atea that are slowing down. It's Finland that are slowing down. And you can see this looking at a lot of data. And we are, of course, also speaking to all the American partners that we have that have the same development. At the same time, we are winning a lot of contracts. And you've seen that we've publicly talked about some of them, some of the larger ones. And so we expect this to turn around. And our internal forecast say that, that will happen somewhere later this year or beginning of next year. That is difficult to predict. And that's why we are keeping the workforce because we will be ready to go with all the contracts and with a better market soon to happen. Christian Stangeland: Thank you. New question, you seem firm on your guidance with Q4 in Denmark. How can you be so precise? Steinar Sonsteby: First of all, I want to give you two insights. As many of you know, I'm a person that looks at the bright side of life. That gives you a better life in 9 out of 10 chances, and you get surprised negatively once. This is not going to be one of them. And then secondly, we are having a better forecast internally than what we're saying here. But we want to invest as much as possible to grow rapidly in 2026 and 2027 also on EBIT. And so we are balancing -- performing with investments, and that's why we feel pretty confident. But again, predicting the future is not an exact science. Christian Stangeland: Thank you. A new question here. Please, could you help explain how the business has performed outside the public sector, and how are your conversations with your enterprise customers going given the macro backdrop? Steinar Sonsteby: Yes. So the mix between public and private have over many years, grown a little bit in favor of public, especially through corona. But what we see right now is that the investments from enterprises, so private -- larger private companies are super good. Their confidence in what they're doing seems to be high. And I'm now excluding Finland a little bit from that discussion. There are two other factors that are important to weigh in here. First of all, you will see that not all IT companies are growing as fast as Atea. So we are definitely -- our strategy are definitely helping us to take market share. But you also understand that there is nothing a company can do today to improve their business, take market share or develop better products and services than investing in digital services. So we're in the right spot with the right strategy, with the right people. And so we are confident from that part. The discussions are very much centered around finding that edge in investing in technology, security to protect and AI to develop. But you need a broader investment in infrastructure and applications to be able to use those tools. So it's a very cool and interesting time to be in our industry, and we don't see that going away anytime soon. Christian Stangeland: Thank you. The new question, what needs to happen for Atea to achieve a top end of the EBIT range for 2025? Or is that something that's just not in the cards? Steinar Sonsteby: Well, I think we've been pretty precise with what we think will happen. We're still -- we have still given an interval, and it's still possible to have both outcomes. But I think we'll leave it with our guiding. Christian Stangeland: Thank you. A furthermore detailed question on Denmark. What are the plans for ramping up the system engineers in Denmark? And what will be the increased cost? And how much will that happen? Steinar Sonsteby: So first of all, the investment in the 100 new system engineers in Denmark is supposed to give a payout after 1 to 3 months per person. So it takes 1 to 3 months to get people to be profitable. The ramp-up is pretty linear over the 12 months from July to July. And by the way, we are ready to further ramp that up after we've got to the 230-240, which is the target as we've set it right now. But there are two reasons why this is important. So the financial impact of each system engineers by itself is a positive contribution, as I said, after 1 to 3 months. But it's also important in our margins on product, but also how the stickiness between us and the customers will become as we have consultants or system engineers in -- or with the customers. So there is an investment. Of course, the cost per head is what it is, and you can do the average math, and we see a positive contribution pretty rapidly on this. And that is also what we've seen in Q3. Christian Stangeland: Thank you. New question. You've previously stated that reaching the upper end of guidance will require a rebound in Finland and Denmark in H2. Now you say you expect to reach the midpoint despite Finland being weak. Does this mean something else has developed better than you expected? Steinar Sonsteby: Well, that statement is the person putting the question to us. We have not seen any weaker development than what we thought outside Finland. Denmark is exactly where we thought it would be or hoped it would be actually, but we do see a stronger momentum in Norway and Sweden. The Baltics is also performing really, really well, but it's a smaller part of the business. So I would say Finland, surprising a little bit on the negative side. The other countries all in line or a little stronger. Christian Stangeland: Thank you. And the final question. In previous presentations, you've been talking about the four big growth drivers. Can you briefly give us an update on those, please? Steinar Sonsteby: Yes. So very briefly here since we are at the end. AI, starting with that. I think everybody understands that the hype curve was high and very early in the cycle of AI as a technology. We see a lot of interest. We see a lot of people taking advantage of Copilot and some, and not very many, but some who are investing deeper and building solutions based on their set of data. This is a long process. It's going to -- AI is going to be a growth driver for us for years and years and years to come. 5 years from now, we'll look at it and people will say, wow, everybody is using it everywhere. And then we'll start talking about quantum computing or something new, which will accelerate AI even more. Security is right now growing faster than what we thought. We've always thought that customers should invest in security and cyber threats are not going away anytime soon. But it hasn't really happened in the history. People have invested more, but not as much as we thought. Right now, we see an increased interest in investing in security. Defense is strong. And I think it's true to say all over Europe that investments in defense is ramping up. The countries are lacking people, and they have the money. And so we see a very strong demand for investments in defense and NATO going forward. And we will launch some new contracts in the months to come that will prove that. And then Windows 10 end of life. As some of you have seen, there's been a huge push over the last 2 years to go from Windows 10 to Windows 11 operating system. That change by itself is not a huge growth driver, but the fact that you can't run Windows 11 on all the PCs that you were running Windows 10 on at the same time as customers are changing to AI or Copilot plus PCs, so stronger, more expensive PCs, is something that have been driving our revenue on the client side for the last 12 to 18 months. Absolutely a driver that we'll see also into the future, even though Microsoft have prolonged service for some customers for 12 months. There are still about 1 million PCs in the Nordics that need to be upgraded. If they're upgraded because of the operating system or because they're end of life or because you want to run AI central -- locally, sorry, locally, doesn't really matter to us. We're going to sell you the PC anyway. With that, we wrap up the Q3 presentation here from Oslo, and we thank all of you and hope that you have a very, very nice day.
Operator: Greetings, and welcome to the Veris Residential, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Taryn Fielder. Please go ahead. Taryn Fielder: Good morning, everyone, and welcome to Veris Residential's Third Quarter 2025 Earnings Conference Call. I would like to remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to the company's press release and annual and quarterly reports filed with the SEC for risk factors that impacts the company. With that, I would like to hand the call over to Mahbod Nia, Veris Residential's Chief Executive Officer, who is joined by Anna Malhari, Chief Operating Officer; and Amanda Lombard, Chief Financial Officer. Mahbod? Mahbod Nia: Thank you, Taryn, and good morning, everyone. We're delighted to report another quarter of exceptionally strong operational performance, including blended net rental growth of 3.9%, significantly outperforming the national market and core FFO per share of $0.20. Despite challenging transaction markets, we made considerable progress on our corporate plan to monetize select non-strategic assets, using sales proceeds to further delever as we seek to continue unlocking the value embedded within the company. To date, we've sold or entered contracts of $542 million of non-strategic assets, including Harborside 8/9, exceeding the upper end of our initial $300 million to $500 million target, which we are now raising to $650 million. These sales and subsequent debt repayments continue to drive outsized earnings growth relative to our peers, while strengthening our balance sheet as we have proactively reduced net debt-to-EBITDA by 15% since the beginning of the year to 10x. Harborside 8/9 is expected to close early next year, albeit closing is subject to factors outside of our control. and the resulting proceeds are anticipated to generate $0.04 of run rate earnings while further decreasing net debt-to-EBITDA to approximately 9x with the potential to delever to below 8x by the end of 2026, as we continue divesting non-strategic assets, in accordance with the revised $650 million target. We anticipate that this will significantly enhance optionality for the company and allows to explore a wider range of financing strategies, including alternatives that were previously unavailable to us, with the potential to further reduce our cost of capital over time, positioning Veris for continued outperformance next year relative to peers. We also realized several one-time tax appeal refunds during the quarter, which Amanda will discuss in more detail. As a result of these adjustments, core FFO per share for the quarter increased to $0.20, which is reflected in our decision to raise guidance for the second consecutive quarter to $0.67 to $0.68, 12.5% above 2024. Before discussing our recent sales in further detail, I'd like to say a few words regarding the broader multifamily market as well as current dynamics in our key markets. While the national multifamily market remains structurally undersupplied, demand has recently weakened in select markets, driven by an influx of new supply, which is expected to be absorbed over time. Rents slowed significantly in September, growing by only 30 basis points year-over-year, with asking rents decreasing in the largest 1-month drop since November '22. Looking ahead, softening labor markets, declining consumer sentiment and more stringent immigration policies could present headwinds to the sector overall. In contrast with the national market, the Northeast continues to perform encouragingly well, supported by favorable supply/demand dynamics and resilient urban migration trends. In September, New York City led the nation in rental growth of 4.8%, reflecting continued strength in demand and extremely limited supply. Between 2020 and 2024, New York City's multifamily supply grew by only 6%, approximately half the national average, driving robust demand to neighboring submarkets with strong transit links, including Jersey City and Port Imperial, where the majority of our properties are located. Over the past 2 quarters, the neighborhood surrounding Manhattan have largely absorbed more than 8,700 units of new supply, including nearly 5,000 units in the third quarter alone, the highest quarterly total in 5 years, with deliveries expected to taper beginning in 2026. Despite this regional supply influx, Manhattan alternatives continue to outperform with the broader New York metro area averaging rental growth of 2.3%. Among these submarkets, the Jersey City Waterfront has been particularly resilient, maintaining low vacancy levels and rental growth of almost 3%, reflecting robust, sustained demand and an ongoing lack of new supply. The Waterfront has not seen any meaningful deliveries since mid-2022 with new supply well below its historical annual average of 600 units, which have been consistently absorbed over the past 15 years. Currently, approximately 4,500 Class A units are under construction on the waterfront with 2,500 units expected to be delivered over the next 24 months across 4 projects. While not directly competing with the Waterfront, nearby submarket Journal Square saw 2,800 units of new supply delivered and absorbed in the last year, further testament to the ability of the broader Jersey City market to absorb new supply across various price points. We expect the New York City demand/supply imbalance to continue fueling sustained demand for housing in alternative submarkets such as Jersey City that are expected to see population growth well in excess of projected unit deliveries for the foreseeable future. Turning to the investment market. While transactions remain challenging, particularly for larger sales, with core capital largely remaining on the sidelines, there are early signs of renewed engagement from Core-Plus capital with interest concentrated in gateway cities. As I mentioned in my opening remarks, we've exceeded our target for non-strategic asset sales with $542 million of sales closed or under contract this year. During the quarter, we closed on the sale of 4 smaller non-strategic multifamily assets for a combined $387 million, reflecting an average cap rate of 5.1%. In addition to Signature Place and 145 Front Street, which closed in early July, as previously announced, we sold The James, a 240-unit property in New Jersey for $117 million; and Quarry Place, a 108-unit property in New York for $63 million. We also continued rightsizing our land bank during the quarter, disposing of Port Imperial South for $19 million and entering a $75 million contract for the sale of Harborside 8/9. The Harborside transaction is anticipated to reduce net debt to EBITDA to around 9x and contribute $0.04 to core FFO on an annualized basis. Following these sales, our remaining land bank is valued at approximately $35 million with parcels primarily located in Massachusetts. Before Anna walks through our operational performance, I wanted to share our recent results from the Global Real Estate Sustainability Benchmark, or GRESB. Year-over-year, our GRESB score improved by 1 point to 90, maintaining our 5-star rating and Green Star and earning us the #1 rank in our peer group as well as designations as a regional listed sector leader and top performer for residential companies in the Americas. Last but not least, I'd like to thank our team whose dedication and execution have been instrumental in establishing Veris as a high-growth, rapidly deleveraging company. With that, I'll hand it over to Anna to discuss our operational performance for the quarter. Anna Malhari: Thank you, Mahbod. Despite a broader market slowdown, our portfolio continues to outperform with the same store blended net rental growth rate of 3.9% for the quarter, comprising 3.6% growth in new leases and 4.3% in renewals; in line with our expectations as we entered the slower leasing season. For the first 9 months of the year, our portfolio's same store blended net rental growth rate was 3.5%, comprising 2.3% in new leases and 4.2% in renewals. Our portfolio's continued rental growth, coupled with our strategic exit from select suburban markets has increased our average revenue per home to $4,255 and over 40% premium compared to peers. Turning to occupancy. Excluding Liberty Towers, where we continue to undergo unit renovations, occupancy was 95.8% as of September 30. Including Liberty Towers, which is now over 85% occupied, overall occupancy was 94.7%, with retention improving by over 570 basis points since last year to 61% across the entire portfolio. Our New Jersey properties continue to benefit from strong fundamentals, including our assets' strategic locations, adjacent to New York City and sustained interest from prospects moving to the broader metro area who are compelled by the relative value proposition of our generally newer, larger units and the wider range of amenities they offer compared to those in Manhattan. During the third quarter, approximately 55% of new move-ins came from out of state and 25% from the metro area. While some portfolios have been impacted by declining international student enrollment, our exposure has been extremely limited as only 2% of our units are occupied by students. Our properties continue to primarily attract affluent, young, urban professionals with an average household income of over $480,000, providing a strong foundation for sustained future rent growth. Notably, our Jersey City Waterfront portfolio has significantly outperformed with new lease net blended rental growth of 6% during the quarter. In September, new lease rental growth across our Waterfront assets was 4.6%, well above the submarket's average of 2.9%, a testament to the quality of our assets, the strength of our markets and platform, and the unwavering commitment and hard work of our teams. We continue to elevate our customer experience and operational efficiency by investing in innovative technologies through PRISM, our strategic approach to technology implementation, which recently earned us recognition as a finalist for the ThinkAdvisor Luminaries Award. These efforts are reflected in year-to-date controllable expenses growth of just 1.9%, well below inflation. With that, I'm going to hand it over to Amanda, who will discuss our financial performance and provide an update on guidance. Amanda Lombard: Thank you, Anna. For the third quarter of 2025, net income available to common shareholders was $0.80 per fully diluted share, reflecting substantial gains from sales during the quarter versus a loss of $0.10 for the prior year. Core FFO per share was $0.20 for the third quarter, up $0.03 from the second quarter due to the recognition of $0.04 of successful tax appeals on sold assets, which was offset by $0.01 from the finalization of Jersey City property taxes in the third quarter. Year-to-date, core FFO is $0.52 per share versus $0.49 at this time last year. Before we dive into same-store, please note that the same-store pool has been adjusted to remove the 4 multifamily properties sold during the quarter, with this recalibration impacting some of the growth rates. Same-store NOI growth was 1.6% on a year-to-date basis and off 2.7% for the quarter compared to last year. This was largely due to the company lapping the extremely favorable resolution of non-controllable expenses in 2024, combined with an approximately 4.5% increase in Jersey City tax rates this year. On the revenue front, same-store revenue increased by 2.2%, both for the quarter and year-to-date. Overall, our revenue growth remains robust, aligning with typical seasonal patterns. In fact, when revenue growth is adjusted to remove the impact of Liberty Tower's occupancy and non-recurring income from last year, growth would have been 3.1% for the quarter and 4.6% year-to-date. As Anna mentioned, technology investments and portfolio optimization have continued to generate cost efficiencies on the expense front. However, a slight rise in R&M and utility expenditures this quarter led to a 5.7% increase in controllable expenses for the period. Combining the impact of technology investments in R&M this quarter with the considerable savings recorded earlier this year, year-to-date controllable expenses have grown by a modest 1.9%. Diving deeper into non-controllable expenses. While our property insurance renewal delivered savings of nearly 20%, this was largely offset by increases in other insurance premiums and the rebalancing of the same-store pool. Jersey City also announced its final tax rates for 2025 during the quarter, as I previously mentioned, which together with other finalized taxes, resulted in a $1.1 million increase. Despite these various factors, year-to-date overall expenses increased by only 3.4%. On the overhead front, core G&A after adjustments for severance payments was $8 million, broadly in line with last quarter as expected and reflecting savings in compensation due to further organizational simplification. For the full year, we anticipate realizing G&A savings in excess of $1 million relative to last year, although fourth quarter G&A is expected to increase sequentially. Last quarter, we took a significant step in strengthening our financial position by modifying our revolving credit facility. This amendment introduced a leverage grid and resulted in a substantially-lower borrowing spread, enhancing our ability to continue reducing financing costs as we delever further. In addition, sales completed during the quarter reduced debt by $394 million, including the early repayment of our most expensive coupon debt, a $56 million 2026 maturity. Furthermore, the buyer of Quarry Place assumed the $41 million in-place mortgage resolving the 2027 maturity. As a result of these transactions, as of September 30, our net debt-to-EBITDA on an adjusted basis has further decreased to 10x, as mentioned by Mahbod, representing a reduction of 14.5% since the beginning of the year. We ended the third quarter in a stronger position than the second, with our weighted average coupon decreasing 32 basis points to 4.8% and weighted-average years to maturity of 2.6 years and liquidity