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Operator: Good afternoon, ladies and gentlemen, and welcome to the Sylvania Platinum Limited Investor presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. After the company can review all questions submitted today and will publish responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Sylvania Platinum Limited. Jaco, good afternoon, sir. Johannes Prinsloo: Good afternoon, Jake, and thank you everyone for joining us for this presentation. And myself and our CFO, Lewanne Carminati, will be taking you through the presentation to discuss the highlights of this past financial year and also hopefully to answer some questions at the end of the presentation. I think maybe just as an introduction for anybody who's maybe new to the company and a bit of background. Sylvania is a low-risk cash generative dividend paying mid-tier platinum mining company that has been in operation for just over 17 years now. And at the heart of our business are the Sylvania Dump Operations, where we operate currently 6 chrome and PGM beneficiation plants on the Igneous Bushveld Complex in South Africa where we treat a combination of both historic and current chrome tailing sources as well as ROM chrome ore from our host mine partners. So while our 6, first 6 SDO operations, we're only generating a stable PGM revenue stream, our exciting new Thaba joint venture, which has just been commissioned during the past quarter. Now we'll also introduce an attractive diversified chrome revenue stream to our business. And I will touch a bit more detail -- in a bit more detail on this later in the presentation. While we also own some greenfield's PGM exploration assets that could offer some future growth optionality, the operational and financial performance that we will be discussing today relates purely to the production and revenue generated from the aforementioned Sylvania Dump Operations. If I just look to the results for the past financial year. I am very happy with a remarkable overall performance for the period under review. After revising our PGM production target twice during the past financial year, our Sylvania Dump Operations managed to deliver a new record PGM performance of 81,002 4E PGM ounces in 2025. That was higher than our ultimate guidance and also 11% improvement on the previous financial year. From a financial perspective, we saw a very encouraging improvement in the 4E PGM basket price, especially during the past 4 to 6 months, bringing the average basket price for the year to about $1,507 per ounce, which is an increase of nearly 13% year-on-year. And then if you combine this higher PGM basket price of the higher PGM production, it enabled us to post a net revenue of $104 million for the year, a 28% improvement on the previous year. Together with group cash costs that are well controlled and a good revenue performance, we were also fortunate then to post a 117% higher EBITDA for the year of $29.3 million for the year. Now once we take this very robust financial performance into account, our still attractive and positive cash balance that we have and considering it in line with our dividend policy, I'm very pleased that the Board has approved a final cash dividend of 2p per ordinary share, that's been declared and to be paid during December, which results in a total dividend for the year of about 2.75p if you want to consider also the interim dividend of 0.75p that we paid in February or declared in February this year. And comparing to the previous financial year, if we exclude the special dividend, we paid with regards to the process from Grasvally, this '25 finance total dividend is higher than the '24 financial year, and also materially higher than the minimum required under our dividend policy. So overall, a very good production and financial performance that we are proud of. Besides looking after our shareholders and retaining value, we also have a significant focus on the well-being of our employees and also in terms of the communities where we operate. And to that end, I am also very proud of our performance during the past year, where the company achieved the best overall safety performance in the history for 2025 in terms of the overall amount of injuries. And it also includes some significant milestones like the Doornbosch operation that achieved 13 years lost time injury free during the period as well as our entire Eastern Operation complex that achieved 1-year total injury free. So not even the medical treatment case during the period. If we just for a moment, look at the operational performance per se and what was driving the record PGM production performance, you will see that the primary driver during the past financial year was primarily our 18% improvement in PGM feed grades. And in particular there, what contributed was higher feed sources from our host mines, such as our Tweefontein and Mooinooi operations. The continuous treatment of higher-grade third-party material feed source and treated our Eastern Operations, as well as the new higher grade current arisings feed source we have -- that has been introduced at Lesedi since about October last year, and that all contributed to the higher PGM grades. For the period, our PGM feed tons was marginally down, some of it impacted by the abnormal heavy rains on this Western Bushveld at the beginning of the year as well as the intervention we had at the city to get it ready for the third party -- for the new current arisings material. From a growth point of view, I'm excited that our new Thaba Joint Venture operation is now commissioned, and we look forward to starting -- for it to start contributing, both in terms of PGMs, but also in terms of chrome revenues during 2026, which will ultimately assist to take our overall attributable production to between 83,000 and 86,000 ounces 4E in '26 and '27 when steady state is reached. But I will deal a bit more later in the presentation on Thaba specifically. In terms of our focus areas, obviously, our primary focus for this next year is to ramp up and optimize the Thaba operation now post commissioning. But at the same time, we also continue to ensure that the existing Sylvania Dump Operations are looked after and further optimized where possible. So -- and just maybe some of the most significant of these are the Lesedi optimization as the host mine run of mine feed at current arisings continue to ramp up during the -- which we expect during the second quarter of this financial year. And also then various other technical initiatives that is aimed at improving PGM concentrate quality and process efficiencies for both PGM and chrome recovery. So I'm going to hand over to Lewanne now to just take us through some of the financial highlights, and then I will talk some more on the market outlook and the -- our growth projects. Lewanne Carminati: Thanks, Jaco. So this year has been quite a successful year for the company, both operationally and financially. And the improvement in the basket price, although only in the latter part of the financial year had a significant impact on the profitability of the company and highlights once again just how sensitive the industry is to the PGM basket price. Sylvania had the benefit of the record production as well as the price improvements, which has translated into year-end financial results, which have exceeded our initial estimates. Our net revenue of $104 million is 28% higher than the prior year, and our costs are up 14%. Royalty tax reduced as a result of the additional CapEx allowances, reducing the percentage payable. The other expenses reduced 35% year-on-year. This cost is mainly general and admin costs at a corporate level, and the reduction from the prior year is as a result of the interest that was written off in 2024 on the settlement of the Grasvally transaction. Our corporate income tax is charged at 27% on taxable profits, which generated in South Africa. And the tax expense line also includes the movement in deferred tax and any dividend withholding taxes incurred on dividends which are declared from the operational entities in South Africa up to the parent, Sylvania Platinum. Full year, our earnings per share was $0.0773 against $0.226 in the prior year. If we look at our revenue in a little more detail, you'll see that the improvement in the metal price contributed 16% to our revenue and the higher production, an additional 12% to our revenue for the financial year. The 6E revenue split has remained fairly consistent with a slight shift between the palladium and rhodium contributions of about 2% and our EBITDA for 2025 more than doubled from the prior year and exceeded our previous estimates at half year. The major contributors, again, being the increase in the metal prices and the increased production. Looking forward to the new financial year, the EBITDA is forecast to increase quite significantly based on the latest consensus pricing, the slightly higher PGM ounces that we're forecasting as well as the introduction of chrome revenue. Moving on to the operational costs. Our current tailings retreatment operations incurred a cash cost of $759 per PGM ounce. Although the total operating costs were higher than the prior year, the cost per ounce remained in line with 2024 due to the higher ounces. Costs for the current year included a full year of third-party material. This was initially only planned up until June 2025. But this contract was extended in March with new pricing terms, and therefore, the slightly increased operational costs will continue into 2026. Although this does impact costs, the additional material does extend the life of the operations, and the higher-grade material increases ounce production. The other significant contributors to operational costs include labor being our largest cost, followed by the power and consumables. Our all-in sustaining costs reduced by 3% on the prior year, but the all-in cost for 2025 increased 14%. This was, however, in line with our capital spend for the year on tailing dams and the Thaba JV. The 2026 tailings dams' capital will result in the all-in cost remaining at around the $1,300 level, but then it will taper off to approximately $1,000 to $1,100 from 2027. As you'll see, the company has maintained a strong balance sheet with a net asset value of [ $244 million ] and a cash balance of $60 million at 30 June. During the year, the operations generated cash flows after tax of just under $20 million. The total tax paid out was $2.9 million, but we also received a refund from the prior year of $1.56 million. So the net effect of tax outflows was $2.3 million. Dividends actually paid out to shareholders in the financial year totaled $5.8 million. This was the final dividend from 2024 as well as the interim for 2025. In addition to the dividends paid, the company also spent $1 million on share buybacks. Our capital cash outflow for the year totaled $31 million. And this includes $16.6 million attributable spend on the Thaba JV, $7 million on tailings stands and $6 million on business improvement and strategic projects, which includes the filtration Plant as well as the collision avoidance system. The capital forecast for 2026 is at similar levels to the past financial year, around $32 million, with the largest spend being that on tailings dams of approximately $21 million. And then this tapers down to just under $10 million from 2027 when all the required tailings dams have been completed. Returning value to our shareholders through maintaining a sustainable business while also paying dividends and buying back shares is a priority for the Board. And as Jaco mentioned, a 2p final dividend for the year was declared, bringing our annual dividend to 2.75p. Including this final dividend, the company has returned $117 million to shareholders since 2018. And we've also bought back 65 million shares since 2015, of which 26 million have been canceled. The company's capital allocation framework provides a balance for allocating capital to sustain our operations, drive long-term growth and consistently return value to our shareholders. Now I hand back to Jaco for the company and market outlooks. Johannes Prinsloo: Thank you, Lewanne. And I think yes, now that we have discussed an overview of the past periods performance and also hopefully demonstrated how we are adding significant return and value to our shareholders. It's important also how we consider, how we aim to continue growing the business, so that we can sustain attractive returns also into the future. So from a growth perspective, we basically have 2 ways of approaching growth in terms of our strategy. Firstly, we continuously look at how we can unlock further potential and value from our existing suite of assets, and these include our current dump operations as well as our various own exploration assets. And I think we've done that very successfully over the years. So growing our production profile from about 10,000 ounces in the initial stages to more than 80,000 ounces achieved this year. And then secondly, we are looking to create value from external growth opportunities where we can replicate our proven operating model and leverage our successful track record and expertise. And 1 such opportunity is the Thaba Joint Venture operation that we have embarked on in collaboration with our partners at Limberg Chrome Mine. So just before giving you an update on the current project progress, let me maybe briefly give you a little update or recap of what the project is about. The Thaba JV project represents significant and exciting diversification for the company in terms of our product portfolio in the sense that it now adds significant chromite concentrate revenue to the business, whereas our current Sylvania Dump Operations only generate PGM revenue stream. And it further combines the proven expertise in PGM recovery of Sylvania with our JV partners' extensive experience in chrome operations. And that assist us to leverage strength of both companies to the maximum benefit of the JV. So from an attributable point of view, the Thaba JV will increase Sylvania's existing 4E PGM production profile by about 9% at steady state and also introduced about 210,000 tons of attributable chrome revenue to Sylvania, so chrome product and there's an attractive revenue stream once that's steady state. And I think the total revenue for the project at steady state is about $33 million a year, of which about 75% originates from the chrome production and about 25% from our PGM sales based on the current pricing assumptions. Based on the current PGM and chrome price assumptions, this will also equate to around $18 million to $20 million of attributable EBITDA for the group. I think it's maybe just important to note here because this is the mining operations. Our waste stripping costs on the mining is capitalized, and therefore, we've included the all-in sustaining cost graph at the bottom. So there's about $67 million of sustaining capital that will go towards stripping to be taken exploration in terms of the EBITDA. But overall, a very attractive project still with gross profit margin of 35% to 40% depending on metal prices. And as we said, within a 3- to 4-year simple payback on the operation. If we look at the -- in terms of project execution and operational readiness, I'm very pleased that the plant construction and commissioning phases are now complete and that we're currently in the operational ramp-up phase. Unfortunately, like many projects of this nature and complexity, we also had some challenges. One obvious include the impact of abnormally higher rainfall over the months of November to -- November '24 to January '25 that's affected the critical path of the project can ultimately cause some delays during the final construction phases. We also had a safety-related incident here in June with electrical injury that resulted in suspension of electrical work impacted on the final commissioning phase of the project. And ultimately, also during recent months as we were ramping up the production towards full capacity throughput, there were some challenges emerging on our interim power supply agreement -- arrangement while our new primary Eskom substation is still under construction, and that resulted in us adjusting our ramp-up schedule slightly. So we did, however, put some mitigation measures in place with additional generators brought on site, which we've commissioned over the past weekend in order to reduce our reliance on the current old rural Eskom power supply line and improved our power stability so that we can ramp up the project. And then we also look forward to the completion of the primary -- new primary supply facility towards the end of October. So we now expect the operation to reach steady state during the third quarter of 2026. However, despite the revised ramp-up plan, as I mentioned earlier, the project investment fundamentals remained robust. There's still a very attractive project that is on track to become a significant revenue contributor for the company asset reach full operational capacity. These are just some pictures from the operation for information. I think at the top left shows a nice view of the chrome primary ROM and secondary fine chrome spiral plants. The bottom left is our primary and secondary mills, also some flotation cells and our [ flotation ] stages. So overall, certainly a very impressive and a world-class project that we have constructed. If we look at growth beyond Thaba, we're also currently busy investigating a number of alternative opportunities with the aim of either increasing the existing PGM ounce profile or to add alternative revenue streams like chrome in like we've done for the Thaba JV or alternatively exploring how to extend life of existing operations. So while this slide do include Thaba and also Lesedi current arisings and the third-party source material I already mentioned, I'm just maybe focusing on 1 or 2 initiatives not mentioned earlier, one being our new Eastern Limb treatment facility that is currently under investigation. We have initiated a pre-feasibility study during the past financial year to determine if we should focus on either just a dump only or a dump and run of mine materials, similar like the Thaba JV and when and how to progress with the feasibility study and execution. And we expect to have an outcome of the pre-feasibility study towards the end of this financial year. And then finally, we continue with ongoing technical and commercial due diligences on various complementary projects and opportunities, and we specifically look at those opportunities and projects that aligned with our current skills and expertise and especially where there is a coproduction potential like Thaba with the chrome and PGMs. And we're quite confident that we will continue to grow the company's production profile going forward. If we look at the -- just a bit on the market overview and what has happened on PGMs during the past year and especially recent months. I think it's worth standing still for a moment, just considering the industry PGM cost curve. The latest one is compiled by Nedbank Corporate Investment Banking. And I think when we compare this to the same cost curve of about 6 months ago, we can see that there's been so much needed relief for PGM producers. 6 months ago, nearly half the industry or something -- sometimes even more of the producers were loss-making from a cash cost plus capital point of view. And with the recent improvement in PGM prices only about 20% of the industry seems to be loss-making at the current PGM basket prices. Certainly, a significant improvement and creating a bit of breathing space for PGM producers. I think also noteworthy from this graph is that Sylvania is still very nicely positioned in the bottom quartile of the PGM cost curve. And what that means for us is that when prices are subdued or tough, like it's been for 2 years, Sylvania is able to still generate attractive cash in a down cycle to fund both our growth aspirations and return value to our shareholders. And when we have a positive price environment, it enables us to capitalize further on this and generate additional cash either for distribution to our shareholders or to reinvest in growth of the company. Before I maybe just move on to the supply and demand fundamentals. Just on the left of this slide is reminding you about Sylvania's PGM basket composition or the prill split. And we -- about -- in our prill split, specifically Sylvania, we have about 12% rhodium and 65% platinum and this makes up more than, say, more than 74% of our total 6E revenue while palladium at 23% is also still significant. And I think especially what we're starting to see as there has been significant price movements is that the miner by products like iridium and ruthenium is becoming more significant and added about 14% of our 6E revenue during the past year. Looking at the various -- at the PGM market per se, from a demand perspective, Auto Catalysts still is one of the biggest drivers of demand and the most significant aspects for us to consider, especially from palladium and rhodium, that's primarily Auto Catalysts consumption. But also, we've seen some interesting movements either platinum over the years. While the growth -- the estimate sales for 2025 is the outlook is about 91 million to 92 million units, it's slightly down from the beginning of the year before some of the tariff rates from the U.S. The outlook was probably close to 94 million vehicles, but still a good improvement on recent years. And combining that with the fact that plug-in hybrid electric vehicles and range extended vehicles, growth rate is outpacing that of the pure battery electric vehicles means so there's still a good demand for Auto Catalysts. So overall, we remain confident of that. And I think finally, also, there's been some increase in the loadings per vehicle in China following a long period where they lagged international peers. So certainly, the Auto Cats some interesting developments. From other demands in the industry, platinum in particular, is -- has seen quite an interesting demand increase in jewelry, and that comes -- especially when gold jewelry and the current gold price, the price parity between gold and PGMs is such that consumers are now buying a lot more platinum jewelry. Platinum, obviously, also has very good applications and future in terms of the energy transition and hydrogen economy and then also in the glass-making industry. So strong fundamentals for platinum. I think rhodium, maybe noteworthy is and we've seen quite a recovery in the rhodium price during recent months. And part of that is with the reintroduction or increasing of rhodium being the glass makers bushings, when rhodium was at all-time high, some of the glass makers were eliminating or reducing rhodium content. But to -- considering durability of the bushings and manufacturing process, they are reintroducing rhodium to a larger extent. From a supply perspective, I have mentioned that there has been recently some relief for PGM producers. But I think what is important to consider is that the short-term relief we've seen in the price so far is not enough to overturn the impact of the significant decline in capital investment and production cuts that have been instituted and evolved over the past decade. So certainly, South African PGM supply on the long term in terms of platinum, rhodium and then also ruthenium is expected to tighten. Outside of South Africa, obviously, the North American palladium supply, is still under pressure with palladium relative low prices and low margins. And there's been quite a bit of restructuring and production cuts at many of the North American operations. So what does that mean for our outlook on PGMs overall? I think we know that platinum, palladium, and rhodium are in deficit for '25. Platinum, palladium still in '26. There's a small swing of rhodium in '26 and '27, but with rhodium having so much lower volumes and a small change in the market can easily swing it from a surplus to a deficit, and I think that's why the rhodium prices is always volatile, and we still maintain a robust outlook on the rhodium as well. From a chrome perspective, I'm not going to talk in too much detail about it, just that we know the bulk of the consumption for ferrochrome is in the stainless-steel industry, and we know the stainless-steel industry is consistently growing at 4% to 6% per annum. And while we acknowledge that the global economic growth rates and also some of the tariff threats and uncertainty from the U.S. to impact short-term consumer trends and industrial development, the long-term demand is robust. And from a supply point of view, so Africa is the largest chrome ore producer in the world. And obviously, with a number of chrome operations and the growing PGM demand, we believe that there will be a tight balance in terms of supply demand going forward. So we maintain a favorable outlook in terms of chrome prices going forward. So overall, we are quite positive for both the PGM and the chrome markets. Before closing, I'm going to just add back or transfer back to Lewanne to just talk us through a brief overview of our ESG performance, and then I'll close the presentation. Lewanne Carminati: Just, yes, as Jaco said briefly on the ESG, I think over the years, we've demonstrated that sustainability is more than just regulatory compliance for Sylvania, and we're quite proud of the ongoing progress that we've made in all aspects of ESG. On the environmental side, excuse me, management of the tailings dams under our control is critical to our business, and we ensure compliance with the South African regulatory requirements and align the management of these with GISTM through ongoing monitoring and annual audits. We also understand the water stewardship is very important given the increasing scarcity of this resource. We're continuously improving our measurement accuracy at the operations, enabling more reliable tracking of flows and losses. And we're also now able to monitor the use of recycled water more efficiently, reducing the need for fresh top-up water. Our revegetation program is progressing well, and we are planning the first full-scale rehabilitation of a tailings dam in the new financial year. Under the social and governance banners, as Jaco mentioned, we are exceptionally proud of our safety records and achievements, especially the Doornbosch operation achieving 13 years LTI-free. The Board and management are committed to diversity and equity throughout the group, and we continue to train and develop our employees through various platforms. We've also made significant contributions to the South African economy where we operate, and this is through the payment of taxes, the use of local suppliers and remuneration payments to our employees. We'll obviously continue to build on these key sustainability focus areas, and we are publishing our annual ESG report in October. So please do look out for that. Johannes Prinsloo: Thank you, Lewanne, for that as well. I think maybe just then -- what's next? What can we expect for '26 and beyond? I think just briefly, I've mentioned earlier, our primary focus at the moment is to ramp up the Thaba JV operation. And you can expect steady state production to be achieved at Thaba during the third quarter, and that's what we're aiming towards. We also expect the host mines new ROM commissioned plant Lesedi to continue ramping up and is likely to achieve steady state by December this year. And then we expect a continued strong performance from our existing SDO operations. And we believe that a lot of the positive momentum from this past record year is being carried through into the next financial year, and we have a positive outlook. And therefore, we have a production target of 83,000 to 86,000 ounces of 4E PGMs for the year, and also estimating 100,000 to 130,000 tons of chromite concentrate from Thaba to be added to our production for the year, and in which will ultimately '27 onwards, increased to around 200,000 tons as the state. We further expect the PGM metal price to be stronger than '25, and we -- our current forecast pricing equated to about $1,800 an ounce, $1,809 for '26, increasing up to about $1,890 in '27 compared to $1,500 per ounce of '25. But we also -- while you consider the current spot price is sitting at about $1,900 to $1,960, we do we think that is realistic. So the solid bars on the EBITDA represent those price outlooks, but we do, as always, illustrate what a 10% movement in either chrome or PGM price would have on the PGMs. So overall, a positive outlook for us on the year, both in terms of production and EBITDA. So I think in closing, I'm very happy with our performance for the past year, both from a production and a financial perspective. And I think we again illustrated that we are a very attractive company in terms of delivering on what we set out to do and promise to the market, delivering on our performance targets and consistently delivering strong value and returns for our shareholders. So thank you again for everybody's support and also, we're looking forward to the year ahead. I think maybe just finally, I want to mention and maybe as we are at the end of the presentation, I'll put my screen. I think Lewanne also put her camera back on. I think I want to take the opportunity [Technical Difficulty] as many of you have seen that we have announced that Lewanne after 16 years with the company, have decided to step down from her position as CFO and also a Director of the Board at the end of October to pursue some -- at the end of November, sorry, the 30th November to pursue some personal aspirations and objectives. And we thank to Lewanne for the valuable contribution over the 16 years with Sylvania and also for being an integral part of our senior management team and the executive. She's been integral part of the team for a long time and contributed significantly to the management team, to myself and my role and also to the Board. I'm also happy to announce that Ms. Ronel Bosman, our current Executive Officer, Finance who's been with the company since 2021 and been an integral part of our senior management team in Sylvania will be taking over the reins from Lewanne on the 1st of December. And I also welcome Ronel, and congratulate her for being selected for the role, and I expect a seamless transition in that regard. But I just thought it's worth taking Lewanne as well for the contributions today. So yes, with that, Jake, I'll maybe hand back to you. Lewanne Carminati: Sorry may -- if I may. Thank you, Jaco. Thanks for the kind words. I just also wanted to thank you and the whole team from Sylvania for the past 16 years. It has been an incredible journey of growth, learning and teamwork. And I think it has been a genuine privilege to serve as CFO of Sylvania and as a director. And I'm extremely proud of everything that we've accomplished as a company and a team over the 16 years. I also wanted to just take this opportunity to thank all investors for the trust and support over the years and to reassure them that the company is in excellent hands as Ronel steps into the role in December. I'm really, really excited for what lies ahead for the company, and I'm quite confident that Sylvania will keep to -- keep building on its success and delivering value to its shareholders. Thank you. Operator: Perfect guys. If I may just jump back in. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] But just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. As you can see there, we have received a number of questions throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions. But Jaco, Lewanne, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Johannes Prinsloo: Thank you, Jake. Yes. If I look at the questions, I think maybe the first one is about PGM markets and specifically in terms of the price of rhodium that have risen significantly during the year. And that's how I would just ask for the main reasons. I think I've mentioned the fact that the reintroduction and the increase of rhodium loadings in the glass maker industry has improved. So that's one of the aspects. What I probably did not touch on a lot was what we have seen on both -- well, on all 3 metals, platinum, palladium, and rhodium is that the current above surface stocks are also significantly lower, they're between a 5- and 7-year lows at the moment. And I think if people look at the supply-demand balance and considering that the surface stocks have been reducing, there has been some additional buying and then also price movement in rhodium. So that, I think, is in terms of rhodium. The second question also deals with rhodium and somebody have asked that given the change in the cycle of precious metal in recent months and the share buybacks from the company seems to have been to the benefit of shareholders, may I ask that during the sudden downturn in rhodium price over the last year as the company withheld some of the reserves to sell at a time like this to take advantage of the sudden cycle -- the up cycle? And if not, what was the reason behind not holding on to reserves during downturn? I understand that the cash reserves have been mostly maintained and used to the joint venture, but I would hope that this action was also done with the reserves of the precious metals in the company's position during those periods. Might also ask what the time frame is for holding reserves and what percentage permitted by the company if there is a legal requirement to do so. Many thanks. So okay, I think maybe 2 things is due to the nature of the PGM product that we produce and our offtake with our smelters, we are not able to hold back reserves in the company. But I think it also comes to a question that somebody -- some investors asked us before about does the company hedge any of our products. We don't have a policy of hedging any products, and we don't have intentional policy of holding back any reserves or stock. So yes, unfortunately, that we don't do that in terms of the metals. I don't think there's necessarily legislation that prevents you from doing it that the practicalities of handling and being able to store stock and also the security aspects around that means that it is not something that is commonly done in the industry. If I move to the next question, it's something just asked what the current 4E basket price is for August. August was -- between August and now, we ranged between $1,900 and $1,960 per ounce 4E. So it is higher -- significantly higher than what we closed the past financial year on. And it is also higher than what the consensus forecast that we use for our forward-looking EBITDA statements. Another question to ask if the Board will consider a new buyback program. Lewanne, maybe you can just touch briefly on the capital allocation policy and also how we discuss the buybacks. Lewanne Carminati: Yes. So we've recently formalized our capital allocation framework. And we, as I said in the -- during the presentation, we prioritized maintaining a sustainable business, long-term growth and then returns to shareholders. This is mainly through dividends, and there is no formal policy around buybacks. But the Board does review this at every Board meeting and does implement share buybacks on an opportunistic basis when the share price moves through certain thresholds and there is surplus cash. So it's certainly -- the Board will consider further buybacks, but it will be very dependent on other cash requirements as well as what the market is doing at the time. Johannes Prinsloo: Thank you, Lewanne. Then somebody also asked and say, thanks. They start -- the question is impressive. Thank you very much for that. And then also ask what is the platinum price that we're using in the revenue forecast. So we have touched in the back of the presentation in the appendix, our metal price assumptions. But just to guide you, the platinum price forecast $1,319 is consensus forecast for '26. That forms part of the total price, and as I said, $1,809 is fully basket price, but we do have a breakdown per year and per element of the metal prices used in our EBITDA and revenue forecast in the presentation. So that is there. And then -- another question about further buybacks, but I believe Lewanne have answered that one. And I think the last question that I can see on the screen here is just saying with the current metal prices, could we see a significant increase in the earnings per share in 2026. And I think we have illustrated with the amounts of shares and issue and the EBITDA rising. Yes, there would be an improvement in earnings per share, and we do include that in the outlook slide. There's one last question that's just come in. As I've been talking to say if platinum spikes to USD 2,500, would your company please consider locking in some production revenue via hedging? Thank you. And I think it ties back to maybe the previous question where we had to say we just, there's not a formal hedging policy in place. But certainly, as I said, I think if we get to those prices, there should hopefully be very attractive returns to our shareholders. Jake, I think that is handling all the questions -- sorry. Just as I said, I'll handle there's another one that's just come in to say how familiar are the analysts following the stock with the chromite impact on the company in the coming 2 to 3 years. Look, I think the -- quite a few of the analysts that are covering us and looking at our business model are also familiar, for instance, with a model of Tharisa Minerals, that is chrome and PGMs and also listed on the LSE here in London. So I do think that there is some good experience and understanding of how the chrome and PGMs impact the revenue streams. And yes, I think that is the bulk of the questions that we have. So Jake, let me hand back to you. Operator: Perfect guys. That's great. And thank you very much indeed for being so advanced of your time and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Jaco, perhaps before really now just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments, just to wrap up with, that would be great. Johannes Prinsloo: Thank you, Jake. Look, as I mentioned earlier, I'm very thankful to the contribution of our management, all our employees and our staff. We made this past year contributed towards a very successful year that was just completed. And as I said, I hope we can demonstrate to our shareholders that we remain an attractive company to invest in, to support and that we can continue to generate very attractive cash from our operations, both the existing as well as the Thaba JV that will be ramping up in the new year. So there's, I think, a couple of very exciting things to look out for the company. And we certainly remain committed despite having still some significant capital allocation to our tailings dams and growth projects as we've communicated. We still remain very committed to maintain very good returns to our shareholders for a balance of dividends and share buybacks. So I hope whether we can continue to do that for well into the future. So thank you very much for your time. Thank you for your support, and I'll leave it at that. Operator: Yes. Okay. That's great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team of Sylvania Platinum Limited, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Sylvania Platinum Limited Investor presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. After the company can review all questions submitted today and will publish responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Sylvania Platinum Limited. Jaco, good afternoon, sir. Johannes Prinsloo: Good afternoon, Jake, and thank you everyone for joining us for this presentation. And myself and our CFO, Lewanne Carminati, will be taking you through the presentation to discuss the highlights of this past financial year and also hopefully to answer some questions at the end of the presentation. I think maybe just as an introduction for anybody who's maybe new to the company and a bit of background. Sylvania is a low-risk cash generative dividend paying mid-tier platinum mining company that has been in operation for just over 17 years now. And at the heart of our business are the Sylvania Dump Operations, where we operate currently 6 chrome and PGM beneficiation plants on the Igneous Bushveld Complex in South Africa where we treat a combination of both historic and current chrome tailing sources as well as ROM chrome ore from our host mine partners. So while our 6, first 6 SDO operations, we're only generating a stable PGM revenue stream, our exciting new Thaba joint venture, which has just been commissioned during the past quarter. Now we'll also introduce an attractive diversified chrome revenue stream to our business. And I will touch a bit more detail -- in a bit more detail on this later in the presentation. While we also own some greenfield's PGM exploration assets that could offer some future growth optionality, the operational and financial performance that we will be discussing today relates purely to the production and revenue generated from the aforementioned Sylvania Dump Operations. If I just look to the results for the past financial year. I am very happy with a remarkable overall performance for the period under review. After revising our PGM production target twice during the past financial year, our Sylvania Dump Operations managed to deliver a new record PGM performance of 81,002 4E PGM ounces in 2025. That was higher than our ultimate guidance and also 11% improvement on the previous financial year. From a financial perspective, we saw a very encouraging improvement in the 4E PGM basket price, especially during the past 4 to 6 months, bringing the average basket price for the year to about $1,507 per ounce, which is an increase of nearly 13% year-on-year. And then if you combine this higher PGM basket price of the higher PGM production, it enabled us to post a net revenue of $104 million for the year, a 28% improvement on the previous year. Together with group cash costs that are well controlled and a good revenue performance, we were also fortunate then to post a 117% higher EBITDA for the year of $29.3 million for the year. Now once we take this very robust financial performance into account, our still attractive and positive cash balance that we have and considering it in line with our dividend policy, I'm very pleased that the Board has approved a final cash dividend of 2p per ordinary share, that's been declared and to be paid during December, which results in a total dividend for the year of about 2.75p if you want to consider also the interim dividend of 0.75p that we paid in February or declared in February this year. And comparing to the previous financial year, if we exclude the special dividend, we paid with regards to the process from Grasvally, this '25 finance total dividend is higher than the '24 financial year, and also materially higher than the minimum required under our dividend policy. So overall, a very good production and financial performance that we are proud of. Besides looking after our shareholders and retaining value, we also have a significant focus on the well-being of our employees and also in terms of the communities where we operate. And to that end, I am also very proud of our performance during the past year, where the company achieved the best overall safety performance in the history for 2025 in terms of the overall amount of injuries. And it also includes some significant milestones like the Doornbosch operation that achieved 13 years lost time injury free during the period as well as our entire Eastern Operation complex that achieved 1-year total injury free. So not even the medical treatment case during the period. If we just for a moment, look at the operational performance per se and what was driving the record PGM production performance, you will see that the primary driver during the past financial year was primarily our 18% improvement in PGM feed grades. And in particular there, what contributed was higher feed sources from our host mines, such as our Tweefontein and Mooinooi operations. The continuous treatment of higher-grade third-party material feed source and treated our Eastern Operations, as well as the new higher grade current arisings feed source we have -- that has been introduced at Lesedi since about October last year, and that all contributed to the higher PGM grades. For the period, our PGM feed tons was marginally down, some of it impacted by the abnormal heavy rains on this Western Bushveld at the beginning of the year as well as the intervention we had at the city to get it ready for the third party -- for the new current arisings material. From a growth point of view, I'm excited that our new Thaba Joint Venture operation is now commissioned, and we look forward to starting -- for it to start contributing, both in terms of PGMs, but also in terms of chrome revenues during 2026, which will ultimately assist to take our overall attributable production to between 83,000 and 86,000 ounces 4E in '26 and '27 when steady state is reached. But I will deal a bit more later in the presentation on Thaba specifically. In terms of our focus areas, obviously, our primary focus for this next year is to ramp up and optimize the Thaba operation now post commissioning. But at the same time, we also continue to ensure that the existing Sylvania Dump Operations are looked after and further optimized where possible. So -- and just maybe some of the most significant of these are the Lesedi optimization as the host mine run of mine feed at current arisings continue to ramp up during the -- which we expect during the second quarter of this financial year. And also then various other technical initiatives that is aimed at improving PGM concentrate quality and process efficiencies for both PGM and chrome recovery. So I'm going to hand over to Lewanne now to just take us through some of the financial highlights, and then I will talk some more on the market outlook and the -- our growth projects. Lewanne Carminati: Thanks, Jaco. So this year has been quite a successful year for the company, both operationally and financially. And the improvement in the basket price, although only in the latter part of the financial year had a significant impact on the profitability of the company and highlights once again just how sensitive the industry is to the PGM basket price. Sylvania had the benefit of the record production as well as the price improvements, which has translated into year-end financial results, which have exceeded our initial estimates. Our net revenue of $104 million is 28% higher than the prior year, and our costs are up 14%. Royalty tax reduced as a result of the additional CapEx allowances, reducing the percentage payable. The other expenses reduced 35% year-on-year. This cost is mainly general and admin costs at a corporate level, and the reduction from the prior year is as a result of the interest that was written off in 2024 on the settlement of the Grasvally transaction. Our corporate income tax is charged at 27% on taxable profits, which generated in South Africa. And the tax expense line also includes the movement in deferred tax and any dividend withholding taxes incurred on dividends which are declared from the operational entities in South Africa up to the parent, Sylvania Platinum. Full year, our earnings per share was $0.0773 against $0.226 in the prior year. If we look at our revenue in a little more detail, you'll see that the improvement in the metal price contributed 16% to our revenue and the higher production, an additional 12% to our revenue for the financial year. The 6E revenue split has remained fairly consistent with a slight shift between the palladium and rhodium contributions of about 2% and our EBITDA for 2025 more than doubled from the prior year and exceeded our previous estimates at half year. The major contributors, again, being the increase in the metal prices and the increased production. Looking forward to the new financial year, the EBITDA is forecast to increase quite significantly based on the latest consensus pricing, the slightly higher PGM ounces that we're forecasting as well as the introduction of chrome revenue. Moving on to the operational costs. Our current tailings retreatment operations incurred a cash cost of $759 per PGM ounce. Although the total operating costs were higher than the prior year, the cost per ounce remained in line with 2024 due to the higher ounces. Costs for the current year included a full year of third-party material. This was initially only planned up until June 2025. But this contract was extended in March with new pricing terms, and therefore, the slightly increased operational costs will continue into 2026. Although this does impact costs, the additional material does extend the life of the operations, and the higher-grade material increases ounce production. The other significant contributors to operational costs include labor being our largest cost, followed by the power and consumables. Our all-in sustaining costs reduced by 3% on the prior year, but the all-in cost for 2025 increased 14%. This was, however, in line with our capital spend for the year on tailing dams and the Thaba JV. The 2026 tailings dams' capital will result in the all-in cost remaining at around the $1,300 level, but then it will taper off to approximately $1,000 to $1,100 from 2027. As you'll see, the company has maintained a strong balance sheet with a net asset value of [ $244 million ] and a cash balance of $60 million at 30 June. During the year, the operations generated cash flows after tax of just under $20 million. The total tax paid out was $2.9 million, but we also received a refund from the prior year of $1.56 million. So the net effect of tax outflows was $2.3 million. Dividends actually paid out to shareholders in the financial year totaled $5.8 million. This was the final dividend from 2024 as well as the interim for 2025. In addition to the dividends paid, the company also spent $1 million on share buybacks. Our capital cash outflow for the year totaled $31 million. And this includes $16.6 million attributable spend on the Thaba JV, $7 million on tailings stands and $6 million on business improvement and strategic projects, which includes the filtration Plant as well as the collision avoidance system. The capital forecast for 2026 is at similar levels to the past financial year, around $32 million, with the largest spend being that on tailings dams of approximately $21 million. And then this tapers down to just under $10 million from 2027 when all the required tailings dams have been completed. Returning value to our shareholders through maintaining a sustainable business while also paying dividends and buying back shares is a priority for the Board. And as Jaco mentioned, a 2p final dividend for the year was declared, bringing our annual dividend to 2.75p. Including this final dividend, the company has returned $117 million to shareholders since 2018. And we've also bought back 65 million shares since 2015, of which 26 million have been canceled. The company's capital allocation framework provides a balance for allocating capital to sustain our operations, drive long-term growth and consistently return value to our shareholders. Now I hand back to Jaco for the company and market outlooks. Johannes Prinsloo: Thank you, Lewanne. And I think yes, now that we have discussed an overview of the past periods performance and also hopefully demonstrated how we are adding significant return and value to our shareholders. It's important also how we consider, how we aim to continue growing the business, so that we can sustain attractive returns also into the future. So from a growth perspective, we basically have 2 ways of approaching growth in terms of our strategy. Firstly, we continuously look at how we can unlock further potential and value from our existing suite of assets, and these include our current dump operations as well as our various own exploration assets. And I think we've done that very successfully over the years. So growing our production profile from about 10,000 ounces in the initial stages to more than 80,000 ounces achieved this year. And then secondly, we are looking to create value from external growth opportunities where we can replicate our proven operating model and leverage our successful track record and expertise. And 1 such opportunity is the Thaba Joint Venture operation that we have embarked on in collaboration with our partners at Limberg Chrome Mine. So just before giving you an update on the current project progress, let me maybe briefly give you a little update or recap of what the project is about. The Thaba JV project represents significant and exciting diversification for the company in terms of our product portfolio in the sense that it now adds significant chromite concentrate revenue to the business, whereas our current Sylvania Dump Operations only generate PGM revenue stream. And it further combines the proven expertise in PGM recovery of Sylvania with our JV partners' extensive experience in chrome operations. And that assist us to leverage strength of both companies to the maximum benefit of the JV. So from an attributable point of view, the Thaba JV will increase Sylvania's existing 4E PGM production profile by about 9% at steady state and also introduced about 210,000 tons of attributable chrome revenue to Sylvania, so chrome product and there's an attractive revenue stream once that's steady state. And I think the total revenue for the project at steady state is about $33 million a year, of which about 75% originates from the chrome production and about 25% from our PGM sales based on the current pricing assumptions. Based on the current PGM and chrome price assumptions, this will also equate to around $18 million to $20 million of attributable EBITDA for the group. I think it's maybe just important to note here because this is the mining operations. Our waste stripping costs on the mining is capitalized, and therefore, we've included the all-in sustaining cost graph at the bottom. So there's about $67 million of sustaining capital that will go towards stripping to be taken exploration in terms of the EBITDA. But overall, a very attractive project still with gross profit margin of 35% to 40% depending on metal prices. And as we said, within a 3- to 4-year simple payback on the operation. If we look at the -- in terms of project execution and operational readiness, I'm very pleased that the plant construction and commissioning phases are now complete and that we're currently in the operational ramp-up phase. Unfortunately, like many projects of this nature and complexity, we also had some challenges. One obvious include the impact of abnormally higher rainfall over the months of November to -- November '24 to January '25 that's affected the critical path of the project can ultimately cause some delays during the final construction phases. We also had a safety-related incident here in June with electrical injury that resulted in suspension of electrical work impacted on the final commissioning phase of the project. And ultimately, also during recent months as we were ramping up the production towards full capacity throughput, there were some challenges emerging on our interim power supply agreement -- arrangement while our new primary Eskom substation is still under construction, and that resulted in us adjusting our ramp-up schedule slightly. So we did, however, put some mitigation measures in place with additional generators brought on site, which we've commissioned over the past weekend in order to reduce our reliance on the current old rural Eskom power supply line and improved our power stability so that we can ramp up the project. And then we also look forward to the completion of the primary -- new primary supply facility towards the end of October. So we now expect the operation to reach steady state during the third quarter of 2026. However, despite the revised ramp-up plan, as I mentioned earlier, the project investment fundamentals remained robust. There's still a very attractive project that is on track to become a significant revenue contributor for the company asset reach full operational capacity. These are just some pictures from the operation for information. I think at the top left shows a nice view of the chrome primary ROM and secondary fine chrome spiral plants. The bottom left is our primary and secondary mills, also some flotation cells and our [ flotation ] stages. So overall, certainly a very impressive and a world-class project that we have constructed. If we look at growth beyond Thaba, we're also currently busy investigating a number of alternative opportunities with the aim of either increasing the existing PGM ounce profile or to add alternative revenue streams like chrome in like we've done for the Thaba JV or alternatively exploring how to extend life of existing operations. So while this slide do include Thaba and also Lesedi current arisings and the third-party source material I already mentioned, I'm just maybe focusing on 1 or 2 initiatives not mentioned earlier, one being our new Eastern Limb treatment facility that is currently under investigation. We have initiated a pre-feasibility study during the past financial year to determine if we should focus on either just a dump only or a dump and run of mine materials, similar like the Thaba JV and when and how to progress with the feasibility study and execution. And we expect to have an outcome of the pre-feasibility study towards the end of this financial year. And then finally, we continue with ongoing technical and commercial due diligences on various complementary projects and opportunities, and we specifically look at those opportunities and projects that aligned with our current skills and expertise and especially where there is a coproduction potential like Thaba with the chrome and PGMs. And we're quite confident that we will continue to grow the company's production profile going forward. If we look at the -- just a bit on the market overview and what has happened on PGMs during the past year and especially recent months. I think it's worth standing still for a moment, just considering the industry PGM cost curve. The latest one is compiled by Nedbank Corporate Investment Banking. And I think when we compare this to the same cost curve of about 6 months ago, we can see that there's been so much needed relief for PGM producers. 6 months ago, nearly half the industry or something -- sometimes even more of the producers were loss-making from a cash cost plus capital point of view. And with the recent improvement in PGM prices only about 20% of the industry seems to be loss-making at the current PGM basket prices. Certainly, a significant improvement and creating a bit of breathing space for PGM producers. I think also noteworthy from this graph is that Sylvania is still very nicely positioned in the bottom quartile of the PGM cost curve. And what that means for us is that when prices are subdued or tough, like it's been for 2 years, Sylvania is able to still generate attractive cash in a down cycle to fund both our growth aspirations and return value to our shareholders. And when we have a positive price environment, it enables us to capitalize further on this and generate additional cash either for distribution to our shareholders or to reinvest in growth of the company. Before I maybe just move on to the supply and demand fundamentals. Just on the left of this slide is reminding you about Sylvania's PGM basket composition or the prill split. And we -- about -- in our prill split, specifically Sylvania, we have about 12% rhodium and 65% platinum and this makes up more than, say, more than 74% of our total 6E revenue while palladium at 23% is also still significant. And I think especially what we're starting to see as there has been significant price movements is that the miner by products like iridium and ruthenium is becoming more significant and added about 14% of our 6E revenue during the past year. Looking at the various -- at the PGM market per se, from a demand perspective, Auto Catalysts still is one of the biggest drivers of demand and the most significant aspects for us to consider, especially from palladium and rhodium, that's primarily Auto Catalysts consumption. But also, we've seen some interesting movements either platinum over the years. While the growth -- the estimate sales for 2025 is the outlook is about 91 million to 92 million units, it's slightly down from the beginning of the year before some of the tariff rates from the U.S. The outlook was probably close to 94 million vehicles, but still a good improvement on recent years. And combining that with the fact that plug-in hybrid electric vehicles and range extended vehicles, growth rate is outpacing that of the pure battery electric vehicles means so there's still a good demand for Auto Catalysts. So overall, we remain confident of that. And I think finally, also, there's been some increase in the loadings per vehicle in China following a long period where they lagged international peers. So certainly, the Auto Cats some interesting developments. From other demands in the industry, platinum in particular, is -- has seen quite an interesting demand increase in jewelry, and that comes -- especially when gold jewelry and the current gold price, the price parity between gold and PGMs is such that consumers are now buying a lot more platinum jewelry. Platinum, obviously, also has very good applications and future in terms of the energy transition and hydrogen economy and then also in the glass-making industry. So strong fundamentals for platinum. I think rhodium, maybe noteworthy is and we've seen quite a recovery in the rhodium price during recent months. And part of that is with the reintroduction or increasing of rhodium being the glass makers bushings, when rhodium was at all-time high, some of the glass makers were eliminating or reducing rhodium content. But to -- considering durability of the bushings and manufacturing process, they are reintroducing rhodium to a larger extent. From a supply perspective, I have mentioned that there has been recently some relief for PGM producers. But I think what is important to consider is that the short-term relief we've seen in the price so far is not enough to overturn the impact of the significant decline in capital investment and production cuts that have been instituted and evolved over the past decade. So certainly, South African PGM supply on the long term in terms of platinum, rhodium and then also ruthenium is expected to tighten. Outside of South Africa, obviously, the North American palladium supply, is still under pressure with palladium relative low prices and low margins. And there's been quite a bit of restructuring and production cuts at many of the North American operations. So what does that mean for our outlook on PGMs overall? I think we know that platinum, palladium, and rhodium are in deficit for '25. Platinum, palladium still in '26. There's a small swing of rhodium in '26 and '27, but with rhodium having so much lower volumes and a small change in the market can easily swing it from a surplus to a deficit, and I think that's why the rhodium prices is always volatile, and we still maintain a robust outlook on the rhodium as well. From a chrome perspective, I'm not going to talk in too much detail about it, just that we know the bulk of the consumption for ferrochrome is in the stainless-steel industry, and we know the stainless-steel industry is consistently growing at 4% to 6% per annum. And while we acknowledge that the global economic growth rates and also some of the tariff threats and uncertainty from the U.S. to impact short-term consumer trends and industrial development, the long-term demand is robust. And from a supply point of view, so Africa is the largest chrome ore producer in the world. And obviously, with a number of chrome operations and the growing PGM demand, we believe that there will be a tight balance in terms of supply demand going forward. So we maintain a favorable outlook in terms of chrome prices going forward. So overall, we are quite positive for both the PGM and the chrome markets. Before closing, I'm going to just add back or transfer back to Lewanne to just talk us through a brief overview of our ESG performance, and then I'll close the presentation. Lewanne Carminati: Just, yes, as Jaco said briefly on the ESG, I think over the years, we've demonstrated that sustainability is more than just regulatory compliance for Sylvania, and we're quite proud of the ongoing progress that we've made in all aspects of ESG. On the environmental side, excuse me, management of the tailings dams under our control is critical to our business, and we ensure compliance with the South African regulatory requirements and align the management of these with GISTM through ongoing monitoring and annual audits. We also understand the water stewardship is very important given the increasing scarcity of this resource. We're continuously improving our measurement accuracy at the operations, enabling more reliable tracking of flows and losses. And we're also now able to monitor the use of recycled water more efficiently, reducing the need for fresh top-up water. Our revegetation program is progressing well, and we are planning the first full-scale rehabilitation of a tailings dam in the new financial year. Under the social and governance banners, as Jaco mentioned, we are exceptionally proud of our safety records and achievements, especially the Doornbosch operation achieving 13 years LTI-free. The Board and management are committed to diversity and equity throughout the group, and we continue to train and develop our employees through various platforms. We've also made significant contributions to the South African economy where we operate, and this is through the payment of taxes, the use of local suppliers and remuneration payments to our employees. We'll obviously continue to build on these key sustainability focus areas, and we are publishing our annual ESG report in October. So please do look out for that. Johannes Prinsloo: Thank you, Lewanne, for that as well. I think maybe just then -- what's next? What can we expect for '26 and beyond? I think just briefly, I've mentioned earlier, our primary focus at the moment is to ramp up the Thaba JV operation. And you can expect steady state production to be achieved at Thaba during the third quarter, and that's what we're aiming towards. We also expect the host mines new ROM commissioned plant Lesedi to continue ramping up and is likely to achieve steady state by December this year. And then we expect a continued strong performance from our existing SDO operations. And we believe that a lot of the positive momentum from this past record year is being carried through into the next financial year, and we have a positive outlook. And therefore, we have a production target of 83,000 to 86,000 ounces of 4E PGMs for the year, and also estimating 100,000 to 130,000 tons of chromite concentrate from Thaba to be added to our production for the year, and in which will ultimately '27 onwards, increased to around 200,000 tons as the state. We further expect the PGM metal price to be stronger than '25, and we -- our current forecast pricing equated to about $1,800 an ounce, $1,809 for '26, increasing up to about $1,890 in '27 compared to $1,500 per ounce of '25. But we also -- while you consider the current spot price is sitting at about $1,900 to $1,960, we do we think that is realistic. So the solid bars on the EBITDA represent those price outlooks, but we do, as always, illustrate what a 10% movement in either chrome or PGM price would have on the PGMs. So overall, a positive outlook for us on the year, both in terms of production and EBITDA. So I think in closing, I'm very happy with our performance for the past year, both from a production and a financial perspective. And I think we again illustrated that we are a very attractive company in terms of delivering on what we set out to do and promise to the market, delivering on our performance targets and consistently delivering strong value and returns for our shareholders. So thank you again for everybody's support and also, we're looking forward to the year ahead. I think maybe just finally, I want to mention and maybe as we are at the end of the presentation, I'll put my screen. I think Lewanne also put her camera back on. I think I want to take the opportunity [Technical Difficulty] as many of you have seen that we have announced that Lewanne after 16 years with the company, have decided to step down from her position as CFO and also a Director of the Board at the end of October to pursue some -- at the end of November, sorry, the 30th November to pursue some personal aspirations and objectives. And we thank to Lewanne for the valuable contribution over the 16 years with Sylvania and also for being an integral part of our senior management team and the executive. She's been integral part of the team for a long time and contributed significantly to the management team, to myself and my role and also to the Board. I'm also happy to announce that Ms. Ronel Bosman, our current Executive Officer, Finance who's been with the company since 2021 and been an integral part of our senior management team in Sylvania will be taking over the reins from Lewanne on the 1st of December. And I also welcome Ronel, and congratulate her for being selected for the role, and I expect a seamless transition in that regard. But I just thought it's worth taking Lewanne as well for the contributions today. So yes, with that, Jake, I'll maybe hand back to you. Lewanne Carminati: Sorry may -- if I may. Thank you, Jaco. Thanks for the kind words. I just also wanted to thank you and the whole team from Sylvania for the past 16 years. It has been an incredible journey of growth, learning and teamwork. And I think it has been a genuine privilege to serve as CFO of Sylvania and as a director. And I'm extremely proud of everything that we've accomplished as a company and a team over the 16 years. I also wanted to just take this opportunity to thank all investors for the trust and support over the years and to reassure them that the company is in excellent hands as Ronel steps into the role in December. I'm really, really excited for what lies ahead for the company, and I'm quite confident that Sylvania will keep to -- keep building on its success and delivering value to its shareholders. Thank you. Operator: Perfect guys. If I may just jump back in. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] But just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. As you can see there, we have received a number of questions throughout your presentation this afternoon. Thank you to all of those on the call for taking the time to submit their questions. But Jaco, Lewanne, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Johannes Prinsloo: Thank you, Jake. Yes. If I look at the questions, I think maybe the first one is about PGM markets and specifically in terms of the price of rhodium that have risen significantly during the year. And that's how I would just ask for the main reasons. I think I've mentioned the fact that the reintroduction and the increase of rhodium loadings in the glass maker industry has improved. So that's one of the aspects. What I probably did not touch on a lot was what we have seen on both -- well, on all 3 metals, platinum, palladium, and rhodium is that the current above surface stocks are also significantly lower, they're between a 5- and 7-year lows at the moment. And I think if people look at the supply-demand balance and considering that the surface stocks have been reducing, there has been some additional buying and then also price movement in rhodium. So that, I think, is in terms of rhodium. The second question also deals with rhodium and somebody have asked that given the change in the cycle of precious metal in recent months and the share buybacks from the company seems to have been to the benefit of shareholders, may I ask that during the sudden downturn in rhodium price over the last year as the company withheld some of the reserves to sell at a time like this to take advantage of the sudden cycle -- the up cycle? And if not, what was the reason behind not holding on to reserves during downturn? I understand that the cash reserves have been mostly maintained and used to the joint venture, but I would hope that this action was also done with the reserves of the precious metals in the company's position during those periods. Might also ask what the time frame is for holding reserves and what percentage permitted by the company if there is a legal requirement to do so. Many thanks. So okay, I think maybe 2 things is due to the nature of the PGM product that we produce and our offtake with our smelters, we are not able to hold back reserves in the company. But I think it also comes to a question that somebody -- some investors asked us before about does the company hedge any of our products. We don't have a policy of hedging any products, and we don't have intentional policy of holding back any reserves or stock. So yes, unfortunately, that we don't do that in terms of the metals. I don't think there's necessarily legislation that prevents you from doing it that the practicalities of handling and being able to store stock and also the security aspects around that means that it is not something that is commonly done in the industry. If I move to the next question, it's something just asked what the current 4E basket price is for August. August was -- between August and now, we ranged between $1,900 and $1,960 per ounce 4E. So it is higher -- significantly higher than what we closed the past financial year on. And it is also higher than what the consensus forecast that we use for our forward-looking EBITDA statements. Another question to ask if the Board will consider a new buyback program. Lewanne, maybe you can just touch briefly on the capital allocation policy and also how we discuss the buybacks. Lewanne Carminati: Yes. So we've recently formalized our capital allocation framework. And we, as I said in the -- during the presentation, we prioritized maintaining a sustainable business, long-term growth and then returns to shareholders. This is mainly through dividends, and there is no formal policy around buybacks. But the Board does review this at every Board meeting and does implement share buybacks on an opportunistic basis when the share price moves through certain thresholds and there is surplus cash. So it's certainly -- the Board will consider further buybacks, but it will be very dependent on other cash requirements as well as what the market is doing at the time. Johannes Prinsloo: Thank you, Lewanne. Then somebody also asked and say, thanks. They start -- the question is impressive. Thank you very much for that. And then also ask what is the platinum price that we're using in the revenue forecast. So we have touched in the back of the presentation in the appendix, our metal price assumptions. But just to guide you, the platinum price forecast $1,319 is consensus forecast for '26. That forms part of the total price, and as I said, $1,809 is fully basket price, but we do have a breakdown per year and per element of the metal prices used in our EBITDA and revenue forecast in the presentation. So that is there. And then -- another question about further buybacks, but I believe Lewanne have answered that one. And I think the last question that I can see on the screen here is just saying with the current metal prices, could we see a significant increase in the earnings per share in 2026. And I think we have illustrated with the amounts of shares and issue and the EBITDA rising. Yes, there would be an improvement in earnings per share, and we do include that in the outlook slide. There's one last question that's just come in. As I've been talking to say if platinum spikes to USD 2,500, would your company please consider locking in some production revenue via hedging? Thank you. And I think it ties back to maybe the previous question where we had to say we just, there's not a formal hedging policy in place. But certainly, as I said, I think if we get to those prices, there should hopefully be very attractive returns to our shareholders. Jake, I think that is handling all the questions -- sorry. Just as I said, I'll handle there's another one that's just come in to say how familiar are the analysts following the stock with the chromite impact on the company in the coming 2 to 3 years. Look, I think the -- quite a few of the analysts that are covering us and looking at our business model are also familiar, for instance, with a model of Tharisa Minerals, that is chrome and PGMs and also listed on the LSE here in London. So I do think that there is some good experience and understanding of how the chrome and PGMs impact the revenue streams. And yes, I think that is the bulk of the questions that we have. So Jake, let me hand back to you. Operator: Perfect guys. That's great. And thank you very much indeed for being so advanced of your time and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Jaco, perhaps before really now just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments, just to wrap up with, that would be great. Johannes Prinsloo: Thank you, Jake. Look, as I mentioned earlier, I'm very thankful to the contribution of our management, all our employees and our staff. We made this past year contributed towards a very successful year that was just completed. And as I said, I hope we can demonstrate to our shareholders that we remain an attractive company to invest in, to support and that we can continue to generate very attractive cash from our operations, both the existing as well as the Thaba JV that will be ramping up in the new year. So there's, I think, a couple of very exciting things to look out for the company. And we certainly remain committed despite having still some significant capital allocation to our tailings dams and growth projects as we've communicated. We still remain very committed to maintain very good returns to our shareholders for a balance of dividends and share buybacks. So I hope whether we can continue to do that for well into the future. So thank you very much for your time. Thank you for your support, and I'll leave it at that. Operator: Yes. Okay. That's great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team of Sylvania Platinum Limited, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.
