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Operator: Good morning, ladies and gentlemen, and welcome to Zumtobel Group's conference call on the Q1 results for the 2025-'26 financial year. With me on the call are Alfred Felder, our CEO; and Thomas Erath, our CFO. Alfred will walk you through the highlights of the quarter, while Thomas will discuss the financial performance. After the presentation, both gentlemen will be available to answer your questions. In case you have not a copy of the report and the presentation, you may find both documents for download on our web page. After the call, a playback of this conference call will be available on our web page as well. And with this, I hand over to Alfred. Alfred Felder: Good morning. Welcome, ladies and gentlemen, and thank you for joining us today for our Q1 '25-'26 call. This first quarter was again not an easy one for us. Market environment remains very, very challenging. In addition, the geopolitical environment also difficult. And the demand of the new construction, especially in our core markets in Europe is weak, triggered by a lot of shifts and delays. And obviously, that has resulted in figures what we will show in a minute. But before I go into this, as usual, I would like to share with you a couple of highlights, what shows that our strategy, what we have implemented in the beginning of '24 in the different growth areas is materializing. And here a couple of projects. One brought in our headquarter city of Dornbirn, where we are the lighting solution provider, where we have installed the state-of-the-art IoT connected luminaires based on the Saga sockets with our [indiscernible] ready, so the connected solution. It's the product what we have from Dornbirn, the Isaro Pro, what is installed here across the city. Another one, which is part of the core strategy growing in the arena in the sports and here an indoor stadium in Dresden equipped with our Altis, where we have now all type of products, including full color comes with DMX controls, includes a complete turnkey solution with commissioning involved. The next one is a shopping center in Belgrade in Serbia, where we have our factories both for components and luminaires, a refurbishment project with really our complete bandwidth of products called [indiscernible], where we have installed. On the bottom left here, the Campus Founder Lab in Heilbronn in Germany, innovation campus. Here, this is a typical high-end brand Zumtobel product with our high-end products [indiscernible], also including the whole emergency products. And last but not least, in the Italian part of Switzerland in Bellinzona, the fortress here, which is a UNESCO world heritage, where we have done refurbishment products. So the outdated sodium vapor lens from the '90s were replaced by energy-efficient [indiscernible] contrast LED spotlights and the result achieved has been the close collaboration what we had with the local authorities, the lighting designers and the technology suppliers. And with that, on Page 4, let me just give you an overview, and Thomas will then share the details on our financial performance in the first quarter, a period that, as expected, was strongly characterized by our economic uncertainty in the persistently weak market environment. These conditions were also reflected in our business performance. So we have a revenue declined by 7.8% to EUR 266 million. And on the segments, you see the Lighting segment generated a revenue of EUR 210 million, while the revenues of the components remained at EUR 70 million, so which means almost 12% below the previous year quarter 1. Adjusted EBIT at EUR 6.6 million, corresponding to adjusted EBIT of 2.5%. And the figures clearly show that the challenges facing our company remain strong. It is therefore particularly important that we continue to focus on resilience and sustainability within the entire group across the segments. And that includes also, of course, the review of our cost structures. And as part of this, you see on Page 5, we have decided to take the strategic decision to close our unprofitably relatively small U.S. production site in Highland in New York, so Upstate New York, 2 hours from New York City. This measure is part of our Focus+ strategy, what we have revised last year and updated. It will allow us now to focus strongly on our core markets and align our global production network accordingly. And this we will do relatively short term so that the measures are taking -- are contributing to our results. Despite this planned closure, our sales presence in U.S. will remain intact. We aim to continue to provide reliable service to our customers, especially on our international accounts, what we are servicing across all the continents, including the planners, the OEM, as I said, and the architects. And with this, the American markets where we have been mainly with our brand, Zumtobel, we will serve out of our global production network. But also let me turn to a more long-term program. As part of our updated corporate strategy, we analyzed in our first stage our global SG&A costs in an initial phase. And based on this analysis, we are currently developing a global package of measure that will be implemented by the end of the fiscal year '28-'29. The first measures have already been defined. This aim to reduce organizational complexity, minimize the efficiency and optimize the process and overhead, increase decision speed and therefore, enable more customer-facing roles. As you see here from this slide, over the next 4 years, we plan to achieve a significant cost savings in the SG&A area, and the savings will increase annually and are expected to reach a volume of EUR 30 million to EUR 40 million in the fourth year, and that is the financial year '28-'29. The main levers are the leaner organization, as I said, the expansion of our shared service centers. We have them already in Serbia in 2 locations, one in Belgrade, one in our factory location niche and in Portugal and in further process automation. We do expect to see the first effects as early as the current fiscal year with 80% of the savings to be then achieved in '27-'28. The associated restructuring costs will be in the single-digit million range annually up to the including '28-'29 fiscal year. In the Phase 2, what we are currently starting, our efficiency program will also involve the review the areas of operations, purchasing and R&D. And this program will build the foundation for steering our company and our employees safely through these challenging times. At the same time, we will ensure that we are well prepared for future development. This also applies to the economic recovery that the industry is hoping for, especially we will see it later in the page, the signs are turning a little bit more positive for the next 18 months, and we are already positioning our company to strengthen its competitive position. Ladies and gentlemen, with these measures, we are convinced that we can strengthen our company in the future and sustainably long term and be ready for hopefully the ramp-up of the business with a better cost structure with a leaner organization. And with this, I would like to hand over to Thomas, who will explain the Q1 results in more detail. Thomas Erath: Thank you, Alfred. Good morning, ladies and gentlemen. A warm welcome from my side. Let me start with the Lighting segment. Q1 revenues in the Lighting segment amounted to EUR 210.7 million and were 7% below the previous year. The sales increases in parts of Southern and Eastern Europe were unable to offset the negative developments in the U.K. as well as in the Asia Pacific region. The fixed cost savings were not high enough to offset the decline in sales. Adjusted EBIT in the Lighting segment decreased from EUR 20.1 million to EUR 11.4 million. Our adjusted EBIT margin declined to 5.4%. Let's move to the Components segment. On Slide 8, you see revenues in the Components segment declined by 11.8% to EUR 70.9 million. The difficult economic environment led to declining sales across all regions. Adjusted EBIT in the Components segment declined to EUR 1.3 million in the first quarter. The adjusted EBIT margin stood at 1.9%. Slide 9 shows the overall Q1 results for the group. Revenues in the first quarter declined by 7.8% to EUR 266.4 million, mainly as a result of declining revenues in the U.K. and weak sales performance in Asia Pacific. Adjusted EBIT decreased from EUR 20.2 million to EUR 6.6 million. The negative revenue development had an adverse impact of EUR 14.1 million. The adjusted EBIT margin was at 2.5%. Slide 10 provides you with more information on our income statement. As indicated, adjusted EBIT stood at EUR 6.6 million. Special effects were negative EUR 7.4 million and mainly include the cost of the closure of our U.S. plant. After deduction of these special effects, our EBIT totaled minus EUR 0.8 million. Our financial results amounted to minus EUR 3 million. Net financing costs amounted to minus EUR 2 million and other financial income and expenses totaled minus EUR 1 million. They include interest expense for pension obligations, FX and hedging valuation. After the deduction of income taxes, our net profit for the first 3 months amounted to minus EUR 4 million. As a consequence, earnings per share were at minus EUR 0.09. Let's move to our cash flow statement. Cash flow from operating results fell from EUR 32.4 million to EUR 12.8 million. The change in other operating items amounted to minus EUR 11.8 million, mainly this is the result of leasing accruals for variable salary components. Cash flow from operating activities stood at EUR 1.3 million in the first quarter. Cash flow from investing activities amounted to minus EUR 11.9 million for the reporting period. In addition to investments in property, plant and equipment, this also includes capitalized development costs of EUR 5.3 million. As a result, free cash flow equaled minus EUR 10.6 million. Cash flow from financing activities amounted to EUR 12 million for the full year. Let me finish with Slide 12 and give you some comments on our balance sheet. The balance sheet structure remains stable. The equity ratio is almost flat with 41.9%. Net debt increased to EUR 134.4 million. This figure includes the extension of the Spennymoor lease agreement by a further 10 years. Our debt coverage ratio is at 1.98. And with this, I hand back to Alfred. Alfred Felder: This slide, you know already the current market outlook. Before I'm turning into that, let me share some sector insights. We do see after 2 very challenging years, first signs of recovery in Europe, especially on the nonresidential sector. You see it here on the graph from Euroconstruct published in June. And there's a progress in both the renovations and the new build, although the growth remains different in the different countries in Europe. Looking ahead, construction actively is expected to pick up, particularly in the education, health