of $274 million. Turning to our outlook. We are raising core FFO guidance for the second consecutive quarter to $0.67 to $0.68 per share annually compared to our previous guidance of $0.63 to $0.64 per share. This enhancement reflects $0.04 from one-time tax appeal benefits associated with previously sold office properties. While we are realizing approximately $0.01 in overhead savings this year, this is largely offset by the increase in real estate taxes in the third quarter. Our raised guidance range represents robust year-over-year core FFO growth of 12% to 13%, underscoring the strength of our markets and portfolio and the effectiveness of our deleveraging strategy. Not only does this approach reinforce the strength of our balance sheet, but it also drives meaningful earnings expansion and increases free cash flow. We are affirming our same-store NOI guidance of 2% to 2.8%, reflecting our solid performance year-to-date and strong visibility into rental revenue through the end of the year as well as realized savings from our technology and operational initiatives and a resolution of non-controllable expenses within expectations. These results are a testament to our commitment to maximizing value for our shareholders while maintaining disciplined financial management and operational excellence, resulting in sustained earnings growth and accelerated deleveraging. With that, operator, please open the line for questions. Operator: [Operator Instructions] And our first question comes from Jana Galan with Bank of America. Jana Galan: Maybe just following up on the same-store guidance ranges that were maintained. The 9 months to-date, they're trending a little bit at the low end. And so, can you let us know any timing-relating items that may impact 4Q that can get you back to kind of the middle of the range? Amanda Lombard: So, look, I think, first off, Q3 same-store NOI growth is an anomaly due to the resetting of non-controllable expenses for this year as well as last year. Last year, we had a very good result, so the expense base is very low. And then this year, we had a slight increase in real estate taxes, which pushes it up. I think looking to the fourth quarter; right now, we don't see any major one-time items, which would impact the numbers. And so, I think you need to really look back at Q1 and Q2, where we have very low expense growth. In fact, I think in Q2, we actually had a reduction in our expenses and expect that, that trend will continue into the fourth quarter. So, I think, those factors combined with the fact that in the fourth quarter, a very small percentage of our revenue is still open is what gives us confidence that we will be within the range of our same-store NOI guidance. Jana Galan: Great. And then on the visibility into the rental revenue into year-end, can you let us know kind of where you're setting out the rental rate increases now? And I guess, kind of the percent of expirations in 4Q, typically, I'm assuming is lower than earlier in other quarters in the year. Anna Malhari: Yes, as you mentioned, we do have our expiration metrics following the seasonal trend in a way that we have limited exposure in Q4. We also have strong visibility into renewals already and only about 0.5% of our NOI is outstanding to renew at this point. In terms of the renewal rates, we continue to send out renewals just touch below kind of mid-single digits around the 4% to 5% range, something maybe slightly below that. But we are in a very good shape from an occupancy perspective since the end of the quarter with 95.8%, excluding Liberty Towers and feel confident about the revenue range that Amanda mentioned earlier. Operator: And we'll go next to Steve Sakwa with Evercore ISI. Sanketkumar Agrawal: This is Sanket on for Steve. We had a question around, like your leverage target of 8x through year-end '26. What does the path forward look like from there on in terms of, will you still focus on selling more non-core assets after that or move to more operational initiatives? Mahbod Nia: Thank you for the question. I think at this point, I would say the focus is on executing on the extended plan that we've announced, and in parallel, continuing to push the operational side of things, which as you've seen, is continuing to perform very well, and we expect that to continue into next year. And that should set us on this path delever in this accelerated fashion down to that 8x or even potentially below 8x, as we've said, next year. As for what comes next, there may be from time-to-time, and in the past, you've seen at the beginning of the year, we set out the plan for the year and communicate that to you. So, there may be further amendments or changes to this plan, which we'll announce in due course. But at this time, I think the focus really is to execute on this plan, see where that gets us while in parallel working with the Board and the SRC to evaluate a wide range of options available to the company as we always do in pursuit of the creation of value on behalf of our shareholders. Sanketkumar Agrawal: Makes sense. And the other question was like you guys were very active on the transactional front, like disposing a couple of assets, land. So, I just wanted to know like, how was the buyer pool like? Was there a wide area of people who are out there buying assets? Or it was just some specific types of people who are out there looking at this asset? Mahbod Nia: Sorry, you're a little faint, but I think I got the question, about the buyer pool out there for assets. Yes, look, I would say consistent with our expectations when we set out on this plan at the beginning of the year, there is a somewhat broader or deeper buyer pool for smaller assets today. I think once you get into sort of what would be regarded as large today, which is not that large, a couple of hundred million dollars, $200 million, $250 million and above, the buyer pool does spin out and the nature of the buyer does tend to become more of a value-add opportunistic type of a buyer. But look, there's also some encouraging signs in transaction activity that particularly with the low end of the curve coming in, obviously, the 10-year has come in and now it's around 4% or touch below 4%, and that's helpful. But with the front end of the curve, rates having come in and expected to continue coming in; in the near-term, we think that that actually is creating more interest in the transaction market from prospective buyers. Operator: And our next question comes from Eric Wolfe with Citibank. Eric Wolfe: Can you talk about how you came up with the high end of the disposition guidance at $650 million and what assets you're considering selling for the remaining $100 million? Mahbod Nia: Thanks for the question, Eric. So, I think the way we came up with that number is, it's really reflective of, again, what we're seeing in the market. You have a Board, a Strategic Review Committee and management team that's highly focused on the creation and crystallization of value for shareholders. And so, when we set out on this plan at the beginning of the year, our best estimate of how much value we could crystallize through asset sales, values that were at or close to intrinsic value, our best estimate was that range. It's been a very challenging transaction market and still is today, which is why it was the range. Thankfully, we've been able to make progress ahead of expectation. That wasn't guaranteed, far from guaranteed. And as we've done that, and I mentioned earlier, we're constantly reviewing, working with the Board and the SRC, a wide range of ways to be able to continue creating and unlocking value for shareholders. And so, I think this extension is really reflective of that dialogue, staying close to the market and what we believe really represents the best interest of our shareholders today, given the restrictive parameters that are placed on us through the current state of the transaction markets. Eric Wolfe: Got it. That's helpful. And I guess on a similar line, the $100 million of stock repurchases, is there sort of a certain price you have in mind? Or is it really about getting the balance sheet to a certain leverage level before you even consider using the repurchases? Just trying to understand the framework from which you'll decide to use repurchases or not? Mahbod Nia: No, it's a great question. Look, it's a very useful tool to have. To be clear, we believe there is significant value in the company over and above the current share price. And so, as an investment, as a capital allocation decision, we have strong conviction that share buybacks would make a lot of sense. Having said that, we have to balance the limited capital that we have as we're recycling capital through asset sales. And the determination we've made at this time is to prioritize deleveraging. And to some extent, notwithstanding the whole sector is trading at a discount to NAV at the moment; to some extent, that leverage is, for us, probably causing some of that discount that we're seeing. And so, it's a little bit circular. But when you take into consideration the potential accretive impact of even that full buyback program, $100 million buyback program relative to the impact on leverage from using those proceeds to delever, to us, it makes more sense at this time to prioritize deleveraging. Operator: And moving on to Tom Catherwood with BTIG. William Catherwood: Just wanted to circle back on Eric's disposition question there. For the $542 million of transactions closed or under contract, did prices come in stronger on the original pool of non-core assets that you had identified back in February? Or did you end up selling more assets than were initially planned in that original pool? Mahbod Nia: Tom, I think it's a great question. I think when we set out in February, the markets were still quite challenging, but we felt like for smaller assets, we'd be able to make some progress. The truth is, it wasn't clear to us how quickly we'd be able to make progress. We felt like conditions could improve during the year, and they did improve during the year, and they're continuing to improve now. But as I said earlier, we could have been in a very different situation here with far fewer asset sales. As for price and the two obviously are related, we ended up pretty much exactly where we expected. As I said, we were looking to crystallize pockets of NAV or sell assets where we could release pockets of value at levels that are in line or very close to NAV, and that really pointed mostly to smaller assets. And the overall cap rate and actually even the individual cap rates, which are pretty much all in line with the blended cap rate at which we sold those assets was right on top of what we expected and hoped for when we announced that plan. So, we sold at a low 5s, around a 5.1% cap rate across that pool and that's stripping out the land. And that's exactly where we thought we'd be or hope it would be. William Catherwood: Got it. Got it. Okay. So, the follow-up on that then is, if you ended up where you thought you'd be on pricing or hoped you'd be on pricing, that would suggest the $150 million increase to sales guidance would be the addition of other assets than were initially planned. If that's the case, are those assets that the market has recovered to the point where now you think you can sell them? Or is that just as you went through the sales faster than you expected, you reevaluated and transferred more into that non-core strategic sales bucket? Mahbod Nia: It's a little bit of both. As I said, we still -- for larger assets, I think there is still illiquidity discount at this moment in time, given capital flows. It feels like things are improving and that discount may over time, reduce or potentially even fully be eliminated. But I think it's a little bit of both. I think it's a little bit of market conditions improving over the past several months and continuing to improve today and us constantly evaluating alternatives that could make sense for shareholders and determining that it could make sense to slightly increase that target to $650 million. William Catherwood: Got it. Got it. And then last one for me, and this kind of follows up on your comment about transaction markets improving. But Mahbod, in your prepared remarks, you noted early signs of renewed interest from Core-Plus capital. I assume that's both commercial real estate and specifically multifamily. Can you provide some more thoughts around that and kind of what was driving those comments? Mahbod Nia: Yes, it's no secret that for the past few years, particularly with rates having climbed at the pace that they have, the more core, Core-Plus capital that was active previously in the market has reverted more to credit strategies, given the relative risk return profile that credit strategies have offered over the last few years. But with rates coming in a little bit recently plus the realization that with credit investments, you don't necessarily get the multiple that you get with equity investments, we understand that potentially the gates are opening somewhat, particularly on the Core-Plus side at this point. In terms of the core, if you look at what's happening there, the Odyssey funds are still seeing net redemptions, that redemption queues come down a little bit, which could be an encouraging early sign, too soon to say. But on the Core-Plus side, there are certainly a few groups out there that are becoming more active, both in terms of capital raising and fund structures and single-managed accounts and starting to look at more Core-Plus type opportunities. Why is that relevant? Because while those 2 groups of capital really have been otherwise focused on credit opportunities, the active capital, the dominant active capital in the market for the last few years has really been value-add and opportunistic capital, which obviously has a much higher cost, a much higher return expectation associated with it. And so that commands a certain risk profile to the assets that those investors are acquiring or it just requires a certain return regardless of the risk profile, which has implications for core asset valuations to the extent that those buyers are involved. And so, it's an encouraging early sign that things may be finally turning. We know that by their very existence, opportunity funds came to be to provide liquidity at times when more traditional sources of capital were unavailable. And so that's been the case for the last few years, but these are temporary capital flow dynamics that ultimately revert back to some normality over time. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Mahbod Nia for closing comments. Mahbod Nia: Well, thank you, everyone, for joining us today. I'd like to thank the team for the hard efforts that have allowed us to post another quarter of extremely strong operational results and meaningful strategic process. We look forward to updating you again next quarter. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Thank you for standing by, and welcome to the Regis Resources quarterly briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Jim Beyer, Managing Director and CEO. Please go ahead. Jim Beyer: Thanks, Darcy. Good morning, everyone, and thanks for joining us this morning for the Regis Resources September quarter results. Joining me today is our Chief Financial Officer, Anthony Rechichi, and our Chief Operating Officer, Michael Holmes; and our Head of Investor Relations, Jeff Sansom. As usual, we will refer to some figures in the quarterly report released earlier this morning. So please, it might be helpful just to keep it handy as we step through the results. So firstly, starting with safety, as we always do. Through the quarter on a 12-month moving average basis, our lost time injury frequency rate actually got down to 0. However, unfortunately, towards the end of the quarter, we saw a single LTI occur, which pushed out LTIFR, lost time injury frequency rate, to 0.36, which was in line basically with our performance last quarter. Now while still below the industry average, as always, we should never be satisfied with any injury. And the team, I know, is driving hard as we are diligent and continue to build a strong disciplined safety culture for our teams across all our operations. Now on to production performance. The September quarter marked another period of consistent operational delivery and a resultant strong cash generation. Group production totaled 90,400 ounces at an all-in sustaining cost of AUD 2,861 an ounce. And I note that this also includes a noncash charge of just under $200 an ounce, and that relates to drawdown on historic stockpile inventories. Now we are comfortable with the performance in our first quarter, and we're well positioned to deliver within our FY '26 guidance ranges. From a financial perspective, this quarter has seen another period of unprecedented gold price movements. Spot gold during the quarter increased over 15% from just over $5,000 an ounce to just under $5,800 an ounce during the quarter. And during that time, we sold at an average price of $5,405 an ounce. Of course, since the end of the quarter, gold has risen another $500 an ounce, will actually rose more than that, and we have seen this slight correction in the last couple of days, but the fundamentals are still there, and it is a great time to be producing gold. This meant that we grew our cash and bullion position by $158 million for a balance at the end of the quarter of $675 million. That's another record for Regis and highlights the ongoing strength of the business and really continues to demonstrate the significant cash-generating capacity. We remain debt-free with significant balance sheet flexibility. From a growth perspective, we saw first ore from our underground development projects at Duketon, and these both remain on target. Now with that, I'll hand over to Michael for more detail on the operational rundown, followed by Anthony, who will cover more on the financials. Over to you, Michael. Michael Harvy Holmes: Thanks, Jim, and good morning, everyone. As Jim mentioned, it was disappointing that we had 1 lost time injury in the quarter, which continued our 12-month moving average frequency rate of 0.36. We are working on numerous initiatives within our operations to reduce the occurrences of safety incidents and injuries. Operationally, the quarter was steady across both sites with results consistent and in line with plan. At Duketon, we produced 58,400 ounces at an all-in sustaining cost of $2,832 per ounce, which includes a noncash charge of $238 per ounce. This is a few hundred dollars lower than the previous quarter on stronger production and reduced total material movement with lower open pit waste movement. During the quarter, open pit mining commenced at King of Creation, recommenced at Gloster and continued at Ben Hur open pits. Our open pits contributed 14,400 ounces at a grade of 0.92 grams per tonne. Underground mining at Garden Well and Rosemont delivered 31,800 ounces at 1.9 grams per tonne with development totaling 3,990 meters for the quarter. Milling throughput was 2.08 million tonnes at 0.99 grams per tonne with an 88.3% recovery. Importantly, as Jim mentioned, during the quarter, first ore was mined from stopes at both the Garden Well Main and the Rosemont Stage 3. The first ore contributed to the increased underground ore tonnages compared to the previous quarter. These 2 underground developments are key contributors to our long-term growth strategy, and Garden Well Main is progressing well towards commercial production in H2 of this financial year, so we should see growth capital from the development roll off towards the end of the year. In light of the ongoing strong gold price environment, the team continues to identify and evaluate options for organic growth across Duketon. At Tropicana, production was 31,900 ounces at an all-in sustaining cost of $2,821 per ounce, which includes a noncash charge of $198 per ounce, reflecting solid delivery and grade improvement. Open pit mining delivered 16,100 ounces at 1.6 grams per tonne, with material movement and grade in line with expectations. Total material movement was elevated related to the previous quarter related to the planned waste mining in the Havana open pit. Over the coming quarters, waste stripping in the Havana pit will ease, and we expect the strip ratio will moderate, and this will be particularly apparent in the second half of FY '26. Our share of what Tropicana underground delivered was 15,200 ounces at 3.12 grams per tonne and 983 meters of development with a recovery steady at 89.7%. Growth capital was moderate at $3 million with development of Havana underground progressing to plan. With that, I'll now pass to Anthony for the financials Thanks, Michael. Anthony Rechichi: We're continuing on from a really impressive financial performance that we reported for the full year ended 30 June 2025, with a great start in the first quarter of FY '26. We sold just under 83,000 ounces in the quarter at an average realized gold price of $5,405 an ounce, generating $447 million in revenue. Operating cash flow was $290 million, including $186 million from Duketon and $104 million from Tropicana. As an aside, when we were selling the gold in and around that $5,500 an ounce mark, the team was ecstatic. But as Jim mentioned, what a difference of a few weeks makes, noting that while those gold prices were impressive, the recent few weeks of gold sales have been in the $6,000, which is just incredible. It's an amazing time to be in gold really. Moving on to capital expenditure. We spent $114 million, including $70 million at Duketon, $19 million at Tropicana, and we spent $20 million on exploration. Within the capital spend amount, $66 million of that was growth capital, with $63 million at Duketon and $3 million at Tropicana. The majority of this spend was related to the underground growth projects. At Duketon, Garden Well Main