Operator: Greetings. Welcome to MIND Technology's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan. Thank you. Mr. Vaughan. You may begin. Zach Vaughan: Thank you, operator. Good morning, and welcome to MIND Technology's Fiscal 2026 Second Quarter Earnings Conference Call. We appreciate all of you joining us today. With me are Rob Capps, President and Chief Executive Officer; and Mark Cox, Vice President and Chief Financial Officer. Before I turn the call over to Rob, I have a few items to cover. If you would like to listen to a replay of today's call, it will be available for 90 days via webcast by going to the Investor Relations section of the company's website at mind-technology.com or via a recorded instant replay until September 17. Information on how to access the replay was provided in yesterday's earnings release. Information reported on this call speaks only as of today, Wednesday, September 10, 2025, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the company is unable to predict or control that may cause the company's actual future financial results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the company from time to time in its filings with the SEC, including in its annual report on Form 10-K for the year ended January 31, 2025. Furthermore, as we start this call, please also refer to the statement regarding forward-looking statements incorporated in our press release issued yesterday, and please note that the contents of our conference call this morning are covered by these statements. Now, I'd like to turn the call over to Rob Capps. Robert Capps: Thanks, Zach, and thank you all for joining us today. Today, I'll discuss some highlights from the quarter. Mark will then provide a more detailed update on our financials, and I'll return to wrap things up with some remarks about our outlook. MIND delivered strong results for the second quarter that were in line with our expectations. We were able to get back on track and return to profitability after certain delivery delays in the first quarter. We generated increased second quarter Seamap revenues, driven by system sales and the growing contributions from our aftermarket activities, which I'll touch on in more detail shortly. Our business continues to operate efficiently, and our execution is generating resilient results. Despite some economic uncertainty, we are finding ways to capitalize on pockets of demand, and our near-term visibility bodes well for the balance of this fiscal year. MIND remains strategically positioned for growth, favorable financial results and continued profitability in the coming periods. Our backlog of firm orders as of July 31, 2025, was approximately $12.8 million, compared to $21.1 million as of April 30, 2025, and approximately $26 million as of July 31, 2024. Now, I'll remind you that it's not uncommon to see positives in order activity throughout the year, especially during the summer months, and more specifically, our second quarter. Therefore, this lower sequential backlog is not unexpected after the substantial deliveries we made this quarter. Let me also remind you that for an order to be included in our backlog, we must have a purchase order or a signed contract in hand. There are a number of pending orders in various stages that we are highly confident in. Let me give you a little color on that. There are 2 orders in particular, totaling about $10 million that we believe are imminent. We've been in almost constant contact with this customer finalizing technical specifications, which is necessary before the formal purchase orders are issued. These orders are not in our backlog, but we are highly confident that they will be received soon. Our pipeline of potential orders remain strong. We believe we will continue to convert these into firm orders. Within our backlog, our orders for MIND is 3 main product lines: GunLink source controllers, BuoyLink positioning systems and SeaLink streamer systems. All 3 of these product lines provide the foundation for our business and will continue to drive our financial results going forward. As a whole, our Seamap business continues to enjoy a strong market position in each of its products, even a dominant position in some cases. As I mentioned earlier, another component that has meaningfully contributed to our improved financial results is our aftermarket business. This consists of spare parts, repair, service and other support activities. Contribution as a percentage of revenue fluctuates from quarter-to-quarter based on product mix and the timing of larger system deliveries. However, in the first 6 months of this fiscal year, aftermarket revenue accounted for about 68% of our total revenues. I'm pleased that our aftermarket activity has continued to meaningfully support revenue. Additionally, this often carries higher margins since these orders normally do not attract discounts as might a full system order. As our installed base of Seamap products continues to expand, with it comes the prospect for increased aftermarket activity. Now, to address this growing aftermarket opportunity, and as I highlighted last quarter, we recently expanded our manufacturing and repair facility in Huntsville, Texas. This expansion provides us with additional floor space and other enhancements that will allow our MIND Maritime Acoustics unit to efficiently take on significantly larger manufacturing and product repair projects from that location. This increased capacity will be used to further support our existing Seamap products, newly developed products and services to third parties. Now, turning to our results. Marine Technology product revenues for the second quarter of fiscal 2026 were $13.6 million. This was a healthy improvement from the same quarter last year. And despite the noise from the first quarter, we remain on track to achieve our fiscal 2026 goals. I'll touch on our outlook in a moment, but I'm pleased with our ability to navigate uncertainty within the market to generate favorable results. We will continue to capitalize on opportunity as it presents itself to stimulate order flow and generate improved returns in future periods. Although we are pleased with our results for the second quarter and maintain our near-term optimism, the current market and global economic environment remain impacted by various macro uncertainties that are limiting visibility into next year. General market conditions within the marine technology space continued to be good. However, at this stage, some customers are taking a more wait and see approach. This has caused some delays in purchase commitments. Despite this limited visibility, we remain encouraged by the favorable long-term market dynamics within the marine technology industry and expect customers to firm up their calendar 2026 plans in the coming months. I continue to believe that we have a differentiated approach and best-in-class suite of products that will give us a competitive advantage. To maintain this competitive edge, we will continue making additional investments to further develop and advance our next generation of marine technology products to meet the evolving needs of our customers. Now, I'll let Mark walk you through our second quarter financial results in a bit more detail. Mark Cox: Thanks, Rob, and good morning, everyone. As Rob mentioned earlier, revenues from marine technology product sales totaled $13.6 million for the quarter, which was up approximately 35% from the same period a year ago. We are continuing to see strength in all our key markets, and the current favorable customer demand environment and our backlog give us confidence for solid results in the second half of fiscal 2026. Second quarter gross profit was $6.8 million. This represents a gross profit margin of 50% for the quarter. These metrics improved both sequentially and year-over-year due primarily to product mix, which included a greater proportion of spare parts and other aftermarket activity. Additionally, higher revenue in the quarter helped absorb overhead costs. We also continue to benefit from our cost structure optimization, which includes greater production efficiencies, and we expect these efforts to help maintain favorable gross profit and margins in future quarters. Our general and administrative expenses were approximately $3.6 million for the second quarter fiscal 2026. This was up both sequentially and compared to the same quarter a year ago. The sequential increase is partially expected due to normal seasonality of certain costs, such as incentive and stock-based compensation. Our research and development expense for the second quarter was $311,000, which was down slightly compared to the same quarter a year ago. Consistent with prior periods, these costs were largely directed toward the development and enhancement of our streamer and source controller arm. Operating income for the second quarter was approximately $2.7 million, which represents an increase of approximately 86% when compared to operating income of $1.4 million in the same quarter a year ago. Second quarter adjusted EBITDA was approximately $3.1 million compared to adjusted EBITDA of $1.8 million in the second quarter a year ago. Net income for the second quarter was approximately $1.9 million compared to net income of $798,000 in the same quarter a year ago. As of July 31, 2025, we had working capital of approximately $25.1 million, including $7.8 million of cash on hand. Liquidity is impacted by the timing of receipts and expenditures as well as our operational requirements, such as acquiring inventory and executing on our backlog of orders. The company continues to maintain clean, debt-free balance sheet with a simplified capital structure. We continue to believe our solid footing and flexibility will help us enhance stockholder value in future periods. I'll now pass it back over to Rob for some concluding comments. Robert Capps: Thanks, Mark. MIND remains well positioned for long-term success, and we are focused on enhancing and maximizing stockholder value. We've taken necessary steps to strategically position the company to realize its full potential. We intend to evaluate all suitable opportunities with the goal of maintaining financial flexibility, preserving our balance sheet, adding scale, expanding offerings and growing existing product lines. This proactive approach should enable us to strengthen MIND and improve its standing within the market for the benefit of all stockholders. Operationally, we have a streamlined footprint, but our technological innovation allows us to expand our capabilities and address new opportunities. We are constantly evaluating unique ways to repurpose our existing technology for new applications. I'm excited to chase these new opportunities in coming periods. We look forward to providing an update as we strive for growth. Given our current visibility, we remain bullish on the balance of this fiscal year. Customer interest and engagement related to our Seamap product lines remain steady. However, the prevalent uncertainty within the market has slowed some customer decision-making for the next year. Despite this, the current strength of our existing backlog and pipeline of orders gives us optimism with favorable financial performance in the coming quarters. We expect customers to solidify their plans for next year in the coming months, and I look forward to sharing updates as our longer-term pipeline takes shape. Now, let me take a moment to address our recent actions to establish an at-the-market, or ATM, program and the stock buyback program. I know some of you have questioned these steps or at least the timing of the steps. We believe that these preparatory actions are entirely consistent with and supportive of our stated objective of enhancing stockholder value by whatever remains available. The ATM facility enables us to raise capital if and when we believe circumstances dictate and in amounts we think appropriate. By having the program in place in advance, we can act quickly and efficiently to take advantage of opportunities. These opportunities could include acquisitions of businesses or product lines to help grow our business. We intend to be very disciplined in our approach to this, weighing the expected return with the cost of capital. Cost of additional capital, essentially the price of our stock at the time, will always be an important consideration. Conversely, market conditions and our view of the prospects for our business might indicate that buying our own stock is the best use of our capital. By establishing the buyback program now, we are able to react quickly and efficiently should circumstances dictate. There's always a chance that timing issues or customer delivery delays, like the ones we experienced earlier this year, could impact our results in any given period. However, our current belief is that our results for fiscal 2026 will look similar to that of fiscal 2025. Our marine technology products continue to penetrate a variety of industries and markets. We believe our backlog of firm orders and the pipeline of pending orders and other prospects are reflective of the significant demand and market adoption of our product lines. As a result, we have line of sight that gives us confidence for continued favorable financial results in the near future. Barring any unforeseen circumstances, we expect to achieve positive adjusted EBITDA and profitability in each of the remaining quarters of fiscal 2026 and on a full year basis. Looking forward, we are encouraged by the setup for the back half of this year. With a solid existing backlog and pipeline of pending and highly competent orders, that will prove advantageous, as we aim to deliver consistently favorable financial results. We are also pursuing several new opportunities within our current and future markets, which I'm confident will bear fruit. We will remain focused on controlling what we can control, which includes optimizing our operations and efficiently managing our cost. Customer delivery requirements and other factors may impact future periods, but we are doing everything in our power to mitigate these impacts in our -- on our financial results. We have a differentiated and market-leading suite of products, a favorable market environment and a clean capital structure. We look forward to sharing updates on our strategic actions in the coming periods, as we strive to enhance stockholder value. With that, operator, I think we can now open the call up for some questions. Operator: [Operator Instructions] Our first question is from Tyson Bauer with KC Capital. Tyson Bauer: Just a couple of clarifications on some of the numbers. The parts and services revenue, given you're 68% for the full year, so that was roughly about $7 million in the quarter. Robert Capps: That's probably about right. I don't have the number in front of me, but that's in the ballpark anyway. Tyson Bauer: All right. No, that's how the math works. Does that include any catch-up from Huntsville, where you had kind of the delays until you got that capital project done? Or is that $7 million from what we've seen in the first quarter, second quarter, a fairly good run rate as we go through the second half of the year? Robert Capps: Yes. So it's -- there's really no catch-up from Huntsville, first answer. Run rate, I'm hesitant to say that's a run rate. I think it's indicative of where that trend is going. Could it be less next quarter? Sure, it could because there will still be some fluctuations in that. But clearly, that line is trending up and going to be more consistent as we go forward. Tyson Bauer: And should we see a boost given the expansion in Huntsville at some point going forward? Robert Capps: I think we will. We'll be ramping up that operation to the balance of this year and into next year. So I think we'll see that start to increase. Tyson Bauer: Okay. You had a $4.5 million delayed order in Q1 that hit in Q2, at least that was what was related to us on the last conference call. Given the $7 million, that leaves about $2 million in new activity in the quarter to hit your revenue level, which I find interesting with your backlog because you ended April with $21.1 million, you had a $4 million order on June 10, a GunLink system. So if you deliver that $4.5 million, you had $2 million in new activity, backlog looks like it should be closer to $18 million, ended up $12.8 million. Were there a cancellation? Were there a reclassification? Just kind of where is that variance of $6 million. Robert Capps: Yes. So a couple of things. There's no cancellations for sure. Some of the aftermarket business will be in backlog. So we'll get an order for spare parts that will be in backlog at some point in time. So that's part of it. And I'm not sure the $7 million is exactly the number for the quarter. Again, I don't have that in front of me. So I think the combination of those things make up that difference. Tyson Bauer: Okay. As we go forward, you made a comment that fiscal '26 should be now similar to fiscal '25, which is a little different. We are almost like the Fed speak here. Previously, you said that fiscal '25. So you have a little bit of an adjustment there. The implication is with your expectation of parts and services, that's about 1 -- basically 2 or 3 more full systems delivered before year-end to hit those numbers. Does that sound about right? And if we're going to get $10 million immediately on new orders, it almost seems like we need to get another $10 million just to feel comfortable that that's achievable for the second half of the year. Robert Capps: Yes. So it's -- Tyson, the timing of some of these orders is when we'll get them out the door is there's some uncertainty there, of course, as when we actually get some of the new orders. So when we'll actually be able to lever them or when they want to be delivered. We do have additional systems in the pipeline, including the 2 orders that we talked about specifically. So that's what we're trying to guide to. And I think it's not too inconsistent with what we said before. I mean, I think we -- I think what we said before was we're going to be in the same ballpark. I think what I tried to guide to is don't expect the same sort of growth in this fiscal year as you saw it before. It's going to be a little more consistent. And I think we're still seeing that. Could there be a $2 million or $3 million swing or a $4 million swing between quarters because of delivery? You bet there could be, as we saw in the first quarter. But I think our general view of the year is pretty consistent as it has been all along. Tyson Bauer: Okay. This is the time of the year where you typically have received a large annual order from our Scandinavian friends, companies over there. Are they still in that time schedule? Or have -- are they cautious also? Robert Capps: I think there is some cautiousness in the marketplace. There has been some softening in the seismic market at least, at least temporarily. So I think there's some caution there. I think people have been careful about CapEx commitments right now. So I think, again, that's what we're trying to indicate. And the one reason I think we've seen the backlog down a bit from where it had been. But I think, again, the long-term prospects, the overall activity, offshore exploration is very bullish. So I think it's just a matter of timing from that standpoint. So again, people are just being cautious about making those commitments until they have their business in hand. I think it's across the board. That's just not Scandinavia. That's across the board. Tyson Bauer: Okay. And last 1 for me, and I'll let others ask questions about your capital stuff. The -- what we hear from the rhetoric from the administration, let's play a little, what's real, what's just headlines, moratorium and offshore wind projects, having an adverse look at wind energy, especially the offshore stuff, but wanting more rare earths and deep sea mapping, those kind of things, which we say may be off in the future or may be more of a commentary of what they want to do as opposed to what will be done. What's true? What's false between these headlines regarding those 2 things that do affect your business? Robert Capps: Well, I wish if I knew all those answers, I guess I would have to work for a living, Tyson. But I think what we're seeing is we're -- remember, we're selling to people who do survey work. And that's all sorts of different kind of survey work. It can be energy exploration, it can be wind farm installations, it can be carbon capture installations, it can be rare earth exploration. So they're doing lots of different things. And we don't always know what they're buying the equipment for. Sometimes you do based on configuration, but not always. Certainly, there's been a slowdown in U.S. activity for offshore wind, no doubt about that. But we're seeing continued activity elsewhere in the world. So that's still been a good market for us. I think that's part of the cautiousness we see in the market right now is as to what is going to happen from a macro standpoint, what's this administration going to do. So it's hard to know what's really going to happen there. I think it's certainly though has caused some of the caution that we're experiencing right now. But again, I think long term, I think those things will work themselves out, and it's still very bullish. Operator: Our next question is from Ross Taylor with ARS Investment Partners. Ross Taylor: First, great quarter. I will admit I was one of those people who was somewhat surprised. I think I've been in this business for a little over 40 years, and I've never seen an ATM and a buyback announced on the same press release, but it's always good to learn. Along that line, I'd love for you to talk to me or us a little bit more about your acquisition strategy from what you've said and the like, what makes the most sense as you'd use the ATM if you were looking at -- you had a very interesting acquisition that fell in. What is your -- what are you looking for? Are you looking for products that you see fit into your current structure? What would be additive? Also what's your thinking of dilution and the like? You've talked a lot about wanting to do the right thing by shareholders and driving and concerns about share price. I'm curious about have you given thought about what parameters you would put on any acquisition you would make. Robert Capps: Yes. So Ross, what we're looking for primarily are things that are additive to what we do. We don't want to do a large step out, and frankly, do another client. We don't want to -- that's not what we're looking to do. What we're wanting to do are things that are additive to what we're doing, things that we understand well operationally, so things that we can tuck in, not go out to make a $30 million acquisition of another company necessarily. The things that tie into our customer base, the technologies that we know, so things that have a lower risk profile from that standpoint. With any acquisition, there's risk. But the better you understand it, the closer it is to what you're doing, the lower that risk. So that's the sort of thing we're looking for. Ross Taylor: Okay. So products or small divisions of other companies, things of that nature is what you'd be looking to do? Robert Capps: Yes, that's the ideal situation for us. Ross Taylor: Okay. Last quarter, we talked about a deal with a company that's innovative newcomer into the mapping space and the like. Has there been any progress with that? Robert Capps: There has. We -- that project is ongoing right now. So we're right in the middle of it. I really don't have anything I could share right now for some proprietary reasons, but we are right in the middle of that right now. That is progressing well. Ross Taylor: And what kind of opportunities do you think if we come back -- looking back a year in the future, 2 years or 3 years in the future, what kind of opportunity are you looking at from that? Robert Capps: In that deal specifically? Ross Taylor: Yes. Robert Capps: Yes. Again, I think I don't want to get too specific on that. I think, again, that is a product that would be used by our existing customer base, so it will be easy for us to sell in partnership with the other company. So it's an easy step out for us. It's a technology that's very familiar to us. Is it going to double the company? No. But is it additive? Can it add a few million dollars? Yes. That's that sort of magnitude, just to give you a sense of it. So again, relatively low risk, relatively low investment at this point. So that's the ideal situation for us. Ross Taylor: I might have missed it, but did you mention what cash was at the end of the quarter? Robert Capps: I think it's about $7.2 million. Mark Cox: Yes. Robert Capps: $7.2 million. Ross Taylor: Okay. Also, can you talk about the opportunity -- you've mentioned, and Tyson asked about Huntsville, can you talk about the opportunities? What is Huntsville going to do? And what kind of opportunities do you see coming out of it business-wise? Will this be something that's meaningful? Meaningful meaning do you see it being able to add around 10% or more to annual revenues? Or is it something less meaningful than that? Robert Capps: Well, I think it's in that magnitude if not a little bit more, frankly. So what we are doing is we are repairing products that have been manufactured by others, so third-party products. We're doing some repair work, and not just one customer. We are doing some ancillary work for Seamap at Singapore. There are some things that we can do here effectively or efficiently that help expand their capacity. So that's new products as well as some support activities as well. We also, in some cases, are doing some manufacturing for third parties of their designs. So it's not our IP, it's their IP that we're building for them. So it's really a combination of those things. The other thing that's interesting is if we're able to move our technology into the maritime security space, as we've talked about, and again, it's still very early days there, being able to do that in the United States is a real plus for security reasons. So that's another reason we want to expand that still. Ross Taylor: And also for tax and cash flow reasons then, right, as well, right? Robert Capps: Absolutely right. For cash flow, for sure. We don't have to bring money back from overseas. Obviously, we have tax loss carry forward. So if we can generate U.S. income, we can shelter that very efficiently. You're exactly right about that. Ross Taylor: So that would be meaningful as well. With regard to your comments about this year, last year, last year, top line grew at about 29%. So far this year, it's been growing at about a 9% rate. Listening to you and Tyson talk, leaves me feeling that you're probably -- you might not want to commit to it, but you're probably shooting for that kind of a continuation of the first half growth over -- year-over-year to see in the second half or something in that high single digits, low double digits type range. Am I wrong in that interpretation? Robert Capps: No, you're not wrong. I think the caution I'm trying to throw in here is given what we saw in the first quarter, that situation, that situation can repeat itself and that can have a big impact on that growth rate. So I think, generally, we're seeing that -- those opportunities for that sort of maybe a single-digit -- high single-digit growth rate. Will that all fall within this time period? That's more difficult to say with precision right now. So that's the reason I want everyone to be cautious. Ross Taylor: Yes. So it's lumpy, but the trends are there. And if it's not made, it's likely it's going to be seen in the backlog if you're not able to get it because... Robert Capps: That's right. Ross Taylor: Right. Robert Capps: That's what we think. Yes. Ross Taylor: Okay. So basically, we're looking at this thing, so we can still trust Tyson in his numbers. I don't usually drink early in the morning, but sometimes I. So -- but yes, it's great. Good job. I think you continue to push forward with it. Thank you for giving us some explanation on the overlapping ATM and share buyback, that did leave me somewhat scratching my rather thinning hair. But other than that, thank you, keep it up. Robert Capps: Thanks, Ross. Appreciate it. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Rob for closing comments. Robert Capps: Okay. Thanks, everyone, for joining us today, and I look forward to getting with you again here in just a few months after we report our third quarter in early December. Thanks very much. Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Ladies and gentlemen, welcome to the Baloise Group Half Year Results 2025 Conference Call and Audio Webcast. I am Mathilde, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Markus Holtz, Head of Investor Relations. Please go ahead, sir. Markus Holtz: Thank you. Good morning, and welcome to Baloise Q&A call about our half year results 2025. Today, we have our CEO, Michael Muller; our CFO, Carsten Stolz; and our CIO, Matthias Henny. We start with a quick overview of our results. For this, I hand over to Michael. Michael Müller: Thank you, Markus. Dear analysts and investors, ladies and gentlemen, I am happy to welcome you together with Carsten Stolz and Matthias Henny to present our half year results 2025. First half of '25 was a period marked by significant strategic decisions and operational successes. We not only successfully started to execute our refocusing strategy but also laid the foundation for further profitable growth with the planned merger with Helvetia, paving the way for a successful new area. In addition, and most importantly, our thoughts remain with the people of Blatten who were affected by the landslides in May. In these challenging times, we stood by our customers swiftly, compassionately and with a little bureaucracy as possible to offer the support they urgently needed. We again proved our commitment to being there when it matters most. Today, I am proud to present a strong set of half year results. Let me start with the key messages on Page 5. First, our refocusing strategy is working and fully on track. Over the past months, we have worked relentlessly on implementing our strategy and to further optimize our core business. This includes a broad set of measures to improve technical profitability and operational efficiency. These initiatives are proceeding as planned, including a targeted reduction of 250 FTEs by '27. After one year, we have already achieved over 50% of this goal. Second, I am very pleased to report that the strategic progress is also reflected in our financial results. Our combined ratio improved by 2.6 percentage points. Net profit increased by 26%. Return on equity rose to 15.5%. One year into our refocusing strategy, it's evident that we are making sustainable progress. Thanks to a clear focus, determined execution and above all, the dedication and hard work of our employees. I would like to extend my sincere thanks to all of them. And finally, we are well on our way in the preparation for closing the planned merger with Helvetia and are confident that we will obtain all necessary approvals in the coming weeks and months, enabling us to complete the planned transaction in the Q4 by year-end. Financial targets for Helvetia Baloise will be shared at the Capital Markets Day next year, together with the full year '25 results. IFRS and cash remittance will remain key KPIs. Now let's take a closer look at our half year figures. For that, I hand over to Carsten. Carsten Stolz: Thank you, Michael, and warm welcome from my side. The first half of 2025 shows progress in refocusing Baloise. We see growth in target segments. We see improved profitability. We are on track with our strategic targets, and we enhanced the return on equity. Let me go one by one. First, we grew in target segments in Non-life, especially due to a disciplined pricing approach where growth amounts to 3.1% in local currency if we adjust for the portfolio exits in Belgium. The investment type premiums rose sharply by 41.2%, thanks to increased contributions from Luxembourg and Belgium. The decline of 10.1% in Life mainly reflects the continuing trend in Swiss group life towards semi-autonomous solutions. Secondly, we improved profitability. Net profit increased strongly by 26% to CHF 276 million, driven by stronger results in Non-life and Asset Management & Banking. Life remained at the very healthy level of the previous year. The Non-life business benefited in particular from a very strong combined ratio, which improved by 2.6 percentage points to 90.6%. Third, based on our results, it is clear that we remain very well on track to achieve our target of remitting more than CHF 2 billion cash for the period 2024 until 2027. Finally, our capitalization remains on a strong level. While CSM and equity declined slightly, return on equity rose from 13% in half year 2024 to 15.5% in half year 2025. Slightly above our target range of 12% to 15%. The driver was the improved underlying profitability. The estimated SST ratio improved to around 215% as a result of slightly higher interest rates and higher market values of Swiss properties. Our rating of A+ was confirmed in June by Standard & Poor's. So in summary, we have earnings momentum, high earnings quality, rising capital productivity and sustained strong cash generation. Now let's take a look at Page 9 at our 4 core markets. In Switzerland, Non-life grew by 1.7%, mainly due to disciplined pricing. In Life, the market trend to semi-autonomous solutions continued. EBIT rose by 58.3%, mainly driven by Non-life, which benefited from an excellent combined ratio of 88% and a good financial result. In Belgium, we kept our focus on profitability over growth. This also included a far-reaching exit of the transport business as already mentioned in our full year 2024 results. Adjusting for this exit, growth was 1.2% in Belgium Non-life. Life grew by 15.1% driven by investment products. In Belgium, the combined ratio slightly improved to 92.5%. The proportion of claims covered by our group internal reinsurance was lower than in the previous year. This resulted in a lower EBIT. In German Non-life, premiums rose by 8.5%, supported by strong new business and price increases. EBIT increased by 11.9% due to operational improvements. Luxembourg showed solid growth in Non-life, plus 5.5% stemming from both price increases and volume effects. And in Life, plus 45.8%, driven by higher investment type premiums. EBIT declined due to a lower result from investments and financial contracts. Let's look now at our operating segments, starting on Page 15. In Non-life, EBIT reached CHF 229 million, a strong increase of 85.6%, driven by a variety of improvements. The insurance service result rose in line with a better combined ratio. The combined ratio improved to a very strong level of 90.6%. And benefited from the better loss ratio, which reflects an enhanced portfolio quality and lower large claims, including fewer nat cat events. The finance result rose to CHF 96 million, driven, among others, by a positive development of the Swiss property market. Other income and expenses finally benefited from our operational cost efficiency measures. Let's move on to the Life business. The Life EBIT remained stable at CHF 143 million on the very healthy level of the previous year while a higher insurance service result and lower costs were offset by a lower finance result. Also, the CSM release was on a similar level as last year. The CSM slightly declined to CHF 4.9 billion due to operating variances. The normalized CSM growth was positive at 0.5% with the expected business contribution and new business CSM more than compensating the CSM release. Please note that we aligned the presentation of the expected business contribution to market practice. It now includes a spread over the risk-free interest rate, which was previously captured in the economic variances. The nonannualized CSM release ratio amounted to 2.8%, slightly above the previous year value. Let's look at our Asset Management & Banking segment. The impact from our optimization measures is also reflected in the results from asset management and banking. We achieved in banking a higher fee and commission income and lower expenses. As a result, EBIT rose to CHF 26 million. This is also reflected in the improved cost/income ratio of 60.3%. In Asset Management, third-party assets increased due to higher contributions from multi-assets and real estate. The EBIT reached CHF 24 million, supported by an improved contribution from the third-party business. Thanks to these higher contributions from the bank as well as from Asset Management, the segment delivered a pleasant EBIT growth of 18.4%, up to CHF 50 million. In summary, we delivered a successful first half of the year with strong results across all segments, reflecting the quality of our business and the progress in optimizing our core business. The measures initiated and implemented in the refocusing strategy deliver financial results. With this, back to Michael. Michael Müller: Thank you very much, Carsten. Let's open directly the Q&A. As already mentioned, besides Carsten and myself is also Matthias Henny, our CIO here for the questions and answers. Operator: [Operator Instructions] The first question comes from the line of Simon Fössmeier from Vontobel. Simon Fossmeier: Just one question on the Life segment. I understand the decline in premiums. I'm surprised about the much lower new business margin. It's just -- it feels that interest rates haven't declined that much. Is that due to business mix? Or what's the driver here? Can you please explain that? Michael Müller: Thank you very much for the question. I think Carsten will go directly into this answer. Carsten Stolz: Yes. Simon, thanks for your question. It is exactly as you said, it is due to business mix, which explains the lower new business margin in half year. We have underwritten a lot of business, for example, in capital-light products. And this different business mix on the new business side in the half year explains the development of the new business margin. Operator: The next question comes from the line of Farquhar Murray from Autonomous. Farquhar Murray: Three questions, if I may. Firstly, just honing in on German Non-life. I wondered if you could detail what's driving the 8.5% growth in business there that ideally maybe split that 8.5% between tariff and volume effects. And then just on the other EBIT line, the minus CHF 63 million. Why is that more negative than the historic average? It looks like you might have put some costs through there? And then very finally, on the Life CSM development, what's driving the minus CHF 77 million operating variance this half? Michael Müller: Thank you very much. I will go to the first one. And after that, the EBIT on other and CSM bulk, give hand over then to Carsten for that. So as we already mentioned, this growth in Non-life in Germany, it's about 8.5%. It's coming from price effect, which is a little bit more than 50% coming from price effect and the rest is from volume effect. So it's from both sides, but slightly bigger part is coming from price effects. So tariff changes and things like that. And for the EBIT other, Carsten. Carsten Stolz: Thank you for your questions. So the development in the other line that you alluded to is linked to costs in connection with the refocusing strategy and the planned merger with Helvetia. And your question with regard to the CSM walk and the drivers of operating variances. This is linked to a portfolio development, mainly lower volumes in the Swiss Group Life business and the associated decline in premiums as well as updated of operating assumptions. Farquhar Murray: Okay. Just a quick follow-up on the other EBIT line. How much were the costs you put through there? Carsten Stolz: No, we have not detailed these costs. We don't detail them out. Operator: We now have a question from the line of Michael Huttner from Berenberg. Michael Huttner: My question is pretty much similar to those that have been asked, but maybe I can ask them differently. On the other line, what figure should we put in the full year? Because I mean the CHF 38 million to CHF 63 million, there's no trend here. So it -- and you presumably now know how much costs are still to come on either the merger or the refocusing strategy? And the second, Swiss real estate so lovely contribution from revaluations in Non-life, CHF 35 million. Is this a figure that we can now start repeating? Your lovely IR explained that the revaluation was 2%, but I just wondered what the trend is here. The other question is on Belgium. Why Belgium in your lovely chart by country. You said that the contribution of Belgium is down a lot. And I couldn't -- I mean, I heard your comments about refocusing volumes and stuff, but going from CHF 85 million to CHF 50 million seems kind of strange. And then the last question really is you actually virtually achieved your refocusing strategy target, so your 90.6% target, I think, is 90%. Is there anything here that you would say no, be aware there's seasonality and we're really not there? Or is it simply that the refocusing works much quicker? Michael Müller: Thank you very much, Michael, for these questions. I will start with refocusing strategy. So with the last question you had, and then also hand over for the EBIT part to Carsten and for the property in Switzerland to our CIO, to Matthias. So just starting the refocusing strategy. I think we are fully on track with our strategy. It's a half year result. Let's say, those are like that, it's always till end of year because it's also some -- sometimes it's also a question how many events you have in the first or the second half year. So for me, it's also -- let's see, at the end, but we are fully on track to our target of 90%. With 90.6%, yes, we are on a good track, but it's not fully reached. So we are also aiming for really going to the 90% overall. And I think that's where we stand at the moment. Also looking at indicated on another level, also FTE, I think we are really fully on track but it's worth to do also in the future. And it's looking at the portfolio and steering portfolio is daily business, I think. So we need also to go there in the future to reach all our goals over the time. But we are confident to reach them. Then we go to the EBIT on other, perhaps. Carsten first. Carsten Stolz: Yes, Michael, on the other EBIT, there will be effects also flowing through this line in the second half. But as we speak, we cannot provide a run rate or an outlook on this line but there will be further costs associated with the execution of the strategy and the planned merger. Michael Huttner: And just a follow-up, does this -- is this then all done in 2025? Or should I also have this slightly higher level going forward? Carsten Stolz: Well, when we talked about the way ahead and as announced on -- in April, the total integration time of the planned merger will take the next few years. And we indicated CHF 500 million to CHF 600 million of integration costs stemming from that. And the value created against these CHF 500 million and CHF 600 million is just to recall on top of the stand-alone strategies, the CHF 350 million in run rate synergies that should translate into more than CHF 200 million run rate improvement on cash remittance and 20% dividend uplift in terms of dividend capacity. So zooming in again on your question, there will be integration costs in the context of execution of the merger in the next years as indicated. And maybe I just also take the decision on -- or the question on the EBIT Belgium right away before I then hand back to Matthias for the property question. So on group level and on a consolidated level, Belgium is contributing pretty strongly and consistently also with the last year to group results. From a segment perspective, as you rightfully say, Belgium shows a lower result in the first half year. It is a group internal shift highly related to the internal reinsurance structures. But on a consolidated view, Belgium is -- this effect is more or less neutral. And with this, over to you, Matthias, with regard to the property valuation effect. Matthias Henny: Michael, the appreciation in investment property value, as you mentioned, is somewhat above 2%. If you combine Non-life and Life together divided by the overall property value that we have for insurance assets. It's mainly coming from Switzerland, where the real estate market is developing very favorably compared to, let's say, 3 years ago when we had much higher interest rates. Now interest rates have come back to 0 at the short end which drives, again, real estate prices. This is a general phenomenon. We see it across the market in Switzerland. And given the strong fundamentals, we expect this trend to continue. I mean we still have very solid or good economic development in Switzerland. We have immigration. We have limited land reserves in Switzerland as such. So fundamentals are still very favorable. And this also is then reflected, obviously, in our valuation of our properties. We continue to have a conservative approach in valuing our real estate. So even after this appreciation, we are still at the lower end of a typical pricing range in real estate valuations. Operator: [Operator Instructions] We now have a question from the line of Nasib Ahmed from UBS. Nasib Ahmed: Two on Life insurance and one on Non-life. Firstly, on life insurance, I understand the trend towards semi-autonomous and you're losing business and premium there, but it doesn't seem like you're recapturing it in Perspectiva because AUM is flat, a number of companies is flat as well. Who have you lost that business to? Second question on Life as well. The average guarantees in Belgium increased by 0.1% versus full year. So I think the 1.7% versus 1.6%. What's -- why have the average guarantees increased in Belgium? And then finally, on Non-life, similar question to Farquhar, but on Switzerland. What was the tariff increase with the volume increase in Switzerland over the first half? Michael Müller: Thank you very much, Nasib. So I will first take the Life part and then for the Life average guarantees in Belgium, I hand over to Carsten. For the Life part, yes, there is a trend to go to more to semi-autonomous solutions in Switzerland, and we have also our semi-autonomous solution with Perspectiva. It is a growing solution. During the last years, it was quite heavily growing. It's close to CHF 2 billion now assets, which are coming or invested in Perspectiva. But it's not the solution for all of these parts. It depends always also what clients are looking for. So not everything is going then into Perspectiva. But it's a growing part. I think a little bit of broader picture, I think, overall, we have also a growing part of third-party asset management, which is also coming from the -- let's say, from the same segment at the end because that's often also part is coming from the bank, which are more individual clients, but there is also a part coming then also for fund solutions in Switzerland, which is also a growing part in our business model. So overall, I think there is also some kind of a shift in different business models in that area. And second one is about the Life average guarantees in Belgium. Carsten? Carsten Stolz: Yes. Thank you, Nasib for your question. So in Belgium, we increased guarantees for some products, but it's products where there is full ALM matching for these products. So for example, there is no negative impact stemming from duration gaps or others. And therefore, these effects are neutralized. It's worth noting that these guarantees are time-limited guarantees and therefore, can adjust to different environments in subsequent years. And then with regard to the Non-life Switzerland price and volume effects, we -- the main effect in Switzerland is stemming from pricing measures. Nasib Ahmed: Yes. So 1.7% is pretty much all price and volume flat? Carsten Stolz: There's a positive price effect and in some areas intended negative volume impact in the context of steering the portfolio, but resulting overall in the stated growth that you mentioned. Nasib Ahmed: Okay. And just a follow-up on Perspectiva. Do we think about the loss of full insurance business as going into Banking, Asset Management and Perspectiva? So the third-party growth in AUM is driven by some recapture of the business. Is that correct? Michael Müller: Sorry, I didn't get the question. We had some problems in the line. Well, can you repeat, please? Nasib Ahmed: Yes, Sure. The third-party growth in AUM, in Asset Management & Banking, is that some recapture of the full insurance product in there back into Asset Management & Banking? Carsten Stolz: So the growth in -- that has been achieved in Asset Management & Banking from the asset management side with regard to third-party business is in the intended area of multi-asset and real estate, in particular, that's where the growth comes from. Matthias Henny: Yes, exactly. So it's fully in line with the strategy that we laid out a year ago. We focus on multi-assets, which is mostly sold over the insurance and banking channel and real estate in Switzerland, which is distributed mostly amongst institutional investors, pension funds, but to a certain extent, also wealth management mandates and the like. And we are well on our path to reach the goals that we set out a year ago. Operator: [Operator Instructions] The next question comes from the line of Rene Locher from ODDO BHF. René Locher: So the first question relates to Slide #6. There you see cash [ remittance ] is okay. You want to pay out 80% of the cash remittance per annum. So I did a calculation, if I go for like CHF 500 million run rate, 80% payout, I end up at CHF 400 million, divided by 45 million, 46 million shares with a potential dividend of [ CHF 8.80 ]. Now I can see in the market that a lot of my colleagues, they are going for a dividend of the combined ratio of CHF 770 million to CHF 780 million. So I was wondering a little bit if all shareholders are getting a lower dividend than the CHF 8.10 they received for last year. That's the first question. The second one, on the Non-Life market, I think with the half year results, we have seen quite a lot of companies with mid-high single-digit growth rate in Non-life and combined ratios well above 90%. Now on the other hand, we can see Baloise growth, 1.7%, combined 88%. So I'm wondering a little bit, Michael, perhaps you can comment a little bit what's the dynamic in the Swiss Non-life market. Then the third question, I guess this is for Matthias. I have seen that your Baloise Swiss property fund, you have a successful cap increase of CHF 135 million. Now you add 50 million in bonds and you are buying CHF 185 million market value real estate from the Baloise Insurance business. I mean just again, big picture, why are you doing this? And what are the -- yes, the impact on the numbers because you're losing rental income, I guess you will get the money from the fund. Just to get a little bit understanding what's the big picture here. Michael Müller: Thank you very much, Rene. So I will go for the first two ones and then hand also over to Matthias for the third one. So just for the first question you had, it's about our dividend policy. You refer to Slide 6, where we have our last year announced policy with a payout ratio of 80% or higher with our Baloise view on that. You did that's also some calculation about the future, which is a combined future planned merger with Helvetia. And for sure, that we have to align processes and the new Board, which then will, after closing be in charge also has to define common -- have to define a common view on the policy on payout ratios and also on the dividend strategy. I think something, which is already clear is that the dividend -- being a reliable dividend payer is something which will also be in the DNA for the future company. It's also something which both companies are already in. But just to be clear, the policy has to be defined by the new Board of Directors then starting after closing. Then for the Non-life market, I think you asked about this dynamic in the Swiss market. I think there is not one dynamic. I think you really also have to look on the different business lines there. Overall, I think at least what we see, we have our refocusing strategy and refocusing strategy means that we really want to go to look on our portfolios and also price it in the right level, which then also means that we are doing it during -- with the correct tariffs from our view. And that means also in some areas, perhaps market is not reacting in the same kind or is perhaps also slower or faster that you never know. And then -- but we are going for our part that means in some areas perhaps also that we are going for profitability and not for growth, could be -- I think in the long run, it always goes in both directions because at the end, I think everybody needs then also business which is profitable. So that's where we stand at the moment. But you cannot say now that there is a clear direction in every part or in every business line. I think something you see we had some kind of tariff changes also in motor business over the last months from our side. So I think overall, we have done and steered it as it is from our side, the most profitable view also to all of our stakeholders. And then perhaps, Matthias, about the third one. Matthias Henny: Yes. Regarding real estate in insurance assets and transfer to Baloise's Property Fund, you described well the mechanics that's going on. And the reason for that is that we have decreasing insurance assets in traditional life insurance. This is not something which is new, but it has been there for a couple of years. And this means we also need to reduce the balance sheet with fixed income and equities, it's quite straightforward. With real estate, it's either you sell it in the market, which we do also for some part of our real estate portfolio and the part we want to continue manage ourselves, and we move those properties into the Baloise Property Fund or, for instance, in the investment foundation that we set up a year ago. Like that, we can continue to manage these assets and become also a significant real estate player in third-party asset management area in Switzerland. Now regarding the loss of rental income, yes, that's the case. But that's a normal development if your total assets on an absolute level go down. The same happens to the current income, but on a proportional level, as we don't change the asset allocation on a relative basis, nothing changes. And given the attractiveness of real estate as an asset class, we stick to the maximum that we can legally invest, which is the 25%, which is the limit for tied assets for real estate in Switzerland. Operator: The next question comes from the line of Anne Risold from Octavian. Anne-Chantal Risold: I would have a question on your operational efficiency and FTE reduction and how are you managing the current FTE reduction, given that significant additional wave of staff cut that is expected, particularly in Switzerland with the upcoming merger. Michael Müller: Yes. Thank you very much, Anne-Chantal for this question. So overall, what we are doing at the moment that we have our efficiency program, which is coming from refocusing strategy. There we are fully on track. We are doing that in the same manner as planned. But we are preparing overall. It's also clear that at the moment, we are not -- so we look like we really have to hire people if there are some people going out. But overall, we do not see a higher rate of something which is higher than in earlier years. That's nothing we see. But what we are looking at also a little bit preparing then that we are not -- that we have it as smooth as possible also for the future because there, yes, you're absolutely right. There is a reduction for future and being prepared there is good for the overall situation we do have. Operator: [Operator Instructions] We have a follow-up question from the line of Michael Huttner from Berenberg. Michael Huttner: I had two. One, can you talk a little bit more about the cash? I know you said you're fully on track, but that still leaves -- well, I wonder if you could be a little bit more -- offer a little bit of granularity here, that would be really helpful. And then the CSM release rate in Life. The reason I ask is, although the increase is isn't much, I think it's got from -- well, the average for last year was 2.7% on the half year basis, now is 2.8%. But you're clearly well below your peers. So I'm just wondering here whether we're beginning to see this catch-up, which I think as analysts, we had been hoping for? Or is this just simply noise and we should ignore it? Michael Müller: Thank you, Michael for these questions. It seems to be two questions for Carsten. Cash is always not easy because it's flowing once per year, but -- with the dividend. But I hand over for Carsten for these two questions. Carsten Stolz: Thanks, Michael, for your follow-up questions. So as we are looking at half year results, which show growth, improved profitability and enhanced returns. This signals that also when we shift the perspective from IFRS to statutory accounts where ultimately cash is upstream and remitted from the operating entities that also from that perspective, the house is very much in order. And that's why we can draw the conclusion as we speak, that cash remittance is sustained and we can -- 2025 can contribute to achieving the overall CHF 2 billion target that we have set ourselves. So we are healthy in terms of the foundations to cash remit the success of the financial year 2025 and also up to the holding company. So that's on cash remittance. And with regard to the CSM release, the ratio is slightly up, as you say. It depends on many elements that influence the release. As you know, models play a role, business mix play a role and so on. So looking ahead, we'll move into a joint view for the combined Helvetia Baloise Group. And then we'll see how the picture will present itself. As we speak, our release ratio is the 2.8% that you mentioned, and that's our current situation. Michael Huttner: And can I just ask a very quick follow-up? It's not on this, it's a different topic. I know it doesn't appear on the current accounting, but it used to. What's the picture on PYD in the Non-life business. Have you -- are you releasing more or less? Or are you adding to buffers? Or just to get a feel for -- I know there are no numbers, but... Carsten Stolz: Yes. By and large, after the move from IFRS 4 to our [ IFRS 17/9 ] PYD as such doesn't -- it doesn't show up as such anymore. And that's why there's nothing special to flag about it. So with regard to reserving and the dynamics on the Non-life loss ratio side, nothing has [ changed ]. Michael Huttner: Another way of looking at it, but I know, I'm not sure, I'm walking on thin ice, I don't know what I'm talking about. Yesterday, I was asking a reinsurer and I said, well, one way of looking -- getting a feel for these kind of releases, buffers, whatever is the experience variance in the CSM. Now I have no idea if there is a CSM in Non-life. So I don't know, but is that a way of looking at it? Michael Müller: No, there is -- you can say that it is kind of an experience variance because it's a question of deviation from assumptions which is the basic idea in the Life CSM. In Non-life, there is no CSM because we -- it's handled under IFRS 17 under the premium allocation approach. And I would just reiterate that the guidance that we've given on Non-life side where we said that we have around 4% in large claims in a "normal year" in the new context, 2 to 3 percentage points stemming from discounting effects and those are the major effects that influenced the Non-life combined ratio on the [ IFRS 17/9 ]. I didn't say that there is no prior year loss developments included but they play less of a role. Operator: [Operator Instructions] We have a follow-up question from the line of Rene Locher from ODDO BHF. René Locher: Just a quick one for Carsten. I was wondering if you could quickly explain in a nutshell, how this IFRS 3 business combination will look like. Michael Müller: Okay. That's, I think, not an easy task in a nutshell. René Locher: But we can take it offline. It's okay. Carsten Stolz: So if you say in a nutshell, then I have a pretty small picture of a walnut in front of me. So if you allow me, I claim with -- if you open it, you have 2 nutshells. And if you allow me, I will use both of them. Probably not enough. So in a nutshell, due to the fact that accounting-wise, Baloise will be absorbed by Helvetia. Accounting-wise, Baloise moves into the direction of Helvetia. And that means, in a nutshell, revaluing and reclassifying the balance sheet of Baloise to Helvetia IFRS and then apply purchase price accounting to the combined new entity. So that means by the end of 2025, we will undergo this exercise. The Baloise balance sheet will move into a consolidated view under Helvetia following the [indiscernible] the business combination by absorption. And then from then on, the new clock will tick and we'll then see a new P&L for the combined entity for -- from 2026 onwards basically. [indiscernible] René Locher: No, no that's okay. But we should expect that we will get a kind of an opening balance sheet once , let's say, like in Q1 2026 as starting point, right? Michael Müller: Sure. There will be some opening balance sheet with closing at the end that will be the starting point for the new company. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Michael Muller, CEO, for any closing remarks. Michael Müller: Thank you very much. Ladies and gentlemen, let me summarize our results once again. First, Baloise refocusing strategy works and is fully on track. Second, our strategic progress is reflected in our strong half year '25 financials. Combined ratio improved by 2.6 percentage points, net profit rose by 26%, and return on equity increased by 2.5 percentage points. Third, the preparation of the planned merger with Helvetia are proceeding as planned. With the planned merger, we are on the threshold of a new chapter in our company's history. Together with Helvetia, we will strengthen our business, become one of the leading insurance in Europe and create a strong basis for further profitable growth. We hereby close the call. Thank you very much for joining, and have a great day. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Hello, and welcome to the Gym Group Half Year Results 2025. If you're joining us on Zoom, automated subtitles are available, and you can turn this feature on or off within your Zoom app settings. But please note, this is an automated service and transcription errors sometimes occur. I'm now going to hand over to Will Orr, CEO. Will, please go ahead. William Orr: Good morning, and welcome to the 2025 half year results presentation for the Gym Group. Thank you for making the time to join us in the room and on the dial-in. After the presentation, we'll take your questions in the room first and then on the webcast. Our CFO, Luke Tait and I will be doing the presenting today. And here's what we plan to cover. I'll start with an overview before handing to Luke to share the 2025 half year financial results. I'll then provide a progress report on our next chapter growth plan before summarizing and taking your questions. So starting with the overview. I'm pleased to report strong performance for the first half of 2025. Closing membership was up 5%, with revenue for the period up 8%, 3% on a like-for-like basis. With this performance and strong management of costs, EBITDA less normalized rent was up 24%. The market we're in remains highly attractive, and gym penetration has again reached new highs, supported by structural growth tailwinds. And within our next chapter growth plan, the program to strengthen the core continues to drive mature site performance, underpinning confidence in further progress on mature site ROIC, which we'll report on at full year results. And when it comes to new sites, we're on track to increase openings to 14 to 16 in 2025, in line with our plan to open circa 50 new sites over 3 years, funded from free cash flow. So the momentum continues. And with that, I'll hand over to Luke for the financial results. Luke Tait: Thanks, Will. Good morning. So starting with a summary of our financial KPIs. The key revenue KPIs, which were released in July have both shown good growth year-on-year. We had average members across the first half of 953,000, up 4% versus last year, and average revenue per member month was GBP 21.16 for the first half, also up 4% on prior year. As a result, revenue was GBP 121 million, up 8% on last year. The additional revenue converted well to profit with EBITDA less normalized rent of GBP 27.4 million, up 24% on prior year. Statutory profit before tax was GBP 3.3 million, up GBP 3.1 million on prior year. Free cash flow of GBP 25.1 million was up 8% on prior year and enabled a net debt reduction of GBP 10.1 million to GBP 51.2 million, reducing the net debt-to-EBITDA leverage ratio to 1x. We will look at each of these key financial metrics in more detail in the following slides. Turning to the income statement. EBITDA grew strongly in the first half of the year, up 24% versus last year. Revenue was GBP 121 million, up by GBP 8.9 million year-on-year. Approximately 1/3 of the incremental revenue year-on-year was generated from like-for-like gyms and 2/3 from new openings since December 2022. Costs in the first half evolved in line with expectations. Site costs of GBP 57.9 million benefited from a reduction in electricity costs from lower commodity rates, resulting in site cost margin improvement of 2%. I'll come back to the other key site cost movement shortly. Central costs grew by 7%, with the growth rate expected to slow further in the second half, and therefore, the central cost margin is expected to drop to circa 11% as guided in March. Normalized rent increased by 7%, reflecting a combination of new site growth and underlying lease inflation. EBITDA was GBP 27.4 million, with EBITDA margin at 23% for the first half, an improvement of 3% versus prior year. Moving on down the P&L. The noncash charge for share-based payments of GBP 2.5 million was higher than prior year due to the delay in the commencement of the new scheme last year. Net financing costs of GBP 10.4 million remained flat year-on-year, as lower interest rates offset an increase in property lease liabilities. The charge consists of GBP 8.1 million relating to property lease interest and GBP 2.5 million relating to our borrowing facilities. Profit before tax and non-underlying items was GBP 4.9 million, up GBP 4.4 million on prior year. Non-underlying items of GBP 1.6 million principally relates to the implementation of a new member management and payment system. Finally, profit before tax for the 6 months was GBP 3.3 million, up from breakeven last year. Revenue grew by 8% in the first half. Average revenue per member per month grew by 4%. This was principally down to a combination of yield increases in their like-for-like estate, and the optimization of yield in the new site openings, including coming off introductory headline rate discounts. The average headline rate of a standard membership was GBP 25.10, up by GBP 1.16 year-on-year. Like-for-like revenue was 3%, in line with guidance, with the average membership remaining at 100% year-on-year and the average yield increasing by 3%. Looking at site costs in more detail. We've been able to control site costs in the first half despite the ongoing inflationary environment. In the first half, like-for-like site costs were down by 1%. This was driven by a further reduction in electricity commodity prices and our energy optimization program. For example, we have now installed 120 voltage optimization units across the estate. Efficiencies in the staffing model and cleaning have partially offset the National Living Wage and NIC increases in Q2. And rates rebates have partially offset the Q2 increase in the UBR. In the second half, we expect site cost inflation to return, bringing the full year in line with our guidance of like-for-like site cost growth of 2%. This is as a result of an increase in the non-commodity element of the electricity cost from Q4 as well as 2 quarters of National Living Wage, NI (sic) [ NIC ] and UBR increases. Turning now to the cash flow. Strong cash flow generation in the year enabled us to self-fund our expansionary CapEx, buy shares for the EBT and pay down debt. The working capital inflow of GBP 8 million reflects the cash generative nature of the business model when growing, and a higher proportion of payout front memberships, although some unwind of this inflow is expected by year-end. After deducting the cash spend on maintenance CapEx of GBP 7.3 million, operating cash flow was GBP 28.1 million. The cash element of non-underlying costs was GBP 0.5 million, bank and lease interest was GBP 2.5 million. It's worth noting that due to losses incurred during COVID and accelerated capital ounces, we do not expect any cash tax until 2028. Free cash flow was GBP 25.1 million. Expansionary CapEx was GBP 12.6 million. And after refinancing and EBT share purchase costs, net debt reduced by GBP 10.1 million during the first half. We continue to invest to grow the business and ensure a well-maintained estate. Total cash CapEx in the first half of the year was GBP 19.9 million. Maintenance CapEx across both property and tech was GBP 7.3 million in the first half. Property maintenance of GBP 6.2 million was 5% of revenue. Tech and data maintenance CapEx of GBP 1.1 million was spent on hardware, including CCTV upgrades and on our data infrastructure. Expansionary CapEx was GBP 12.6 million, with the main spend being on new sites as we target 14 to 16 new sites this year. Tech and data expansionary spend relates principally to investments in the website to enable next chapter growth initiatives such as product add-ons and website conversion optimization. Spend on replacement member management and payment systems was GBP 0.7 million and is expected to increase significantly in the second half as this project ramps up. We continue to expect total CapEx to be approximately GBP 50 million for the full year. Turning now to net debt. The strong free cash flow in the first half has allowed good progress on leverage reduction. Non-property net debt was GBP 51.2 million at the end of June, down GBP 10.1 million from the year-end. The debt consisted of GBP 59 million of bank debt and GBP 1.5 million of finance leases. As a result of the reduction in debt, the net debt-to-EBITDA multiple reduced to 1x EBITDA, down from 1.3x at year-end. Given the second half weighting of CapEx and an unexpected element of working capital unwind, year-end net debt is expected to be at a similar level to last year end at circa GBP 60 million. In June, we agreed an amend and extend of our current facilities with our bank syndicate, increasing the total facilities to GBP 102 million and extending the maturity to 2028. The new sites continue to perform well. The 25 sites opened in 2022 are expected to deliver ROIC of 30% this year. The small 2023 cohort is on track to deliver an average ROIC of 25% with one site having been impacted by an unusual level of competitors' openings. And although early in their tenure, the 12 2024 sites are progressing well with strong initial membership volume. Overall, our confidence remains high on returning 30% on new openings. Finally, turning to current trading and outlook. Current trading momentum has continued through July and August. We're now entering the key student acquisition period. We've opened 5 new gyms so far this year with another 8 gyms currently on site. For the full year, like-for-like revenue is expected to grow at circa 3% and like-for-like cost growth is expected to be circa 2%. Given the current trading momentum, we now expect EBITDA at the top end of market expectations. We do not expect to pay any cash tax before 2028. We're on track to open 14 to 16 new openings in 2025, in line with our March guidance, with total CapEx of circa GBP 50 million expected for the full year. Therefore, net debt is expected to trend back to last year's level by year-end. I will now hand over to Will. William Orr: Thank you, Luke. In March 2024, I set out our next chapter growth plan and wanted to provide you with a further update on the strong progress we're making. Firstly, a reminder of investment case, sustained growth from free cash flow and why we think it's so compelling. Starting at 12:00 on the circle, health and fitness is a very large market that's benefiting from continued structural growth. And in gyms, the high-value, low-cost sector is growing fast. As with other categories, we're benefiting from consumers' appetite for no-frills great value propositions and from new more committed generations of gym goers. This winning proposition has high levels of customer satisfaction and is delivered by a strategically advantaged labor-light business model. We also have multiple drivers of growth listed on the right-hand side of the slide with detailed plans on each of them. Strong execution on those growth drivers is increasing returns in our existing estate, in turn, funding the organic rollout of quality new sites. This virtuous circle of sustained growth is being powered by data and technology, 2 areas we continue to invest in is the foundation for any successful digital subscription business. Demand for gyms continues to grow. U.K. consumers now spend GBP 6.5 billion on gym memberships with 11.3 million of us being members. That penetration continues to grow with another strong increase in 2025 to 16.6%. And as you can see, low-cost gym growth is strong. With the proposition that's high quality and affordable, we're introducing new generations of gym goers to something they really value as well as benefiting from the continued trade down from the mid-market. And in this growing market segment, we're 1 of 2 brands that account for 80%-member share. Seeing the way future generations, particularly Gen Z, are embracing gyms is one of the reasons we're so optimistic about the Gym Group's future. With around 40% of our members being in this cohort, we now publish a Gen Z fitness report based on a regular independent survey of over 2,000 respondents. The most recent results are again encouraging. Nearly 3/4 of this group now saying they're making time for fitness at least twice a week. And their fitness is their top priority when it comes to discretionary spend. For a growing number of this generation, fitness is a nonnegotiable. These are consumers who are highly engaged in fitness for its physical and mental health benefits, who have a growing appetite for strength training, best done in a well-equipped and affordable gym and who increasingly see going to the gym as part of their identity and social life. And I should add that these trends extend beyond Gen Z and into our membership base as a whole. The future is bright for fitness and gyms. To take full advantage of the market with structural growth, you need a winning proposition and ours resonates more than ever. For any subscription business, usage is a good health indicator. And the proportion of members visiting us 4 times a month or more increased again year-on-year. While the proportion of members rating us 5 out of 5 in satisfaction surveys has risen to a remarkable 62%. And when it comes to Google reviews, we lead the market with every one of our gyms scoring 4 out of 5 or better. So the Gym Group is growing in a growing part of a growing market, benefiting from structural market growth and an advantaged labor-light business model that delivers a winning proposition. The Gym Group also has a clear growth plan. As a reminder, there are 3 elements to the next chapter. Strength in the core is focused on increasing returns from our existing sites, principally by growing like-for-like revenue. It's the program that helped us deliver our 25% midterm target for mature site ROIC in full year 2024 ahead of schedule, and is generating the cash to accelerate our organically funded rollout of quality sites in the U.K. As we said in March, those first 2 COGS are very much where our executional focus is for the time being because we see so much headroom here. I will, however, also update on the third COG, broaden our growth later in the presentation. Turning in more detail to strengthen the core. We've again delivered multiple wins across 3 levers of customer revenue growth. On pricing and revenue management, we're seeing a sustained upside opportunity based on our strong value-for-money credentials and I'm confident we have the data and capability to continue growing yield. When it comes to acquiring new members, we're using data, ad technology, brand management, local targeting and e-commerce skills to create a highly efficient acquisition engine. And thirdly, on member retention. We continue to increase the average tenure of our membership by taking a systematic approach. On the next few slides, I'll give you some examples of the progress we're making in these areas. In explaining why, we see such a sustained opportunity on pricing and yield, I wanted to start with the U.K. gym market as a whole. At the Gym -- at The Gym Group gym, you get a large, clean, well-equipped, well-maintained gym with friendly expert people. You also get 24/7 access, and you're not tied into a contract. And yet, because of our advantaged business model, we're able to offer all this at prices that as well as being marginally lower than the direct competition are comprehensively lower than the rest of market. And as I'll touch on shortly, we have ways to keep enhancing the perceived value of what we offer without adding to our costs. So our market position gives us a strong long-term pricing and yield opportunity. And critically, that opportunity exists in the minds of our consumers. The graph on the left-hand side is output from a large quantitative study we refreshed again in H1 with Simon-Kucher Partners. It plots perceived value on the X-axis against perceived price on the Y-axis and shows that the high-value low-cost gym sector remains underpriced in the minds of our target consumer. In other words, they continue to perceive more value than they pay. And when you consider the value proposition I just described, that large, well equipped, well maintained 24/7 gym for about GBP 25 a month, that's not surprising. It is a phenomenal piece of value engineering. And as you can see on the right-hand side of the chart, this delivers strong value, for money scores, which remains stable despite increasing prices again over the last 12 months. With this opportunity in mind, we delivered several wins again in H1, all these have been underpinned by analytics and AB testing, derisking our decision-making as we execute. Firstly, we've increased our headline rates for new members, while remaining cheaper than the competition in competing sites. We note that our main competitors continue to take a similar approach with JD Gyms particularly aggressive in the period and further pure gym price increases noted already in H2. Secondly, we've continued to test and innovate on promotions, seeking to optimize for return on spend. This has included more targeted treatments at site level and ongoing deployment of our churn-reducing stepped kickers. Thirdly, we've continued to revenue optimize our product range, including offering premium features like Guest Pass and Multi-Site Access as add-ons to standard membership. And finally, we've developed a data model to assess site level headroom in the mature estate, enabling even more targeted pricing and volume interventions as a result. I'll return to this data model later. Turning to acquisition. We're also taking a targeted approach here. As I've described before, to maximize return, we're spending our marketing money close to our sites where the demand will naturally be. And as you can see in the graph, unprompted awareness within 3 miles of our sites is growing. When it comes to then converting prospects into sales, our program of web conversion improvements continues with 9 successful AB tests completed and adopted in H1. We're also progressing initiatives to be as relevant and attractive as possible to our core audience of Gen Z consumers. This includes growing our footprint in social media and enhancing the presentation of our brand and our sites. To expand on this a bit further, as you can see on the left-hand side of this chart, our social media reach, both at national and local level continues to grow at pace with well over 0.5 million people interacting with us in social. This is a key channel for quality fitness advice, engagement and, of course, sales, and we'll continue to prioritize this area. We're also evolving the aesthetic presentation of the Gym Group in marketing activity and in our gyms. This is one of the ways we'll continue to build our perceived value in the minds of members, supporting pricing and revenue growth. And I'll return to what evolves in gym design in more detail shortly. Our focus on retention is one of the reasons we've been able to hold like-for-like membership constant, while pricing up and where the average tenure of our members continues to grow. Churn rates are highest in the first 45 days of the members' tenure, which is why we developed our early life plan. Part of this plan is encouraging new members to visit more often in their first month, and in H1, we launched targeted nudge messages in the app to encourage visits. As well as this, we're enhancing all aspects of the new joiner experience. For example, we've renamed and better promoted the free Kickstart induction session we offer new members. Kickstart introduces the new member to the gym and helps them get the most from it. We've seen a 37% increase in participation and 10% higher retention rates among participating members. Rejoins are also an important part of our member mix, with members benefiting from our flexible proposition. We have a program of enhancements to capture as many returning members as possible and increase the 6-month rejoin rate by 6% in H1. And finally, we continue to grow our base of members on a longer-term commitment. We call these 6-, 9- and 12-month product savers and have enhanced them in several ways, growing this base by 37% in H1. So that's a few examples of the many ways we're strengthening the core of the business and improving mature site ROIC. To remind you, we grew that measure 4 percentage points in full year 24% to 25%, and look forward to reporting further progress on this metric at full year results. Now turning to the second part of the plan. In line with our strategy and capital allocation policy, we're currently deploying free cash flow to accelerate the rollout of quality sites in the U.K. PwC estimates 10 years plus of U.K. white space for low-cost gyms. So the opportunity for sustained rollout is clear. And we're taking a disciplined returns-focused approach to unlocking that opportunity. We opened 12 new sites in 2024 at the top end of guidance and are on track to open the guided 14 to 16 in 2025. Using data to isolate the characteristics of our best-performing mature sites, we're then applying that formula to the new sites we open. And as a result, I'm pleased to say that the 5 sites we've opened so far this year are performing ahead of expectations. Given the power of data-driven site selection, we continue to enhance our methodology. In H1, we devoted a new fully bespoke site selection model with more data sources and machine learning to further increase accuracy and speed of appraisal. And as referenced earlier, we're elevating design aesthetic and kit innovation in new sites. I'll provide some more detail on that now. We have great gyms with strong customer ratings and improving returns. But we've identified headroom to elevate the gym experience further, driving those high value perceptions and supporting sustained revenue growth. The evolved approach is being applied to all new sites and as I'll cover in a moment, being rolled out in our mature estate in a commercially targeted way within our existing maintenance CapEx program. The work to do this, which has included input from a world-leading retail design agency was based on 5 principles. Firstly, this is a careful evolution, so we wanted to build on the strengths we have and continue to create welcoming gyms for all our members. That said, we're evolving the look to be more on trend and premium. This includes some darker colors, more use of original building features, more use of neon and lighting design, black kit, better change rooms and better zoning. Thirdly, kit is a very important part of why customers choose the Gym Group. So we're innovating here with more advanced strength training equipment and in the introduction of some sort after kit brands like Booty Builder and [ ExCo ]. We're also being more conscious about creating spaces for members to socialize in an environment suited to posting on social media. Finally, and critically, through thoughtful cost engineering, we're doing all this without adding to fit-out costs. And here are some visuals of the new approach. I'm pleased to say the performance of the 8 sites we've opened so far with the new approach has been strong. The rate at which we fill these gyms with members is well above our historic growth curve, and at an average of 4 out of -- 4.8 out of 5. The feedback on Google reviews is excellent, too. As well as opening new sites with this improved approach, we want to apply it to the mature estate within our existing CapEx budget. And we'll prioritize this maintenance spend based on likely return. To aid this, we recently completed a multi-variant statistical model to analyze potential membership headroom across the estate. This is allowing us to prioritize our refurbishment program, where the returns should be highest. It will also help us to target local marketing and pricing as well as those in gym enhancements. Here's an early example of the approach. The model identified membership headroom in Bristol Longwell Green. We business case the site investment within our maintenance CapEx budget and rolling refurb program. And then we reopened with a new design approach and some local relaunch marketing. I'm extremely encouraged by the early results we're seeing. And across new and existing sites, we expect around 40 of our gyms to benefit from the new design approach in the full year 2025, with a program then continuing into 2026. So that's some examples of the progress across the first 2 COGS of our growth plan. As I said earlier, we see headroom in both of these areas, headroom to further strengthen the core of the business by continuing to improve mature site ROIC and headroom to accelerate our organically funded rollout of quality sites into ample U.K. white space. And that's why these 2 areas remain the majority of our focus. We have, however, continued to analyze opportunities to broaden our sources of growth. So a brief update on this part of the plan. One area we've explored here is channels to market, new scale channels delivering incremental members. Wellhub is a B2B2C channel, providing a platform of fitness and wellness benefits to 1.5 million eligible employees across 450 U.K. companies, including the likes of Santander, Tesco and Nationwide. We recently started a 6-month pilot on the platform with a robust framework to assess incrementality when it comes to new members. If the pilot delivers in line with our estimates, and we've seen an encouraging start, we'll roll this out nationally as a new source of like-for-like membership growth. We also continue to investigate other significant adjacencies, well aligned not just a fitness, but also to our core competencies. We'll, of course, update on this in more detail at the appropriate time. So that's the progress report on the next chapter growth plan. I'd like to take the opportunity to thank the committed expert people across our gyms and support center for delivering the progress you can see. We'll very shortly take your questions. But before that, I'll briefly summarize today's presentation. The Gym Group operates in a large market with structural growth. We have an advantaged labor-light business model that delivers high value at low cost and limits exposure to national living wage and national insurance increases. With a clear growth plan and significant white space, H1 saw 24% growth in EBITDA less normalized rent, underpinning confidence in full year progress on mature site, ROIC. Profit growth is converting into strong cash flow, and that's allowing us to accelerate our organically funded expansion. As a result of this strong progress and our current trading performance, we're now expecting 2025 EBITDA less normalized rent to be at the top end of analysts' forecast range. Thank you, and we'll now take your questions. Operator: [Operator Instructions] Sahill Shan: Sahill Shan from Singer. Three questions from me. Just on the ending of your presentation, Will, in terms of broadening our growth part of the presentation. Should we assume that as part of our strategy, moving overseas could be an option over the medium term? Second question is given the strength of the free cash flow and self-funding and where leverage is now, how should we be thinking about capital returns going forward? And the final question, I suppose, this is for you, Luke, any update in terms of what's happening to site costs relative to previous guidance? William Orr: Thank you. I'll take the first one. So in terms of broaden our growth, I mean, as I said, we see a lot of U.K. headroom, both in terms of sort of mature site performance and white space. So that's very much where our focus is for the time being. To the international piece, we wouldn't rule out anything. And periodically, we sort of assess the landscape. But for the time being, we're very much focused on the U.K. So that's that one. And perhaps, Luke, do you want to talk buyback and cost. Luke Tait: Sue. So, as you know, it was 18 months ago, we set out our capital allocation policy, which I think still essentially remains the same. First priority is making sure that net debt leverage remained below 2x. It is now down to 1x as we just reported, but will increase again a bit towards year-end. So obviously, well within scope there. The second was to prioritize organic growth as long as we had high-level confidence on achieving 30% ROIC. I think we're still there. And then the third was if we felt we had excess free cash flow, we would consider returns to shareholders. And we're very much still looking at that actively. The returns are pretty good, and in theory, at least risk fee. That said, there is still quite a big gap between those returns and the returns we think we can get from deploying the CapEx on organic growth. So for the time being, we're still concentrating on that organic growth, but it is something that is under active consideration by the Board. And we may well make changes in the future. The third question was around site costs. So we had a very strong first half in terms of site costs -- like-for-like site costs actually down year-on-year, driven by that commodity -- continuing reduction in the commodity rate, which actually we continue to see going into the future. We had only 1/4 of the sort of changes imposed on us around Living Wage, NI and rates. We will have 2 quarters of that in the second half, so that adds to the inflation burden, and we will also see non-commodity rates increase in the final quarter, as I said. So if we're down one in the first half and then up 2 for the full year. You can see that second half will -- we will have a much sort of more significant increase. From point of view of what that means going into next year, that non-commodity increase will last for a year, and its 2-year contract will then be flat thereafter. So it's kind of one hump to get over if you see what I mean. And then on the National Living Wage for next year, I'd be interested in your view, so -- but we'll find out in November. And I think we'll guide when we know more, which is probably early January. Sahill Shan: Sorry, my third question, I was thinking more about CapEx per new site much have been reduced...? Luke Tait: Oh, sorry. So get CapEx on new sites, essentially running in line, I think, to sort of more general levels of inflation. So we do see some increase from wage costs coming through. That said, everything is tendered to minimum of 3 contractors. And as a result, we're not seeing massive increases year-on-year. The biggest variation really is down to site level sort of dimensions such as, is it Central London or London? Or is it outside of London? Is it a complex site to develop? Or is it a nice clean sort of industrial-type box. But no, nothing more than sort of headline inflation rates. Ross Broadfoot: Ross Broadfoot for RBC. You referred a few times to average tenure continuing to grow. I was wondering if you could give any color on sort of where it's been and where it is, just to give that a bit more sort of scope. Number two, you talked about strong volumes at the enhanced new sites. And just question, to what extent discounting has played a role in the strong volumes or whether those sort of normal volume growth, if you see what I mean? And then thirdly, off-peak now 13% of the mix. I think previously, you've said mid-teens is where you sort of see it maturing? Any update on that at all? William Orr: So yes, on tenure, I mean, the average tenure of our membership is sort of around 18 months with a very significant sort of dispersion around that, the average of 18 months and it's been sort of ticking up nicely over the last couple of years. So that's that one. And yes, we continue to work on that. I think volume at new sites, yes, well ahead of historical averages. I would say, we've been moderately more aggressive on kind of opening offers because strategically, we think it's good to fill new sites fast and then yield up thereafter, but it's not been a sort of huge change to our sort of historical approach. So yes, there's a little bit of promotion in there. But I would still say that I think what we're seeing from the kind of the new aesthetic and so on, I think is encouraging, very encouraging in its own right. So that's that one. Off peak, do you want to take. Luke Tait: It's not off peak, Ross. So yes, I think that guidance of sort of mid-teens still is sort of our best direction. And I think in around off-peak has performed pretty much as expected from the trials, has some multifunctions. It has added some volume, which has helped offset some of our price increases. It's also enabled us to price more aggressively in the other essentially 85% of members, 87% of members, and it also gives us that sort of excellent marketing low headline rate, which we use. I think we'll continue to optimize it. So we do literally set that differential in pricing at a gym level. And therefore, we can sort of control that volume depending on what we think will maximize revenue. Harold Jack: It's Douglas Jack, Peel Hunt. Three questions, if that's okay. First one is, are you seeing much difference in terms of regional performance across the U.K., i.e., London versus outside in particular. And are you seeing any changes in terms of competitor behavior in terms of expansion? And in terms of the refurb program, how many are you doing at the moment per annum? And what does that mean in terms of that pipeline applying your latest format to the mature estate. William Orr: Yes. I mean, maybe I'll start with the last one and then sort of work up from there. Yes. I mean, I think I said that between the new sites that we're opening this year and the sort of significant refurbs, we'd estimate about 40 of our sites by the end of this year. We'll sort of -- would have had a sort of -- will either be the new look because it's a new site or have had a sort of significant refurb. There's actually over 100 sites in the refurb program gets some form of treatment, let's say, upgrade. So -- yes, sort of I think happy with the pace of that, and then it will continue into 2026. And I think I'm sort of excited by this now more granular ability to try and assess how we should prioritize that maintenance program. But I think we will -- as we move into next year, we'll have a sort of a significant proportion of the estate with that kind of new and more premium look and feel, if that answers that question. I think on competitor behavior. I think as we've said before, we continue to think the market is rational, I think rational on pricing, rationale on sort of site selection and sort of looking at trade areas and those sorts of things, I think we noted JD being particularly aggressive on pricing in H1. And as I say, PureGym doing some pricing already in H2. So that direction of travel looks to be very sort of consistent. And then in terms of rollout speed, PureGym are going faster than us, but opening quite a lot of small sites, and we're principally sticking to our sort of tried and trusted formula of larger sites. But I think the market continues to be to be rational. There's a lot of white space. I think there's a lot of room for everybody to be on this among us and PureGym. And then on regional performance, I don't think there's any particular change, and we have strong performing sites right across the U.K. I mean, London -- Greater London has always been a good area for us, but we haven't seen any real change in that. Jack Cummings: Jack Cummings at Berenberg. My first question is just on-site openings. And it's a bit H2 weighted this year and obviously, it's accelerating next year. Could you just give us a little bit more kind of color in terms of your confidence behind those targets and also what phasing we should expect in 2026? You mentioned the new add-ons like guest passes, multisite access, et cetera. What sort of penetration are you getting for this? And has this been rolled out across the entire estate and all of your members? And then the final one is just going back to the prioritizing of that mature estate investment. Is there potentially a discussion internally actually accelerating the amount of maintenance CapEx, given this headroom and the returns that you could get from it? William Orr: [indiscernible] one answer and I'll try the first and third. So phasing of new openings, I think we are confident about our guided 14 to 16 for this year. We've opened 5. We're on site at another 9. So we -- I think we're on track there. It is going to be back weighted for sure this year. And then in terms of 2026, I think we actually -- the pipeline for 2026 is looking strong already. I think we're sort of further ahead at this point than we have been historically, not sure of the exact phasing of all of that in next year. But I think net back weighted this year, but confident on guidance and looking really promising actually for next year as we step up. So that's that one. I think on the mature estate investment, I think as I said, various times in that presentation sort of trying to do it within the existing sort of envelope at the moment. But to your question, we assess the performance of every newly refurb site. It takes a bit of time to assess that performance because it needs to go through sort of a bit of a trading cycle. But if we see really strong returns and really strong improvements then we would potentially accelerate that. But I think we'd sort of guide if that's something we thought we were going to do. Luke Tait: Yes, Jack, on the add-ons, it's very early in the launch process. So I think it's probably premature to give stats on that. William Orr: I think we're on site at 8, not 9. I saw Catherine looking at me in a horrified way. But yes, I think we're on track for our 14 to 16. Timothy Barrett: Tim Barrett from Deutsche Numis. The first question was about yield. Obviously, the 3% price increase you put through certainly wasn't greedy versus the competition. Do you feel you might go faster in 2026? Is there scope for more catch-up? And then Slide 32 is really interesting about local market headroom. Can you give us an idea of what the scale was on that chart? And does it include the workforce-centric gyms. I'm just thinking whether you might be able to recoup some of the previous lost members there. Luke Tait: Yes, sure. Thanks, Tim. So yes, on yield, as you said, I think sort of 3% which was proportionate to the inflationary pressures we were seeing, I think. So I don't -- I think there is definitely sort of continued, as we also set out in those slides, continued midterm opportunity to take yield. And whilst our input inflation isn't a driver, it's definitely an important consideration. And we do know that particularly around that noncommodity utility rate, we will be seeing some more inflation next year. So we will definitely wait and see what happens through the budget on other cost lines. But I think depending on the inflationary pressure, I think we will sort of flex our pricing plan to match that. William Orr: And then on that headroom piece, I think that the headroom in certain sites, as you see on the left is significant. That's not to say it can be automatically unlocked and it's a statistical model, and we're now applying it to sites like the one I showed and sort of assessing the performance. So we've got to sort of test the model. But yes, I mean, there's definitely a number of sites on there that look like they had good headroom. And then I think the second part in terms of workforce, yes, the model would suggest that there's some opportunity there, but I don't think it would be our first priority, to be honest. But it's something that we'll sort of continue to keep under review. And I think you are sort of seeing incremental return to office working and so on. So I hope that answers the question. So I think some good headroom in that model. We need to prove that out. But I think were -- those sort of that small handful of workforce is unlikely to be the top priority for the deployment of that effort. Unknown Analyst: Jane from Ocean Wall. Can you help us a bit with the algebra on the ex workforce ROIC calculations, because in the 2025 presentation, you showed the 184 mature sites delivering this huge uplift in ROIC. But with the same EBITDA margin as the ex workforce 159 sites in the 2023 presentation. So it just seems strange that the EBITDA margin, admittedly one includes rent-free, one doesn't, I think. But why isn't the margin showing a bigger improvement? And is -- does that mean that we should be worrying about the workforce gyms? Or put it another way, is there still a 200 basis point drag from the workforce gyms, then -- and the portfolio is 25 mature gyms bigger, should we be -- is there a deterioration in the workforce gyms? I suppose is a long-winded way of saying that. Luke Tait: So I'm not sure I totally followed all of your numbers in the first part of the question. But to the second part of the question, I don't -- we're not seeing any particular deterioration in the workforce dependent gyms. And I would anticipate a similar level of drag by year-end. So I don't think that will have changed at year-end. Unknown Analyst: So even though the portfolio is bigger the drag is the same, so it should be getting smaller, shouldn't that? Luke Tait: The portfolio will have increased by 4%, whatever it is. So -- yes, it will have got a bit smaller, but it won't be -- I don't think it will be material there. Unknown Analyst: And can I just follow-up on rents? Are they inflation linked by and large, and the [indiscernible]...? Luke Tait: They are, by and large, inflation linked with colors and caps. Anna? Anna Barnfather: Anna Barnfather from Panmure Liberum. A lot of questions have been asked already. Can I just drill a bit deeper on marketing costs? Obviously, you changed your approach to be more local. Can you give us a sense of where that is as a percentage of revenues and how that will trend? And then a bit of a technical one, Luke, on business rates. You talked about sort of inflationary impact of the rise in the second half. Business rates may well be reviewed in the budget, who knows. Can you just give me a sense of what business rates are as a percentage of revenue as well? Luke Tait: Yes, sure. So marketing costs, I think we've historically said marketing costs are around about 5% of revenue, and we are not materially outside of that. I mean I think what we would say is as we continue to sort of optimize the way we spend the marketing money on media and get a better and better understanding of CPAs and particularly incremental CPAs, I think we will -- we are trying to move into a world where we see marketing costs more -- almost more as a variable cost as in if we think by deploying more in a given moment that we can drive new members that write incremental CPA, then we would do that. But I mean, essentially, I think for modeling purposes, probably 5% of revenue is the right assumption. On business rates, I don't think we've ever sort of given that as a margin. I mean it's a significant cost, but not the biggest cost. We have seen UBR rates, I think, increased to 6% this year. So it was sort of similar -- 6% to 7%, similar to living wage. What we've heard about rates going into next year is that there'll be quite a meaningful reset where I think the ratable values are expected to be increased quite significantly, but offset by reductions in UBRs, particularly in properties, which have rental -- annual rental charges of less than GBP 0.5 million, which broadly speaking, is us. So I don't know what will happen in November, but there is a possibility of some good news. Anna Barnfather: Just on the marketing then. Sorry, just a follow-up on the marketing cost. So maybe I asked as a percentage of revenues. Do you look at it internally acquisition member cost of acquisition per member? Luke Tait: Yes, absolutely. I mean, there are... Anna Barnfather: And is that trending down? Luke Tait: It varies by month within the year. And generally speaking, there is inflationary pressure on media costs, but we have been able to offset the majority of those through continued efficiencies in how we deploy it. But media, there has been inflation in media historically, if that makes sense. William Orr: But with that, the percentage staying largely constant, we'd expect marketing spend to increase, but only in line with revenue growth. Luke Tait: And on CPA specifically, if we if we decided to push a bit harder, you might actually see your CPA go up, but we'd only do that if the LTV of the acquired members justified that incremental CPA. Harold Jack: Douglas Jack at Peel Hunt. Just a couple more rather boring accounting questions. IFRS 16 is still a headwind in these results. When do you think it will become a tailwind to you? And the second question is, historically, fixed asset depreciation precise being much higher than what you've had to spend on maintenance CapEx. You've been very conservative on that. Can we expect depreciation per site to perhaps come down in the future? Luke Tait: Thanks, Doug. Yes. So on IFRS, I expect the drag to be about GBP 2 million this year, and I think most of that should be gone within the next 2 years. And then in theory, we're actually in a place where we will see a benefit. And then on fixed asset depreciation, yes, you're right. I mean a big chunk of the leasehold improvements will never be replicated through maintenance CapEx, and therefore, we should continue to see maintenance CapEx below fixed asset depreciation. And as the estate matures, which is obviously also a driver that IFRS point, we should see sites starting, as you say, to come off that original maintenance depreciation cycle, and therefore, it should be a benefit. Operator: [Operator Instructions] Ross Broadfoot: Ross again. Just a quick one on the pilot, the B2B2C. When do you think we'll hear more about how that sort of pilot is going? And is that something you would expect to see nationwide? And sort of part 2, could there actually be a benefit then for the workforce dependent gyms? William Orr: So 2 parts to that. I mean the pilot is a sort of roughly 6-month pilot. So I'd expect we'd update on that in March potentially. And then the second part of the question is this isn't specifically a workforce site play. Already, we're seeing participation sort of right across the estate because it's more about where we have gyms that fit with that particular employer. So it's a sort of like-for-like volume play right across the estate, but very early days, but I should think by March, I'd expect we could give an update on that. Operator: Thank you for all your questions. I will now hand back to Will for any closing comments. William Orr: Well, thank you for coming. Tube strikes, notwithstanding. Thank you, and I think that's it. Thanks.