care sectors, while the growth in storage facilities starting to slow. We are still seeing momentum, especially when it comes to data center builds and the new technologies based on artificial intelligence. In short, we are seeing early signals of recovery in the construction market, even if the base differs across the regions. And our strategic focus will be on leveraging these opportunities in renovation and position our group both from components and the lighting level in this area. And let me add, the lighting industry typically comes late in the construction cycle. So the positive momentum will reach us with some delay, especially if I'm referring to the huge investment plan what the German government has issued. Ladies and gentlemen, the overall market and here on Page 14 remains highly challenging with the geopolitical instabilities, what we are all seeing, the ongoing conflicts and the rising protectionism that continues to create significant uncertainty in all our markets. And this makes short and midterm forecasting increasingly complex with low visibility. We are seeing customers adopt a more cautious approach with longer decision-making cycles, more frequent project delays and especially on the components business with very, very short-term projects, what we see in the business. And these dynamics will have an impact on our business. But that said, there are also reasons for cautious optimism. After 2 years of recession, the European nonresidential construction sectors is explained, showing signs of moderate growth. And therefore, we believe we can participate. Taking all this into account, we are anticipating a single-digit percentage decline in the revenues compared to the previous year. Our priority is clear. We are driving operational efficiency, delivering on long-term initiatives and on our updated Focus+ strategy, including the 2 I highlighted here in the start of the call. Given the current revenue pressure and the time required for our measures to take the full effect, we are expecting an adjusted EBIT margin to be in the range of 1% to 4% and continue with our planned CapEx for this year of EUR 50 million. With that, I would like to conclude. Thank you for your attention. And Thomas and myself will be ready and happy to take your questions. Thank you for listening. Operator: [Operator Instructions] And we have the first question coming from the line of Michael Marschallinger from Erste Group. Michael Marschallinger: I got 2. Firstly, on the regional development. Your most important region, DACH, we saw some small decline in the fourth quarter, now some slight growth again in first quarter. And if I understood you correct, you see more positive on the outlook. So I assume we would this trend to continue in the next quarters. Is that correct? Alfred Felder: Yes, thank you for your questions. That's correct. So obviously, in the DACH region, we have 2 very strong countries, which is Austria and Switzerland. And in Germany, we are seeing a slow momentum. But as indicated previously, we are late in the cycle and a lot of these investments are still to be released in construction. But especially when it comes to refurbishment, we believe that we will be able to continue with a slight recovery in the DACH. Michael Marschallinger: Okay. Understood. And then secondly, on this announced restructuring measures on the Slide #6. On this listed measures, where do you see the biggest lever for the announced measures? Organization, I assume, is more footprint in reductions similar to the U.S. Is that correct? And maybe on the time line, if you can comment. Alfred Felder: Yes. So what we have done over the summer, so from late spring to summer, we have analyzed the entire SG&A structure, which means the administrative structures in our headquarters, but as well as the sales territory. And when it comes to leaner organization, just to give you an example, we are planning more to go into the sleep country concept, which means in smaller countries, we are having then a much flatter hierarchy. Let me say, if you have countries like Poland, Hungary, Slovakia, Czech Republic, they are under one leadership. So we are saving some costs in the leadership and having more horsepower than directly out. So the leaner organization has not to do per se with closing sites, but to be more efficient. And in the headquarter, we are, of course, looking into all the processes what we can streamline to get faster and therefore, also reduce cost. Time line, I think you have seen it. We plan to have the first impact already in '25-'26, which is small and then the second one in '26-'27 and more or less reaching 80% of the same. So this is a EUR 30 million to EUR 40 million have been identified with clear measures, with clear, let me say, projects and the plan is now to execute it over time. I mentioned the excellence centers, what we plan to establish more professionally in Serbia and in Portugal. And obviously, you can imagine that this will be a transformation of jobs, what we will then build up there and more or less after that, those jobs in high-cost countries will then be removed. And we are also planning to do this smoothly based on the natural fluctuation. Operator: The next question comes from Elias New from Kepler Cheuvreux. Elias New: I hope you can hear me. My question is really on the sort of year-on-year margin bridge and sort of just trying to understand where that margin decline is coming from. Is that mostly attributable to negative volume growth? Or are there any other main drivers that you can call out? And secondly, if we talk about volume growth, is your expectation still that we will return to growth in the second half of this fiscal year? Thomas Erath: Well, you are right. The main driver is volume. Volume is basically the whole impact of our decline in profitability is volume. Alfred Felder: And your second question, obviously, we do see, and I said this at the beginning, still an extreme weak demand. Like I said in the last call, nothing has changed. We believe that maybe in the second half of calendar year '26, we might see the first impact on recovery simply because we are late in the cycle. So if the German government is issuing the budgets for infrastructure, what comes earlier is refurbishment, and we believe that, that might come as early as second half of '26. So with that said, we believe it will be rather flat also in the second half of this fiscal year, both for the Components business as well as for the Lighting Solutions business. Elias New: That's very clear. And if we just return maybe to sort of the different regional trends. I mean, could you comment on what you're seeing in Europe compared to the U.S.? Because one of your competitors is speaking of a better environment in the U.S. So just wondering if that's something that you are seeing as well. And particularly, I know we spoke about the DACH region already, but maybe there are other sort of regional developments in Europe. So what you're seeing in Eastern Europe relative to Western Europe and Southern Europe? Alfred Felder: Yes. In Eastern Europe, we are seeing a moderate, also flat development, fortunately, not shrinking. In the core countries, what we had -- so we had a very good momentum in U.K. last year, and that is easing out a little bit. So we are not seeing the growth here. Italy, okay, France, weak and also some of the Nordic territories. As you know, our U.S. business never was big. So we are mainly there with high-end Zumtobel products for museums, art galleries, working with international architects. So it's not a substantial revenue here. And Tridonic is also having small revenues in the U.S. Of course, the U.S. market with a full portfolio of what local companies have is in a better shape than Europe, as we know economically. Elias New: Great. Very helpful. And then maybe just final question. I was just wondering what you're seeing on the customer side of your Components business. I mean, specifically with regards to inventory levels, whether you think those are sort of currently elevated or normalized? Any commentary surrounding that would be very helpful. Alfred Felder: No, the inventory levels, what we have in Tridonic internally are on a normal level, so to speak, slightly higher simply because the customer behavior now is even more short term than it was in the past. So obviously, Tridonic customers, the OEM customers, our competitors, Photon and Zumtobel, they are -- if they are winning a project, then they are placing the orders to avoid inventories and it needs to be shipped within a couple of days. And that's a little bit the behavior what we see in the market. Thomas Erath: So -- but -- the question with the inventory of the customer is that they have low inventory levels, but expect Tridonic to deliver within very short notice. They have no destocking, but low inventory levels. And if they get an order, they place it to Tridonic and its competitors and want to have the material on short notice. Elias New: That's great. Very helpful. And just a final question for me on the pricing development in the Components business. What the expectation is for this year and maybe sort of over the midterm, do you expect it to be at the current level or pricing -- price erosion to fade or deteriorate? Any comment around that? Alfred Felder: We are looking it up what it is at the moment. But basically, we are back to the normal behavior with something like 3% price erosion, so to speak. Of course, customers -- or let me put it that way, competitors do all have capacities available. So when it comes to projects, price is important. But luckily, Tridonic has products what are more in the mid- to high end, but everybody can apply for it. Thomas Erath: As Alfred said, 2% to 3% is the price erosion. Operator: The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Three questions from my side, if I may. I'll take them one by one, if that's okay. First one, how much of the Phase 1 savings expected to come from personnel savings and how much is coming from other sources and which are they, if you could maybe give 1 or 2 examples? Alfred Felder: You mean on the SG&A project, right? Patrick Steiner: Yes, exactly. Alfred Felder: So we are not having all these details ready now on what exactly is the personnel savings. But it's a mix of, let me say, savings on, let me say, an example, marketing expenses, but the majority of the savings will be in the range of 66%. Thomas Erath: 70% to 80% will be personnel savings. Patrick Steiner: On the time frame of 4 years, what is this depending on? And could we see a probability of the actual execution of the cost savings program to be quicker than the planned 4 years? Alfred Felder: As I said, one quite significant part of the cost savings will be that we are having a key position with current and future skills built up in the excellence centers in Serbia and in Portugal. And obviously, we have calculated that it will take some time to hire these people, to train these people to give them the responsibility. And therefore, we believe that this is quite an aggressive plan here what we have with reaching 80% in '27-'28. Maybe we can accelerate a little bit what we do in '26-'27. It depends also how this whole setup is working in the different countries. Patrick Steiner: Okay. That's helpful. Last question. The Phase 2 cost savings, can you give us some kind of quantifiable range with accepted cost savings? And also when do you expect to start the second phase of the program? Alfred Felder: It's currently starting. We are going into that with a similar approach like with the SG&A. We are not having the details yet, but we are also expecting a double-digit million savings with that second phase. Operator: [Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Alfred Felder for any closing remarks. Alfred Felder: Yes. Ladies and gentlemen, thank you very much for listening. Thank you very much for your interesting questions. Outlook, as I said, is a little bit shaky with a continuous weak environment, but we are positioning our company for the future, and we will update you on the progress in the next conference call after the half year. Thank you so much for listening, and have a great day ahead.