is expected to commence commercial production later in the financial year. And therefore, the capital spend in that area from then on will report to sustaining capital, not growth capital anymore. With this in mind, in the absence of any new organic growth we create along the way, we expect to see the growth capital spend rate reduce as the year goes on. But again, that's on the basis that we don't find anything extra across Duketon that's worth pursuing. So for cash and bullion, in the end, we closed the quarter with $675 million, which is another record for Regis and the $300 million revolving credit facility remains undrawn. I'll just circle back now to all-in sustaining costs, and Michael mentioned the noncash charges across Duketon and Tropicana, and I want to talk some more about that. At Duketon, there was a noncash charge of $238 an ounce related to stockpile inventory movements. And at Tropicana, we had a charge of $125 an ounce for the same reasons. At a group level, that's a charge of $198 an ounce for the quarter. Focusing in on Tropicana, this quarter's all-in sustaining cost per ounce was higher than last quarter. If you cast your mind back, in the June quarter, Tropicana reported a significant noncash credit related to stockpile survey adjustments. If we net off the noncash stockpile movement impacts for Tropicana, then the all-in sustaining cost per ounce becomes similar across the 2 periods. On another topic, and as you now know, with the business high profitability and impressive cash generation, the directors declared a final fully franked dividend of $0.05 per share, totaling $38 million off the back of the FY '25 results, and we paid that earlier in this month of October. And as I've mentioned before, due to that strong profitability, Regis will return to a cash tax payment position and is expected to pay approximately $100 million in the third quarter of this FY '26. So that's all for me. Thank you all, and back to you, Jim. Jim Beyer: Thanks, Anthony, and thanks, Michael. At McPhillamys, we're progressing the dual-track strategy to return the project to an approvable status. And I want to very quickly go over some of the details of the project and remind or highlight why we continue to pursue this line. Look, we released the DFS at McPhillamys back in the middle of last year, and that highlighted a resource of 2.7 million and reserves of 1.9 million At the time we released the DFS, as I said, the reserves were about 1.9 million, which, of course, isn't a reserve anymore, thanks to the Section 10, but the key fact is it's still in the ground and quite valuable at the moment. As expected, it was to have a mine life of around 10 years, so an average production of 185,000 ounces per annum, at a capital cost of $1 billion and a life of mine average all-in sustaining of something like $1,600 an ounce. Now I do have to say that as a result of the Section 10 declaration, of course, the project is no longer viable in its current form, and we were through the DFS. However, if you benchmark the project on those metrics I just mentioned and look at the spot gold price today where it's sitting around $6,300, that gives nearly 3/4 or gives well over $2 million a day, $3.5 billion in pretax cash flow each year on average. Now that's the value to our shareholders. But there is also other stakeholder value in addition to this such as the value that it represents in New South Wales. And this would be significant. It takes the form of 300 steady-state jobs over -- well over now with this price $366 million in royalties along with millions in local rates and taxes. The list of benefits goes on as it always does when we have a grown-up conversation about the real contribution mine makes to our Australian economy and the quality of life, but that's a topic for another time. So with these multiple value benefits for many stakeholders, we are committed in our drive towards a positive outcome for the McPhillamys Gold project. And to that end, we continue to prepare the legal challenge of the Section 10 declaration, and we expect that to be in mid-December. And in parallel, we're also investigating alternative waste disposal options and concepts. This dual-track approach aims to put Regis in a position where we could conceivably return the project to an approvable status and positioned to proceed under either outcome, albeit with probably different time lines. Now back to our current operations. As Michael and Anthony have discussed, the quarter was in line with expectations. And as we sit here today, we are very comfortable with our FY '26 guidance range and see no changes required there. We'll maintain capital discipline focused on generating strong margins for our core assets while positioning the business for future growth. As also noted by Michael and Anthony, we continue to seek out organic opportunities that make good economic sense in this new gold price environment. Our exploration team continues with their focus on conversion and extensional drilling to build long-term optionality. And I haven't said anything -- I won't say anything more on that, but I do note that we will be providing a midyear exploration update later on this quarter. So to summarize, our team has delivered another quarter of consistent performance that has enabled us to capitalize on the exceptional gold price. Cash and bullion is up $158 million to a record $675 million. First ore mine from Garden Well Main and also Rosemont Stage 3, and we continue to ramp up both of these underground projects. Ongoing development at Havana Underground. We continue to seek out and evaluate organic growth opportunities within Duketon. McPhillamys is progressing through both legal and technical pathways. And finally, but very importantly, our FY '26 guidance is reaffirmed. So thanks for this morning. I'll now open the floor up to questions and back to you, Darcy. Operator: [Operator Instructions] Your first question comes from Hugo Nicolaci from Goldman Sachs. Hugo Nicolaci: Obviously, as you said, a great time to be in gold. Just first one for me, just a clarification on the McPhillamys project. Just with the hearing in mid-December, do you have a rough time line for when you'd expect an outcome after that hearing? Jim Beyer: Yes, sometime after that hearing. I mean, unfortunately, these -- as we know, the courts run to their own beat. We would like to think that we would get a result back sometime in the first quarter of next year, but that's not certain. Remembering and understanding the legal process here, it's not actually an overturning of the decision. It's a process of going through and convincing the judge that there were elements of the process that we felt we were significantly disadvantaged over. And as a result, of that, the judge sort of says, well, the decision is set aside. The minister, who is a new minister now, of course, presumably asked the department to correct the injustices, for want of a better description, or the correct the flaws in the process. And then the minister will make a new determination. How long that takes, there is no time line to that? It could easily be out to the end of next year. Hugo Nicolaci: Got it. That's helpful color. And then just the second one for me just at Tropicana, just observing that your partner there had put in and then recently got an environmental approvals for a power plant expansion and a new pace plant there to support the Boston Shaker. Could you just provide a little bit of color around the need for the paste plant? Has there been a change in geological conditions what you expected? Or was it more around cost and greater ore recovery that you're putting that in? And then just any comments around sort of timing and cost benefits there? Jim Beyer: No. I mean the power thing is pretty obvious. We'll need more power. And the paste fill is really, it's a trial at the moment, and it's driven by the potential to improve overall economics by increasing ore extraction ratios. Hugo Nicolaci: And in terms of timing of having that trial up and running? Jim Beyer: I mean there's a trial in the first instance and then there will be -- have to be a decision, and that's on the -- on when it would -- a full approach will be implemented, and there's no timing on that, but I would consider that to be a least a year. Operator: Your next question comes from Levi Spry from UBS. Levi Spry: Just exploring a little bit more of the returns piece of the big cash pile you built and building in the context of these growth options. So how are you thinking about it? Is there a scope to formalize some sort of returns policy? Or do we really need to wait for McPhillamys or potentially something from inorganic [indiscernible]? Jim Beyer: Yes. Look, I mean, it's -- you're the first person who asked that question lately. Look, the first thing -- and I guess, historically, what we've done is we've pointed to the fact that the company and the Board has always had a strong view on returning returns to shareholders via dividends. And it's great and very pleasing to see that as we've moved our way through all the recapitalization and the hedge books over the years that we've been able to return and the debt, of course, for Tropicana, we've been able to return to a position to be able to pay dividends. And our view has always been where we've got the capacity to do it and it makes sense, we will look at that ongoing process very favorably. But as you pointed out, we don't have a policy. That is something that we are under consideration at the moment. And I would imagine as we work our way through that, we'll make some decision on that over the coming months. The next key time for us to make any another decision on whether a dividend is payable or not. And obviously, it's a pretty favorable environment at the moment, but I wouldn't want to preempt anything, but the next time to be making any decision would be the half year results because we look at it on a half year and full year basis. So yes, no, we don't have a policy. We've always said that where we've got the money and the -- it's an important part of our reason for being is to return -- make a return to our investors via dividends as well as regular growth. So -- and that's what we plan to continue to do. We just don't have a locked-in policy at this stage. Operator: Your next question comes from Andrew Bowler from Macquarie. Andrew Bowler: Just a question on the McPhillamys study just looking at the dry stack tailing options. Just wondering on the timing of those studies? And will that be affected by the judicial review? So for example, if it falls in your favor, are we likely to see that study a bit sooner maybe as you sort of -- or should I say, if it falls in your favor, we likely never to see that study? Or if it falls against you, are you like to see it a little bit sooner as you try and get it out to market as quickly as possible? Jim Beyer: Look, our intention is, as I said, we're running a dual track. I think our preferred scenario because it's probably a little bit more timely and requires less additional approvals is -- and test work is to return to the original DFS concept, i.e., what I'm saying there is we much prefer to win the -- we much prefer to be successful in the challenge of the Section 10 and then follow that through with an appropriate decision by the minister after his review. That's the way we prefer it to go. But we don't want to sit around in hope, so we've also planned to find and prove up this alternative method. Probably the reality of that is that it's going to take, at this stage, it could take considerably longer for us to work that through. But the initial test work that we've done is encouraging. It's really a timing issue and making sure that we understand all the risks that this now introduces that we didn't have before and have we got everything in place. So the short answer to your question is we prefer the Section 10 to be successful, but we'll continue to pursue the other one. And if the Section 10 is successful and that's great because it means we've probably got a better time line as well. Andrew Bowler: Yes. Sorry I was on mute. Yes. No, sorry, I was on mute. And just a follow-up. I mean I know you're working through the study, and it's very early stage, but is it the intention for these dry stack tailings studies to retain the relative scope and scale of the old plan at McPhillamys? Or are you -- or is there some tinkering to be done with the dry stack tailings studies that might see a [ biggering ] of the project or a bit of a trimming as well? Or is it roughly the same with the dry stack scenario [ bolted ] on the back end? Jim Beyer: In terms of footprint, it's probably a little smaller. So it's not actually -- the concept that we're working on is not so much a dry stack. It's an integrated waste landform. So we -- there's -- obviously, in terms of what can move as much as I'd like to, we can't move the ore body. The process plant probably stay roughly where it is. There's a big waste rock dump that's already there. It's already part of the approval. But obviously, if we co-mingle the tails in that, then whatever we don't put in the tailings because we won't be able to which has to go under the waste rock dump. And that's why it's sort of, that's why it's called an integrated waste landform. And that would need to be bigger. And so there's a few things that we have to go through and get, work on to see whether that requires extensive changes or reasonably modest modifications. And so that's all part of the work that's kicking off at the moment. Andrew Bowler: Apologies. I wasn't very clear. I mean as in sort of, I guess, the processing capacity scale. So the project itself would be on a similar scale. Jim Beyer: Yes. No, it'd be a similar scale. I mean basically, the concept is you put -- it's not unusual. It's reasonably common certainly in South America, where water is exceptionally at altitude where it's scarce. And there's a couple of operations here in Australia, one over here in WA that uses a form of it. So it's not uncommon, but it is something that involves more equipment. But our plan would be to maintain the scale of the operation as it currently isn't just changed the back end of it. Andrew Bowler: No worries. That's very clear. Operator: Your next question comes from David Coates from Bell Potter Securities. David Coates: Just more on observation. I suppose it sounds like McPhillamys, understandably, is getting quite a bit of attention from you guys. Is that because sort of [indiscernible] the inorganic opportunities that are a bit sort of thinner on the ground and I guess, sort of harder to find value in the current market and McPhillamys obviously has those really compelling metrics that you mentioned -- referenced before? Jim Beyer: Yes. Good question, David. Look, I don't think what -- I guess the question don't misinterpret the fact that we only talk about McPhillamys as we're only inwardly focused. We do talk about it because I do genuinely think that the market doesn't recognize the value that's there. I mean, basically, what we're saying is one way or another, this thing is going to be developed. It's really just a question of when. And if you're sitting down and trying to work out what the value is -- in this new price environment that we see gold in, and frankly, this is not a flash in the pan. This is, you can see that there are global fundamentals that have driven us to this new level from where we were 18 months or 2 years ago. So it reminds us that we need to -- our team needs to keep pushing on and make sure that, that becomes approved in one form or another, and then we can develop it. The thing is the time line. So that could be a couple of years out. And so that we put our effort into it and you can see we're spending not an insignificant amount at the moment on an annual basis on that works under the McPhillamys guidance that we've given, but that doesn't mean that we're not looking for near-term opportunities to sit between now and then either, which is definitely on our agenda and probably everybody's at the moment, but then we're no different. David Coates: Cool. And then just sort of sticking with the organic opportunities. You mentioned with this price that everyone's out sort of looking hard and reviewing the at Duketon in particular. Can you give us a bit more detail on some of the opportunities that might be emerging up there? Jim Beyer: Look, we've -- at the moment, the exploration side of things is pretty interesting and getting exciting again for us, but we haven't really got anything material to sort of hang our head on there yet, although, I guess, we'll keep an eye for whatever it is those time. And -- but if you look at what else and what Michael and Anthony were talking about is where there's no doubt about it that this at this new price environment, we can go back to some of our old pits, be they big or small. And sometimes it's a small ones that are actually the opportunity or back to -- even back to some of our old oxide stomping grounds. We look and go, well, hang on at $5,000 or $6,000 an ounce. This stuff is actually quite viable. And so they are the things that we're looking at. I don't really not in a position, really, I don't really want to go through the nuts and bolts of the individual items. But when we get something that is material, we will certainly update the market on that so that what you can add to our model and add to your valuation work. So we are doing plenty of it at the moment. We're just not in a position yet to strike it into a gold bar. Operator: There are no further questions at this time. I'll now hand back to Mr. Beyer for any closing remarks. Jim Beyer: Thanks, Darcy. And thanks, everyone. Thanks, especially for the folks that asked questions. Thanks for joining us and enjoy the rest of your day. Take care. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Kati Kaksone: Good morning, everybody, and welcome to Terveystalo's Q3 Results Call and Webcast. My name is Kati Kaksonen. I'm responsible for Investor Relations and Sustainability here at Terveystalo. As usual, we'll go through the result highlights with our CEO, Ville Iho; and our CFO, Juuso Pajunen. And after the presentation, you will have a chance to ask questions. I will take the questions from the phone lines, as well as through the webcast, after the presentation. Without further ado, over to you, Ville. Ville Iho: Thank you, Kati, and good morning from my behalf. Let's dive directly into Q3 highlights. As you can see from the numbers, this quarter 3 was a quarter of margin improvement amid a revenue headwind. So the EBIT -- adjusted EBIT margin developed positively; very strong operating cash flow; EPS developing positively as expected; very high NPS, taking all-time highs all the time; but then with a decline of some 5% top line, adjusted EBIT in absolute terms slightly down. Double-clicking into different P&Ls and their role in the business, how they are contributing and continue contributing in the future, starting from Sweden. Just as a reminder, Sweden is in a phase still of turnaround. We have been adamant in the fact that we continue focusing only on turnaround and profitability improvement. Sweden is getting -- our Sweden team is getting the results. The underlying efficiency is continuously improving. The results continue to improve. The market being fairly muted at this stage still, we are not making proper profits yet. But looking at next year, volume development looks positive, and we start making results, and then it's time to focus on growth. Portfolio Businesses, quite the same story. The profitability turnaround has for large parts happened. Some minor fixes in smaller businesses, but the bigger businesses are doing fine and developing positively. Now, it's time to grow, and we are eyeing specifically in 2 different segments, as we have said before, dental and then opening public market. Healthcare Services, our biggest business, margin on a very, very high level, really strong, starting from a very strong position. Now, our eyes and focus turn into volume growth, and we continue to boost that one with selective specialties-driven M&A, and then investments in digital delivery and capabilities. Further double-clicking into the strategic agenda, as I said, Sweden profitability improvement program, [ Gamma ], almost done and dusted. Efficiency in all-time high level. Now, looking at organic and potentially inorganic growth there on a solid base. Portfolio Businesses, as I said, profitability improvement done and dusted. Now, organic growth in dental and also inorganic growth in dental and public partnership being relevant in the opening market when health care counties are actually starting buying, where we have seen positive signs already. Inside Healthcare Services, we are seeing very strong development in our consumer-driven businesses. We continue boosting that one, Kela 65 being a prime example of sort of a positive drive. Also in insurance business, our position continues to be strong and developing nicely; out-of-pocket in good place and developing positively against the low morbidity. We have reorganized our operations and our delivery model so that there's clearly separate brick-and-mortar delivery through our health care services or hospital network, and then, now, forcefully and decisively scaling up the digital health 10x, where we are eyeing at major leaps in efficiency, in transactions, more intellect in our patient and customer steering, and then finally, truly scaling up truly digital health care services, tech-based services, nurse services and in very near future also, AI-supported health services. Among all the positive developments, the challenge currently, which we'll further discuss is in occupational health care. We know exactly where we are. We know how to turn around the negative development. There we have a program called [indiscernible], led by new