Operator: Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the Sarantis Group conference call and live webcast to present and discuss the Sarantis Group's Half Year 2025 Financial Results. With us today, we have Mr. Ioannis Bouras, Group CEO; and Mr. Christos Varsos, Group CFO. [Operator Instructions] The conference is being recorded. [Operator Instructions] Please be reminded that this presentation contains the formal disclaimer with regards to forward-looking statements. The presentation and discussion are conducted subject to this disclaimer. At this time, I would like to turn the conference over to Mr. Ioannis Bouras, Group CEO. Mr. Bouras, you may now proceed. Ioannis Bouras: Hello, everyone. I would like to thank you for joining the call today. We're very happy to have you all here. We are ready to start. So first of all, I would try to highlight -- we give some highlights at the glance of the first 6 months of 2025. What we would like to confirm is that our strategy remains the same. We are consistent and very precise with our strategy designed over the last 3, 4 years and consistent execution is also critical for our performance. This year, the first half of 2025 has been massive in terms of investment and energy behind the CapEx investments in our group, and we are on track on that, where all these CapEx are supporting the growth for the future. The Stella Pack integration is in the final stage as we are working right now on combining warehouses in Poland for the local operations plus all the networks in the markets. And of course, a significant part of our CapEx investments directed to Stella Pack upgrade -- factory upgrade, supporting our regrnulation capabilities in Poland. On the digital transformation, we are well on track. It's also a significant amount of energy from the team to deliver our digital agenda. We are -- of course, we'll have some details later on that. 2025, we continue our investments in our people as the capability enhancement of our people and of course, the leadership development is critical for our future of our business. And another highlight is the expansion of our footprint in the U.S. market via our Sun Care brand, Carroten, which is well advanced and has been also significant for the first half of the year. From a commercial excellence point of view, the priorities and strategy remains the same. The HERO SKU philosophy continues and even we are working towards that. We're applying a lot of rules of revenue growth management in the market, focusing on the mix of the portfolio, the investment strategy, promotional strategy and how we are delivering the growth via the categories that are improving our profitability as a business. On the innovation side, many new things coming through. And of course -- but as always, we are focusing on fewer and bigger initiatives. And the international expansion, as I mentioned, is driving growth and strengthening, of course, our select international markets that is one of our key priorities in our strategy. So in terms of numbers, of course, from a top line point of view, plus 0.5%. It's -- we're keeping -- just to remind you that last year, first half was very, very strong. So we're keeping our power in the market. On gross profit, we have also equivalent growth. But when it comes to EBITDA, EBIT and EBT and net profits are double-digit growth is coming through. And this is happening, of course, because of our operational efficiency, cost controlling and of course, all the work happened over the years to make the organization much more efficient, plus the mix of some of the categories are helping towards this direction. Now when it comes to category, as you can see clearly here, as we always present, Beauty and Skin and Sun category has provided significant growth in the first half of the year, plus 22.7%. This is, of course, includes the international markets growth where U.S. also is critical to this journey. Personal Care. Personal Care, there are some pressures in this category. Of course, intensive competition is coming to the game. There are things happening in the market that are affecting the top line growth, but still is one -- it's a very big category for us. Home Care Solutions, also similar. We have a pressure in the market where it's coming from demand from specific markets. And this is also something that we are working on. Strategic partnerships, we have a 2.1% growth, and this is coming mainly because of the work that we are doing with our strategic partners on some of the innovations they are providing for us, plus some new smaller businesses that they are coming to our portfolio. Private label has been minus 16.7%. We have discussed this in the past that private label is a business that is supporting our supply chain agenda for Home Care solutions category. So key priority for us also is the profitability of this category. It's not -- as you will see later, it's not a massive profitable category for us. So we have to balance between the growth and the profits at the same time. So although the category for us is dropping by 16% from a profit margin point of view is not significant. On the right-hand side, you can see that the branded business of Sarantis Group for the first 6 months is growing by 2.5%, while in private label, we are dropping by 16.7%. Now a bit of an update on international expansion. As we said, Skin and Beauty is a significant growth category for Sarantis Group as a whole. And within that category, the international expansion of beauty and skin is a critical part in our agenda. We have set up this priority 2, 3 years ago. The projects that we are running in different parts of the world are doing very, very well with, of course, U.S. been exceptionally -- running exceptionally well for the first half of 2025. We are working with some of our portfolio from a planning point of view and becoming a very successful in the U.S. market in different retailers, either online retailers or offline retailers, where this year, of course -- and this is also increasing our appetite for further initiatives in the market for the years to come, right? So this is something that is helping us a lot. And of course, we'll put a lot of energy and efforts behind. On top of U.S., though, we have on the other side of Earth is Australia, where the news are that we have listed in one of the leading retailers in Australia, one of the 2 biggest retailers in Australia. So it's going to hit the market in the coming summer for summer, meaning Australian summer, November, December this year. With Philippines, we continue with our Bioten very strongly. Of course, the brand is launched many years ago. So we are now quite mature. But of course, the product is developing nicely there together with Clinea. And recently, we had some openings in the Middle East with Saudi in the #1 retailer in Health and Beauty and United Arabic Emirates with the second -- #2 retailer in Health and Beauty with our Carroten brand in Middle East. So plenty of initiatives here. And of course, as a team, we are working behind all this and some others that they are rising over the last period. When it comes to geographies, so here is the usual table about the different markets. As you can see, Greece is growing nicely. It is not only the international markets that they are growing by 52%, but also Greece domestic market, which is the biggest, it would a growth of 3.5%, which is very, very positive. And Poland is -- overall, if you see, there is a minus 4.7%, but this is mainly due to the private label business, which is included in Poland country. While in the branded portfolio, we are growing 1.1%. Romania, the first 6 months has been challenging for Romania market. There are several issues on the market. We believe that going forward, things will get better. There are some political things happening in the market affecting the overall demand from the consumer. When it comes to Czech and Slovakia, very, very good growth and continuing growing from the previous years. West Balkans also have been facing some challenges, especially in Serbia over the last months. Ukraine, yes, minus 12%. But just to remind you here, we have disposed some business from Stella business that we bought last year, mainly private label or tactical business that they had in Ukraine. So if you compare like-for-like, this is minus 1.2%. So actually, Ukraine business for us is flat versus 2024. When it comes to Bulgaria, it's again, a smaller market, flat, and then Hungary is developing by plus 5.2%. So this is a picture from the geographies point of view. And now regarding all the things that I mentioned at the beginning of the highlights, 3 major pillars here. One is the digital transformation. So if you remember, we said before that we are implementing new SAP for our business and plus other systems together with that. So where we want to build a unified data platform across our markets. So the go-live of SAP went first in Greece, Czech Slovakia and Hungary, very successfully in the Q1 of 2025. And now we are preparing the Wave 2 for January '26, which includes West Balkans, Romania and Bulgaria. The whole project on this one will be concluded beginning of '27 with Poland and Ukraine. So we are well advanced now with our plans. Team is very confident, and I think the implementation is successful and without disruptions. Now the integrated business planning completed. This is already completed in June this year. So we have a new platform for planning and for the whole organization, critical to manage our complexity to include our commercial planning together with the supply planning. and, of course, be more accurate in our forecasting and our planning accuracy. The new -- we have new digital tools coming together with the new systems that are helping to optimizing our operations and workflow and processes. So this is critical. On the manufacturing upgrade, as I said before, the Stella Pack regranulation update is well on track. And of course, the whole project will be completed by Q4 2025. And I think this is critical as the investment is around EUR 15 million, and this investment is critical for making sure that our supply chain of garbage bags is one of the most competitive supply chains in Europe. And of course, having a fully recycling granulated materials for producing our garbage bags, which is a differentiator for us as well. Our [ Innovita ] plant because of the expansion of our Skin Care business and our export business of the sun care, we have another EUR 10 million investment program that is going to be completed by Q1 '26. But of course, the majority of that will be happening also this year, increasing our capacity for our Beauty and Skin and Sun Care sales. All of these CapEx investments are linking also our sustainability and ESG agenda, where energy efficiency is also critical for the business. And of course, all the automations around our plants in Greece and Poland are critical also to improve our productivity. On the ESG agenda, we have commitments. We are following through properly our agenda on delivering the commitments that we promised. Now we are in the position to validate with SBTi our near-term climate targets. Also, we are working on with the digital agenda to have a proper accurate and fast way of measuring our progress. So everybody will be accountable and dedicated to the delivery. We are working with the ratings right now, CDP and EcoVadis to get proper rating and also -- and this is also part of our agenda of ESG. So that's an introduction from my side with the basic numbers. I will hand over to Christos right now, Varsos, our CFO, to give us more detail about the numbers and the financial results. Christos Varsos: Thank you, Ioannis. Let me now provide some details behind the key numbers Ioannis described. Our net sales grew marginally compared to 2024 with focus on our core categories in Beauty Skin and Sun Care, which influenced favorably the mix of sales. I remind you that we are cycling a very strong half year 1 in 2024 when we had very hot summer across Europe, which was not the case this year for several of our countries. Our gross profit grew marginally with a gross profit margin remaining at 38.6%. EBITDA grew significantly by almost 16% to EUR 48.3 million, leveraging on the mix of categories of our core portfolio with strong growth, as mentioned, our beauty skin sun care category, supported by our export business, cost benefit from initial phase of commercial integration of Stella that was completed last year, while controlling OpEx overall in our business. EBITDA margin grew by 200 bps coming to 15.9%, plus EBIT at EUR 37.5 million, an 18% increase versus EUR 31.8 million last year and EBIT margin of 12.3%, an increase of 181 bps. Financial expenses in 2025 improved significantly following the early prepayment in the last quarter of 2024 of EUR 18 million of debt, combined with lower interest rates. We will continue prepaying early debt, supporting further improvement in our earnings per share. Following the improvement of financial expenses, our earnings before tax grew by 21% to EUR 36.5 million from EUR 30.1 million in 2024 and PBT margin grew by 200 bps to 12% from 9.9% last year. Net income, EUR 29.2 million, up by 20% versus EUR 24.3 million in 2024 and EPS at EUR 0.46, a 22% decrease to prior year of EUR 0.37. Moving now to our product categories, so you can understand more about the dynamics in the first 6 months of the year. Beauty, Skin and Sun Care. As we have already mentioned in our 5 years plan, achieving disproportional growth in the Beauty skin and sun care category is a key pillar where we build our organic growth strategy. In half year 1 2025, we grew by 22.7% to EUR 55 million, supported by our Sun Care sales that continued accelerating this year with the help also of our export business that Ioannis described. Category EBIT grew by 72% and EBIT margin by 800 bps to almost 29%, affected by the mix within the category. Personal Care. In terms of Personal Care, which is a core profit generator for us, we have a decline of 3.5% of net sales, as Ioannis described, compared to prior year, but EBIT grew by 13% to reach EUR 8.5 million EBIT with EBIT margin of 16.7%, an improvement of almost 250 bps compared to prior year. Home Care Solutions. Home Care Solutions declined by 2.9% to EUR 101.7 million, affected by pressure in some of our markets like Ukraine and West Balkans, which are mostly represented in this category. EBIT declined by EUR 1.5 million to EUR 11.1 million, largely affected by the sales and the [indiscernible] expenses of Stella supply chain as we are optimizing our supply chain network while continuing investing heavily. However, the real support and the benefits from these investments and from the optimization will be benefiting mostly 2026 rather than the current year. Private label sales were mainly impacted by continued rationalization of the private label product portfolio, especially in terms of Stella Pack products. We expect that the completion of our CapEx investments in the granulation lines will support us not only to be more cost efficient, but also will improve our overall competitiveness, both for our private label and branded portfolio. As mentioned in the past, we use private label on a tactical basis to absorb costs from branded business will over time increase branded business and decrease the private label portfolio. Strategic partnerships. Finally, in our strategic partnerships, we had a healthy performance, increasing our sales by 2%, while improving our EBIT by 9% to EUR 2.8 million, improving slightly also the margin. As mentioned in the past, we use the category for market leverage, and we are focusing in fewer and better relationships. For the total group, we had a solid net sales performance, reaching EUR 304 million of net sales. EBIT grew, as mentioned, by 18% to EUR 13.5 million, and EBIT margin grew by 180 bps to 12.3%. Now turning to our geographies. As discussed in the past, we wanted to share with the investor community the different dynamics outlining our performance. For Greece, we are splitting the sales between the domestic market and the exports to selected international markets. For Poland, we're splitting Poland between branded products and private label as this affects mainly the geography of Poland. Greece grew in total to EUR 97 -- almost EUR 98 million, an increase of almost 10%. In terms of EBIT, this grew by 56% to EUR 19.3 million and EBIT margin grew by 600 bps to 19.8%. If we look at the subsegments, Greece domestic business net sales showed a healthy growth rate, posting an increase of 3.5% despite citing a very strong half year 1 2024 due to Sun Care sales with an EBIT of EUR 12.1 million, a 32% increase to prior year and 15.1% margin, an improvement of more than 300 bps affected by mix of categories and cost control. In export markets, we grew by 53% to EUR 17.6 million and EBIT to EUR 7.2 million, which is more than double compared to prior year. As you see, exports have much higher EBIT of almost 41%, and that's why we strongly believe in this segment as an accelerator to our growth for our 5-year plan. In Poland, the total business had net sales of almost EUR 90 million, a 4.7% decrease versus prior year, with EBIT also declining affected by the private label portfolio. The branded portfolio grew by 1% to EUR 64.3 million, while EBIT decreased by 7.6%, coming to almost EUR 6 million, including also supply chain integration expenses, as already mentioned. Private label declined by 6.7% on the back of rationalization of contracts in the product portfolio, especially for Stella, with EBIT being similar to prior year. In other territories, we had a mixed picture driven by specifics in each country. Romania, as already mentioned by Ioannis, had a slower start this year with EUR 46 million of net sales, a decline of 5% versus prior year, cycling a strong performance in prior year. In terms of EBIT, Romania achieved almost EUR 7 million, representing a decline of 7% with flattish EBIT margin at 15%. Czech and Slovakia accelerated growth by adding 8% more net sales, reaching almost EUR 25 million with EBIT of EUR 3.4 million, a 23% increase to last year. In terms of EBIT margin, this improved by 160 bps, reaching 13.8% West Balkans showed a decline in the net sales of 4% to EUR 19 million, mainly impacted by the Serbian market with some arrest in the year and market pressure. However, in terms of EBIT delivery, West Balkans managed to grow EBIT by 5.6% to EUR 1.6 million and EBIT margin 8.6% with support from cost control. For Ukraine, it is a year of pressure in the results as identified already from our full year results discussion. However, Ukraine specifically was also impacted by the sale of Stella Ukraine completed at year-end. Stella Ukraine for the record had EUR 1.4 million of sales in half year 2024, EUR 100,000 EBIT. Without this impact, the net sales would be almost flat and the EBIT would be growing by 4.5%. As mentioned, we are working with resilience in Ukraine and expanding our portfolio outside the Home Care category, which is the key category for Ukraine, which still -- and still it is a leading business in the area. Moving now to our healthy and strong balance sheet. As we have discussed also in the past, we maintain a strong balance sheet, which can support our organic growth, the next steps on our transformation agenda and M&A activities. As of 30th of June, we had a net debt of EUR 32.8 million compared to EUR 43.9 million net debt as of 30th of June 2024. I remind you that due to the seasonality, our lowest net debt position -- our worst net debt position is on 30th of June, whereas the best is on 31st of December. Already today, today, I'm talking about today, 10th of September as we speak, our net debt has improved more than EUR 20 million compared to the June numbers, standing today at around EUR 12 million. Thus, by year-end, we should be again close to net cash position. During half 1, we have received the EUR 20.8 million installment from Estee Lauder with the final one expected for January 2028. As discussed also in the full year results, in the last quarter of 2024, we have made early debt prepayments of EUR 18 million, reducing our financing expenses. We have now committed and formed one of our lenders for EUR 5 million early prepayment to be executed next week and further enhancing further our earnings per share. In half 1 2025, we have generated free cash flow of EUR 13.4 million with our working capital improving compared to last year by 2.3 days. Enhancing our shareholder value is key for us. EPS reached EUR 0.46 from EUR 0.37 last year, an increase of more than 22%. During the first half, we paid dividend of EUR 20 million or EUR 0.31 per share, representing a 33.3% increase compared to the EUR 15 million paid last year. This represented a 43.5% payout ratio versus 38.2% payout ratio last year. And as you remember, as per our dividend policy, we said that floor or the minimum we're going to pay will be 38% and more. I would like now to provide an update on our CapEx for this year. We are assuming less CapEx this year with respect to the distribution center next to our Nova factory due to later commencement of the project. We are now in the competitive process to commission the construction company that will build it for us, so we expect to start within the next month. This will mean that only EUR 1.5 million from the EUR 7 million initially assumed will be spent this year and the remaining amount of EUR 5.5 million will be invested next year. The rest of CapEx remains the same as per our guidance back in March. Thus, our new CapEx expectation for 2025 is EUR 34.5 million from EUR 40 million we communicated earlier this year, while '26 -- 2026 will be EUR 35.5 million from EUR 30 million initially communicated. This will impact obviously favorably the free cash flow generation delivery by -- for full year 2025 by EUR 5.5 million. Finally, we would like also to update you on our 2025 outlook. We reiterate our 2025 profitability guidance. I remind you that our estimations for 2025 are EBITDA of EUR 92 million, improved by 12.7% versus 2024. EBIT to EUR 70 million improved by almost 3% versus 2024. For net sales, we now expect a growth of 2% versus 2024, which will bring our net sales for 2025 to EUR 612 million. Thank you. Operator: [Operator Instructions] The first question comes from the line of Svyrou Natalia with Eurobank Equities. Natalia Svyrou Svyriadi: I was wondering if you could -- if you have any indication on how we are -- exports are running into Q3 as we entered because we are talking about products that are summer care products. Should we assume that these are continuing also in Q3 and running rates are holding in this period also? And as I understand, with the expansion into Australia, we're trying to get the seasonality there. So maybe you could give us also an indication about the exports you are expecting in the other markets. And based on the experience you've already seen, what are you thinking? What numbers are you thinking there? That's one question. I also have a question again regarding exports. If you could remind us -- this is just a reminder, these are higher-margin products, higher margin actually and the products we are talking about. Could you remind us a range there? How much this boosts our EBIT line? Okay. These are the questions I have for now. Ioannis Bouras: Yes. Okay. On the export side, because, yes, Sun Care products is the majority of the growth coming for the export business. So the seasonality is critical. So until the first half of June of 2025, the majority of the sales are in -- so the second half of the year will not be the same, not the same momentum. Definitely, though, Australian business like Australia will help. But what we know is that it's not going to be near to the ones have in U.S. in the first half of the year. So you cannot put the same second 6 months for the exports. It's a slower pace, of course. And this is also helping, of course, the first half of the year from this category point of view. So just to remind you that last year, total year exports were EUR 19 million for the full year. And this first half is EUR 17.5 million, if I'm not mistaken, right? You said... Christos Varsos: EUR 16.5 million. Ioannis Bouras: EUR 16.5 million. So our expectation -- and also just to remind you, in the 5-year plan, we said that by 2028, we'll get to EUR 30 million. So it looks that this one is coming much faster. So the expectation of the year will be something a bit below -- in the area of EUR 24 million, EUR 25 million, right, just to give you the perspective. Christos Varsos: So practically, we'll bring this from 2028, most likely will be at this range in '26. Ioannis Bouras: But of course, you cannot expect the same rate of sales for the second half of the year because the majority still is in Northern Hemisphere is not in the South, is only in Australia in the South. So it's not enough to do the same. Now regarding the margin, I think Christos presented that the EBIT margin for export is around... Christos Varsos: 41%. Ioannis Bouras: 41%. So this is the accelerator from a profitability point of view, is presented in the presentation, right? So it is a margin that it is really accretive to the margin due to the structure that we have discussed in the past. So this brings much more. Natalia Svyrou Svyriadi: Okay. Great. Yes, I remember the margin around 30%. That's why I wanted to get this clear. Okay. Well, that's a good business coming in. Also, I wanted to ask something -- a follow-up. I just thought about that. Poland has been running, if I recall correctly, 1%, 1.5% on sales, the local market. But should we expect this to continue at this rate? Or should we see there -- not the private label products, the rest of the -- should we expect an acceleration there? It's one of your big markets. So I'm wondering how this should evolve? Ioannis Bouras: We're expecting to be higher. We don't have exactly the number to share with you right now. But of course, if you remember also because this is a general comment, this is not taking the opportunity because in the 5-year plan, we talk about 4.5% to 5% -- 4% to 5% growth, organic growth every year. So this year, what we said right now, we are guiding for 2% at the end of the year, including private label, including all the roles of the different categories. We are not changing the thinking and the mindset for the organic growth for the coming years. We believe that 2025 has been a little bit challenging in the sequence of some markets. And -- but we are not changing our strategy or say we are keeping our 5-year mindset and thinking behind the growth and organic growth. So we believe that -- and all the action plans we are taking in every country, in every category is to deliver these numbers. right? So what we are expecting coming to your question specifically is not only in Poland, but also in other markets that today showing a drop for the first half of the year to go back to growth and go closer to the numbers that we have in our 5-year plan. Operator: [Operator Instructions]. Christos Varsos: We can look at the questions that we have already received also in writing, so we can start answering that. And as if people want in the meantime, they can also continue asking questions. Operator: Okay. Great. There are no further audio questions. We will now accommodate any written questions from the webcast participants. The first written question comes from Iakovos Kourtesis with Piraeus Securities. And I quote, "What is your CapEx estimate for full year 2025?" Christos Varsos: We have actually, we included in the presentation. So as I said, we'll just -- we had EUR 40 million, now we have almost EUR 35 million, EUR 34.5 million. And we're only switching EUR 5 million to next year because of the later start of the distribution center in [ Nofta. ] So for this year, instead of EUR 40 million will be EUR 35 million, EUR 34.5 million. Next year instead of EUR 30 million will be... Operator: The next written question comes from [ Giorgio Andreopoulos ] with Piraeus Asset Management. They quote, "Given the slowdown in sales within the Personal Care segment, do you anticipate this trend continuing into the second half of the year and into 2026? Additionally, what strategies are you implementing to remain competitive in that market? Finally, should we expect any changes to the sales guidance provided in the Q1 report for this year or subsequent years, 2026, 2027 and 2028 sales growth of 5.5%. And what should we expect in terms of EBITDA margin in the medium term?" Ioannis Bouras: Now starting from the end, I think I said something before, but now I can reinforce, as we speak right now, we are keeping the 5-year plan and the guidance of the top line and the EBIT margins the same. Of course, this year is 1 year as we are moving on following the closure of the year in March and of course, the guidance for 2026, things can be a little bit -- but this is what we keep right now, haven't worked another plan. So that's the plan that we have. Of course, as you remember, it was doubling the EBITDA when we presented. So it's a strong and challenging plan. But this is what we keep and the mindset of the growth as a company, organic growth is still here with our strategy that we are implementing. Regarding the Personal Care specifically, I think I also -- Christos mentioned about the top line in the first half, but also the profitability growth. these categories are quite competitive, and we have strong plans behind to bring back to growth and of course, to even further grow in our coming years. So this is a continuous battle in the stores. And of course, with everybody participating in this category. So competitors in this category coming from new product, innovation, coming from promotional strategies, from advertising strategies, all this mix that is critical for all FMCG companies. So we are working on all these plans behind with our big brands and our hero brands in different markets or the whole region. Operator: The next question comes from Iakovos Kourtesis with Piraeus Securities. And I quote, "Do you expect the recent VAT rate increases in Romania as of 1st August 2025 to further affect demand in the country? Do you have a specific strategy to cope with this?" Ioannis Bouras: Definitely, any measurements that are affecting the consumer income, they are not positive for the market, right? But this is something is not only in Romania, but other markets have other measures. So the #1 priority for us is to be competitive and of course, adaptable to the new reality, and this is what we do. Competitiveness, meaning that you have to be aware about the consumer disposable income. And of course, what is your promotional strategy and how you're promoting your brands and taking every little opportunity from the market. This is the way we work. This is the way we worked before, and this is the way we keep working right now. So there is no magic recipe. There is one thing. We have to do multiple things right in order to compete. But definitely, things like that are affecting the consumer demand. This is for sure a reality. Operator: The next written question comes again from Iakovos Kourtesis with Piraeus Securities, and I quote, "Could you provide us with an update on the third quarter 2025 trading for specific international markets, Poland, Romania and Serbia. Do you see improved trends in these markets?" Ioannis Bouras: In the third quarter, of course, not ending. So September is a significant month for all these markets because it's true that July and August are months that are not heavy in terms of sales and, of course, of activities. So we have to wait to see the closure of September. But again, the things are not like they are on flying. There are, of course, continue there have been challenges in these markets, right? But of course, we still need to wait the closure of September. Christos Varsos: We're going to announce the third quarter end quarter in 24th of October or something like that. So we will have a full view on the September. And by then, we'll have also a portion of October. Operator: The next question comes from Emmanuel de Figueiredo with LBV Asset Management. And I quote, "Could you give more color on the seasonality of the business as skin and beauty grow more, does this mean the company become more have to weighted?" Christos Varsos: Thank you for the question. So if you remember the season in terms of seasonality, Q2 is a very strong period every year because of the sale of sun care. I remind you that we sell the sun, we start selling the sun. We produce it late in the year. Then first quarter, we actually send it to the stores and especially in the second quarter, then the stores sell it on the third quarter. So practically in every year, the first 6 months is the growth due to the sun care, which is seasonal, is much stronger. Obviously, we have seasonality at the year-end with gifting and with our selected business as well. But in terms of half 1, it is always the stronger pace in terms of growth of our revenue. In this respect, the duty scheme is growing, obviously, not only the Sun Care. So the Sun Care is what we're talking about. But as Ioannis already mentioned, we have the exports will be a slower growth on the second part of the year. So to your question, we're not becoming much more heavy half 2 weighted. We are still largely half 1 weighting. But again, this supports also the difference in the profitability. Operator: The next question is again from Emmanuel de Figueiredo with LBV Asset Management and I quote, "For 2025, should we expect a stronger second half than first half?" Christos Varsos: I think you have seen the first half and you have seen the guidance for profitability for the full year and for revenue. So in this terms, it is -- it's almost 50-50 in terms of net sales, if you think about it, EUR 304 million versus EUR 612 million. In terms of profitability, we maintain at the same pace. So I don't think that we're talking about stronger or less strong half 1. We mentioned about the exports and everything that continue growing, which improves also the EBIT margin. Operator: The next question comes from Georgia [indiscernible] Securities. And I quote, "Can you please elaborate on the reduction in your OpEx? Can you please discuss the impact of the changing product mix on your EBIT margin? Can you discuss your strategy on private label?" Ioannis Bouras: I think on the OpEx side, elaborate. I mean, all the investments that we started a few years ago, and of course, we are accelerating in 2025 with more digital investments and everything, including our way we do business. This is helping, of course, the cost of doing business, and that's one of the major objectives. And this is what we are doing. It's not a magic recipe, plus making an efficient organization. Of course, we can grow without increasing our costs. This is also critical from this side. This is meaning also we are challenging the way we do things. with new systems in place, we can challenge the way we did things in the past that were not that efficient. So efficiency in our business, meaning lower cost, right, definitely. Christos Varsos: It is a sequence of events as well. Don't forget that last year, we started integrating Stella, and we started getting the commercial integration, which has finished last year. So we're reaping the benefits now. Now we're doing the supply chain optimization, and we're actually controlling this, which you'll see much benefits coming in 2026. So the OpEx is not a drastic type of thing. It is -- we built on it, and we built the culture as well to be able to have this saving moving forward. Now... Ioannis Bouras: Product mix. Christos Varsos: Product mix. As you remember and we have discussed even in the 5-year plan, in our plan for organic growth over 5 years in order to double our EBITDA to EUR 120 million, we said that we want to disproportionately grow Beauty, Skin and Sun Care because this has the highest margin. And I think this 6 months is pretty obvious of this because we are improving largely in a product category that we're gaining large EBIT margins, whereas at the same time, we're rationalizing a category like the private label, which in terms, it didn't have a strong EBIT. So practically, we removed, if you think about it, we removed the balance that you see removed in private label really affected the bottom line. So this, you can see it going forward, and we believe that the acceleration also of the Beauty, Skin and Sun Care categories and the export, obviously, as discussed, will support very much the mix towards the direction that we've already communicated in the 5-year plan. Ioannis Bouras: On the private label because I think we said during the call, we said before private label in [indiscernible] is complementary to our supply chain as an activity. It is a big size. It's important for us for 2 things. One is fulfilling capacities and of course, keeping our competitiveness. On the other side, we are not going to build more capacity to serve private label. This is that we made it clear. And our objective is to build and grow our branded business over the years and gradually removing capacity from private label. Operator: The next question comes from Dimitris Giannoulis with Researchgreece and I quote, "What level of EBIT do you expect for the private label segment post rationalization? Which countries contributed in international sales in first half besides the U.S.?" Ioannis Bouras: In the EBIT of the private label, we don't expect to be -- it's going to be a single-digit EBIT, right? So this is positive. So this is going to happen. It's not going to change significantly our profitability because of the rationalization. Regarding the countries contributed national sales, we have countries like Middle East, Philippines, we have Australia and of course, we have some Middle East, as I said. And we have countries, the U.S. is a big part of the H1. Operator: The next question comes from John Kalogeropoulos with Beta Securities, and I quote, "What about further expansion abroad, examining any further opportunities?" Ioannis Bouras: Yes. I mean what we say internally, I mean, this is one of our growth pillars for the future, in line with our skin and beauty strategy that we have as a strategic pillar. And of course, some of the initiatives that we are doing in the markets are giving us the signal that our brands, whether it's skin care brands, Bioten, Clinea or our Sun Care brand, Carroten, they are well accepted by consumers in different markets because of the quality, because of the claims that we have, the seriousness behind the production and of course, the competitiveness in general. So as we speak right now, of course, we are scoping other markets around the world. Just to remind you, international business, meaning markets outside our territory, right? So whether markets can be in Western Europe can be an activation place for us, for our brands. And of course, accelerating markets like Australia and U.S. because U.S. we just started a year ago, less than a year ago. So we are having plans to expanding our distribution in the U.S. or bringing more products into the market, and we are well advanced with these plans for 2026. More news on that, we will have on -- either on October this year in the 9-month results or in the results of the year-end in March 2026. Operator: The next question comes from Bruno [indiscernible], and I quote, "The Romanian economy is currently slowing fast. What level of sales are you expecting for the full sales are you now estimating?" Ioannis Bouras: What we're estimating for the full year is to have a flat year for Romania or minus 1%. This is the number that we are looking at right now. Operator: The next question comes from Emmanuel de Figueiredo with LBV Asset Management and I quote, "How likely are you to perform any M&A? Do you have any open due diligence ongoing for bolt-on acquisitions?" Ioannis Bouras: Starting from the end, we have no any due diligence at this moment in time. From the M&A point of view, as you already know, Sarantis is always open and active on this field. As long as there are any targets that are in line with our strategy, where the strategy is in our categories that we operate in our markets that we operate here in the Eastern Europe and in our channels. So at this moment in time, we have no active due diligence process. But of course, there are opportunities out there, which may arise anytime soon or not. I don't know right now. I can't give you any information on that. Operator: The next question comes from [indiscernible] and I quote, "Anything in the M&A pipeline considering the potential return to net cash by year-end?" Christos Varsos: Starting from a net cash position, as you know, we are a cash flow generative business. Obviously, we have also committed debt and we have committed lines if we want to buy something. So in this sense, we have the framework, and we're actually in the market, as Ioannis described to have -- and we have things that we would like to buy. Obviously, they need to be -- wanted to be sold as well at a reasonable price. So in our strategy, we maintain and want to do bolt-on acquisitions. Obviously, it's a matter of timing. But we have all the capability internal and the funding to actually do larger things as well. Operator: The next question comes from John Kalogeropoulos with Beta Securities and I quote, "You mentioned lower CapEx and potential shareholders reward uptick. To what extent?" Christos Varsos: I mentioned lower CapEx, and I mentioned that we have higher free cash flow by EUR 5 million. What I mentioned as well was that we have a policy, a dividend policy that we're paying at least 38% of our net income as dividend. This year, when we saw also the profitability this year, we actually gave 43%, and that was the EUR 20 million. So it is not that it will be anything outside of our policy, and we'll continue making sure that we provide a good return to our shareholders and the good value for our shareholders. Operator: The next question comes from Bruno [indiscernible] and I quote, "Please explain what caused the large drop of sales in the private label segment. What is the outlook for sales in the private label market in second half?" Ioannis Bouras: I'll take the first part. I think we mentioned also while presenting that it has to do with rationalization of our contracts, especially of contracts, and we wanted to make sure that they actually are much more profitable. That's why you saw that despite the difference in the net sales line, practically nothing changed. So actually, we're doing -- we're removing the correct contracts out of the case. So... Christos Varsos: And also just to add here that some of the big customers that we have in private label, they have a bit of slowdown in sales as well. So we are not -- we are depending on also their activities in the private label. So this is also affecting. From the H2 on the private label, we don't expect any significant change versus H1. Maybe we expect things to improve. So we'll bring the level of sales minus 10% versus 2024. This is what we see right now. But of course, these things are changing right now. And of course, new discussions are happening in every -- with different types of customers for the year to go. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Ioannis Bouras: I would like to thank you for participating in the call. I hope we explained and present our case properly. Thank you very much for the participation and the questions and talk to you soon in our future interactions, right? Christos Varsos: Looking forward for our next announcement in late quarter and obviously, to the continuous discussions with you, understanding more of our case and the execution of our 5-year plan. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.
James O'Shaughnessy: Buenos días and good morning to everyone today. A warm welcome to all those taking part in our half year 2025 results presentation. My name is James O'Shaughnessy, Investor Relations. The presentation today will be led by Inditex's CEO, Oscar Garcia Maceiras; our CFO, Andrés Sánchez; and Gorka García-Tapia, Director of Investor Relations. [Operator Instructions] Let's take the disclaimer as read. Over to you, Oscar. Oscar Maceiras: Good morning. Welcome to our results presentation. It's good to be with you all today. In the first half of 2025, we have again achieved a solid performance with satisfactory sales in a complex market environment and keeping strong levels of profitability. The efficient execution accomplished by our teams demonstrates the strength of Inditex's business model. This business model continues to be driven by our unique fashion proposition and increasingly optimized customer experience, our focus on sustainability and the quality and commitment of our teams. These factors continue to enhance our competitive differentiation. Our Spring Summer collections have been well received by customers. We had a satisfactory sales growth of 1.6%. Sales in constant currency increased by 5.1%. It's evident from the figures we are providing this morning that the execution of the business model has also been strong, reflected in the good gross margin performance and by disciplined cost control. At the bottom line, net income increased 0.8% to EUR 2.8 billion. This satisfactory performance has continued going into the second half of the year. Store and online sales in constant currency between the 1st of August and the 8th of September grew 9%. Our diversified presence across 214 markets in conjunction with a relatively low market penetration in most of these markets underpins our belief in the significant global growth opportunities we have ahead of us. This confidence comes from the fact that we have a unique model that permits us to build upon the increasing levels of differentiation we have seen in recent years. And now let's move to Andrés to go over the numbers. Andrés Sánchez Iglesias: Thanks, Oscar. As you have seen in the report released early this morning, Inditex executed in a very consistent manner in the first semester of 2025. Sales performed well at plus 1.6%. Furthermore, by actively managing our supply chain, we have been able to generate a very good gross margin performance. In line with what we saw in the first quarter results, operating expenses in the first half have been closely monitored. EBITDA in turn increased 1.5% to reach EUR 5.1 billion. And net income grew by 0.8% to EUR 2.8 billion. On the top line, I'll point out that sales reached 1.6% to reach EUR 18.4 billion. In constant currency, that translates to 5.1%. We saw consistent growth in sales in our integrated model across both channels. At current exchange rates, we expect a minus 4% top line currency impact for the full year 2025. We enjoy a presence in 214 markets as well as a low market share in the vast majority of these markets. It should also be pointed out that the sector as a whole continues to be very fragmented. It is due to these factors that we see continued growth for Inditex over the medium to long term. In constant currency, all geographical areas had a positive sales evolution. In the first half of 2025, gross profit increased 1.5% to reach EUR 10.7 billion. The gross margin reached 58.3%. This gross margin performance serves as a demonstration of the good execution of the business model over the period despite a challenging market environment. Based on the data we have at our disposal right now, for the full year 2025, we expect a stable gross margin of plus/minus 50 basis points. As you can see throughout the half year, we have been able to maintain firm control over operating expenses across the business. Operating expenses increased 2.2% in the first 6 months of 2025. It is worth highlighting that the PBT margin came in at 19.6%. Operating working capital remains negative as a result of the business model. The development of operating working capital is very much aligned with the performance of the business over the period, as you would expect. In conjunction with the satisfactory operating performance we have seen in the first semester Inditex's inventory as of the 31st of July was 3% higher. It is important to note that the closing inventory at the end of the trading period was of high quality. As you can see from this slide, we continue to generate very strong levels of cash flow. Funds from operations increased 5% to EUR 3.7 billion. Capital expenditure reached EUR 1.3 billion, reflecting the ordinary and extraordinary investments in 2025, focused on ensuring future growth. Cash flow in the period was impacted by the calendar of payments coming from the normalization of supply chain conditions over the last year relating to the Red Sea. And now over to you, Gorka. Gorka Yturriaga: Thank you, Andrés. As Oscar and Andrés have alluded to already, we are content with the performance of the group in the first half of 2025 and with the overall execution of the model over the period. The global rollout of the optimization program continues to take place. As per usual, we are, of course, referring to new store openings, refurbishments, enlargements and absorptions. It may interest you to know that sales in constant currency have been positive across all concepts over the period. To give you a taste of what we've been doing in the first 6 months of this year, Inditex opened stores in 35 different markets all across the globe. Each of the concepts with no exception, are participating in the global growth plan. We continue to expand our concepts into new markets. Stradivarius entered Austria in July with a store in Vienna. Tomorrow, 11th of September, Oysho opens its first store in the Netherlands in Amsterdam, Kalverstraat. Finally, Manchester Trafford Centre is a good example of our active store optimization program. Taking advantage of a large real estate opportunity, Zara and Pull&Bear have all relocated to new stores with larger footprints, while Bershka has opened its first store in the mall. We'll go into more detail as to some of these activities shortly. And now back to you, Oscar. Oscar Maceiras: Thank you, Gorka. Our objective has always been to continually strengthen and reinforce the key pillars of our highly integrated business model. As has always been the case, our first priority is to enhance the appeal of our commercial proposition. After all, it is the creativity, innovation, design and quality of our collections that will determine our success going forward. Thanks to our more than 700 designers and our prototype teams, every meticulous detail in the design process is taken care of, enabling us to offer the highest quality fashion to customers in all corners of the globe. The end result of our unique approach is the integration of the physical with the online experience in a seamless manner that permits us across multiple formats to rapidly react to changing fashion trends and offer the latest collections. With our integrated store and online model, our teams have been able to take advantage of the growth opportunities we see across all channels, concepts and markets. Underlining this consistent level of growth are the new openings, enlargements and the refurbishments of stores in the very best locations, expanding into new cities and into new territories and launching new services that enhance the customers' shopping experience. As Gorka has already mentioned, in August, Zara relocated to a new store in Manchester Trafford, which has dedicated spaces for our collections, including Zara Athleticz, which offers customers a sportwear fashion for them. Another example is the recent reopening of our store in Madrid Serrano. This iconic location includes our third The Apartment, a new way of interacting with our customers. Also available in Compostela Coruña and [indiscernible] Paris that offers the premium part of our Zara and Zara Home collections in a highly curated way. The rollout of the soft-tag program at Zara was completed last year. This program adds to the existing in-store technology ecosystem with Click & Collect silos, assisted checkouts and drop-off points and sorters. We are using this as a springboard for the further integration of the online platforms with our increasingly digitalized stores for the years to come. The technology is being rolled out currently in Bershka and Pull&Bear. Within the bringyourbag initiative and thanks to the reuse of shopping bags by our customers, we have reduced their consumption in our stores by 49%. We are investing the equivalent full amount raised from charging for recycled paper bags and envelopes in environmental projects in over 30 countries, in partnership with non-profit organizations such as Conservation International and WWF. Recently, we have formalized a new program, in collaboration with the international environmental organization, Ocean Conservancy, aimed at the protection of marine ecosystems and biodiversity. This agreement, endowed by Inditex, includes the removal of more than 450 tonnes of plastics from beaches and areas of high environmental value, the collection of nets and fishing gear abandoned in the oceans and the promotion of zero waste projects for the collection and recovery of waste. With a view to Inditex's long-term growth potential, in the current year, we are planning investments that will scale our capabilities, generate efficiencies and increase our competitive differentiation. The growth of annual gross space in the period 2025 to 2026 is expected to be around 5%. Over this same time period, Inditex expects net space to be positive along with strong online sales. For 2025, we estimate ordinary capital expenditure of approximately EUR 1.8 billion. We continue to focus the ordinary capital expenditure on our global store base, the online platform and the rollout of technology programs aimed at enhancing the level of integration. As we have already shared in recent results presentations, given our view on Inditex's strong long-term growth opportunities, we are in the process of executing the logistics expansion plan set for 2024 and 2025. This 2-year extraordinary investment program, focusing on the expansion of the business allocates EUR 900 million per year to increase logistic capacities in each of the 2024 and 2025 financial years. The logistics expansion plan is on track. The Zaragoza II I distribution center is now up and running. Our centers have the highest standards of sustainability and cutting-edge technology. We focus on productivity and team well-being. In July, Inditex invested in Theker Robotics, a start-up developing AI-driven logistics automation. A brief reminder on the dividend. The final dividend payment for 2024 of EUR 0.84 per share will be made on the 3rd of November 2025. I would like to finish with a comment on our current performance. Autumn/Winter collections continue to be very well received by our customers. Store and online sales in constant currency increased 9% between the 1st of August and the 8th of September 2025 versus the same time period of 2024. Thank you all for attending this results presentation. That concludes our presentation for today. We will be happy to answer any questions you may have. James O'Shaughnessy: [Operator Instructions] The first question comes from Geoff Lowery from Redburn. Geoff Lowery: It's not often that Inditex comments on markets, but you've used the interesting phrase of complex. Can you help us understand more exactly what you mean by that? Is it what you're seeing from the consumer? Is it a comment on supply chain or tariffs? Sort of just help us understand this a little bit more, please. Gorka Yturriaga: Thank you, Geoff. No, I mean, when we are talking about market and challenging conditions, we're really talking about the market as a whole. So you think of, for example, the tariffs and the trade wars and the consequence of the FX swings that we've seen over the period. So we're really just highlighting that. In any case, what we are also liking to mention is the fact that as you've seen the performance of the group in the quarter and the resulting gross margin, which we think is a good reflection of the strong execution of the unique business model that we have, we've been able to somehow overcome all of those headwinds. Thank you. James O'Shaughnessy: The next question comes from Anne Critchlow from Berenberg. Anne Critchlow: I had a question on Lefties because I believe it's stepping up expansion at this point. And I'm just wondering if there are any regions or countries where you think Lefties wouldn't be relevant and which countries and regions are the focus of store openings in the short to medium term? Gorka Yturriaga: Great. Thank you, Anne. I mean with regards to Lefties, we've talked about the fact that it already has an international presence. It originated with more focus in its heritage markets of Spain, Portugal and also Mexico. Currently, it has presence in 18 markets, and we are testing Lefties in a series of other markets. We've also reported today, as you've seen in the note, that Lefties currently has 210 stores versus last year's store count, which was about 198 stores. So we're just growing as we are with all concepts with a lot of opportunities that we see on a project-by-project basis. Thank you. James O'Shaughnessy: The next question comes from Monique Pollard from Citi. Monique Pollard: My question is just coming back to this point of the strength of the gross margin in the second quarter or stability over the first half. I guess, as you point out, given the headwinds from the tariffs, et cetera, that has come in quite a bit better than expected. Just wondered if you could talk a bit about what you have done to manage the tariff impact, if there have been some consumer-focused price increases in the U.S., negotiations with suppliers, et cetera. Gorka Yturriaga: Thank you, Monique. Great. So with regards to tariffs, I think, first of all, I'd like to say that the current environment is difficult to predict, and we're, of course, continuously monitoring the situation, and it's quite fluid. We generally feel that as a company, we have 3 key tools at our disposal. And I think we've talked about this in the past. First of all, you have to consider that we are a global company and, therefore, we have a lot of experience with related to tariff regimes and changes of tariff regimes. The second one is one point that we always highlight that we have a very broad-based diversification, both in terms of sales as well as in the sourcing. And I think this is a great advantage for us to manage all of these issues. And then finally, of course, the flexibility of the business model, which is also leveraged on that proximity sourcing that we always highlight. I think that with regards to the tariffs in the U.S. specifically, we have a stable pricing policy that we're always talking about. And of course, all pricing activity, be it in the U.S. or any other geography is primarily driven by commercial decisions, not financial ones. And what we try to do in every market is maintain our relative position. So with all that in mind, we're quite confident with regards to the gross margin guidance for the year of plus/minus 50 basis points. James O'Shaughnessy: The next question comes from Sreedhar Mahamkali from UBS. Sreedhar Mahamkali: I guess if you could talk a little bit about online versus stores. Clearly, last couple of years, online has been growing considerably faster than stores. Do you think that is to continue? And as a result of the space growth we see this year is a good proxy for the medium term as well, please? Gorka Yturriaga: Great. Thank you, Sreedhar. As you know, we have a fully integrated business model. And the reason I mentioned this is because it's difficult to think of online growth without the physical store presence. So you really have to see it as a whole and not try to separate both channels as for us, really, we feel that it is one a consequence of the other. If you think of, for example, online sales without a store or store sales without online, it's difficult for us because of that fully integrated business model. I think what you should consider is that we continue growing and we see great opportunities of growth in both channels, in all markets and throughout all concepts. James O'Shaughnessy: The next question comes from Warwick Okines from BNP. Alexander Richard Okines: Perhaps you could just talk a bit more about the growth in the Americas region in the half. And in particular, just going back to March 2023 when you said that you'd have at least 30 expansion projects in the U.S. over 3 years. Are you on track to meet that number? Oscar Maceiras: Thanks for the question. Well, the growth of the group is broad-based across all regions and concepts. And as you know, in the U.S., it's a very relevant market for us, and we continue to see opportunities to keep on executing that strategy of selective growth in the market. In 2025, we remain very active in the U.S. In June, for instance, we relocated to a new flagship store in L.A., The Grove with significant more space and upgraded customer experience. Some additional projects have already been executed, including another openings, Boston CambridgeSide Mall or relocations, New York Hudson Yards. More projects for the rest of the year will be new openings, Las Vegas Forum Shops at Caesars. Our new Zara Man stand-alone store in Costa Mesa. Or enlargements like Boston Newbury or Austin, Texas. For 2026, we are planning very relevant initiatives, refurbishments in iconic stores like New York Fifth Avenue, new openings for instance, the 400 Post Street, our new flagship store in San Francisco or the opening of the store in Charlotte that will imply the opening of our state #26 with stores in the U.S. And of course, all of them combined with solid -- very solid performance of our online platform in the states. We keep on exploring new opportunities for sure in the market for our different formats. Thank you. James O'Shaughnessy: The next question comes from James Grzinic from Jefferies. James Grzinic: Congratulations. Just had a quick one. I appreciate your guidance around gross margin. But I was wondering, when I think about the timing of supply chain cost deflation, FX tailwind building on sourcing, product cost deflation, should I be thinking that these start property building in the current autumn/winter ranges that are hitting the stores now? I would be curious on your thoughts about that dynamic and the timing of that, please? Gorka Yturriaga: Great. No, that's a good question. I think from our perspective, what we see is that, in general, the demand of our collection has always been driven by the ability of us to be able to execute the business model. And so that's how we're thinking about the second half of the year. I get your point with regards to, for example, FX, but you have to also consider that though we do have a sourcing in U.S. dollar, we have somewhat of a natural hedge on the sales side as well, which is what gives us a little bit of a confidence when we're talking about a stable gross margin of plus/minus 50 basis points. Thank you. James O'Shaughnessy: The next question comes from Richard Chamberlain from RBC. Richard Chamberlain: I just had a question on working capital, please. I wondered if you could just explain the drivers of the working capital outflow that you've seen in the first half in the cash flow statement, in particular, the change in current liabilities, it's an EUR 811 million cash outflow by the looks of it in the first half. Andrés Sánchez Iglesias: Thank you for your question. As we explained during the presentation, this decline was driven primarily by the normalization of our supply chain conditions over the last year related to the Red Sea. So this has led to more normal payments during the period compared to the same period of last year. And this is, as we had explained during fiscal year 2024 results, would also explain why inventory levels have also fluctuated over the last 2 years, a slight shift in timing. This impact will normalize next year. Thank you. James O'Shaughnessy: We're going to move over to the webcast questions now. There's a couple of questions -- a few questions we've had today. The first of which relates to the new flagship store in Manchester. You recently opened a new flagship store in Manchester. Can you give us some color on this and your general view on the U.K., please? Oscar Maceiras: Thanks for the question. Well, the U.K. is, of course, a very relevant market for us. We continue to see very good opportunities to keep on growing both for Zara and the other concepts in different locations. After recent relevant projects in cities like Liverpool or Birmingham and our recent flagship stores for Pull&Bear, Massimo Dutti, and Oysho in Oxford Street, London, we have taken advantage of our large real estate opportunity in Manchester Trafford Centre, as we mentioned during the presentation. And this opportunity is allowing us to expand our Zara store over 40%, relocate Pull&Bear, open Bershka; and in the coming months, also to relocate our Stradivarius store. The experience of our customers has significantly improved as we are offering our different collections with a state-of-the-art technology that includes silos for online orders and returns and assisted checkout areas. For 2026, we will continue to be very active in the U.K. with plans, for instance, to refurbish some of our iconic stores in London, such as our Zara stores in Bond Street and Brompton Road. Thank you. James O'Shaughnessy: Thank you, Oscar. The next question on the webcast platform relates more to the younger concepts. Can you explain why some of the younger concepts have been growing quite so strongly recently, provide some color. Oscar Maceiras: Thank you. Well, we are happy with the performance of our different concepts, of course, including Zara. Our other concepts are performing very well with the ambition of further diversifying our customer base and our product offering. We continue to see additional good opportunities to expand their presence in new markets. We have just mentioned during our presentation 2 examples, the arrival of Stradivarius and Oysho to Austria and the Netherlands with the opening of our new stores in Donauzentrum, Vienna and Kalverstraat, Amsterdam. Another example is Denmark for Bershka that is about to open its first store in that market after having a very positive feedback in recent openings of the first stores in Sweden and India. James O'Shaughnessy: The next question relates more to the technology systems within the stores. Can you provide some more detail on the store technology ecosystem, including sorters, please? Oscar Maceiras: As we have mentioned during the call, we are executing many projects to improve the customer experience in our stores, thanks to the rollout of soft-tag technology. Some of these projects involve customer-facing technology like assisted checkouts, Click & Collect and drop-off points. Customers feedback, as I have just mentioned, with the example of Manchester Trafford has been very positive with an increasing level of adoption in the different markets. We are also introducing technology that impacts and improves the experience of our team behind the scenes in the stores. And one of these technologies, which we are rolling out in the stores are our sorters that support some processes that are key in order to make as quick as possible available to customers products that are temporarily outside the commercial floor in the stock rooms or fitting rooms or when new products arrive. James O'Shaughnessy: The next question on the webcast platform relates to the trading update. We had a good trading update of 9% going into the second half of the year. Can you provide some color on this, please? Oscar Maceiras: Thanks for the question. Well, I guess that's obvious that we are seeing a positive evolution throughout the year. First quarter plus 4% in constant currency; second quarter, plus 6% in constant currency. And this morning, we are providing a trading update for the first 5 weeks of the third quarter, plus 9% that reflects an acceleration of the sales. We remain confident about the year ahead and, as always, focused on increasing the differentiation of the business model. The results that we have announced this morning demonstrate the strength of the model that, as we mentioned, in a complex environment keeps with high levels of profitability. James O'Shaughnessy: Thank you. And that concludes the webcast questions for today. Oscar Maceiras: Thank you to all of those participating in the presentation today. For any additional questions you may have, please get in touch with our Investor Relations department, and we will welcome you back in December for the 9 months 2025 results.