Operator: Good morning, ladies and gentlemen, and welcome to Zumtobel Group's conference call on the Q1 results for the 2025-'26 financial year. With me on the call are Alfred Felder, our CEO; and Thomas Erath, our CFO. Alfred will walk you through the highlights of the quarter, while Thomas will discuss the financial performance. After the presentation, both gentlemen will be available to answer your questions. In case you have not a copy of the report and the presentation, you may find both documents for download on our web page. After the call, a playback of this conference call will be available on our web page as well. And with this, I hand over to Alfred. Alfred Felder: Good morning. Welcome, ladies and gentlemen, and thank you for joining us today for our Q1 '25-'26 call. This first quarter was again not an easy one for us. Market environment remains very, very challenging. In addition, the geopolitical environment also difficult. And the demand of the new construction, especially in our core markets in Europe is weak, triggered by a lot of shifts and delays. And obviously, that has resulted in figures what we will show in a minute. But before I go into this, as usual, I would like to share with you a couple of highlights, what shows that our strategy, what we have implemented in the beginning of '24 in the different growth areas is materializing. And here a couple of projects. One brought in our headquarter city of Dornbirn, where we are the lighting solution provider, where we have installed the state-of-the-art IoT connected luminaires based on the Saga sockets with our [indiscernible] ready, so the connected solution. It's the product what we have from Dornbirn, the Isaro Pro, what is installed here across the city. Another one, which is part of the core strategy growing in the arena in the sports and here an indoor stadium in Dresden equipped with our Altis, where we have now all type of products, including full color comes with DMX controls, includes a complete turnkey solution with commissioning involved. The next one is a shopping center in Belgrade in Serbia, where we have our factories both for components and luminaires, a refurbishment project with really our complete bandwidth of products called [indiscernible], where we have installed. On the bottom left here, the Campus Founder Lab in Heilbronn in Germany, innovation campus. Here, this is a typical high-end brand Zumtobel product with our high-end products [indiscernible], also including the whole emergency products. And last but not least, in the Italian part of Switzerland in Bellinzona, the fortress here, which is a UNESCO world heritage, where we have done refurbishment products. So the outdated sodium vapor lens from the '90s were replaced by energy-efficient [indiscernible] contrast LED spotlights and the result achieved has been the close collaboration what we had with the local authorities, the lighting designers and the technology suppliers. And with that, on Page 4, let me just give you an overview, and Thomas will then share the details on our financial performance in the first quarter, a period that, as expected, was strongly characterized by our economic uncertainty in the persistently weak market environment. These conditions were also reflected in our business performance. So we have a revenue declined by 7.8% to EUR 266 million. And on the segments, you see the Lighting segment generated a revenue of EUR 210 million, while the revenues of the components remained at EUR 70 million, so which means almost 12% below the previous year quarter 1. Adjusted EBIT at EUR 6.6 million, corresponding to adjusted EBIT of 2.5%. And the figures clearly show that the challenges facing our company remain strong. It is therefore particularly important that we continue to focus on resilience and sustainability within the entire group across the segments. And that includes also, of course, the review of our cost structures. And as part of this, you see on Page 5, we have decided to take the strategic decision to close our unprofitably relatively small U.S. production site in Highland in New York, so Upstate New York, 2 hours from New York City. This measure is part of our Focus+ strategy, what we have revised last year and updated. It will allow us now to focus strongly on our core markets and align our global production network accordingly. And this we will do relatively short term so that the measures are taking -- are contributing to our results. Despite this planned closure, our sales presence in U.S. will remain intact. We aim to continue to provide reliable service to our customers, especially on our international accounts, what we are servicing across all the continents, including the planners, the OEM, as I said, and the architects. And with this, the American markets where we have been mainly with our brand, Zumtobel, we will serve out of our global production network. But also let me turn to a more long-term program. As part of our updated corporate strategy, we analyzed in our first stage our global SG&A costs in an initial phase. And based on this analysis, we are currently developing a global package of measure that will be implemented by the end of the fiscal year '28-'29. The first measures have already been defined. This aim to reduce organizational complexity, minimize the efficiency and optimize the process and overhead, increase decision speed and therefore, enable more customer-facing roles. As you see here from this slide, over the next 4 years, we plan to achieve a significant cost savings in the SG&A area, and the savings will increase annually and are expected to reach a volume of EUR 30 million to EUR 40 million in the fourth year, and that is the financial year '28-'29. The main levers are the leaner organization, as I said, the expansion of our shared service centers. We have them already in Serbia in 2 locations, one in Belgrade, one in our factory location niche and in Portugal and in further process automation. We do expect to see the first effects as early as the current fiscal year with 80% of the savings to be then achieved in '27-'28. The associated restructuring costs will be in the single-digit million range annually up to the including '28-'29 fiscal year. In the Phase 2, what we are currently starting, our efficiency program will also involve the review the areas of operations, purchasing and R&D. And this program will build the foundation for steering our company and our employees safely through these challenging times. At the same time, we will ensure that we are well prepared for future development. This also applies to the economic recovery that the industry is hoping for, especially we will see it later in the page, the signs are turning a little bit more positive for the next 18 months, and we are already positioning our company to strengthen its competitive position. Ladies and gentlemen, with these measures, we are convinced that we can strengthen our company in the future and sustainably long term and be ready for hopefully the ramp-up of the business with a better cost structure with a leaner organization. And with this, I would like to hand over to Thomas, who will explain the Q1 results in more detail. Thomas Erath: Thank you, Alfred. Good morning, ladies and gentlemen. A warm welcome from my side. Let me start with the Lighting segment. Q1 revenues in the Lighting segment amounted to EUR 210.7 million and were 7% below the previous year. The sales increases in parts of Southern and Eastern Europe were unable to offset the negative developments in the U.K. as well as in the Asia Pacific region. The fixed cost savings were not high enough to offset the decline in sales. Adjusted EBIT in the Lighting segment decreased from EUR 20.1 million to EUR 11.4 million. Our adjusted EBIT margin declined to 5.4%. Let's move to the Components segment. On Slide 8, you see revenues in the Components segment declined by 11.8% to EUR 70.9 million. The difficult economic environment led to declining sales across all regions. Adjusted EBIT in the Components segment declined to EUR 1.3 million in the first quarter. The adjusted EBIT margin stood at 1.9%. Slide 9 shows the overall Q1 results for the group. Revenues in the first quarter declined by 7.8% to EUR 266.4 million, mainly as a result of declining revenues in the U.K. and weak sales performance in Asia Pacific. Adjusted EBIT decreased from EUR 20.2 million to EUR 6.6 million. The negative revenue development had an adverse impact of EUR 14.1 million. The adjusted EBIT margin was at 2.5%. Slide 10 provides you with more information on our income statement. As indicated, adjusted EBIT stood at EUR 6.6 million. Special effects were negative EUR 7.4 million and mainly include the cost of the closure of our U.S. plant. After deduction of these special effects, our EBIT totaled minus EUR 0.8 million. Our financial results amounted to minus EUR 3 million. Net financing costs amounted to minus EUR 2 million and other financial income and expenses totaled minus EUR 1 million. They include interest expense for pension obligations, FX and hedging valuation. After the deduction of income taxes, our net profit for the first 3 months amounted to minus EUR 4 million. As a consequence, earnings per share were at minus EUR 0.09. Let's move to our cash flow statement. Cash flow from operating results fell from EUR 32.4 million to EUR 12.8 million. The change in other operating items amounted to minus EUR 11.8 million, mainly this is the result of leasing accruals for variable salary components. Cash flow from operating activities stood at EUR 1.3 million in the first quarter. Cash flow from investing activities amounted to minus EUR 11.9 million