SVP, Occupational Health care or Corporate Health, Laura Karotie, and that one will be discussed in more detail. So, all in all, agenda, very clear, sort of 9 out of 10 moving very fast to the positive territory, more focus needed for occupational health care, which will be fixed. Looking at the volume development and our sort of view on markets in near term, next 12 months, starting from the smallest, Sweden, as we have communicated many times, the market has been very soft. Swedish economy has driven the demand for occupational health care services very low. Now, looking forward, both the market seems to be picking up. Sweden economy is doing better next year. But more importantly, looking at our internal view on the sales funnel, commercial activities, sales funnel looks positive. And when we are able to do, in next year, more volume on higher operating leverage, of course, then we'll start making money. Portfolio Businesses, public business, as all know, has been very, very slow in buying. Health care counties are only sort of picking up the buying activities. What we see in large tenders and also in smaller tenders is increased activity. And looking at the next 12 months, we see the market developing positively. Same goes with the consumer business. It has been fairly muted due to low confidence of consumers. We have seen already some positive signs, specifically in the dental services, which typically is the most sensitive for consumer behavior, and we expect the positive drive and vibe to continue for next 12 months. In public business, when we jump over to Healthcare Services, in public services produced by health care services units, it has come down and it has brought -- or contributed to lower volumes in Healthcare Services. We see that one bottoming out, and next 12 months should be more positive. Consumer business, even though our own position has been strengthening, has been fairly flat due to low morbidity. But with the sort of normalized view on that one, our strong drive in Kela 65 and insurance business, we see that one developing positively also going forward. Insurance business, equally, it has actually been the growth driver inside Healthcare Services, continues to be so. Number of insured persons in Finland continues to slowly pick up, and use of services is on a high level. Occupational health care, finally, so we'll double-click on the development, what has contributed to lower volumes in Q3, but very shortly, it's number of connected employees, sort of thinner scopes in the agreements by the corporate clients, and then inside those agreement scopes, lower use of services. All of these are slightly negative from our business point of view. It's been negative. It's going to stabilize. But specifically, number of connected employees will not be sort of turned around in 1 quarter. We'll turn that one around, but it will take a couple of quarters to get to -- again to all-time highs. If we dive deeper into this phenomena, as you can see, and it's good to remember the phases that we have seen in the development over the last couple of years and quarters. In '22 and '23, in the number of connected employees, we were pushing all-time highs. At the same time, as you remember, the profitability of this business was really, really low. And we struggled with the low contribution to rest of the business and hence, the Alpha program. With the Alpha program, we totally turned around the profitability of not only occupational health care, but the company. With that one, of course, the -- some of the less profitable agreements went out. And now, we see also some unintended tail effects of the Alpha period. Now what we are doing is, of course, we are rebalancing products, pricing, offering, and it's not going to be either or. It's going to be both, so both profitability and volumes. Occupational health care, as I said, is the biggest focus area in our agenda currently. It will be turned around with our program. It's a comprehensive exercise of renewing, partly even transforming sales and account management, our product offering to become more relevant and according to expectations by ever-demanding customers. And then, finally, digital front renewal, which we now can accelerate and fast track with our MedHelp joint venture. And our customers will see tangible results already from Q1 onwards on this area. Positive thing -- a very, very positive thing in our portfolio is consumer side, so combined insurance, Kela 65, out-of-pocket area. Our brand is doing fine. And that's, of course, one of the basic building blocks for boosting this business. We are the most preferred brand when we look at the brand preference development. We have been so. But now, we are all-time high. Also in top of mind, the company, health care services company that Finnish consumers think about them when they wake up in the morning, that's now Terveystalo for the first time. And that itself gives a very solid base for further improvement in this business. We have invested heavily in services. We invested heavily in digital engagement with our consumer customers. We have invested in Kela 65. And in that particular new segment, we are a clear leader in that developing market. Finally, Juuso will explain in detail the strength of our finances, the profitability, cash flow and balance sheet. We continue increasing our investments in our digital capabilities. It's an ever-increasing value driver in our business model. And we have some key focus points and developments in that digital ecosystem. For the professionals, we have launched the Ella user interface and digital front door and continue scaling that one up. And that's going to bring tangible efficiency improvements during next year in our sort of traditional brick-and-mortar appointment activities. For individual care, looking at -- looking from a customer's point of view, as I said, it's very much in the core of our 10x agenda. We are making leaps in efficiency, in transactions related to our incoming traffic and customer contacts. We are going to further improve the leading capabilities that we today already have in patient steering and customer steering. And then, finally, we'll make efficiency leaps in text-based appointments, text-based digital appointments, nurse services and introduce first AI-supported health services in very near future. In occupational health, as I said already, we are now in a very good position to migrate our occupational health capabilities, digital capabilities into new MedHelp environment. It's best-in-class in Europe. And our customers, as I said, they will see tangible results and fully a new view and sort of better control on their own people, own organization, sick leaves, workability, starting from Q1 next year when we start deploying new system to first customers. All in all, we are, in this digital journey, in very strong, very good place. Our architecture is where it should be. Our initiatives, projects create value, not in years, but rather in months, and we are confident in investing more and getting more yield out of the digital engine. With that one, over to you, Juuso. Juuso Pajunen: Thank you, Ville. So good morning all. I'm Juuso Pajunen, CFO of Terveystalo, and let's talk about the financial performance in the third quarter. So first of all, if we look at the whole group, we have the positive margin development continued despite the revenue headwinds. This was, in relative terms, the second best Q3 during the group's history, and the best one was during the COVID times. So what I want to highlight is that our efficiency is in place, our machine is [ ticking ]. But also having said that one, we do know that we can't be happy on the growth and especially the revenue development when it comes to occupational health care. So if we look at the big picture, portfolios in Sweden improved both in relative and absolute profitability, while they are still facing anticipated negative growth. So portfolios in the outsourcing businesses in Sweden, we are still coming from the efficiency hunt and now going for the growth mode. And then, with Healthcare Services, we have the strong margin, but the headwinds in the occupational health and the morbidity have been pushing the growth negative, like Ville also explained a bit on the occupational health part. So then, if we look first on the Healthcare Services, I will double-click in the next slide on the growth, especially what comes to visit growth. So let's park that question. But all in all, the performance, what comes to the relative profitability, it was really solid. We had the decline in revenues, headwind in the markets. And despite those ones, we were able, through solid cost control and our flexible operating model, to keep our profitability in a good place, especially remembering that this is the low season Q3. And for the growth, we have a strong plan. And in the longer perspective, I still remind you that the megatrends will continue to support our long-term outlook [ what ] comes to the growth. So then, let's see the visits. Let's address the elephant in the room. So basically, we can split our visits growth. So now, we are talking about the volume. We can split it into different type of buckets. First of all, we have the morbidity. So, that one is basically seasonal. We have no control over that one. And we had plenty fewer visits compared to previous year. And this is part of normal seasonal variation, and it changes annually. We have -- then if we go into the occupational health care, we have different factors behind the decline. We have basically macro-driven components. So the general employment in Finland is lower than earlier, and we have a sluggish economy, and that one also then impacts on the employers' behavior. So basically, they are implementing cost reduction initiatives due to own economic pressures and push, and that one impacts on our demand also. So, a concrete example on that one would be narrowing down the contract scopes on what they offer to their employees. Then we have the third component, which goes into more on what we have done ourselves. As Ville explained, how our profit improvement program has been progressing and how the -- despite having very high amount of connected employees, our occupational health business was not super profitable. Now, we have very efficient machine, profitable business, and we need to load further volume on that one and get then the benefit of the operating leverage. And for that part, we have a solid strong program ongoing, like Ville mentioned. The name is [indiscernible]. And we are confident that by implementing that program, we will address the weaknesses we have had, and we would expect to see growth in the number of connected employees in the coming year. In public sector, especially the capacity sales, which is a minor part in the Healthcare Services segment, but it is in a very low level due to the wellbeing county setups and all of that one. But now we have seen that the sales pipeline is opening up and the market is little by little finding its form. And then, we have the positive momentum, Kela 65 consumer insurance market where we have been growing and we have been able to capture positive momentum. And that one, we will obviously continue pushing. The experiences from Kela 65 are very positive from the patient perspective and also from our perspective. So with all of this one, there are various factors impacting our growth, and we will address especially the occupational health part decisively when going forward. Then if we go into the Portfolio Businesses, we have clear improvement in profitability. We have been able to improve the EBIT margins continuously, 2.2 percentage points up compared to previous year. And then, we have the momentum in especially public sector business. Outsourcing, we have been guiding you that it will most likely decline EUR 30 million this year, and we are on that trend, on that pattern and continuing on that one. On staffing, we started to have revenue headwinds during roughly a year ago, and now those ones are stabilizing out. And part of that one was also our own selection on how we address the market. But now little by little, the positives are coming, markets are opening up. Wellbeing counties are more and more capable of also buying and willing to buy. So this market momentum is little by little turning. And then, we have the consumer part that is growing. It is performing positively, and we will obviously continue to push on that part. So solid performance improvement in the portfolios when it comes to profitability. Then in Sweden, we are also improving both absolute EBIT and relative EBIT. We are still showing heftily negative numbers in a very seasonally low quarter. So Q3 is always difficult and weak in Sweden due to how the offering behaves during vacation period. In here, what I'm really proud is that our efficiency continues to ramp up. We have -- we continuously see, on our KPIs, positive development what comes to occupancy rates, but also we start to see that one on a monthly gross margin levels going up. So we are now getting into an efficiency place, and we will load further volumes on top of that one. We have a solid sales pipeline that supports us getting back on track and on heftily numbers. So program is in plan. Improvements are now continuously more visible also in the backward-looking income statement, and we will push forward. However, there is a weak market environment still in Sweden as a totality. So the macro has not recovered yet to the full extent. But despite macro, we are able to push Sweden back to good numbers in the coming year. Then, if we look at our investments, we've been continuously investing in technology. We have been stating since the Capital Markets Day last year that we will land somewhere between 4% to 5% of revenues in the longer perspective on the investments. Now, we are at 3.4%. We are heavy in digital. We have been talking about Ella, our professional user interface and related flows. You have seen, during the quarter, investments in MedHelp, the joint venture, which will be the digital front door in our occupational health. And then, some may have seen that we have deepening our collaboration with Gosta in the artificial intelligence and ambient scribing, further improving our tools. We have a good momentum. We have solid technology road map, and we have capability to invest. So we will continue on doing on that one. And then, in inorganic growth, the market is there, and we are evaluating different type of opportunities. And for those opportunities, we had a solid quarter for cash flow. We are now in the green bucket again. As was the [ negative part ] normal seasonality, so is this one. Our cash profile has not materially changed, and there is no reason to believe it materially changes either, so normal volatility. We are the Swiss clock we have been. We tick, tick, tick cash. And then, our leverage ratios, 2.1 at the moment, so we have powder to continue investing. So positive financial position, and we can definitely do organic and inorganic investments. Then, if we look for our guidance, basically this is unchanged. So despite some market headwinds, we reiterate our guidance after the second best third quarter ever. So we are expecting our adjusted EBIT to be between EUR 155 million and EUR 165 million. These are based on the current demand environment, employment levels and morbidity rates. So normal disclaimers, nothing new on that one. What is good to note maybe that the implied range for Q4 seems highish compared to previous year Q4. But then, you need to look back on your notes and remember that in previous year Q4, we had especially personnel-related items that we don't have this quarter -- this year in Q4. So the baseline adjusting needs to be a bit taken to understand our Q4 performance. So all in all, I'm happy to reiterate our guidance, EUR 155 million to EUR 165 million in total. With these words, let's invite Kati on stage and let's have a Q&A. Kati Kaksone: Thanks, Juuso. I think we are ready to take questions from the phone lines. Operator: [Operator Instructions] The next question comes from Anssi Raussi from SEB. Anssi Raussi: Maybe I'll start with your guidance as you mentioned that as the last item here. So you already said that there were some special items in your comparison period. But how should we think about underlying assumptions here? Like, does it require any improvement in the market sentiment or something you are not seeing yet to reach your lower end of the guidance range? Juuso Pajunen: I think that's a very relevant question. So, at the moment, the guidance is based on the current market environment and the current morbidity rates. So it already factors in, like always when issuing the guidance, everything we know up to yesterday evening. So the current guidance assumes lowish morbidity rates and the occupational health market in the conditions we know at the moment. Anssi Raussi: Got it. That's clear then. And maybe the second question about your occupational health care. So I think you said that maybe you lost some connected employees due to your profit improvement program. So do you think that it's possible to increase the number of employees or connected employees without sacrificing some of your profitability gains in this program? Ville Iho: Yes. Again, a good question. So, as I said during the presentation, it is not going to be either or, so either volume or profitability. It's going to be both going forward. It requires some balancing in our sort of offering and pricing, but we are not going to sacrifice the profitability just for the sake of absolute volume. Anssi Raussi: Okay. So maybe continuing on that one. So when we look at your -- of course, you showed your appointment volumes and the impact of prices. So how should we think about the pricing going forward in the coming quarters or years? Ville Iho: So, of course, the cycle is very much different than it was, let's say, 2, 3 years ago. The pressure on the -- contracts pressure on prices is, of course, higher post inflation cycle. And we should not -- or you should not expect as sort of a rapid price development going forward. Now, it's more on the how we package our products, what is the mix in our sort of agreement portfolio, and how efficient are we under the hood in delivering those services. And then, final component is the volume. So the growth cannot be, for example, next year, driven so much by the price increases as we have seen during last -- or past 2 years. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Kati Kaksone: All right. It's a busy results day today. I think there are some 30 companies today. There's one question in the webcast currently from DNB Carnegie from Iiris; two parts. Regarding the plan to address the revenue headwind, can we talk about when do we actually expect to see these measures to become visible in the top line and whether we plan to provide any financial estimates of the sales or earnings impact of those actions? Juuso Pajunen: If I start, like I actually hinted a bit, or not even hinted, written out loud in the bridge that we would expect the connected employees' impact to be visible in '26. And that's obviously coming from the nature that if you today win something before it's visible and the connected employees are part of our portfolio, that, especially in the big cases, is a matter of months rather than anything else. So we would expect on '26 the impact. And at the moment, obviously, our financial guidance relates to Q4 and full year '25, and we will come back for the total guidance for '26 along with Q4 publication. Ville Iho: Yes. Again, the only caveat is sort of with what Juuso said, this is that -- as I said before, we are not hunting the volume with the price of profitability. So it is going to be both profitability and revenue and also volumes. So we are not repeating the mistakes that the company did some 6, 7 -- or 5, 6, 7 years ago. Kati Kaksone: Maybe then, continuing on that one, a follow-up question from Iiris. We talked about an update to our product offering in the occupational health to make it more relevant for our customers. Can we give some examples on what that means in practical terms and where we expect to see the largest positive impact? Ville Iho: It's down to the segmentation of different needs amongst our customers. Of course, we are serving 30,000 -- roughly 30,000 different companies in Finland. And there's a wide spectrum of different type of needs and appetites also to pay for the services. Now, when we are talking about sort of transforming or renewing the products, typically, it concerns the sort of customers who are more sort of keen on looking at the price and value for money type of sort of comparisons. And there, we do have strong means inside the company to steer the services across our vast network. We have not used them to the full extent. So what I mean is that if there's a company whose main focus is to get things to a certain level and then look at the spend after that one, we have means to serve that type of customer. If there's a customer that wants to maximize the services to the employees, then we can serve that type of customer. If there's a product, which is priced with a fixed contract, we have means to control both the profitability, delivery and cost for that type of customers. And that type of steering capabilities will be sort of utilized to full extent now going forward. So we have the flexibility. We have different type of delivery models, and we are also renewing sort of commercial packaging of these type of different models. Kati Kaksone: Yes. And of course, MedHelp is a concrete example of the value increase that we can show to our customers in a relatively short term as well. Ville Iho: Absolutely. It's going to be the next level. Kati Kaksone: Good. Then, a question on the public outsourcing tenders and the outlook there. Besides the tender of