James O'Shaughnessy: Buenos días and good morning to everyone today. A warm welcome to all those taking part in our half year 2025 results presentation. My name is James O'Shaughnessy, Investor Relations. The presentation today will be led by Inditex's CEO, Oscar Garcia Maceiras; our CFO, Andrés Sánchez; and Gorka García-Tapia, Director of Investor Relations. [Operator Instructions] Let's take the disclaimer as read. Over to you, Oscar. Oscar Maceiras: Good morning. Welcome to our results presentation. It's good to be with you all today. In the first half of 2025, we have again achieved a solid performance with satisfactory sales in a complex market environment and keeping strong levels of profitability. The efficient execution accomplished by our teams demonstrates the strength of Inditex's business model. This business model continues to be driven by our unique fashion proposition and increasingly optimized customer experience, our focus on sustainability and the quality and commitment of our teams. These factors continue to enhance our competitive differentiation. Our Spring Summer collections have been well received by customers. We had a satisfactory sales growth of 1.6%. Sales in constant currency increased by 5.1%. It's evident from the figures we are providing this morning that the execution of the business model has also been strong, reflected in the good gross margin performance and by disciplined cost control. At the bottom line, net income increased 0.8% to EUR 2.8 billion. This satisfactory performance has continued going into the second half of the year. Store and online sales in constant currency between the 1st of August and the 8th of September grew 9%. Our diversified presence across 214 markets in conjunction with a relatively low market penetration in most of these markets underpins our belief in the significant global growth opportunities we have ahead of us. This confidence comes from the fact that we have a unique model that permits us to build upon the increasing levels of differentiation we have seen in recent years. And now let's move to Andrés to go over the numbers. Andrés Sánchez Iglesias: Thanks, Oscar. As you have seen in the report released early this morning, Inditex executed in a very consistent manner in the first semester of 2025. Sales performed well at plus 1.6%. Furthermore, by actively managing our supply chain, we have been able to generate a very good gross margin performance. In line with what we saw in the first quarter results, operating expenses in the first half have been closely monitored. EBITDA in turn increased 1.5% to reach EUR 5.1 billion. And net income grew by 0.8% to EUR 2.8 billion. On the top line, I'll point out that sales reached 1.6% to reach EUR 18.4 billion. In constant currency, that translates to 5.1%. We saw consistent growth in sales in our integrated model across both channels. At current exchange rates, we expect a minus 4% top line currency impact for the full year 2025. We enjoy a presence in 214 markets as well as a low market share in the vast majority of these markets. It should also be pointed out that the sector as a whole continues to be very fragmented. It is due to these factors that we see continued growth for Inditex over the medium to long term. In constant currency, all geographical areas had a positive sales evolution. In the first half of 2025, gross profit increased 1.5% to reach EUR 10.7 billion. The gross margin reached 58.3%. This gross margin performance serves as a demonstration of the good execution of the business model over the period despite a challenging market environment. Based on the data we have at our disposal right now, for the full year 2025, we expect a stable gross margin of plus/minus 50 basis points. As you can see throughout the half year, we have been able to maintain firm control over operating expenses across the business. Operating expenses increased 2.2% in the first 6 months of 2025. It is worth highlighting that the PBT margin came in at 19.6%. Operating working capital remains negative as a result of the business model. The development of operating working capital is very much aligned with the performance of the business over the period, as you would expect. In conjunction with the satisfactory operating performance we have seen in the first semester Inditex's inventory as of the 31st of July was 3% higher. It is important to note that the closing inventory at the end of the trading period was of high quality. As you can see from this slide, we continue to generate very strong levels of cash flow. Funds from operations increased 5% to EUR 3.7 billion. Capital expenditure reached EUR 1.3 billion, reflecting the ordinary and extraordinary investments in 2025, focused on ensuring future growth. Cash flow in the period was impacted by the calendar of payments coming from the normalization of supply chain conditions over the last year relating to the Red Sea. And now over to you, Gorka. Gorka Yturriaga: Thank you, Andrés. As Oscar and Andrés have alluded to already, we are content with the performance of the group in the first half of 2025 and with the overall execution of the model over the period. The global rollout of the optimization program continues to take place. As per usual, we are, of course, referring to new store openings, refurbishments, enlargements and absorptions. It may interest you to know that sales in constant currency have been positive across all concepts over the period. To give you a taste of what we've been doing in the first 6 months of this year, Inditex opened stores in 35 different markets all across the globe. Each of the concepts with no exception, are participating in the global growth plan. We continue to expand our concepts into new markets. Stradivarius entered Austria in July with a store in Vienna. Tomorrow, 11th of September, Oysho opens its first store in the Netherlands in Amsterdam, Kalverstraat. Finally, Manchester Trafford Centre is a good example of our active store optimization program. Taking advantage of a large real estate opportunity, Zara and Pull&Bear have all relocated to new stores with larger footprints, while Bershka has opened its first store in the mall. We'll go into more detail as to some of these activities shortly. And now back to you, Oscar. Oscar Maceiras: Thank you, Gorka. Our objective has always been to continually strengthen and reinforce the key pillars of our highly integrated business model. As has always been the case, our first priority is to enhance the appeal of our commercial proposition. After all, it is the creativity, innovation, design and quality of our collections that will determine our success going forward. Thanks to our more than 700 designers and our prototype teams, every meticulous detail in the design process is taken care of, enabling us to offer the highest quality fashion to customers in all corners of the globe. The end result of our unique approach is the integration of the physical with the online experience in a seamless manner that permits us across multiple formats to rapidly react to changing fashion trends and offer the latest collections. With our integrated store and online model, our teams have been able to take advantage of the growth opportunities we see across all channels, concepts and markets. Underlining this consistent level of growth are the new openings, enlargements and the refurbishments of stores in the very best locations, expanding into new cities and into new territories and launching new services that enhance the customers' shopping experience. As Gorka has already mentioned, in August, Zara relocated to a new store in Manchester Trafford, which has dedicated spaces for our collections, including Zara Athleticz, which offers customers a sportwear fashion for them. Another example is the recent reopening of our store in Madrid Serrano. This iconic location includes our third The Apartment, a new way of interacting with our customers. Also available in Compostela Coruña and [indiscernible] Paris that offers the premium part of our Zara and Zara Home collections in a highly curated way. The rollout of the soft-tag program at Zara was completed last year. This program adds to the existing in-store technology ecosystem with Click & Collect silos, assisted checkouts and drop-off points and sorters. We are using this as a springboard for the further integration of the online platforms with our increasingly digitalized stores for the years to come. The technology is being rolled out currently in Bershka and Pull&Bear. Within the bringyourbag initiative and thanks to the reuse of shopping bags by our customers, we have reduced their consumption in our stores by 49%. We are investing the equivalent full amount raised from charging for recycled paper bags and envelopes in environmental projects in over 30 countries, in partnership with non-profit organizations such as Conservation International and WWF. Recently, we have formalized a new program, in collaboration with the international environmental organization, Ocean Conservancy, aimed at the protection of marine ecosystems and biodiversity. This agreement, endowed by Inditex, includes the removal of more than 450 tonnes of plastics from beaches and areas of high environmental value, the collection of nets and fishing gear abandoned in the oceans and the promotion of zero waste projects for the collection and recovery of waste. With a view to Inditex's long-term growth potential, in the current year, we are planning investments that will scale our capabilities, generate efficiencies and increase our competitive differentiation. The growth of annual gross space in the period 2025 to 2026 is expected to be around 5%. Over this same time period, Inditex expects net space to be positive along with strong online sales. For 2025, we estimate ordinary capital expenditure of approximately EUR 1.8 billion. We continue to focus the ordinary capital expenditure on our global store base, the online platform and the rollout of technology programs aimed at enhancing the level of integration. As we have already shared in recent results presentations, given our view on Inditex's strong long-term growth opportunities, we are in the process of executing the logistics expansion plan set for 2024 and 2025. This 2-year extraordinary investment program, focusing on the expansion of the business allocates EUR 900 million per year to increase logistic capacities in each of the 2024 and 2025 financial years. The logistics expansion plan is on track. The Zaragoza II I distribution center is now up and running. Our centers have the highest standards of sustainability and cutting-edge technology. We focus on productivity and team well-being. In July, Inditex invested in Theker Robotics, a start-up developing AI-driven logistics automation. A brief reminder on the dividend. The final dividend payment for 2024 of EUR 0.84 per share will be made on the 3rd of November 2025. I would like to finish with a comment on our current performance. Autumn/Winter collections continue to be very well received by our customers. Store and online sales in constant currency increased 9% between the 1st of August and the 8th of September 2025 versus the same time period of 2024. Thank you all for attending this results presentation. That concludes our presentation for today. We will be happy to answer any questions you may have. James O'Shaughnessy: [Operator Instructions] The first question comes from Geoff Lowery from Redburn. Geoff Lowery: It's not often that Inditex comments on markets, but you've used the interesting phrase of complex. Can you help us understand more exactly what you mean by that? Is it what you're seeing from the consumer? Is it a comment on supply chain or tariffs? Sort of just help us understand this a little bit more, please. Gorka Yturriaga: Thank you, Geoff. No, I mean, when we are talking about market and challenging conditions, we're really talking about the market as a whole. So you think of, for example, the tariffs and the trade wars and the consequence of the FX swings that we've seen over the period. So we're really just highlighting that. In any case, what we are also liking to mention is the fact that as you've seen the performance of the group in the quarter and the resulting gross margin, which we think is a good reflection of the strong execution of the unique business model that we have, we've been able to somehow overcome all of those headwinds. Thank you. James O'Shaughnessy: The next question comes from Anne Critchlow from Berenberg. Anne Critchlow: I had a question on Lefties because I believe it's stepping up expansion at this point. And I'm just wondering if there are any regions or countries where you think Lefties wouldn't be relevant and which countries and regions are the focus of store openings in the short to medium term? Gorka Yturriaga: Great. Thank you, Anne. I mean with regards to Lefties, we've talked about the fact that it already has an international presence. It originated with more focus in its heritage markets of Spain, Portugal and also Mexico. Currently, it has presence in 18 markets, and we are testing Lefties in a series of other markets. We've also reported today, as you've seen in the note, that Lefties currently has 210 stores versus last year's store count, which was about 198 stores. So we're just growing as we are with all concepts with a lot of opportunities that we see on a project-by-project basis. Thank you. James O'Shaughnessy: The next question comes from Monique Pollard from Citi. Monique Pollard: My question is just coming back to this point of the strength of the gross margin in the second quarter or stability over the first half. I guess, as you point out, given the headwinds from the tariffs, et cetera, that has come in quite a bit better than expected. Just wondered if you could talk a bit about what you have done to manage the tariff impact, if there have been some consumer-focused price increases in the U.S., negotiations with suppliers, et cetera. Gorka Yturriaga: Thank you, Monique. Great. So with regards to tariffs, I think, first of all, I'd like to say that the current environment is difficult to predict, and we're, of course, continuously monitoring the situation, and it's quite fluid. We generally feel that as a company, we have 3 key tools at our disposal. And I think we've talked about this in the past. First of all, you have to consider that we are a global company and, therefore, we have a lot of experience with related to tariff regimes and changes of tariff regimes. The second one is one point that we always highlight that we have a very broad-based diversification, both in terms of sales as well as in the sourcing. And I think this is a great advantage for us to manage all of these issues. And then finally, of course, the flexibility of the business model, which is also leveraged on that proximity sourcing that we always highlight. I think that with regards to the tariffs in the U.S. specifically, we have a stable pricing policy that we're always talking about. And of course, all pricing activity, be it in the U.S. or any other geography is primarily driven by commercial decisions, not financial ones. And what we try to do in every market is maintain our relative position. So with all that in mind, we're quite confident with regards to the gross margin guidance for the year of plus/minus 50 basis points. James O'Shaughnessy: The next question comes from Sreedhar Mahamkali from UBS. Sreedhar Mahamkali: I guess if you could talk a little bit about online versus stores. Clearly, last couple of years, online has been growing considerably faster than stores. Do you think that is to continue? And as a result of the space growth we see this year is a good proxy for the medium term as well, please? Gorka Yturriaga: Great. Thank you, Sreedhar. As you know, we have a fully integrated business model. And the reason I mentioned this is because it's difficult to think of online growth without the physical store presence. So you really have to see it as a whole and not try to separate both channels as for us, really, we feel that it is one a consequence of the other. If you think of, for example, online sales without a store or store sales without online, it's difficult for us because of that fully integrated business model. I think what you should consider is that we continue growing and we see great opportunities of growth in both channels, in all markets and throughout all concepts. James O'Shaughnessy: The next question comes from Warwick Okines from BNP. Alexander Richard Okines: Perhaps you could just talk a bit more about the growth in the Americas region in the half. And in particular, just going back to March 2023 when you said that you'd have at least 30 expansion projects in the U.S. over 3 years. Are you on track to meet that number? Oscar Maceiras: Thanks for the question. Well, the growth of the group is broad-based across all regions and concepts. And as you know, in the U.S., it's a very relevant market for us, and we continue to see opportunities to keep on executing that strategy of selective growth in the market. In 2025, we remain very active in the U.S. In June, for instance, we relocated to a new flagship store in L.A., The Grove with significant more space and upgraded customer experience. Some additional projects have already been executed, including another openings, Boston CambridgeSide Mall or relocations, New York Hudson Yards. More projects for the rest of the year will be new openings, Las Vegas Forum Shops at Caesars. Our new Zara Man stand-alone store in Costa Mesa. Or enlargements like Boston Newbury or Austin, Texas. For 2026, we are planning very relevant initiatives, refurbishments in iconic stores like New York Fifth Avenue, new openings for instance, the 400 Post Street, our new flagship store in San Francisco or the opening of the store in Charlotte that will imply the opening of our state #26 with stores in the U.S. And of course, all of them combined with solid -- very solid performance of our online platform in the states. We keep on exploring new opportunities for sure in the market for our different formats. Thank you. James O'Shaughnessy: The next question comes from James Grzinic from Jefferies. James Grzinic: Congratulations. Just had a quick one. I appreciate your guidance around gross margin. But I was wondering, when I think about the timing of supply chain cost deflation, FX tailwind building on sourcing, product cost deflation, should I be thinking that these start property building in the current autumn/winter ranges that are hitting the stores now? I would be curious on your thoughts about that dynamic and the timing of that, please? Gorka Yturriaga: Great. No, that's a good question. I think from our perspective, what we see is that, in general, the demand of our collection has always been driven by the ability of us to be able to execute the business model. And so that's how we're thinking about the second half of the year. I get your point with regards to, for example, FX, but you have to also consider that though we do have a sourcing in U.S. dollar, we have somewhat of a natural hedge on the sales side as well, which is what gives us a little bit of a confidence when we're talking about a stable gross margin of plus/minus 50 basis points. Thank you. James O'Shaughnessy: The next question comes from Richard Chamberlain from RBC. Richard Chamberlain: I just had a question on working capital, please. I wondered if you could just explain the drivers of the working capital outflow that you've seen in the first half in the cash flow statement, in particular, the change in current liabilities, it's an EUR 811 million cash outflow by the looks of it in the first half. Andrés Sánchez Iglesias: Thank you for your question. As we explained during the presentation, this decline was driven primarily by the normalization of our supply chain conditions over the last year related to the Red Sea. So this has led to more normal payments during the period compared to the same period of last year. And this is, as we had explained during fiscal year 2024 results, would also explain why inventory levels have also fluctuated over the last 2 years, a slight shift in timing. This impact will normalize next year. Thank you. James O'Shaughnessy: We're going to move over to the webcast questions now. There's a couple of questions -- a few questions we've had today. The first of which relates to the new flagship store in Manchester. You recently opened a new flagship store in Manchester. Can you give us some color on this and your general view on the U.K., please? Oscar Maceiras: Thanks for the question. Well, the U.K. is, of course, a very relevant market for us. We continue to see very good opportunities to keep on growing both for Zara and the other concepts in different locations. After recent relevant projects in cities like Liverpool or Birmingham and our recent flagship stores for Pull&Bear, Massimo Dutti, and Oysho in Oxford Street, London, we have taken advantage of our large real estate opportunity in Manchester Trafford Centre, as we mentioned during the presentation. And this opportunity is allowing us to expand our Zara store over 40%, relocate Pull&Bear, open Bershka; and in the coming months, also to relocate our Stradivarius store. The experience of our customers has significantly improved as we are offering our different collections with a state-of-the-art technology that includes silos for online orders and returns and assisted checkout areas. For 2026, we will continue to be very active in the U.K. with plans, for instance, to refurbish some of our iconic stores in London, such as our Zara stores in Bond Street and Brompton Road. Thank you. James O'Shaughnessy: Thank you, Oscar. The next question on the webcast platform relates more to the younger concepts. Can you explain why some of the younger concepts have been growing quite so strongly recently, provide some color. Oscar Maceiras: Thank you. Well, we are happy with the performance of our different concepts, of course, including Zara. Our other concepts are performing very well with the ambition of further diversifying our customer base and our product offering. We continue to see additional good opportunities to expand their presence in new markets. We have just mentioned during our presentation 2 examples, the arrival of Stradivarius and Oysho to Austria and the Netherlands with the opening of our new stores in Donauzentrum, Vienna and Kalverstraat, Amsterdam. Another example is Denmark for Bershka that is about to open its first store in that market after having a very positive feedback in recent openings of the first stores in Sweden and India. James O'Shaughnessy: The next question relates more to the technology systems within the stores. Can you provide some more detail on the store technology ecosystem, including sorters, please? Oscar Maceiras: As we have mentioned during the call, we are executing many projects to improve the customer experience in our stores, thanks to the rollout of soft-tag technology. Some of these projects involve customer-facing technology like assisted checkouts, Click & Collect and drop-off points. Customers feedback, as I have just mentioned, with the example of Manchester Trafford has been very positive with an increasing level of adoption in the different markets. We are also introducing technology that impacts and improves the experience of our team behind the scenes in the stores. And one of these technologies, which we are rolling out in the stores are our sorters that support some processes that are key in order to make as quick as possible available to customers products that are temporarily outside the commercial floor in the stock rooms or fitting rooms or when new products arrive. James O'Shaughnessy: The next question on the webcast platform relates to the trading update. We had a good trading update of 9% going into the second half of the year. Can you provide some color on this, please? Oscar Maceiras: Thanks for the question. Well, I guess that's obvious that we are seeing a positive evolution throughout the year. First quarter plus 4% in constant currency; second quarter, plus 6% in constant currency. And this morning, we are providing a trading update for the first 5 weeks of the third quarter, plus 9% that reflects an acceleration of the sales. We remain confident about the year ahead and, as always, focused on increasing the differentiation of the business model. The results that we have announced this morning demonstrate the strength of the model that, as we mentioned, in a complex environment keeps with high levels of profitability. James O'Shaughnessy: Thank you. And that concludes the webcast questions for today. Oscar Maceiras: Thank you to all of those participating in the presentation today. For any additional questions you may have, please get in touch with our Investor Relations department, and we will welcome you back in December for the 9 months 2025 results.
Operator: Greetings, ladies and gentlemen, and welcome to the SEALSQ First Half 2025 Financial Results Earnings Conference Call. As a reminder, this conference call contains forward-looking statements. Such statements involve certain known and unknown risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of SEALSQ to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. SEALSQ is providing this communication as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise. These risks are also discussed in our filings made with the Securities and Exchange Commission. Please be advised that our first half 2025 earnings release was issued on Tuesday, September 9, 2025. Also, our Form 6-K for the 6-month period ended June 30, 2025, which was filed with the SEC on Tuesday, September 9, 2025, can be found by visiting the Investors section of the SEALSQ website at investor.sealsq.com. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce Carlos Moreira, Founder and Chief Executive Officer of SEALSQ. Mr. Moreira, you may begin. Carlos Moreira: Thank you very much, Kevin. Good afternoon to those joining us from Europe and good morning to those joining us from the United States. I will begin today, the call by discussing our business milestone for the first half of 2025, then I will provide our growth initiatives and outlook for the second half of '25 and beyond and hand over to John to provide our financial performances of the year -- for the half year. So 2025 was a transformative year. It has been a pivotal year for SEALSQ as we accelerated our mission to deliver quantum-resistant semiconductor solutions and secure digital infrastructure for our rapidly evolving global market. The first half of the year confirmed the strength of our strategy, the resilience of our operations and the scale of opportunities ahead. As a fabless semiconductor innovator, SEALSQ designs market secure microcontrollers, both off the shelf and custom designed, integrated within a vertical trust service ecosystem featuring a post-quantum root of trust managed by public infrastructure services and secure chip personalization. Our solutions protect industries such as IoT, energy, automobile and smart homes, as well as sensitive applications in health care, government and defense. While the global embedded security chip market is projected to reach nearly $10 billion by 2028, suppliers offering certified secure products remain scarce. This creates a significant opportunity for SEALSQ, uniquely positioned to deliver both regulatory compliance and resilience against emerging threats such as quantum computers. Our strength market recognition, bolstered by the urgent need for secure microcontrollers to defend against post-quantum threat, has attracted a strong investors' confidence. Since November 2024, we have raised over $140 million in additional capital to accelerate our product road map, execute strategic investments and expand our growth pipeline. So in terms of the product and technology milestones, in the first half of '25, we achieved tangible progress on innovation and commercialization. The first one is with QUASAR Program, engineering sample of the QS7001, which is a post-quantum microcontroller delivered to initial partners in Q2 2025 for testing. Production samples and development kits are scheduled for Q3 '25, with initial revenue expected in 2026. It is important to mention here that we are one of the first companies in the world with that type of aggressive road map, and this can be transformed into a very important business opportunity and revenue generation in 2026. The QVault TPM, which is a pilot-customer sampling for QVault TPM V183. It is expected in Q4 '25, followed by V185 in Q1 '26. Initial revenues are projected for '26. The VaultIC408 secure microcontroller, which is an advance to FIPS 140-3 level 3 validation, has been confirmed by UL independent lab tests, which is NIST review ongoing now. The MS6003 Secure Element launched with FIDO2 passwordless authentication to meet demand in the fast-growing authentication market. Also INeS Box, which is deployed for factory IoT identification injection and in larger scale projects, ensuring compliance with Matter, which is the Homeland Certification for Home Appliances in the United States and the U.S. Cyber Trust Mark. Also the Quantum RootCA, very important development achieved during the first year, introduced by the OISTE Foundation as the first PQC integrated PKI system to safeguard IoT, financial and defense infrastructure against quantum encryption. Commercial achievement. So the commercial momentum mirror our technology progress. Revenue is on track to increase 59% to 82% in 2025 versus 2024, supported by a strong demand for PKI services, secure hardware and custom ASICs. Our TPM engagement more than doubled from 35 customers at the end of 2024 to 82 customers by mid-'25, validating the relevance of our road map. We also secured a multiyear supply agreement with global leaders such as the Hager Group, Dyson, MIWA and [ Delta Dore ]. Expanding collaboration with Landis+Gyr, which is one of the leading provider of smart meters in the world, including PKI deployment for 30 million utilities users in Asia and for the development for the U.S. market. Smart meters is one of the potential hardware that can be in real trouble if they are not post-quantum ready, and this company is taking the right step to make resilient at the product level with our technology. Advance on Card Reader business in Asia with new customers committing to several hundred thousand annual units, expanding our global footprint by opening a sales office in India and appointing distribution in Asia, Europe and Turkey. So now talking about the strategic investment and partnership. So 2025 has also marked a transformational phase in our growth strategy. The IC'ALPS acquisition, bringing 100 engineers to our staff force. In August 2025, we completed the acquisition of 100% of IC'ALPS, a French company located in Grenoble, which are ASIC design specialists, bringing, as I mentioned, 100 skilled engineers into the SEALSQ force. This has strengthened our common and custom post-quantum ASIC capability for medical, automobile and IoT industry, as this company has been provided this technology to leading health companies and automobile companies in Europe, all of them requiring new and specialized generation of chips. Quantix Edge Security facility, which executed a EUR 40 million investment in Murcia, Spain with EUR 20 million from the Spanish government, which is sitting now in $18 billion of investment in semiconductor in Spain, and we were one of the first projects authorized by them with a EUR 10 million investment from WISeKey and SEALSQ and EUR 10 million investment from partners localized in Spain like OdinS and TProtege. This facility, aligned with the EU Chips Act, will focus on post-quantum RISC-V chip design and secure semiconductor personalization, with revenue expected already in 2026. Quantum Investment Fund was launched initially launched at $20 million in late 2024, which has been expanded to $35 million in March '25. The first investment was ColibriTD, a French Quantum-as-a-Service company with whom we are codeveloping a quantum simulation approach to improve semiconductor wafer yields, potentially increased yield from 50% to 80% and reducing per chip cost by up to 50% in order to be more competitive in the market. This Quantum Investment Fund is now looking into other companies, as our vision is that both quantum technologies will merge very soon with quantum capability and quantum computer companies, creating major leaders in this sector. Therefore, the requirement of this aggressive road map and investment fund that has been created within the company. We also invested, as has been discussed in the last call, in space technologies. So we -- in cooperation with WISeSat, we have been deploying a constellation which is now sitting on 22 satellites. And SEALSQ has invested $10 million to expand our secure quantum-ready satellite constellation. So from the next launch of the satellites in November this year, we will have the capability of securing post-quantum connections from the space all the way down to objects on Earth in what is going to be one of the first ever secure post-quantum communication, connecting mobile phones with our satellite. With two launches completed already in '25, SEALSQ now has one of the largest constellations in Europe with 22 operational satellites, with plans to scale to 102 satellites by 2027. A strategic project with the Swiss Army has been signed, and we are in full deployment with their own requirements of the use of those satellites. Very strong year also in terms of research and development in order to maintain the leading edge. We continue to invest heavily in research and development, allocating $4.7 million in the first half of '25 as part of the $7.2 billion full year budget. This underscores our commitment to leadership in post-quantum innovation and the commercialization of next-generation chips. Also, on the financial strength with a robust cash reserve of $121 million as June 30, '25 and actually $150 million at September 9, '25. So the company is sitting now, $150 million that, combined with a strong balance sheet, positions SEALSQ to capitalize on growing demand for post-quantum resilient technology, potentially look into acquisitions and strategic investment in the post-quantum road map. We are all placed to drive commercialization to our new technologies while funding strategies, growth initiative becomes available. In August '25, SEALSQ unveiled Convergence, a forward-looking initiative integrating AI quantum technology and next-generation solution. The market is converging. All technologies are getting exponential, and they are creating synergies between themselves. And there is a huge market opportunity to develop business model around this convergence opportunity. Convergence unify PQC aligned with NIST standard tokenization advanced encryption, WISeSat 22 satellite constellation, decentralized physical infrastructure network, DePIN and machine-to-machine end-to-end communication. Its goal is to build a robust digital trust architecture for the group, protecting over 1.6 billion devices that is already in the market across health care, IoT, financial services, smart cities and space infrastructure. So the outlook for 2025 is also promising. Revenue is expecting to be in the range of $17.5 million to $20 million, representing already a growth of 59% to 82% year on. As you all know, the revenue on quantum computers is still small because the market is not yet ready, and people are now taking decision in investing in quantum technology. But one of the things coming first even in quantum is the post-quantum, and you need to build their own resilience at the enterprise level, government level, hospital level, airport level so you are ready when those quantums computer arrive in 3 to 5 years to be able to defend their attacks. This includes contribution from IC'ALPS following the August acquisition, the Quantix Edge Security project and renewed demand for traditional products. So 2023 -- sorry, 2026, the growth will be fueled by a full year of ICL's revenue, new personalization center project revenue, including Quantix Edge Security, and the launch -- and this is the most important part for the year -- visibility of our quantum-resistant TPM. Initial estimate reflects 50% to 100% revenue growth year-on-year, which is unseen in this sector for the moment. Pipeline, so we have a very strong pipeline. Our business pipeline stands at $170 million in opportunities for 2026 to 2028, reflecting a surge in demand for quantum-resistant security solution and sovereign semiconductor expertise. I will now turn the call to John O'Hara, our CFO, who will discuss in detail the financial results for the first half 2025 and our guidance for the second half of the year as a complement of my information provided so far. Please, John, go ahead. John O'Hara: Good morning, good afternoon, everybody. For the half 1 2025 revenue, our revenue of $4.8 million, which was consistent with the first half of 2024, was entirely in line with our expectations. It reflects the anticipated continued strategic transition period ahead of the launch of our new post-quantum technologies, and we expect the second half of the year to start to grow, as we'll come on to shortly. The gross profit was $1.6 million, and the gross profit margin increased by 15 percentage points from 19% last year to 34% this year. We do expect when the revenues return to a more steady state level and we grow further that, that will settle somewhere around the 45% to 50% margin on our legacy [indiscernible] chip products and with the [ rep ] margin from IC'ALPS is expected to be somewhat higher due to the nature of their revenue and their services. We had cash reserves of $121 million as at June 30, 2025, which was up from $19 million at the same point last year and up from $85 million at the end of 2024. Our current estimate is that this -- our cash burn, this gives us sufficient cash flow for a long time now on our cash burn rate. And we therefore believe we've got a strong war chest to also take advantage of any investment opportunities, any M&A activity that might come our way. We invested $4.7 million in research and development in the first half of the year, and we continue to have over $7 million allocated in the budget for this area for 2025, which is up from $5 million in the prior year. And that's before we take into account the research and development activities of IC'ALPS, which will also be consolidated in our second half results. As Carlos has already mentioned, for the full year 2025, we expect our revenue to be between $17.5 million and $20 million, representing between 59% and 82% growth year-on-year, which is, therefore, noting a return to growth in demand for our current semiconductor products as well as consolidating the revenue of IC'ALPS since acquisition. We also look forward for a strong 2026, as Carlos has also highlighted with some very early guidance, which will be supported by a new business pipeline of $170 million of identified opportunities for 2026 to 2028 across PQC, ASIC and sovereign semiconductor markets. With that, we have finalized the prepared remarks. And I will pass back to Carlos, so we can open up the call for Q&A. Thank you for your attention. Carlos Moreira: So thank you, John. Just as an end of the call remarks before we move into Q&A, just to mention that 2026 is going to be a very important year for the quantum industry and particularly post-quantum as the regulatory and technology landscape is moving in our favor with frameworks such as the European Union Cyber Resilience Act, the U.S. government Cyber Trust Mark and the UK PSTI Act mandating secure identities, encryption and life cycle management. So governments and strategic institutions worldwide have published road map requiring PQC adoption within the decade. So as I mentioned before, this industry is a emerging industry. We are in quantum, what we were on the web in the year 2000. Major players, and they have developed technologies and positions such as SEALSQ will become automatically high demanded companies as they bring a concrete solution for a concrete problem. Insurance companies are already announcing that they will increase their insurance premium if you are not yet PQC-compliant. Government regulations are putting regulations bringing companies and other government institutions to be PQC-compliant. And that will be reflected, obviously, on valuations of companies as the entry level to become a PQC-compliant and quantum company is still very high and requires hundreds of millions of dollars of investment. So with the strong financial resources, then we have the proven innovation and a strategic investment in place, SEALSQ enters the second half of 2025 with a very strong momentum and confidence. Our vision is clear: To lead the world in quantum resilience, cybersecurity and semiconductor innovation while we have a very proven quantum road map in place. So we thank our shareholders and employee partners and customers for their continued trust and support as we scale SEALSQ into the next phase of growth. So with that, we are finalizing the remarks. I would like to open now the call for Q&A. Thank you very much for your attention. Operator: [Operator Instructions] Our first question today is coming from Matthew Galinko from Maxim. Matthew Galinko: Firstly, just if we could clarify a little bit on the full year R&D budget. I think you mentioned it was around $7 million. And I think for the first half, reported $4.7 million, would seem that you're tracking ahead of that. So was there anything unusual in the first half spending that would not repeat in the second half? Just kind of ignoring the impact of the consolidation of the acquisition that we might expect? John O'Hara: Yes. Matt, hope you're well. So yes, so within the first half of the year, there was a bit of an expense of -- one-off expense for some stock-based compensation that falls under R&D. So that was the main... Matthew Galinko: Got it. Okay. And could you venture a guess for what kind of the annual R&D run rate, taking that out would be when you layer in the acquisition? [Technical Difficulty] Operator: Matthew, go ahead. Please go ahead. Carlos Moreira: Okay. So Matthew, sorry, we were disconnected. So did you got the answer from John? Matthew Galinko: I'm not sure if you got my second question or not? John O'Hara: No, I didn't. Carlos Moreira: No, no, we didn't. I'm sorry. John O'Hara: Did you get the answer to the first one on the research and development though, Matt, did you get that answer? Matthew Galinko: Yes. Yes. So I want to -- I appreciate the follow-up. So the -- I guess the question is what the run rate or if you could offer a run rate on the revenue -- on the R&D line, if you kind of back out that onetime stock-based comp piece under R&D in the first half and later on, the R&D consolidation in the second half, what would kind of the annual rate of R&D be? John O'Hara: So on the underlying business down in Provence, we would probably put that around about sort of $500,000, $550,000 per month. Matthew Galinko: Got it. Okay. All right. And then I also wanted to ask about the pipeline. I think you shared $170 million. As far as the prospective customers and perspective-type numbers in that pipeline, is that -- how do you build the pipeline estimate, I guess? Can you provide a little bit more of the process for how you include stuff in the pipeline? John O'Hara: Yes, sure. So essentially, my understanding is it's a relatively standard process where we go from certainly in the industry, I believe, where we go from kind of identifying an opportunity and evaluating that to the best of our ability, but then applying a relatively low success percentage to that. Because obviously, when we've just identified it, we haven't really gone very far, and then we go through the phase of identified, then qualified when we've kind of ratified the opportunity, and we've made at least first contact with the potential client. Then comes into design in, which is usually when we've signed up to provide them with a kind of a test kit and actually spec out and create a potential solution for a set of clients. And then design win at the end, which is the point where we believe that where we've been mandated to go ahead and produce the product and are in the final stage with that client. So obviously, by the time we get to design win, we apply a much heavier percentage because at that point, we're the only people in the game, so we generally expect at that point to get an order unless there is a technical limitation to the product or the client cancels their own internal project. So yes, so we put all that together, apply the weightings and then we tend to look 3 years into the future. So that $170 million will include revenues over '26, '27 and '28. What it does not include is the revenues for the clients that we've already won. So once we actually have received our first major purchase order of a significant volume and therefore, we've gone into production, we move that out the pipeline, and then we're kind of operating on a backlog where it's based on them sending and giving us orders. Carlos Moreira: Yes. Just to add on that, the sales cycle is long. On the hardware part, it's around 6 months. And the reason -- I mean, there's a lot of complexities to introduce those new generation chips into existing hardware that their electronics are now being designed to introduce the chip, and that requires engineering. So that means that you have to first understanding the problem, let's say, a smart meter or let's say, a connected car or a drone. So you have to understand the electronics, you have to redesign some of those components, so you insert the chip, then you have to check the connectivity, the chip in with electronics in order to create a post-quantum capability. So all that takes a long time, right? And normally, companies, the way they act on that is, as I mentioned in my presentation, post-quantum technology is emerging technology in terms of many customers don't realize the need of moving PQC yet. There are some that say quantum computers will be in 30 years, so why we should bother now. So this has been slowly, gradually, the education in the market has been improved by even companies that they have this type of thinking before. So that creates some kind of urgency in our clients. And now they are saying, okay, let's just start with 1 generation of products. So they don't immediately want to PQC-enable all their products. So they start with 1 type of products, they test and then they go to the next cycle of expansion internally in the company as you not only need to modify the security of the product, which is the hardware component, but also the software part. So that needs to be integrated into their back end, right? So that process as we move forward, will be more -- a more automated process. Actually, AI is helping a lot to create more efficiencies on that cycle so we can reduce the time and we can increase the numbers. So this is the present situation. That's why we believe that the revenue of these type of companies make now is not that important because what we are addressing is a much bigger problem in the future, which is when regulation arrives and regulations says, company, you need to have PQC enablement in your products, otherwise, you cannot sell them anymore because your products will not be authorized to enter into a specific territory. So there is the inflection point. We believe the big opportunity is for us. Operator: [Operator Instructions] We reached the end of our question-and-answer session. I'd like to turn the floor back to the call to Carlos for any further or closing comments. Carlos Moreira: So just to, again, to recap it too later on what we say, a huge opportunity ahead of us. 2026 is going to be a critical year, especially once this post-quantum chip will be available in the market. I know that some investors have been disappointed by the latest price of the share. I always say that '26 is the year where you -- everybody needs to be betting on and not '25. '25 was a transitional year. Despite that, we managed to end the first quarter -- the first semester of the year with a very strong position and very strong cash position, which is essential in this industry. And we are available for any further discussions, website, documentation is available. And our investment relation contacts in New York are available to set up one-to-one meetings. John and I, we're going to be doing a non-deal road show starting the third week of -- sorry, the second week of October. And it will culminate in New York in an event, the Quantum + AI event, where we are providing the keynotes, and where we're going to be bringing more results, and we will also be discussing, which we didn't discuss on this call, our U.S. strategy. As we have been informing in the past, SEALSQ is looking to personalize semiconductors in U.S. territory, and this is something that is top priority. We were looking into different locations such as Arizona and others. So we will be giving in a few weeks, a full update on that. And I'm sure everybody will be very satisfied to see the progress also in that area. So we'd like to thank our shareholders, employee partners and customers and all the participants on this call for their support as we scale SEALSQ into the next phase of growth. Thank you very much for your attention. Have a great day. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the Third Quarter Fiscal Year 2025. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you should require assistance during the call, please press star 0, and an operator will assist you. Today's call will last one hour. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Tushar Jain, Investor Relations. Please go ahead. Tushar Jain: Good afternoon, everyone. With us today are Sassine Ghazi, President and CEO of Synopsys, and Shelagh Glaser, CFO. Before we begin, I'd like to remind everyone that during the course of this conference call, Synopsys will discuss forecasts, targets, and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during this call, important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release. Pursuant to the close of the ANSYS acquisition on July 17, our results include roughly two weeks of ANSYS financials. As shown in today's financial statements, the vast majority of ANSYS revenue appears under the simulation and product group, with the remainder included under EDA. In addition, we will refer to certain non-GAAP financial measures during this discussion. Reconciliations to their most directly comparable GAAP financial measures, and supplemental financial information, can be found in the earnings press release financial supplement, and 8-K that we released earlier today. All of these items plus the most recent investor presentation, are available on our website at www.synopsys.com. In addition, the prepared remarks will be posted on our website at the conclusion of the call. With that, I'll turn the call over to Sassine Ghazi. Sassine Ghazi: Good afternoon. Q3 was a transformational milestone quarter for Synopsys. Against an unprecedented and challenging geopolitical environment, we closed the ANSYS acquisition, expanding our revenue, our customer base, and our long-term opportunity. We delivered third-quarter revenue of $1.74 billion and non-GAAP EPS of $3.39. Our results were primarily impacted by underperformance in the IP business as we had the expectation of deals that did not materialize, driven largely by the following three factors. One, new export restrictions disrupted design starts in China, compounding China weakness. Two, challenges at a major foundry customer are also having a sizable impact on the year. And finally, we made certain roadmaps and resource decisions that did not yield their intended results. We are actively pivoting our IP resources and roadmap towards the highest growth opportunities which I'll discuss in more detail. Looking ahead, we believe we have derisked our forecast knowing that transformation takes time and the external headwinds I cited will continue. We are taking a more cautious view of Q4 while still expecting to deliver a record revenue year. Let me provide more color on our Q3 execution and the actions we're taking to accelerate our strategy before Shelagh covers the financials in more detail. Zooming out, AI continues to drive unprecedented investment in infrastructure and R&D. Demand for high-performance computing and AI applications continues, while semiconductor demand in markets like industrial and automotive remains subdued. Despite the uncertainties and industry dynamics that we must navigate, I remain very optimistic about Synopsys' future. The increasing complexity, cost, and time-to-market pressure of designing and delivering AI-powered systems is a trend that persists across industries and underpins our opportunity. Now more than ever, we believe Synopsys will be a mission-critical partner in addressing these challenges. Adding ANSYS' gold standard simulation and analysis solutions to our portfolio dramatically expands our long-term growth opportunity. We are now not only the EDA leader, we are the global leader in engineering solutions from silicon to systems. This acquisition marks a significant milestone for not only Synopsys but also our customers and the industry. As products evolve into more sophisticated intelligent systems, their designs grow increasingly complex while development cycles continue to accelerate. The rise of physical AI underscores the importance of our combined expertise. R&D teams must not only optimize product design for performance and efficiency but also consider the real-world interactions of these products. That's why, for example, we're embedding NVIDIA Omniverse technology into our ANSYS simulation solutions making it easier to develop, train, test, and validate autonomous systems with greater speed and confidence. Not only can we deliver new innovation, with ANSYS now part of Synopsys, we have diversified our portfolio and our global customer base. Together, we will maximize the capabilities of engineering teams across industries, from semiconductor to automotive, industrial, aerospace, and beyond, enabling them all to rapidly innovate AI-powered products. Let's move on to business highlights. Design automation revenue inclusive of ANSYS products was up 23% year over year led by strength in hardware. As the complexity of designing silicon for AI workloads drives demand for Synopsys' powerful emulation and prototyping solutions. In Q3, we achieved multiple competitive wins with leading hyperscalers and shipped record Zebu Server 5 and HAPS 200 Xebu 200 units. EDA continues to demonstrate resiliency. Our Q3 results reinforce our leadership in next-generation chip design. Synopsys continues to win competitive bids for full-flow digital implementations, including a multiyear commitment with a leading AI customer. Synopsys' sign-off and extraction platforms also continue to set the industry standard with broader customer deployments and successful tape-outs on advanced designs. Synopsys' leading AI capabilities are a key differentiator. Today, roughly 20 customers are broadly piloting Synopsys.ai GenAI-powered capabilities. These capabilities pave the way for agent engineer technology. We believe the evolution of AI from helper to a doer will truly transform engineering workflows. Multi-die momentum also continued in Q3. We enabled multiple successful multi-die tape-outs for leading AI semi companies. Customers are enthusiastic about the promise of integrating our semiconductor timing and power sign-off capabilities with ANSYS' gold standard of thermal sign-off. And we expect to deliver our first fully integrated solution in the first half of next year. I'll turn now to simulation and analysis products which empower users to build and test products virtually. These solutions represent the largest portion of our ANSYS acquisition and performed in line with our expectations for the quarter. As is typically the case, the largest contributors were in the high-tech, aerospace, and automotive verticals. In Q3, we released ANSYS 2025 R2, providing customers access to groundbreaking advancements in AI-driven simulation, GPU acceleration, system-level modeling, and cloud computing. These newly released products extend Synopsys' AI leadership into simulation and analysis to help customers more efficiently develop and deliver their innovations. Turning to design IP, which was down 8% year over year due to the headwinds I previously mentioned. Again, we need to pivot our IP resources and roadmap to the highest growth opportunities. These changes are already underway. Let me give some context. Zooming out, evolving data center architectures, particularly those focused on AI, are accelerating the demand for faster data movement. This trend is driving strong demand for high-speed protocol IP and solutions that enable both scaling up and scaling out of large-scale systems. At the same time, the semiconductor and IT landscape is undergoing profound change. What was once a business rooted in individual licensing is rapidly evolving. The industry is increasingly requiring more sophisticated subsystems and chiplet-based solutions to combat complexity and accelerate time to market. In summary, our high-performance silicon-proven IP portfolio positions us as the leader in the fast-growing interface IP market. We support a broad spectrum of applications, including HPC, Edge AI, automotive, mobile, and consumer. By retargeting our resources and portfolio toward higher-value solutions, we are further strengthening our leadership in advanced interface and foundation IP. Before handing over to Shelagh, I want to address the company-wide steps we're taking to achieve greater scale and efficiency to accelerate our silicon-to-systems strategy and drive long-term growth. Synopsys' transformation, which began with the divestiture of the Software Integrity Group followed by our strategic acquisition of ANSYS, continues. Specifically, we are conducting a strategic portfolio review and will be taking actions to focus our investments and our execution on the highest growth opportunities. We look forward to delivering with ANSYS a differentiated design solutions roadmap and remain firmly committed to realizing the projected synergies of the merger. In addition, our enterprise-wide initiative to develop and deploy custom GenAI is boosting productivity. We will continue harnessing AI efficiencies to optimize our cost structure. Taken together, we expect to undertake related actions starting soon that will reduce our global headcount roughly 10% by the end of fiscal year 2026. A few closing thoughts. Synopsys is transforming. With ANSYS, we are now the leader in engineering solutions from silicon to systems. We've expanded our opportunity, broadened our portfolio, and increased the resiliency of our business. We remain focused on maintaining our leadership position while pioneering new solutions that will shape the next wave of innovation. Near term, we are deeply committed to prioritizing our IT execution and improving our efficiency to scale the business, accelerate our strategy, and capitalize on the highest growth opportunities. Thank you to our employees, customers, and partners for your continued commitment. Engineering is undergoing unprecedented transformation and Synopsys is seizing the opportunity to reengineer engineering. Now over to Shelagh. Shelagh Glaser: Thank you, Sassine. Q3 revenue came in at $1.74 billion, non-GAAP operating margin at 38.5%, and non-GAAP EPS at $3.39. Backlog came in at $10.1 billion including ANSYS, underscoring the resilience of our business. Our results were impacted by the underperformance in the IP business due to the headwinds Sassine outlined. Tailwinds from a strong quarter in our design automation segment and the close of the ANSYS acquisition partially offset these headwinds. In light of these headwinds and tailwinds, we are taking a conservative view on Q4 and updating our full-year 2025 targets for revenue, operating margin, EPS, and free cash flow. I'll now review our third-quarter results. All comparisons are year over year unless otherwise stated. We generated total revenue of $1.74 billion, up 14%, with strong growth in design automation. Regionally, we saw strength in Europe and North America, and despite sequential improvement in China, headwinds persist. Total GAAP costs and expenses were $1.57 billion and total non-GAAP costs and expenses were $1.07 billion, resulting in a non-GAAP operating margin of 38.5%. GAAP earnings per share were $1.50, and non-GAAP earnings per share were $3.39. Earnings included the impact of lower cash on our balance sheet and the additional $4.3 billion term loan used to fund a portion of the cash consideration and expenses associated with the ANSYS acquisition. Now onto our segments. Design automation segment revenue was $1.31 billion, up 23%, with strong performance from our hardware business. Design automation adjusted operating margin 44.5%. Design IP segment revenue was $428 million, down 8%. As mentioned before, our IP business faced several headwinds. In response, we are taking a more conservative view of Q4 and we are realigning our IP resources to the highest growth opportunities and improving our execution. Third-quarter Design IP adjusted operating margin was 20.1%, due to the lower than expected revenue and the investments we are making in the IP roadmap. Moving to cash. Free cash flow was approximately $632 million. We ended the quarter with cash and short-term investments of $2.6 billion and debt of $14.3 billion. Now to guidance, which has been updated to include ANSYS, as well as factoring the continuation of the headwinds previously discussed. For fiscal year 2025, the full-year targets are revenue of $7.03 to $7 billion, total GAAP costs and expenses between $6.08 and $6.1 billion, total non-GAAP costs and expenses between $4.43 and $4.44 billion, non-GAAP tax rate of 16%, GAAP earnings of $5.03 to $5.16 per share, non-GAAP earnings of $12.76 to $12.80 per share. Cash flow from operations of $1.13 billion and free cash flow of approximately $950 million, lower than prior expectations due to lower revenue and the interest impact of cash utilization and additional debt for the ANSYS acquisition. Now to targets for the fourth quarter. Revenue between $2.23 and $2.26 billion, total GAAP costs and expenses between $2.12 and $2.14 billion, total non-GAAP costs and expenses between $1.44 and $1.45 billion, GAAP earnings of negative 27¢ to negative 16¢ per share, and non-GAAP earnings of $2.76 to $2.80 per share. Our press release and financial supplement include additional targets in GAAP to non-GAAP reconciliations. With the ANSYS acquisition now closed, we remain confident in achieving the committed synergies of the merger. This is despite the delay in completing the follow-on divestitures of the Optical Solutions Group and PowerArtist business which is elongating the full integration of ANSYS as we work to obtain a final regulatory approval of the buyer. In conclusion, this was a milestone quarter for Synopsys. We are clear-eyed about the challenges we face and the actions we must take to align our portfolio to the highest growth opportunities, optimize our cost structure to drive greater scale and efficiency, which will include reducing our global headcount roughly 10% by 2026, and importantly, to extend our leadership position in engineering solutions from silicon to systems. Delivering a differentiated design solutions roadmap with ANSYS. The team is laser-focused on executing a strong finish to the year and delivering resilient, long-term growth for our shareholders. With that, I'll turn it over to the operator for questions. Thank you. Operator: Thank you. To ask a question, please press 1 on your telephone keypad. Please ensure you are not on mute when called upon. Before we begin the Q&A session, I would like to ask everyone to please limit yourself to one question and one brief follow-up to allow us to accommodate all participants. If you have additional questions, please reenter the queue, and we'll take as many as time permits. Again, it is star one to ask a question. Your first question comes from Ruben Roy of Stifel. Your line is open. Ruben Roy: Yes, hi. Thank you very much. Sassine, I'm wondering if you could maybe spend a few minutes just walking through the three challenges around the IT business. Just kind of thinking through export restrictions and design starts in China and then the foundry customer versus the roadmap and, you know, the impact of that. It seems like that's potentially a bigger issue that could be a headwind longer term. And maybe you could just kind of describe Q3 and kind of what the impacts were across each of those three issues. And then, you know, as you think about next year, and, you know, resource reallocation, etcetera, you know, will this require acceleration in things like M&A, or are you, you know, kind of positioned to address the needs of your customers with what you're working on for organically? And how soon can you turn this around on what sounds to be the most important part of those three headwinds? Thank you. Sassine Ghazi: Yeah. Thank you, Ruben, for the question. You're right. There are three factors that we mentioned that impact our IP performance for the year. The first one is the China BIS. Even though the restriction was only limited to six weeks, the impact from our customer behavior lasted definitely longer than the six weeks restriction. Customers were questioning whether or not they will invest in a multiyear commitment with Synopsys, how broad will they make that investment, they start an investment in a chip, can they finish it? Can they tape it out? So I don't want us to assume that the impact was limited to the restriction period, which was six weeks. The other factor, which is the foundry customer impact, where we have made a significant investment in building out our IP for that foundry customer with an expectation that there will be a return in '25 and that did not materialize for a number of reasons out of our control. They are market-driven reasons and customer-related reasons for that. So when we look at the impact for the quarter and as we derisk our Q4, those two primary reasons were what created the impact for the revenue during Q3 and as we're anticipating, Q4 and continuation of these factors. As for the last point, which is the roadmap and resource allocation, it's somewhat related to bullet number two. As we make investments and as the leader in IP, we have responsibility as part of the market position we have. We're not a boutique IP. We have the broadest IP portfolio and our customers expect us to serve various needs and requirements that they have. So some of the decisions we made were investing, for example, in edge AI opportunities for IP, that we put resources on delivering to these opportunities and it came at some roadmap cost. On which foundry to make that investment and for data center delay in some of our IP titles. That is something we know exactly what we need to do, and we're already underway to address them and to give you some color on what we are doing. Within Q3, we have merged two engineering teams. So we have our IP team that builds and delivers on what we call standalone IP. And the market is shifting towards subsystem and potentially in the future chiplet delivery, and we had a separate team that works on customization, which we call the system solution group. We merged these two groups together in order to accelerate our ability to deliver to the opportunities that they're in front of us. So it's all about scaling and we are addressing the scaling opportunities. And I have no doubt that we will see our ability to pivot these resources. And these are things you cannot visit within a ninety-day window. But as we look at the roadmap and the priority of the roadmap, we will commit and deliver to these items. Ruben Roy: Thank you for that detail, Sassine. If I could segue then into a question for Shelagh on the operating margin. With IP coming down, and ANSYS, you know, sort of coming into the model here. I've done my math correctly. It looks like, Shelagh, the operating margin is gonna net out to a little less than 36% for Q4. And just wondering if you can comment on kind of the decline in operating margins and maybe how you bridge to the longer-term target in the mid-40s? Shelagh Glaser: Yeah. Thanks for the question, Ruben. It's really the impact of the IP business and the downside on revenue of the IP business. As Sassine talked about, that's a very resource-intensive business. So as the revenue headwinds that we talked about are hitting the business, we're realigning the resources but we want to continue to invest in that roadmap for the long term. And so, that's really the impact. I would say it's a lesser impact. Obviously, ANSYS is fully integrated. ANSYS came with a higher operating margin, so the impact is really the IP. And our commitment to the long-term margin in the mid-forties is still intact. So our short-term headwinds that we're managing through are really short-term headwinds, but there's no change in our long-term commitment. Ruben Roy: Got it. Thank you, Shelagh. Sassine Ghazi: Thank you, Ruben. Operator: The next question comes from Lee Simpson of Morgan Stanley. Your line is open. Lee Simpson: Great. Thanks for squeezing me in. I mean, maybe I'll start again with the design IP. I mean, clearly, the weakness here has come as quite a surprise for everyone. We haven't seen this elsewhere. It does look maybe on simplistic mathematics that it's run about $120 million that you're weaker versus expectation anyway for design IP and I think you've called out the two elements, China and, of course, the foundry customer as primary here. So I'm just trying to understand how much of a heads up did you have on this weakness, this design IP slowdown, and maybe how much of this is permanent? I mean, does the China business come back, you think? Does the foundry business evolve into something else? And I'm really just trying to get a color on how permanent this might actually be. Thanks. Sassine Ghazi: Yeah. Thank you, Lee, for the question. I want to start with that we had an aggressive plan in IP for FY 2025 after an outsized performance the year prior where we grew that IP business by 24% and the year before that, by 17%. And there were some large agreements we were not able to get during this, I want to call it, hyper and intense period of our company's history. I know I communicated to some of you that during Q3, I was in China six times. In order to work on the transformative acquisition that we got to a positive outcome. Of course, it was the most important thing we had to do, and we got it done and we're very excited about it. In the process, there were signals that were missed in the forecast as to the magnitude of the factors I described, the two factors that you outlined. So I don't believe that these factors are just a Q3 impact. We will continue on derisking our forecast and anticipate that we will have a transitional and muted year in IP as we look ahead into FY '26. Now in December, we'll provide more color about the overall FY '26 components and we feel strongly about the other segments of the business. But as it relates to IP, and these two factors regarding China and the conditions in China, I don't believe this is a Q3 only challenge. As it relates to the foundry customer, it all depends on where do they go with the technology that we already developed the IP for. And what's the opportunity to sell that IP we developed it? Now is it permanent? It depends what you mean by permanent and at what level of the IP business. We have an incredible market position in IP. The demand actually is much higher than our capacity to deliver. One of the challenges that I described as roadmap, resource allocation, we have a massive team working on IP yet we cannot capture all the opportunities ahead. I mentioned some of the actions we took, there will be more, deeper look in terms of priority as well as our ability to scale by leveraging technology like AI. New methodology to be able for our team to deliver the IP faster, higher quality, etcetera. So the opportunity in IP is absolutely strong, but there will be a transitional period due to the factors I mentioned. Lee Simpson: Gotcha. And maybe just one further clarification on the roadmap and resourcing. I'm just trying to understand. Is there a specific area that we should be thinking about here? It sounds to my ears, and I could be wrong, obviously, that this is mainly foundational IP that you're realigning for. Because you did mention interface technology but didn't suggest that that was where you're realigning. That almost seemed like where you were doubling down. Have I got that the right way around? Sassine Ghazi: Let me add more color, Lee, because it's not quite. So today, if you look at the Synopsys portfolio for IP, we serve multiple markets. HPC, Edge AI, automotive, mobile, consumer, and we serve that portfolio for multiple foundries, not only one foundry. And as I mentioned to Ruben when he asked the question, we have and our customer has expectations. And we have the responsibility given that portfolio breadth that we have to serve the multiple foundries for those multiple markets. In both interface IP and foundation IP. There's more and more customization in particular for interface IP. And these customizations are moving from an off-the-shelf to a more subsystem delivery. Which is it takes longer, it takes more resources. And our ability to change the business model or the need to change the business model is an ongoing dialogue with our customers. Because as they're expecting us to do more work than just off-the-shelf IP, there's an opportunity for higher monetization. And that's what we're pivoting our resources, our methodology, our approach, from an architecture point of view to serve that market for the interface IP that I talked about. Lee Simpson: That's very clear. Thanks so much. Sassine Ghazi: Thank you, Lee. Operator: Your next question comes from Charles Shi with Needham and Company. Your line is open. Charles Shi: Yeah. Good afternoon. I do want to follow-up. The pivoting on the IP side of the business. It does sound like, other than the China and maybe the foundry customer challenges, Synopsys is really going through a transition in the IP business model. I think one thing really caught my attention in your prior remarks, Sassine, was about the higher level of customization, maybe more migration into subsystems. It seems like that it's something your IP, not necessarily a competitor, but another peer of your IP in the IP business is going through over the past couple of years. I wonder how should we rethink about the long-term IP operating profitability from that perspective because we do get the idea of why this is moving to that direction, but are you able to maintain or the same kind of IP long-term operating profitability targets going forward? Wonder if you can provide some strategic thoughts on that direction. Thanks. Sassine Ghazi: Yeah. Thank you, Charles. You know, the pivot from our customers in terms of expectation from off-the-shelf IP to customization is not new. But what is new is the magnitude in which the number of customers are expecting for us to deliver instead of discrete IP, to deliver a number of IP that we glue them together with some customization logic and test logic, etcetera, and validate and ensure that it hits the mark with the right quality. Each one of those engagements historically had two components. It had an NRE component and a use fee component. Given the demand for that customization, we need to ensure that we are capturing the right value for the impact we're delivering. Therefore, it's not something that we are, I want to say, happy to just say it's an NRE plus a use fee. There has to be another element in order for us to put priority for these opportunities and deliver too. And that's what discussions we're having with a number of these customers. And as you look ahead, if you fast forward two plus years from now, will we start delivering from a discrete IP to a subsystem to possibly chiplet? What level of chiplet? Is it a soft chiplet? Is it a hardened chiplet? Meaning, GDSII? Is it all the way down to a known good die with a partner? These are all questions and expectations our customers are asking us given we are the leader in that space. And we have a number of engagements with a few strategic partners, we are absolutely assessing as this market is pivoted and we're pivoting with it what is the business model to maintain the right profitability? In order to capture the opportunity and growth that we have? Charles Shi: Thanks, Sassine. Maybe I'll follow-up a short-term 10.1 billion backlog for the quarter exiting July. How much of that was ANSYS backlog and how much of that was legacy Synopsys backlog? Thanks. Shelagh Glaser: Hi, Charles. We're not gonna be breaking that out, but we have strength across the business. So we continue to see strength in our core business. We saw strength in ANSYS. And that gives us a lot of confidence in the long-term growth of the business. 10.1 billion. Thank you. Operator: Thanks for the question, Charles. The next question comes from Joe Quatrochi with Wells Fargo. Your line is open. Joe Quatrochi: Yeah. Thanks for taking the questions. Maybe just to follow-up on that last kind of train of thought on the IP business. I mean, are we to think about, you know, you looking at different business models in terms of royalty, and things of that nature similar to some of your competitors? And I guess, you talk about just if your customers, I think you talked about them wanting to move very quickly on these subsystems and IP. I guess, can you talk about just time to market and the competition there? Sassine Ghazi: Yeah. Joe, the key is the IP business is scaling. And Synopsys, we've been fortunate. We've been in that business for 26 years and we do have the investment and the scale. But given the fragmentation, I want to call it, based on our customer needs and requirements that are becoming more customized. No matter how much scale you have, you need to put priority. And based on the priority, the right business model, in order to capture the right value for what we are delivering to those customers. And some of the discussions we're having with our customers is a combination that does include some sort of a royalty. We're in a fairly early phase in this discussion, and those are very much related to subsystem type of delivery to our customers. So I hope that clarifies it, Joe, what I mean by we need to look at something different than an NRE plus a use fee given that customization opportunity. Joe Quatrochi: Yeah. Appreciate the detail. And then as a follow-up, for Shelagh, how should we think about just on the go-forward basis? Like, what's the right level of cash balance that you need, you know, day to day as we think about just the debt pay down and the pace? Shelagh Glaser: Sure. So in terms of our day-to-day cash balance, we have a minimum that we hold just to ensure that, you know, we're properly able to invest in the business. We're well above that with the cash balance we have. This year, we'll make interest payments on the debt. And we anticipate being able to start to pay some of the principal next year on the term loans. Those two term loans are due in '27 in the '28 time frame. So well above our minimum to be able to manage the business. And the one other cash inflow that we'll have once it was in my prepared remarks, but once we complete the approval with SAMR of the buyer, of OSG and PowerArtist, we'll have that cash in. Both of those dispositions. Thank you. Operator: Thanks for the question. Your next question comes from Sitikantha Panigrahi with Mizuho. Your line is open. Sitikantha Panigrahi: Thank you. I want to switch to the ANSYS acquisition. So it's been now ANSYS one and a half more than one and a half months. With after the close. So what are the puts and takes in terms of, you know, what you expected at the beginning last year when you talked about versus after you having? What are the surprises that you have seen? And, specifically, I think you talked about the revenue synergy. You still reiterated, but going back to the ANSYS growth, if we look at S-4 filing there, they were talking about low to mid-teens over the next few years. So what are the potential drivers for that ANSYS to grow above that 10% market growth? Any color would be helpful. Sassine Ghazi: Yeah. Thank you, Sitikantha, for the question. As you can imagine, we are incredibly thrilled and enthusiastic about the opportunities ahead. And the market is speaking, actually, when you look at the moves that are happening in the market, to grab assets in order to bring in the solution that is required for physical AI to have a digital twin of a system. And in order to have it on time with high quality and low cost, you need simulation. You need virtualization of these systems. And in order to have it, with high quality, you need a sign-off product, multiple levels of physics in order to make it happen. Now the opportunity is not waiting for the physical AI when it takes place and it happens. There's an immediate opportunity, which is 3D IC. With 3D IC, there's a thermal need. There's a structure need. There's a fluid need. And ANSYS is bringing a great position into the Synopsys portfolio and integrating this technology during the semiconductor and chip design phase. So when you're building that multi-die system, you are confident that you're signing off with the right technology in order to achieve the right outcome. So from a surprises, there are no surprises actually except pleasant ones, given we know the team very well, a lot of enthusiasm, and energy and excitement from the teams. As Shelagh mentioned in her remarks, there's a final stage that we're trying to close with SAMR as soon as possible, which is the acquisition's scope has been, oh, sorry. The divestiture scope has been approved. But the buyer is in the process of approval. So we are taking some measures to keep the business and the integrity of the optical and power artist separate. But once that is behind us, the integration full force ahead to deliver on these solutions. Sitikantha Panigrahi: And, Shelagh, just a follow-up to that. ANSYS revenue, $78 million in Q3. But what's your assumption of ANSYS revenue embedded into the Q4 guidance? Is Q4 historically a strong quarter for ANSYS, but, again, you'll only include October. So is there any linearity in the quarter that we should consider? Any color will be helpful. Shelagh Glaser: Yeah. So in Q3, as you noted, the $78 million revenue disaggregation of S&A, and as we noted in the prepared remarks at the beginning, there's a small portion of ANSYS revenue that is also in our EDA. And for Q4, it's included in the full guide that we have ANSYS for all weeks of the quarter. And then in terms of ANSYS, they have conformed to our fiscal calendar, which as you note, their Q4 only one month of it falls into our fiscal calendar. So, obviously, some of that, some strength that you see in sort of the November time frame, that'll be in our Q1. And so we've aligned that fully. But I'm not gonna give a subsegment view as we don't guide below the total company. Thanks for the question. Sitikantha Panigrahi: Thank you. Operator: Your next question comes from Joe Vruwink with Baird. Your line is open. Joe Vruwink: Great. Thanks for taking my questions. EDA and IP as industries have fairly diversified opportunities, and that's true across customer accounts and end markets. But Synopsys has always been fairly unique that traditionally, you have one outsized account. It exposure, and some of the things you're saying seem to consider a need to diversify further. You made a remark, Sassine, earlier, about two years, you know, two years from now, we'll look back, and I think contract lengths being two to three years. Is that the appropriate time frame to fully enact the changes you're focused on and getting the business back on the track you believe is right? Sassine Ghazi: You're right. In terms of EDA and IP, we have a fairly diversified customer base simply because you cannot build a semiconductor chip without the need of EDA or IP. So while we have a fairly diversified customer base, Synopsys has been very successful with capturing the large percentage of wallet from leading large semiconductor companies. That has been our strength. With this one customer exposure that you're talking about, we have derisked part of that exposure in our FY '25. And there's a blend of contracts we have with that customer no different than any other customer, which is EDA, software, hardware, and IP. They have different time horizons, and it's very difficult at this stage to forecast what will happen and by when not knowing the situation of that customer one, two years from now. But that being said, we work very actively to expand our business at multiple levels of growth opportunities and that's where ANSYS will bring us a significant and positive opportunity to diversify the portfolio as well in terms of customer concentration as well as regional concentration. For example, the percentage of business in Europe versus China for ANSYS is very different than Synopsys Classic. So there's a big opportunity to diversify further with the ANSYS addition to the portfolio. Joe Vruwink: Okay. That's helpful. Thank you. Shelagh, maybe you'd answered this already, but I think it would be helpful just to get a baseline around what's changing in this guidance versus the guidance that was previously on the table. You know, how much is IP coming down, how much does ANSYS add, China is a factor. Just anything there that can help get us all on the right baseline going forward. Shelagh Glaser: Sure. So, as you know, the three headwinds that Sassine talked about in the IP, those are fully incorporated, and it's a balance between those three. What the impact was, and then as you noted, ANSYS has been added and it was a sub-period in Q3, so somewhat minimal. You saw the S&A, $78 million. And then ANSYS for Q4, again, I will remind you, the question that was asked previously. So I would say the biggest part of the ANSYS quarter is usually in the November time frame, and that'll be in our Q1. You know, the decline was really that update on the IP and then that's offset by the addition of ANSYS. Joe Vruwink: Okay. Thank you. Operator: Thanks for the question. Your next question comes from Harlan Sur with JPMorgan. Your line is open. Harlan Sur: Good afternoon. Thanks for taking my question. I assume that the Q3 foundry revenue weakness in IP was due to your largest customer as they pivot from their prior focus on 18A to now 14A foundry manufacturing technology? Is that the right assessment? And given the challenges of this customer, I mean, there's still question marks on their ability to be successful in Foundry. Is this Synopsys team still gonna support this customer on their future Foundry roadmaps? Sassine Ghazi: Harlan, as you know, I used the word earlier. There's an expectation. When you're the leader in IP, and you engage with a customer, we cannot tell that customer that we want to pick and choose what project or which foundry and for which application we want to engage. Because then they will not trust and the relationship with Synopsys. That has been our strength. As far as the whole 18A and the pivot to possibly a different technology, that's a customer choice. Whatever choice they make, we already have the IP available to the node that we have built it to. And part of the relationship with the foundry is we look ahead at timing, and the size of the opportunity, meaning the commitment to Synopsys and the post-delivery on that IP, what is the available market that we can sell it to? So that's really the situation that we have in general in IP. And specifically with some of our foundry customers. Harlan Sur: Thank you for that, Sassine. And then, Shelagh, looks like your total expense guidance for Q4 is coming in about $15 million higher, about three and a half percent higher than if I just combine your total expense structure and ANSYS' total expense structure prior to the close of the acquisition. So what's driving the higher expense outlook for Q4? And then more importantly, from the Q4 base, how do we how should we think about the potential cost synergies looking out over the next few quarters? In other words, how should we think about the fiscal 2026 Q4 exit run rate on total expenses? Shelagh Glaser: For the question, Harlan. On the first one, there's just some cost with, you know, really the initial quarter of bringing ANSYS on. And we want to make sure that it's a very successful integration. So I would say it's just part of ensuring that we've got a smooth integration going on. And then in terms of longer-term guidance, we'll talk about that in our Q4 earnings, what the expectations are for 2026. As we talked about in our prepared remarks, we are taking a comprehensive portfolio look and we're also driving greater scale and efficiency with a 10% overall headcount reduction that will drive through fiscal year 2026. And so that has the effect of actually accelerating our synergies that we had talked about when we announced the deal. So we'll talk more specifically though, Harlan, about sort of the direction of travel in '26. When we do Q4 earnings. Harlan Sur: Okay. Thank you. Operator: Your next question comes from Jay Vleeschhouwer with Griffin Securities. Jay Vleeschhouwer: Sassine, for you first, is the 10% targeted reduction of headcount something that you would have done irrespective of the current and anticipated unpleasantness in IP? And in other words, you would have done that anyway. It looks as though your organic headcount ex ANSYS was up 2,000 heads year over year, up over 600 sequentially. So perhaps you got a bit ahead of yourselves in terms of the organic expansion. And in the meantime, can you talk about the integration or consolidation that you've done of ANSYS already? Our understanding is that very soon after the close, you consolidated around the named accounts direct business. And perhaps you could also talk about your intentions on their very large indirect business. And then my follow-up for Shelagh. Sassine Ghazi: Jay, thanks for the question. As you can imagine, with an eighteen-month regulatory process, we were somewhat limited in terms of our ability to take actions on either portfolio or headcount adjustments. So the 10% headcount adjustment is something we would have done and we've been planning for it for a while and before even the acquisition was approved in preparation that we will be ready to act and carefully and thoughtfully of where to target that reduction. So that we have gone through internal strategic portfolio review. We're looking at the multiple layers of management processes, systems, the impact of AI that we have been deploying inside the company for about two years. So there are many opportunities actually to make sure we're putting the resources at the high impact, high return, and reducing where we can reduce, leveraging technology and the impact of it for further reduction or cost avoidance in the future. There's a very thoughtful process we've gone through for a number of months in preparation for action to be taken post-close. In terms of integration, as I mentioned a few questions ago, we have to make sure that we are very careful in our integration speed as we still are owning OSG, which is the optical business and PowerArtist. To make sure there's no contamination, there's no impact whatsoever in terms of the health of that business as we're handing it over to the buyer. So we are moving in some places where there's no impact. In other places, we're being very cautious and careful how fast do we go. Jay Vleeschhouwer: Okay. Shelagh, you made the interesting comment that you've already coordinated ANSYS' fiscal period with yours. And you noted the Q1 concentration. Following up on that, historically, ANSYS was indeed highly seasonal, particularly in their Q4, but not only in their Q4 because of 606 effects. So the question is, do you think that over time you could perhaps smooth out those seasonality and or 606 effects that they had so pronounced in their numbers? In other words, do you think you might change their lease and upfront model to more of your prevailing subscription model? Shelagh Glaser: Jay, that's certainly something we're looking at over time as we deploy new products and have new offerings for customers, how there might be more alignment with how we renew with customers, we give products to customers, and then we service them. So that's certainly something, but as you mentioned, that's a bit longer term because the renewal dates and the products that customers are buying are those have to be on the shelf right now. So as we move forward, there's an opportunity to do that. I do want to follow-up because you had a question for Sassine on the channel, I think. And so I want to make sure that we do address that. As a really important part of is about 25% of ANSYS. We're really thrilled to have such a robust channel, and we are ensuring that that's very smooth and that's very seamless, and those customers continue to get service. And then there's an opportunity, of course, because at Synopsys Classic, we did not have a channel. But now there's an opportunity for our products to be sold by those great partners. So there's no change whatsoever for the channel. They're just, you know, a wonderful asset, and we're ensuring that there's no disruption to the channel as we move forward. Jay Vleeschhouwer: Okay. Thank you. Kevin, I'll take one more question. Operator: Thank you. Our final question comes from Jason Celino with KeyBanc Capital Markets. Your line is open. Jason Celino: Hey. No. I appreciate you fitting me in. I'll just ask one. In the essence of time. I think, you know, you've mentioned multiple times that you've tried to derisk, you know, the Q4 guide to adjust for some of the headwinds you've been seeing. Without knowing how much ANSYS is contributing, it's hard to measure how conservative or derisked it is. So maybe I'll ask it a different way and say, you know, IP historically has been up sequentially for the past two years in Q4. Maybe it's regular seasonality or maybe it was something more specific. But, you know, given the headwinds you've seen directionally, you know, could we see the same trend again with seasonality in IP for the last couple of years? Sassine Ghazi: Jason, we do expect a transitional period and a muted year as we look ahead in IP. And that's due to the two factors we don't believe they will disappear in a short period of time. Now we have it balanced with a number of other opportunities to scale and deliver to the points I mentioned, like the subsystem opportunity, the serving the various markets, various foundries, etcetera, etcetera. But that's the expectation as we look ahead. Sassine Ghazi: Thank you all for joining our call. We look forward to talking you through the quarter. Sarah, could you please close us out? Operator: Thank you. This concludes today's conference. We thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Korn Ferry First Quarter Fiscal Year 2026 Conference Call. As a reminder, this conference call is being recorded for replay purposes. We have also made available in the Investor Relations section of our website at kornferry.com a copy of the financial presentation that we will be reviewing with you today. Before I turn the call over to your host, Mr. Gary Burnison, let me first read a cautionary statement to investors. Certain statements made in the call today, such as those relating to future performance, plans and goals constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, investors are cautioned not to place undue reliance on such statements. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, which are beyond the company's control. Additional information concerning such risks and uncertainties can be found in the release relating to this presentation and in the periodic and other reports filed by the company with the SEC, including the company's annual report for fiscal year 2025 and in the company's soon to be filed quarterly report for the quarter ended July 31, 2025. Also, some of the comments today may reference non-GAAP financial measures such as constant currency amounts, EBITDA and adjusted EBITDA. Additional information concerning these measures, including reconciliations to the most directly comparable GAAP financial measures is contained in the financial presentation and earnings release relating to this call, both of which are posted in the Investor Relations section of the company's website at www.kornferry.com. With that, I'll turn the call over to Mr. Burnison. Please go ahead, Mr. Burnison. Gary Burnison: Okay. Thank you, Regina, and thanks to everybody for joining us. I'm really, really pleased with our performance in the quarter. The team is going to get into the results in a little bit. But when I look at the results, even over the past few quarters, with all the choppiness, the uncertainty around tariffs, the labor and economic environment, it's clear that our strategy is working. In fact, when you consider our diversification strategy and the current and future demographic trends alone, the opportunity is immense. And I think that's evidenced this quarter by the growth in all of our solutions. And today, we're driving performance with a far more sophisticated, holistic approach that delivers our expertise and robust IP through integrated solutions in every region of the world. In the quarter, we won a number of notable engagements. I'll highlight a couple, a top pharma company with over 20,000 employees where we're building a globally aligned leadership team, helping them foster a culture of innovation and streamline talent development across the regions. It's part of a multiyear engagement or a FTSE 100 retailer, we're now the exclusive assessment provider across all levels of the organization using our consulting-led assessments and our digital at-scale solutions with the ambition to deliver our capabilities from the shop floor to the boardroom. And finally, a top provider of HR management software, where we're going to deliver a subscription-based digital solution, a global leadership offering that includes content, instructor-led materials, micro learning and more and that complements the consulting engagement that includes leadership assessments and coaching. And these are just 3 examples of how we're integrating multiple solutions to create enduring client partnerships. We also continue to make measured capital investments that extend our offerings and solutions and expand our impact with clients. And a case in point is Talent Suite, which offers seamless integration of proprietary IP and data and talent applications into 1 digital SaaS platform, which enables our clients to make better hiring decisions, structure their organizations, assess, develop and reward their talent. In other words, Talent Suite enables clients to unlock human and organizational potential at scale. Our evolution towards large-scale, multi-solution client engagements is real. As we change the fundamental composition and scale of our business, and when I just look at the tail of the tape, today, we have loyal, repeatable clients of scale. Marquee & Diamond accounts generating almost 40% of our revenue, a 10-year revenue CAGR of 10%, driven by an expanding set of diversified solutions. We have strong top line synergies with 25% of revenue generated from cross-solution referrals. Clearly, this diversification is driving resilience and durability in our business and contributing to sustained shareholder value, and that's evidenced through our balanced capital allocation strategy, which includes 6 dividend increases in the last 5 years and a demonstrated track record of M&A and share repurchases. I'm optimistic, truly optimistic about the trajectory of this firm and more importantly, the impact we're making. We have a strong foundation with incredible brand permission that is fostering deep client relationships. We have relevant, diverse, scale and increasingly more integrated solutions that are even more closely aligned with the talent needs of our clients. And through our disciplined approach, I'm confident we are poised and well positioned for the future. With that, Regina, I'll now turn it over to Bob. Bob, it's all yours. Robert Rozek: Great. Thanks, Gary, and good morning, good afternoon, depending on where you're at. The global business environment over the last quarter remained extremely uncertain with many lingering economic challenges, keeping investment spending cautious. Unresolved tariff issues added to ongoing geopolitical tensions, readings on inflation cause uncertainties as to whether interest rates would remain higher for longer. . And despite the impact of these uncertainties on business sentiment, our clients continue to see the impact and value of our services and solutions. Our financial results for the first quarter of fiscal '26 remained strong providing further proof that our integrated business strategy, which is really diversified across industries, geographies and solutions is working. In fact, the current economic environment has created opportunity for Korn Ferry to really strengthen our client relationships and continue becoming a trusted global partner of choice, helping our clients solve complex talent in organizational performance challenges. And today, we're helping our clients resolve these challenges with both our skilled workforce and our proprietary data and IP, which is really a product of decades of behavioral science research. Additionally, we focus our efforts to sell larger, more integrated solutions via our [indiscernible] Korn Ferry go-to-market strategy. We're paving the way for stronger, more durable long-term growth. I'm also pleased to share that we remain on track for the market launch of our new Talent Suite platform that Gary referenced this November. Talent Suite will enable our consultants and clients to more easily derive and prioritize insights across our multiple Talent products using client data, our own proprietary data and select third-party data to help them make better and more insightful talent decisions. Now in addition to the detailed results found in our posted earnings presentation, I just want to go over a couple of company-wide solution-specific highlights for the first quarter. As Gary mentioned, the Marquee & Diamond accounts remained strong at almost 40% of our consolidated fee revenue. And that program delivered a little better than 7% fee revenue growth when you look at it year-over-year. Our cross-solution referrals also remained strong at 25% of our consolidated fee revenue. Executive Search fee revenue also remained strong, growing 8% in the quarter, and that's our fifth consecutive quarter of year-over-year growth in that solution area. Professional search and interim fee revenue was up 10% year-over-year with growth in both professional services perm placement, plus 5% and interim was up 14%. Our digital subscription and licensed new business grew 10% year-over-year in the first quarter and with 39% of total digital new business, and that's going to continue to add stability and predictability to our overall revenue base. And last, our average bill rates in Consulting and Interim both grew year-over-year, Consulting by 9% and Interim by 4%. Now turning to company overall results. Our consolidated fee revenue grew 5% year-over-year to $709 million, which is a second consecutive quarter of positive growth. Earnings and profitability also continued to grow. Adjusted EBITDA grew $9 million or 8% year-over-year to $120 million. Adjusted EBITDA margin grew 50 basis points year-over-year to 17% and our adjusted diluted earnings per share grew $0.13 or 11% year-over-year to $1.31. Total company new business, excluding RPO, grew 5% year-over-year led by strength in EMEA and APAC. Our RPO delivered $99 million of new business in the quarter, 46% of that came from new logos, 54% from renewals and the renewals included one large financial institution at $32 million. Estimated remaining fees under existing contracts also remained strong in the first quarter. Now as a reminder, this operating metric that we introduced last quarter is the quarter ending estimated fees under existing contracts to be recognized in future periods. At the end of the first quarter, this amounted to $1.67 billion, which was up 9% year-over-year. Of this amount, we expect approximately 58% or $972 million will be recognized as fees within the next year and 42% or $702 million to be recognized thereafter. Now turning to our regional results. Fee revenue in the Americas was down 2% year-over-year, with growth in Executive Search and RPO being offset by slightly lower demand in consulting, digital and professional search and interim. EMEA fee revenue was strong, growing 19% year-over-year, and we saw growth in all solutions. APAC fee revenue was also strong, growing 12% year-over-year also with growth in all solutions. And finally, our capital allocation in the first quarter remained balanced as we returned $36 million to shareholders through combined share repurchases and dividends, and we invested $22 million in capital expenditures focused on Talent Suite, our new technology platform as well as productivity tools and other product enhancements. Now turning to our outlook for the second quarter of fiscal '26. Assuming no further changes in worldwide geopolitical conditions, economic conditions, financial markets and foreign exchange rates, we expect fee revenue in the second quarter of fiscal '26 to range from $690 million to $710 million. Our adjusted EBITDA margin to range from approximately 17% to 17.5% and our consolidated adjusted diluted earnings per share to range from $1.23 to $1.33. Finally, we expect our GAAP diluted earnings per share in the second quarter to range from $1.10 to $1.16. Now I'd like to note that our GAAP diluted earnings per share includes approximately $10 million or $0.14 per share of accelerated depreciation, and that's related to our current product technology platform, which will be sunsetted as the Talent Suite is commercially launched at the beginning of the third quarter in November. We remain committed to controlling what we can control, leaning into identified growth opportunities and driving operational excellence. We will continue to promote a culture of innovation and remain focused on delivering outstanding client service. Korn Ferry is a global consulting firm that powers client performance. We're focused on improving our go-to-market efforts, engaging with our clients as one firm, we are Korn Ferry. We are well positioned for the next step in our growth, and I'm more confident and excited than I've ever been about what this company can become. With that, we would be glad to answer any questions you may have. Operator: [Operator Instructions] Our first question will come from the line of Trevor Romeo with William Blair. Trevor Romeo: Just maybe I had a couple on your digital business to start, the Talent Suite rollout coming up in November. As you're getting ready for that commercial launch, I guess, what are some of the key milestones you'll be tracking there? And how should we be thinking about maybe the time line for the benefits there to start flowing through the financials? Gary Burnison: Well, I think the benefits will take some time. I think it will be towards the end of calendar '26 realistically when we start to see the true benefits of it. Some of the milestones that we are working on include the partnerships that we have and further accelerating the go-to-market strategy around those partnerships. That's very important, particularly with the 3 or 4 large HCM players, that's certainly one thing we're working on. The second is enabling our colleagues and training our colleagues. We have a robust schedule in front of us to train all of our 1,800 frontline consultants on awareness and provocation, and selling of the Talent Suite. That's going to be happening over the next 6 months starting in October. And we also have a targeted strategy with milestones there around our Marquee and Diamond accounts. So it's really kind of a balanced approach here, a multipronged approach. Outside with partners, with our Marquee & Diamond accounts top down, bottom up with many of our clients, then there's an internal mobility strategy as well. Trevor Romeo: Thanks, Gary. Maybe just one quick follow-up on digital. The subscription and license piece of the segment going above, I think, 40% of segment revenue now. Could you maybe just remind us what is your kind of long-term aspirational target for how big those subscriptions could grow as a percentage of that segment? Gary Burnison: Well, we'd like to see it be north of, say, 60%, but that's certainly not in the next several months. But I just think there's this opportunity to impact a lot of people's lives and the destination of organizations through our IP, and we just have to figure out the best way to drive scale. And I think the best way to drive scale in that business is through our partnerships that we have. And we -- that's something that we're going to pursue very aggressively. Robert Rozek: Trevor, this is Bob. One thing I would add to that, as you think about Talent Suite, obviously, selling subscriptions and licenses is important for us. But it is -- also think about it as an enabler of the delivery of our other services solutions. So whether it's Talent acquisition, it's consulting, other areas in the organization are going to really benefit from having all of the assets, IP, data content, what we call foundational assets at the center of the organization, right? And they're going to be able to much easier -- gain much easier access and utilization of those. And then we have a reporting and analytics layer. And then when you layer on AI and Gen AI in terms of being able to access, slice and dice data much faster, easier, quicker you have to think about it more broadly than just selling subscriptions and licenses. Trevor Romeo: Great. And then maybe one more, if you don't mind. Maybe for you, Bob. Just on the guidance, I think typically, Q2 is a little bit of a stronger seasonal revenue quarter for you. So I guess the guidance may be a slight dip at the midpoint sequentially for revenue. Can we just maybe reconcile that. Should we read that as a little bit of conservatism or any reasons across the businesses that would make you think you wouldn't see a little bit of an uptick? Robert Rozek: I would say, Trevor, just given the uncertainties in the backdrop out there, we're probably on little bit on the conservative side. Operator: Our next question will come from the line of Tobey Sommer with Truist. Tobey Sommer: I wanted to ask what you're hearing from clients. You mentioned in your -- that uncertainty out in the economy prompted some conservatism in guidance, we see the BLS revision lower here this morning for job creation over the last year, maybe rates starting to come down here at the Fed sometime soon. What are customers telling you? Gary Burnison: Well, it depends where you are in the world. Look, everybody has got to play on the pitch. Everybody is dealing with the same economic and labor environment. I've spent the last several months with clients and colleagues in Europe in many different countries. And I think, broadly speaking, there's a great deal of optimism. And in the Americas, I think people are dealing with the lack of pricing power and the fact that costs have escalated 50% over the last 5.5 to 6 years. And look, I'm not surprised at all by the downward revision in those BLS numbers. I mean that's not shocking. There's been a labor recession for 2 years. And so companies are -- they're not doing massive downsizing, but they're letting natural attrition take its course and they're not replacing those hires. And then the other big thing not only in Europe, but in America and Asia is what does AI do long term in terms of how does an organization get work done. And with how many people. We've seen a really good rebound in Asia. And we've seen it in the numbers, both Europe and Asia really performed well. That was fairly broad-based in both regions. Life Sciences clients are -- that's a tougher deal as well as health care. We've seen a lot of great activity in industrial, which is 30% of the company. Private equity has been a source of significant strength because they have thousands of companies that are past their sell by date. And because of that, they're actually having to go in and think about how you really operate the company beyond just cutting costs and increasing EBITDA. So those would be the major themes that I've heard from clients directly. Tobey Sommer: Just sort of a specific question on consulting, if I could. With respect to your merger and divestiture kind of services in playbook. What are you seeing there? Because we've seen sort of an uptick in at least announced deals. And many of them seem to be sort of corporate breakups, I'm wondering if you're participating in that from a consulting perspective? Gary Burnison: There's actually -- there are a couple that we are participating. I can't talk about it, but there are a couple. But I think the bigger activity has actually been on the private equity side. And I think that's a direct result of firms hanging on to portfolio companies longer and the work that has to be done beyond 3, 4, 5 years. Tobey Sommer: Appreciate that. Last question for me is if we do see an appreciable uptick in demand or across the businesses and get a little bit faster revenue growth for the firm. Do you have some excess capacity now sort of in the businesses to be able to meet that? Or might you need to step on the gas with hiring and have sort of flat to down-ish margins for a quarter or 2 while you ramp things up? Gary Burnison: No. We're continually managing that talent. And I do think that there is capacity. And I think the big question what do you have to believe for this economic environment that we've seen now for a couple of years to actually turn. There's got to be some significant rate cuts. The Fed has been slow. It was never transitory several years ago. Anybody with any common sense could have said that. And that's what you have to see to get this thing going. Robert Rozek: Tobey, it's Bob. The other thing I would add to that, too, is we've set ourselves formally organized around AI, Gen AI and we're driving that into the organization. So from a capacity perspective, I would expect that to help us get through any groundswell that comes out of a more rapid rebound. Operator: Our next question comes from the line of George Tong with Goldman Sachs. Unknown Analyst: This is Sami on for George. Could you talk about how consulting new business performed in the quarter? What is your outlook for consulting for the remainder of the year? Any -- and the key drivers behind your expectations? Gary Burnison: Well, I think it's going to depend regionally too. I'm not looking -- I just don't think the economic environment particularly is going to change dramatically unless we see the Fed take action. And I think it's been a very, very difficult consulting market for 8 quarters now. And when you look at the overall firm results quarter on quarter-on-quarter and what I would characterize as the labor recession, it is incredibly, incredibly impressive. And so I would assume that in Europe and Asia, we're going to see continued momentum with our consulting solutions. And in the Americas, I think it's going to be a bit more challenging given the backdrop of what we're dealing with. And then the other move that we're making and this is not new. But many, many years ago, we said, look, we've got to get into bigger, larger scale and as Bob said, more integrated solutions, delivering impact to our clients. And so we purposely made an effort towards bigger, more transformational assignments. And it shows in the numbers. This isn't just rhetoric. When you look at the average look at rate per out as an example. That has gone from -- it's gone up 50% from $300 an hour, just a few years ago, to now almost $500 an hour, $470 an hour. When you look at the backlog, the backlog is actually increasing in consulting, 42% of that backlog is engagements over $1 million. And when you look at the new wins, those are also a good part of them, not the majority, but a good part are over $1 million. So what's happening is we're moving the entire organization towards more integrated solutions. The numbers reflect that. And with that then becomes a slower consumption by clients of the backlog. And so when we look at new business, it was your specific question in consulting, in the quarter, it was decent. I mean it was definitely on the plus side. But I tend to look at the firm as a whole and what we're doing there. And I just think you look quarter-on-quarter in the environment that's been very difficult and looking at the company's profitability, it's impressive. Unknown Analyst: Got it. And on digital, the number of consultants was down significantly this quarter. Could you talk about what drove the decision to reduce digital head count, especially given you have the launch of Talent Suite coming up? And is the head count now fully aligned with the current demand? Or could we see further rightsizing? Gary Burnison: Well, we are always managing the workforce, and so we've done it over the last 2 to 3 years, if you look at professional search and interim, for example, you'll find there that we've made significant changes in that workforce and reposition that workforce, and we've done the same thing in digital. So for us, it's -- again, it's around the firm. And it's not around these segments. It's around enabling the entire firm to be able to deliver the platform. And that platform is at its very, very foundation, how do you unlock human and organizational performance. How do you design an organization? How do you assess what type of leaders do you need? How do you develop and how do you pay them? That's what it's about. So it's not strictly around the 236 digital sellers that we have. It's around the entire firm. And the 1,800 frontline consultants that we have and their ability to deliver the entire firm. Unknown Analyst: That's helpful. Operator: Our next question comes from the line of Josh Chan with UBS. Joshua Chan: If I look at the -- if I look at the geography, the North American part of the business, most parts of the business is down somewhat, which jives with the macro, but Exec Search is still up in North America. So what's going on in Exec Search that's allowing that part of your business to really seemingly outperform the environment? Gary Burnison: Yes. It's a combination of [indiscernible]. It's the phenomenon where I've talked about this for a good 6 quarters, 7 quarters, it's peak 65, so there's the demographic shifts and trends that I referred to in my opening comment. So you've got that playing out. You've got the fact that many of the executives in the C-suite we're probably in the C-suite during COVID. And so you had a period of going from light to darkness to light and all the things in between around that time than the subsequent pent-up demand and great resignation. And so you've got people that are making the decision for themselves around work-life balance. Then you have boards looking at the C-suite and saying, is the leadership team that I need over the next 5 years what are their skills that will be needed and versus the past 5 years. So it's really those combination of factors that I believe are driving the Executive Search business. Joshua Chan: Great, Gary. And I think you guys also mentioned that in a choppy environment that could provide some opportunity for you to strengthen your position. I'm sure you'd love a stronger environment, but curious how you can still win business in a weaker environment and what kind of opportunities those might be? Gary Burnison: Yes. This is the best environment. I mean it's we're on most motivated. This is where good companies become great companies. It's only in these types of environments because people don't change unless there's a reason to change. And I think the environment gives us that reason to change. So I look at it and I -- it's not a question of just dealing with ambiguity, but it's embracing the ambiguity. And I love the environment and it does present opportunities for us, and it presents an opportunity even internally around how we think about ourselves and do we think about ourselves as business segments or do you think about yourself as Korn Ferry? And the truth is that we don't have the 5 businesses. We have 1 business, which is Korn Ferry. We have 5 solutions, but we have 1 business. And so the ability to change mindset in an environment like this, you have to take advantage of it. And that's what we're doing, and that's what we plan to do over the next several months is to continue to change mindset particularly around how we go to market. Robert Rozek: One of the things that I've talked about quite a bit with investors is when the world is somewhat [indiscernible] chaotic. It's actually, as Gary mentioned, a good thing for us. Think about Covid hit, everybody went home. Work got done differently, different work had to be get done and organizations turn to us to help figure that out. Right now, there's a lot of uncertainty out there, AI, Gen AIs out there. How do I change -- how does that impact my workforce? Does it change my job profiles? Do people have the right skills, to any different people. So when there's chaos out in the world and organizations are trying to figure their way through it, they turn to us to help them do that. So for -- as Gary indicated, it's actually a good thing for us. Joshua Chan: That's an interesting perspective. Operator: Our next question will come from the line of Mark Marcon with Baird. Mark Marcon: Gary in your discussion, you talked a lot about some of the bigger deals that you've been signing and you specifically noted one with a big HCM company. I'm wondering if you can elaborate in terms of what you're going to do for them? Gary Burnison: I'm not going to get into -- it's really a transformational program centered around leadership development. And so it's a big learning engagement where that particular client is not only licensing our IP around developing and transforming a workforce, but it also includes consulting with assessments in coaching. So it's really around kind of transforming a workforce in transforming not just skill set, but mindset, and it's using both our IP and consulting. Mark Marcon: That's really interesting. How big of a program could something like that be? Gary Burnison: These are typically multiyear and several million dollars. I'm not saying that this particular one is that, but that's generally what these look like. And part of it then is it gets consumed by the clients, not the digital piece, but the consulting wraparound on these leadership development programs, they have to consume it. They have to pull it down on the shelf. And that's why I can think of one that is huge. It was an 8-digit sale to a massive, massive organization. And we are now -- we've just completed year 3, and we've touched about 40% of that organization. And so the consumption of all of those services, not the IP, obviously, but the consumption of the services is really dependent on the client's speed, not on us. And that's one reason why you see the backlog, for example, in consulting increasing is because of that phenomenon moving to multiyear, multimillion dollar engagements. Mark Marcon: That's great. Gary, we have been in a labor recession. You guys have held up the best of arguably any of the major players that are out there that most investors look at. You've been getting more and more into professional search and interim. You've made a number of acquisitions there. I'm wondering as the environment remains relatively uncertain, what's your posture there? What have you learned from the acquisitions that you've made in terms of [indiscernible] what are the types of acquisitions, the best spaces where you guys actually fit? And how many more opportunities are there in terms of bolstering the areas where you really do fit? Gary Burnison: I think the pro search -- let me bifurcate that. The pro search market, as you said, is enormous. Today, most of that business that we have, most of that solution is in the U.S. What we've learned is the contingent part of that market opportunity does not work for us for the most part. So the learning there is we love the market. We want to go into it, but we also want to be eyes wide open. We don't want to be in contingent recruiting. It doesn't fit well with the brand in the Marquee and Diamond account strategy. And there is a -- still a big opportunity outside the U.S. we're underpenetrated there. And we have to be very cognizant both in pro search and interim as to what technology is going to do to a company's labor force over the next 5 or 10 years. So we have to be very, very targeted there and very smart. On the interim side, what we've learned is that it is, number one, why did we get into it? We got into it because we see a mega trend that's playing out that we continue things going to play out even with AI, with fractional workers. And so we think that megatrend is something that we should invest into. What we've learned there is that it is very synergistic with our brand. And similar to Pro Search, the opportunity is quite significant outside of the United States. And in fact, when you look at both pro search and interim, you would find that 70% or so of our solution today is in the United States. And there's an enormous market opportunity. I think you would see us on the acquisition side, more oriented towards interim than pro search because on the pro search side, there are a number of transactions we could do today. But will those transactions would come with a large pro search contingent piece, which we don't think is commensurate with our brand. Robert Rozek: Mark, just maybe a little bit more color. A couple of things for me that have been learning, Gary mentioned the synergistic in the ability to sell across the organization within the interim business itself, since we started down that path, we've created over 1,200 incremental opportunities by referring work across the system that never would have existed in those organizations had they stayed independent. And the other thing is I talk to people in the field that I find very interesting is a lot of our clients are asking us, you do my firm hiring now, why wouldn't you help us with the interim or temporary labor force as well. So I think there's -- the market is used as Gary indicated, and there's great demand amongst our client base. And it is extremely synergistic as you bring it into this organization. Mark Marcon: That's terrific. And then can I just ask about AI, twofold question. One is, clearly, there's been a labor recession for anybody who's been following the labor market for some time. And the question revolves around like even if we do see some [indiscernible] a little bit more actively. Gary, what do you think about the chance of uncertainty around AI kind of freezing certain employers. And in some cases, we are seeing some sections where labor demand is being reduced by AI. So I'm just wondering what you're seeing on the client front. . And then secondly, you mentioned you're injecting [indiscernible] processes. Wondering if you can be a little bit more specific in terms of specific areas that you're injecting to AI? How much are you spending there? And do you expect it to be an efficiency driver? And what's that impact going to be in terms of your own headcount? Gary Burnison: I'll let Bob -- Bob, you can address the second part. I guess I would -- none of us have a crystal ball. I would say when you look at the -- take the America, there's no question that lower birth rates over the last 30 years, are going to result in significantly less people coming into the labor force over the next many years. And so therefore, if a country wants to grow productivity like America has done at 2% a year, how does that supply and demand imbalance get corrected. Well, it gets corrected through technology. So I think there will be whether -- in whatever form that is, agentic AI, whatever it is, I think there will be a massive sucking sound, and it will be this huge pull that technology will have to bridge that -- less people into the American workforce. So I think that's undeniable. That's mathematics, that's data. And in this environment, that companies have been dealing with now for a couple of years, the reality people can talk about inflation at 2% or 2.5% to 3%, that is like such [[indiscernible] the fact is costs are up 40% to 50%, and that's a direct result of COVID. So in this environment, companies are having to look at ways to deliver impact to their customers more efficiently. And that has played out in the labor force over the last 8 quarters by letting -- for the most part, letting attrition take its course and not being so hell-bent on replacing those people that leave. There's no doubt that when you look at what you can do today with AI that any CEO would be absolutely looking at their organization and saying, what does this mean for my workforce strategy and it invariably has to mean, but I'm probably going to have less employees. I don't see how one would come to a different conclusion than that. And so for us, -- we are -- broadly, there's inside out and outside in inside out. We're doing the things that you would expect around our own workforce and how we mobilize that workforce with AI. And then there's the outside in with our delivery services and not only the consulting engagements, such as we have today around going into an organization and saying, are they AI ready, which we have many, many of those engagements, we're actually using, again, our IP to assess and benchmark company's AI readiness. But we're also using it relative to our assessment and coaching engagements. So Bob, maybe you could take the second part of Mark's question. Robert Rozek: Sure. So Mark, we're -- we actually are making investments into this area that are fairly substantial. Now we haven't gone out and hired a bunch of people. What we've done is we've taken approximately 40 individuals who had been within each of our solution areas, working on various aspects of AI, Gen AI and we've organized them under a central leader only, Brian Akerman. And Brian is driving the AI, Gen AI usage in the firm. We -- so we've taken those roughly 40 people centralize them. We now have rolled out licenses depending on your skill level or what your job role is and so on, the licenses may have -- some might be more -- have more efficacy than others. And we're going through right now and figuring out the impact that the AIG is going to have on our work. I guess where we are today, if you think about AI and Gen AI, it's -- to me, it's -- mantra is human plus AI. So it's really looking at those as efficiency tools. I think where it potentially gets more interesting is with the use of agents ultimately as they will be integrated into workflows work process, and so the impact of that is obviously something that we're going to -- we'll figure out, but that's down the road. I would say that as I look at our workforce scale, Gary mentioned a couple of times on the call, our backlog, right? So to me, it's not just about how do I look at AI and Gen AI as a way to get our head count down. But it's also a way is how do I take out some of the menial tasks that folks are doing today and I could take that freed-up capacity and use that to deliver the backlog that we have. So in my mind, it's sort of a combination of, yes, will it have an impact on our overall head count? Absolutely. But it's also going to give us the ability to free up capacity to provide and deliver services to our clients more -- on a more rapid basis. Operator: And it appears that there are no further questions, Mr. Burnison. Gary Burnison: Okay. Regina, thank you for hosting us, and we certainly appreciate you listening to our story. And we look forward to talking to you here over the next few days and over the next quarter. Thanks a lot. Operator: Ladies and gentlemen, this conference call will be available for replay for 1 week starting running through the day September 16, 2025; and at midnight. You may access the Echo replay service by dialing (800) 770-2030 and entering the access code 5927-661 followed by the pound key. Additionally, the replay will be available for playback at the company's website, www.kornferry.com in the Investor Relations section. This concludes our call today. Thank you for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2025 Hello Group, Inc. Earnings Conference Call. Please note, this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms. Ashley Jing. Thank you. Please go ahead, ma'am. Ashley Jing: Thank you, operator. Good morning, and good evening, everyone. Thank you for joining us today for -- hello Group's Second Quarter 2025 Earnings Conference Call. The company's results were released earlier today and are available on the company's IR website. On the call today are Mr. Tang Yan, CEO of the company; Ms. Zhang Sichuan, COO of the company; and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. We will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law. I will now pass the call over to our COO, Ms. Zhang Sichuan. Mr. Zhang? Sichuan Zhang: Thank you. Appreciate it. Hello, everyone. Thank you for joining our call. In Q2, both our domestic and overseas business continued to see positive trends again at the start of the year, achieving good results across various operational and financial metrics. Next, I will give you an update on execution of our strategic goals. Starting with the financial performance. For Q2 '25, total group revenue was RMB 2.62 billion, down 3% year-over-year. Domestic revenue reached RMB 2.18 billion, down 11% year-over-year, while overseas business was RMB 442 million, up 73% year-over-year. Adjusted operating income was RMB 448 million, down 6% from Q2 last year with a margin of 17%. Our key priorities for 2025 include the following: for Momo, the goal is to maintain the productivity of this cash cow business with the healthy social ecosystem. For Tantan, the goal is to maintain and improve its core dating experience and build an efficient business model that drives profitable growth. For the new endeavors, our goal is to continue deepening our presence in overseas markets, enriching our brand portfolio and building a long-term growth engine. In the first half of 2025, our domestic business gradually stabilized with both revenue and profit exceeding our initial expectations. For overseas business, we continue to drive rapid revenue growth with controllable costs and expenses. And now let me walk you through the details. First, on Momo app, all products and user acquisition efforts were focused around the goal of ensuring the productivity of the cash cow business. On the product side, the focus was to enhance user track experience to ensure long-term stability through our healthy social ecosystem. In Q2, we fully roll out in-house developed AI greeting feature, which have male users to generate personalized reading, driving the rates up by a high single-digit percentage. Using our use of AI to enhance icebreaking chat experience, we have also been testing an AI chat assistant feature, which provides content suggestion for male users during the ongoing conversations. This feature drives an increase in number of multiround conversation and rate of in-depth tracks, thereby improving retention and playing positive growth in stabilizing Momo's user base. On the user acquisition front, we further refined our approach based on ROI and reduced the budget of inefficient channels. We also optimized acquisition materials for high ARPPU users and drove sequential growth in ARPPU by enhancing the on-boarding experience for paying features among users from these channels. The reduction in unit acquisition costs combined with the ARPPU growth drove further improvement in ROI, which has already achieved a target greater than 100% in Q1. The overall user retention remained stable despite increased channel investments thanks to the improved user experience driven by product enhancements and algorithm optimization as well as the ability to accommodate channel users more effectively. In Q2, Momo app had 3.5 million paying users, a sequential decrease of 0.6 million due to our ongoing efforts to cut user acquisition investments with negative ROI. Since the ultra low paying users that we proactively abandon, make very limited contribution to the top line. The absence of this group has had a very minimal negative impact on revenue. Instead, their absence contribute to an improvement in profitability. We believe that the current user acquisition environment in China has fundamentally changed from the pre-pandemic experience and our user acquisition strategy to also evolve to achieve ongoing improvements in ROI. I believe that -- I'm confident that both Momo and Tantan still have room for continuous improvement in this area. Now on the productivity of the cash -- of Momo cash cow capital. In Q2, Momo value-added service revenue reached RMB 1.85 billion, down 11% year-over-year. The decline was mainly due to the soft spending sentiment among high-paying users, particularly in live streaming experience amid the weak macro environment. In light of this, we increased operational efforts in chat room experience, which is popular among mid cohort users. We adjusted common recommendation algorithm to enhance penetration rates and user scale of the audio and video-based experiences thereby stimulating consumption amongst mid cohort users. After the seasonal lows in Q2, reorganized non-bonus driven competition events in live streaming and increased the exposure rate of high-quality broadcasters to high-paying users in our algorithm. On the product side, we introduced new interactive gifts that further facilitate relationship building and paying conversion between users and broadcasters. With the joint efforts of our algorithm and product, we enhanced our traffic monetization efficiency, coupled with a seasonal recovery. VAS revenue increased 4% from last quarter. Turning to Tantan. In order to maintain profitability amid revenue pressure, we continue our strategy of reducing channel investments in Q2. A plan initiated at the start of the year with a target ROI of over 100%, we further scaled back budgets for underperforming channels. This decrease in channel traffic puts some pressure on the overall user scale. However, organic user growth show a positive trend since the beginning of the year and increased steadily over quarter-over-quarter, which potentially offset the decline in user numbers caused by the reduction in marketing expense. In June, Tantan's MAU reached 10.2 million, down 5% from last quarter. As of the end of Q2, Tantan had 740,000 paying users, a decrease of 80,000 from Q1. In addition to a decrease in MAU, another reason for the decline in paying users is the short-term pressure on the paying conversion caused by the improvement in user experience associated with the product upgrade. Following the full-scale rollout of the pilot projects, there was a slight quarter-over-quarter decrease in paying ratio. Turning to Tantan's financials. Revenue from the onshore business in Q2 was RMB 160 million, down 18% year-over-year and 4% quarter-over-quarter. The revenue decrease was due to a decline in the number of paying users, but ARPPU increased 18% year-over-year and 8% quarter-over-quarter, which particularly alleviated the pressure on revenue. At the product level, to explore dating experiences for Asian, we launched product upgrades from last year. Our key efforts included: first, strengthening view user application to enhance user authenticity and brand trust. Number two, we're focusing on the core dating experience by simplifying the UI layout to focus on key information, while downplaying noncore dating features such as fees and good track. The improvement in user experience has a certain negative impact on paying ratio and user retention. The upgraded version was fully rolled out in Q2. And currently, we are mitigated the negative impact of the new version on user metrics and amortization through continuous product fine-tuning. On user acquisition, our goal was to achieve 100% ROI including personnel costs and to eliminate budgets from the underperforming channels. The unit acquisition cost narrowed significantly and ARPPU will slightly compared to last quarter. In Q2, ROI remained stable at a level far exceeding 100%. The improvement in organic traffic and in the channel ROI has led to a significant year-over-year and quarter-over-quarter growth in Tantan's profitability. In terms of monetization, we mitigated the impact of the product upgrade on paying ratio by restructuring the membership package and refining the operations of core cities and user groups. The differentiated product design and pricing schemes has driven a continuous increase in ARPPU, recording a revenue decline that is significantly smaller than the decrease in the number of paying users. Lastly, on the overseas business. In Q2, overseas revenue reached RMB 442 million, up 17.3% year-over-year and 7% quarter-over-quarter. The overseas revenue accounted for 17% of the group revenue compared to 10% in the same period last year. In Q2, overseas revenue maintained its rapid growth momentum driven by the audio and video-based social product in the MENA region. Soulchill product optimization to the core chat room experience, boosted both the paying conversion ratio and the paying user accounts, thereby driving the crucial revenue growth from a high base. for Yahale and Amar, the local teams drove growth involves the number of paying users and ARPPU by continuously optimizing product features and strictly adhering to a paying user-oriented acquisition strategy. We initiated expected the overseas revenue would have grow even faster with more aggressive marketing expansion. We decided to be more prudent due to the following reasons. Number one, train -- Soulchill expansion to an affluent Gulf region, we felt the need for a better segmentation among different user groups. Therefore, we are currently trying to penetrate the market with a stand-alone app, which might take a bit more time. Number two, we noticed that the unit acquisition costs increased a bit too fast as we increased channel investment in two new apps. Therefore, we decided to move a bit slowly on the marketing expansion plans, focusing on improving ARPPU and optimizing acquisition costs, first. We will increase our channel investment again once ROI reaches a satisfactory level. We prefer such kind of prudent model that balance growth and bottom line because it prevents the from entering an awkward offer situation, where the rapid top line expansion is achieved through bottom line sacrifice. It's worth to mention that our overseas business is not limited to audio and video-based social product in the MENA market. Another key focus of our overseas business lies in the dating market across developed countries. Turning the overseas dating products led by our Singapore team already contributed a double-digit percentage of our total overseas revenue, primarily driven by Tantan International. After checking over last year, the Singapore team, we evaluated the brand positioning and product strategy for overseas Chinese and other Asian country users. Tantan International shifted from balancing entertainment and dating to focusing on the core dating experience. Based on this, we have initiated the product and branding. After 1 year's effort, Tantan International revenue has now stabilized. Moving forward, we will focus on dating and the growth opportunities in overseas Chinese communities and the Southeast Asia market. We plan to take Tantan International as a pilot product to our presence in our overseas stating field, providing users with some more dating brands that facilitate the discovery of romantic relationships and effectively establish connection from online to offline. This concludes my remarks. Now let me pass the call over to Cathy for the financial review. Cathy, please. Cathy Peng: Thank you, Sic. Hello, everyone. Thank you for joining our conference call today. Now let me take you through the financial review. Total revenue for the second quarter 2025 was RMB 2.62 billion, down 3% year-on-year, but up 4% quarter-over-quarter. Non-GAAP net loss was RMB 96.0 million compared to RMB 449.2 million from the same period of 2024. In the second quarter, we accrued an additional amount of withholding income tax of RMB 547.9 million, associated with profits generated by our -- in China for prior periods. I will elaborate on this accounting treatment later. This tax expense item is one-off in nature and did not reflect the normal business operations of the current and future periods. Excluding this special item, non-GAAP net income for the quarter would have been RMB 451.9 million, up 1% from Q2 last year and 12% from last quarter. Looking into the key revenue items for Q2. Total revenue from value added services for the second quarter of 2025 was RMB 2.58 billion, down 3% year-on-year, but up 4% quarter-on-quarter. On a user geography basis, PRC Mainland SaaS revenue was RMB 2.14 billion, down 11% year-on-year, but up 3% quarter-over-quarter. The year-over-year decrease was primarily due to soft consumer sentiment stemming from the macro factors, which put pressure on Momo business, and, to a lesser degree, a decline in compound paying users. The sequential increase was primarily driven by the recovery from Q1 seasonal weakness. VAS overseas revenue came in at RMB 440.7 million, up 73% year-over-year and 7% quarter-over-quarter. The year-over-year and sequential growth was mainly driven by the rapid expansion from multiple social entertainment and dating brands across our rich portfolio. Turning to cost and expenses. Non-GAAP cost of revenue for the second quarter of 2025 was RMB 1.60 billion compared to RMB 1.59 billion for the same period last year. Non-GAAP gross margin for the quarter was 38.8%, down 2 percentage points from the year ago period. The year-over-year decrease was due to three factors. Number one, an elevated payout ratio driven by structural revenue shifts towards overseas markets, which have a higher payout ratio, especially during fast expansion phases. Number two, workforce optimization leading to one-off severance payments. Number three, payment channel costs and structure -- infrastructure expenses accounted for a larger revenue proportion due to geographic mix tilting towards international operations, where fee structures are systematically higher compared to domestic business. Non-GAAP R&D expenses for the second quarter was RMB 172.0 million compared to RMB 179.7 million for the same period last year, representing a 4% decrease year-over-year. The decrease was attributed to personnel optimization. Non-GAAP R&D expenses remained stable at 7% of revenue, consistent with the figure from the previous year. We ended the quarter with 1,268 total employees compared to 1,364 from a year ago. The R&D personnel as a percentage of total employees for the group was 58% compared with 62% from Q2 last year. Non-GAAP sales and marketing expenses for the second quarter was RMB 239.7 million compared to RMB 360.6 million for the same period last year, both representing 13% of total revenue. The year-over-year decrease in sales and marketing expenses was attributable to the ongoing cost control strategy for the PRC Mainland businesses where both Momo and Tantan narrowed their marketing spend. This decrease was partially offset by the increase in channel investment for the overseas app. Non-GAAP G&A expenses was RMB 67.5 million for the second quarter compared to RMB 89.5 million for the same quarter last year, both representing 3% of total revenue. Non-GAAP operating income was RMB 447.7 million with a margin of 17.1% compared with RMB 476.5 million with a margin of 17.7% from the same period last year. Non-GAAP operating expenses as a percentage of total revenue was 22%, a decrease from 23% from Q2 2024. Now on income tax expenses. Total income tax expenses was RMB 638 million for the quarter. In Q2, the company accrued withholding income tax of RMB 578 million, of which RMB 547.9 million was a special item -- special nonrecurring item related to prior periods, namely that in the second quarter of 2025, we accrued an additional withholding tax of RMB 547.9 million, related to dividends paid or payable by our WOFE in Mainland China to its offshore parent company in Hong Kong. This accrual followed a notice received by our WOFE Momo Beijing from the Chinese tax authorities requiring it to withhold tax at the standard rate of 10% instead of the previously applied preferential rate of 5%. While the company continues to believe our initial assessment was reasonable, we note the authorities most recent interpretation and position and have complied accordingly. Among the total amount accrued, RMB 356.1 million was related to dividends paid by WOFE in 2024 and in the first half of 2025, and this amount has been paid in September 2025. The remaining RMB 191.8 million was the additional 5% withholding tax accrued for the undistributed retained earnings of Momo Beijing as of March 31, 2025. So from Q2 2025 onwards, we will accrue withholding tax rate at 10% and for profit generated by our Beijing WOFE. Without withholding tax, our estimated non-GAAP effective tax rate was around 11% in the second quarter. Now turning to balance sheet and cash flow items. As of June 30, 2025, Hello Group's cash, cash equivalents, short-term deposits, long-term deposits and restricted cash totaled RMB 12.39 billion compared to RMB 14.73 billion as of December 31, 2024. The decrease in cash reserves was largely attributable to the repayment of RMB 1.76 billion bank loan, including accrued interest in the first half of 2025. Additionally, in Q2, we paid an equivalent of RMB 346 -- we paid an equivalent of RMB 346 million cash dividend to our shareholders. Net cash provided by operating activities in the second quarter 2025 was RMB 250.1 million. Lastly, on business outlook. We estimated our third quarter revenue to come in the range from RMB 2.59 billion to RMB 2.69 billion, representing a decrease of 3.2% to an increase of 0.6% year-on-year. This is based on assumption that on a year-over-year basis, PRC Mainland business will decrease mid- to low teens, while overseas revenue is expected to grow in mid-60s. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes. That concluded the prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q&A. Ashley, please. Ashley Jing: Thank you. Just before we take the questions, for those who can speak Chinese, please ask your questions in Chinese first, followed by Enrich translation by yourself. Thank you. And operator, we're ready to take questions, please. Operator: [Operator Instructions] Your first question comes from Thomas Chong from Jefferies. Thomas Chong: [Foreign Language] We have seen Momo fundamentals in first half came in better than expectations set in early 2025. Can you talk about our second half outlook. On the other hand, we just talk about different AI tools like AI greetings and AI chat assistance. Can you also talk about what are our thoughts and strategy on AI application? Ashley Jing: [Interpreted] Let me translate this first. So Momo revenue achieved a sequential growth in the second quarter, primarily due to seasonal recovery. Additionally, with some the relatively stable consumer sentiment and regulatory environment, we took this opportunity to organize a number of nonbonus-oriented competition events. By offering the winners incentives such as training tours abroad or production of heat music videos, instead of simply cash rewards. We simulated broadcasters participation in this competition events at a relatively low cost. Whether this trend can be sustained in the second half of the year, largely depends on the overall consumer sentiment as well as the enthusiasm of agency and broadcasters. Regarding consumer sentiment. We currently do not see any significant deterioration, but are relatively fragile overall. On the other hand, due to some new tax regulations, agents and broadcasters may be affected in the second half of the year. Internally, we are adjusting our operational policies to address this issue. The main goal of our policy adjustment is to help the supply side enhance compliance while maintaining the normal and reasonable income and profit. This may put some pressure on the platform's revenue and gross margin, but our team will strive to mitigate this impact through improved product operations. Currently, Momo's overall revenue and profit in the second half of the year expected to be relatively controllable. Moreover, tax compliance across the entire industry is also a good thing for the long-term stability of the social entertainment platform. Okay. Let me translate this. So the second question is about application of AI in the social field. Since 2022, the group has done a lot of explorations and innovations in this area with significant strategic deployment and efforts. At the application level, it mainly involves several aspects. Firstly, we are integrating AI into existing social products to enhance user experience. And Chinese users generally struggle with icebreaking conversations, which posted a significant barrier to building new connections and maintaining ongoing interactions. This has been a key user of pain point we have sought to address through product operations. AI, however, can play a substantial supporting role in this area. Momo's previous product practice in AI-assisted icebreaking have observed a strong evidence of this. We believe AI has broad application potential in this area, such as offering chat advice and providing other similar systems functions. In addition to existing applications, we have recently launched a stand-alone AI character role play in chat in Japan. Users can choose their preferable IPs and storylines to be engaged in chat and role playing. This app is currently doing very well in Japanese market, and we have initiated preliminary monetization efforts. And beyond these application level exploration, we have also made significant efforts in underlying technology and infrastructure. Since there are no off-the-shelf AI vertical models tailored for the social sector available on the market, our group has set up a dedicated team for large model applications and continuously invested resources in this area. Based on Momo's we are conducting in-depth research and model training on how to leverage AI to better help users build and maintain new connections more efficiently. Our progress achieved in this area will significantly enhance the product and commercial value to Momo and Tantan and many of our new social products in the overseas markets. Thomas, I think that's the answer to your question. So operator, we're ready for the next question. Operator: Your next question comes from Leo Chiang from Deutsche Bank. Leo Chiang: [Foreign Language] Management mentioned in the prepared remarks that the company has taken measures to restructure the membership package and require the operations of core cities and user groups to mitigate the impact of the product upgrade on paying ratio. Can management elaborate more details of what measures you have taken? Sichuan Zhang: I will take this. So the recent Tantan product upgrade has led an increase in the number of users completing real person verification and profile pages now show more comprehensive information. User feedback shows that it feels like they can see more real people on Tantan. However, this improvement has resulted in users which has put some pressure on revenue to adjusted -- in Q2, we adopted a user classification approach, specifically with group user base on whether they have complete real personification, engagement level, paying history and factors such as appearance. For different user groups, we implemented tailor exposure strategy and monetization approaches. For example, for users with high paying potential, we moderately adjusted their matching rate and pay design to improve their paying conversion and ARPPU. Additionally, we divided domestic cities into several tiers based on user engagement level and regional consumption capacity. We developed suitable membership packages and pricing plans. Our goal is to maximize revenue, either by increasing the paying ratio to grow the number of paying users or by boosting ARPPU to drive revenue growth. In terms of UI design, we focus on core saving features by the previously quarter images and test information on the homepage. We now highlight the key information such as age, online status and systems. The revenue pressure caused by the product upgrade was fully evaluated in Q2. Recent product and algorithm adjustments gradually mitigated the negative impact of the upgrade on the revenue. So therefore, it's worth noting that the improved user experience has helped drive organic user growth and user retention. Previously, the vast majority of new users on Tantan were acquired to pay marketing channels. However, since the start of this year, the number of organic users have been steadily increasing. In Q2, the number of new organic users significantly bypassed acquired through channels. We believe the enhanced user experience provided by the product has established a solid foundation for recovering our user base and revenue following a reduction in channel investment. Ashley Jing: Yes, that's it for the answer. Operator: Your next question comes from Yicheng Yuan from UBS. Yicheng Yuan: [Foreign Language] So we've seen like overseas revenue grow over -- grew by over 17% year-over-year for two consecutive quarters. So could management please share your views on sustainability of the strong growth? And what are your expectations for overseas revenue in the second half? Sichuan Zhang: Thank you for the question. I will kick this to sum up the rapid growth of the overseas business in the first half of the year in one line that is pretty well across the board. For the social entertainment business, Soulchill has maintained steady growth momentum. The accelerated growth in the first half of the year is mainly driven by continuous breakthrough with Yahale and Amar. Despite the ongoing increase in channel investments, the ROI has constantly met target, allowing us to achieve revenue growth while improving profitability. This marks our most significant breakthrough since the start of the year. In fact, our social entertainment business could have grown even faster in Q2 and Q3. However, given the strict profit requirements set by the group, aiming for higher growth will sacrifice on profits, and we are conscious about the risky growth model at the moment. So in Q2 and Q3, we will focus on increasing ARPU and optimizing user acquisition costs. Although year-on-year growth may slow slightly, these three apps targeting MENA is still expecting to deliver very healthy and robust growth overall. So beyond social entertainment, our overseas dating business has also performed very well this year. This includes the stabilization of Tantan's overseas operation and other overseas dating products that managed by our Singapore team. We have also recently completed the acquisition of the -- although this scale is larger, isn't large compared to our overall overseas business. This brand has significant untapped potential in terms of user user possession in European markets and team capacity -- capabilities. We believe that this overseas dating brands will become key growth driver for our international revenue in the future. As for the revenue outlook, I will turn it over to Cathy. Cathy Peng: Okay. Sic has already given pretty clear and detailed answers about the growth dynamics of our overseas business. Let me try to translate into those comments into more quantifiable terms that model builders can work with. First of all, as you can see in Q1, Q2, we delivered over 70% overseas growth, which reflects strong momentum across both social and our -- some of our emerging brands. We -- as Sic mentioned, we could have moved a little bit faster in Q2 in terms of top line growth. However, we purposely slowed down a bit towards mid Q2, so we didn't have to sacrifice profit for faster top line and market expansion. It was really a decision out of strategic discipline and priority on growth with profit rather than growth at the expense of profit. And for that same reason, in Q3, we expect a temporary moderation maybe toward a year-over-year growth of around 60% as we deliberately pace marketing spend and focus on improving ROI through optimizing user acquisition costs and enhancing ARPU. That said, nonsocial emerging brands as a whole are continuing to accelerate at a triple-digit pace and will become an increasingly important growth driver as the year progresses. This is a good thing for the group because a lot of the new brands are subscription-based with higher margins. And these brands -- as these brands mature, we could see gradual improvement in our overall margin profile. By Q4 as ROI optimization take effect and with the contribution from some of the newer brands, we expect overseas growth to reaccelerate again. Hopefully, that answers your question. Back to Ashley to take more questions. Ashley Jing: Okay. So in the interest of time, maybe let's just take one last question before we wrap up for today's conference. Please, operator, if we have any. Operator: Your final question comes from Xueqing Zhang from CICC. Xueqing Zhang: [Foreign Language] The management just share the revenue outlook the second half of this year. And I would like to know if there will be any change in terms of profit margin. In particular, regarding the withholding tax issue that Cathy just mentioned in the prepared remarks. Can you will share more details. I believe investors are quite concerned about whether this is an issue specific to the company itself are effectively related to industry-wide process. Cathy Peng: Okay. On margins, it's hard to separate the discussion on margin from our overall top line outlook. So here is a recap on how to think about revenue outlook for 2025 at the group level, again, in a more quantifiable way. As mentioned earlier, we expect some pressure on Momo's value-added services in the second half, primarily due to recent tightened up in tax scrutiny affecting a lot of our performers and agencies. And of course, macro remains an uncertainty factor here as well. For these reasons, there could be some fluctuations in revenue and gross margins, particularly in Q3 and Q4. That said, we've been adjusting our revenue sharing policies to offset part of the impact. So the overall effect on top line should remain pretty manageable. On the other hand, content's performance, as you can see, has been a positive surprise after the restructuring at the beginning of the year where we substantially cut down personnel and marketing costs. Despite significantly reducing marketing spend, product improvements and monetization enhancements have kept revenue more resilient than expected. And the revenue is stabilizing as we move through the back half of the year. So it looks like we've achieved stabilizing revenue trend on top of significant cost savings for Tantan, which will give us pretty meaningful improvement in Tantan's profitability compared to last year. Now moving back to group level revenue outlook for 2025. We continue to see somewhere around the low teens year-over-year decline for domestic revenue, offset by strong growth in overseas where we anticipate a year-over-year growth around 70% taken for the whole year. Taken together, this implies that group top line in 2025 could either see a slight downtick from or remain flattish versus 2024. That's the current view of mine. Turning to margins. On the gross margin line, there are mixed forces that sometimes oppose one another. First, we are slightly raising payout ratios to support domestic agencies as well as performance as they adapt to the new tax environment, that could mean a 1 to 2 percentage point increase in overall payout on normal. Second, as the overseas revenue contribution becomes increasingly meaningful, mix shift across businesses could swing gross margin one way or another, making it difficult to pin down the group level margin expectations. For example, if the dating brands continue to outperform, margin will improve. However, if some of our newer entertainment brands grow faster, it could shift the margin profile the other way around. That said, I can give you guys my best estimate at this point. As a reference point, adjusted gross margin was 39% in 2024. Last quarter, we guided for -- if I remember correctly, somewhere around 36%, 37% for 2025. Given the recent developments in the live streaming and value-added services space in China, we now expect 2025 gross margin to land closer to the lower end of that range. So that's for gross margin. Below the gross margin line, R&D will trend lower in absolute dollar terms as we continue to optimize headcount. Sales and marketing will increase low teens percentage-wise, reflecting our investment to drive overseas growth, especially some of the newer applications that we are launching in the second half, especially in Q4. At the operating margin level, last quarter, we guided for -- from 13% to maybe 14% on an adjusted basis for 2025. Our current view is that we will probably land in the lower end of that range depending on where the top line ends. So overall, despite some near-term challenges faced by some of our agencies from tax scrutiny, our annual margin profile remains broadly stable and, I believe, aligned with prior guidance as we continue to exercise cost discipline and fund overseas expansions. So now the big question, moving below the operating profit line, it's probably worth elaborating a little bit more on the big special tax item for Q2. Basically, here is what happened. Recently, actually towards end of August, the tax authorities provided an interpretation that we believe represents a new position regarding the applicable withholding tax rate for dividends distributed by our WOFE to its Hong Kong parent company, Momo Hong Kong. The authorities have determined that the standard 10% rate should apply rather than the 5% preferential rate under the Mainland China and Hong Kong tax arrangement that we have applied in prior periods. Actually, from April 2025 to -- I'm sorry, from April 2024 to April 2025, our tax filings with 5% preferential dividend tax rate were subject to multiple routine reviews by the local tax bureau -- local tax authority, which raised no objections or concerns at the time. In addition, we believe the practice we previously followed was a common industry approach for companies in similar situations. That's why we were surprised by the subsequent reassessment of the authorities. While we continue to believe our initial assessment was reasonable, we note that the application of tax laws can involve very complex interpretation. As a reasonable corporate citizen, we have complied with the authority's latest guidance and have adjusted our accounting accordingly. As to the question about whether this is industry-wide or specific to Hello Group, from our recent dialogues with the third-party advisers who have been involved all along in this specific matter as well as the dialogues with the authorities, it is our belief and our understanding that the latest scrutiny that Hello Group experience is not unique to us alone. Our original approach was not unique either. Many companies with similar structures have followed the same practice. And if so, according to the authorities, there is a possibility that they could face similar scrutiny as well. That's what I can say at this point. So maybe back to Ashley to wrap up the call. Ashley Jing: Yes. I think times up. So let's call the day, and thank you for joining us today, and we will see you next quarter. Operator, we're ready to close. Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Welcome to the Rubis 2025 Half Year Results presentation. [Operator Instructions] Now I will hand the conference over to the speakers to begin today's conference. Please go ahead. Clemence Mignot-Dupeyrot: Good evening, everyone. I'm Clemence Mignot-Dupeyrot, Head of Investor Relations. I am here today for Rubis's H1 2025 Results. I am with Clarisse Gobin-Swiecznik, Managing Partner; and Marc Jacquot, CFO. Clarisse will start the conference. Clarisse Gobin-Swiecznik: Ladies and gentlemen, good evening. To kick off this presentation of our H1 results, let me very quickly remind you what we do. Our business is about distributing energy while supporting mobility solutions. In Europe, we distribute and sell LPG, and we also produce and sell photovoltaic power. In Africa, we distribute and sell bitumen to road contractors in West Africa and fuel and LPG in East Africa. In the Caribbean, we distribute and sell fuel and LPG. Those products reached a wide range of customers, both individuals and professionals while the distribution is supported by a reliable and most of the time in-house logistics. For H1 2025, this diversified business model delivered a steady performance. In a global economic environment marked by uncertainty, our results for the first half of 2025 standout with growth in volumes and margins across all regions and product lines. Photosol continues to progress according to plan on track towards 2027 objectives. Our group EBITDA grew by 3% and the net income group share by 26%, driven by a stronger operational performance, better FX management and stable emerging currencies. Cash flow generation remains steady at EUR 276 million for H1, which is a key highlight of this publication. All of this gives us confidence in reaching our full year guidance, even in a less favorable USD-Euro exchange rate environment in H2. The following slide highlights our balanced growth across product lines and geographies. It showcases the strength of our commercial strategies, our agility, and seamless execution. Looking at our H1 performance by business line, you can see that in Retail & Marketing, all products delivered both volume and margin growths. LPG was driven by a very strong commercial momentum in Europe. In fuel distribution, the expected pricing formula adjustment in Kenya took the first step in March. The second step implemented in mid-July will show in our H2 performance. In bitumen distribution, demand in Nigeria is strongly picking up. The sharp decrease in unit margin visible here is purely a basis effect linked to the 2024 currency devaluation. We already mentioned it in Q1, Marc will elaborate further on this point. As for Support and Services, which covers supply to the distribution business, and the SARA refinery performance remains overall stable. Finally, the renewable business is expanding as planned with a sharp increase in both assets in operation and secured portfolio, in line with the remark we presented at last year's Photosol Day. In conclusion, this first half results are yet another demonstration of the group's ability to deliver consistent commercial and operating performance, cycle after cycle. And when you combine that resilience with discipline and proactive financial management, the outcome is clear, the strong and steady cash flow generation is fully in line with our historical standards. Marc Jacquot: Thank you, Clarisse. Good evening to all. Let's start with the big picture for the first half. Our EBITDA is up 3% year-on-year and flat on a comparable basis. As Clarisse already mentioned, this is driven by strong LPG performance in Europe, while in Africa, Kenya improved volumes and margins in the retail segment, and bitumen return to growth in Nigeria. Net income is up 26% to EUR 163 million, reflecting the absence of FX losses. CapEx related to the distribution business remains well under control, roughly stable at EUR 73 million while they are increasing in renewable to EUR 85 million, which is a concrete and positive sign that our growth projects are now materializing and are being steadily derisked. Nearly 85 megawatts were put in operation over H1 and 290 megawatts are now under construction. Corporate net debt is stable at 1.4x despite a negative trend in working capital over H1 which confirms our strong financial position. And finally, cash flow from operations remained strong at EUR 276 million for the first half year, supported by the good operating performance and the absence of FX losses. All in all, that's a solid performance. Now let's take a closer look at our activities. Retail & Marketing delivered a solid performance across the board with EBITDA increasing by 3% year-on-year. In Africa, we have three things to highlight. First, retail. Retail is contributing well and the impact of the new pricing formula in Kenya is expected to be fully visible in the second half. Second, aviation, which is more volatile, is facing higher pricing competition, leading us to reduce our volumes for the moment in Kenya. And the third one is bitumen. Bitumen margins increased less than volume and this is a basis effect from 2024 when naira devaluation impact affecting the financial results below the EBITDA was passed through to customers. Now let's look at the Caribbean. The Caribbean region was broadly stable, which is in line with our expectations. Guyana slowed down a bit with the election coming up in September, creating some kind of wait-and-see behavior among our B2B customers. In Haiti, the measures we have taken in our logistic management are starting to pay off, even if volumes remain a bit soft. Jamaica is normalizing with supply conditions slightly less favorable than last year. Now Europe. In Europe, the momentum is particularly good as a result of our challenger positioning combined with the excellence drive of our commercial teams and a colder winter this year. Looking at Support and Services, it remained stable, which is normal as this segment usually flexes with our Retail & Marketing activities. Now the renewable electricity production, what we can say is that the power EBITDA stands at EUR 22 million, which is up 38% year-on-year. In line with our road map, our development expenses have increased, reflecting the acceleration of the growth of this business, resulting in a consolidated EBITDA at EUR 10 million. In conclusion, this is a robust operating performance, attesting to the strength of our product and geographical diversification. Let's have a look at our financial results. Let me highlight just a few items here. The net income group share is up 26% or on a comparable basis, 18%. This is the result of lower expensive local debt levels and reduced FX exposure. When analyzing our income statement, let me remind you that the share of net income from associates in H1 2024 included Q1 results from Rubis Terminal. Interest costs are down, thanks to lower debt in Kenya and more favorable interest rates. As you know, last year, Rubis recorded significant FX losses, particularly in Kenya and Nigeria. In H1 this year, local currencies were more stable and the strategies we put in place to mitigate the FX risk have proven efficient, and we didn't incur any FX loss. As for taxes, nothing major to flag, the OECD global minimum tax is now fully integrated in our normal run. Overall, Rubis demonstrated agility and delivered solid financial results, fueling its cash flow momentum and supporting its balance sheet. Now a word on our financial debt. Total net debt stands at EUR 1.4 billion, with corporate debt at EUR 910 million, maintaining a healthy leverage of 1.4x at corporate level. Our liquidity level is high with more than EUR 180 million under RCF in addition to our EUR 530 million cash on balance sheet. The main variation of this debt this half came from the steady operational cash flow of EUR 390 million, which is up 11%, reflecting the good operating performance combined with the absence of FX losses. A negative impact from change in working capital of EUR 68 million after a very positive effect in H2 '24 as a consequence of lower trade payables. CapEx of EUR 164 million, which is higher than last year with the ramp-up of Photosol, hence, our usual June dividend that we paid to shareholders, but also to minority interest and general partners. Nonrecourse debt increased by EUR 63 million, in line with the renewable investments. All in all, our balance sheet remains solid with ample liquidity to support our future growth. Clarisse Gobin-Swiecznik: Thank you, Marc. Before we open the floor to Q&A, let me wrap up. So first, we saw Rubis commercial and operating performance. Second, our seamless execution and agility deliver reliable cash flows through the cycle. Finally, these H1 achievements make us confident, we are on track to reach our 2025 targets even in the less favorable euro-dollar context in H2. With a healthy balance sheet and a stable leverage ratio, we confirm we are aiming at EUR 710 million to EUR 760 million EBITDA within the framework of assumptions you have here on the slide. Thanks a lot for your attention. We are ready to take your questions. Operator: [Operator Instructions] Marc Jacquot: We have no audio questions for the moment. I propose you begin by the written questions on the webcast. Clemence Mignot-Dupeyrot: So we have 2 questions on the webcast from Auguste Deryckx of Kepler. Question number one is group EBITDA was stable on a comparable basis despite 5% volume growth, what are the key headwinds preventing stronger margin conversion? Marc Jacquot: What we can say on the margins, as I mentioned, the LPG margins were stable over the first half. And in the fuel distribution business, so the unit margin decreased by 1% in H1. And this decrease came exclusively from the Caribbean, especially from Jamaica. In Jamaica, the supply is not in Rubis' hands. And last year, we had very favorable condition for this supply. And this semester, actually, those conditions normalized, I would say. So that's the first explanation. Second one is on the bitumen, bitumen distribution business. So the volume growth in Nigeria resumed, as we explained. And H1 2024 was high due to the FX pass-through and the significant decrease in margin is explained by the basis effect after H1 2024 devaluation, after considering the guidance. Clemence Mignot-Dupeyrot: We have 2 questions considering on euro and USD FX. So question number one is -- but both questions have the same answer. Question number one is what level of FX rate and hyperinflation assumptions underpin the guidance, the EBITDA target of EUR 710 million to EUR 760 million. And what contingency levers do you have if the macro backdrop worsens. And another question from Emmanuel Matot is what is the total negative impact we can expect for 2025 on your EBITDA? Marc Jacquot: So regarding the guidance and the hyperinflation embedded in the guidance. We have the same level of hyperinflation in the guidance than in 2024, meaning a positive impact of EUR 25 million -- EUR 24 million on the EBITDA, EUR 22 million on the EBIT and minus EUR 10 million at a net income group share level, okay? So this is our assumption, and it will be -- and this is something that we will know only at the closing. So there is a lot of uncertainty in the hyperinflation. So we cannot commit on this number. In terms of impact of U.S. dollar, euro, the initial assumption we have was the euro-dollar level of the beginning of the year, meaning an exchange rate of $1.05 okay, for EUR 1. Now we are at $1.17 or $1.16 depending of the day. What we can say is that the good performance of the H1 will compensate the favorable impact related to the U.S. dollar impact. The margin we have in U.S. dollar is concerned, actually, I would say, 2/3 of our business, okay? So you can calculate what is the impact yourself on for H2. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: So we have another question online from [ Jean-Luc Romain ]. Could you please give us an idea of what the renewable EBITDA is before development costs? Marc Jacquot: So the renewable EBITDA before development cost is what we call the power EBITDA, the power EBITDA amounted to EUR 22 million in H1. Clemence Mignot-Dupeyrot: We have another question from [ Thomas Trotter ] saying about the aviation business. Are any of your markets showing activity in SAF, sustainable aviation fuel and is that a market Rubis might get into? Clarisse Gobin-Swiecznik: We are more or less agnostic to the type of fuel we distribute. We adapt to the demand of our customers. We would be able to distribute SAF and we do, in some places, especially in the Caribbean, but it's mainly a question of offer and demand, and there is not a lot of offer to date. We are, in any case, adapting ourselves to the demand from our customers. Clemence Mignot-Dupeyrot: Another question from Mr. [indiscernible] about Photosol portfolio evolution. It is not on the slide you have here in the presentation that is in the webcast, which you can find it on our website. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: We have another question from Emmanuel Matot at ODDO online, asking us if we have any impact of U.S. tariffs during the summer? Clarisse Gobin-Swiecznik: Rubis geographic and operational model makes it largely insulated from the direct effects of tariffs. We are not present in the U.S. nor in China, and we do not depend in any case of U.S.-based or China-based suppliers in our distribution business. On the indirect side, the products and services we offer are essential, particularly in the energy space. As such, demand tends to be relatively inelastic, meaning it remains quite stable even during periods of price volatility or economic slowdown. So I would say we have no effect of tariffs on our P&L or results. Clemence Mignot-Dupeyrot: Another question from [ Roger Degree ]. Can you update us on the CapEx plans and specific projects for the next year or 2 in the energy distribution business? Marc Jacquot: Roger. What we can say on the Photosol CapEx, this level, as you know, will increase in line with the ambitions communicated to the market at Photosol Day. So this is a EUR 1.1 billion CapEx in the 2024, 2027 back-end loaded. And for 2025 it should be in the range of EUR 150 million to EUR 160 million. Talking about Rubis Energy, so the distribution business, we should be in the normalized level in the -- I would say, EUR 185 million on the run rate. Clemence Mignot-Dupeyrot: Another question online. Can you give us an update on the shareholder structure? So the answer is public. The shareholding structure as of today is, the largest shareholder is Mr. Patrick Molis with more -- a bit more than 9%. Then you have the Bolloré Group through Plantations des Terres Rouges, a bit above 5%. You have Mr. Sämann 5% or so, Groupe Industriel Marcel Dassault a bit above 5%, and then the rest of the shareholding is structure an overall split between different shareholders. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Clemence Mignot-Dupeyrot: Thanks a lot for being here. We will be on the road on the days to come. So do not hesitate to reach out to us if you want to schedule a meeting or if you have questions, you know where to reach us. Thanks a lot, and have a nice evening.