for the reporting period. In addition to investments in property, plant and equipment, this also includes capitalized development costs of EUR 5.3 million. As a result, free cash flow equaled minus EUR 10.6 million. Cash flow from financing activities amounted to EUR 12 million for the full year. Let me finish with Slide 12 and give you some comments on our balance sheet. The balance sheet structure remains stable. The equity ratio is almost flat with 41.9%. Net debt increased to EUR 134.4 million. This figure includes the extension of the Spennymoor lease agreement by a further 10 years. Our debt coverage ratio is at 1.98. And with this, I hand back to Alfred. Alfred Felder: This slide, you know already the current market outlook. Before I'm turning into that, let me share some sector insights. We do see after 2 very challenging years, first signs of recovery in Europe, especially on the nonresidential sector. You see it here on the graph from Euroconstruct published in June. And there's a progress in both the renovations and the new build, although the growth remains different in the different countries in Europe. Looking ahead, construction actively is expected to pick up, particularly in the education, health care sectors, while the growth in storage facilities starting to slow. We are still seeing momentum, especially when it comes to data center builds and the new technologies based on artificial intelligence. In short, we are seeing early signals of recovery in the construction market, even if the base differs across the regions. And our strategic focus will be on leveraging these opportunities in renovation and position our group both from components and the lighting level in this area. And let me add, the lighting industry typically comes late in the construction cycle. So the positive momentum will reach us with some delay, especially if I'm referring to the huge investment plan what the German government has issued. Ladies and gentlemen, the overall market and here on Page 14 remains highly challenging with the geopolitical instabilities, what we are all seeing, the ongoing conflicts and the rising protectionism that continues to create significant uncertainty in all our markets. And this makes short and midterm forecasting increasingly complex with low visibility. We are seeing customers adopt a more cautious approach with longer decision-making cycles, more frequent project delays and especially on the components business with very, very short-term projects, what we see in the business. And these dynamics will have an impact on our business. But that said, there are also reasons for cautious optimism. After 2 years of recession, the European nonresidential construction sectors is explained, showing signs of moderate growth. And therefore, we believe we can participate. Taking all this into account, we are anticipating a single-digit percentage decline in the revenues compared to the previous year. Our priority is clear. We are driving operational efficiency, delivering on long-term initiatives and on our updated Focus+ strategy, including the 2 I highlighted here in the start of the call. Given the current revenue pressure and the time required for our measures to take the full effect, we are expecting an adjusted EBIT margin to be in the range of 1% to 4% and continue with our planned CapEx for this year of EUR 50 million. With that, I would like to conclude. Thank you for your attention. And Thomas and myself will be ready and happy to take your questions. Thank you for listening. Operator: [Operator Instructions] And we have the first question coming from the line of Michael Marschallinger from Erste Group. Michael Marschallinger: I got 2. Firstly, on the regional development. Your most important region, DACH, we saw some small decline in the fourth quarter, now some slight growth again in first quarter. And if I understood you correct, you see more positive on the outlook. So I assume we would this trend to continue in the next quarters. Is that correct? Alfred Felder: Yes, thank you for your questions. That's correct. So obviously, in the DACH region, we have 2 very strong countries, which is Austria and Switzerland. And in Germany, we are seeing a slow momentum. But as indicated previously, we are late in the cycle and a lot of these investments are still to be released in construction. But especially when it comes to refurbishment, we believe that we will be able to continue with a slight recovery in the DACH. Michael Marschallinger: Okay. Understood. And then secondly, on this announced restructuring measures on the Slide #6. On this listed measures, where do you see the biggest lever for the announced measures? Organization, I assume, is more footprint in reductions similar to the U.S. Is that correct? And maybe on the time line, if you can comment. Alfred Felder: Yes. So what we have done over the summer, so from late spring to summer, we have analyzed the entire SG&A structure, which means the administrative structures in our headquarters, but as well as the sales territory. And when it comes to leaner organization, just to give you an example, we are planning more to go into the sleep country concept, which means in smaller countries, we are having then a much flatter hierarchy. Let me say, if you have countries like Poland, Hungary, Slovakia, Czech Republic, they are under one leadership. So we are saving some costs in the leadership and having more horsepower than directly out. So the leaner organization has not to do per se with closing sites, but to be more efficient. And in the headquarter, we are, of course, looking into all the processes what we can streamline to get faster and therefore, also reduce cost. Time line, I think you have seen it. We plan to have the first impact already in '25-'26, which is small and then the second one in '26-'27 and more or less reaching 80% of the same. So this is a EUR 30 million to EUR 40 million have been identified with clear measures, with clear, let me say, projects and the plan is now to execute it over time. I mentioned the excellence centers, what we plan to establish more professionally in Serbia and in Portugal. And obviously, you can imagine that this will be a transformation of jobs, what we will then build up there and more or less after that, those jobs in high-cost countries will then be removed. And we are also planning to do this smoothly based on the natural fluctuation. Operator: The next question comes from Elias New from Kepler Cheuvreux. Elias New: I hope you can hear me. My question is really on the sort of year-on-year margin bridge and sort of just trying to understand where that margin decline is coming from. Is that mostly attributable to negative volume growth? Or are there any other main drivers that you can call out? And secondly, if we talk about volume growth, is your expectation still that we will return to growth in the second half of this fiscal year? Thomas Erath: Well, you are right. The main driver is volume. Volume is basically the whole impact of our decline in profitability is volume. Alfred Felder: And your second question, obviously, we do see, and I said this at the beginning, still an extreme weak demand. Like I said in the last call, nothing has changed. We believe that maybe in the second half of calendar year '26, we might see the first impact on recovery simply because we are late in the cycle. So if the German government is issuing the budgets for infrastructure, what comes earlier is refurbishment, and we believe that, that might come as early as second half of '26. So with that said, we believe it will be rather flat also in the second half of this fiscal year, both for the Components business as well as for the Lighting Solutions business. Elias New: That's very clear. And if we just return maybe to sort of the different regional trends. I mean, could you comment on what you're seeing in Europe compared to the U.S.? Because one of your competitors is speaking of a better environment in the U.S. So just wondering if that's something that you are seeing as well. And particularly, I know we spoke about the DACH region already, but maybe there are other sort of regional developments in Europe. So what you're seeing in Eastern Europe relative to Western Europe and Southern Europe? Alfred Felder: Yes. In Eastern Europe, we are seeing a moderate, also flat development, fortunately, not shrinking. In the core countries, what we had -- so we had a very good momentum in U.K. last year, and that is easing out a little bit. So we are not seeing the growth here. Italy, okay, France, weak and also some of the Nordic territories. As you know, our U.S. business never was big. So we are mainly there with high-end Zumtobel products for museums, art galleries, working with international architects. So it's not a substantial revenue here. And Tridonic is also having small revenues in the U.S. Of course, the U.S. market with a full portfolio of what local companies have is in a better shape than Europe, as we know economically. Elias New: Great. Very helpful. And then maybe just final question. I was just wondering what you're seeing on the customer side of your Components business. I mean, specifically with regards to inventory levels, whether you think those are sort of currently elevated or normalized? Any commentary surrounding that would be very helpful. Alfred Felder: No, the inventory levels, what we have in Tridonic internally are on a normal level, so to speak, slightly higher simply because the customer behavior now is even more short term than it was in the past. So obviously, Tridonic customers, the OEM customers, our competitors, Photon and Zumtobel, they are -- if they are winning a project, then they are placing the orders to avoid inventories and it needs to be shipped within a couple of days. And that's a little bit the behavior what we see in the market. Thomas Erath: So -- but -- the question with the inventory of the customer is that they have low inventory levels, but expect Tridonic to deliver within very short notice. They have no destocking, but low inventory levels. And if they get an order, they place it to Tridonic and its competitors and want to have the material on short notice. Elias New: That's great. Very helpful. And just a final question for me on the pricing development in the Components business. What the expectation is for this year and maybe sort of over the midterm, do you expect it to be at the current level or pricing -- price erosion to fade or deteriorate? Any comment around that? Alfred Felder: We are looking it up what it is at the moment. But basically, we are back to the normal behavior with something like 3% price erosion, so to speak. Of course, customers -- or let me put it that way, competitors do all have capacities available. So when it comes to projects, price is important. But luckily, Tridonic has products what are more in the mid- to high end, but everybody can apply for it. Thomas Erath: As Alfred said, 2% to 3% is the price erosion. Operator: The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Three questions from my side, if I may. I'll take them one by one, if that's okay. First one, how much of the Phase 1 savings expected to come from personnel savings and how much is coming from other sources and which are they, if you could maybe give 1 or 2 examples? Alfred Felder: You mean on the SG&A project, right? Patrick Steiner: Yes, exactly. Alfred Felder: So we are not having all these details ready now on what exactly is the personnel savings. But it's a mix of, let me say, savings on, let me say, an example, marketing expenses, but the majority of the savings will be in the range of 66%. Thomas Erath: 70% to 80% will be personnel savings. Patrick Steiner: On the time frame of 4 years, what is this depending on? And could we see a probability of the actual execution of the cost savings program to be quicker than the planned 4 years? Alfred Felder: As I said, one quite significant part of the cost savings will be that we are having a key position with current and future skills built up in the excellence centers in Serbia and in Portugal. And obviously, we have calculated that it will take some time to hire these people, to train these people to give them the responsibility. And therefore, we believe that this is quite an aggressive plan here what we have with reaching 80% in '27-'28. Maybe we can accelerate a little bit what we do in '26-'27. It depends also how this whole setup is working in the different countries. Patrick Steiner: Okay. That's helpful. Last question. The Phase 2 cost savings, can you give us some kind of quantifiable range with accepted cost savings? And also when do you expect to start the second phase of the program? Alfred Felder: It's currently starting. We are going into that with a similar approach like with the SG&A. We are not having the details yet, but we are also expecting a double-digit million savings with that second phase. Operator: [Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Alfred Felder for any closing remarks. Alfred Felder: Yes. Ladies and gentlemen, thank you very much for listening. Thank you very much for your interesting questions. Outlook, as I said, is a little bit shaky with a continuous weak environment, but we are positioning our company for the future, and we will update you on the progress in the next conference call after the half year. Thank you so much for listening, and have a great day ahead.
Operator: Greetings, and welcome to the Frequency Electronics First Quarter Fiscal 2026 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer. Thomas McClelland: Thank you. Good afternoon, and thanks for joining the Frequency Electronics First Quarter Fiscal Year 2026 Earnings Call. With me today is our Chief Financial Officer, Steve Bernstein. On our fourth quarter fiscal 2025 earnings call in July, I told you that particularly strong execution allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a more extended period of time in fiscal 2025, '26 and beyond. So while we do not provide guidance given the inherently lumpy nature of contract awards and customer-driven activity, we did want to point out in July that the previous quarter, the highest revenue quarter in 25 years, should not be viewed as the near-term new normal. We anticipated instead that the fiscal first quarter of 2026 would look more like the first 2 quarters in fiscal 2025. This would have been the case, but for customer-driven delays on a few key programs that pushed revenue recognition out of the fiscal first quarter. Recall that the allocations for space and defense-related programs that were enacted by Congress were first finalized in early July with only a few weeks left in the quarter, which created some late quarter customer scrambling. Critically, this revenue will still be earned in the coming quarters and predominantly in this current fiscal year. These are neither cancellations nor contract reductions. In fact, we expect at least one of these programs to be meaningfully increased in total contract value. Now that we're 6 weeks into this second fiscal quarter, I can clearly state that the issues we saw in the first quarter related to customer-led delays are now behind us, and we're making significant progress towards a bigger book of business. When we have a quarter like this first one with lower revenue than recent trend levels, while we're still investing in growth for the future, we can see temporarily lower levels of profitability. But make no mistake, this is not your grandfather's FEI. We have fundamentally transformed this business over the past few years to be a larger, more profitable, more cash-generative company that invests in the future and rewards shareholders for years to come. One indication of our future success is that our funded backlog remains at historically high levels, but we're also actively bidding on new programs and anticipate meaningful new business in the near term. Some of the programs we're bidding on are larger than the typical contract wins we've previously reported. Furthermore, these programs have significant follow-on potential over the next decade and beyond. Both space and non-space defense activity point to continued healthy growth in our core markets, both for our legacy products and our next-generation technology. Notable programs we're involved in include Golden Dome, Patriot missile system, B-2 bomber, and Terminal High Altitude Area Defense system, or THAAD, as well as other multi-domain defense systems. To support these markets as well as our new initiatives in quantum sensing, the company recently opened an engineering facility in Boulder, Colorado and hired senior scientists formerly with the National Institute of Standards Technology, Time and Frequency Division. These physicists and others who are expected to join FEI at the Boulder facility in the near future will support ongoing company programs and new technology efforts. We anticipate that the Boulder facility will contribute positively to the bottom line by the third quarter of this fiscal year. In addition, as noted previously, we're pursuing external government funding for research and development with significant activity underway, particularly in the area of quantum sensing, which is a large emerging market for us. Building on the enthusiastic response and strong encouragement from last year, our company will host its second annual Quantum Sensing Summit in New York City this October. This scientific conference will convene leaders from government, academia, industry and other laboratories to explore emerging technologies, discuss strategies for realizing their full potential and reinforce our nation's leadership in this critical field as well as FEI's expanding strategic role in advancing this technology. We're excited about the enthusiasm, which has developed around this event. Additional details related to this event are available on the Frequency Electronics website. We have always been a quantum physics organization. Quantum is at the heart of atomic clocks that we have designed and produced for many years. This area of our business is robust and taking on more meaning in the position, navigation and timing, high reliability security complex, and our solutions are critical elements of mission assurance and surveillance. What has changed over the past year or so is that our customers need quantum solutions, particularly in sensing that are real and timely in order to deal with an increasingly tech-focused and conflicted global defense landscape. We are in a prime position to deliver solutions given our technology expertise in defense, space and quantum. Our opportunity set is not only the best we've seen, but we believe is also the best in our industry, and our relevancy is critical to the mission of the defense of our country and allied partners. Although this quarter showed a temporary decline in revenue and earnings, our strong fundamentals remain unchanged. We continue to generate profitability in our core technologies and are actively investing in innovation to drive long-term growth. With a debt-free balance sheet and the unwavering commitment of our talented workforce, we're confident in the company's continued strength and bright outlook. Our leadership in position, navigation and timing has never been more paramount in the industry. Traditional customers as well as emerging leaders are engaging with FEI, recognizing our unparalleled and growing technical leadership, coupled with manufacturing expertise. We have also now proven our ability to execute complex contracts with greater speed and precision than industry norms. In recent years, we have returned cash to shareholders via 2 significant special dividends while still investing in the business for future growth. Today, the company announced a $20 million authorization for the repurchase of shares, and we remain committed to both investing for the future and finding ways to return cash to shareholders. Please see today's 8-K for further information. Before I turn the call over to Steve to discuss our financials in greater depth, I want to highlight an issue making global headlines that goes to the heart of our mission, the growing battle to protect time. As the Financial Times recently reported, the ultra-precise clocks that power GPS and other satellite systems are increasingly at risk. From war time jamming and spoofing to accidental outages and even potential attacks on satellites themselves. This isn't just about navigation. Time is the invisible utility that keeps the world running. Financial markets, power grids, telecom networks and emergency services all depend on precise secure timing. Even a small disruption can ripple through critical infrastructure with serious consequences. In one recent case, suspected Russian GPS interference forced the European Commission President's plane to abandon satellite guidance and land in Bulgaria reportedly using paper maps. That's why governments worldwide are accelerating investments in resilient timing. The U.S. has unveiled its most advanced atomic clock. The U.K. and France have pledged to strengthen infrastructure together. Sweden is upgrading national timing systems to secure 5G communications. For FEI, this is powerful validation. Our technologies in alternative PNT and quantum enhanced timing are designed precisely to close these vulnerabilities. We're not just a supplier, we're a strategic partner helping ensure that our nation and our allies can rely on resilient, secure and sovereign sources of time. In summary, we remain highly confident in our continued upward but not necessarily linear trajectory and our increasing strategic importance in the industry. We look forward to demonstrating this in the quarters and years to come. I'll now turn the call over to Steve, and I look forward to taking your questions in a little bit later in the call. Steven Bernstein: Thank you, Tom. Good afternoon. For the 3 months ending July 31, 2025, consolidated revenue was $13.8 million compared to $15.1 million for the same period of the prior fiscal year. The components of revenue are as follows: revenue from commercial and U.S. government satellite programs was approximately $6.5 million or 47% compared to $8.3 million or 55% in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FEI-New York segment. Revenues from non-space U.S. government and DOD customers, which are recorded both in the FEI-New York and FEI-Zyfer segments were $6.9 million compared to $6.3 million in the same period of the prior fiscal year and accounted for approximately 50% of consolidated revenues compared to 42% for the prior fiscal year. Other commercial and industrial revenues were approximately $439,000 compared to approximately $544,000 in the prior fiscal year. The revenue for the 3 months ending July 31, '25, is lower than expected due largely to several externally imposed program delays, which halted work on the affected programs. Importantly, these delays are not expected to result in overall program revenue reductions and the revenue shortfall from the first quarter of fiscal '26 is expected to be made up in the upcoming quarters, predominantly in this fiscal year. For the 3 months ending July 31, '25, both gross margin and gross margin rate decreased compared to the same period in the prior fiscal year. The decrease in gross margin was primarily due to the decrease in revenue and the decrease in gross margin rate was attributable to quarterly fluctuations in the mix of business activity between higher-margin programs and lower-margin programs. As we have stated in the past, gross margin on the manufacture of existing products are generally high, whereas gross margin on development efforts and new products are typically lower. For the 3 months ending July 31, '25 and '24, selling, general and administrative expenses were approximately 26% and 19%, respectively, of consolidated revenue. The increase in SG&A expense during the 3 months ending July 31, '25, was primarily related to onetime expenses related to investments in the future growth of the company, including expansion into Colorado and quantum sensing and an increase in payroll-related expenses. R&D expense for the 3 months ending July 31, 2025, decreased to approximately $1.1 million from $1.5 million for the 3 months ending July 31, a decrease of approximately $400,000 and were approximately 8% and 10%, respectively, of consolidated revenue. Fluctuation in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The company plans to continue to invest in R&D in the future to keep its products at the state-of-the-art. For the 3 months ended July 31, '25, the company recorded operating income of approximately $364,000 compared to an operating income of approximately $2.4 million in the prior fiscal year. Operating income decreased due to lower revenue and gross margin, as previously mentioned. Other income expense net is derived from various sources. The majority of the approximately $200,000 investment income for the 3 months ending July 31, '25, was from interest income and unrealized gains on assets held in the Frequency Electronics deferred comp trust. This yields a pretax income of approximately $556,000 for the 3 months ending July 31, '25, compared to an approximately $2.6 million pretax income for the 3 months ending July 31, '24. For the 3 months ending July 31, the company recorded a tax benefit of $77,000 compared to a tax provision of $133,000 for the same period of the prior fiscal year. Consolidated net income for the 3 months ending July 31, '25, was approximately $634,000 or $0.07 per share compared to approximately $2.4 million or $0.25 per share for the same period of the prior fiscal year. Our fully funded backlog at the end of July 25 was approximately $71 million compared to approximately $70 million for the previous fiscal year ended April 30, '25. The company's balance sheet continues to reflect a strong working capital position of approximately $30 million at July 31, '25, and a current ratio of approximately 2.3:1. Additionally, the company is debt-free. The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and the foreseeable future. I will call -- turn the call back to Tom, and we look for your questions shortly. Thomas McClelland: Thanks, Steve. I think we're now prepared to take questions. Operator: [Operator Instructions] And the first question today is coming from George Marema from Pareto Ventures. George Marema: Thanks, Tom. Back in the beginning of the year, this last winter, you kind of outlined some of your various clock technologies, including the rubidium vapor clock, the mercury ion clock, of course, quantum sensing and NV Diamond magnetometer and you kind of gave some time lines on that. I just wonder if I can get an update on sort of the progress on these, the productization of these things and sort of like an updated time line on when these might be convert to actual product. Thomas McClelland: Okay. Well, keep in mind that we have atomic clocks that are available off the shelf at this time. And in fact, we're actively producing. In particular, we have a satellite grade state-of-the-art GPS atomic clock for GNSS satellite systems that we're actively producing. But to address some of the more advanced things that we are working on, in particular, as you stated, we're working on mercury ion, atomic clock. And we are actually beginning to produce prototypes at this point in time in collaboration with the Jet Propulsion Laboratory. And we anticipate that this will be ready for low-rate production in another year or so. We're also, as you stated, working on various magnetometer technologies. This is primarily to support a very important field at this point in time, which is alternate navigation sources that are completely independent of GPS and related satellite navigation systems. We have externally supported programs to develop this technology, in particular, NV Diamond magnetometer technology. And we anticipate by the middle of next calendar year to have prototypes available to support testing done by some of the -- our potential customers. And roughly a year after that, we're anticipating that we'll have a next generation higher performance devices available. Let me leave it at that. George Marema: Okay. And I had one more question, which is kind of a 2-part question about quantum sensing. The first one is just sort of a general update on where we are on the space application. But -- and I know you guys focus on space applications, but I was wondering, there seems to be some emerging research on how quantum sensing can also be used in other areas like quantum computing, for example. Has there been any thought, discussion or interest in applying your technology to anything outside of space? Thomas McClelland: Yes. So quantum computing doesn't necessarily exclude space. So the space, it's not like those are opposites, space and quantum computing. But certainly, we also don't need to do quantum computing in space. I think that at this point in time, we are not investing directly in quantum computing. But a lot of the technologies that we're working on potentially have applications in quantum computing. And I think our approach is that quantum computing is a very tricky kind of business. I think everybody realizes it's not ready for prime time right now and an awful lot of people working on it. And instead, we're focusing on some aspects of quantum sensing that it's very clear that we can make a contribution very quickly in the near future. At the same time, I think we are aware of what's going on in quantum computing, and we're trying to put together a workforce that's part of the reason for our investment in the Colorado facility so that we put together an engineering team with the kind of expertise that can potentially contribute to quantum computing in the future. George Marema: Okay. Thank you, Tom, for your outstanding leadership. I appreciate it. Thomas McClelland: Thanks. Operator: [Operator Instructions] And there were no other questions from the lines at this time. I will now hand the call back to Thomas McClelland for closing remarks. Thomas McClelland: Okay. Well, I would like to thank everybody for taking the time to listen and to participate in today's earnings call. We look forward to providing further updates in the coming months. Thank you. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the ADF results for 3 months and 6 months ending July 31, 2025 conference call. [Operator Instructions] This call is being recorded on Thursday, September 11, 2025. I would now like to turn the conference over to Mr. Jean-Francois Boursier, Chief Financial Officer. Please go ahead. Jean-François Boursier: Good morning, and welcome to ADF's conference call covering the second quarter and 6 months ended July 31, 2025. The I am with Jean Paschini, Chairman of the Board and CEO of ADF, who will be available to answer your question at the end of the call. I will first update you on our quarterly and year-to-date results, which were disclosed earlier this morning by press release and then proceed with a quick update about our operations, including our multiyear contract announcement from last July 23rd and also about last week's acquisition announcement. First, a word of caution. Please note that some of the issues discussed today may include forward-looking statements. These are documented in ADF Group's management report for the second quarter and 6 months ended July 31, 2025, which were filed with SEDAR this morning. Revenues for the quarter ended July 31, 2025, at $53 million were $21.9 million lower than last year. Year-to-date, revenues stood at $108.5 million compared to $182.3 million for the 6-month period ended July 31, 2024. While the corporation's order backlog is more than adequate, exceeding $468 million as of July 31, 2025. The uncertainty surrounding the U.S. tariffs has created a nonrecoverable delay in fabrication hours, mainly at ADF plant in Terrebonne, Quebec. As such, and as previously announced, a work-sharing program was implemented at ADF plant in Terrebonne, Quebec and remained in place for virtually the entire quarter ended July 31, 2025, thus, reducing fabrication hours and consequently, revenues for the same quarter and year-to-date. We closed the second quarter ended July 31, 2025, with gross margin of 20.7% as a percentage of revenues down from the exceptionally high 36.9% margin for the quarter ended July 31, 2024. While the year-to-date gross margins as a percentage of revenues at 21.3% is also down from the 32.3% margin for the 6-month period ended last year, July 31, 2024. As I just mentioned, the decrease in revenues required ADF to implement a work-sharing program at its Terrebonne plant. This program has allowed the corporation to mitigate the negative cost impacts of the decrease in fabrication hours but