Pirkanmaa wellbeing services county, which was won by our peer yesterday, are there any larger tenders opening up at the moment? Ville Iho: Well, there's one other which we know of. And then, I think what's going to happen is that health care counties are watching very closely each other. And when somebody is opening a path, then the rest will follow, specifically if there's a successful implementation of a certain model. So we believe that this is only a first step, this [ Pirka ], and congrats to Pihlajalinna for good competition and a nice win in there. Kati Kaksone: Yes, indeed. Then maybe a question to both of you. Can we talk about the M&A pipeline? How does it look at the moment? Juuso Pajunen: Yes, if I start, so basically, it is fair to say that M&A opportunities are now little by little emerging in different type of segments. And we are, as we have said, happy to do disciplined M&A when we see an opportunity to fill a blank, whether it's a technology bank, offering blank or other blank. So, that market is little by little activating, and we are and we will be active in that one. Ville Iho: Yes. There's -- just looking from sort of a short history perspective, where we have been and where we are now and potentially will be, the activity on our desk is way higher than it has been for 5 years or so -- 5, 6 years, sort of post-COVID or during COVID times. This is sort of an all-time high activity. And there are sort of real potentials out there. Of course, you always need to get to the -- get over the sort of finish line to get something materialized. But the funnel is there, and it's strongest that it has ever been during my term in Terveystalo. Kati Kaksone: Yes, definitely signs of picking up there. Then a couple of questions from Matti Kaurola, OP. We mentioned that the insurance business is growing fast. Are there any possibilities to take more market share from other players in that segment? Ville Iho: Well, I would say, it's not growing fast. It's growing steadily. So it's -- coverage of insurances in Finland has been developing positively, and then use of services have been developing positively. We have gained market share over the 2 last years. And then, further gaining market share, of course, requires also new means and new type of value creation for insurance companies. I think we have a strong plan there, which we continue implementing. The bigger moves, in my view, will happen only in 2027. Next year will be more like a steady progress in this segment. Kati Kaksone: Of course, we have a clear attack plan for 2027 to deepen the cooperation with the insurance companies. Then, maybe continuing on the outsourcing market and the well-being services counties, how do we look at the public outsourcing market in general in the future? Is it attractive? And is it a part of our core offering and our business going forward? Ville Iho: Well, we explicitly said earlier that we are interested in this new type of outsourcing deals. We were part of [ Pirka tender ]. And one can say looking now in hindsight, the competition and the outcome that each and every out of 3 main players were on the ball in sort of pricing and offering the package. So very close margins who won and who did not win. When it comes to profitability, of course, this would have not been sort of the richest agreement, but still value-creating, EPS enhancing, which is the key for our business model. So when this type of tenders come to the market, we are interested. Kati Kaksone: Indeed. At the moment, we don't -- we have one more question from the phone lines. Let's take it now. Operator: The next question comes from Anssi Raussi from SEB. Anssi Raussi: One follow-up from me. So you also mentioned these somewhat extraordinary costs last year in Q4 and that there were some one-offs related to employee expenses. But can you remind us like what kind of amount we are talking about that you consider one-offs in Q4 last year? Juuso Pajunen: Yes. So basically, compared to baseline in last year, if you go into the details, you remember that we paid EUR 500 per employee to all employees an extra bonus. And based on the CLA, there was EUR 500 per employee fall all under CLA. So that's the personnel expenses I referred to. And then, if you go into a bit deeper, you see that there was a bit of accelerated amortizations and depreciations in the income statement in Q4 last year. So, that one you need to put your finger into yourself, but normally, forecasting depreciation and amortization is not super difficult. Kati Kaksone: Thanks. With that, I believe we don't have any further questions on the phone lines or from the webcast. So any closing words? Over to you, Ville. Ville Iho: Well, as discussed earlier, a quarter of improving margins with revenue headwind; strong agenda to further accelerate the areas where we are progressing well and to tackle the headwind in occupational health care; investments with the dry powder provided by [indiscernible], used more and more to digital offering, where the agenda is -- strong architecture is there and delivering tangible results. Kati Kaksone: Great. With that, we thank you for your time, and have a great rest of the week. Juuso Pajunen: Thank you. Ville Iho: Thank you.
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Bank earnings conference call third quarter 2025. [Operator Instructions] I would now like to turn the call over to Patrick Ryan, President and CEO. Please go ahead. Patrick Ryan: Thank you, Kate. I'd like to welcome everyone today to First Bank's Third Quarter 2025 Earnings Conference Call. I am joined by Andrew Hibshman, our Chief Financial Officer; Darleen Gillespie, our Chief Retail Banking Officer; and Peter Cahill, our Chief Lending Officer. Before we begin, Andrew will read the safe harbor statement. Andrew Hibshman: The following discussion may contain forward-looking statements concerning the financial condition, results of operations and business of First Bank. We caution that such statements are subject to a number of uncertainties, and actual results could differ materially, and therefore, you should not place undue reliance on any forward-looking statements we make. We may not update any forward-looking statements we make today for future events or developments. Information about risks and uncertainties are described under Item 1A Risk Factors in our annual report on Form 10-K for the year ended December 31, 2024, filed with the FDIC. Pat, back to you. Patrick Ryan: Thanks, Andrew. I'll hit on a couple of the high-level points from the quarter and then turn it over to the team to provide some of the details. In the third quarter, we saw a nice increase in net interest income, thanks to continued loan and deposit growth, coupled with net interest margin expansion. Our net interest income was up $1.5 million compared to the second quarter and up $5 million compared to a year ago. Our margin was up 6 basis points linked quarter and was up 23 basis points compared to a year ago. And the pre-provision net revenue number increased to 1.81% from 1.65% in the prior quarter. So all nice positive movements upward in terms of our overall revenue and margin. That strong revenue growth, coupled with expense control, drove continued improved profitability -- our net income was up $3.5 million or 43% compared to Q3 of 2024. Our return on average assets improved 28 basis points to 1.16% compared to 0.88% in the third quarter of last year. Our earnings per share improved to $0.47 in the third quarter, a 46% increase compared to Q3 a year ago, and our return on tangible common equity came in at 12.35%. We did see continued loan portfolio diversification within the quarter. Our investor commercial real estate to capital ratio came down to 370% from a high of 430% after we closed the Malvern acquisition. Our specialized lending groups now make up 16% of total loans, but within that broader category of specialized lending, no niche makes up more than 5% of total loans. Overall, credit quality seems to be holding up with the exception of some softness we saw in the small business segment, specifically companies with revenues under $1 million. Our NPAs in our nonperforming loans did decline during the quarter, and our allowance coverage ratio to nonperformers increased to 2.93%. Charge-offs were elevated but remain very manageable. Third quarter results also included 2 months of "extra sub debt expense" as we did not pay off the old sub debt until September 1 of this year. And during the quarter, we bought back almost 120,000 shares at an average price of $14.91. In summary, the core operating trends look good, and they're improving. The economic outlook remains uncertain, but we're well positioned for whatever rate environment may emerge. And obviously, we're keeping a close eye on the overall level of economic activity and what that might mean for credit quality going forward. I'll turn it over now to Andrew Hibshman, our CFO, to give you a little more detail on the financial results. Andrew? Andrew Hibshman: Thanks, Pat. For the 3 months ended September 30, 2025, we recorded net income of $11.7 million or $0.47 per diluted share and a 1.16% return on average assets. We saw another quarter of solid loan growth, however, down from the first and second quarter as we continue to prioritize relationships and profitability over volume. Loans were up $47 million for the second quarter or 5.6% annualized. Over the last 12 months, loans have grown $286 million or over 9% with our core areas of focus leading the way. C&I grew $194 million and owner-occupied commercial real estate loans grew $40 million. Our evolution into a middle market commercial bank can be seen in our loan mix shift over the past 12 months. C&I and owner-occupied commercial real estate are now a combined 42.2% of loans compared to 40% of loans at September 30, 2024. And our investor commercial real estate loans, which includes multifamily and construction and development, are now 49.8%, down from almost 53% 1 year ago. Growth was also solid again on the deposit side. Balances were up over $55 million during the quarter or an annualized 7% as we continue to execute on adding and maintaining profitable relationships. The growth primarily came with time deposits, along with some interest-bearing demand deposit growth. Darleen will expand on this, but we saw a strong response to promotional campaigns in markets around our new branches. We also utilized some brokered CDs to help reduce FHLB advances by $25 million during the quarter. I'll highlight that our deposit growth occurred even as our average cost of deposits declined 3 basis points to 2.69% for the quarter. Net interest income increased $1.5 million compared to the second quarter, primarily due to margin expansion on a growing balance sheet. Our net interest margin grew 6 basis points to 3.71% in the third quarter despite increased costs on our subordinated debt. We carried sub debt totaling $65 million from June 18, 2025, through September 1, which is the date we redeemed $30 million of outstanding debt. This carry resulted in about $486,000 in additional interest for the third quarter. Looking ahead, we continue to manage a well-balanced asset and liability position, which should result in continued strong net interest income generation. We will benefit from lower sub debt interest costs. However, we expect the immediate impact of Fed rate cuts to be slightly negative as it takes longer to move deposit costs lower compared to the immediate impact of rates moving lower on our variable rate assets. We also continue to expect a larger decline in our acquisition accounting accretion over the next several quarters. Overall, we expect our margin to remain relatively stable as we continue efforts to push deposit costs lower and replace the runoff of lower-yielding assets with higher-yielding loans. Our asset quality metrics at September 30 continue to be strong. NPAs to total assets declined to 36 basis points compared to 40 basis points at June 30 and 47 basis points 1 year ago. The linked quarter decline reflects a decrease of $1.6 million in nonperforming loans. Our allowance for credit losses to total loans increased slightly to 1.25% at September 30 from 1.23% at June 30. We recorded $1.7 million in net charge-offs during the quarter compared to $796,000 for the second quarter and $15,000 in net recoveries in the first quarter. Year-to-date charge-offs are almost exclusively in our small business portfolio. We continue to value this business for the sticky deposit relationships it generates, its impact on improving our community presence and brand loyalty, and it builds a pipeline of future middle market commercial customers. Pat summarized our credit outlook, and Peter will discuss it further in his comments. Noninterest income totaled $2.4 million in the third quarter of 2025 compared to $2.7 million in Q2. The decrease reflects lower swap fees, loan swap fees as well as $397,000 gain on the sale of a corporate facility that occurred in the second quarter. Noninterest expenses were $19.7 million for the third quarter compared to $20.9 million in Q2. Recall that Q2 expenses included $863,000 in onetime executive severance payments. Additional declines in other line items reflect efficiency initiatives as the bank continues to prioritize effective expense management. Darleen will expand on this in her remarks, but we have some new branch openings that will drive costs slightly higher, but we also have an offsetting branch closure in process and other cost mitigation initiatives in place that should help to minimize cost increases. Tax expense totaled $3.6 million for the third quarter with an effective tax rate of 23.4%. This compares to an effective tax rate of 22.9% in Q2. We anticipate our effective tax rate going forward will be relatively stable. Our efficiency ratio improved to 52% and remained below 60% for the 25th consecutive quarter. We also continued to expand our tangible book value per share, which grew $0.46 during the quarter to $15.33. We continue to be pleased with our earnings momentum and our progress in executing our strategy to evolve into a middle-market commercial bank. Our capital ratios remain strong, allowing for capital flexibility. This affords us the opportunity to further drive shareholder value through ongoing investment in the franchise and technology, a stable cash dividend and share buybacks as applicable over time. At this time, I'll turn it over to Darleen Gillespie, our Chief Retail Banking Officer, for her remarks. Darleen? Darleen Gillespie: Thanks, Andrew, and good morning, everyone. As Pat and Andrew noted, we experienced solid deposit growth in the third quarter with balances up $55 million or 7% annualized from Q2. This reflects increased business development activities by our sales teams and the success of targeted promotions, which we were -- which were implemented to drive engagement with our newly opened branch locations. While at a higher cost, promotional campaigns tend to generate strong relationship deposits and have proven successful as part of our branch network optimization efforts. We also saw growth from some CD promotions implemented to strategically onboard funding in support of our strong loan growth. But we're not only growing high-cost deposits. The point-in-time balance sheet hides an important success that I'd like to highlight. Our average noninterest-bearing deposits grew by $21 million during the quarter and by $52 million year-to-date, reflecting strong relationships that provide critical interest-free funding. During the third quarter, our average cost of interest-bearing deposits declined by 2 basis points to 3.27% and our overall cost of deposits declined by 3 basis points to 2.69%. This occurred despite growth coming from higher cost promotional campaigns and some brokered funding to support our loan growth. It reflects our bankers' outstanding success in executing their dual mandate to both maintain deep customer relationships and lower funding costs. The initiatives and banker incentives we have in place to support these goals continue to be effective. Similarly, what's also hiding in our net growth is our continued success in managing out some higher cost balances over the past few quarters. If you look at the first 9 months of 2025, our average money market deposits grew by about $25.1 million or 2.4% over the same period of 2024, but the average cost declined by 61 basis points, lowering the overall interest expense on these deposits by $4.1 million compared to the year-to-date period. And I do not believe we have fully realized the benefit of the Fed's September rate cut yet, but we have made solid progress lowering our pricing and managing interest expense through the first 3 quarters. Now I'll talk a little bit about our branch strategy, which has always been aimed at supporting engagement in our current markets and opportunistic expansion into adjacent markets. We opened a de novo branch in the Fort Monmouth section of Ocean Port, New Jersey, extending our footprint into Monmouth County and increasing our New Jersey footprint to 10 counties. We also completed the relocation of our Palm Beach branch to Wellington, Florida, still in Palm Beach County. This location was part of our Malvern Bank acquisition and was originally in a small office suite. We now have a full-service branch in a more convenient and accessible location to better serve our customers. We also officially closed our limited-service Morristown office in August and transferred those relationships and deposits to our nearby Denville branch. In line with our strategy to operate efficiently, we made the decision to close our Coventry, Pennsylvania branch in December of this year and transferred those deposits and relationships to our nearby Lionville branch. This decision allows us to better leverage our resources while continuing to provide high-quality service across our footprint. Needless to say, it's been a busy year for us with branch -- with several branch openings and consolidations. We've focused on aligning our branch footprint with customer demand and growth opportunities. By year-end, these efforts will result in a net increase of 1 branch in our network. I'll finish up with a note on rates and pricing. We've been very proactive in moving rates with the Fed cuts and expect to continue to do so. Now this does take time and a measured approach. We've been able to grow deposits in many rate environments, and we aim to continue doing this provided the desired profitability levels can be achieved. At this point in our evolution, growth for the sake of growth is not our end goal. We will focus on growing our deposit portfolio through disciplined relationship-driven strategies while remaining competitive in our pricing. Our goal is to continue to offer fair, market-aligned pricing, supported by strong customer relationships and exceptional service. Our focus is on serving our customers -- or growing our customers and serving our customers well and profitably. And also, our team is doing an outstanding job toward this end. At this time, I'll turn it over to Peter Cahill, our Chief Lending Officer, for his remarks. Peter? Peter Cahill: Thanks, Darleen. Well, Pat and Andrew have already commented on the loan growth. We've experienced in the past quarter as well as year-to-date, an annualized growth rate of 9%, I think, compares favorably to our peers. The third quarter was right in line with budgeted loan growth. And after 2 quarters of growth that were well ahead of plan, I think we're positioned to report good overall growth in earnings at the end of the year. For the past couple of years, I've reported on our goal to do more C&I business, which includes owner-occupied real estate, while maintaining a healthy level of investor real estate and consumer lending. And I'm happy to report that the trend of growing C&I business has continued. New loans closed and funded for the 9 months ending 9/30/25 were comprised 65% by C&I loans and 18% by investor real estate, the remainder consisting mainly of consumer loans. That's an increase in C&I lending from 2024 when C&I loans represented 64% of all new loans. The regional commercial banking teams continue to generate most of the loan growth for us. They represented 39% of new loans generated in Q3, followed by investor real estate at 28%, private equity at 18% and small business banking at 9%. Our specialty areas, which also includes asset-based lending, are all at or very close to their growth plans for the year. Regarding investor real estate, we closed a number of new loans in the third quarter, but similar to previous periods, new loans were offset by payoffs. You'll see a bump up in investor real estate if you look at the schedules in the earnings release, but that was due mainly to a reclassification of a loan from owner-occupied to investor. Our goal over time is to moderate growth in investor real estate and manage more of that business in its own investor real estate team, focusing on relationships and loan concentrations, and that continues to go very well. A focus of most community banks is the ratio of investor real estate loans to total capital, as Pat mentioned, we hit a high point at 430% of capital after the Malvern acquisition, but got to 390% in March of 2025 and finished Q3 at 370%, which is about where we want to be. The lending pipeline at the end of the third quarter stood at $283 million of probable fundings, down 6% from the level of probable fundings at June 30. The number of deals in the pipeline, however, is up 5% from the end of Q2. If one breaks down the components of the pipeline at quarter end, C&I loans made up 68% of the overall pipeline, exactly where we were at June 30 and up from 63% at March 31. Overall, I'm happy with where the new business pipeline stands. We are anticipating a higher level of loan payoffs in Q4 than what we've experienced on average over each of the