Philip White: I'm Phil White. I'm Executive Chair of Mobico. Welcome to our 2025 half year results presentation. Now I'm not standing at the podium today. A few weeks ago, I had an operation on my knee. I've got a new knee. And the last thing I want to do is stand up there and fall over. That will make the wrong headlines. Okay. So you'll have to bear with me if I sit down. So sorry for this. So anyway, can I first introduce my colleagues sat next to me on my left is Brian Egan, who's just joined us as CFO. Brian's got a lot of experience in many difficult businesses in many difficult countries. So he's definitely the right guy for us at the moment. You'll find that he's a very softly spoken, polite, gentle Irishman from Dublin. But believe me, don't be fooled by that. It's nothing of the sort. Anybody who worked with him in the room will know he's as absolutely hard as [indiscernible], especially when you're negotiating fees with him. Okay? So don't be fooled. On my right is Paco Iglesias. Paco is our new -- not new, but in this year, our Group Chief Operating Officer. He's also been Chief Executive of ALSA for nearly 10 years. Now you only have to look at the results of ALSA for the last 10 years, which are absolutely stunning, and they continue to be so. So that's all down to Paco and his team. Welcome. All 3 of us are from 3 different countries. We've got an Irishman, a Yorkshireman, our own country, and we've got a Spaniard. But we've got one thing in common, although we speak differently. We've all joined the Board this year in 2025. So what you see before you today is a brand-new team. We set ourselves various commitments. The first thing I did was go around our shareholders and speak to them and introduce myself to try and understand their thoughts on why I've been appointed, why I'd come back. So I had to calm them down on that a bit. And when Brian came, we did a full roadshow of our lenders and our banking colleagues. And what we've said to them is that our style is perhaps different, not only from our predecessors, but probably from different countries. Going forward, we will be very open and very honest. We will communicate regularly. So hopefully, there won't be any unwelcome surprises. But most importantly, we will deliver what we have promised. Now this should be pretty easy for us because this is how we normally work. We're normal people. So we're going to be open and honest and probably we will be a bit too honest at times. I'm often criticized for that. We will talk a lot to our stakeholders and probably a bit too much and a bit too less, and we'll always try to overdeliver. But we are human. Sometimes we won't get it right. We can't get it right every time. We will make mistakes. So as it says on your pads in front of you, quite interesting headline, which I've just seen, what will inspire you today, and this is what we're here for. So we hope we inspire you. So let me start by telling you how the 3 of us are approaching our new roles. It really is back to the future. We've actually decided to start by going backwards. I know that sounds a bit crazy, but we are taking a small step back to achieve a bigger future. We've asked ourselves 2 simple questions. We think the strange questions are so easy. What are we? And what's our priorities? In our case, we don't have the luxury of starting with a clean sheet of paper. We've got to work with what we've got. So what are we? Now this is very simple. We're a major public transport group. We've been listed for years on the London Stock Exchange. We've got businesses in the U.K., the U.S.A. and Spain and some other business in some other countries. That's a pretty obvious answer to that question. But being listed on the LSE does give us responsibilities and obligations, and we are fully aware of what our responsibilities are. The second question, what are our priorities needs a little bit more explanation. So what I'm going to do is take you briefly through the group and all our divisions. And we're going to be absolutely open and honest with you on this. So if you look at group first, despite having some great businesses, we're not performing as well as we would like to. We have a track record of overpromising and underperforming, and we're overleveraged and unloved by our shareholders. They've told me that, absolutely. Despite this, there are some things that haven't changed since my first spell at National Express when I was a bossier. We still have a great team of loyal people who are committed to looking after their customers and the communities in which they work. And as before, we also have a diverse portfolio of businesses, a bit different from the old days, but we've got deep expertise across many geographies and many different modes of transport. We think that we've got many opportunities for significant value creation for our investors and our people, although we have to be a lot more disciplined in our execution. But please remember, we are a new team, and we don't have all the answers just yet. So let's take a look at our various divisions. Firstly, Coach. This is where it all started in the '70s with National Express coaches created under National Bus Company. And we still have a national network of coach services in the U.K., mainly run by third parties under our branding. I think that model is well known to you all. But we are now creating a pan-European coach powerhouse. U.K. Coach will join ALSA from January next year. This will unlock our ability to compete, win and grow and deliver more efficiencies and synergies. The National Express brand is highly respected in the U.K., is highly recognized and it will remain as it is. We have today announced that Javier Martinez Prieto has been appointed as MD of U.K. Coach. As you know, we're facing many competitive challenges to our network, particularly in pricing. We are fighting back by continuing to invest in the digital customer service interface, more dynamic pricing and upgrading customer service in all our coach stations. This will give our passengers a much better experience of traveling with us. Although at the moment, we are maintaining our passenger numbers, which is great news, we are experiencing reduction in our yields. So we have to respond by being more efficient and more cost effective. If you look at U.K. Bus, as you know, in my time, U.K. Bus was formerly the jewel in the National Express Group Crown. It's a leading operator in the West Midlands market, but has struggled a lot since COVID. We now have a funding agreement with Transport for the West Midlands, which covers fares and service levels. Thanks to Kevin Gale and his new team, we have now much improved relationships with our West Midlands stakeholders, which is crucial to us given what is coming around the corner. So what's coming around the corner? The answer is the mayor of the West Midlands, as you know, has decided to introduce bus franchising in the region, and this will happen between 2027 and 2030. This marks the end of the deregulated and commercial bus network introduced in 1986. Our focus now is on preparing for franchising, leveraging our long history in the area, but also looking for opportunities in the other major conventions. As we did when deregulation was introduced in the '80s, we will embrace the change and do our best to help our local authority partners achieve a seamless transition to the new regulated era. Over to the States. WeDriveU operate shuttle transit services across the U.S.A. It has nearly 100 contracts, the majority -- the vast majority, in fact, of which are profitable. But unfortunately, 2 are loss-making, and that's affected the group's results today. One of the loss-makers is in Charleston and this will terminate at the end of the year, the contract, and we will not be renewing it. The other loss maker is our Washington contract, and this has operational issues. We have an action plan in place to fix the problems, which have been caused by a difficult mobilization at the start of the contract and significant driver management issues. As you know, WeDriveU separated from its sister business, School Bus, when School Bus was sold earlier in the year, and it is now run as a separate stand-alone business. There is a strong pipeline of growth opportunities, both in shuttle and in transit with 4 new contracts already secured for the second half of this year, which is good news. Our focus going forward will be securing more asset-light contracts, which are cheaper to operate and carry far less risk. Moving on to German Rail. We're the second largest operator in North Rhine-Westphalia and one of the top 5 rail operators in Germany. We have 3 contracts, 1 profitable and 2 loss-making. I've got the balance quite right there. These have been very difficult contracts for us, particularly in driver recruitment and issues arising from poor rail infrastructure. We are now making progress in reducing the driver shortage gap, which has vastly improved network performance. And we are looking forward to more work by Deutsche Bahn on the network to fix the problems we have that have plagued the system for quite some time now. We have a new management team in Germany and the U.K. who have engaged a lot more closely with our local stakeholders, again, crucially important. I can say today that discussions with our German local authority colleagues on our contracts are progressing very well. We are aiming to press ahead with supplementary agreements, which hopefully will be finalized in the coming months. I'm told from a reliable source that we've made more progress in the last 4 months than the last 4 years. Hopefully, it will soon be sorted. Moving on to ALSA. In preparing for my script for today, I Googled to try and find what the original name of ALSA was and here it is, but I can't pronounce it. So Paco, what is it? Francisco Iglesias: ALSA is Automóviles Luarca Sociedad Anónima. I think Phil has made up a new name. That's much better. Philip White: But when I go [indiscernible] called ALSA, a life-saving acquisition. And it truly is. And we much prefer ALSA to the big name, don't we? But we like a life-saving acquisition because that makes me feel good as well. So ALSA truly has been a life-saving acquisition. It is a new jewel in the Mobico crown. It's the largest bus and coach operator in Mainland Spain and has expanded into the Canaries, the Balearics, and also Morocco, Portugal, Switzerland and Middle East. It has also been very brave and very successful in diversifying into other transport-related businesses, such as health transport, which basically is ambulances. There is also a strong pipeline of growth opportunity in both new contracts and potential acquisitions. For instance, ALSA are currently bidding with a local partner for a significant 10-year asset-light contract in Saudi Arabia. This contract is valued at over EUR 500 million and is part of a EUR 75 billion global investment there to create the world's largest entertainment destination. So if we get that, that will be really good news. But ALSA continues to be our dominant business within the group. Underlying profit growth compared to last year is again in double figures at around 10%. We will be maximizing ALSA's operational experience to drive improved performance across the whole group. So looking ahead, there are 3 things we need to do. Firstly, we've got to simplify our business. Secondly, we've got to strengthen our balance sheet. And thirdly, we've got to succeed by delivering on our premises. We've got to stop letting people down. So we're streamlining our management structure. We're attacking overheads. We're removing duplication and integrating businesses where this makes sense to do so. Sounds simple, and it is. We will strengthen our balance sheet by generating more cash, improving liquidity and reducing debt, which is far too big. We are already reviewing our CapEx and acquisition plans to get better value from our investments. Succeed. What does succeed mean? Well, I always feel the biggest motivator for people who work for us and work with us is not money. It's a success of a business. If we have a successful business, we have happy people who provide quality service for all our customers. If our people feel good about our business, they'll stay with us, fight for us and hopefully feel even happier. And this is what I focused on in the first few months. I'm trying to get a buzz back in the business, a good feeling. But to achieve success, we've got to deliver what we've promised, and we haven't done this for quite a while, which is not good. So we've got to make our customers happy. We've got to hit our targets. We've got to generate cash to fund more investment in the business. We've got to be smarter. We can't settle for sake and invest anymore. And we've got to achieve the right value for our investors, earn back their trust, and we want to make them love us again. So just a brief explanation of the results before I hand over to my colleague on my left. Here is a summary slide of our H1 results. You've already seen these in the [ RNS ] this morning. The good news, particularly in public transport, is the top line is still growing, up 7% in the group compared to last year. But the bottom line is not so good. We're not converting our revenue and our cash into profits. So we've got to manage our costs better. Let's face it, this should be a lot easier job from us compared to managing our revenue. Hitting the costs, controlling the cost, reducing their costs is a lot easier than making your customers and your stakeholders pay for you. So ALSA has delivered another strong performance this year. But unfortunately, it's not been replicated elsewhere in the group. Our U.K., WeDriveU and German Rail businesses have made little or no financial contribution to the half year bottom line. This is incredibly sad and it can't continue. As a result of this, EBIT is GBP 9 million down on last year, and we've also had to make a further impairment charge on the sale of School Bus. This means we have wasted even more money on that investment. I'll be as bold to say that. We've got to invest our monies a lot better than we have done in the past. So it's a first half where we could have done much better. As I've said this morning, we are taking immediate action to address all these underlying issues, and we expect to deliver full year results, Gerald, in line with our previously stated guidance. I will now hand over to Brian to give you some interesting stuff. Brian Egan: Okay. Thank you very much, Phil, and good morning, everyone, and thank you very much for coming today. First of all, I would like to begin by highlighting the direction we are taking in terms of the financials. And the good news is that our revenue continues to grow year-on-year. However, we are now focused on reducing and controlling costs in order to improve profitability. Second, we need to manage our balance sheet, and this means, in particular, tighter control over CapEx and working capital. This will increase our cash generation so we can reduce our debt to acceptable levels. As Phil said, we need to simplify and strengthen the business. H1 group revenue increased by GBP 86 million, reaching GBP 1.3 billion. This is a 7% increase, mainly reflects the strong growth in ALSA, where passenger figures grew across all businesses, including 11.5% in Spain. And in WeDriveU, we also saw strong revenue growth of over 13%, driven by new contracts in corporate, university shuttle space and paratransit operations. U.K. revenue was flat in H1 when you take into account the exit of NXTS contracts. It is important to note that the Coach sector in the U.K. remains extremely competitive. Adjusting operating profit for the group is GBP 59.9 million, an GBP 8.7 million decrease versus last year. This reduction was the result of lower profitability in WeDriveU caused by operational challenges in Washington-based paratransit contract. Of particular note, GBP 82 million profit was generated by ALSA. The rest of the group reduced the profit by GBP 22 million. This is being addressed. The business simply cannot afford the central and divisional overheads at this level and steps to reduce them significantly have already been taken. I would like to confirm that our full year profit guidance remains at GBP 180 million to GBP 195 million. Free cash flow of GBP 57.8 million is GBP 38.5 million down from the prior year as a result of an increase in working capital, mainly because of delayed collections in ALSA. This is expected to reverse in H2. Return on capital employed was 11.6% versus 8.1% in half year '24. However, this is primarily due to the impairment of School Bus leading to a lower asset base. Whilst net debt and covenant gearing have increased since the year-end, this is before the benefit of the GBP 273 million School Bus deleveraging proceeds. Taking these proceeds into account, gearing would have been 2.7 rather than 3. Statutory profit from continuing operations is GBP 35 million, a GBP 23 million improvement on the prior year. Revenue has grown across all of our business, except for U.K. Coach, and this is the result of the exit of the loss-making private coach operations, which reduced revenue by GBP 12.5 million. In terms of operating profit, only 2 divisions made a profit, ALSA and WeDriveU. However, the profit from WeDriveU is GBP 13 million lower than last year due to operational challenges in the WMATA contract. It is clear that there is a strong top line growth, but we need much better control over our costs. And as I mentioned before, central and divisional overheads are being reduced at present. I will now discuss our divisions in their local currencies. ALSA's continued strong performance saw revenue increase of over 13%. Adjusted operating profit was in line with the last year with a 0.9% increase in adjusted operating profit. There was particularly good momentum in regional urban and long-distance markets in Spain, where revenue grew by over 10% and operating profit grew 8%. The extended Young Summer initiative has driven strong long-haul performance, which is 20% up on prior years. ALSA continues to diversify business in Spain. For example, the health transport business, where revenue more than doubled since the same period last year from GBP 18 million to GBP 39 million. It's also important to note that of the GBP 97 million profit generated by ALSA, GBP 9.3 million came from outside Spain. Underlying profit margin is in line with Half 1 one-off settlements in regional and urban businesses in the prior year taking into account. The underlying profit growth was 11%. ALSA had a successful half year in terms of contract retention and bids for new contracts, including Andalucia, [indiscernible] and the contract in Saudi Arabia that Phil mentioned earlier on. Whilst WeDriveU has seen revenue grow by 16%, the operating profit of $3.4 million is disappointing. This is as a result of operational challenges with the WMATA contract. Although it took some time, WMATA operational targets are now being met. However, costs grew in doing so, and these are now being rightsized. Looking forward, streamlined business processes, automated systems and tight cost control will drive margin improvement in WeDriveU. Strong contract momentum continued in half 1, and these contract wins alone will increase annual operating profit by over $2 million. Moving on to the U.K. performance. During H1, we saw increased competition in the Coach sector and the announcement by TfWM of their intention to franchise the regional bus market. Overall, revenue declined by GBP 12.5 million. However, this was due to our exiting of the loss-making NXTS and NEAT Coach businesses. Otherwise, revenue is flat. Growth continued in Ireland with strong -- with revenues up GBP 2.7 million due to strong demand. The reduction of GBP 1.5 million in operating losses to GBP 9.1 million in the Coach business is materially driven by the exit of the loss-making contracts that I've already mentioned. Total U.K. Coach operating margin improved by 0.6% as a result of the restructuring and changes to seasonal timetables to optimize the network utilization. U.K. Bus reported an operating loss reduced by GBP 2.5 million to negative GBP 0.5 million. So it's virtually breakeven. However, this was supported by funding increases from GBP 23.7 million to GBP 26.2 million from TfWM. To optimize business operations, a 2% network reduction commenced in May with a 1% already in effect and the remainder expected by September. This will improve operating profit by approximately GBP 1.4 million. In addition, an agreed price increase of 8.6%, which was effective from the 16th of June. This is expected to generate almost GBP 8 million in operating profit for the full year '25. Finally, turning to German Rail. Our Rail business in Germany performed in line with expectations, delivering a H1 turnover of EUR 143 million, up 1.9% and delivering an operating profit of EUR 0.6 million. The RRX1 and RRX 2/3 contracts are both onerous contracts with losses of GBP 26.5 million. That's cash losses of GBP 26.5 million, being offset by a utilization of the onerous contract provision, which has now reduced from -- to GBP 158 million at the 30th of June. Our investment in driver training is paying off with an increase of 22 drivers year-to-date, up to 333 drivers in total. The increased level of infrastructure works and network disruption continued to result in penalties under the contract. However, as Phil has already stated, the discussions with the German PTAs are progressing constructively and are expected to conclude in the coming months. Now looking at our cash -- focusing on our cash. Our operating free cash flow generation is lower by GBP 38.5 million versus last year. This is driven by increased working capital outflow in the period. The outflow is as a result of the timing of cash collections in ALSA and is expected to reverse before the year-end. Growth capital expenditure of GBP 61.5 million has increased by GBP 33.4 million, GBP 50.8 million of this CapEx related to School Bus. Acquisitions cash outflow of GBP 14.9 million related to deferred consideration on the CanaryBus acquisition that ALSA completed last year. In terms of net debt, the cash outflow of GBP 44.1 million consists of GBP 26.5 million OCP utilization, which I mentioned previously on the German Rail contracts, GBP 17.6 million related to restructuring, the majority of which is -- the vast majority, in fact, of which relates to the School Bus disposal. Adjusting items are explained in more detail in the appendix. GBP 21.3 million of coupon payments on the hybrid instrument were made in the period, in line with prior periods. And net funds outflow for the period of GBP 90 million resulted in adjusted net debt of GBP 1.3 billion at the end of the period. At 30th of June, covenant gearing was 3x. And again, as I mentioned before, this does not reflect the benefit of School Bus net proceeds for the covenant deleveraging of GBP 273 million. This would have reduced gearing to GBP 2.7 billion. But obviously, the cash came in, in July and missed the year-end. We expect full year '25 covenant gearing to be approximately 2.5x, and that's at the 31st of December. Finally, debt maturity. At the 30th of June '25, the group had utilized GBP 1.2 billion of committed facilities with an average maturity of 5 years. And we had cash and undrawn facilities of GBP 700 million in total. And of course, we received the School Bus deleveraging proceeds in July. 75% of our debt is fixed with most of the floating portion due to revert to fixed by the end of the year. With the proceeds from School Bus sale, we have sufficient liquidity to meet the earliest debt maturities, which are May 2027. In addition, the majority of the core RCF facility has been extended to 2029. Finally, in relation to the hybrid bond's call window, which expires in February '26, the group will decide whether to roll the bond prior to this date. So I'd now like to hand you back to Phil. Philip White: So let me just summarize and conclude the presentation by telling you what we want to do with the business going forward. Please remember, we are a new team. We've got a new approach. We've got a very different style, and we've got a very simple strategy. So our first objective is to get the group right by fixing the underperforming businesses. This is an absolute must. Secondly, we want to continue to invest in our strong businesses to ensure they continue to grow and develop. This is also very important. We have to continue to feed and support our growing businesses. Thirdly, we want to -- we need to be leaner and smarter. We want to be more efficient and improve our EBITDA. We have to do this to strengthen our balance sheet. Fourthly, we're going to continue to generate positive cash flows to reduce our debt levels so they are more manageable and more affordable. Fifthly, to care for our customers, give them a great experience on their journeys, so they come back and they stay with us. And most importantly of all, to make our people feel proud again. Happy people means happy customers. Thank you. So over to you guys now, it's your turn. Q&As, and Paco has been very quiet this morning. So he's going to answer all the difficult questions. Paco. Gerald? Nice easy one to get going. Gerald Khoo: Gerald Khoo from Panmure Liberum. I will start with three. Firstly, can you elaborate on the problem contract in Washington? You talked about inherited problems. How much of that was foreseen? How much of it was foreseeable? How do you go about fixing the operations and therefore, the profitability? Secondly, in U.K. Coach, what changes with -- shall we say the effective merger operationally with ALSA? What's going to be run differently? And how much can change given the fact that 80% of the operations are actually outsourced? And finally, in U.K. Bus, what share do you think you have of the West Midlands bus market? And what opportunities might there be to extract capital or assets once franchising has run its course? Philip White: Okay. WeDriveU first. I'll answer it generally and perhaps Brian or Eric can come in. But Eric will correct me if I'm wrong. This was a contract in Washington. We did have a contract there already, but this opportunity gave us to secure a much, much bigger operation. We were given a very short time scale, I think, a month to mobilize it. And probably we -- hindsight is a wonderful thing on these sort of things, but we could push back on that and give them more time. And also, I think when you talk about an inheritance, there were also driver retentions and recruitment problems, Gerald, before we start -- before we got there. And these turned out to be much bigger than we thought. So it was -- first of all, the issue was understanding the financial information when we first arrived and understanding what it was telling us. And secondly, we had to tackle the driver recruitment issue very quickly because we weren't hitting our required service levels, which were incurring penalties on us, quite expensive penalties. We fixed that by recruiting more drivers. Like in Germany, we've bridged the gap. Probably to be on the safe side, we've recruited more drivers than we need. So instead of incurring the penalties, we're incurring extra operational costs. So what we've got to try and achieve, and it's really what our main purpose in life is to get the number of drivers in line with the number of buses we've got to get out every morning. So it's not rocket science. It's just getting down to the detail, managing the driver, getting them on the buses and hitting the service and making our customer happy, which is not at the moment, right? So it's probably a longer job than we thought. As far as ALSA is concerned and the transfer of ALSA to Coach, the coach market has changed. As you know, we've got people who want more of our business than we like them to have, but that's life. There's different rules applying to disruptors coming in and how you can act to incumbents already there and how you can respond. And the balance of power under competition law is with the disruptor, not the incumbent, and you might think that's fair. How long the cream off our existing routes is another matter. They don't operate a network. These disruptors, they cream off the best routes and take our best revenue away. So we've got big issues to face. The market has changed. It won't go back. And we've got to respond by being meaner and leaner, and we can't afford the overhead costs that go with the current business. So this is why it's going to be part of ALSA to form a big pan-European coaching business. That will bring new eyes into the business. The coach operation has been operated for a long time. We bring people in who can look at things differently, probably be a bit harder than our current management and me, I'm too soft. So we need somebody else coming in there, looking at the new model, using all the systems and best practices from ALSA and really looking at the business as an acquisition. That's what we want them to do. I think what I'd like to do, if at all possible, is to become the new disruptor. We can't do that ourselves. It's impossible. And secondly, on U.K. Bus market share, it's big, Gerald. I don't want to quote a number, but it's pretty big, right? And there's a lot of interest. The key to success of bus reregulation is having the vehicles and the depots. You can see that in Manchester. And I've got a long queue, [indiscernible] operators ring me every day to buy our buses and to buy our depots. So there's a lot of interest, but I think there's better ways of doing this in the future. I think, as I said before, we didn't like deregulation, but we embraced it. We don't like reregulation now because it don't suit us. Deregulation didn't, but we'll embrace reregulation, and we're working with the local authorities in the West Midlands. And we want to begin to think again to lovers, not to think we're just after the money because we don't. Jack Cummings: Jack Cummings at Berenberg. Also three questions, please. Firstly, just two on the guidance. The profit guidance is obviously quite half 2 weighted. So could we just get a little bit more color in terms of the building blocks, which can get you to that half 2 profit number to hit the guidance? Then secondly, on the guidance. So obviously, there's a GBP 15 million range. What needs to happen? Or what are the kind of pinch points here that could get you to the top end versus the bottom end of that guidance? And then the final question is just on the CapEx. So what goes into the decision-making process between that growth CapEx and the CapEx that's kind of to decide for small M&A versus potential cash conversion given the leverage? Philip White: They are three easy ones, so I'll hand it over to Brian. Brian Egan: So just looking at H1 versus H2, I mean, traditionally, 1/3 of the profit is H1, 2/3 is H2, and that's mainly driven by the fact that particularly July and August are really big months for the business. And in fact, December is also a big month. So it really is very much in line with -- if you go back over the last 2 or 3 years. In terms of delivering at the higher end of the range, I look towards Eric here. I mean some of the critical factors, particularly WeDriveU is a big one. So if WeDriveU can manage to get the cost issue under control earlier, it's going to help us towards the higher end. If it's going to be later, then we're going to be towards the lower end. That's probably the biggest one, if I'm honest about it. The third one was -- so we are looking at CapEx. It's a bit hard at this time of moment. CapEx, we have a budget that we've agreed for CapEx over the next couple of years. The priority, obviously, is retention CapEx, and then there's a balance left. And then it depends upon a level of flexibility around that depending on the opportunity. But one of the problems at the moment is that we are quite constrained because of our debt position. But the priority number one is retention, retention CapEx. Then there is an amount left over and then we look at the returns depending on whether it's a contract bid and there are a couple of good opportunities, in fact, that we're looking at present -- that ALSA is looking at the moment. But that will depend on the return of both of those. Alexander Paterson: It's Alex Paterson from Peel Hunt. As if I'm greedy, can I ask four questions, please? But they're all very simple ones. Philip White: That's fine. No condition. Alexander Paterson: First question is, just before the North American School Bus deal closed, you were talking about leverage being fairly flat year-on-year. You're now saying 2.5x. Can you just say what's driven that improvement, please? Secondly, in the U.K. Bus, can you say what sort of proportion of your fleet is owned, because I know you've got some of it through Zenobe, and I'm not quite sure what those proportions are now. And thirdly, on Germany, can you say has the group given any guarantees over the German Rail losses? And then lastly, just on Germany, as it stands. So if nothing changed, what would your expectation of cash losses be in the next couple of years? If you can get a better deal is when you described it as equitable in the statement, does that mean no more outflows? Or what kind of change on that? Philip White: Brian? Brian Egan: Okay. So they weren't so easy. Okay. So let me just -- I mean, first of all, cash losses for Germany. So you'll see for the first half of this year '26. So we have actually impairment at the start of the year of GBP 170 million. So that is the expected cash loss from those contracts. So clearly, the discussions we're having at present, we are optimistic that I mean they are going quite well. So anything that will hopefully end up because discussions end up in a positive note, we will hopefully be able to reverse some or maybe even all of that GBP 170 million depending on how they get on. So that is cash. Kevin Gale: I think they're quite front-end loaded. Brian Egan: They are, correct. That's correct. So this year, it's almost GBP 50 million. Yes. In terms of the improved leverage as a result of School Bus, this year, we have the benefit of half year's profit from School Bus and that half year disappears last year. So we get a double benefit in this particular year because we -- the half year benefit of the School Bus profit. Next year, that half year disappears. So in fact, we have a negative impact with School Bus taken out next year. So it sort of -- it goes -- it improves and then it sort of goes back a little bit then we look at next year, unless, of course, we take actions to address that, which we're looking at, at the moment. There is a guarantee [indiscernible] the details, there is a guarantee in relation to Germany. And in terms of the percent of fleet owned by us. Philip White: Kevin, have you got that number? Kevin Gale: Circa 2/3, 1/3, So 2/3... Philip White: Any other questions, guys? Ruairi Cullinane: It's Ruairi Cullinane from RBC. The first question is it doesn't seem like you're looking for a CEO, which I think was a top priority in the spring. So what drove the change there? Secondly, could you touch on options to delever? Would that be noncore disposals? What could be on the cards given the potential upward pressure to leverage in full year '26 as School Bus EBITDA drops off? And then finally, I think there was a fare increase in U.K. Bus last summer, but there wasn't sort of much sign of it annualizing in H1. So could you just explain that? And should we expect the fare increase this summer to annualized as a sort of typical fare increase? Philip White: Okay. As sort of Executive Chairman, which means both jobs, I think I'm best answer to the first question. And at the moment, I think the Board are happy with the new team. We've got a lot of projects in hand at the moment. I'd like to work with Paco and Brian into the near future to make sure all those projects are achieved in a good way. So I don't think at the moment, the Board are rushing to find a new CEO, and they're quite happy to stick with the team that's here. And hopefully, we'll deliver the results that we are set to deliver. Delevarage. I suppose the easy answer is when you're in a position like that, when we're earning the EBITDA we've got at the moment, and we've got the level of debt we've got at the moment, nothing is off the table. And I think we've got to be hard. There might be disposals, there might be more disposals. And we've already said we're going to look at efficiencies. We're looking at integrating the businesses together. We're going to duplicate in -- we're going to cut out the duplication. But you have to remember between 60% and 70% of our costs are labor costs. So when we're talking about being more efficient, cutting costs, we're really talking about people. But the important thing is if we do that, we've got to be honest with them, and we've got to do it in a kind and caring way. But as I said, we're looking at everything at the moment. Brian Egan: So I think in general, we haven't -- we put a detailed plan together, but there are two approaches. First of all is to reduce the debt itself. We have to look at how we do that. And the second is create capacity to manage more debt by improving our EBITDA. So there are the two things we're looking at. First of all, create more capacity with the higher EBITDA and second then to tackle the debt. And the fare increase... Philip White: On the fare increase...When do we implement it, Kevin? Kevin Gale: The end of June. Philip White: Oh, it is end of June, so fairly early. Brian Egan: For this year, it's... Philip White: It's 8.6%. So it's a big one. So it's going to be interesting to see what -- how the customers react to it. Brian Egan: The expectation is a GBP 7.5 million impact. Philip White: Yes. And I think Kevin will agree with me. It's -- we spent too many years with -- you get a funding agreement with it, but you don't get it for nothing. So to get that funding agreement, which is [indiscernible] at the moment. They control our service levels and our fares. But it's the first increase we've had in many years, Kevin? Kevin Gale: Substantial increase in 5 years. Philip White: So it's a big one. So it's going to be interesting to see whether we land it. Kaitlyn Shao: Kait Shao from Bank of America. Also three from me. First, I think, Brian, you mentioned for WeDriveU, you're expecting a [ GBP 2 million ] improvement. Can I just confirm it's a [ GBP 2 million ] kind of on top of first half performance, basically full year impact coming through in the second half? And then second, on ALSA margin. You mentioned some one-off items for the first half. Can you elaborate a little bit on what those items are? And just thinking ahead for second half, how should we think about margin? It's going to be kind of similar around 12%, that kind of level? and then number three, on the hybrid, I appreciate a decision is coming in the next [ year ]. Brian Egan: Profit value of contracts won in the first half of the year. So that's the annual profit increase expected to begin [ ranging ] from those contracts. In terms of the margin, if you compare like-for-like, you will see the margin -- the profit margin is slightly down in the first half of last year. A provision was released, so the expectation was we would have to repay some grants. We didn't have to repay the grants, therefore, we released [ GBP 8 million ] provision. So it basically slightly inflated the last year's results compared to this year. So if you back that out, you will see that overall there is an 11% growth in profit in ALSA. The final one, on the hybrid. We will take a view on that [indiscernible] with the current thinking is that we will [indiscernible]. We'll make a decision closer to the date. Gerald Khoo: Gerald Khoo from Panmure Liberum again. German Rail, can you sort of outline the sort of scope of talks? You talked about how -- well, there was a discussion about how the onerous contract provisions are front-end loaded. What's the trade-off between time and value? And if talks were to drag on, is there a lost opportunity to recover? Or is it not possible to recover past losses, so to speak? Brian Egan: No. So the discussions -- I mean, there are two broad buckets. The first is compensation for the past is what we are seeking. Whether we'll be successful or not, we don't know at this time. But there are two buckets. One is to do with the compensation for the past. So for example, we've incurred a lot of penalties, which really relate to the poor infrastructure. And then the second bit is in terms of profitability going forward. So it's -- they're the 2 areas. And then depending on how we come out, we have two different buckets. So the answer is yes, we absolutely are looking for compensation for some of the past costs, absolutely. Ruairi Cullinane: Ruauri Cullinane, RBC again. Just on -- is there any growth angle to incorporating U.K. Coach within ALSA? Obviously, there's mention of making a pan-European powerhouse? Or is it mostly about best practice? Brian Egan: So the integration sort of -- do we see a growth opportunity... Francisco Iglesias: Well, okay. First, sorry for my English, sorry for English. I'm a very simple person. So I think that the success is to do the things simple. That's the reason why I believe in this project, I believe in this team. This strategy is very simple. And the plan for this merger between U.K. Coach and ALSA is right there -- is to get the things simple. And what do I mean by that? For me, we need to focus on the metrics, on the basics. What does it mean? For example, occupancy, what's the ratio of occupancy that can we improve that? For sure, I think. For example, customers, can we improve the scoring of the -- from our customer, what do they need? Are we delivering the best for them? I think we can do that. For example, the cost, can we remove duplicates between people in ALSA and people in U.K., for sure. For sure, U.K. does things better than ALSA and ALSA does other things better than U.K. Can we get the best of that? So my expectation is to focus on these three things: operation, the occupancy level, cost efficiency, customer, how to deliver better and cost that is very related with technology. We have different technologies in U.K. and ALSA. We are not going to get just ALSA. But I think we have to make a better decision in the next tools, for example, for planning, for pricing, for whatever you can consider that is important in a transport business. So this is my idea. And I'll work with Kevin and the team and the new people that are going to join the project. And I think we are not going to make up the wheel again. It's just to make very simple things. And I think we have had success in the past, why not in the future? This is -- let's see in the next months, but I'm optimistic. Philip White: Okay. Thanks, Paco. Anymore? Okay. Then guys, just before we finish, I'd just like to thank a few people, if you don't mind me saying so. So thanks for everybody in the room today, and thanks for all the people who have dialed in to listen and see the presentation. I would also like to thank our fantastic advisers who make us think differently and help us to really explain our strategy to everybody, our shareholders and our lenders. Thank you to all the people at the center and in our divisions who work so hard, we deliver what they're doing. They've worked incredibly hard over the last few weeks and getting the results in order and the presentation so we can explain the results to guys like you and people on the phone. But I'd also say a special thank you for 2 people. First of all, thank you for the RMT for being so caring again, looking after all your customers in London. You do a great job of there. And thank you to a writer in the Sunday Times called Rod Liddle. I don't know whether you saw it over the weekend, but it was comparing various accents in the north of England and now nice Jordi and Cleveland accents were lovely to hear. But you described the Yorkshire accent "as a pantamine agglomeration of belched arrogance, right? So thank you for listening to my belched arrogance this morning. I really appreciate it. Now going forward, we're going to update you later in the year. This will include the strategic update on ALSA and we'll do that quite a comprehensive presentation on that to you. And secondly, we'll bring you up to date on the progress we're making in efforts to improve our efficiency and to increase our EBITDA, things that have formed such a huge part of the presentation this morning. So great to see you all. Have a safe journey back to work or back to home, avoid the tube, give a big kiss to RMT and we'll see you soon. Thank you.
Operator: Good day, ladies and gentlemen, and welcome to accesso's Interim Results 2025. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Steve Brown, CEO, to start the presentation. Steven Brown: Thank you, and good afternoon, everyone. Thank you for joining us. We are pleased to present our half year results, interim results to you today, and of course, take lots of questions at the end. So without delay, let's get started. Obviously, I'm here Steve Brown, Chief Executive Officer and joined by Matt Boyle, our Chief Financial Officer. And as usual, we have a short agenda today. We are going to give you a quick summary, a quick highlights of the year and on the numbers, talk about our progress in terms of our strategy. Matt will review the numbers and then we'll chat at the end in terms of our outlook and our questions. So moving on to Page 5, just quick numbers. We'll breeze through this quickly because Matt is going to spend a lot more time on this in a few minutes. Our revenue was just under $68 million, cash EBITDA at $5.1 million and we ended the period with over $25 million in net cash. Our ticketing and distribution business was up 2.5%. That was propelled by strength in our distribution business. Guest experience was down 21%. That's related to a hardware purchase that we had in the prior year as well as the softness that we saw across the early summer months of June due to the extreme heat, which reduced the visitor volumes, which then means are shorter queues, so we obviously sold less for chilled queuing. And then our professional services business, although on a small base, was up 5% as we continue to support our customers with their specific needs for implementation and extensions that they may need to our software through our RPS team. Once again, diversification is coming into play in our business. I talked a lot about that in the past and the importance of diversifying across our business with products, markets and geographies. And this is a great example where -- while we saw some softness in the summer, our transactional revenue was down about 4%, primarily driven by the June weather. We had extreme heat here in the U.S., and it was even too hot to go to a water park. We saw a very soft attendance across the theme park operators in North America as well as other venues around the world just due to some weather impacts. We'll talk more about that in a minute, but I'm happy to say we seem to be over that hump and June was a bit of an exception. Geographic and revenue diversification. We're seeing that come into play here. We had an uptick with implementation and change request services as we continue to meet our customers' needs with their specific request applicable to their business. Our maintenance support business was up about 15% and we have revenue now coming in from the new business we brought in across Saudi Arabia with Qiddiya as well as Skyline in Australia, New Zealand. And so you can see the overall picture is helping kind of offset the weakness we saw in the summer from transactional revenue coming in other areas of our business as we continue to grow. I want to spend more time on the next section, which is our strategic process -- progress. And you'll remember at the beginning of the year, you would have seen these same 4 bullet points. And we laid out a strategy at the start of the year. To really do 4 things: to accelerate the pace of our wins, increase our basket size from our customers, continue investing in new technology and also think carefully about how we leverage our capital and our cash in particular. And I'm really happy to report kind of where we are on each of those 4 points. So in terms of new wins, if you look at on a revenue basis, so we think about a win -- I know we report the counts, 28 venues, 38 venues, 39 venues, but really what matters is how much revenue is coming from those wins because obviously, all wins are not treated equal. And if you look at a revenue basis and we track that based upon how much is the client worth on a 12-month basis. Whether they sign in February or November, on our end, we're looking at what are they going to be worth on an annual recurring basis. And if I look at what we've signed at the end of the half, our revenue basis was nearly double the prior year, almost 90%. So we've almost doubled the amount of revenue -- new revenue that we booked, and our sales pipeline has doubled. I just looked at it on Friday. And last year at this time, our pipeline here today in September was about $12 million. And right now, it's at about $24 million. So we've increased our pipeline, and we've really increased our win rate and the size of the wins that we're bringing in; a very important success for us as we think about increasing our growth rate going forward, and the actions we've taken to get there. I'll talk more about that on the next slide. We're also seeing continued traction with Freedom. You see the number of wins we've received. We went from 11 venues to, I believe, 38 or 39 venues now this year. And we have a very strong pipeline. Again, I just reviewed that. We have 48 current customers that we are working in the Freedom pipeline. Obviously, all those will not sign, but it just shows you the strength of that particular product. We also signed our first theme park for Freedom. It's a theme park opening here in the United States in 2026. That's alongside Passport. And so overall, we're really working to increase that basket size and bringing Freedom in alongside Paradox or alongside Passport allows us to increase our check average with each customer. We're investing in new technology. Third point, our composable commerce project. We had our first pilot this summer, the initial phase sort of Version 1.0 of composable commerce kind of road tested it. And that's going to become a very important element for us as we think about the next generation of e-commerce and also expanding that strength beyond just Passport and leveraging our e-commerce prowess across Paradox, across Horizon, across the whole product set. And that's really what composable commerce is going to allow us to do. We're continuing to roll out Paradox. We're seeing success with converting series for our customers, and also they're going to get the benefit of composable commerce as they move over to Paradox. Of course, I have to use the word AI. It would be -- not be a results presentation without the use of the word AI somewhere. But importantly, we're thinking carefully about AI. And I think you probably have all seen AI for AI sake being listed in presentations. And perhaps we've been a little quiet about it in the past because we've been thinking carefully about how it should work in our business and not just chasing technology for technology's sake. And we have a couple of really cool things that are in flight in terms of product enhancements. I'll talk about that in a moment. And also the use of AI to drive efficiency, efficiency in our programming, efficiency in our operational support, efficiency in our commercial process. For example, answering our RFPs that have thousands of questions sometimes and leveraging AI to help us speed that up. And fourth, our use of capital, we had an acquisition earlier in the year of 1RISK, which is a digital waiver product that's very important to us, and we continue our buyback. And again, Matt will share more on those details. And Matt is also working on a structured capital allocation framework so that we have a model to follow when we think about how we leverage our cash and the sort of decision tree process to follow around how we and the Board all think about the use of our capital. Talking a bit more about the commercial strategy. This has been a very big focus for us, and you will have noticed that perhaps in our statement today. But as a business inside of our group, we have spent a lot of time and a lot of energy thinking about our commercial strategy, and how we propel our growth rate. So thinking about our go-to-market and how we approach that, how do we increase our pipeline, how do we increase our win rate? How do we improve our deal size. And there are a number of things we've been taking action on to get there. First of all, we've enhanced the sales enablement. And people say, what are the heck of sales enablement. That is all the work we do behind the scenes. So you have a sales director out in the field. But there are a lot of resources behind them supporting them with demos, proposals, presentations, all the things that they need to be successful. And one of the things we've done is allocate more resources into that area, so that our sales directors can be more polished and more prepared and also move more quickly with their sales presentations and their responses to customers. We've increased our win rate, a lot of focus around getting that customer across the finish line. Getting to 90% isn't good enough. We've got to get them across the finish line. We had 36 product wins in the first half of the year, which is an increase of 11% year-on-year from a percentage basis, that's a pretty big jump in our win rate. Our new offerings are doing well. As I mentioned, Freedom had 20 wins in the half. We now have 39 in total, and as I mentioned, 48 in our go-forward pipeline. We've also seen higher transaction values. So when a customer signs, what are they worth on an annual basis? Are they worth $00,000, $00,000. What is that value of each individual win. And we've seen that increase by about 82%. So pushing double in terms of the value of our wins, meaning we're winning bigger customers and also that they're taking more products when they sign with us. And importantly, last but not least, we named a new commercial leader to our Group. He actually started yesterday. We're really pleased to welcome Mike Evenson to the group. He brings a tremendous amount of experience and it's really just going to be a great fit for our group. It was a long search, a very careful search. It took us, obviously, until now. But I wanted to make sure we really found the right leader that was a fit for us culturally that would understand our customers, understand our markets and importantly, had a sense of our technology and his background with audience view of nearly 15 years, which is a SaaS-based ticketing platform, sets him up for great success with us as we move forward. So we're really pleased to have him on board. In terms of the other bullet point, innovation and investing in our technology and leveraging AI and Passport, a few highlights. We've done a lot more than this, but a few highlights for the page. In Passport, we released our commerce API. So allowing customers to develop their own front-end e-commerce or purchasing applications if they have use cases, where maybe they want to create some smaller widget to sell tickets or they want to build their own e-commerce. We've now released a full commerce API allowing them to do that. We've had 1 customer pilot that. But again, it keeps us competitive because other suppliers often have the API. It's not always used. But importantly, it's important to have that flexibility for customers because sometimes they have these unusual use cases, and they want to create something themselves and allowing them that opportunity is very important from a competitive perspective. We've enhanced our checkout flow, conversion rate is super important in Passport e-commerce, and we've also finished the rollout of V6, which is our latest update to Passport. We finalized that across our customer base. We had to wait for seasonality. We can't roll things out, for example, during the middle of the ski season. So we finished those up as soon as the clients were in a position to do those updates. In Paradox, we did a very important integration with a company called Inntopia, which is really very popular to ski industry for packaging the overall bundle, hotels ad tickets, for example, and having that integration with Inntopia aligns us with the market leader in that space across the ski industry. We did a lot of enhancements on snow school, which is where you book your lessons, making that product even easier to use and more feature-rich for our customers, particularly the ones moving from Siriusware over to Paradox to make sure they have a really great upgrade on those features. And we continue to migrate and prepare for the broader migration Siriusware customers over to the SaaS product that is offered by Paradox. Accesso Freedom. The product itself is very, very feature rich, and it's interesting when we do demos, and we've done many, many, many demos this year. We rarely have a comment on functionality. It's more questions about implementation or their particular use cases. And so a lot of our work we're doing in Freedom is really about go-to-market and things we might need to make sure we can hit our full addressable market. One of them, for example, is Quebec has a new compliance for tax requirement. And it is just actually waiting to effect in July. But in order to sell in Quebec, we needed to be integrated with the government and their tax compliance system, which is actually quite complicated. So we finish that, which will allow us to sell primarily across our ski customers in Quebec, which there are many of those for Paradox. We also have added room charge functionality, which will allow us to go more into resorts. Think about ski resorts that need room charge back to their hotels, think about venues in Las Vegas that might need room charge capability, and that was a really important development item for us. We've also expanded our integration features that we offer between our products. So some of the detailed functionality between, say, Freedom and Paradox or Freedom and Passport, we continue to progress those to make sure that we have everything customers are looking for. Composable commerce, I already mentioned it will bring market-leading e-commerce to Paradox. Think about the Passport level of e-commerce, our crown jewel, Think about that now being available on Paradox. That will happen in 2026, and we'll upgrade password e-commerce, again, starting in '26 and across 2027 into the new composable commerce model. And that importantly gives us the pathway to begin offering e-commerce across successful Horizon customers where today, they have to develop their own using the Horizon API, and we don't have that transactional revenue opportunity. Composable commerce in this new model will allow us to place that alongside Horizon, which is a really important strategy for us. AI, as I mentioned, we're enabling the model context protocols, basically making our system compatible to use all the tools of AI. And we've done those releases across Passport and Freedom, to make sure that we can leverage those tools that are out there for commerce, to sort of skipping the technical gibberish. Really cool thing, we'll be debuting this at IAAPA in November is we have a voice-enabled chatbot. It's a prototype, but I would say it's basically market ready, allowing you to voice order tickets, voice order food and retail. Again, keeping ourselves on the front edge of how other products are evolving and importantly, showing our edge towards innovation in the market. This is something that it seems like it's not a lot of people doing it yet, but our view is this will get adopted very rapidly, and we need to be ready and have those capabilities available for our customers. So you can say, "Build a London Eye ticket for tomorrow at 10:00 a.m. " And the chatbot can do that for you and then run it across your Apple Pay, for example. And last but not least, we've done the Passport language model integration, and that allows us, if you think about Passport in all the different regions we serve and how many translations we have to do for languages, leveraging the AI model that's available for language translation will help us tremendously in terms of efficiency and being able to support those broad range of languages that we do today. I think Passport supports over 30 languages. And I believe about 15 of those are versions of English, believe it or not. And so having this model will really help us in our deployment and our development process. Matt will talk more about this, but it was the fourth pillar in our strategy for the year in terms of how do we use our capital in the business. Two things, really 3 things here. One is the acquisition strategy. In the half, we did make 1 acquisition, which was of 1RISK, which is a liability waiver application. And if you think about a ski resort, every customer signs a waiver, a risk waiver. If you think about a trampoline park, if you think about rock climbing, you think about any kind of venture experience, you sign a waiver. And in the ski industry, this is absolutely central to their business. And we realized that essentially, we were integrated with 1RISK across all of our customers, and we were relying on a third party for that product. So it made a lot of sense for us to bring that in-house. We can now enhance our integration and offer a more robust product to the marketplace. It also gives us a competitive differentiation because now we have the market-leading waiver application as part of our product set, exclusive to our integrations. And this has really been very well received across the ski industry in particular. And we're looking to leverage this across Horizon with some of our implementations in Saudi Arabia. We already leveraged it across Passport and of course, across Paradox. Our buyback continues. As you all are aware that operated through H1, it continues today. We are about halfway through the target of that buyback that we started earlier in the year. That target was about GBP 8 million, and we're about halfway there. I think if you look at where we are today, we've passed the halfway point. And last but not least, and Matt can talk more about this, we are developing that structured capital allocation framework, just to give us more of a road map on how we think about the use of our cash going forward. And thinking ahead as we continue to build our cash about how we would leverage that to maximize shareholder value. So those are the highlights. I think what's important is we laid out 4 key strategies at the beginning of the year. And our team has done a great job of really focusing on those 4 items and making sure that we not just meet them, but we've exceeded those deliverables. And despite the headwinds we saw from some trading volume in June, overall, we are on track with all those particular objectives. Our pipeline is incredibly strong. Our win rate is increasing. And I wish I could control the weather, but other than the extreme heat that really knit us a little bit in June. I'm extremely confident about where we are. And as you look past June, it was like a turning point. We got past July 4, and the volume just turned back more to what we would expect. In terms of overall numbers, we basically made up in July what we lost in June due to the heat. And now what we've seen is things are more on track with our expectations. And so we did have that little bit of a wobble, but overall, it seems like we're back on course with our expectations. We have a few months to go, obviously, the important Halloween season. So it's too early to call the exact result. But it's important not to let that heat from June weigh too heavily on your minds because we got past that point and really things are back to normal by all accounts. And the other thing I would add just in commentary about the market is the operators realized or have realized, obviously, the softness they saw in June was heat-related. So you can't overreact to that, right, because you would run a bunch of discounts that were unnecessary because once the heat is gone, you might not need them, but they have really fine-tuned their promotional strategy. And if I look at the reports across July, across August, we're seeing very strong volumes from the operators as they have now adapted to the current consumer environment, and they're pushing to deliver their attendance numbers, not just through discounting, but through packaging, through marketing, through promotions, through their PR, all those different elements seem to be firing on all cylinders. And without the headwind of the heat, the weather against them, they seem to be actually doing much better than they had done earlier in the year, and the volume numbers have looked really good for us since the end of June. So with that editorial, I'll turn it over to Matt, and he'll walk us through the numbers. And then we'll have plenty of time, obviously, for questions. Matthew Boyle: Thank you, Steve. So hitting the key financial highlights. Steve -- Steve went through them earlier, but on a more detailed basis. You see our revenue was down 1.9% of the headline. There are actually a few adjusting items to think about in there. We exited a B2C business back in early 2024. We also sold a Brazilian subsidiary back in January '25 of this year as well as the fact that we had this large hardware sale of $1.8 million back in H1 2024 that wasn't repeated. So on a constant currency basis, if you exclude the hardware, we're actually 1.2% ahead of where we were this time last year in the prior period, which was strong given the circumstances and certainly the volume headwinds that we had in the June period, Steve went through. We had an improved gross margin. So you see there the jump from 76.2% to 78.3%. Again, I think that majority -- the overriding reason for that is because of this hardware sale. So the hardware sale for us is a low-margin line in comparison to our SaaS and services and SaaS, in particular, is very high margin for us. And so you see that jump there of a couple of percentage points. And cash EBITDA was down to $5.1 million, which I'll cover the reasons as to why on a later slide, but predominantly the increase in our underlying admin expenses. And our net cash was up to $25.4 million, and that's quite a big jump from where we were in June 2024, again, there's a detailed slide on the cash flow later on that highlights the strong free cash flow that our business has and the uses that we make of it. Proceeding to the next slide, I've just got a split and those of you who have seen this slide before will be familiar with it. You see on the right-hand side is our split of revenue mix effectively. And you can really see the impact of the things that we're talking about there, where our transactional volumes, so the great percentage mix piece is down from 74% to 72% of the total, that's the volume headwinds as well as the other piece, so the [ luminous green ] being down from 6% to 3%, which is the hardware drop and they are being offset by the other repeatable and the nonrepeatable piece taking more of a share of our overall mix, which I'll come on to a little bit later shortly. And again, so those who have seen this presentation before, you'll be familiar with this slide. So we break down our revenue into the various different types that we have, transactional repeatable, nonrepeatable or other. And you can see there that the transactional revenue as a headline was down 3.8% on the prior period, but there's really 2 stories in there. The virtual queuing and the ticketing, both down as a result of the softness that we saw predominantly in June, but really there from April onwards, but not as pervasive and that's offset somewhat by the increase in distribution revenue. So the distribution channels that we operate act as a key strategic enabler for a lot of our venues to navigate the promotional discounts that they're offering in quite a rapid basis and respond to changing demand and changing conditions, which is positive asset and just another string to our bow. And then working your way down the table, you'll see that the total repeatable revenue is 2.5% down, but that's down lower than the transactional volume because of the increase in the maintenance and support and the recurring licensing revenue. They are predominantly accesso Horizon driven, but the increases certainly are at this point as a number of our larger implementations start to go live. And Steve mentioned a few of the brand names there, but we have a number of projects in progress out both this year, next year and thereafter, such as in the Middle East. And you'll see there a 15% and 25%, a 25.6% increase, respectively, on the maintenance and support and recurring license fees. And then you get to our onetime nonrepeatable revenue. And we've broken this down into a bit more granular detail this year to give it slightly more color than we have done in previous years. And you'll see that there's a new line implementation change of there is some billable services which is really the onetime work that we're doing for a lot of our customers, whether it's the implementation, the initial implementation of the product, or whether it's a change request for feature enhancements or road map acceleration or whatever it might be; again, another string to our bow, so to speak, that we're there to be able to respond to a customer's demands and really highlights the fact that customers are willing to invest in our products as well, which is great. And highlights mission-critical place in a customer's ecosystem. And then lastly, at the bottom of the table there, you've got the hardware revenue dropping 85.6%, and that's the hardware decrease, the accesso Prism, the sale of $1.8 million that wasn't repeated in the current period, and that they are all of the revenue by type. Taking you through our full income statement down to the profit before tax, the revenue piece we've covered and the gross profit we've covered, the jump there being predominantly in the mix and moving away from our hardware sale in the prior period. Really to talk about is the admin expenses, administrative expenses. So on a reported basis, they're 0.6% up on where they were in the prior period. Really, we look at expenses on an underlying basis, so stripping out that depreciation and amortization piece. And on that basis, they were up 4% on where they were in the prior year, up to $48.5 million. And included within those underlying expenses, we had an FX cost headwind. So we had about $1 million of cost resulting from revaluations of non-USD assets and other foreign exchange losses in the year, whereas in the prior year, that comparative figure was $0.8 -- $0.4 million, so a $0.6 million increase there. On a constant currency basis, our underlying admin expenses were about 2.4% up on where they were in the prior year. And that's really reflective of broader wage and staffing inflation that we've seen on a relatively consistent headcount. You'll see in our head count there has dropped from 682 at the end of December '24 through to 675 at the end of June, and that's inclusive of hiring 7 heads from the 1RISK acquisition that we made. So really managing that head count robust state, but there are some aspects, whether it's health insurance, whether it's broader wage inflation that we continue to manage as tightly as we can, but experience the level of cost increase. The other piece to highlight on here is the net finance both income and expense numbers here. So in the current period, we actually had net finance income of $0.5 million. which is reflective of the fact, again, of a $0.9 million positive revaluation of our USD loan, so creating an FX gain in our net finance income. And then that in comparison -- in conjunction with the fact that we've just had lower drawings for the period. So we were about just shy of $19 million with our average drawings through the early part of 2024 and we're around about $10 million drawn through the early part of this year. So the lower drawings, lower interest expense, and you can see the interest expense dropping there and as well as the finance income resulting in a -- quite a marked increase in profit before tax, the $1.8 million versus $0.3 million we had in the prior period. Taking you through from cash EBITDA. So again, cash EBITDA have been our principal operating metrics for the past 5 years or so. And this is showing the movement from operating profits through to that cash EBITDA metric. And you can see in the top layer, operating profits up to $1.3 million versus $1.2 million in the prior period versus cash EBITDA being down on a prior period. And really, that's reflective of the fact that we've got movement in the reconciling items there between the two and mostly driven not only through the amortization lines. So 2 amortization lines in there, really, it's the amortization on acquired intangibles. So we last made an acquisition 2 years ago at this point. So we've got the runoff there as we get further away from making from those original acquisitions, the amortization charge decreases through to the runoff effect. So we're down 14.6% there. And the other piece is the R&D capitalization/amortization that's been in this business for the past 5 years, you'll see there the amortization on R&D is $1.6 million versus the capitalized cost of $1.6 million or $1.54 million at the moment, almost equal to each other. And that hasn't been that way for quite some time. You see in the prior period, it was $2.3 million versus $1.2 million. We're getting to a point now where they almost equal each other and that -- those large amounts of capitalization that were done in the period to pre-2020 prior to Steve and I's time are now starting to run off completely and we don't have an impact of that in our P&L, which is growing. And then lastly, the cash flow side, to the key points to highlight here, which should peak interest. You can see there, and we spoke about this again in previous presentations, the working capital movements that we have. We have some pretty large swings, particularly when our cutoff periods are June and also at December at the year-end where we have seasonal peak trading. And then you add in the fact that the business -- 1 part of our business, the distribution business collects gross cash flow. So quite a lot of the time is collecting the gross ticket price that is flowing through our balance sheet, whether it's an accounts receivable and out through the other side of an accounts payable. The movements are there around the cutoff period of June and particularly impact our working capital. So you see the swing there from a $40 million outflow in the prior year to a relatively fat $477,000 income in the current year, which is really just a snapshot. We generate free cash flow throughout. But if you're taking a snapshot in time, that's what it ends up looking like. It reverses relatively quick thereafter. If you look back at December, you'll have seen a similar story and the inflow comes in the preceding on the subsequent 6 months as it did this year. The net cash, actually, the number that we've got at the bottom there, $25.4 million this year and $18.2 million at the end of the prior period does include the impact of that pass-through cash. So there's about $5 million of cash related to Ingresso in the current period, the distribution business and again, $2.8 million roughly against the $18.2 million that was in the -- at the end of June 2024. The other 2 key items to highlight here really, and they feed into the capital allocation piece that Steve was mentioning earlier. Firstly, to talk through is the purchase of intellectual property is the 1RISK acquisition with a little bit of the balance of cost on our improved corporate website that will go live later this year. And then the final one there is the $5 million on the purchase of own shares for cancellation. So -- at the end of June, we were at $5 million, which is roughly of $10.5 million in total, which is GBP 8 million. At the end -- so as of Friday last week, we were at GBP 6.6 million, so roughly $9 million of the $10.5 million, so about 2/3, just over 2/3 of the way through, which is a total of 1.4 million shares being purchased and canceled. So around about 3.5% of our shares in issue at the time we started this program. So really positive and we will have a continued impact on our earnings per share number and forms a key part of our capital allocation strategy. And just to talk a bit more about that briefly before we -- and we don't have a slide yet on it, but we will do in future presentations, is really going to outline, what is our decision tree analysis, how are we thinking at Board level of how we spend our free cash flow. I mean you can see there we've jumped from $18.3 million at the end of June '24 to $25.4 million at the end of a year later, and that's despite spending on intellectual property and despite spending $5 million on shares. So a marked increase in cash and generating free cash flow. So how are we making best use of that? And previously, this year, we've obviously been making use of share buybacks. But really, we're going to outline our thought process. So how do we work through that? Is it mergers and acquisitions? Is it distribution? Is it buybacks? But putting a bit more color to the decisions that we're making, I think, would be worthwhile and providing the level of framework that we haven't otherwise done before, which is something we'll look to do in the future. That's largely it on cash flow. And then on to summary and outlook, and that is unchanged. So we gave this guidance in April post results. We revised it slightly to say we'll be at the lower end of the revenue expectation when we came out with our trading update in July, but our margin guidance remains unchanged at approximately 15%. Steven Brown: Thank you, Matt. So now with the formal part of the page turning done, we will open up the rest of the time for questions. And I'm sure there are plenty of those for us. Operator: [Operator Instructions] Our first question is from Tintin Stormont from Deutsche Numis. Tintin Stormont: Can you hear me guys? Steven Brown: Yes. Matthew Boyle: Yes. Tintin Stormont: I'll do 3 in case it doesn't come back to me anytime soon. First, on the new wins. How should we think of the time to revenue from these wins. So when you win the deal and then obviously the time to implement, is there any bottleneck that we should be sort of kind of aware of any risk of bottleneck there? Do you have -- have you got the resources to be able to get them all live when the client wanted to, et cetera, et cetera, especially given the greater success you're seeing. And then secondly, in terms of the much improved win rates, could you maybe just delve a bit deeper into where the improvements are? Is it in deal discovery origination? Is it slicker, more targeted pitching conversion? Are there any changes in the competitive landscape that we should also be thinking about? And then lastly, in terms of Mike's arrival, what would you say is the top of this agenda, if you could speak on his behalf. Steven Brown: All right. Well, as the Interim Chief Commercial Officer for the majority of us here, I'm more than happy to answer those 3 questions. In terms of implementation, we're in great shape. We -- one of the things we've been disciplined about is even when the win rate dropped is maintaining our resources because those are highly trained individuals that know our products very, very well. And cycling those positions is not something you really want to do. So we have a strong bench for implementation. And of course, our operations team can spot them as needed for some of the work. So we don't really expect any issue with the implementation, and we're careful with how we schedule those. The majority of time when we have a delay on implementation, to be honest, it's the client often underestimates the complexity that they're about to embark on, and they have not allocated enough resources on their end. And so that really ends up being more of the equation in terms of their responsiveness just because they have day jobs, too, and now they're implementing a new system. And so that becomes more of the time line issue, and we try to help them as much as possible to work around those things. Where are the improvements? I think one of the important improvements was just reorganizing the team a bit. And we had drifted where we had too many of our salespeople trying to sell everything. And to be a really good expert and to talk your game, you need to know the product. And knowing a little bit about a lot of products is not as efficient as knowing a few products really well. And so I think that's helped. They're not as scattered as they were. I also think we had some confusion around how do we sell Horizon, how do we sell Passport. We've tightened that up. I think a lot of it has been our response time to customers. I really worked with the team on that. If a client asks 3 follow-up questions, you get 3 follow-up answers same day and making sure that the organization is supporting them on answering those questions because they don't really know the answers all the time. They need a technical answer. They need a product answer. They may need a financial reporting question answered and making sure the [indiscernible]37:52 team all rallies behind them to get those back as soon as possible. And I would say one more item is showing up more in person. It's something that as you try to manage cost, which you can see we're doing quite aggressively, you tend to be a little careful about traveling. And I've encouraged them to be less careful, to be honest, because I'll give you a great example of the theme park that we won, which was a really good win for us here in the U.S. And the team went -- this is early on in the year. The team went, 2 of them, sales engineer, sales director in person. It was a half a day demo, took customized meeting materials, reflective of the clients' brand, did all that and really just did a fantastic job. The main competitor dialed in for a 4-hour demo on Zoom. And so you can imagine how we fared in that and how we could respond to the questions when you're eye to eye. And so I think just getting them realigned around our approach has made a big difference. And it's not just the ones we're selling to, but our pipeline has increased substantially. And I think a lot of that is all the same things. How fast do you respond to a lead, how much time are you dedicated to outbound outreach, how are you handling trade shows? And we've just kind of rethought all those different parts to make sure we're generating those leads and getting their attention. And I know we talk about the website, and it seems relatively straightforward. But with our product set and having acquired 1RISK, having acquired Paradox, having acquired -- having Horizon now in the mix, and we have Freedom, we really needed to step back and rethink our whole go-to-market proposition in terms of how we communicate and so it wasn't about an outdated website. It was about rethinking how we now deal with this expanded product set in a much more straightforward manner. And so it's been a lot of mapping, a lot of creative, but probably 20% creative and 80% mapping and logic of how do you communicate better. And we've already started using that in our communication, but the website is really going to be an important tool for us. And so we've done all this so far without the website and without the traction from what we've been building in the last 8 or 9 months. So I feel very good about where we're going and what Mike is walking into now is in a really great place. I think if there's one priority for him, and it's to be very hands-on, we're selling big-ticket items here. And those sales directors, as skilled as they are, they still need support. And me being able to dial in and call the client, me being able to help them nudge their proposal just a little bit, being hands-on is his #1 priority. It's just helping them with that experience that he brings, that I've been bringing and helping them just round out their presentation, round out their responsiveness, another set of eyes on how we're presenting things. Editing proposals to not have the word fee show up 15 times on 1 page, things like that, that just psychologically play into our presentation. That really him being hands-on is absolutely a #1 sort of operational, I think, priority for him. And beyond that, I would say, helping us build out our global framework a lot more. We have a sales team of 3 handling all of international. And we're sufficiently handling the demand we have, but we need to create more demand. So how do we do that? How do we do that with international marketing? How do we do that with our trade shows? Our domestic or our U.S., Canada lead generation and sales team is really quite refined as our international team is, we just need more of it. And so how do we scale that team? How do we get our product and our message into these markets a bit deeper so we can increase our penetration outside of the U.S., outside of the U.K. So that will be his main priorities. Operator: Our next question is from Katie Cousins from Shore Capital. Katie Cousins: Sorry, can you hear me? Steven Brown: Yes, Katie. Matthew Boyle: Yes. Katie Cousins: Just 2 from me, please. Going back to the pipeline. Just interested in a few more details around that. And if it's skewed to a certain geography or service that you provide? And also, is it conversations with existing clients of expansion? Or are these completely new sites or customers? And then a bit more -- second question is a bit on 1RISK, and how that fits into the current offer? And are you offering that as an additional revenue to customers? And any development spend needed on that product? Steven Brown: So the pipeline is really across all areas. As I mentioned, Freedom has a pretty good pipeline. And our pipeline is weighted. And so when we look at our pipeline, we size the opportunities and we apply a weight. So if they just called us up, right, hey, how are you? They're probably weighted at 0 in our pipeline. If they've done a demo and they showed some interest, they might be at 10% or 15% weighting in our pipeline. If they're in the negotiation phase, they may be at 50% or 60%. So it's a weighted pipeline. And that allows us to have a more disciplined view of around what the real opportunity is. And it's across all products. And there are some larger ones in there that may be Horizon because those check averages are larger. There's a lot of volume around Horizon. There's quite a bit in Paradox because we're seeing the demand of the Siriusware customers looking to move to Paradox and how we're working those leads. But the majority of it -- the vast majority is new venues, new customers. We're installing or we just are contracting with a new museum in Nashville for a very popular singer. There are things we're working on in Dubai that are quite interesting. So there's a whole range of things in there and the vast majority of it, because our sales team, yes, they sell additional products like Freedom, but a lot of those are add-ons that our operation team is handling. Our sales team is really focused on new customers as their priority or in the case of Siriusware getting those customers moved over to Paradox onto the SaaS model over to Passport, that does follow our sales team. But I would say, by and large, it's new customers, and I can certainly quantify that and give you a follow-up answer. But by and large, Matt, would you agree with me on that? Matthew Boyle: Yes. No, yes. definitely. It's new venues really rather than new products and event at existing? Steven Brown: And in terms of 1RISK, it's a really healthy product. They were a small business, 7 employees. That's not a very big company, right? But they've done a lot with a small team. And they had 150-plus venues they were serving. We're going to roll those into our operational flow and operational process. It will become embedded as part of our support model. Right now, we're still in that sort of transition phase of making sure the customers are being supported with what they had already signed up for. But if they're buying Paradox, for example, when they're on the transaction-based SaaS model, 1RISK will be included as a feature of Paradox. If they're still using Siriusware, they would pay for it under their contract. And if there are customers out in the market that want to use it on a stand-alone basis, not integrated with any ticketing system, just a stand-alone waiver system, those would also be available. But the only integration to an e-commerce platform, for example, or a point-of-sale platform will be an accesso product. And so we bring -- we brought the market-leading waiver, which is a must-have into our product set. And the other customers that were using the product are now looking at a second tier or third tier product because they don't have that integration available anymore. So it was very strategic for us. And it wasn't a large acquisition. It was more of a buying a product feature. It's a huge differentiator to have that integrated in our system. And because the integration is for us now, we can do a lot more with it. When it's a third-party application, they're having to please everyone. And so the integration has kind of become the lowest common denominator. And now that it's ours, we can really take that to the next level and make it much smoother. We're already doing that, make it much more integrated, much more intuitive because we now can control essentially that product road map. And so our product will be even more superior to what it was previously and another leg up, so to speak, on the competition, particularly in the ski market. Operator: Our next question is from Jon Byrne from Berenberg. Jonathan Byrne: Jon Byrne here. Three questions for me, if you don't mind. So firstly, as the Middle East rollout progresses, can you maybe give us a steer on what the potential contribution from that geography could look like and what you expect the revenue sort of ramp-up profile to look like over the next few years? And then secondly, on virtual queuing, can you give us any more color on the revised commercial agreements you cited in the statement? Is that for lower price terms and sort of likely to impact going forward? And then finally, on margins, you mentioned AI efficiencies. Is there any other areas that you're focused on from an operational efficiency standpoint? And what do you see sort of potential benefits from that program being? Steven Brown: Yes. The Middle East rollout, the main one we're focusing on now is Qiddiya for the opening of the theme park and the water park here in the next few months. We're doing everything on our end to stay on track. Again, we're subject to the construction time lines that they're dealing with there. But overall, things seems to be progressing well. They are highly focused on opening the theme park this year as they've committed to. And by all accounts, they seem to be, from our view, on track with that. We can't control it, but they seem to be on track with it. And once that is fully rolled out, there's always enhancements and follow-ups, things they think of later they didn't think of on the front end. That will be enhancement-type work that we'll be delivering, I'm sure. And then it turns into a maintenance and support model. Importantly, on those -- on that and another engagement, if you think about VGS when we bought it, now Horizon, they did not offer the opportunity to help the customer run the software. They basically sold them the software, help them install it and then the client was left to run all the server environment, which is actually quite complex for that scale. In those Middle East engagements, we've now -- we're going to be signing them or have signed them. I'm not sure today -- this time of day if it's signed or not, but we're going to be running those for them under our professional services team as site reliability, managing their environment for them. So we've extended our opportunity there for them beyond just the license and maintenance into actually operating the software for them and managing their servers, their security environments and all of that, which is an additional check average for us, a check item for us. And it will add hundreds of thousands of dollars of margin to that deal. And we have that process running and proposing and contracting across a number of customers. They don't really want to run these things, to be honest. And the fact that now is the broader accesso team, we can offer that to the rising customer base -- it's been very well received that we can bring that expertise and allow them to run their business instead of sort of running servers. And I think we'll continue to see opportunity coming from that. The Middle East overall, there are -- there's still another project there, which is 7 also by QIC. It's in its construction phases. We can't control the timeline there. That will continue to evolve. And there are a number of other leads we're working on in the Middle East that I honestly, unfortunately, can't comment on. It's interesting that area is becoming very competitive. And the details, even the systems they are choosing are important. And more than I've seen, honestly, previously, the NDAs that are being required are actually quite steep. And so you'll find us using our words carefully when we talk about Middle East and the opportunities there just because the sensitivity in that particular market seems to be a bit enhanced from what we dealt with in other areas, just to maintain, I think, their competitive advantage or whatever they're concerned about. But we have a number of opportunities we're working on there. Some of them are quite large. I think Disney World large, very large. Some of them are smaller, water parks, resorts, different things like that. But I think now that we've planted the flag with Qiddiya, we've certainly gotten the market's attention. The VGS team already had its attention. I think now even more that we have these broader capabilities, we're going to continue seeing that growing. I think it will become a very important market for us. Particularly for Horizon, it's just so compatible with the languages and currencies that it seems to be appealing. That said, there are some projects that Passport is a better fit for, that are being considered. So I can't comment on the number, but it is going to, I think, become a significant area for us over the next 3, 4, 5 years. In terms of the virtual queuing that we mentioned in the trading update, again, there's some commercial sensitivity there. But as we indicated, the client has -- was leveraging 2 products, and they have informed us that they don't plan to enter a new contract after this one expires on the queuing side. But on the other hand, we've extended our e-commerce agreement and with revised commercial terms that, to some extent, some material extent, offset the impact from the other agreement not being -- the new agreement not being executed. And so it was really balancing a bit. Some of that was bringing the e-commerce rates to market level, honestly. Some of these legacy contracts that have been around for a very long time, have a market rate adjustment that is appropriate. It was honestly more so about that. And coincidentally, it allowed us to kind of offset some of that -- some of the impact from the other agreement. And last but not least, in terms of efficiencies, one of the things that Lee, who is our Chief Operating Officer, is working on with the team is organizational, I hate to say, realignment or maybe it's more of alignment. And especially as we again, almost like the website, we have all these different products now. And the last 2 or 3 years, we've added several. And just thinking how we bring those to life for customers operationally when a customer may have -- they may have Paradox alongside Freedom. They may be even using Lo-Q, they might be using Ingresso. And how do we service them, so they're not calling 4 different departments. And in doing that, can we be more efficient with our resources, both in terms of service model, better service for the clients, but also in terms of the number of people that it takes to deliver that. And can we just become more efficient as a business if we realign and think about how to realign some of those processes. So -- and not to just say it as a token point, but actually, AI is an important part of that because how can we leverage some of the tooling to increase our efficiency around how we handle routine service tickets, how we handle questions that come in, the questions that come in about how to set up product, can we give them user guides that are automated, prompted around how to use the system, things to reduce the workload coming into our team that today is manual. And so it's beyond just let's use AI to build something cool. It's also how do we give these tools and maybe these realigned -- how do we give these teams and the realigned teams further tooling that has continued to become available to help them move more rapidly, which as we continue adding more customers, which we're doing, obviously, quite rapidly, maintaining our headcount, keeping our cost as tight as possible, hopefully reducing our cost. But how do we do that with some organizational realignment as we continue to add. And that's really -- there's a sprinkle of AI in that, but it's really about the overall structure and how we realign and how can we gain some efficiency there. Operator: Our next question is from Oliver Tipping from Peel Hunt. Oliver Tipping: Just a couple of quick ones from me. The first is probably for Matt. Just looking at the sort of cash EBITDA metric that you guys have used for the last few years. Are you thinking about changing that back to a sort of more standard operating profit metric versus the cash? Because obviously, now the CapEx and the D&A are much more closely aligned than they have been in the past, which I think was the original reason why you sort of switched to a cash EBITDA. And then just secondly, on the Freedom opportunity, how does the e-commerce market compare to sort of original food and beverage market in terms of opportunity for you guys. I imagine it's more applicable to a much larger number of your clients? Or do they all seem to all have both e-commerce and F&B? Matthew Boyle: Yes. Thanks, Oliver. So I'll cover the first piece that you mentioned really on our cash EBITDA metric. As you point out, certainly was our principal operating metric for the last 5 years, given the difficulties we had with capitalization in years gone by. I think we will move to -- not as a cutoff completely, but we will move to something that is closer to pure operating profit adjusted EBITDA number that certainly both presenting that on those numbers and on a per share basis will become something we do quite routinely; one, because we don't have that impact of capitalization anymore, but also because of the capital allocation decisions that we're making are making marked improvements in our shareholder returns, and they're illustrated by the earnings per share that we're generating. You can see in the numbers today, our statutory operating profit, basic earnings per share is up compared to the prior period. And our adjusted earnings is relatively flat, which reflects that offset of amortization or the decrease in amortization. So yes, I think we will transition towards a metric that is closer to adjusted earnings and per share earnings over the next few months and years. Steven Brown: And the question for Freedom. One of the key differentiators, I would say, probably top 1 or 2 points is venues that have multiple locations and how you administer that. It's very complicated when you have hundreds of employees running different restaurants, maybe they're working in the retail stores as well and how you manage the product setup, the employee setup, all the controls. And we have a client -- we have a lead right now. We're working a proposal where we're up against a stand-alone point-of-sale provider. And they would install -- say the place has 12 restaurants. They would basically install 12 different systems in there, and the client would have 12 different sets of products, 12 different sets of employees. In Freedom, you can run all that as one universe with 12 locations as part of that universe, and very, very elegantly. That is a major differentiator and something that is really not found in many products on the market. And when you're trying to streamline your operation, manage efficiently, manage your inventory of your products, manage your staff, it is absolutely a key differentiator in how all that works. And it's not just we're covering the bases with features, which a lot of the stand-alone point-of-sale providers are really good, but the depth of this product because of its history. If you can run the food system at Walt Disney World, which we're still doing today with the legacy product, the legacy version, the functionality that is in that system is extraordinary. And so when you're doing a demo, it's not a top line demo. They're asking very complex questions that we can answer on the fly. And so we are very differentiated in the market. And I think that is -- as customers are discovering the quality that's there in a full SaaS model, I think it's really propelling our win rate and the interest in the product. And every customer has food. I mean there are -- everybody has food. The only exception is maybe some of them outsource it to, say, a Sodexo or a Host Marriott or HMS. Some of them, not many, but a few do, but all of them have food and retail. In fact, we just got our first win with one of those names I just mentioned that is the outsourced provider at a rather large venue operator here in the United States. That third party actually is signing with us for Freedom. And you can imagine Sodexo, HMS, all those different companies, how many locations they have. And so you start to make an impression with these. I think the opportunity is beyond just our typical theme park ski resorts and in any of those venues they might serve as they see the product and appreciate its capabilities. And it's not an old product with these functions and some of the products we're competing with are quite old. It is fresh, fresh architecture, fresh API, fresh user experience, mobile ordering, kiosk ordering, all built in. The legacy products that are out there, even if they're SaaS, you've got to go find a partner to build your kiosk, find a partner to build your mobile ordering. They don't have it like we do, where you can handle multiple venues on your mobile ordering, handle their season pass discounts, handle their season pass entitlements, do all the things you do in the venue. It's different than selling a point of sale to a restaurant that's on the street corner. It's a different ball game. And we are highly differentiated in that space. There are only 2 or 3 other products that could come close to what we're offering. And it is ubiquitous to use that word across our customer base. Some of the clients only have a couple of terminals. They're not the most interesting ones, but it's easy to deploy. We can handle those. Most of them have 12, 15, 20, 30. One we're dealing with right now has 100 terminals across a relatively large opportunity. So we're going to see that as a very important cross-sell for us. When I look at the one win we've mentioned a couple of times for the theme park here in the U.S., when we look at the revenue from ticketing and the revenue from the food and retail, they're equivalent. Our revenue is equivalent. So we've doubled the check size on that particular customer. Typically, in a venue, if they sell whatever it is, $100 million in tickets, they typically sell about $100 million in food and retail, roughly speaking. So essentially, it gives us the opportunity under the same SaaS model, percentage of revenue model to double the check average. And there's a little bit more competitive pricing on the food and retail side than there is maybe on ticketing, but we're still getting, on average, well above 1% of revenue on all of these deals. So it's going to be a really good long-term play for us. Operator: And our final question is from Richard Jeans from Hardman & Co. Richard Jeans: Thanks for the presentation. Excellent presentation. You recently launched the accessoPay 3.0. Perhaps you could give some color on the long-term digital payments strategy. That's my first question. I got -- I think I've got 3 questions. The second one is on Brazil, the disposal of -- does that have any implications for showcase more broadly? And thirdly, on -- just wondering what your -- do you see any growth opportunities in virtual queuing and Ingresso, could you give a bit of color about where the growth potentials is in virtual queuing in Ingresso? Steven Brown: Yes, let's go backwards. So virtual queuing in Ingresso, absolutely. It's really important that we continue to think virtual queuing is very relevant for us. It is a very relevant product. We have a lot of customers using it, customers that love the product. And we continue to see an opportunity there with -- we're currently working on an operator right now to extend their -- to extend into other venues within large operator. So there are -- there's still plenty of demand for the product. It continues to really have no competition other than someone doing a manual risk band system that is not tech forward and does not offer the same revenue opportunities or features that we offer. And although we don't have the main IP anymore, the sort of general one, we have a lot of individual IP. In fact, we just had one granted in this period, another patent granted. We've got these sort of Easter eggs of patents that even though you can handle -- maybe handle the basic system yourself with wristband or some basic technology, you start getting into the use cases that are unique, you start running into our patents. And so I think we've still fenced ourselves relatively well from delivering the same level of product that we have. You can certainly do -- make a do-it-yourself product and get buy, but not with the same level of customer support features and revenue-enhancing features that we offer. So I think there's still opportunity there. Ingresso as well. Ingresso, as you will see, did well in the half of the year. And when operators are slightly challenged on volume as they were perhaps in June, they look to these channels where they can get quick promotional value. They haven't got to build a TV commercial or build social media ads, they can go to channels like Groupon, for example, and immediately push out to millions of customers, these promotional officers with a click of a button. And that's what Ingresso gives them as the outlet for that kind of distribution. And so you kind of see the inverse effect. When things are really great and booming, even in the Westin theater business, those operators will give us very few seats because they can sell them at full price. They don't need promotions. They don't want to pay a commission. When things are running normal, it's kind of a balanced model. When things get a little tight, we may suffer a little bit on this at the Passport side, but we get the volume now on the Ingresso side. So Ingresso will continue to grow. I think our priority there, as I just reviewed with the team this last week is, it's all about efficiency and margin. And we don't want to have a -- we don't want to take a $20-plus million business with the margin it has today to be a $40 million business with that margin. I want a $20 million, $25 million, $30 million business with a good margin. And so the priority there is really around the types of customers we bring in, the types of opportunities we pursue. And importantly, how we're helping our broader customers with Paradox or Passport or ShoWare, Horizon, how we're helping them with their distribution as a strategic advantage to our competitors. So Ingresso will continue to be really important for us, and we'll continue looking for ways to make it as efficient as possible from a margin and profitability perspective. Going backwards, I think, Matt, the second question was for you. Matthew Boyle: That was on the Brazil disposal, I think, Richard. And so we -- it's an increasingly difficult market to operate for us, and it was exclusively operating accesso ShoWare for us. So we took the decision to exit that market. It was relatively small amounts of revenue, so EUR 0.6 million on an annual basis, EUR 0.3 million in the comparative period for the figures shown. It doesn't preclude us operating any of the other products in the space, but ShoWare, we don't operate in that region because of the difficulties we faced in operating. A relatively simple decision and sell to former management. Steven Brown: And what was the first question again, Richard, I'm sorry? Richard Jeans: How you recently... Steven Brown: One of my favorite things to talk about because we haven't unfolded this a lot in our presentations. But if you look at the competitive set that are out there, some of the newer companies that are coming along, particularly on e-commerce, they're largely going into the payment space. And some of them are honestly not making money on the product, making all their money on payments. And so we've been taking a hard look at how we approach payments and how we bring that to market for our customers, because when you think about the aggregate volume that we're producing, we can get really good deals from payment processors, probably better deals than our customers can get on their own as an individual going to their local bank for merchant processing. And so we have been evaluating -- it's a very competitive landscape. It can be -- the payments can be a little confusing or a lot confusing. And what you see is not always what you get. So we've done a lot of work this last year of evaluating all the different providers that we could work with, talking to their customers, really understanding their tech set. We have a lot of experience with all of them, but evaluating what business model will work for us to bring the payments opportunity into our offering and how we would bring that to market. So someone signing up for Freedom, for example, can have the option to add the payments. And I think in most cases, we will be more competitive than whatever they're currently paying. And it could end up adding 30, 40, 50, maybe more basis points to our pricing model. That's what we're seeing competitively from others out there, and that's what we see from the providers we talk to in terms of what that margin is. And importantly, it gives the customer a better rate at the same time. We end up on the service side. Those become our customers. So we're the first-line support. We're handling all of that. But we're already doing most of that for our customers anyway. And so can we bring that full circle, give them that full offering? It allows us to, I think, be pricing competitive on our product and on payments. And if you're looking at some of the benchmarks out there, and we've looked at plenty of them, some of them perhaps acquisition opportunities, some of them publicly traded that have information out there, you'll see the payments commissions or payment margin to be pretty significant in their P&Ls. And on our end, it's not something that we have really built in structurally to our process. And we're looking to change that and to evolve that into something that's more meaningful in our business. And I think that there's several million dollars of opportunity there as it can take hold over time. Obviously, bringing new customers in, getting them on our platform, our payments platform, going back across our customer base and working to convert them over with better rates, we can bring more margin in, again, back to the basket size conversation. But until we have all the -- I's dotted and T's crossed, I don't want to lay out exactly what we're thinking, but we're very close on having a commercial arrangement sorted on that front and being able to offer this to our customers in the very near term. Operator: Thank you. There are no further questions. I will now hand back to the accesso team for closing remarks. Steven Brown: Well, thank you, everyone, for joining us. Hopefully, we answered the majority of your questions. If you think of things that are still burning questions, feel free to reach out to us. We'll be more than happy to answer. As I say, this is always the best part of the presentation is really getting at what you're interested in. So thanks again, and we will speak to you all again in a few months.