not entirely. Tariffs also had an indirect negative impact on the corporation margins, impact which is caused by the increase in the price of steel set by the U.S. steel mills. Adjusted EBITDA for the quarter ended July 31, 2025, at $3.7 million compared to $24.9 million for the same quarter ended a year ago, while year-to-date adjusted EBITDA stood at $14.1 million compared to $48 million for the 6 months ended a year ago. It is worth mentioning that while the financial results for the period ending July 31, 2025, are severely impacted by the tariff and associated turmoil, last year's results were impacted by an exceptionally favorable product mix. Again, this quarter, the mark-to-market valuation of our DSUs and PSUs impacted our SG&A expenses. For the quarter, and considering the increase in ADF share price during that quarter, SG&A expenses at $8.8 million were $4.6 million higher than last year. The stock price variation for the full 6 months was not as significant. As such, year-to-date SG&A expenses stood at $12.2 million actually $1.7 million lower than for the 6 months ended July 31, 2024. We, therefore, closed our second quarter with net income of $898,000 or $0.03 per share compared to $16 million or $0.51 per share for the corresponding quarter a year ago. Year-to-date, net income stood at $9.6 million or $0.34 per share compared to $31.3 million or $0.98 per share for the same period ended July 31, 2024. We closed our second quarter with $50.9 million in cash and cash equivalents, $9.1 million lower when compared to the January 31, 2025, closing balance, while working capital as of July 31, 2025, reached $105.5 million. Year-to-date, operating cash flow reached $7.4 million for the 6-month period ended July 31, 2025, while we spent $3 million on property, plant and equipment and intangible assets acquisitions, including an update of ADF ERP system, which is scheduled to take place over the next 3 fiscal years. In addition, and as mentioned with the July 23 multiyear contract announcement, we will be investing in new equipment at our Terrebonne site, which should bring our full year CapEx investment at approximately $11 million. Yesterday, our Board of Directors approved the payment of the second semiannual dividend, which now stands at $0.02 per share. This dividend will be paid on October 16 to shareholders of record as of September 26, 2025. Finally, we closed the quarter and 6 months ended July 31, 2025, with an order backlog of $468 million. It should be noted that the order backlog as at July 31, 2025, does not include the option to extend the contract announced last July 23 by 5 years. We cannot escape from the negative impact of the U.S. tariffs on our year-to-date results. This said, we have chosen to look ahead and find innovative solutions to these new challenges. In light of the new economic realities, we have put in place solutions that will allow ADF to not only continue its growth, but also to protect itself against the uncertainties brought about these changes in trade policies. First, we announced a few weeks ago a 5-year term contract, including an option to extend it by -- to extend it 5 additional years for a new infrastructure project in the energy sector in Quebec. Moreover, on September 2, we also announced that ADF had entered into an agreement to acquire, subject to the approval of the Superior Court of Quebec, the Group LAR and certain of its subsidiaries. Briefly, Group LAR is a Canadian leader in the design, manufacture and installation of mechanically welded steel structures, primarily focused on the rapidly expanding large-scale hydroelectricity market, the LAR Group also offers customized overhead crane solution for the heavy industry. The LAR Group generated close to $81 million in revenues for the fiscal year ended December 31, 2024, and had an order backlog of $104.5 million as of July 31, 2025, which should progressively be realized before the end of ADF fiscal year ending January 31, 2027. This backlog is not included in the -- in our previously confirmed July 31, 2025, for $468 million backlog and will not be until the transaction is completed. We expect this transaction to close in the next few days. Once closed, we will be able to provide you with more information. These 2 announcements should not only provide recurring revenues to ADF for the next years, but allow us to significantly increase the Canadian content of our order backlog, thus, reducing our exposure to the U.S. market and recent uncertainties thereof. Thank you for your interest and confidence in ADF. Jean and I will now answer your questions. Operator: [Operator Instructions] Your first question comes from Nicholas Cortellucci with Atrium Research. Nicholas Cortellucci: First thing I wanted to ask about here was I saw in the MD&A, there was a mention of you guys achieving a nuclear certification. So just wanted to see if you had any more color on that and if that's a new sector you guys are working to break into? Jean Paschini: Yes. We just received our certification of nuclear. There's quite a bit of work coming in Ontario. So that's going to be a big market for the next 5 to 10 years. Right now, we have -- our people working with the general contractor and companies down in Ontario, and we should see something by I would say, beginning of next year. Nicholas Cortellucci: Okay. Got it. And that's -- you guys haven't done work in the sector before from what I understand? Jean Paschini: Yes, we did 5 years ago. We did a project in Ontario. So right now, we are certified. We have everything. So it's a go for us. Nicholas Cortellucci: Okay. Awesome. All right. And then shifting to LAR. Maybe just walk us through the rationale behind it from a geographic perspective and how that changes your guys' geographic mix and client mix going forward? Jean Paschini: Well, listen, with what's happening right now in the U.S., it's tougher to get work here in Terrebonne, okay? Because of the tariffs, we don't know exactly what's going on. It could change from one day to the other. So right now, what we're doing, Great Falls, it's full, okay? We're -- they have quite a bit of work, U.S. work in California, Oregon and all those places. So they're good for the next year. They have a nice big backlog. Here in Terrebonne, we have worked for the next -- the second half of the year is going to be good, okay? Plus then our project in infrastructure is going to kick in beginning of next year. So that's -- and then we are looking to get more work here in Terrebonne. In Métabetchouan LAR, they have good work. They didn't have any bonding in the last few months. So the last jobs, but not the job that we announced, they have $108 million, if my memory is good, $104 million on the backlog. So right now, once the acquisition is done, while they're going to get bonding, they're going to get everything. So I would say by the end of this year, backlog is going to go up. And most -- what they do is mostly in Quebec, Ontario and BC. So with the financial support with the bonding company -- with our bonding capacity, backlog will go up in the next 6 months. I've got no doubts at all. So backlog is going to go out. Backlog is going to go up. So there's quite a bit of work we're going to be able to do here in Terrebonne for them. And so I would say that it's going to be fantastic for the Terrebonne shop. It's going to be fantastic in Métabetchouan, the LAR shops and then our U.S. facility in Great Falls, no, they have work, and we're bidding quite a bit of work down there. So I want to book them at least 150% of their capacity. So if you look at all the 3 entities, it looks good for the future. Nicholas Cortellucci: Okay. Makes sense. That's good to hear. And then what are kind of the integration steps that you guys need to go through? And what are those synergies that you're looking for? Jean-François Boursier: Well, as we mentioned, we'll start by closing the deal. So that's really the first step we need to do. We obviously are in discussion with them. So we're in the process of laying out not only from a production standpoint, but also from an administrative standpoint, how we will be working together to get those synergies. I think the first one should the deal be closed or once the deal is closed and hopefully within the next couple of days, as we mentioned previously. But one of the first synergy for LAR is that they'll be able to bond jobs going forward. That was obviously because of their actual -- the present financial -- their financial position. They had a tough time getting bonding agencies to follow them. So that will all be solved just because of the strength of the balance sheet of ADF. So they'll be able to get back on the bidding process because there's -- not only do they have a good backlog as it stands now, but the pipeline is really, really good. So that's going to be the first impact, but then there's -- we won -- we did mention it also in the press release, we want to invest. We're also in discussion to make sure that we do the right thing. We want to increase their capacity. We want to provide them with additional equipment because the fact of the matter is that they were performing really well with the type of equipment they were getting. So if we can improve the equipment and to adding their know-how and their experience, they were bound to just there to improve on the efficiency and obviously, that would show up on the margin. But this is all coming up. Again, as we mentioned, we need to close the deal. And once we -- the deal is closed and that we can actually move forward with what we need to do, we'll be able to provide more color to this acquisition. Jean Paschini: Yes. But I think what we're going to do is once the deal is closed, we'll do another conference call with all the investors to tell you exactly what's our game plan. Nicholas Cortellucci: Okay. No, that makes sense. And then just last one, JF. I know you mentioned CapEx for the full year, you're targeting to be about $11 million. So that's a pretty big jump from the first half. So what does that entail? What are you guys looking to do with that? Jean-François Boursier: It's basically for the project we announced at the end of July. So we need to add equipment at our Terrebonne shop to be able to especially since it is a long-term project, at least 5 years, most probably 10 years. So we want to equip ourselves to be able to deliver that project more efficiently. Once we do the -- once we -- again, once we finalize the close and as I just mentioned, we're also looking at investing for the -- for Group LAR. So the $11 million obviously doesn't include anything that would be -- that would happen between now -- between the close and the end of the year for -- specifically for LAR. So that too will be done in an update once we close the deal. But based on ADF, as we know it today, excluding LAR as at July 31 and including the requirement for the new project we announced, the $11 