first 3 quarters, which is why despite a strong start to the year from the standpoint of overall loan growth, our target has remained in the 6% to 7% growth range. On the topic of asset quality, Andrew provided a good outline on where we are. I think things continue to be in good shape. The loan portfolio continues to be well diversified. Andrew mentioned some softness in the small business loan portfolio. We've made some adjustments there, and we anticipate a return to the quality we've experienced previously. Overall, it's a modest piece of the overall loan portfolio. I should probably also comment on what's been out there in the banking news about the fear of deteriorating credit quality and the "one-offs" cited by a handful of banks. I can only say that we don't do any lending into deals like what you read about publicly around First Brands, Tricolor, factoring and borrowers not providing financial information. That's not what we do. We have very -- and we have very limited exposure to NBFIs and none to private lenders. In summary, I think we had a good third quarter. Loan growth was in line with budget, and we expect to meet our loan growth goals for the year. That pretty much concludes my remarks. So I'll turn things back to Pat for any final comments. Patrick Ryan: Great. Thank you, Peter. Appreciate all the additional comments. And at this point, I think we'd like to open it up for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Justin Crowley with Piper Sandler. Justin Crowley: Just want to start on expenses. You've talked about tighter cost control before. So nice to see the core base now down 2 quarters in a row. How would you describe some of the efficiency actions taken, what they involve, what, if anything, is left to do? And where does that leave you on the thinking around run rate here over the next several quarters, more specifically, just factoring in your comments as well about some actions like new branches that could add to costs? Patrick Ryan: Yes. No, absolutely. Justin, we always are focused on costs. But at the same time, we don't want to miss out on important investment opportunities. I think you've seen over the last couple of years, we've invested in some new teams in terms of some of the specialty lending niches, we've invested in some additional branch locations in new markets for us, and we've invested in some technology, whether that be the online loan application platform or salesforce, things like that. But I think in terms of big investments, we're at a point right now where we're just kind of digesting the moves we made. We're letting those new business units scale up. And so I don't see a lot of big new costs on the horizon. We are a year away from needing to make a decision on our core and how much we want to keep kind of with our current provider versus spreading it out amongst other kind of best-in-class operators. So always a little bit of a question mark on tech when you're doing a big core contract renewal. But again, I don't suspect there's going to be anything too outlandish there in terms of technology spend increases. And we've been very focused internally on just making sure we can get our noninterest expense to average asset ratio down to that 2% range and below since that's where we've been able to operate historically. So that's a little bit of big picture on expenses, and I'll let Andrew jump in and talk a little bit about some of the initiatives and kind of where he sees the line item moving forward. Andrew Hibshman: Yes. Thanks, Pat. I'd just add, I think Pat talked about this in previous calls where kind of you do a big acquisition and you get cost saves and then you kind of recalibrate and now we're just kind of recalibrating a little bit more and fine-tuning. We haven't done anything drastic to save money, like things like professional fees, a lot of that was kind of elevated because of some of the big projects we had going, implementation of salesforce. We have consultants helping us with that. We had some other projects going on. And so I think really, the cost mitigation has been really just kind of settling to where we're at, finding some excess spending where we could. I don't think there's any major initiatives that are going to significantly reduce costs from where we're at now. We will -- obviously, like we mentioned, we will see a little bit of a creep for some of the couple of small -- the branches we've done, new branches. But I think we can minimize expenses, keep them relatively flat, maybe again, like some slight increases, always kind of heading into a new year, there's standard cost of living adjustments on things like rent and salaries and things. So we'll continue to see that. But no major new costs that I'm aware of or any major new cost-cutting initiatives, but we're going to just keeping a tight eye on things. We think we can continue to grow without adding meaningfully to the expense base and to the payroll. So again, I think we're going to be able to maintain the total expenses at a relatively flat level. Justin Crowley: Okay. And then just, I guess, in terms of like very near-term run rate, like next quarter, even if we do see a little bit of an increase given the new branches, it's going to be modest. It's not going to be anything too eye-popping. Andrew Hibshman: Yes, I think that's right. Justin Crowley: Okay. And then on the margin and some of the inputs, obviously, the latest Fed cut came late in the quarter. But following that and what should be, I guess, some further reductions looking out here, and Darleen touched on it, but can you folks talk a little bit more on how aggressive or active you think you can get on lowering deposit costs? Patrick Ryan: I'll start and then I'll let Darleen provide a little more color there. But at the end of the day, when the Fed moves, we move, as Andrew pointed out, it takes a little bit of time to kind of to go through it. We have certain rack rates we can move down and we obviously are taking a look to see are there areas where we can move more than what the Fed did. And so we try to be selective in certain product categories to see if we can even move things a little bit further. But at the end of the day, our goal is to try to make enough adjustments on the deposit cost side to offset what we know is coming in terms of floating rate asset yields so that after a month or so, it should be a relatively neutral event from a margin perspective. And then separate from that, there's just kind of the work we do every day to drive core low-cost noninterest-bearing deposits and move promotional customers into rack rate so that if we can make the impact of the Fed move neutral, then some of the mix improvements and some of the other changes we make can hopefully continue to drive costs lower. So I don't know, Darleen, anything you want to add there? Darleen Gillespie: I think, Pat, you touched on it. I would just add that we talked a lot about this over the past year and even early -- I'm sorry, late 2024, in which we've really been focused on lowering our cost of deposits, looking at specific portfolios and determining where we can make an adjustment without negatively impacting our customer base. One of the benefits that we have is our government portfolio, a good portion of that is tied to the effective funds rate. So as the Fed makes adjustments, we can make adjustments immediately. But I think everyone within the organization understands the message of competitive pricing but not going overboard and not necessarily winning based on rate. So overall, I think that we do a really good job in managing our cost, and I anticipate us continuing to be able to do that as the Fed continues to make adjustments over the next couple of months. Justin Crowley: You mentioned the government portfolio of funding. How much do you have in deposits that are like that, that are indexed directly to Fed funds? Darleen Gillespie: Our government portfolio is approximately 12% to 13% of our total deposit base. And I would say 75% of that portfolio is tied to the effective funds rate. So we look to onboard full customer relationships when we look at deposit opportunities on the government side. And generally, when we bid on that business, the request is to tie it to an index. So we've been successful in winning business in that world by bidding based off of an index rate. And so I think, again, as we look at additional cuts down the road, we'll be able to make adjustments in that portfolio. Justin Crowley: Okay. Got it. And then just one last one. You continue to be active on the buyback and seems like that should continue to some degree. Obviously, with the stock right around tangible book makes it attractive. But what are other considerations like, for example, on capital levels? What levels are you comfortable at? Or what do you think could serve as a good floor for you guys? Patrick Ryan: Well, we always look at internally the total risk-based capital ratio, and we have a soft limit around 11.5% that we try not to dip below if we don't need to. And then after that, it's just sort of looking at different uses for capital, and we're happy to see that based on -- despite the strong growth based on the strong earnings, we've been able to see that level creep up over the last couple of quarters. So I think we're in a position right now where based on organic growth alone, we're growing capital, which gives us flexibility. And what we choose to do with that " additional capital" that we're creating will be a function of the opportunities in the market. Obviously, M&A could be one consideration, but we continue to be very selective there. Our dividend is relatively low, so we could take a look at that. And then depending on where the stock trades, we think we've got room to look at capital deployment in the form of the buyback. So we're at a level where we think capital ratios are growing nicely, and that gives us flexibility to kind of pull the levers that we think will generate the best returns. Operator: [Operator Instructions] I would now like to turn the call over to Patrick Ryan. Please go ahead. Patrick Ryan: Thank you very much. I just want to conclude the call by thanking everybody for calling in. We appreciate your interest in First Bank, and we look forward to reconnecting with you after year-end results. Thanks, everybody. Have a great day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning. The Roper Technologies conference call will now begin. Today's call is being recorded. [Operator Instructions] I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead. Zack Moxcey: Good morning, and thank you all for joining us as we discuss the third quarter 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Principal Accounting Officer; and Shannon O'Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. Now if you please turn to Page 2. We begin with our safe harbor statement. During the course of today's call, we will make forward-looking statements, which are subject to risks and uncertainties as described on this page, in our press release and in our SEC filings. You should listen to today's call in the context of that information. And now if you please turn to Page 3. Today, we will discuss our results primarily on an adjusted non-GAAP and continuing operations basis. For the third quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets, transaction-related expenses associated with completed acquisitions; and lastly, financial impacts associated with our minority investment in Indicor. Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now if you please turn to Page 4, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil? Neil Hunn: Thank you, Zack, and thanks to everyone for joining us and excited to be with you this morning. As we turn to Page 4, you'll see the topics we plan to cover today. We'll start with our third quarter highlights and financial results. Next, we'll review our segment performance, our AI progress and momentum and our most recent set of bolt-on acquisitions. Then I'll get into our guidance details and of course, wrap up with your questions. So with that, let's go ahead and get started. Next slide, please. Turning to Page 5. Let me run through the 4 key takeaways for today's call. First, we had a strong third quarter. Total revenue grew 14%, organic revenue grew 6%, software bookings grew in the high singles area, and we continue to deliver impressive free cash flow with free cash flow growing 17%. And of note, free cash flow margins posted at 32% for the TTM period, really impressive financial results. Second, we're super encouraged by the progress and momentum we're seeing across all of our businesses as it relates to our AI enablement and our product stacks and our internal operations and more on this in a moment. Third, we're announcing today our first share repurchase authorization, $3 billion in total. And lastly, we continue to execute on our M&A strategy of acquiring faster growth platforms and bolt-on or tuck-in acquisitions at a high fidelity rate. In the quarter, we deployed $1.3 billion, $800 million for Subsplash, which we detailed this time last quarter, and $500 million on a series of tuck-in acquisitions. Also more on this later, but worth highlighting here, we are very encouraged by this recent capital deployment execution and the future growth potential that's being layered into our enterprise. Importantly, we remain very well positioned for the continued execution of our M&A strategy and continue to have north of $5 billion of capital deployment capacity available over the next 12 months or so. As I turn the call over to Jason, reflecting on the quarter, I'm quite bullish on most of what we're seeing, a very strong 3Q, real demonstrable AI progress, which is a long-term growth driver for us, excellent execution of our higher growth, higher returning capital deployment strategy and the announcement of our first-ever buyback authorization. This all bodes very well for the future. That said, we'd like to see some of our markets start to cooperate a bit better, namely the government contracting and freight markets, and we have some delays in Neptune. Much more on this as we walk through today's call. So with that, let me turn the call over to Jason to talk through our P&L and our balance sheet. Jason Conley: Thanks, Neil. Good morning, everyone, and thanks for joining us today. I'm pleased to take you through our third quarter results and strong financial position. Turning to Page 6. Q3 and TTM results reflect the long-term financial profile of Roper, which is to compound cash flow in the mid-teens area. We'll start with revenue, which was 14% over prior year and surpassed the $2 billion mark. Acquisitions contributed 8%, led by the final quarter of Transact before it turns organic and CentralReach, which we acquired in April this year. Of note, these businesses are tracking very well against our acquisition expectations. We printed 6% organic growth, both for the consolidated enterprise and across each of our 3 segments. Our Application and Network Software segments were in line with expectations, while TEP was a bit below given near-term timing at Neptune, which Neil will discuss further. EBITDA of $810 million was 13% over prior year with EBITDA margin of 40.2%. Core margins expanded 10 basis points and segment core margins expanded 30 basis points, led by our software segments. DEPS of $5.14 was 11% over prior year and $0.02 above the high end of our guidance range despite absorbing $0.05 of dilution from Q3 acquisitions that were not reflected in previous guidance. Free cash flow was outstanding at $842 million, up 17% over prior year and representing 32% of revenue on a TTM basis. Our software businesses captured strong renewals, and we drove great working capital performance across the board. Broadening out a bit, TTM cash flow of over $2.4 billion is a 17% CAGR over a 3-year period. And for those looking at per share metrics, you'll note that our share count has compounded at about 0.5% over that same time period. At Roper, we have been and will continue to be relentlessly focused on cash flow and shareholder value creation. Now let's turn to Slide 7 and discuss our very strong financial position. Our net debt-to-EBITDA stands at 3x, which is up only modestly from Q2 at 2.9x despite deploying $1.3 billion towards acquisitions. This places us in a great position with over $5 billion in next 12-month capacity for capital deployment. Regarding M&A, you can see that we've been quite active this year in acquiring high-quality growth businesses and several strategic bolt-ons. This is against the backdrop of a muted PE deal environment. The pipeline of high-quality acquisitions continues to build as assets mature in PE portfolios and a return of capital to LPs becomes paramount. Additionally, as Neil mentioned, we're pleased to announce another capital deployment lever that was previously unavailable. Our Board has authorized a $3 billion share repurchase program with an open-ended time period to execute. While M&A will continue to be the majority of our capital deployment allocation, our share repurchase program will allow us to opportunistically complement our M&A program. Over the last year or 2, we have talked about the great business building taking place across the Roper portfolio from strategy to talent to execution, all now greatly turbocharged by AI. Our repurchase program reflects both confidence in our strategy and our commitment to delivering long-term shareholder value. So with that, I'll turn it back over to Neil to talk about our segment performance. Neil? Neil Hunn: Thanks, Jason. Turning to Page 8. And before we get into our segment details, we want to discuss why AI is a powerful and durable growth driver for Roper. To start, AI represents a meaningful expansion of our TAM across the portfolio. We can now deliver transformational software solutions that automate labor-intensive work adjacent to our existing platforms. This creates substantial new value streams for our customers and correspondingly facilitates long-term growth for Roper and our businesses. Importantly, our businesses are uniquely positioned to win in AI, in fact, having a very high right to win in the AI world. Our software solutions are deeply embedded system of record applications with workflow-oriented domain-specific architectures. The decades of cumulative workflow knowledge built into our platforms, combined with the proprietary vertical market data, provide the precise context needed to develop Agentic AI solutions. Because of this, our businesses have an exceptionally high right to win as we deploy these capabilities across our VMS end markets. Internally, we're becoming AI native across all functions to drive productivity gains. We're excited to reinvest these gains to further accelerate our product development and go-to-market initiatives. It's important to note, we've always had more great ideas than resources needed to execute, and AI has the potential to attack this challenge. Finally, we have tangible proof points, though it's still early. Aderant has claimed a technology leadership position in legal tech, accelerating their bookings growth. CentralReach now has roughly 75% of their bookings attributed to AI-enabled products, which have automated 100 million reimbursement rule evaluations, over 3.5 million learner appointments and over 1 million clinical summaries being generated, great real-world examples of the power of AI. Deltek has released over 40 AI features into their cloud offerings, driving increased cloud conversion activity. And DAT has industry-leading AI/ML-enabled freight matching capabilities, which I'll detail shortly. These are but a few examples from across the portfolio. Very exciting times for sure. With that, let's now turn to our segment review, starting with Page 10 and our Application Software segment. Revenue for the quarter grew by 18% in total and organic revenue grew by 6%. EBITDA margins were 43.4% and core margins improved 40 basis points in the quarter. Starting with Deltek. Deltek delivered solid performance in the quarter with particularly strong results in their private sector end markets. Construction, architecture and engineering remained robust throughout. The GovCon business experienced softness in September as agencies paused activity ahead of the pending government shutdown. This timing is unfortunate. Pipeline activity and commercial momentum had been building nicely following the passage of the one big beautiful bill in July, and we are seeing increased engagement across our customer base heading into the new fiscal year. The fundamentals remain strong. The OB3 authorized significant increases in defense and infrastructure spending that will flow through to our customers once appropriations are finalized. This is simply the timing issue, not a demand issue. Finally, retention levels across the entire Deltek franchise remain very high. Aderant continues to be incredibly strong and continues to post impressive bookings and recurring revenue growth. The booking strength is broad-based, fueled by their AI-enabled solutions, especially as it relates to AI-enabled compliant time capture and billing and is a combination of market share gains, cloud migration and SaaS growth. Vertafore continues once again to be steady and solid for us. We continue to see consistent ARR growth and strong customer retention and strength across their agency, MGA and carrier solutions. This growth is enabled by their strong go-to-market capabilities and their long-term commitment to product strength. PowerPlan's performance has been terrific. Their success is a result of several years of business building in the product stack, the go-to-market capabilities, their service delivery really across all functions. In addition, to remind everyone, they serve power generation customers, which are adding capacity as quickly as possible to handle the AI workloads. The