Operator: Good afternoon, ladies and gentlemen. And welcome to the Rubrik Second Quarter Fiscal Year 2026 Results Conference Call. At this time, all lines are in a listen-only mode. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on Tuesday, September 9, 2025. I would now like to turn the conference over to Melissa Franchi, Vice President, Head of Investor Relations. Please go ahead. Hello, everyone. Welcome to Rubrik's Second Quarter Fiscal Year 2026 Financial Results Conference Call. Melissa Franchi: On the call with me today are Bipul Sinha, CEO, Chairman, and Co-founder of Rubrik, and Kiran Chaudhry, Chief Financial Officer. Our earnings press release was issued today after the market closed and may be downloaded from the Investor Relations page at www.ir.rubrik.com. Also on this page, you'll be able to find a slide deck with financial highlights that, along with our press release, includes a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. During this call, we will make forward-looking statements including statements regarding our financial outlook for the third quarter and full fiscal year 2026. Our expectations regarding market trends, our market position, opportunities, including with respect to generative AI, growth strategy, product initiatives, and expectations regarding those initiatives, and our go-to-market motion. These statements are only predictions that are based on what we believe today and actual results may differ materially. These forward-looking statements are subject to risks, and other factors that could affect our performance and financial results which we discuss in detail in our filings with the SEC. Rubrik assumes no obligation to update any forward-looking statements we may make on today's call. With that, I'll hand the call over to Bipul. Bipul Sinha: Thank you, Melissa. I want to start by thanking everyone for joining us today. We are pleased with our second quarter results that once again exceeded all guided metrics across top line and profitability. Here are five key numbers. First, subscription ARR surpassed $1.25 billion, growing 36% year over year. Net new subscription ARR reached $71 million in the second quarter. Second, our subscription revenue was $297 million, growing 55% year over year. Third, our subscription NRR remained strong once again, above 120%. Fourth, customers with $100,000 or more in subscription ARR crossed 2,500, growing 27% year over year. Finally, on profitability, we once again made material improvement in subscription ARR contribution margin, up about 1,800 basis points year over year. On cash generation, we are very happy to report we generated over $57 million in free cash flow this quarter. This combination of top line growth and cash flow margin at our scale is rare. We remain confident about the opportunity ahead, and thus, we are raising our outlook for the year. Let me first give you some context on where we are focused. Rubrik is evolving into the security and AI company. In the last several quarters, it is clear to us that as we continue to focus on and win the past cyber resilience market, we also have a tremendous opportunity in the enterprise AI acceleration. Let's start with cyber resilience. And the broader context of the market opportunity. From our inception, Rubrik was designed to help customers achieve the fastest cyber recovery time. To deliver this, we uniquely combine data security posture management, identity resilience, and cyber recovery natively on our Rubrik Security Cloud or RFC platform to achieve complete cyber resilience. And at the center of our differentiated architecture is the Rubrik preemptive recovery engine. In Q2 alone, I had over 125 meetings with customers and prospects worldwide. What was abundantly clear is that IT and security leaders now have an assumed breach mindset. Simply meaning they are certain that cyber attacks are inevitable despite significant investments they have made in cyber prevention and detection. At the same time, these enterprises are also looking to replatform and modernize their infrastructure in preparation for the imminent enterprise AI transformation. As companies shift deeper into cloud engine AI, customers continue to turn to us, Rubrik, for complete cyber resilience. Delivering uniform and consistent data security policy control as well as rapid accurate recovery from cyber attacks. Concurrently, our Predibase acquisition I'll discuss later in my remarks, also allows us to deliver enterprise AI acceleration. The bottom line is this. We have tremendous opportunities ahead of us. First, we continue to lead the vast cyber resilience market. And second, at the same time, we continue to build a new future for enterprise AI. Now I'll detail some of the wins across our initiatives at varying scale. For our cyber resilient data protection business, we continue to add solutions across new applications and workloads. Leveraging the same underlying preemptive recovery engine to deliver risk and remediation capabilities. This unique architecture consistently enables us to outperform both legacy and new gen backup vendors. Let me highlight this with two illustrative customer events from the quarter. A major North American oil and gas company selected Rubrik after its legacy backup provider was unable to support a fast recovery following a disruptive cyber attack. Rubrik was selected because of our superior recovery time relative to both legacy as well as new gen alternatives. Our comprehensive yet radically simple platform cyber recovery across all workloads including the cloud, was another key reason for the legacy backup replacement. In another example, a Fortune 50 pharma leader turned to Rubrik to protect its critical applications displacing its twenty-year-old legacy backup vendor as well as native cloud backup solutions. We also outcompeted new gen backup vendors for this opportunity. Rubrik was selected due to not only our ability to deliver greater cyber resiliency, in the face of escalating cyber risk, but also more efficient cloud storage cost. Let me now talk about innovations in cloud protection that are delivered from RSC which is a single unique platform across center, cloud, SaaS, and identity workloads. We continue to expand our purpose-built cloud data protection solution to more applications services, and databases in the public cloud. This quarter, we expanded our cyber protection of AWS RDS database. And added comprehensive protection for Amazon DynamoDB strengthening Rubrik's leadership in cyber resilience for cloud databases. We'll continue to build upon our code to cloud cyber resilience platform which offers protection from the first line of code full stack of applications in production across the major hyperscalers. Let me highlight a few customer wins cloud and SaaS protection. First, a global Fortune 500 transportation organization increased their investment in Rubrik this quarter, adding M365 protection. Protection for Azure workloads, code-based recovery for GitHub, and Azure DevOps as well as Jira protection. This expansion bolsters the company's cyber resilience. And reduces recovery times across its critical cloud applications. Another example is with the Fortune 500 logistics and supply chain company that also expanded its partnership with Rubrik, by fortifying its mission-critical data state in Azure and M365 applications. After adding Rubrik to safeguard its data center applications in the past. Furthermore, the customer added identity recovery, reducing recovery time of directory and Entra ID, from several weeks to mere hours. Rubik's cyber resilience platform now avoids an estimated $65 million losses per day for this customer in case of downtime due to cyber attacks. Now let's turn to our opportunity in identity resilience. In just a couple of quarters of general availability, we have seen notable momentum for Rubik identity recovery solution with now over 200 customers. Rubik is addressing a critical need for enterprises by enabling the rapid recovery of their identity services following cyber attack, or operational failure so that they can return to business as usual. We are the only vendor in the market that delivers rapid recovery of both active directory and intra ID in a hybrid cloud manner the backbone of identity solution worldwide. Let me give you two specific customer wins in identity. This quarter, a leading UK financial services company strengthened its partnership with Rubrik by adopting Rubrik Identity Recovery, prompted by a recent cyber attack on a major UK retailer the company evaluated vulnerabilities within its own active directory environment. They recognize that these weaknesses could lead to significant post-attack disruption resulting in substantial market cap declines and potentially affecting millions of pensioners. By consolidating data and identity protection with Rubrik, this company now considers Rubrik one of its top three strategic IT vendors. In another example, a Fortune 500 financial institution in The US turned to Rubrik after an audit uncovered that its active directory recovery would take upwards of seven days with millions of dollars at risk each day. By adding rubric identity recovery, they reduced recovery times to under two hours preventing potentially significant business disruption and satisfying board mandate. We continue to invest in our identity solutions. We deepen our innovation with the general availability of Rubik identity resilience. Like I mentioned in the last quarter's earnings call, we are bringing together Rubrik's identity and DSPM solutions. Our latest Rubik identity resilience solution brings together data security and identity intelligence for the first time. Similar to how we monitor and sustain data, Rubric Identity Resilience continuously monitors and protects human and nonhuman identities. Tracking misconfiguration, as well as high risk and malicious changes in the active directory and intra ID. It also ties identity-based information like privilege access to rubrics, DSPM sensitive data context and activity. To strengthen risk posture and accelerate cyber recovery. Next, let's talk about our innovation in the Gen AI space. As I noted during our IPO, Rubik by design perpetually lives on the frontier of innovation. And our long-term success depends upon our ability to continuously create and commercialize pioneering products. As part of this, we continue to build a portfolio of innovation at different stages and at different levels of risk. This approach allows us to stack multiple f curves to maintain maximal momentum. While preparing for what's next. Along these lines, I will talk about our longer-term initiatives for GenAI. While GenAI can unlock significant new efficiencies for every organization, there are significant barriers like accuracy, cost, and security which hinders its adoption beyond proof of concept. We are addressing these challenges while leveraging our unique ability to extract, manage, and business data. Rubrik's data platform not only delivers robust cyber recoveries, but also provides clean, secure data with the necessary permission and policy enforcement to power generative AI applications. This ensures only the right person has access to the sensitive data. Our recent acquisition of Predibase furthers this vision. Just as Rubrik is working to simplify data access for GenAI, Readybase works to solve performance and cost issues around deploying GenAI models for proprietary AI applications. The Predebase platform allows enterprises to fine-tune GenAI model and run an optimized inference stack for faster accurate results at lower cost. We believe the combination of Rubrik and Predibase is incredibly powerful in accelerating GenAI from proof of concept to full production and value realization. We welcome the pretty based team to Rubrik. Where they have hit the ground running and continue to innovate and define new frontiers in enterprise agentic AI. We recently announced agent rewind, built on our Rubrik's secure data platform underpinned by ReadyBasis AI technology. We have spent years helping our customers recover from cyber attacks and operational error. With Agent Rewind, we can now help customers undo the mistakes of AI agents without full system rollback. Which is crucial for a scalable and secure AI adoption. We are still in the early stages of optimizing product market fit for our AI solutions. Including agent rewind. We plan to add more capabilities and investments to enable confident enterprise AI transformation and agentic work adoption. This is our multiyear initiative to scale rubrics AI solutions. In closing, I would like to share my gratitude. First, thank you to all my fellow Rubik continues to win the cyber resilience market. Because of Rubikanth's collective focus and disciplined execution. We continue to break new grounds for enterprise AI acceleration. And you know what? It's still early days for all the opportunities ahead of us. Also, a big thank you to all our customers and partners. Your trust inspires us to continue to lead and define future of cybersecurity and enterprise AI. And lastly, of course, thank you to you, our shareholders, your continued support and trust. With that, I'm pleased to pass it over to our Chief Financial Officer, Kiran Chaudhry. Kiran Chaudhry: Thank you, Bipul. Good afternoon, everyone, and thank you for joining us today. We had a strong Q2, which was highlighted by solid growth at scale and continued improvement in profitability. We continue to benefit from our leadership in the growing market for cyber resilience, and we are pleased to raise our outlook for the year. Let me start by briefly recapping our second quarter fiscal 2026 financial results and key operating metrics and then I'll provide guidance for the third quarter and full year fiscal 2026. All comparisons, unless otherwise noted, are on a year-over-year basis. We are very pleased to have ended Q2 with subscription ARR of over $1.25 billion, growing 36%. We added $71 million in net new subscription ARR. We continue to drive adoption of our Rubrik Security Cloud which resulted in $1.1 billion of Cloud ARR up 57%. Our differentiated land and expand model benefits from multiple avenues to gain new customers and grow our footprint after the initial contract. Expansion occurs through increased data existing applications, securing more applications or identities, or adding more security functionality. As a result, we continue to see a strong subscription net retention rate which remained over 120% in the second quarter. All vectors of expansion are healthy contributors to our NRR. Highlighting the meaningful runway we have to more deeply penetrate our customer base. Adoption of additional security functionality contributed approximately 35% of our subscription net retention rate in the quarter. We ended the second quarter with 2,505 customers with subscription ARR of $100,000 or more up 27%. These larger customers now contribute 85% of our subscription ARR up from 82% in the year-ago period as we become an increasingly strategic partner to our enterprise customers. For our second quarter, subscription revenue was $297 million up 55%. Total revenue was $310 million, up 51%. Revenue in Q2 benefited from our strong ARR growth and tailwinds from our cloud transformation journey. We also saw a higher nonrecurring revenue which was accounted for as material rights related to a crowd transformation. This contributed approximately seven percentage points to the revenue growth this quarter. Which was a few percentage points above our expectation. Adjusting for the benefit from material rights in Q2, total revenue grew approximately 44%. Turning to a geographic mix of revenue. Revenue from The Americas grew 53% to $225 million. Revenues from outside The Americas grew 46% to $85 million. Before turning to gross margins, expenses, and profitability, I would like to note that I'll be discussing non-GAAP results going forward. Our non-GAAP gross margin was 82% in the second quarter compared to 77% in the year-ago period. Our gross margin benefited from the revenue outperformance including higher nonrecurring revenue, reduced hosting costs from new cloud contracts, including a one-time hosting cost credit, and the improved efficiency of our customer support organization. We anticipate total gross margin to remain within our long-term target of 75% to 80% in fiscal 2026. As a reminder, we look at subscription ARR contribution margin as a key measure of operating leverage. We believe the improvement in our subscription ARR contribution margin demonstrates our ability to drive operating leverage and profitability at scale. Subscription ARR contribution margin was positive 9% the last twelve months ended July 31 compared to negative 8% in the year-ago period. An improvement of approximately 1,800 basis points. When normalizing for the $23 million, in employer payroll taxes associated with the IPO in the prior period, the improvement was approximately 1,500 basis points. The improvement in subscription ARR contribution margin was driven by higher sales the benefits of scale, and improving efficiencies and management of costs across the business. Free cash flow is positive $57.5 million compared to negative $32 million in 2025. This increase was driven by higher sales including timing of renewals, improved operating leverage, and optimizing our capital structure. Turning to our balance sheet, we ended the second quarter in a strong cash position with $1.5 billion in cash, cash equivalents, restricted cash, and marketable securities and $1.1 billion in convertible debt. Let me now provide some context for our outlook for fiscal 2026. We remain confident about our outlook given the strength of the fiber resilience market and demand for our differentiated offerings. We believe these drivers alongside our strong and consistent execution will deliver strong subscription ARR growth ahead. In terms of operating investments, we continue to invest in R&D to drive innovation in the large and growing markets we operate in across data, security, and AI. We'll also continue to make investments in go-to-market where we see the most compelling ROI across select regions and verticals and to find product market fit and scale our new innovations. Let me discuss our current outlook on quarterly seasonality. After a strong first and second quarter, we anticipate Q3 will contribute approximately 21 to 22% of full-year net new subscription ARR. In addition, subscription ARR contribution margin has some seasonality due to the timing of net new subscription ARR and operating expenses each quarter. Based on our current net new ARR linearity and investment plans, we continue to anticipate the subscription contribution margins will be the seasonally lowest in Q3 before moving higher in Q4. In terms of revenue, we now expect material rights related to our cloud transformation to contribute approximately six percentage points to revenue growth for the full year. Up from our prior expectation of a few percentage points. As a reminder, the revenue related to material rights is nonrecurring, and we expect minimal revenue contribution from material rights in fiscal 2027. Please see additional modeling points for fiscal 2026 in our investor presentation which can be found on our investor relations website. Now turning to our guidance for the third quarter, and full year fiscal 2026. In Q3, we expect revenue of $319 million to $321 million, up 35-36%, which includes a few percentage points higher benefit from material rights than previously expected. We expect non-GAAP subscription ARR contribution margins of approximately 6.5%. We expect non-GAAP earnings per share of negative $0.18 to negative $0.16 based on approximately 200 million weighted average shares outstanding. For the full year fiscal 2026, we expect subscription ARR in the range of $1.408 billion to $1.416 billion reflecting a year-over-year growth rate of 29% to 30%. We expect total revenue for the full year fiscal 2026 in the range of $1.227 billion to $1.237 billion reflecting a year-over-year growth rate of 38% to 40%. Or 32% to 34% without the benefit from material rights in fiscal year 2026. We expect non-GAAP subscription ARR contribution margins of approximately 7%. We expect non-GAAP earnings per share of negative $0.50 to negative $0.44 based on approximately 197 million weighted average shares outstanding for the full year. We expect free cash flow of $145 million to $155 million. Finally, we are pleased with our execution in the first half of the year as we continue to deliver cyber resilience to organizations around the world. With that, we'd like to open up the call for any questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed with the number two. If you are using a speakerphone, please lift the handset before pressing any keys. In the interest of time, please limit yourselves to only one question. Your first question comes from the line of Saket Kalia from Barclays. Your line is now open. Saket Kalia: Okay. Great. Hey, guys. Thanks for taking my question here and another nice job this quarter. Absolutely. You know, guys, the number that really jumped out to me the most of all was the free cash flow margin at 19% in the quarter. I think that's now four consecutive quarters of positive free cash flow. Bipul, maybe the question is, what's changed strategically in driving that type of profitability? And, Kiran, is there anything that we should think about in the second half on free cash flow as we fine-tune our models? Bipul Sinha: Thanks, Saket. As I've said before, I'm a capitalist. And I love profitability and cash flow. But, look, we are in a very large and an expanding market of cyber resilience. And as customers are looking to transform their businesses into AI enterprises, they are doing multiple transformations around cloud, around infrastructure, and cyber resiliency is the number one topic for them because if your data doesn't have integrity or availability, none of the AI will be useful. Or helpful. So we are helping do that cyber resilience transformation for our customers. Giving them like, AI-based ransomware detection, fast recovery, capabilities like that. And that's what is helping us win in this large market. And as we are scaling our business, the efficiencies are kicking in. I would love to have Kiran add some more from a finance perspective. Kiran Chaudhry: Sure, Bipul. And hi, Saket. I'll just give you a little bit more context both for the cash flow in the quarter and assumptions on the guide. So super pleased with the $58 million we generated in free cash flow this quarter. As you said, 19%. It was 3,500 basis points improvement year over year. And then from 700 basis points from last quarter Q1. A few reasons for that. Starting off with stronger ARR performance, than anticipated, and then the margin improvement as well, 9% sub AR margin. That was a key driver for the cash flow. In addition to that, you'd have seen we made some capital structure optimization in the quarter. We settled our private company debt, which has a higher interest coupon with a 0% convertible. So we had more cash on the balance sheet and less interest expense, which we sometimes pay out in cash. So that helped as well. And then on the duration front, we saw favorable duration this quarter. As you know, we increasingly sell cloud-native products, which tend to have a shorter contract length as well as shorter payment terms, and we didn't see that compression duration this quarter. And the last thing I'll say is that there's probably more timing related, but we saw more early renewals. Related to the usual trend and some of which was multiyear as well. This was in the context mostly of customers co-terming renewals with active expansion. So all of that really drove the cash flow outperformance to 19% margin this quarter. I look at the guide, we are happy to raise the guidance for the year. We previously had guided around 6% margin and we're guiding to 12%. And that's a thousand basis point or 10 percentage points improvement year over year. Some of the trends continue. Obviously, it's based on our ARR guide as well as the higher investments we are making in the second half from an OpEx perspective. Obviously, the capital structure portion will continue. But specifically in the duration, we are not assuming the compression continues. We are modeling in a little bit more compression. Would say low to mid-single digits through the rest of the year, and that is all the assumptions. We have made in the guidance. Saket Kalia: Super helpful, guys. Thank you. Melissa Franchi: Thank you, Saket. Operator: Your next question comes from the line of Andrew Nowinski from Wells Fargo. Your line is now open. Andrew Nowinski: Good afternoon. I just wanted to say, I think the net new ARR in Q2 is really impressive. Considering you went through a sales comp change, moving to annual sales comp plans this year. And so I know the change really didn't have an impact on your year-over-year growth in Q2, but I was wondering if you could just talk about whether you saw any impact from that and whether you're expecting higher seasonality in Q4 because of that change? Thank you. Bipul Sinha: Let me give you some qualitative perspective on it, and I'll let Kiran provide some more details. Look. We have been running our business on a per-year net ARR basis. And it jumps this quarter, that quarter, depending upon the deal timing and deal closure. But we run our business on a full-year new ARR. We used to do a quota compensation for the sales team on a half-yearly basis. So starting this fiscal year, fiscal year 2026, we decided to align how we run the business with how we compensate our sales team. And that change in the first half so far has not brought out any material impact to how we see our business or their achievement. Obviously, we have the rest of the year in front of us and we'll know more about the impact by the end of this year. But so far, it has gone well. Kiran? Kiran Chaudhry: I'll just add a few more thoughts here. So there are, of course, some shifts in seasonality. But it's only the first half. So we can give you a full update on our first year with this sales compliant change at the end of the year. But so far, it's been smooth and there's been no disruption. But from a modeling perspective, since we don't have a Q2 accelerator as we had in the previous half-year plans, Q2 and Q3 will look somewhat similar. That is reflecting our guidance, but Q4 will be seasonally strong. And this is reflected both in our subscription ARR guidance as well as the margins and free cash flow. Andrew Nowinski: Thank you very much. Melissa Franchi: Thank you, Andy. Operator: Your next question comes from the line of John DiFucci from Guggenheim. Howard Ma: Great. Thank you. This is Howard Ma on for John. I guess either for Bipul or Kiran, can you help us better understand how you're levered to data growth? So for instance, there's an aspect to your pricing model that's based on volume tiers. Which you could argue is directly tied to data growth. And then there's a user-based element especially with securing SaaS apps, So what is the mix today, and is there an opportunity for a purely consumption-driven component that gets bigger over time? Bipul Sinha: So Rubrik's products are a combination of data volume, and data security features and capability that we attach to it. And the combination of the two is the pricing for our different editions like enterprise edition, foundation edition, So we don't separate the two. And we help our customers identify all of the critical data and deliver all our security capabilities on those critical data. And as their data grows, as their applications or number of users grow, as they adopt more workload for Rubrik, we grow. So we have multiple growth vectors in Rubrik. One vector is organic data growth within a workload and applications that we are already securing. The new workloads that are coming to Rubrik, or existing applications, which are moving to Rubrik. And then the third piece is attaching the data security products. For products such as M365, which is tied to the number of users, We have a licensing model that aligns to that SaaS program. So we'll make it easy for our customers to adopt Rubrik and for them to understand the pricing model and expense based on how they pay for their core platform. Howard Ma: Does it answer your question? Bipul Sinha: Yes. That does. Thank you so much. Melissa Franchi: Thank you, Howard. Operator: Your next question comes from the line of Eric Heath from KeyBanc. Your line is now open. Eric Heath: Hey, guys. Thanks for taking the question and congrats on the results again. Kiran, I want to ask a few different questions on the model if I could. Could you just help us understand maybe what drove some of that early renewal activity given some of the sales comp structure changes to make it more year-end? I would have thought the opposite would have happened given the comp structure change. And if you could just speak to what's driving the decline in non-cloud ARR quarter over quarter is a little bit bigger than normal one. And lastly, if I could, if I could push it. But on the material rights, just what's driving that higher material rights activity that you're not necessarily expecting or you weren't expecting? Thanks. Kiran Chaudhry: Sure. I'll take them in order. So from a renewal perspective, we always see some early renewals every quarter. I mean, some of this is timing. Right? We have some on-time renewals, which is the majority. And some early and some late. But the renewals which occurred this time were more related to our expansion deals, which were in process with the same customers. And, typically, customers' core term the renewal activity with the expansion itself. So that was really the driver of the early renewals. And I also pointed out that some of those renewals are multiyear in nature. So that obviously impacted cash flow because of the higher billings. And just to add one more point, that is not related to the comp structure changes because that is tied to expansions, which is occurring along with renewals. So I wouldn't relate those two activities. And the second question, the non-cloud ARR, most of our since we're about 85% cloud right now, most of the cloud ARR is net new in the sense either coming from new customers or expansion with current customers. But there's still a small element of migrations which are happening from the non-cloud part. So you still see that declining a little bit. And at some point, we're getting towards the, I would say, point where it optimizes to a more steady rate it's a few points more than 80%, after which you'll see the non-cloud ARR grow as well. And then on the last point on the material rights, just to give some context, these are related to some qualified customers who had gotten some credits at the time we start our cloud transformation and those credits are beginning to expire. In some cases, where the qualification is possible, the customers use the credits to purchase some newer expanded products. In other cases, they expire. So the accountant treatment is slightly different. When those credits are used to purchase something versus when it expires. So that drives variability as well, and there's some timing element to that. Too, which we saw outperformance this quarter. Eric Heath: Thanks, Kiran. I threw a lot at you, but appreciate that. Thank you. Melissa Franchi: Thank you. Yep. Thank you, Eric. Operator: Your next question comes from the line of Kash Rangan from Goldman Sachs. Your line is now open. Matt Martino: Hey, guys. This is Matt Martino on for Kash. Thanks for taking my question. Bipul, Rubrik's brought to market a slew of new innovations across identity AI and data security. As you expand from a core product to a multiproduct platform, how do you see your go-to-market and sales motion evolving to effectively sell this broader, more complex vision to the C-suite? Thanks. Bipul Sinha: So multiproduct sales for some time now. Because we started with our core data protection business for data center as well as cloud, then we added M365. Then we added like, Salesforce, then we added now identity recovery, identity resilience, We are now building solutions for AI. So we have a kind of, like, a pipeline of three stages. So the stage number one is what we call RubrikX. That actually is the incubation phase of new products and go-to-market. And then the next phase is PLS, which is our product line sales team. That takes the early majority of product to scale it to be ready for the core sales team, and then we've transferred it to the core sales team. That's how we kind of scale our multiproduct go-to-market strategy. Obviously, we are doing all our product in a single platform. Rubrik Security Cloud. So that when our customers adopt more of Rubik's solution, our platforms get smarter and smarter and deliver more value. For example, if our customers have M365, as well as on-premises data center solutions. If there is a threat actor on both sides, we will be smart. We'll be giving our customers a smarter information about the complete picture of their data security and cyber resilience. As opposed to dumping logs and having them analyzed separately. So that's the platform strategy that we have taken from day one. And that's how we are building a multiproduct portfolio, but driving the value from a single platform. Matt Martino: Very helpful. Thank you, Bipul. Operator: Your next question comes from the line of Gregg Moskowitz from Mizuho. Your line is now open. Gregg Moskowitz: Great. Thank you for taking the question, and very nice quarter, guys. I wanted to ask about the DSPM. First of all, how it did in Q2? But more broadly, because it remains a hot area within cybersecurity, But, you know, these days, almost all the larger vendors have some sort of offering. Clearly, a significant majority of enterprises have yet to implement DSPM, When I think about Rubrik, I know you have a differentiated position here, but is there a point at which you think we'll see an inflection in DSPM market adoption? How do you think this will all evolve? Bipul Sinha: We have a belief that cyber resilience requires both resilience and identity resilience. And combining DSPM, is the data portion with identity information is needed to provide complete cyber resilience. Because when a privilege gets escalated for a user, inside your active directory, you may want to understand what new sensitive data is now being exposed to this customer and what is the blast radius for the customer credential get compromised. So bringing the identity intelligence and data security intelligence in a single platform is differentiated. We have this new unique vision in this market, and we believe that the future is going to be a holistic view for the customers from data identity and cyber recovery to be able to drive complete cyber resilience. And that's what we are driving for. Gregg Moskowitz: Okay. That's helpful. Thank you. Melissa Franchi: Thanks, Gregg. Operator: Your next question comes from the line of Todd Coupland from CIBC. Todd Coupland: Great. Good evening, everyone. You Bipul, you gave a number of examples on competitive wins this quarter. Could you just talk about the environment and your major sources of share and update us on your deal win rate? Thanks a lot. Bipul Sinha: As far as we are concerned, there is no change in the competitive environment for us. We still win the vast, vast, vast majority of deals against all competition legacy as well as new gen vendors. And it is due to our unique platform Rubrik Security Cloud, it is underpinned by a preemptive recovery engine that pre-calculates a clean data state even before the cyber attack happens. So that our customers are ready to recover as soon as they have a successful cyber attack. As a result, many of our customers are not in the news even when they are confronted with significant cyber attacks and they are not disrupted. And that's what is differentiated about Rubrik. And, again, we are equal opportunity replacers. For both legacy solutions as well as new gen solutions because they lack cyber resilience. Capabilities in a way of preemptive recovery engine. Just to give you an example, a European multinational industrial company replaced the legacy backup vendor with Rubrik's cyber resilience platform because a third-party audit found that they were not ready to recover upon a cyber attack, and they needed to upgrade their resilience posture. And they chose Rubrik for fast recovery for a simplified software platform for cyber resilience. So that's what we see in the marketplace. Again, our win rate comes from a very differentiated platform that we envision and built in the last ten years. Todd Coupland: Great. Thanks for the color. Operator: As a reminder, if you wish to ask a question, please press 1. Your next question comes from the line of Junaid Shah Siddiqui from Truist. Your line is now open. Junaid Shah Siddiqui: Great. Thanks for taking my question. Bipul, as the MCP protocol adoption gains traction across the cybersecurity ecosystem, do you view it as a strategic growth lever that could expand Rubrik's role from, you know, data protection into a broader security orchestration platform? Bipul Sinha: The way we see Rubrik is not in the prevention and detection business. We are in the cyber resilience business. Because we have a fundamental belief you can't prevent the unpreventable. And the world requires cyber resiliency and cyber recovery capabilities, and that's what we are focused on. Having said that, if you take a step back, Rubik is really a secure data lake. And we use that data lake data to recover applications. And recover your system. And this data is governed and secured and classified. And with Anapurna platform, we built vectorized search to deliver embeddings directly into GenAI applications. And now Predibase which is the fine-tuning and serving platform, And now we are building AgenTeq Rewind that combines our core cyber resilience plus the AI platform technology to really deliver capabilities around undoing the action bad actions of agents. So we are looking at AI in a holistic way. But we are not just focused on securing the AI. What we are focused on security, which is the cyber resilience business, as well as AI operations business, which is about agent fine-tuning, serving, agent rewind plus plus. So that's why we are defining ourselves Rubrik is the security and AI company. Junaid Shah Siddiqui: Thank you. Melissa Franchi: Thank you. Yeah. Operator: Your next question comes from the line of James Fish from Piper Sandler. Your line is now open. James Fish: Hey, guys. Sorry for any background noise here. Just wanna go back to the DSPM side. Any way to think about the updated penetration here? What you're seeing competitively just within this part of the market? And then additionally, what are you guys assuming you're thinking about for Fed here heading into, you know, the big Fed? And understanding it's been a small part historically, you know, what do you actually see for maybe some disruption there? Thanks, guys. Bipul Sinha: Sorry. Did you say Fed? Fed. Okay. As I said, we see the opportunity in the data security market around combining data and identity together. Because I don't believe just the data classification itself is a long-term sustainable business or a platform. So our vision is that how do we combine identity and data together to give a full picture of not just the posture of the data and identity, access to the data, but at runtime understanding what is really happening to the data and should anything bad happen. How do we do data recovery or identity remediation? And it's all data is the underpinning technology or the platform across all three. And that's the vision that we are driving. In terms of the again, this is still in the investment phase for us. And we are continuing to kind of build the cyber resilience transformation for our fed customers. It is high priority for fed organization given the nation-state actor and the fed that they face. It is we continue to invest in the growth and develop the Fed market for ourselves. We recently received Fed RAMP Moderate, For example, this quarter, a Fed agency had a challenge of deployment of a new gen vendor that they had bought a couple of years ago. So they are replacing that new gen vendor with Rubrik to protect their mission-critical databases. Which is required for their cyber resilience. And they picked Rubrik for our ability to deliver faster recovery times on the data. So fed again, we continue to win in the fed. It's still a developing market for us. Continue to invest. And we believe that Fed will continue to be a significant opportunity for us given how important cyber resilience and cyber recovery is for this market. James Fish: Thank you, James. Operator: Your last question comes from the line of Shrenik Kothari from Baird. Your line is now open. Zach Schneider: Great. Hey, guys. This is Zach Schneider on for Shrenik. Thanks for taking our question. So I believe nearly half of new deals are landing in the enterprise tier with foundation still key entry point for budget-constrained customers, and please correct me if that number is wrong, But could you just walk us through how deal sizes, renewal patterns are subsequent expansions differ across the tiers? Especially over multiyear contracts? Thanks. Kiran Chaudhry: Hi, Shrenik. So this is Kiran. I'll take your question. So on the first part, it's generally the trend has been similar. Close to half of our lands are coming from the enterprise edition. And then a mix of both the business and foundation with foundation being the larger of those two. And the enterprise the expansion path can vary. As you know, we are a multiproduct company. So customers start with one of these editions and maybe a couple of one or two of these workloads, and then they can expand by either expanding to a higher tier edition if they start with foundation or business, or if they already start with enterprise, they could expand to other workloads as well. And start with Microsoft 365, go to a native cloud workload or an Oracle workload, or database workload. So the expansion paths are not limited just because you started in a higher edition because you can always add more workloads as well. Zach Schneider: Great. Thanks a lot. Melissa Franchi: Thank you. Operator: This concludes our Q&A session. I would now like to turn the call over to Bipul Sinha for closing remarks. Bipul Sinha: Thank you. Thank you, everyone, for joining us today. We remain very excited about the cyber resilience opportunity as we build the future of AI transformation in terms of the enterprise AI acceleration. Much appreciate your support and trust. Again, very early days for Rubrik. We are in the first decade of our multi-multi-decade story. Thank you so much for your time. Talk to you three months from today. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Welcome to the Rubis 2025 Half Year Results presentation. [Operator Instructions] Now I will hand the conference over to the speakers to begin today's conference. Please go ahead. Clemence Mignot-Dupeyrot: Good evening, everyone. I'm Clemence Mignot-Dupeyrot, Head of Investor Relations. I am here today for Rubis's H1 2025 Results. I am with Clarisse Gobin-Swiecznik, Managing Partner; and Marc Jacquot, CFO. Clarisse will start the conference. Clarisse Gobin-Swiecznik: Ladies and gentlemen, good evening. To kick off this presentation of our H1 results, let me very quickly remind you what we do. Our business is about distributing energy while supporting mobility solutions. In Europe, we distribute and sell LPG, and we also produce and sell photovoltaic power. In Africa, we distribute and sell bitumen to road contractors in West Africa and fuel and LPG in East Africa. In the Caribbean, we distribute and sell fuel and LPG. Those products reached a wide range of customers, both individuals and professionals while the distribution is supported by a reliable and most of the time in-house logistics. For H1 2025, this diversified business model delivered a steady performance. In a global economic environment marked by uncertainty, our results for the first half of 2025 standout with growth in volumes and margins across all regions and product lines. Photosol continues to progress according to plan on track towards 2027 objectives. Our group EBITDA grew by 3% and the net income group share by 26%, driven by a stronger operational performance, better FX management and stable emerging currencies. Cash flow generation remains steady at EUR 276 million for H1, which is a key highlight of this publication. All of this gives us confidence in reaching our full year guidance, even in a less favorable USD-Euro exchange rate environment in H2. The following slide highlights our balanced growth across product lines and geographies. It showcases the strength of our commercial strategies, our agility, and seamless execution. Looking at our H1 performance by business line, you can see that in Retail & Marketing, all products delivered both volume and margin growths. LPG was driven by a very strong commercial momentum in Europe. In fuel distribution, the expected pricing formula adjustment in Kenya took the first step in March. The second step implemented in mid-July will show in our H2 performance. In bitumen distribution, demand in Nigeria is strongly picking up. The sharp decrease in unit margin visible here is purely a basis effect linked to the 2024 currency devaluation. We already mentioned it in Q1, Marc will elaborate further on this point. As for Support and Services, which covers supply to the distribution business, and the SARA refinery performance remains overall stable. Finally, the renewable business is expanding as planned with a sharp increase in both assets in operation and secured portfolio, in line with the remark we presented at last year's Photosol Day. In conclusion, this first half results are yet another demonstration of the group's ability to deliver consistent commercial and operating performance, cycle after cycle. And when you combine that resilience with discipline and proactive financial management, the outcome is clear, the strong and steady cash flow generation is fully in line with our historical standards. Marc Jacquot: Thank you, Clarisse. Good evening to all. Let's start with the big picture for the first half. Our EBITDA is up 3% year-on-year and flat on a comparable basis. As Clarisse already mentioned, this is driven by strong LPG performance in Europe, while in Africa, Kenya improved volumes and margins in the retail segment, and bitumen return to growth in Nigeria. Net income is up 26% to EUR 163 million, reflecting the absence of FX losses. CapEx related to the distribution business remains well under control, roughly stable at EUR 73 million while they are increasing in renewable to EUR 85 million, which is a concrete and positive sign that our growth projects are now materializing and are being steadily derisked. Nearly 85 megawatts were put in operation over H1 and 290 megawatts are now under construction. Corporate net debt is stable at 1.4x despite a negative trend in working capital over H1 which confirms our strong financial position. And finally, cash flow from operations remained strong at EUR 276 million for the first half year, supported by the good operating performance and the absence of FX losses. All in all, that's a solid performance. Now let's take a closer look at our activities. Retail & Marketing delivered a solid performance across the board with EBITDA increasing by 3% year-on-year. In Africa, we have three things to highlight. First, retail. Retail is contributing well and the impact of the new pricing formula in Kenya is expected to be fully visible in the second half. Second, aviation, which is more volatile, is facing higher pricing competition, leading us to reduce our volumes for the moment in Kenya. And the third one is bitumen. Bitumen margins increased less than volume and this is a basis effect from 2024 when naira devaluation impact affecting the financial results below the EBITDA was passed through to customers. Now let's look at the Caribbean. The Caribbean region was broadly stable, which is in line with our expectations. Guyana slowed down a bit with the election coming up in September, creating some kind of wait-and-see behavior among our B2B customers. In Haiti, the measures we have taken in our logistic management are starting to pay off, even if volumes remain a bit soft. Jamaica is normalizing with supply conditions slightly less favorable than last year. Now Europe. In Europe, the momentum is particularly good as a result of our challenger positioning combined with the excellence drive of our commercial teams and a colder winter this year. Looking at Support and Services, it remained stable, which is normal as this segment usually flexes with our Retail & Marketing activities. Now the renewable electricity production, what we can say is that the power EBITDA stands at EUR 22 million, which is up 38% year-on-year. In line with our road map, our development expenses have increased, reflecting the acceleration of the growth of this business, resulting in a consolidated EBITDA at EUR 10 million. In conclusion, this is a robust operating performance, attesting to the strength of our product and geographical diversification. Let's have a look at our financial results. Let me highlight just a few items here. The net income group share is up 26% or on a comparable basis, 18%. This is the result of lower expensive local debt levels and reduced FX exposure. When analyzing our income statement, let me remind you that the share of net income from associates in H1 2024 included Q1 results from Rubis Terminal. Interest costs are down, thanks to lower debt in Kenya and more favorable interest rates. As you know, last year, Rubis recorded significant FX losses, particularly in Kenya and Nigeria. In H1 this year, local currencies were more stable and the strategies we put in place to mitigate the FX risk have proven efficient, and we didn't incur any FX loss. As for taxes, nothing major to flag, the OECD global minimum tax is now fully integrated in our normal run. Overall, Rubis demonstrated agility and delivered solid financial results, fueling its cash flow momentum and supporting its balance sheet. Now a word on our financial debt. Total net debt stands at EUR 1.4 billion, with corporate debt at EUR 910 million, maintaining a healthy leverage of 1.4x at corporate level. Our liquidity level is high with more than EUR 180 million under RCF in addition to our EUR 530 million cash on balance sheet. The main variation of this debt this half came from the steady operational cash flow of EUR 390 million, which is up 11%, reflecting the good operating performance combined with the absence of FX losses. A negative impact from change in working capital of EUR 68 million after a very positive effect in H2 '24 as a consequence of lower trade payables. CapEx of EUR 164 million, which is higher than last year with the ramp-up of Photosol, hence, our usual June dividend that we paid to shareholders, but also to minority interest and general partners. Nonrecourse debt increased by EUR 63 million, in line with the renewable investments. All in all, our balance sheet remains solid with ample liquidity to support our future growth. Clarisse Gobin-Swiecznik: Thank you, Marc. Before we open the floor to Q&A, let me wrap up. So first, we saw Rubis commercial and operating performance. Second, our seamless execution and agility deliver reliable cash flows through the cycle. Finally, these H1 achievements make us confident, we are on track to reach our 2025 targets even in the less favorable euro-dollar context in H2. With a healthy balance sheet and a stable leverage ratio, we confirm we are aiming at EUR 710 million to EUR 760 million EBITDA within the framework of assumptions you have here on the slide. Thanks a lot for your attention. We are ready to take your questions. Operator: [Operator Instructions] Marc Jacquot: We have no audio questions for the moment. I propose you begin by the written questions on the webcast. Clemence Mignot-Dupeyrot: So we have 2 questions on the webcast from Auguste Deryckx of Kepler. Question number one is group EBITDA was stable on a comparable basis despite 5% volume growth, what are the key headwinds preventing stronger margin conversion? Marc Jacquot: What we can say on the margins, as I mentioned, the LPG margins were stable over the first half. And in the fuel distribution business, so the unit margin decreased by 1% in H1. And this decrease came exclusively from the Caribbean, especially from Jamaica. In Jamaica, the supply is not in Rubis' hands. And last year, we had very favorable condition for this supply. And this semester, actually, those conditions normalized, I would say. So that's the first explanation. Second one is on the bitumen, bitumen distribution business. So the volume growth in Nigeria resumed, as we explained. And H1 2024 was high due to the FX pass-through and the significant decrease in margin is explained by the basis effect after H1 2024 devaluation, after considering the guidance. Clemence Mignot-Dupeyrot: We have 2 questions considering on euro and USD FX. So question number one is -- but both questions have the same answer. Question number one is what level of FX rate and hyperinflation assumptions underpin the guidance, the EBITDA target of EUR 710 million to EUR 760 million. And what contingency levers do you have if the macro backdrop worsens. And another question from Emmanuel Matot is what is the total negative impact we can expect for 2025 on your EBITDA? Marc Jacquot: So regarding the guidance and the hyperinflation embedded in the guidance. We have the same level of hyperinflation in the guidance than in 2024, meaning a positive impact of EUR 25 million -- EUR 24 million on the EBITDA, EUR 22 million on the EBIT and minus EUR 10 million at a net income group share level, okay? So this is our assumption, and it will be -- and this is something that we will know only at the closing. So there is a lot of uncertainty in the hyperinflation. So we cannot commit on this number. In terms of impact of U.S. dollar, euro, the initial assumption we have was the euro-dollar level of the beginning of the year, meaning an exchange rate of $1.05 okay, for EUR 1. Now we are at $1.17 or $1.16 depending of the day. What we can say is that the good performance of the H1 will compensate the favorable impact related to the U.S. dollar impact. The margin we have in U.S. dollar is concerned, actually, I would say, 2/3 of our business, okay? So you can calculate what is the impact yourself on for H2. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: So we have another question online from [ Jean-Luc Romain ]. Could you please give us an idea of what the renewable EBITDA is before development costs? Marc Jacquot: So the renewable EBITDA before development cost is what we call the power EBITDA, the power EBITDA amounted to EUR 22 million in H1. Clemence Mignot-Dupeyrot: We have another question from [ Thomas Trotter ] saying about the aviation business. Are any of your markets showing activity in SAF, sustainable aviation fuel and is that a market Rubis might get into? Clarisse Gobin-Swiecznik: We are more or less agnostic to the type of fuel we distribute. We adapt to the demand of our customers. We would be able to distribute SAF and we do, in some places, especially in the Caribbean, but it's mainly a question of offer and demand, and there is not a lot of offer to date. We are, in any case, adapting ourselves to the demand from our customers. Clemence Mignot-Dupeyrot: Another question from Mr. [indiscernible] about Photosol portfolio evolution. It is not on the slide you have here in the presentation that is in the webcast, which you can find it on our website. Operator: [Operator Instructions] Clemence Mignot-Dupeyrot: We have another question from Emmanuel Matot at ODDO online, asking us if we have any impact of U.S. tariffs during the summer? Clarisse Gobin-Swiecznik: Rubis geographic and operational model makes it largely insulated from the direct effects of tariffs. We are not present in the U.S. nor in China, and we do not depend in any case of U.S.-based or China-based suppliers in our distribution business. On the indirect side, the products and services we offer are essential, particularly in the energy space. As such, demand tends to be relatively inelastic, meaning it remains quite stable even during periods of price volatility or economic slowdown. So I would say we have no effect of tariffs on our P&L or results. Clemence Mignot-Dupeyrot: Another question from [ Roger Degree ]. Can you update us on the CapEx plans and specific projects for the next year or 2 in the energy distribution business? Marc Jacquot: Roger. What we can say on the Photosol CapEx, this level, as you know, will increase in line with the ambitions communicated to the market at Photosol Day. So this is a EUR 1.1 billion CapEx in the 2024, 2027 back-end loaded. And for 2025 it should be in the range of EUR 150 million to EUR 160 million. Talking about Rubis Energy, so the distribution business, we should be in the normalized level in the -- I would say, EUR 185 million on the run rate. Clemence Mignot-Dupeyrot: Another question online. Can you give us an update on the shareholder structure? So the answer is public. The shareholding structure as of today is, the largest shareholder is Mr. Patrick Molis with more -- a bit more than 9%. Then you have the Bolloré Group through Plantations des Terres Rouges, a bit above 5%. You have Mr. Sämann 5% or so, Groupe Industriel Marcel Dassault a bit above 5%, and then the rest of the shareholding is structure an overall split between different shareholders. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Clemence Mignot-Dupeyrot: Thanks a lot for being here. We will be on the road on the days to come. So do not hesitate to reach out to us if you want to schedule a meeting or if you have questions, you know where to reach us. Thanks a lot, and have a nice evening.