setup here should be quite good for a long time. Also in the quarter, we completed the acquisition of Orchard, a tuck-in acquisition for our Clinisys business. Orchard brings additional clinical laboratory capability to Clinisys with particular strength in reference, physician office and public health labs. Finally, the balance of our application software portfolio continues to execute very well. CentralReach was awesome again in the quarter, driving accelerating adoption of their AI tools and capturing ABA therapy capacity additions. Procare made a great installment of progress with new bookings continuing to be strong, posting low double-digit growth in payments with improved gross margins, though still work to do, in particular, with faster implementation time frames and share of wallet expansion, but meaningful progress for sure. Finally, Strata and Transact were steady and solid in the quarter. As we look to the final quarter of the year, we expect to deliver mid-single-digit organic revenue growth. This outlook reflects high single-digit growth in our recurring revenue base, offset by declines in nonrecurring revenue, primarily due to anticipated softness in our Deltek business stemming from the ongoing government shutdown. Given the uncertainty surrounding the duration and impact of the shutdown, we see potential outcomes across the full range of our MSD outlook from the lower to the higher end. That said, our businesses in this segment continue to compete and execute exceptionally well. The primary variable remains a higher level of market uncertainty than we typically experience for our Deltek business. Please turn with us to Page 11. Total revenue in our Network segment grew 13% and organic revenue 6% in the quarter. EBITDA margins remained strong at 53.7% with core margins improving 60 basis points. As we dig into the individual businesses, we'll start with DAT. DAT was solid in the quarter and had strong ARPU improvements. DAT continues to execute exceptionally well on their core strategy of driving enhanced network value for both brokers and carriers. This dual-sided approach positions DAT to better monetize their entire network ecosystem and more on this when we turn to the next page. ConstructConnect was solid again for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer net retention. Of note, this business continues to make good progress with our emerging AI-enabled takeoff and estimating solution. Foundry is turning the corner on growth, posting continued sequential improvements in ARR, and we expect our Q4 exit ARR to grow year-over-year in the HSD area. Really happy for the team there as they've had to work through some tough market conditions. Next, our network health care businesses, MHA, SHP and SoftWriters were very good in the quarter. Of particular note, SoftWriters is executing at an exceptional level, winning a few very large pharmacy customers and making substantial progress on a high-impact AI solution, which is being beta tested in the market currently. Congrats to Scott and his entire team for their success. Finally, Subsplash, our most recent acquisition that closed on July 25, is off to a great start, delivering financial results in line with our deal model expectations. Of note, they saw very good market traction with their AI-driven [ sermon ] content offering, Pulpit AI, and they deepened its integration with their core engagement platform, driving strong product-led growth, exciting stuff. As we turn to the outlook for the final quarter of the year, we expect to see organic revenue growth at the higher end of the mid-singles area. As we turn to Page 12, we'd like to spend a few minutes describing the strategic evolution of our DAT business and why we're so excited about its future growth prospects. To start, our legacy DAT platform is the largest freight matching network across the U.S. and Canada. The scale is remarkable, over 1.2 million loads posted and 15 million rate views every single day. DAT is the clear market leader, delivering tremendous value to both freight brokers and carriers, both of whom pay to participate in this powerful network. As strong as the legacy business is, we're even more bullish about where DAT is headed. To bring this vision to life, DAT is building capabilities across the entire freight automation workflow from carrier vetting to broker carrier matching to AI-driven rate negotiation, load management tracking and finally, payment and settlement. Through deep customer partnering with the brokerage community, DAT is working to fully automate the freight matching process. As this happens, DAT will generate $100 to $200 per load in savings for brokers while giving carriers greater predictability and faster payments on their invoices. What sets DAT apart is this end-to-end product capability and its role as a neutral trusted partner, a Switzerland-like player that equally serves the entire freight brokerage market. This is a truly unique position in the market. This evolution also highlights the Roper DAT partnership at its best. We work closely with the DA team to craft this strategy, then we executed a focused M&A program to strengthen it through 3 strategic tuck-ins: Trucker Tools, Outdo and Convoy. With the deals complete, DAT is now fully focused on delivering against this strategic opportunity. Important to note, Convoy is an unusual transaction for us as it currently is not profitable, but we expect the financial returns over the next several years to be extremely attractive. The key to success is scaling efficiently, leveraging DAT's advantaged customer unit economics for both brokers and carriers to drive sustained growth and profitability. We are confident in this strategy, market position and DAT's ability to execute. I know this was a bit of a deep dive, but we wanted to share with you why we're so excited about the growth opportunity that sits in front of DAT, true AI-based freight automation. Now let's turn to Page 13 and review our TEP segment's quarterly results. Total revenue here grew 7% and organic revenue grew 6%. EBITDA margins came in at 35.2%. Let's start with Neptune. As we've said before, Neptune continues to execute really well, particularly around its ultrasonic meter strategy, and we're seeing strong traction in its data and software billing solutions. The new copper tariff that took effect on August 1 caused some short-term disruption. Neptune responded by implementing surcharges to offset the tariffs impact, which temporarily slowed order timing. These actions reflect the benefit of being part of Roper, doing the right long-term thing for customers and the business even when it creates near-term headwinds. Verathon continues to perform well. In particular, during the quarter, Verathon saw continued strength in its single-use recurring product lines, both BFlex and GlideScope, which remain key growth drivers. NDI also delivered an excellent quarter. As we discussed previously, NDI provides proprietary world-class precision measurement technologies to a range of health care OEMs. These technologies in turn enable guidance-enabled solutions across multiple clinical markets, including orthopedic surgery, interventional radiology and cardiac ablation. Finally, we saw strong execution and growth across CIVCO, FMI, Inovonics, IPA and rf IDEAS, rounding out a solid overall performance for this group of companies. Looking ahead to the fourth quarter, we expect organic growth in the low single-digit area given the very difficult prior year comp and the timing we discussed at Neptune. Now let's turn to Page 15 and review our Q4 and updated full year 2025 guidance. Starting with the full year outlook, we continue to expect total revenue to remain in the 13% area. Also, given the delays at Neptune and the temporary impact of the government shutdown, which is slowing year-end commercial activity at Deltek, we now expect organic revenue to land in the 6% area versus our previous 6% to 7% range. Relative to our full year DEPS outlook, we're tightening guidance to the high end of our prior range after adjusting for $0.10 of dilution from the $500 million of tuck-in acquisitions completed during the quarter. Specifically, we now expect adjusted DEPS to be in the range of $19.90 and $19.95. We expect to see our tax rate at the lower end of our 21% to 22% area for the full year. For the fourth quarter, we're establishing adjusted DEPS guidance to be between $5.11 and $5.16, which includes $0.05 of dilution for last quarter's tuck-in deals. Now please turn with us to Page 16, and we'll open it up to your questions. We'll conclude with the same key takeaways with which we started. First, we had a very good third quarter with exceptional free cash flow. Second, we're super excited about the pace of AI innovation and the growth potential in front of our enterprise. Third, we're announcing a $3 billion authorization for a share repurchase. And finally, we remain super well positioned for further M&A activity. Relative to our financial results, we grew total revenue 14% and organic revenue 6%, grew EBITDA 13% and delivered 17% free cash flow growth in the quarter. AI is a significant growth driver for Roper, expanding our TAMs by automating tasks and work across our vertical market offerings. With deep workflow integration, proprietary data and vertical market-specific architectures, our businesses are well positioned to succeed in AI, in fact, have a very high right to win and are already seeing measurable yet early product and commercial results. DAT exemplifies this strategy in action, evolving from a traditional freight matching network to a fully automated freight marketplace powered by AI. Through this transformation, DAT is unlocking significant efficiency and economic value for brokers and carriers alike, positioning itself for improved high-quality growth. As Jason mentioned earlier, we're excited to announce a $3 billion share repurchase authorization, which will deploy opportunistically, enabling us to take advantage of dislocations in the market. We're super confident with our talent advantage, our strategy and our execution capabilities, and this first-ever buyback is evidence of such. Importantly, we remain exceptionally well positioned to execute our M&A strategy. We have north of $5 billion of available firepower over the next 12 months and a very active, large and attractive pipeline of opportunities. Importantly, Roper continues to strengthen its position as an acquirer of choice for both target CEOs and their private equity owners. As always, we'll pursue these opportunities with our consistent, unbiased, patient and disciplined approach. Prior to turning to your questions and if you flip to the final slide, our strategic compounding flywheel, we'd like to remind everyone that what we do as Roper is simple. We compound cash flow over a long arc of time by executing a low-risk strategy and running our dual threat offense. First, we have a proven powerful business model that begins with operating a portfolio of market-leading application-specific and vertically oriented businesses. Once the company is part of Roper, we operate a decentralized environment so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their long-term and sustainable organic growth rates and underlying business quality. Second, we run a centralized process-driven capital deployment strategy that focuses in a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market-leading business or tuck-in acquisition to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid-teens area, meaning we double our cash flow every 5 years or so. So with that, we'd like to thank you for your continued interest and support and open the call to your questions. Operator: [Operator Instructions] Your first question comes from the line of George Kurosawa with Citi. George Michael Kurosawa: Great to be on the call here. Wanted to first touch on kind of the high-level organic growth picture. I think you can -- took a step back this quarter, but I think you can certainly argue there are some onetime or short-term dynamics at play here. Maybe just if you could frame your confidence in a reacceleration from here, particularly as we start to sharpen our pencils for '26. Neil Hunn: Yes. Appreciate it. Thanks for being on the call this morning. So the -- yes, I think you're right. I mean the reason that was a little rough this quarter were the 2 reasons we talked about, the commercial activity at Deltek with the government shutdown and then this tariff-related impact at Neptune. As we think about '26, I mean, it's a little early for us to get super detailed about '26. But if you sort of roll sort of segment by segment, it's been pretty -- in application, it's been pretty consistent trends there throughout '25. Deltek and government contracting should improve next year given the passage of OB3. I think the timing of when that improves is still up in the air a little bit. We'll see that as we get through our planning and roll into next year. But there's definitely sort of improvement happening in that market given the spending attached to OB3. In the Networks segment, it's been pretty consistent over the last 3 quarters. There is sort of a comp thing in the first quarter. So pretty consistent over the last 3 quarters despite the sort of the headwinds in the freight market. We'll have to see how the freight market evolves next year, but really like the business building we're doing at DAT, as I talked about. As I also mentioned, foundry is going to be better next year. And then on TEP, the Neptune order patterns likely continue normalizing the pre-COVID sort of lead time levels. Orders there have been pretty good. It's just the lead -- and the lead times are going to continue to shorten. NDI is poised for a couple of strong years, but we really need to get through our planning process to have more clarity on how TEP is going to play out next year. But all in all, we feel pretty good about the trends in GovCon, Foundry, CentralReach and Subsplash turning organic in the second half of next year and the general business building. But as usual, we go through a pretty exhaustive Q4 planning process, which we kick off in a couple of weeks. George Michael Kurosawa: Okay. That's super helpful color. And then maybe just one quick follow-up here on the AI strategy. I think you disclosed 25 products last quarter. I'm curious if you have an updated number just to give us a sense for the pace of innovation and just more generally, how you feel businesses are coming up the AI curve here. Neil Hunn: Yes. We feel very, very good. I won't rehash all the prepared comments about why we feel that way. But we're going from having a large number of products and key features. We talked about the 40 AI features in the Deltek core that's driving sort of the cloud migrations and SaaS. But increasingly, we're seeing sort of AI SKUs. So we feel real good about that. Now we've got to get through the commercial activities as we release these SKUs across essentially every one of our software businesses now and in the first half of next year that we got to go sell them and commercialize them and then the momentum will sort of pick up from there. But feel very good, very high right to win, a lot of compounding of knowledge about how to do all this stuff internally. This is -- you can hire some talent, you got to build it. So we feel real good about that. A lot of internal sharing that's going on, which is great to see, a lot of momentum. So we can certainly talk more about that, but feel great about where we are on the AI front. Operator: And the next question comes from the line of Brent Thill with Jefferies. Brent Thill: Just on the buyback, I guess, maybe walk through the strategy, why not leaning harder into M&A versus -- I believe this is your first buyback ever. What drove that decision? Neil Hunn: Yes, I appreciate it. The -- so just to be clear on what it is. So it's $3 billion. It's open-ended timing. It's opportunistic and in no way, shape or form, a change in our strategy. Set this in the context of the amount of capital we have to deploy over the next 3 years is somewhere in the $15 billion to $20 billion range. So it's not a change in any way, shape or form. The rationale for it is pretty straightforward. We just have a ton of conviction in what we're doing. And in terms of the talent we have on the team and that lead our companies, the strategies, the AI execution, the general continuous improvement execution, the business building we're doing. And we think this buyback is just clear evidence and support for our conviction there. But we're going to maintain a strong bias towards M&A. The compounding nature of the numerator is better than the denominator. It's just straight math. We're super active on the M&A front. We cultivate every day. In fact, our Janet Glazer leads our capital deployment efforts had a fantastic meeting 3 or 4 weeks ago, I think, with 18 CEOs of companies that are in the pipeline, so a marketing event, and it was met with great reviews, and we're really becoming sort of a buyer of choice, both for the CEOs of companies and also the private equity sellers. So we feel real good about the execution of our M&A strategy, and this buyback is just a small complement to the overall strategy of Roper. Brent Thill: Okay. Neil, I know the last couple of years, we've had a couple of things that maybe haven't gone the way you wanted to. The question is just how do you derisk this out of the guide? And I think investors have looked at the portfolio and said that you get the diversification aspect, but why do we keep having kind of the setbacks if we're that diverse. So that's the question I'm getting. Neil Hunn: Yes. So you're right. I mean we've built this portfolio to essentially take as much cyclicality and cycle risk as you can take out of an enterprise. If you look back over our long history, before we sold and divested all the industrial businesses, we'd cycle up or down 5 to 10 points. Now we're cycling like a point here or there. So we've essentially beaten out ostensively all the cycle risk you can in an enterprise. In this case, it's just -- it's frustratingly bespoke situations. Government contracting, normally, you're in GovTech because of the stability of the end market here. It's been anything but that the last couple of years. Transportation, who would have predicted like a 3-year freight recession. And so it is frustrating these things are stacking on top of each other, but they're bespoke, and we like the construct of the portfolio for sure. Jason Conley: I think the cash flow generation continues to be strong and consistent with what we thought. Obviously, we've had some new deals come in that have been dilutive, but we have been able to sort of push through that. Our guidance is -- adjusted for dilution is pretty close to where we were before. So despite some of the softness we've seen, we've been able to sort of maintain the bottom. Operator: The next question comes from Brad Reback with Stifel. Brad Reback: Software bookings decelerated a little bit sequentially, I think from the mid-teens to the high singles. Was that predominantly Deltek? Or were there other drivers there? Jason Conley: Yes. It was mainly Deltek, a little bit of frontline. We've talked about the -- some of the funding from the DOE. We don't get a ton of funding down to the states, but at the margin, it does slow down a little bit in K-12. But yes, it's Deltek Frontline. Outside of that, it's very strong. So if you look on a TTM, also a very lumpy dynamic, right? Software bookings are -- can be lumpy quarter-to-quarter. TTM is up low single digits -- sorry, low double digits. So I feel good about that trend. And I would also just call out that health care has been particularly strong this quarter. Our Strata business, we combined Strata and Syntellis a couple of years ago, and that's really starting to take hold in the market. So bookings are really strong there. And actually, our Clinisys business is doing quite well, too, in Europe and even in the U.S. with some of the bolt-ons we've done for them to get outside of the hospital, that's starting to gain traction as well. So just some color behind the bookings this quarter. Brad Reback: Great. And then, Neil, I think 2 questions ago, you talked about the rollout of the AI SKUs happening now through the first half of '26 and then needing to sell it. That all seems like we should be thinking about this more of a '27 and beyond organic driver as opposed to '26? Neil Hunn: I think that's a fair -- we're certainly viewing it that way. I think it's a fair assumption. We'll certainly see progress in bookings throughout next year because again, this is across 20-plus software companies and multiple products across 20 software companies. And so we'll see building momentum. But before it has a meaningful impact, I think it's '27 because of the commercial activity that has to go along with the innovation. Operator: The next question comes from Ken Wong with Oppenheimer. Hoi-Fung Wong: Fantastic. I wanted to maybe drill in a little bit on just the organic growth. Any way for you guys to help kind of slice what you might have seen from maybe the same-store sales versus maybe the net new organic that's coming on to the P&L. Hopefully, that question makes sense. Neil Hunn: We want to make sure we're framing -- answering the right question. Essentially, what's the cross-sell versus sort of net new mix? Is that your question? Hoi-Fung Wong: No. I guess what was coming from, let's say, the portfolio, let's say, prior to, let's say, like a Procare, Transact versus the stuff that is now kind of flowing in as incremental organic. What was once inorganic coming in as organic? Does that make a little more sense? Jason Conley: Yes, like what's the impact of Procare coming into organic. A little bit of accretion from Procare, not as we talked about, not as much as we had thought when we did the deal, but it's certainly accretive to the segment. Hoi-Fung Wong: Okay. Got it. And then on the TEP business, I think going into the quarter, I think the expectations were high single digit in the back half. I guess, yet only 6% in the quarter, low single in Q4. Was that isolated to any particular piece? Or was it a little more broad-based? Is it just Neptune? Or should we think about any other pieces that contributed to that slight weakness? Jason Conley: Yes. It was Neptune predominantly. I mean you had -- it was an acute impact in Q3. We always had a little bit of a tougher setup in Q4, but even aside from that, it was definitely down in both quarters -- it's Neptune, sorry Neptune. Operator: The next question comes from Joshua Tilton with Wolfe Research. Joshua Tilton: Hey guys, can you hear me? Neil Hunn: Yes. Joshua Tilton: I've been bounced around a few earnings this morning, so I apologize if it's already been asked. But I guess the #1 question for me is just, is there anything you can give us on the guidance front, specifically for organic revenue growth that could increase our confidence that like you derisked it enough. Maybe you could just like walk us through a little bit further on where the derisking is coming from Deltek versus Neptune and kind of what gives you the confidence that this is a good base to start for the rest of the year? Jason Conley: Yes. I mean I think we've given the outline by segment. And so I think Neil had framed at AS, we've got it at mid-single-digit growth. There could be a range there, and it really depends on Deltek's perpetual license activity and a little bit to a lesser extent, there's a couple of projects at our Transact business that might hit this quarter or next quarter. So that's sort of the range there. And so I think we've given you that. Network is going to be sort of mid-single-digit plus. I think we've -- a lot of that's recurring revenue. And the only thing that can move around is Truckers, right? They can come in and out of the DAT on a monthly basis. So we think we've sort of -- we've got that sort of boxed. And then on low single digits for TEP, I think we've identified where the challenges are for Neptune's tariff activity. NDI works on mostly backlog for the quarter. The others are a little bit less backlog. But just based on the trends and the call downs we had with the business, we feel like that's an appropriate number for the quarter. Joshua Tilton: Really appreciate the color. And just maybe for a quick follow-up. I really appreciate all the color you guys gave on the AI positioning that you guys have and some of the examples. I guess what I'm trying to understand is it feels like every company that we talk to is trying to race to be a winner in this AI world at a pace that we've kind of never seen before. Is there a dynamic? Or do you feel that maybe you guys have this unique AI think tank going on inside of Roper because you have a group or a portfolio of companies that are all marching towards the same AI goal? And then if that's the case, maybe could you share with us how they're sharing knowledge and best practices and what they're seeing across some of the use cases that are already being successful to kind of set up the rest of the portfolio to be just as successful in their AI endeavor? Neil Hunn: Yes, I appreciate that. So I don't know if I would go as far as say like there's some think tank sitting in Sarasota that's like crafting all this. What it is, is we have clarity of purpose, right? So when you're vertical market, system of record, you're going to evolve like system of work, it's everybody -- the portfolio construct is so similar that we're running basically the same play across the 20-plus software companies. There's common purpose and common understanding about that. Then there is a lot of information sharing. Every 3 weeks, there's an AI sort of showcase inside of Roper. We have a few hundred people in sort of talking about 1 company or 2 companies to highlight what they're doing internally or externally, architecture, commercial, whatever it may be. We send a weekly e-mail about sort of where the state of the technology is, the state of the evolution of AI to galvanize the leaders. There's telemetry we're putting into our planning process that we're looking for, for both the product road maps and internal productivity. The group executives who, as you know, coach 6 or 7 businesses each, those businesses are together all the time on all things related to business, AI being a big topic of it. And I could see us in the not-too-distant future, sort of adding some resources at the corporate office at the center that are an overlay to all of that, that are really sort of scanning the horizon for the -- enabling technologies are going and how to apply that technology. Because at the end of the day, this stuff is hard. I mean it's what we're trying to do to identify tasks and work where you have to be deterministic and not probabilistic. It's hard to do. It's good that it's hard because when you do something that's hard, you create this magical moment for your customer, and that's where you can sort of have this win-win relationship on value. And so we're super excited about all that, again, have this high right to win because of all the context and data and decades of sort of accumulated knowledge about how these verticals work. And the final thing I would say is the real unlock for really anything inside of Roper is our org structure, right? where this highly decentralized high-trust autonomous structure, taking an $8 billion P&L gets put into 29 units. You have super talented leadership teams that are highly motivated intrinsically and through our financial reward system to compete and win in the marketplace, and this is the new frontier on how to do that. Joshua Tilton: Sounds like a good setup for AI success. Operator: The next question comes from Terry Tillman with Truist Securities. Terrell Tillman: Two questions. The first question is on software bookings and specifically with Deltek. The second one is going to be DAT. So first, in terms of software bookings, I think you said high singles in 3Q. So what are you assuming in 4Q? And the second part of that first question is, and maybe this is wildly optimistic, but assuming at some point, the government shutdown thesis, could you actually get those licenses in still in November or December? Or are you just assuming that doesn't happen? And then I'll have that DAT follow-up. Jason Conley: So -- yes, so thanks for the question, Terry. So I think for the fourth quarter, we'll see how it plays out. We had a very strong Q4 last year. So the comps are a little tougher, but I think it's the end of the year. And obviously, the pipelines look very strong across our businesses. You're right about Deltek. We're not assuming that's going to hit this year, but we've also seen customers make very quick decisions in the last few days, especially if it's sort of -- they've got an internal budget dynamic that they can utilize. So we're not assuming that at this point, but I will say just for '26, we do feel really good about what [indiscernible] is going to mean for Deltek. Additionally, I mean, just Deltek's had -- the markets haven't been cooperative just in general for the last couple of years. So the demand is definitely there. Deltek has done a lot to their cloud product. They're incorporating a lot of the new AI features that are going to be cloud only. So that should help drive some higher conversion. That's one of our -- I think it's our biggest maintenance base at Roper. So excited about the future, just need to get past this quarter of sort of uncertainty. Terrell Tillman: Got it. And then, Neil, on Slide 12, I like that slide, shows kind of where you've delivered on the platform. I know with DAT, pricing and packaging was an important kind of growth unlock and improvement this year. But now you have this idea of one-click automation and then newer areas that seem like they've expanded the TAM around management and payments. Like is there any way you can frame like how much you can garner now per successful load or transaction going forward with some of this newer technology versus the past or the present as you laid out on that page? Neil Hunn: Yes. I appreciate it. So yes, you're right. So the strategy at DAT, and I've called this out for a few quarters, if not longer, is we have this remarkable business that's a network between brokers and carriers, and we monetize both sides of the network on a subscription basis. And we have -- what we have is the market captured, and we have very favorable go-to-market unit economics, especially on the carrier side because the carrier, you get your authority first, then you probably subscribe to DAT second, so you can understand where you're going to grab your load from. So they -- it's a very efficient go-to-market motion on capture there, very unique go-to-market motion relative to the unit economics. So then the strategy is how do you just scaffold more value on both sides of that network. And then the ultimate value creation is the one you're talking about, which is how you sort of take the labor -- the task labor out of the matching of a broker transaction. As we mentioned today, we broker about -- there's about 1.2 million loads a day on DAT. There's about $100 to $200 in task labor savings for each one of those that's automated. So you can apply whatever percentage you think is fair. I'm going to leave that open at the moment. We have a good indication internally, but some small percentage of the total loads and then some small percentage, a fair percentage of the labor task savings, and you'll get a very large sort of opportunity. Now that's the opportunity. Now we have to go equip it. You've got to make -- we've got to integrate this capability into the TMS of every broker, so it's native. You got to onboard a large portion of the carrier base into this, which we're actively doing. So we're super excited. The early results were like sold out on the broker front. So the early results for integration is great. But there's a business we've got to go build here. And the reason that we're unique in this is that we're truly Switzerland. Like we don't -- we're not competing with the brokers. We're enabling the brokers, and it's a huge value savings for both the brokers and the carriers. Operator: The next question comes from Deane Dray with RBC Capital Markets. Deane Dray: Just want to get a clarification on the timing delays at Neptune. Our experience has been, especially recently going through COVID is once a utility is ready to place an order, they're unlikely to switch. It's already gone through the rate case. It's all a pilot study and so forth. So have they lost any of these orders? Or this is strictly delay at this point? Neil Hunn: No, no, just to be super clear. This is pushed to the right. So what we've done, and I alluded to this in the prepared remarks, is we have this tariff coming through. We at Neptune decided we concurred fully that they're going to assess a surcharge, which then you've got to go essentially recontract or renegotiate with all the open orders about how to do that, and it just puts some gum into the system. It's a little bit easier when you're going through distribution to do that because you have a distribution partner, you can sort of share some of this surcharge with, but when you're doing the direct business, that's a little bit more difficult to do it and a little bit slower. So this is 100% pushed to the right. In fact, Neptune reports, I mean, there was a little market share gain in the quarter for Neptune, but these sort of market share quarter-to-quarter are sort of a point here, a point there, 0.5 point here, 0.5 point there, but the latest report is the share has actually improved a little bit with Neptune in the quarter. Deane Dray: That's really helpful. And then a follow-up, and I'll echo the -- how much we appreciate that spotlight on DAT. And just the idea, can you talk about the implications of making the investment in Convoy. You added that it's not profitable, but just the willingness to subsidize and make that investment so you have this end-to-end automation, but just the implications of a bolt-on that's not profitable. Neil Hunn: Yes. So I'll just -- I'll start and ask Jason to add a little bit of color. In our case, it was very -- it was a unique situation for us. It was very much a buy versus build. This is very complicated. It sounds very easy. It is very complicated, complex algorithms to do this. They have to be absolutely deterministic. It's more ML than AI. There's a very large group of talented engineers that came with the acquisition. They're now part of the DAT sort of franchise. And so it's unique in that it's money losing at the moment, but it's like the final piece to sort of manifest the strategy of DAT and because of what we talked about earlier, we have such high conviction of what's going to happen here. Jason Conley: Yes. I would just add that, I mean, most of our strategies call for tuck-ins that are adjacent and they sort of fold them in. It's like we just did Orchard for Clinisys. That's sort of the bread and butter that we would do for bolt-ons. This is really a technology acquisition that was -- it's really to create a new market. And so I would say that's very rare for us, but we think it's a great opportunity. And so we're willing to make that technology investment. Operator: The next question comes from Dylan Becker with William Blair. Faith Brunner: It's Faith on for Dylan. Maybe expanding on the DAT question. It seems like this end-to-end platform has been in the making for some time. So can you talk about where you see DAT growing as you continue to build out this network and the long-term potential there? And maybe even how this can drive durability despite some of the headwinds we're seeing in freight? Neil Hunn: Yes. So we want to -- so the DAT core business is a low double-digit growth business when you get the benefit of some unit growth versus just packaging and price. So that's the long-term sort of organic growth rate of the core business. When you talk about this sort of this entire sort of tracking automated business, we're talking about adding a capability that doesn't exist in the industry that is multiples of the existing TAM. And so we want to see actual momentum in there before we quote sort of what the acceleration magnitude could be to DAT, but it's exciting for sure. So I know that's a little bit of a -- but not an answer you're not looking for at the moment, but we want to actually see the growth on the field before we call the how much accelerated growth rate that's going to be there. Faith Brunner: All right. No, that's helpful. And then maybe just double-clicking on Deltek. Can you maybe remind us what you guys saw during past government shutdowns and the impact to the business and any potential insulation there? Neil Hunn: Yes, happy to do that. So just to remind everybody, Deltek is 60% GovCon, 40% non-GovCon. We're talking about the 60% of Deltek that's in GovCon. What we've seen is when you have the government shutdown, it's the pending -- it's the potential of the shutdown and the actual shutdown that it just pauses commercial activity. The activity is still there. The pipelines continue to build. There's still discussions because everybody knows the shutdown will end, the government will be operational again, and we have this OB3 spending where we have to -- all that will be awarded and has to be delivered. It's just -- in the height of the uncertainty, there's just not a lot of signing of the purchase orders or the contracts. If this were -- hypothetically, if this were happening in March, we would probably not be calling down the year because there'll be time left in the balance of the year to sort of for the commercial activity to sort of resolve itself. It's just we're sitting here in the last 2 or 3 months of the year, we're going to run the clock out on the year and roll into next year. Operator: The next question comes from Joe Giordano with TD Cowen. Joseph Giordano: Just looking at App Software, I mean, if we strip out the Deltek GovCon stuff for a second and just think about like the acceleration of organic here, what's the catalyst for this? I mean you look back, I mean, it's been small variance, but we're kind of like 3 years around 6%, give or take. So like what in your sense is like really the catalyst to bring this into like a high single to -- more of like a high single framework? Neil Hunn: Yes. So it certainly will help when your largest business -- the largest segment of your largest business can sort of grow at its normalized growth rate. I mean we're a couple of years into sort of a slowdown with the uncertainties across all the government sort of spending so that helps quite a bit when you look at that. We've had -- just going through the businesses, Vertafore is steady for us, a lot of AI opportunity in front of that business, probably takes -- I mean, we'll see some early green shoots of that next year, but as we said earlier, probably more '27. Aderant has been just killing it. PowerPlan, doing a great job. CentralReach will turn organic, which will help. Frontline has been a little sluggish for the last couple of quarters, couple of years -- a couple of quarters, largely because of some uncertainty around the funding coming from what's happening in Department of Education. You've got this hangover from all the COVID spending and it's just now that's getting more normalized. So frontline reaccelerating, which is in the offing in the next couple of years will be super helpful to that regard. And then finally, our Clinisys business for the U.S. part of our laboratory business, the legacy Sunquest has just lagged for all the reasons that everybody knows for 8 years, and now that's turning or that's a mid-single-digit organic growth enterprise for us now. So that starts to help. So we like what's happening here in terms of the growth optionality and growth capability. Joseph Giordano: When you think about the buyback now and you think about the multiple of your stock, like what's the thought process when you're weighing like, okay, here's a $1 billion opportunity here or $1 billion of deploying capital. Like it used to kind of be pretty straightforward with where the multiple your stock was versus the multiple of what you're acquiring, and now it's kind of -- it slipped a little bit. So maybe talk us through how much that's informing your decisions on where to allocate at a given moment in time. Neil Hunn: Yes. For us, it's never been about the multiple of our stock. It's been what's in the compounding math for a cash flow acceleration, what's the best deployment of capital to optimize the long-term cash flow compounding of the enterprise. And now we just have another lever to buyback to put into that consideration set. Operator: The next question comes from Julian Mitchell with Barclays. Julian Mitchell: Just wanted to start off with the outlook for TEP and Neptune, in particular, on the top line. So you had the backlog declining there for sort of 2-plus years. The revenue growth is slowing a little bit. So I just wondered sort of what's the confidence that, that organic growth on revenue doesn't continue slowing into next year, just given those backlog dynamics? Neil Hunn: Well, I think we got to -- so let's be clear about the backlog dynamic. This is about the buildup from the COVID period. I mean pre-COVID, this was -- you might have a couple of quarters of visibility to an order backlog. And it wasn't quite a book and ship business, but much more book and ship than it was when you ran up through COVID. And then all the customers gave us blanket orders that were a year plus out. Now we're -- when I spoke earlier, we're normalizing the order lead times slowly over time. So we -- the backlog grew and it's bleeding down based on this order timing dynamic. Set that apart from the demand environment, the market share environment. So that's point one. Point two, on the more normalizing piece at Neptune on the demand environment is we're just in a cycle now this year, probably next year, where we're just in normalized growth for that business, where the prior 2 or 3 years were accelerated growth because of the hangover from the COVID period. Julian Mitchell: That's very helpful. And then just my second one might be around sort of with all this effort around sort of AI, just wondered what the implication for that might be on your, let's say, core R&D. Is that -- could that be a bigger headwind to core margin expansion in future? And whether there's been any view to sort of looking to acquire more AI-intensive businesses within your overall capital deployment framework? Jason Conley: Yes. So actually, this is Jason. I think the -- it's interesting. We're getting quite a bit of activity using some of the frontier models out there, CloudCode, Codex, Cursor. And so we're not really seeing now. Obviously, we're going through our planning this year, but it's creating a lot of opportunity to just do more with less. And so that's the -- that's our posture is that our R&D envelope will probably stay the same, and we'll just get more out of it. And when it comes to acquisitions, look, yes, we'll look for small tuck-ins that we can do. We just did a really small one for Aderant, and that's not necessarily buying AI talent, but it's providing an AI solution that gets us faster to market. So we'll do those occasionally, I think it's not going to be our primary way to get after AI faster, but certainly will be an option. Operator: And this concludes our question-and-answer session. We will now return back to Zack Moxcey for closing remarks. Zack Moxcey: Thank you, everyone, for joining us today. We look forward to speaking with you during our next earnings call. Operator: And this -- the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.