Operator: Hello, everyone, and thank you for joining the ANGLE 2025 Interim Results Call. My name is Claire, and I will be coordinating your call today. [Operator Instructions] I will now hand over to Andrew Newland, CEO. Please begin. Andrew David Newland: Good morning, everybody, and welcome to ANGLE's interims webcast for 2025. It's been a very strong half year in terms of major progress in commercialization on multiple fronts. However, there has been strong revenue pressure from adverse market conditions. So it's a balanced 6-month period. As you know, ANGLE has developed a breakthrough product for cancer diagnostics, which can be used to help patients get better outcomes by making sure that they have more appropriate treatment and also reduce health care costs. We're getting closer to its deployment widely for patients. We've had 3 major achievements during the half year, which are in relation to large pharma contracts, DNA dual analysis and cluster buster drugs. So I will tell you about those now. First and very importantly, our large pharma strategy, which we've developed as a way of accessing development funds to progress clinical trials in support of Parsortix has progressed well. The idea here is that pharma can fund for their own drug development purposes, individual clinical trials and that they can actually lead eventually to a companion diagnostic based on the Parsortix system and wide adoption. So as you know, we've had 3 pharma projects -- large pharma projects that we've been working on. And all 3 of those successfully completed during the period. The first one, the Eisai HER2 breast cancer trial was very important as it demonstrated in a 200-patient cohort Phase II trial that 2 tubes of blood taken at the same time and processed by Parsortix gave very consistent results in terms of the number of cancer cells present, the circulating tumor cell clusters present and critically, the expression or absence of expression of HER2 protein. But -- and this is the key point, the 2 time points were different. So very often, we saw that the patient's condition had changed. And this was to be expected because the first blood draw was taken prior to the patient being given the HER2 antibody-drug conjugate drug and the second time point was afterwards. So we saw significant changes in some, but not all of those patients. We're currently awaiting access to the clinical data to demonstrate whether or not the changes we saw directly correlated with the patient response or otherwise to the drug. But that's obviously what we would anticipate. So this trial has successfully confirmed that our HER2 assay, so our test for analyzing the HER2 protein on the cancer cells is very useful for the HER2 drug clinical trials, but also is likely to be relevant for selection of the drug for individual patients. So that was a big step for us. Secondly, the 2 AstraZeneca contracts, which were slightly different in nature because we were funded to develop assays for AstraZeneca. The first one was in DNA Damage Response, which is applicable for multiple cancers and the second one in Androgen Receptor, which again is a protein, but in this case, for prostate cancer. Both of those assay development projects were successfully completed. And we're now waiting actually to hear from AstraZeneca and indeed from Eisai and BlissBio, the owner of the ADC in HER2, about next-stage projects. So we've got next-stage projects under discussion with those companies. The second major achievement was the development of the DNA dual analysis, Illumina, end-to-end NGS assay, and I'll talk about that in more detail later, but it was a major achievement during the half year. And the third one, which I'll also discuss later, was the publication in Nature Medicine, a top-level peer-reviewed journal of the first inpatient trials for cluster buster drugs developed using Parsortix and fundamentally dependent on Parsortix. Post the half year-end, so since the 30th of June, momentum has continued, and we were absolutely delighted last month to announce our first large med tech collaboration. So why would a med tech company want to collaborate with ANGLE? Well, the answer is that we can offer them access to circulating tumor cells, so intact cancer cells from blood. And if they can move their test across to that analyte, then they can do repeat testing. And I'll talk more about that, but we're delighted to have secured that collaboration deal with Myriad Genetics, which offers the potential for large-scale commercialization of the Parsortix system. And as I said, I'll explain that. We built out the pipeline of opportunities with multiple large med tech and large pharma companies. So there are other companies coming down that track. One of the very interesting developments is the development that we've now managed to engage with the NHS in very serious discussions, and that has come since the NHS' announcement on the 30th of May that they were launching something called blood test-first in lung cancer, where lung cancer patients will have a blood test processed. And that is current -- to identify whether the specific treatments they can be given. The advantage of that blood test versus the tissue is that the results from the blood test can be found quicker, so the patient gets treatment quicker. And also a number of patients, probably about 20% don't actually have a successful biopsy. So they have no sample to guide their treatment. But what the NHS is interested in is the DNA dual analysis solution that ANGLE uniquely provides. So I'll give more information on that a little bit later. And then finally, internally, we've been working extremely hard, and we're making very good progress on accrediting -- getting an accreditation for our clinical lab. We're targeting completion of that by the end of the year. And that would then open up the possibility for ANGLE to start offering tests directly for patient management, which clearly would be a major step forward for the business. In terms of the half year results, in terms of the finances, we have unfortunately been subjected to the challenging market conditions. Market volatility and tariff concerns have actually slowed decision-making regrettably at many large corporates that we're in touch with. So they're pausing or delaying some of their decisions. And that comes on top of a lack of capital for the smaller companies that we'd like to work with. So in both cases, there's been a delay in conversion of pipeline opportunities that we've been developing. The consequence of that is that the pharma revenue is regrettably down on the prior year half year period, and the product revenue is flat. We believe that this is a temporary situation, which will resolve itself over time. But at the moment, it's unclear when that will happen. We've been managing our costs very carefully with tight cost control, and we've reduced our operating expenditure by 12% compared to the previous period. And overall, that has slowed down to the comprehensive loss being reduced by 7%. Clearly -- and the cash and R&D tax credits position stands at GBP 6.6 million with the cash runway unchanged into Q1 2026. But clearly, access to additional funding is a key focus for the business for H2. And that funding can come from a variety of different sources. In terms of some more granularity on key developments, our integrated NGS workflow with the Illumina platform is a major step forward for ANGLE. It's a unique offer actually, that ANGLE offers the ability to assess both the DNA from circulating tumor DNA, the dead, which come fragments from dead and dying cancer cells which is the standard approach from the plasma as well as the circulating tumor cells, which we can obtain from the waste product of the ctDNA analysis. So the ctDNA providers, what they do is they extract the plasma liquid and they throw away the blood cellular component. What we've developed is the methodology for resuspending that in a saline, running it through the Parsortix system and recovering the circulating tumor cells, and they can then be analyzed with the exact same approach of sequencing as the ctDNA. So then you have 2 analytes from the same tumor blood, which have been sequenced in the same way. As I said, we're the only company that can offer that solution. Now what we've done in the half year is we have developed an Illumina end-to-end solution. So by that, I mean, we start with the Parsortix, but then we use an Illumina pan-cancer gene panel and the Illumina next-generation sequencing. And that has some really significant advantages. Firstly, Illumina has got worldwide distribution of its products, which means that there is a customer base with their products that can now implement Parsortix. We don't have to supply a separate cancer panel external to Illumina. And secondly, of course, this increases the revenue potential for Illumina and has got them quite interested in working with us on joint sales. Now this form of analysis, as you can see from the image here, identifies twice as many mutations, so actionable DNA variants than ctDNA alone. And it is therefore the case that we believe that very, very important information about how the cancer is progressing is missed by circulating tumor DNA. It's also missed by tissue biopsy because the tissue biopsy is a onetime point. And what happens is the cancer progresses and changes and you can't repeat the tissue biopsy. And that is what has stimulated the interest from the NHS. And they're now considering the idea of testing on a large-scale basis, whether they can, in fact, get additional actionable information from the circulating tumor cells, which would improve the outcome for patients and importantly, reduce the cost of operation. So this whole area of getting the Illumina end-to-end DNA dual analysis to work was a major achievement in the half year. The second major achievement was this first medtech partnership. So this, we think, is the first of many such medtech partnerships. It's driven by the idea that companies who offer tissue-based tests. Now in the case of Myriad Genetics, they do that via large-scale clinical laboratories where they offer tests. These companies basically can only do one time point for the patient. They can only do their test when they've got the tissue available. Now the same approach applies also to medtech companies who sell products. Their products can only be used at a single time point where there is tissue. And this is a crucial limitation on cancer care today, which is that it's all based off -- apart from some ctDNA, which has its own limitations. It's all based off tissue where there's only one time point available. And yet everybody knows that cancer progresses and changes. So with Myriad, the idea here is that they are working with ANGLE to see if they can port one of their cancer tests onto a CTC platform. So that would then enable them to have, as I mentioned, multiple repeat tests for a patient, so that generates repeat revenue for them. And secondly, it opens up the opportunity to provide tests for patients who don't have tissue and quite a lot of patients have a failed tissue biopsy or alternatively, the biopsy tissue is not accessible. So that's 2 major benefits for them. The third potential benefit is actually looking at patients before the tissue diagnosis. So if you have a test, you can do a blood test without any major impact on the patient. So you can do it very early when, in fact, you might not choose to do a tissue biopsy because of the invasive nature of that. So Myriad has made a commitment to expanding its offering across the cancer care continuum. And we see Myriad as an excellent major partner for commercialization. They have, as I mentioned, a very large-scale clinical laboratory establishment, and they're a major player. They have around $800 million in revenue as it stands at the moment. And they're an outstanding partner for us to work with for commercialization because they have already got all the market channels in place. We expect to see other medtech partnerships coming through in due course. Now the reason I've highlighted this area of targeting metastasis is because the Parsortix system has unearthed some amazing information. The fact that there are large-scale circulating tumor cell clusters present in patient blood and that these circulating tumor cell clusters are absolutely incredibly important in terms of the metastasis of the patient. In fact, the Aceto Lab in Switzerland has demonstrated using Parsortix in a mouse model that the cancer is 100x more likely to spread. The metastatic potential is 100x greater where there are circulating tumor cells in a cluster than when the same number of circulating tumor cells are separate rather than attached to one another. And these large-scale circulating tumor cell clusters have never been seen before the advent of Parsortix. Now we previously reported the publications by this group over the last 4 or 5 years in nature. But what they've done is they've stepped forward, and we announced in January a publication again in Nature Medicine, where they have used the Parsortix system with breast cancer patients to identify patients with circulating tumor cell clusters. And then they have given them a heart-related drug called digoxin and showed again using Parsortix, the ability to separate these circulating tumor cell clusters into individual cells. That same process in a mouse reduced the spread and pretty much stopped the cancer progression in the mice compared to identical mice that didn't have the heart-related drug. So there was now a spin-out company that's been set up in Switzerland with the idea of developing a new class of drugs to stop the spread of cancer. And this can only be possible if the Parsortix system is used to identify whether the patient has circulating tumor cell clusters and ensure that the right patients get the drug and then monitored with routine blood test to see whether they need to have the drug again. We expect that there will be major clinical trials using Parsortix in order to progress this further. So a very exciting development for cancer management of the future, and it's entirely enabled by the Parsortix system. So our system has a lot of evidence behind it, and that continues to build. So now we have 46 independent cancer centers in 15 different countries, who have published between them 115 peer-reviewed journal publications on Parsortix across 23 different solid tumor cancers. And all of these publications are positive. So we are now into the phase of commercialization. As I mentioned earlier, we have had some adverse market conditions, which have temporarily slowed the decision-making process at some of the largest companies. However, we have a very major pipeline that we have developed, and we expect to see a whole series of developments coming through in the relative near term. So we're getting started on the Myriad Genetics collaboration, porting their tissue test to CTCs, and we expect to see that expanding over time. We have discussions going with several large pharma companies in relation to multiple projects, and that's being progressed further at an upcoming conference, the World CDx Conference in Boston on the 21st of September, where we have many meetings with pharma to progress these discussions. We also have engagement with multiple med tech companies who will be at that conference, including some who have declared themselves wanting to do joint sales with ANGLE of CTCs -- potential CTC solutions marrying their downstream technology and offering that to pharma, which is a welcome addition to our sales approach. The partnership for DNA dual analysis. So this evidence is now beginning to get out there, and we have several molecular companies, both NGS and other molecular downstream analysis companies looking to partner with us to take that further forward. So we expect to see progress in relation to that. We also have some companies interested in partnering with ANGLE in relation to protein analysis. So this is looking at the proteins such as the HER2 and the Androgen Receptor that I mentioned earlier on in the presentation. There's many different ways that you can analyze these proteins, but you have to have intact cancer cells to do it, and we provide that solution, which isn't otherwise available. The methods can involve immunofluorescence, immunohistochemistry and FISH, to name a few. So there are several companies wanting to partner with us on that. We're hopeful that we'll be able to agree a suitable clinical study with the NHS soon, which would be then to evaluate the benefits that can come from analyzing and circulating tumor cells, first for lung cancer, but then for other cancers. And obviously, the target there would be to generate the clinical evidence which will be sufficient for the NHS to seek to adopt solution from ANGLE as a routine solution. And obviously, we're a U.K. company. We're close to the Royal Marsden, who's heavily involved in this, and we have a number of benefits that we can offer them over and above their current solutions, which are based from the U.S. ctDNA companies. And we -- the NHS is the largest medical market in the world in terms of a single customer, and we believe that adoption by NHS would drive -- further drive worldwide interest in our technology. And as I mentioned, we're working on our own clinical laboratory accreditation. That's going very well, and we expect to see that complete by the end of the year. So in summary, we have a breakthrough technology, and it is capable of transforming cancer patients' outcomes, both diagnosis and treatment as well as reducing costs for health care providers. We believe it provides the best sample for analysis, and particularly that is now being proven for next-generation sequencing, which is the major area of focus for all the health care providers. And it's interesting that NGS is getting a lot of attention. The cost of NGS sequencing is dropping and the sensitivity is increasing. The adoption of artificial intelligence is increasing. And again, that enables patents to be seen that might be missed otherwise and the cost of AI is dropping. So what you actually end up with is a limiting factor is access to the best sample. And we believe that intact living cancer cells taken at a real-time point from the patient blood provides the best possible sample. In terms of downstream analysis, we have got a unique DNA molecular analysis of intact cancer cells married also with the ctDNA, and that gives the ability to look at clonal evolution. And looking at clonal evolution and how the cancer is changing is the driver to get ahead of the spread of disease. And that's why the new drugs to block cancer progression based on Parsortix are a major development. And that's also why the NHS is now expressing strong interest in what ANGLE is doing. So thank you very much for listening. We'll now move to Q&A, and Ian Griffiths, our CFO, will join me for that. Operator: [Operator Instructions] We have our first question from Adam McCarter from Cavendish. Adam McCarter: I've just got a few. So yes, just you talked during the presentation about the challenging environment sort of experienced during H1. Just wanted to know if you've started to see any encouraging signs of these headwinds begin to subside at all in the second half of the year? So second question then just on the NHS. Just how do we sort of think about those NHS clinical studies that Parsortix could be incorporated into the opportunity and the materiality there? And then the final question is obviously good to see sort of more of those high-impact journal publications for Parsortix, particularly the Nature Med one. Are these types of publications helping sort of in your BD efforts and helping progress those conversations with pharma and the medtech? Andrew David Newland: Thank you very much, Adam. The first comment -- question was about encouraging signs. Well, certainly, the Myriad Genetics signing up to go ahead with us was a very encouraging sign. That was a conversation that had been going on for quite some time. And they've taken the decision that despite the conditions, they want to start investing in this. I listened recently to the Chief Executive's presentation of their own results, and they specifically referred to extending their offer into the continuing cancer care continuum. So I thought that was a very promising sign. That said, there are multiple others, which I would have liked to have dropped by now. So let's hope to see -- we'll see some more of them coming through in a similar way. In terms of the NHS side of things, what that's generally speaking about is the fact that they are adopting the blood test-first in lung cancer patients for 15,000 patients per year. And interestingly enough, they literally do throw away the blood cells. And that's quite a compelling argument. You're throwing away the best part of the sample with Parsortix, we can analyze that. So I guess we'll start off with a pilot study first and then if they like it, we can expand. But the good thing is they don't even have to take an additional tube of blood to address this. And in terms of the -- Ian, you can add to this if you wish to. But in terms of the publication side, absolutely, we use these peer-reviewed publications to drive business development. We have a medical writing team that packages that information, and it forms a lot of the interaction that we have with prospective collaborators and customers. Ian Griffiths: Yes. And I'd probably add to the encouraging sign a couple of things. So one is increasing sort of awareness of the need to incorporate multi-omics into oncology and multi-omics, just for clarity, it means not just DNA, but adding in RNA and protein information. And if you look at Illumina, in particular, the way they're developing their next-generation sequencing is they can already do RNA and the sensitivity and cost points are improving that all the time. But they're also introducing a new protein solution as well. So obviously, we've got the perfect sample to fit with the Illumina equipment. And then the other thing is in discussions. So obviously, we produced data earlier in the year on the dual analysis. And that's generating a lot of interest because I think people are quite surprised how much additional DNA information we're finding with CTC-DNA, not just what the ctDNA produces alone. So there's quite a lot of interest around that complementary nature, but the fact that there's a lot of additional data. Operator: Our next question comes from Edward Sham from Singer Capital Markets. Edward Sham: Congratulations on all the operational progress despite the tough sector headwinds. I've got a few questions. But if I could just first start with your kind of your large pharma contracts because you've obviously completed in the first half, the 3 contracts with Eisai and AstraZeneca. I was just wondering how much visibility do you have in converting those into further contracts? And just can you give me a sense of the wider pipeline? Are you seeing strong traction across pharma? Or is it more medtech? Andrew David Newland: So in terms of the visibility on the new contracts, regrettably, we don't control the timing of these large pharma, and they will tell us when they're ready to do whatever it is that they want to do. So that's a bit of a challenge. But we are seeing increased wider interest from large pharma, and we have a very strong roster of meetings at World CDx. And this includes pharma that we've been dealing with for some time. We have been called on by several large pharma to provide them with -- essentially, they call it an RFI, a statement of what we can analyze from CTCs and how that works and how much we would charge them for that. So we do know that there are multiple players at these large pharma who are actively considering adoption of our solutions. What we don't know is when they might decide to jump in and also when those studies would start. So that's it really. I mean basically, there is mounting evidence and mounting interest, but we've got to get it converted. Edward Sham: No, that's really helpful. And then maybe just on the Myriad Genetics collaboration. Can you just outline the key milestones and importantly, how the economics would work if that was to be commercialized at scale? And just kind of give me an idea would that -- would ANGLE's revenues primarily be through services? Or is that also driving part sorting sales and consumables as well? Andrew David Newland: So we gave an announcement in relation to the work with Myriad. It was a bit lighter on details, and that's because they don't want to disclose some of those bits of detail. But I can talk in principles. So initially, we are being paid to provide some direct services to assess our sample going into their test. Some of that work has already been done. Now we're looking at various different modifications, which may improve the outcomes. So that's paid for service work. Assuming that progresses, what I would anticipate is there will be more paid for service work in terms of clinical trials to actually assess how well the CTC test does against the tissue biopsy test. And then beyond that, an implementation would involve us selling them a whole lot of Parsortix machines and setting up -- they would have to set up a Parsortix laboratory. So we'd have quite a lot of product sales. And every single sample, of course, would then need a Parsortix cassette as a consumable. And we currently charge $300 a cassette for that purpose. So that's on the specific tests we're working on at the moment. But they have a whole series of tests. And if the first one is looking good, there's absolutely no reason why they wouldn't do all their tests in a similar way. So we'd expect to see them getting -- wanting to get closer and closer to ANGLE. And then what I just described in terms of the sort of revenue flows being multiplied out by multiple different tests. Edward Sham: That sounds like a really great opportunity. And then just maybe just one last question on costs and runway. So you've highlighted your cash runway goes into Q1 '26. But I was just wondering beyond that, you've mentioned the alternative sources of funding. I was just thinking what can you do now? So realistically, can you take further cost out of the business and kind of what do you think your cash burn is going to look like through to kind of the end of the year? Andrew David Newland: Ian, do you want to cover that one? Ian Griffiths: Yes. Obviously, we are -- and you've seen that from the half year, we are continuing to try and manage our costs tightly. So certain spend has been sort of paused, certain costs have been cut back. But the nature of us being a regulated industry and having to have the sort of capability and capacity to deliver on the projects, deliver on the milestones means there's a certain level of underlying spend. So we're focused very heavily on the sort of that milestone delivery, and that can in itself be sort of one of the potential sources of funds. As we highlighted in the interims, there's a variety of sources of funding that are available to us. It's not just the revenues, but there's also commercial milestones, licensing, other income from collaborations with industry partners as well as sort of debt and equity funding, which is what we've historically done with the company. So we flagged, we will need to raise additional funding through one or a combination of such sources. We know there's challenges on the AIM market and biotech sector, which are well documented. And so our focus is very much is generate the milestones, generate the contracts that show that we're making that commercial progress to secure that support. Operator: [Operator Instructions] We currently have no further audio questions. We'll now move on to our text questions. Our first question is from Franc Gregory from Trinity Delta. She asks, following up on Adam's question, what can you tell us about the state of discussions with large pharma and large medtech companies? Andrew David Newland: So Franc, thanks for the question. So I think I gave a fair amount of information on that. We're talking to large pharma. There's multiple large pharma involved and across a variety of different drug categories. Just to recap, the protein analysis, which is what we've done so far for pharma, such as HER2 Androgen Receptor and the DNA Damage Response proteins, those are all things that have to be done by looking at cells and looking for expression. So they cannot go elsewhere for that. And there is, therefore, quite a lot of interest and particularly from antibody-drug conjugate companies because the antibody-drug conjugate attaches to the cancer cell via the protein. And if that protein is not there, then it won't work. And as an example, AstraZeneca's drug in HER2 is a HER2 antibody-drug conjugate. It is prescribed currently based off tissue biopsy. So if the patient is HER2 positive or HER2 low, then they'll be given that drug but as a second or third-line therapy, and that can be 3, 5 or even more years after the tissue biopsy. So there's published independent data that shows that up to 40% of the HER2 status would have changed in that time frame. This is mirrored across all the different proteins, and that's why the pharma are interested in that. The second interest for the pharma is in relation to the DNA dual analysis. And our pitch there is that the circulating -- so some of the pharma are adopting circulating tumor DNA analysis in their clinical trials. And our pitch to them is you're missing out on information, which might be critical in your clinical trial by not analyzing the circulating tumor cells in the blood cellular component. And that is beginning to gain traction as well. It's obviously a new area because we've only just developed it, but that is the subject of a lot of the conversations in the World CDx. So hopefully, that's a little bit more information on the pharma relationships. In terms of the med tech, we've got several big med tech product providers who offer molecular or protein-based testing solutions, which are sold worldwide, but they don't have access to a repeat sample. And those people are beginning to talk to us about implementing a CTC solution, which could be sold to their customers. And also, there's quite a lot of interest in working for -- jointly to get sales from pharma. And that would help us a lot because credibility of a very big company that they already do companion diagnostics with in tissue, wanting to work with ANGLE would obviously be a credible offering to the pharma. Operator: We have a follow-up question from Franc. How long and complex is the selling cycle into these partnership discussions? Andrew David Newland: Sorry, I missed that. Could you repeat the question? Operator: How long and complex is the selling cycle into these partnership discussions? Andrew David Newland: That's very variable. So what's happened is that the selling cycle has been longer than anticipated for the reasons that I said that these pharma are delaying commitments to various different things. But generally speaking, you're looking at a 6-month engagement before you can actually get into a sale because you're providing information to the pharma on the specific data from -- it was an earlier question, but data from the publications, for example. And then we sometimes do some pilot work ourselves. And so we have to submit a lot of data to be considered before they then decide to go forward. Operator: Our next question comes from Nigel Birks from Cavendish. [ BSL ] highlighted the unique potential of Parsortix in cluster cells a while back. What is new now? And how might this be commercialized? Andrew David Newland: So that's a great question. Thank you very much, Nigel. So what is new is that they have actually used the Parsortix system with breast cancer patients to identify circulating tumor cell clusters. And then they have dosed these patients with the heart drug, digoxin, and they've showed that the circulating tumor cell clusters separate into individual cells. So this is a completely new way of trying to approach cancer therapy is to reduce the competence of the circulating tumor cells to actually grow somewhere else and cause the secondary cancer. The reason that's significant is because well over 90% of patients who die from the metastatic spread to secondary cancer sites. Now that is caused by the circulating tumor cells in clusters landing somewhere else and growing. And there's -- so -- and they've demonstrated in a mouse model that if this heart drug is given, then the circulating tumor cell clusters disaggregate in the mouse and the mouse does not then succumb pretty much at all to the cancer. So it doesn't spread and kill the mouse. So the hope is that, that will translate to cancer patients. Now normally, there would be quite a big risk associated with a transfer of a mouse model across to a human model because there are a variety of differences, which mean that it might not be successful. So this first step shown that they have been successful in disaggregating the circulating tumor cell clusters is incredibly important. But the second element is that there was work done in the mid-1980s and 1985, the first large-scale study was done looking at breast cancer patients and trying to work out differences between the ones who had a successful outcome and the ones who didn't. And what they found was that actually a good factor for a better outcome was relating to having a comorbidity of a heart condition. So can you believe that? So if you've got cancer, you'd be better off if you have a heart condition, you're more likely to survive your cancer than if you don't have a heart condition, which is patently absurd. So the only -- and nobody understood that in the '80s and late '80s when this was investigated in detail. But they then -- and they sort of gave up on it. But now, of course, when we now know that heart drugs disaggregate circulating tumor cell clusters, there's the possibility that, that's the reason why we're seeing the progress in the mouse model. So the spin-out company is now working on some other drug targets very similar to digoxin, but with greater potency for CTC cluster disaggregation and basically less side effects. So that's super exciting because it could likely lead to a lot of work with Parsortix on clinical trials, which we can obviously enable and make money out of. And then as and when it potentially comes to market, the Parsortix is an absolutely crucial element. It would have to be used with every patient on multiple time points. Operator: We currently have no further questions. So I will now hand back to Andrew for closing remarks. Andrew David Newland: Well, I'd like to thank everybody for their support. It's obviously very disappointing that we didn't deliver higher revenue lines. We're hopeful that this will change, and it will change as we get our large pharma and our large med tech collaborations moving forward. And as I mentioned, our clinical lab will open up the potential for us to actually start providing tests for patients. And there is a very, very strong demand from the medical world and patients for this approach. And the fact that the NHS has started engaging with ANGLE is, I believe, a very strong positive. So thank you very much for your support. Have a good day, everybody.
Holly Schoenfeldt: Good morning, everyone, and thank you for joining us today for our webcast announcing U.S. Global Investors Results for Fiscal Year 2025. As you can see on Slide #2, the presenters for today's program are Frank Holmes, U.S. Global Investors CEO and Chief Investment Officer; Lisa Callicotte, Chief Financial Officer; and myself, Holly Schoenfeldt, Director of Marketing. Moving on to Slide #3. During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical facts are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and corresponding Form 10-K filing for more detail on the factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today, and U.S. Global Investors accepts no obligation to update them in the future. Moving on to the next slide. As always, we appreciate our loyal shareholders. So if you like one of our signature USGI hats that are featured on this slide, just send us an e-mail at info@usfunds.com with your mailing address and we'd be happy to send them your way. Okay, on the next slide, I want to briefly review the company U.S. Global Investors is an innovative investment manager with vast experience in global markets and specialized sectors. We use a quantamental strategy to create thematic smart beta 2.0 products. The company was originally founded as an investment club, becoming a registered investment adviser in 1968 and has a long-standing history of global investing and launching first-of-their-kind investment products, including the first no-load gold fund. And finally, we are experts in thematic investing, in particular, in gold and precious metals, natural resources, airlines and luxury goods, all using a quantimental approach that includes both macro and micro factors. At this point, I do want to hand things over to our CEO and CIO, Frank Holmes, who will provide a deeper macro overview of this visual and in the whole fiscal year. Frank, over to you. Frank Holmes: Thank you, Holly. Thank you very much for the introduction, and really smart beta 2.0 is very key as a dynamic investment process that we adhere to. And also from a macro point of view and our thematic ETFs, we try to cross what are the key drivers on global themes, where big government spending is going, and we right in all our perspectives that we believe that government policies are precursor to change. So we monitor and track both monetary and fiscal policies, and we comment regularly, every week in investor alert and if you're not a subscriber, I highly recommended because it gives you a good recap of these various asset classes. As you're looking at right now the DNA volatility and life is all about managing expectations. And when it comes to the stocks, volatility is very important to try to understand grasp. So when we look at the S&P and gold and grow, they all basically, it can go up or down 70% of the time, 1%, not a bit. If it's all 3% that's material. And when we look over 10 days, is 3% to 4%, so if it goes up 10% over 10 days, that means it has a change in momentum. It falls more than 4% over 10 days, usually that's a by. And I'm going to comment about how we continue to buy in those down days, especially when we get these big drought any volatility in spoke volatility in the marketplace. But here, you can see that the DNA volatility of grow is now left, which is really important to me than the Dow Jones U.S. asset managers index used to be greater -- and it used to be much more like the volatility with GOAU is or the airlines index of 3% daily, and now it's down to 1%. And it was important for you to recognize that our revenue comes from assets that are in JETS and GOAU. And they're very important because they drive the overall revenue line. So our DNA volatility has been becoming much calmer than the volatility underlying assets. Next, please. I want to thank the shareholders, all the retail and then the institutional. These are the top 3, either Capital Management, Vanguard and Perritt. Perritt is known for a long period of time, there's expert specialists in micro caps and also have a cultural affinity towards golds and asset class, which I'll comment later on in this macro overview before we turn it over to Lisa Callicotte, to give you the financial updates. Next, please. I owned approximately 90% of the company and 99% of the voting control, which has been compliance with SEC rules, et cetera. We do have independent directors and independent boards that we have to go through the normal process in managing the affairs of the company. And we have experts in the fund business and legal and accounting and venture capital -- so I'm happy to see that the independent directors have a breadth and depth of knowledge of capital markets, which I believe is important. Thank you. Next, please. So strategy and tactic. So create thematic products that are sustainable, using our smart beta 2.0. It requires rigorous back testing for thousands of hours. Our mission is to make people feel financially happy and secure that their wealth is consistently growing. And they relate to these themes that we're providing for public and what I said we backtested it and employs on these products also in addition to myself. But as a company, we strategically buy back the stock using an algorithm on flat and down days. And we managed to preserve past and future growth and opportunities of market corrections, M&A activity to acquire fund assets on a regular basis, we look at opportunities. Grow our subscriber base and followers. We believe that that's very important for the crossover from people that follow us, read our research. They know our culture, they know our values, and it's much easier for them feeling the trust factor to come into our thematic funds. So we want to really have educated and informed investors and increase our closure to the bitcoin ecosystem. We've regularly deploying capital into the Bitcoin ecosystem, especially, when since the Genius Act has been approved, and that has been changing overall capital markets acceptance. And we think that scarcity is important for gold as much as and more so even for Bitcoin, which is capped at 21 million coins, and the adoption process seems to be growing slowly outside America, but pretty quite rapidly in America. Next, please. GROW performs a [indiscernible] cap over the past 5 years, but it's just marginal. What's positive for the shareholders is that small cap stocks has started turning up. And what this visual is trying to show you, the last time we had this epic surge to $12 of share for GROW. A lot of that was a huge growth we had in just ETF and HIVE. HIVE had this exponential move because Ethereum had moved in Bitcoin, but really, we were the dominant player in Ethereum, and we were making almost $1 million a day at that time. Ethereum is no longer a crypto asset to mine and HIVE is now just going through a new growth cycle with Bitcoin mining, especially the expansion in Paraguay and our HPT strategy in Canada -- so that has been part of our exposure is through HIVE. Next, please. They're really important is if you know that 80% of the world's cargo is carried by ship -- so the CETF is connected to emerging markets. So I want to try to explain to people that it's so important like arteries and veins of the world, that is the connectivity between emerging markets, exporting commodities to developing markets, buying the finished product coming out of China or Thailand, all this shipment is taking place on cargo ships. And one of the things we had shut down is our Eastern European fund after Putin invaded Ukraine, it really changed the whole dynamic to New York. And the whole concern about China building up their military and becoming more and more difficult, what they've done, but what we've noticed is that to have a pulse global activity and trade, it really all comes from cargo. And so we created a product. And in daily, you can see cargo provide goods and for energy shifting what the rates are. And what's interesting to me is that they all fell on April 2 earlier this year when Trump came up with his global tariff war, but really start to rebound and cargo shipping actually it is making more money than we were a year ago. And for investors, cargo shipping, the yield on this was about something like an 18% dividend payouts. So these shipping companies are leveraged, but they offer big payments. And I'm happy to share with you with all the negative news last year, the shipping companies did payout big dividends. And this year, their shipping rates are higher, even with this backdrop of all those negative news. Next, please. So this is another visual to highlight that despite tariffs, total imports in the first half of 2025 forecast to be nearly 4% higher than the previous year. Next please. Now gold, gold is in the region all-time high in 2025, but gold talks are ripping up, they're showing up in growth stocks in IBD's growth momentum, both for this huge increase in revenue per share and cash flow per there. But the ETF space, I'm happy to share with you is that we've not experienced the redemptions, but there's been a lot of redemption next place has taken place and when we take a look at the other ETFs. So the biggest is GDX, the experience with $3 billion of redemptions other ETF as the gold stocks have been making all-time highs because the gold is making an all-time high and profit margins have been expanded. So from when we look at our product OAU, it's really how well in fund flows relative to the other big gold ETF. Gold equity ETFs, but what's important here is to show that gold is performing well. And a big part of that is China's push with the BRICS Nations, Brazil and Russia and other one [ road ] one belt countries being anti the U.S., anti particular U.S. dollar in particular, when Obama went after sanctions and complicated U.S. dollar assets and then Biden did it again. There's this big push to de-dollarize. So what you've seen is China and other countries, having less dollars of foreign currency and increasing it into gold. And it's more and more central banks buying gold. So it just tends be prudent for many reasons, central banks have a different theme than retail and family offices or smart investments like Galileo, they believe that when you have such a big interest payment on $37 trillion deficit that goal becomes an important asset class. But what I want to share with the listeners -- it's not just the dollar. It's also the G20 countries are just extensive money printing, and that has really triggered an interest in bitcoin. And with the new administration and with the Genius Act just being recently passed, it enters in that the scarcity of Bitcoin capped 21 million coins, and the scarcity of gold, but there's no mathematical perfect cap on it is showing you that money printing excessive, they're going into alternative asset classes. And gold and silver and gold stocks and Bitcoin and Bitcoin mining stocks are like HIVE was the Bitcoin mining stock but holds Bitcoin. These are alternative asset classes are capturing more appeal, especially when the large hedge fund, the world it keeps articulating why you want to have gold as an asset class. So we think we're in a good position. Next, please. Market disconnect. This is a visual to show you the GDX, which is market-based, market cap-based ETF unlike GOAU, which is more focused on revenue and cash flow and free cash flow and royalty model. There's been nothing, but redemptions as the gold prices have gone up. I believe that is turned now, which is good. The positive fund flows a bit of an offset, but it's really been really weird market, since last year that you would experience Gold taking off profit margin of gold stocks and gold stocks going up 40% to 80% to 100%, various names that there would be net redemptions. What was acclaimed to me was that there's been a lot of hedge funds that were short gold stocks. And along the GDX as gold has been rising, we've been unwinding their hedge position. So I don't know, if that's true, but it really is a conundrum I've seen before. But I think us behind us I really do. I think U.S. Global is well positioned with GOAU and these other thematic products, please next. Record-breaking quarters for royalty companies. Franco-Nevada reported record revenue for the quarter, up 42% year-over-year. Wheaton also had generated record revenue and operating cash flow Triple flags, which came out about 5 years ago, basically posted operating cash flow and increased their dividend. So I think that, that model is continuing to grow, but the gold stock that have higher expenses and then as gold trades higher, all of a sudden, their cash flow and exploding, they've had better stock performance. And when we look at stock by Gold Fields, it's been on a tier. But as a value gold stock picker, it's not the best for a value, but as high leverage, they call it, high operating costs, when both starts to take off as it has been these companies have the biggest percentage change in gross profit margin. And a lot of more speculative funds and hedge funds go into those names. Next, please. So the growing global reach U.S. Global ETFs now, in particular, JETS and GOAU are listed on the Mexican Stock Exchange, I went down to Mexico made a presentation to family offices of about 150 investors. And we're seeing that also listed in Bogota and Peru and Chile that these the Colombian securities that we're getting more trading and more volume that is taking place in these particular products. It was interesting that in Peru, there was lots of more interest in SCA, the sea cargo shipping ETF. Next, please. Well, there's another factor. There's an intersection with military spending and AI and data centers and NVIDIA chips that's really important for investors we're on a super cycle here for AI. There is no doubt about it, but there's also a fast-end big spend into data centers and sourcing energy. In fact, the biggest spend in America right now for infrastructure is in [ between ] Oplin, Texas, whereas the $500 billion spend to build the biggest high-performance computing data center at this. And what's interesting is that 70% of that demand is for Open Chat GPT. And an Open Chat is a phenomena. Unlike I hear these people say, oh, it's a bubble like tech bubble like 1999, and it's just not true. That tech bubble was eyeballs. This tech bubble, if it's a bubble is because of cash flow and revenue Open Chat has gone from basically nothing to $1 billion a month in revenue. And continues to grow, along with the other big language model companies like perplexity, Groq, which is Elon Musk investment and through a special purpose fund, we have a small investment in the sort of growth in that Groq that's in the U.S. global portfolio investments. And the only way to get that was to go through a special purpose. And it's illiquid, but it's growing, and it's just important to recognize that we believe that U.S. Global, we were in a super cycle. And a super cycle is really important for us that the military spend because of what's happened in the Ukraine and how the Ukraine have a pushback with creating asymmetry with drones for using GPU chips, but these inexpensive drones basically been able to deter and push back against Russia. And President Trump, no mentioning of words of telling the NATO members of Europe and Canada got better [ antipasto ] spending more money or they're going to pull NATO. And it's been a sea change. The amount of money and what's happening in Europe is very profound, they're going to emulate America and create an industrial complex that parts will be made through all these different countries in Europe and basically being assembled in Germany, tax special weaponry cannons, missile launchers, et cetera, et cetera, and so Germany is committed to up to 5% of their GDP. But that's a big number. You're talking, and that's going to be, when I do my other calculation is up to over $300 billion. And you take a look at a Sweden, all of a sudden there are 2%, who's the strongest center has been Poland. So next place. So there is a big spend of the NATO members, and this is looking back, basically, but these numbers are just going to grow and the consumer is concerned. Well, a lot of this money is going to go into a satellite that's going to go into needed to use of NVIDIA chips to power these new drones or autonomous weaponry, autonomous submarines, autonomous vehicles, dogs that are autonomous that can go into high conflict zones. It goes on and on with your imagination, but the spend is huge, but what you realize is that it has to go into data center, so that it has to go into -- because if you don't have high performance computing data centers, then the drones don't work and the satellites. So all this stuff is all hyperlinked to each other. Next, please. We used to think it was just metal, iron and steel, now it's a very different world. But this was NATO members projected defense spending and the numbers are quite substantial. The last number like for Canada is actually over $150 billion. And it's up faster than what this was printed out. Just to give you an idea of what's taking place. Countries like Poland became big spenders because not only from refugees come from Ukraine, but from Belarus and they had to build a wall to protect illegals or the spies coming into sabotage illegal complexes within Poland. So Poland is very sensitive of Russian spies coming into the country. So you're seeing them put up a big spend. And what's interesting is that Greece is a big percentage of GDP because they had no idea how to protect their borders when they had the Syrian crisis, and they were going from Turkey over to Greece and how do they manage all of this was a game changer for them. So the U.S. is projected to spend $1.5 trillion. But what's the difference between what we're spending in China? China might spend 8% on soldiers and health care, et cetera, most of us going into armaments, whereas 50% of NATO and U.S. is on soldiers and the cost for health care and continuous care for these soldiers we are actually underspending relative to what China is spending. Next, please. The AI market is exploding. And will continue to spend 28% CAGR. And next please. So it's important to understand these big changes. And that's 1 reason why we created our war with ETF. But as AI to rebuild the military, so it has a lot of cybersecurity-related investments. Next, please. But what's really alarming is that ETFs have grown to be more in numbers than overall listed public companies and talk to a retired former SEC senior lawyer is alarming and that the SEC has to go and promote new IPOs, new companies coming public, the formation of capital because if that's not growing faster than M&A work, then all of the sudden mutual funds became bigger than stock shares outstanding. And what you do see is that there are lots of mergers and there's not of private equity coming in buying companies. So therefore, eventually starts impacting liquidity. The new administration is very pro turning up IPOs and creating capital for more public companies, which is positive. The ETF is really fasting what's happening there is the thematic ETFs are capturing more imagination. And not just an index that's really based on something by these index providers, but active ETFs have flourished, and that's something that we are really happy about and positioned to capture the growth. Next, please. So U.S. ETF assets are approaching $11 trillion. Next, please. Now what's the time for small caps to run? Michael Gade is well known in Piper Sandler, likes to say, a small caps, the unquestionable winner in August. But we saw that we rose, but really nothing greater than the rose of 2000 small caped index. It's related to what's the growth in assets. And I showed you earlier that when we had JETS go from $40 million to $4 billion in assets and HIVE go from $0.50 to $10 or some number like a big number. Those big moves on our balance sheet, in particular, the growth in JETS that there is lots of sophisticated investors that trade our stock around the number of creates and fund flows. So they're looking at the total number of assets we have every month. And if they start to expand, then they want to be long. If they start to fall, then they want to be out. I was told by 1 small group that they do biweekly what the overall asset picture is because it drives revenue. That's not how we function. We're long-term investors. And we believe that we have great products. We have real conviction on the quality of the products we offer. And so they've been rigorously back tested before we put them in the marketplace. JETS has validated this concept of what we went out to create that was to be the New York Stock Exchange Global Airline Index. And even after fees has done that. And when we look at the airline industry, it is almost 9% of global GDP. So can you get 1 product that's capturing 9% of their global GDP? Well can you capture -- another product captures 80% of all global trade at sea. I think these are really unique products. And I hope we have in England, it's called Trip. So it's basically JETS with additional hotels and cargo and not cargo ships but cruise liners because cruise liners are having incredible growth in revenue that people are still spending incredible cruise amounts of money to go on cruises and same thing with airline tickets, the prices have not gone down. When I get analyst say, it's really interesting to share with you, Wall Street comes out and says, well the airlines are going to grow up 3%, but GDP Airport grew at 15%. So how can the airport grow of traffic, 15%, but the airlines are only grow 3%. And so there's a disconnect that there's always a negative narrative that's been going on for 2 years now that the airlines are going to fall apart, but they continue to defy and they're using AI to have pricing power and how they move their Jets along, if they're going to cancel roots, it's done very quickly. So it's important for you to recognize the investors that AI is a significant component for how airlines are managing supply, which then gives them pricing power. Next, please. Bull markets have lasted 5x longer than Bear markers on average. So I watch this. I see this and I listened to and I read a Twitter and LinkedIn and this is just potentially to look for the next crisis. So people can pat themselves they call the crisis. But if it happens by the dip and hold on for life that's basically what this suggesting because of trade payer. Next, please. Warren Buffett highlights the value proposition of buying back one's own stock at a value accretive prices. And it benefits all shareholders. It's very much a democratic process democracy, democratizing capital markets is not just for the biggest holders. And so he will retire at the end of 2025 at the age of 95 with $340 billion cash to invest. So I think it's interesting in what he's done, but he was a big proponent of buying back stock. So let me give you a quick recap. Next, please. So positive news, buyback authorizations have increased 19% year-to-date. So that has been another part about executives and boards making a decision to buy back their stock. Next, please. While we buy back stock because we believe the stock has undergone and therefore, buy back shares as we're long-term investors. And this is part of the company's 2-pillar strategy to enhance shareholder value by paying dividends as well as buying back stock per year. Next, please. So for share repurchase program for the end of June 30, the company repurchased a total as 801,000 Class A shares using cash of $1.9 million, of which a lot of these proceeds came from being paid back on our debenture from HIVE. Next, please. Those repurchases, as you can see, showing you that has steadily increased. Next, please. The dividends, the company pays a monthly dividend. That's a 3.66% yield, it was more attractive than any money fund. Next, please. Shareholder yield. This is the algorithm dividends plus buybacks plus debt reduction divided by market cap is the overall shareholder yield. And next, please says that U.S. Global, and the 5-year treasury is 3.79%. Most dividend paid stocks are based on the 3.79%, the 10-year is 4.24%, odds favor rates dropped this month. So what does that mean? Well, that's one other factor that people look at to move stocks around. But the shareholder yield is 9%, so we believe that GROW is an attractive buy. Next, please. We look to compare our souls to WisdomTree which is 100% ETFs at Invesco, 40% of their assets to our QQQ and give an idea for relative multiples and what the rotations are for investors. Next, please. So I look for at 2025, the company has a steady cash flow despite volatile and challenging macro environments at the apathy for JETS is disappointing and for gold, we believe that this turns on when a turn is very rapid, it just happens so quickly. And so we -- our assets are down from a year ago. So we ended up losing money, but we still keep deploying and building our plan because we believe that it just happens so quickly, fund flows and directional change. And so we believe that we'll continue to buy back stock on flat and down days and pay monthly dividends. And we have a strong business to do so. Next, please. Smart beta investing is our quantamental fundamental investment strategy because it combines cutting-edge technology with robust data analysis to help optimize returns and manage risk effectively for our shareholders. It's a quant approach. It's back tested thousands of hours before we go and launch a product just like medical product is supposed to be tested over and over before unleased to the public, and we have the same sort of discipline. Next, please. GROW's investment is slowly drilling down to 8% comfortable debenture of $1.5 million. And as the money comes in, we're redeploying back into the crypto ecosystem. Next Please. So it's -- we have $1.4 billion in assets. We have [ $1.5 million ] in annual operating revenue. the real important number is to get through $1.9 billion. We've seen this happen in a month. So as I said to investors that we've seen the redemptions slow down, we've seen the apathy slowdown -- and we think that with our thematic asset classes that we remain very bullish and committed to a long-term secular Bull market. Next, please. Average assets under management. As you can see that shift, that's really just the talent time of apathy not having bad products, but having good quality product out there. Sentiment, we can't control. We can still control, having a good product. Next, please. Quarterly earnings per share were definitely impacted marked by the tariff war for the quarter. It's improved this quarter ended June and hopefully, it improves this next quarter. Historically, in the fourth quarter, airlines have a huge run -- and usually, September is usually a good buying, and they have a big run along with Bull stocks, so we remain very positive going into the year-end. Next, please. Now I'm going to turn over to hard working, our CFO, Lisa Callicotte, to give you a granular detailed analysis. I know I've been long-winded to talk about a macro theme of where we are and she'll give you a bottom-up analysis of financial analysis. Thank you, everyone, for being loyal shareholders. Lisa? Lisa Callicotte: Thank you, Frank. Good morning. First, I'll start with our Slide 43 that has the financial highlights for our 2025 fiscal year. Average assets under management were $1.4 billion for the year ending June 30, 2025. The Operating revenues were $8.5 million, and we had a net loss of $334,000 or $0.03 per share. Slide 44 notes our breakout of earnings. So we have operational earnings that consist of our advisory services and then we have other earnings, which mainly consists of realized and unrealized gains and losses on our investment holdings. But both of these are dependent and will fluctuate based on stock market forces. The next slides talk about more of our detail of our operations for the fiscal year ending June 30, 2025. Our operating revenues were $8.5 million for the year, which was a decrease of $2.5 million or 23% from the $11 million in the prior year. The decrease is primarily due to a decrease in assets under management, especially in our JETS ETF. Operating expenses for the current quarter were $11.4 million, relatively flat compared to the prior year. On the next slide, we see our operating loss for the year ending June 30, 2025, is $3 million. And we had other income for June 30, 2025, of $2.7 million compared to $2.4 million in the prior year. This was an increase of approximately $329,000, mainly due to higher investment income in the current year. In the current year, we had lower realized and unrealized losses versus the prior year. Net loss after taxes for the year was $334,000 or a loss of $0.03 per share, which is an unfavorable change of $1.7 million compared to the net income of $1.3 million or $0.09 per share for fiscal year 2024. If we move on to the balance sheet on Slide 47 and 48. We see that we have a strong balance sheet and has high levels of cash and securities. And then if we go to Slide 49, that notes our total liabilities, and these are consistent with prior year. The next slide is a detail of our stockholders' equity. At June 30, 2025, the company had a net working capital of $37.2 million and a current ratio of 20.9:1. With that, I'd like to turn it over to Holly, so she can discuss marketing and distribution initiatives. Holly Schoenfeldt: Thank you, Lisa. All right. This first slide in my section showcases our ongoing dedication to delivering original timely market insights to our YouTube and TikTok channels, Video content remains one of the most powerful tools for educating and engaging both new and existing shareholders. If you haven't already, we'll strongly encourage you to explore our YouTube channel. All right. On the next slide, I'd like to spotlight several recent interviews featuring Frank Holmes from the past quarter, including appearances on the Seeking Alpha podcast premarket Prep, FOX Business television and other major platforms. Earned Media remains a cornerstone of our marketing strategy, giving us the opportunity to share timely insights and thought leadership across a range of thematic sectors. We regularly amplify these appearances on our special media channels JETx and LinkedIn, and we featured them throughout our website content too. All right, on the next slide. Our war ETF launched about 9 months ago, and we continue our outreach and marketing efforts for this unique product and we actually just published a white paper this week on defense spending and the ETF itself, and that can be found on u.Sglobaletfs.com or to e-mail us at info@usfunds.com, I will send you that link. All right. On the next slide, I also want to quickly announce a few webcast we have in September, both of which you will be able to access a replay for. One is September 10, where we will be teaming up with the HIVE ETF team out of Europe to discuss our UCITS Travel ETF, ticker symbol TRIP or TRIP. Secondly, on September 25. Frank Collins will do a virtual webcast highlighting clear trade in the market right now and specifically, why not going to be a good time to look at exposure to defense and gold. All right. On the next slide, we always like to recap the most read Frank Talk blog post during the most recent quarter. So as you can see here, the top being focused on defense and [indiscernible] along with the attractiveness of gold. So again, that perfectly aligns with our webcast on September 25, we hope you'll tune in. And we hope you'll keep reading the Frank Talk Blog. Thank you. All right. Finally, on my last slide, I do encourage all of you to follow U.S. Global Investors on social media. We're on Twitter or X LinkedIn, YouTube, Instagram and Facebook. So wherever you prefer to get your news, be sure to check us out. This was your up-to-date with what's going on not only with growth but our funds and, of course, the broader market insight. All right. As a reminder to our audience, if you have any questions today, please feel free to e-mail those to us at info@usfunds.com, and we will gladly follow-up with you and get anything clarified that you may need more information on. Thank you so much for tuning in today. That concludes our webcast summarizing fiscal year 2025.
Operator: Hello, everyone, and thank you for joining the ANGLE 2025 Interim Results Call. My name is Claire, and I will be coordinating your call today. [Operator Instructions] I will now hand over to Andrew Newland, CEO. Please begin. Andrew David Newland: Good morning, everybody, and welcome to ANGLE's interims webcast for 2025. It's been a very strong half year in terms of major progress in commercialization on multiple fronts. However, there has been strong revenue pressure from adverse market conditions. So it's a balanced 6-month period. As you know, ANGLE has developed a breakthrough product for cancer diagnostics, which can be used to help patients get better outcomes by making sure that they have more appropriate treatment and also reduce health care costs. We're getting closer to its deployment widely for patients. We've had 3 major achievements during the half year, which are in relation to large pharma contracts, DNA dual analysis and cluster buster drugs. So I will tell you about those now. First and very importantly, our large pharma strategy, which we've developed as a way of accessing development funds to progress clinical trials in support of Parsortix has progressed well. The idea here is that pharma can fund for their own drug development purposes, individual clinical trials and that they can actually lead eventually to a companion diagnostic based on the Parsortix system and wide adoption. So as you know, we've had 3 pharma projects -- large pharma projects that we've been working on. And all 3 of those successfully completed during the period. The first one, the Eisai HER2 breast cancer trial was very important as it demonstrated in a 200-patient cohort Phase II trial that 2 tubes of blood taken at the same time and processed by Parsortix gave very consistent results in terms of the number of cancer cells present, the circulating tumor cell clusters present and critically, the expression or absence of expression of HER2 protein. But -- and this is the key point, the 2 time points were different. So very often, we saw that the patient's condition had changed. And this was to be expected because the first blood draw was taken prior to the patient being given the HER2 antibody-drug conjugate drug and the second time point was afterwards. So we saw significant changes in some, but not all of those patients. We're currently awaiting access to the clinical data to demonstrate whether or not the changes we saw directly correlated with the patient response or otherwise to the drug. But that's obviously what we would anticipate. So this trial has successfully confirmed that our HER2 assay, so our test for analyzing the HER2 protein on the cancer cells is very useful for the HER2 drug clinical trials, but also is likely to be relevant for selection of the drug for individual patients. So that was a big step for us. Secondly, the 2 AstraZeneca contracts, which were slightly different in nature because we were funded to develop assays for AstraZeneca. The first one was in DNA Damage Response, which is applicable for multiple cancers and the second one in Androgen Receptor, which again is a protein, but in this case, for prostate cancer. Both of those assay development projects were successfully completed. And we're now waiting actually to hear from AstraZeneca and indeed from Eisai and BlissBio, the owner of the ADC in HER2, about next-stage projects. So we've got next-stage projects under discussion with those companies. The second major achievement was the development of the DNA dual analysis, Illumina, end-to-end NGS assay, and I'll talk about that in more detail later, but it was a major achievement during the half year. And the third one, which I'll also discuss later, was the publication in Nature Medicine, a top-level peer-reviewed journal of the first inpatient trials for cluster buster drugs developed using Parsortix and fundamentally dependent on Parsortix. Post the half year-end, so since the 30th of June, momentum has continued, and we were absolutely delighted last month to announce our first large med tech collaboration. So why would a med tech company want to collaborate with ANGLE? Well, the answer is that we can offer them access to circulating tumor cells, so intact cancer cells from blood. And if they can move their test across to that analyte, then they can do repeat testing. And I'll talk more about that, but we're delighted to have secured that collaboration deal with Myriad Genetics, which offers the potential for large-scale commercialization of the Parsortix system. And as I said, I'll explain that. We built out the pipeline of opportunities with multiple large med tech and large pharma companies. So there are other companies coming down that track. One of the very interesting developments is the development that we've now managed to engage with the NHS in very serious discussions, and that has come since the NHS' announcement on the 30th of May that they were launching something called blood test-first in lung cancer, where lung cancer patients will have a blood test processed. And that is current -- to identify whether the specific treatments they can be given. The advantage of that blood test versus the tissue is that the results from the blood test can be found quicker, so the patient gets treatment quicker. And also a number of patients, probably about 20% don't actually have a successful biopsy. So they have no sample to guide their treatment. But what the NHS is interested in is the DNA dual analysis solution that ANGLE uniquely provides. So I'll give more information on that a little bit later. And then finally, internally, we've been working extremely hard, and we're making very good progress on accrediting -- getting an accreditation for our clinical lab. We're targeting completion of that by the end of the year. And that would then open up the possibility for ANGLE to start offering tests directly for patient management, which clearly would be a major step forward for the business. In terms of the half year results, in terms of the finances, we have unfortunately been subjected to the challenging market conditions. Market volatility and tariff concerns have actually slowed decision-making regrettably at many large corporates that we're in touch with. So they're pausing or delaying some of their decisions. And that comes on top of a lack of capital for the smaller companies that we'd like to work with. So in both cases, there's been a delay in conversion of pipeline opportunities that we've been developing. The consequence of that is that the pharma revenue is regrettably down on the prior year half year period, and the product revenue is flat. We believe that this is a temporary situation, which will resolve itself over time. But at the moment, it's unclear when that will happen. We've been managing our costs very carefully with tight cost control, and we've reduced our operating expenditure by 12% compared to the previous period. And overall, that has slowed down to the comprehensive loss being reduced by 7%. Clearly -- and the cash and R&D tax credits position stands at GBP 6.6 million with the cash runway unchanged into Q1 2026. But clearly, access to additional funding is a key focus for the business for H2. And that funding can come from a variety of different sources. In terms of some more granularity on key developments, our integrated NGS workflow with the Illumina platform is a major step forward for ANGLE. It's a unique offer actually, that ANGLE offers the ability to assess both the DNA from circulating tumor DNA, the dead, which come fragments from dead and dying cancer cells which is the standard approach from the plasma as well as the circulating tumor cells, which we can obtain from the waste product of the ctDNA analysis. So the ctDNA providers, what they do is they extract the plasma liquid and they throw away the blood cellular component. What we've developed is the methodology for resuspending that in a saline, running it through the Parsortix system and recovering the circulating tumor cells, and they can then be analyzed with the exact same approach of sequencing as the ctDNA. So then you have 2 analytes from the same tumor blood, which have been sequenced in the same way. As I said, we're the only company that can offer that solution. Now what we've done in the half year is we have developed an Illumina end-to-end solution. So by that, I mean, we start with the Parsortix, but then we use an Illumina pan-cancer gene panel and the Illumina next-generation sequencing. And that has some really significant advantages. Firstly, Illumina has got worldwide distribution of its products, which means that there is a customer base with their products that can now implement Parsortix. We don't have to supply a separate cancer panel external to Illumina. And secondly, of course, this increases the revenue potential for Illumina and has got them quite interested in working with us on joint sales. Now this form of analysis, as you can see from the image here, identifies twice as many mutations, so actionable DNA variants than ctDNA alone. And it is therefore the case that we believe that very, very important information about how the cancer is progressing is missed by circulating tumor DNA. It's also missed by tissue biopsy because the tissue biopsy is a onetime point. And what happens is the cancer progresses and changes and you can't repeat the tissue biopsy. And that is what has stimulated the interest from the NHS. And they're now considering the idea of testing on a large-scale basis, whether they can, in fact, get additional actionable information from the circulating tumor cells, which would improve the outcome for patients and importantly, reduce the cost of operation. So this whole area of getting the Illumina end-to-end DNA dual analysis to work was a major achievement in the half year. The second major achievement was this first medtech partnership. So this, we think, is the first of many such medtech partnerships. It's driven by the idea that companies who offer tissue-based tests. Now in the case of Myriad Genetics, they do that via large-scale clinical laboratories where they offer tests. These companies basically can only do one time point for the patient. They can only do their test when they've got the tissue available. Now the same approach applies also to medtech companies who sell products. Their products can only be used at a single time point where there is tissue. And this is a crucial limitation on cancer care today, which is that it's all based off -- apart from some ctDNA, which has its own limitations. It's all based off tissue where there's only one time point available. And yet everybody knows that cancer progresses and changes. So with Myriad, the idea here is that they are working with ANGLE to see if they can port one of their cancer tests onto a CTC platform. So that would then enable them to have, as I mentioned, multiple repeat tests for a patient, so that generates repeat revenue for them. And secondly, it opens up the opportunity to provide tests for patients who don't have tissue and quite a lot of patients have a failed tissue biopsy or alternatively, the biopsy tissue is not accessible. So that's 2 major benefits for them. The third potential benefit is actually looking at patients before the tissue diagnosis. So if you have a test, you can do a blood test without any major impact on the patient. So you can do it very early when, in fact, you might not choose to do a tissue biopsy because of the invasive nature of that. So Myriad has made a commitment to expanding its offering across the cancer care continuum. And we see Myriad as an excellent major partner for commercialization. They have, as I mentioned, a very large-scale clinical laboratory establishment, and they're a major player. They have around $800 million in revenue as it stands at the moment. And they're an outstanding partner for us to work with for commercialization because they have already got all the market channels in place. We expect to see other medtech partnerships coming through in due course. Now the reason I've highlighted this area of targeting metastasis is because the Parsortix system has unearthed some amazing information. The fact that there are large-scale circulating tumor cell clusters present in patient blood and that these circulating tumor cell clusters are absolutely incredibly important in terms of the metastasis of the patient. In fact, the Aceto Lab in Switzerland has demonstrated using Parsortix in a mouse model that the cancer is 100x more likely to spread. The metastatic potential is 100x greater where there are circulating tumor cells in a cluster than when the same number of circulating tumor cells are separate rather than attached to one another. And these large-scale circulating tumor cell clusters have never been seen before the advent of Parsortix. Now we previously reported the publications by this group over the last 4 or 5 years in nature. But what they've done is they've stepped forward, and we announced in January a publication again in Nature Medicine, where they have used the Parsortix system with breast cancer patients to identify patients with circulating tumor cell clusters. And then they have given them a heart-related drug called digoxin and showed again using Parsortix, the ability to separate these circulating tumor cell clusters into individual cells. That same process in a mouse reduced the spread and pretty much stopped the cancer progression in the mice compared to identical mice that didn't have the heart-related drug. So there was now a spin-out company that's been set up in Switzerland with the idea of developing a new class of drugs to stop the spread of cancer. And this can only be possible if the Parsortix system is used to identify whether the patient has circulating tumor cell clusters and ensure that the right patients get the drug and then monitored with routine blood test to see whether they need to have the drug again. We expect that there will be major clinical trials using Parsortix in order to progress this further. So a very exciting development for cancer management of the future, and it's entirely enabled by the Parsortix system. So our system has a lot of evidence behind it, and that continues to build. So now we have 46 independent cancer centers in 15 different countries, who have published between them 115 peer-reviewed journal publications on Parsortix across 23 different solid tumor cancers. And all of these publications are positive. So we are now into the phase of commercialization. As I mentioned earlier, we have had some adverse market conditions, which have temporarily slowed the decision-making process at some of the largest companies. However, we have a very major pipeline that we have developed, and we expect to see a whole series of developments coming through in the relative near term. So we're getting started on the Myriad Genetics collaboration, porting their tissue test to CTCs, and we expect to see that expanding over time. We have discussions going with several large pharma companies in relation to multiple projects, and that's being progressed further at an upcoming conference, the World CDx Conference in Boston on the 21st of September, where we have many meetings with pharma to progress these discussions. We also have engagement with multiple med tech companies who will be at that conference, including some who have declared themselves wanting to do joint sales with ANGLE of CTCs -- potential CTC solutions marrying their downstream technology and offering that to pharma, which is a welcome addition to our sales approach. The partnership for DNA dual analysis. So this evidence is now beginning to get out there, and we have several molecular companies, both NGS and other molecular downstream analysis companies looking to partner with us to take that further forward. So we expect to see progress in relation to that. We also have some companies interested in partnering with ANGLE in relation to protein analysis. So this is looking at the proteins such as the HER2 and the Androgen Receptor that I mentioned earlier on in the presentation. There's many different ways that you can analyze these proteins, but you have to have intact cancer cells to do it, and we provide that solution, which isn't otherwise available. The methods can involve immunofluorescence, immunohistochemistry and FISH, to name a few. So there are several companies wanting to partner with us on that. We're hopeful that we'll be able to agree a suitable clinical study with the NHS soon, which would be then to evaluate the benefits that can come from analyzing and circulating tumor cells, first for lung cancer, but then for other cancers. And obviously, the target there would be to generate the clinical evidence which will be sufficient for the NHS to seek to adopt solution from ANGLE as a routine solution. And obviously, we're a U.K. company. We're close to the Royal Marsden, who's heavily involved in this, and we have a number of benefits that we can offer them over and above their current solutions, which are based from the U.S. ctDNA companies. And we -- the NHS is the largest medical market in the world in terms of a single customer, and we believe that adoption by NHS would drive -- further drive worldwide interest in our technology. And as I mentioned, we're working on our own clinical laboratory accreditation. That's going very well, and we expect to see that complete by the end of the year. So in summary, we have a breakthrough technology, and it is capable of transforming cancer patients' outcomes, both diagnosis and treatment as well as reducing costs for health care providers. We believe it provides the best sample for analysis, and particularly that is now being proven for next-generation sequencing, which is the major area of focus for all the health care providers. And it's interesting that NGS is getting a lot of attention. The cost of NGS sequencing is dropping and the sensitivity is increasing. The adoption of artificial intelligence is increasing. And again, that enables patents to be seen that might be missed otherwise and the cost of AI is dropping. So what you actually end up with is a limiting factor is access to the best sample. And we believe that intact living cancer cells taken at a real-time point from the patient blood provides the best possible sample. In terms of downstream analysis, we have got a unique DNA molecular analysis of intact cancer cells married also with the ctDNA, and that gives the ability to look at clonal evolution. And looking at clonal evolution and how the cancer is changing is the driver to get ahead of the spread of disease. And that's why the new drugs to block cancer progression based on Parsortix are a major development. And that's also why the NHS is now expressing strong interest in what ANGLE is doing. So thank you very much for listening. We'll now move to Q&A, and Ian Griffiths, our CFO, will join me for that. Operator: [Operator Instructions] We have our first question from Adam McCarter from Cavendish. Adam McCarter: I've just got a few. So yes, just you talked during the presentation about the challenging environment sort of experienced during H1. Just wanted to know if you've started to see any encouraging signs of these headwinds begin to subside at all in the second half of the year? So second question then just on the NHS. Just how do we sort of think about those NHS clinical studies that Parsortix could be incorporated into the opportunity and the materiality there? And then the final question is obviously good to see sort of more of those high-impact journal publications for Parsortix, particularly the Nature Med one. Are these types of publications helping sort of in your BD efforts and helping progress those conversations with pharma and the medtech? Andrew David Newland: Thank you very much, Adam. The first comment -- question was about encouraging signs. Well, certainly, the Myriad Genetics signing up to go ahead with us was a very encouraging sign. That was a conversation that had been going on for quite some time. And they've taken the decision that despite the conditions, they want to start investing in this. I listened recently to the Chief Executive's presentation of their own results, and they specifically referred to extending their offer into the continuing cancer care continuum. So I thought that was a very promising sign. That said, there are multiple others, which I would have liked to have dropped by now. So let's hope to see -- we'll see some more of them coming through in a similar way. In terms of the NHS side of things, what that's generally speaking about is the fact that they are adopting the blood test-first in lung cancer patients for 15,000 patients per year. And interestingly enough, they literally do throw away the blood cells. And that's quite a compelling argument. You're throwing away the best part of the sample with Parsortix, we can analyze that. So I guess we'll start off with a pilot study first and then if they like it, we can expand. But the good thing is they don't even have to take an additional tube of blood to address this. And in terms of the -- Ian, you can add to this if you wish to. But in terms of the publication side, absolutely, we use these peer-reviewed publications to drive business development. We have a medical writing team that packages that information, and it forms a lot of the interaction that we have with prospective collaborators and customers. Ian Griffiths: Yes. And I'd probably add to the encouraging sign a couple of things. So one is increasing sort of awareness of the need to incorporate multi-omics into oncology and multi-omics, just for clarity, it means not just DNA, but adding in RNA and protein information. And if you look at Illumina, in particular, the way they're developing their next-generation sequencing is they can already do RNA and the sensitivity and cost points are improving that all the time. But they're also introducing a new protein solution as well. So obviously, we've got the perfect sample to fit with the Illumina equipment. And then the other thing is in discussions. So obviously, we produced data earlier in the year on the dual analysis. And that's generating a lot of interest because I think people are quite surprised how much additional DNA information we're finding with CTC-DNA, not just what the ctDNA produces alone. So there's quite a lot of interest around that complementary nature, but the fact that there's a lot of additional data. Operator: Our next question comes from Edward Sham from Singer Capital Markets. Edward Sham: Congratulations on all the operational progress despite the tough sector headwinds. I've got a few questions. But if I could just first start with your kind of your large pharma contracts because you've obviously completed in the first half, the 3 contracts with Eisai and AstraZeneca. I was just wondering how much visibility do you have in converting those into further contracts? And just can you give me a sense of the wider pipeline? Are you seeing strong traction across pharma? Or is it more medtech? Andrew David Newland: So in terms of the visibility on the new contracts, regrettably, we don't control the timing of these large pharma, and they will tell us when they're ready to do whatever it is that they want to do. So that's a bit of a challenge. But we are seeing increased wider interest from large pharma, and we have a very strong roster of meetings at World CDx. And this includes pharma that we've been dealing with for some time. We have been called on by several large pharma to provide them with -- essentially, they call it an RFI, a statement of what we can analyze from CTCs and how that works and how much we would charge them for that. So we do know that there are multiple players at these large pharma who are actively considering adoption of our solutions. What we don't know is when they might decide to jump in and also when those studies would start. So that's it really. I mean basically, there is mounting evidence and mounting interest, but we've got to get it converted. Edward Sham: No, that's really helpful. And then maybe just on the Myriad Genetics collaboration. Can you just outline the key milestones and importantly, how the economics would work if that was to be commercialized at scale? And just kind of give me an idea would that -- would ANGLE's revenues primarily be through services? Or is that also driving part sorting sales and consumables as well? Andrew David Newland: So we gave an announcement in relation to the work with Myriad. It was a bit lighter on details, and that's because they don't want to disclose some of those bits of detail. But I can talk in principles. So initially, we are being paid to provide some direct services to assess our sample going into their test. Some of that work has already been done. Now we're looking at various different modifications, which may improve the outcomes. So that's paid for service work. Assuming that progresses, what I would anticipate is there will be more paid for service work in terms of clinical trials to actually assess how well the CTC test does against the tissue biopsy test. And then beyond that, an implementation would involve us selling them a whole lot of Parsortix machines and setting up -- they would have to set up a Parsortix laboratory. So we'd have quite a lot of product sales. And every single sample, of course, would then need a Parsortix cassette as a consumable. And we currently charge $300 a cassette for that purpose. So that's on the specific tests we're working on at the moment. But they have a whole series of tests. And if the first one is looking good, there's absolutely no reason why they wouldn't do all their tests in a similar way. So we'd expect to see them getting -- wanting to get closer and closer to ANGLE. And then what I just described in terms of the sort of revenue flows being multiplied out by multiple different tests. Edward Sham: That sounds like a really great opportunity. And then just maybe just one last question on costs and runway. So you've highlighted your cash runway goes into Q1 '26. But I was just wondering beyond that, you've mentioned the alternative sources of funding. I was just thinking what can you do now? So realistically, can you take further cost out of the business and kind of what do you think your cash burn is going to look like through to kind of the end of the year? Andrew David Newland: Ian, do you want to cover that one? Ian Griffiths: Yes. Obviously, we are -- and you've seen that from the half year, we are continuing to try and manage our costs tightly. So certain spend has been sort of paused, certain costs have been cut back. But the nature of us being a regulated industry and having to have the sort of capability and capacity to deliver on the projects, deliver on the milestones means there's a certain level of underlying spend. So we're focused very heavily on the sort of that milestone delivery, and that can in itself be sort of one of the potential sources of funds. As we highlighted in the interims, there's a variety of sources of funding that are available to us. It's not just the revenues, but there's also commercial milestones, licensing, other income from collaborations with industry partners as well as sort of debt and equity funding, which is what we've historically done with the company. So we flagged, we will need to raise additional funding through one or a combination of such sources. We know there's challenges on the AIM market and biotech sector, which are well documented. And so our focus is very much is generate the milestones, generate the contracts that show that we're making that commercial progress to secure that support. Operator: [Operator Instructions] We currently have no further audio questions. We'll now move on to our text questions. Our first question is from Franc Gregory from Trinity Delta. She asks, following up on Adam's question, what can you tell us about the state of discussions with large pharma and large medtech companies? Andrew David Newland: So Franc, thanks for the question. So I think I gave a fair amount of information on that. We're talking to large pharma. There's multiple large pharma involved and across a variety of different drug categories. Just to recap, the protein analysis, which is what we've done so far for pharma, such as HER2 Androgen Receptor and the DNA Damage Response proteins, those are all things that have to be done by looking at cells and looking for expression. So they cannot go elsewhere for that. And there is, therefore, quite a lot of interest and particularly from antibody-drug conjugate companies because the antibody-drug conjugate attaches to the cancer cell via the protein. And if that protein is not there, then it won't work. And as an example, AstraZeneca's drug in HER2 is a HER2 antibody-drug conjugate. It is prescribed currently based off tissue biopsy. So if the patient is HER2 positive or HER2 low, then they'll be given that drug but as a second or third-line therapy, and that can be 3, 5 or even more years after the tissue biopsy. So there's published independent data that shows that up to 40% of the HER2 status would have changed in that time frame. This is mirrored across all the different proteins, and that's why the pharma are interested in that. The second interest for the pharma is in relation to the DNA dual analysis. And our pitch there is that the circulating -- so some of the pharma are adopting circulating tumor DNA analysis in their clinical trials. And our pitch to them is you're missing out on information, which might be critical in your clinical trial by not analyzing the circulating tumor cells in the blood cellular component. And that is beginning to gain traction as well. It's obviously a new area because we've only just developed it, but that is the subject of a lot of the conversations in the World CDx. So hopefully, that's a little bit more information on the pharma relationships. In terms of the med tech, we've got several big med tech product providers who offer molecular or protein-based testing solutions, which are sold worldwide, but they don't have access to a repeat sample. And those people are beginning to talk to us about implementing a CTC solution, which could be sold to their customers. And also, there's quite a lot of interest in working for -- jointly to get sales from pharma. And that would help us a lot because credibility of a very big company that they already do companion diagnostics with in tissue, wanting to work with ANGLE would obviously be a credible offering to the pharma. Operator: We have a follow-up question from Franc. How long and complex is the selling cycle into these partnership discussions? Andrew David Newland: Sorry, I missed that. Could you repeat the question? Operator: How long and complex is the selling cycle into these partnership discussions? Andrew David Newland: That's very variable. So what's happened is that the selling cycle has been longer than anticipated for the reasons that I said that these pharma are delaying commitments to various different things. But generally speaking, you're looking at a 6-month engagement before you can actually get into a sale because you're providing information to the pharma on the specific data from -- it was an earlier question, but data from the publications, for example. And then we sometimes do some pilot work ourselves. And so we have to submit a lot of data to be considered before they then decide to go forward. Operator: Our next question comes from Nigel Birks from Cavendish. [ BSL ] highlighted the unique potential of Parsortix in cluster cells a while back. What is new now? And how might this be commercialized? Andrew David Newland: So that's a great question. Thank you very much, Nigel. So what is new is that they have actually used the Parsortix system with breast cancer patients to identify circulating tumor cell clusters. And then they have dosed these patients with the heart drug, digoxin, and they've showed that the circulating tumor cell clusters separate into individual cells. So this is a completely new way of trying to approach cancer therapy is to reduce the competence of the circulating tumor cells to actually grow somewhere else and cause the secondary cancer. The reason that's significant is because well over 90% of patients who die from the metastatic spread to secondary cancer sites. Now that is caused by the circulating tumor cells in clusters landing somewhere else and growing. And there's -- so -- and they've demonstrated in a mouse model that if this heart drug is given, then the circulating tumor cell clusters disaggregate in the mouse and the mouse does not then succumb pretty much at all to the cancer. So it doesn't spread and kill the mouse. So the hope is that, that will translate to cancer patients. Now normally, there would be quite a big risk associated with a transfer of a mouse model across to a human model because there are a variety of differences, which mean that it might not be successful. So this first step shown that they have been successful in disaggregating the circulating tumor cell clusters is incredibly important. But the second element is that there was work done in the mid-1980s and 1985, the first large-scale study was done looking at breast cancer patients and trying to work out differences between the ones who had a successful outcome and the ones who didn't. And what they found was that actually a good factor for a better outcome was relating to having a comorbidity of a heart condition. So can you believe that? So if you've got cancer, you'd be better off if you have a heart condition, you're more likely to survive your cancer than if you don't have a heart condition, which is patently absurd. So the only -- and nobody understood that in the '80s and late '80s when this was investigated in detail. But they then -- and they sort of gave up on it. But now, of course, when we now know that heart drugs disaggregate circulating tumor cell clusters, there's the possibility that, that's the reason why we're seeing the progress in the mouse model. So the spin-out company is now working on some other drug targets very similar to digoxin, but with greater potency for CTC cluster disaggregation and basically less side effects. So that's super exciting because it could likely lead to a lot of work with Parsortix on clinical trials, which we can obviously enable and make money out of. And then as and when it potentially comes to market, the Parsortix is an absolutely crucial element. It would have to be used with every patient on multiple time points. Operator: We currently have no further questions. So I will now hand back to Andrew for closing remarks. Andrew David Newland: Well, I'd like to thank everybody for their support. It's obviously very disappointing that we didn't deliver higher revenue lines. We're hopeful that this will change, and it will change as we get our large pharma and our large med tech collaborations moving forward. And as I mentioned, our clinical lab will open up the potential for us to actually start providing tests for patients. And there is a very, very strong demand from the medical world and patients for this approach. And the fact that the NHS has started engaging with ANGLE is, I believe, a very strong positive. So thank you very much for your support. Have a good day, everybody.