million is based upon these assumptions. Operator: [Operator Instructions] Your next question comes from Abigail Zimmerman with Lowell Capital. Abby Zimmerman: I guess, first of all, we find the company very attractive. Our question would just be, given your exposure to fixed-price contracts and large customer concentration what would you say are the key strategies that help you manage the contract risk? Jean-François Boursier: We -- well, historically, this is something that's really part of the way our business is done. We are signing a few contracts, and we've always had the concentration from a revenue standpoint, and it's been the case for the past years and has been with the company for 15 years and even longer than that. So obviously, in light of that, we have a certain set of rules when we negotiate and sign contracts. First, we only deal with really major clients, general contractors and clients, so which by themselves are financially strong and with strong balance sheet. And additionally, when we sign contracts, there are a number of contractual clauses that we just won't budge from or deviate from. So we will considering that although getting bigger, but we do sign a big contracts, and there's always the huge potential of the contracts going sideways. We need -- we manage the risk pretty closely. We do spend a lot of time making sure that we are not only comfortable with the operational requirement from each project, but most importantly, that we are 100% comfortable with the contractual clauses. In the past, we have passed on really interesting contract that would have provided good revenues, good margin, but the contractual clauses were just not acceptable for us. So we passed on those projects. And I think this is -- not I think, but this is something that ADF has been doing for the past years and has enabled us to be able to be 100% comfortable with our backlog and the fact that the backlog would deliver positive results and not have a really huge backlog, but with so many risks that you end up announcing contracts, but then you end up 1 year, 1.5 years, 2 years later announcing write-offs. So this is something from a strategy standpoint that is well known in the market. This is something that's been the mantra for ADF for the longest time. And at the end of the day, it might not be as sexy from a contract announcement standpoint, but it does assure a steady growth to our company and also a profitable growth to our company. So this is really the way we handle these contracts and the fact that we are bound and we are stuck with having year-over-year 1, 2 or 3 major projects being the majority of our revenues. This is something also that's part of the -- of our market. So hopefully, it answered your question. Abby Zimmerman: Yes. That's helpful. And my other question is just given your exposure to these government and large-scale corporate projects, would you say that you would describe yourselves as more of an infrastructure company? Or is that the right way to think about the business? Or is there a different way you prefer investors to kind of frame ADF's role in the market? Jean-François Boursier: Well, I'm not sure how to answer that question. We're really -- we're not specific to -- we're in the industrial, commercial market. We've done airports. We've done sports complex. We've done -- so we're basically pretty much in all the complex structure market, not -- we do work on the private side. We also do private public work. Obviously, for public work in the U.S., most of the public projects are tied to the Buy American Act. So those projects, we are able to take, but they need to be manufactured from our Montana plant. So we're compliant with the Buy American Act from that standpoint. So it's really -- we are able to tackle pretty much all the projects. It's just that over the years, because of our experience, because of our equipment, we're definitely better known and really good at working on the more complex work, the heavy work, the fast-track project. So that's where -- really where we differentiate ourselves from the others. So that would explain the environment and the market that we're working in. Operator: Your next question comes from Jesus Sanchez Leon with Castañar Investment. Jesus Sanchez Leon: I want to get your insights about the current situation. Obviously, there is a lot of talk about tariffs, a lot of talk about how contracts are lost, how contracts will have to stop. But I see a growing backlog in our company. I see $468 million plus $100 million of LAR plus $40 million of the big contract we won recently that puts us in $600 million. So it's kind of like my numbers are telling something different than narrative. Am I losing something in the narrative? Or what's your take on that? Jean-François Boursier: Well, just to clarify, the $468 million does include our announcement from last July. So the $468 million is as of July 31. LAR, the $100 million from LAR, that's their backlog. But as long as the acquisition, as I mentioned, is not closed, this is not part of the backlog. So to your point, as of July 31, including the contract we announced at the end of July, our backlog in Canadian dollars, ADF Group is $468 million. Should we close or once we close the deal by consolidating LAR, yes, we'll be picking up about $100 million of new backlog once we're done. And the nice thing about that backlog is it's entirely Canadian volume. So it will reduce our exposure to the U.S. market. So I just wanted to clarify. This said, considering in light of the tariffs, the negotiation historically and still today from a steel manufacturing standpoint, the U.S. market is the biggest market for us, and that will remain. Because of the tariffs, signing contract in the U.S. is really, really difficult. We know and Jean mentioned that before on the call, we know the rules and the exclusion and how the tariffs work today. But what we don't know is how long those exclusions or these rules will be in place because there is nothing that tells us that they won't -- the administration won't change the way they apply the tariffs. There is no -- nothing telling us that they won't change the actual rate of the tariff store altogether get rid of the tariff. So we can only work on what we know now, and that's what's created the issue because, obviously, when you negotiate a contract with a U.S. client today, we're able to confirm what the reality is today. But when they ask what happens if they change their mind, the U.S. administration changes their mind in the next week, 2 months or what have you. Since we signed contracts that normally between the time we signed the contract and we end the project, it's anywhere between a year or 2 years, sometimes more. We can promise them that if the tariffs rules change and we end up having an additional 35% or even 50% or even 85% additional tariffs should they be added together, we can't tell the client that we'll absorb all these costs. And that's when you get into this what-if discussion, that the negotiations start stalling and take forever. So factually, the market -- the U.S. market is still good. There's still lots of opportunities. It's just that it definitely takes longer. We've been able to announce contract in July 31 -- the end of July contract we announced a multiyear contract is a contract in Quebec. So that's Canadian content. As I just mentioned, LAR if once we close, would bring additional Canadian content also. So as much as we can, we try to steer away from the -- at least to add Canadian content to balance out to not to be as subject to U.S. tariff. But the fact is that we do have a plant in Great Falls. We'll try to maximize the plant in Great Falls with U.S. volume, and that's really the approach we were taking. But -- and we'll see it in the next quarters. The market or the contract signing or the negotiation process are definitely tougher than they've been. It creates a lot of uncertainty. People are obviously -- clients are obviously concerned about potential additional costs going forward, as are we, and you try to navigate through all of these, which makes for longer negotiation. But we'll try to optimize. We have the chance to have a really efficient plant here in Terrebonne. We do have a chance to have a really efficient plant in Montana that's able to handle those U.S. contracts without tariffs issues. So we'll maximize our operation. We'll maximize the different solutions we have to all of these concerns and go from there. But as you've seen in our results, it did put a strain on the results. It does add cost to our cost base. So it's a tough environment. Jesus Sanchez Leon: Understood. Just another one for me. We have an NCIB in place, but we stopped buying back at the end of May i.e., now in retrospective, we see that there was an acquisition there that we now are facing more CapEx expenditures to fulfill this big contract. But on the other hand, we are a no debt company cash generative. What are your thoughts about the NCIB? What it's going to be? Jean-François Boursier: Yes. Well, we -- as you mentioned, we did complete the NCIB that was put in place in December. So it was in total just under $1.8 million. We completed it at the beginning of our second quarter. So the NCIB, we initiated last December is done. By TSX rules, we cannot put a new NCIB in place before next December. But to your point, considering the acquisition, considering the additional CapEx and without -- we haven't discussed the second NCIB, but should the deal go through, we will also look at additional CapEx investment for Group LAR and we'll also need to support the initial working capital of LAR, just to keep them going from an operational standpoint. So we haven't made a final decision on NCIB, but if I'd be putting something in -- if you want to have my take on it for now, I don't think we'll be putting a second -- a new NCIB program in place when December comes when we would be able to do it in light of everything I just mentioned. Operator: Your next question comes from [ Richard Kochan ], an investor. Unknown Attendee: I would love to do this in French, I will stick with English.[Foreign Language] is going to shift the capacity. Is there a capacity number at which Montana is running right now? Jean Paschini: Right now, we're running -- I would say we're running right now at about 60%. Unknown Attendee: And this is more of a political nature. And I don't want to -- you probably won't be able to answer. But even though you're based in the U.S. knowing that you're a Canadian owned company, is there -- do you feel any resistance bidding for projects out there with your -- obviously, your big one was [ Lilly ], I think, in the past? Or is there -- is this all about pricing and delivering the goods on time? Jean Paschini: No. Right now, we don't see -- it's the price and delivering the good on time. And we don't see any resistance because we're a Canadian company. Bear in mind, over there, it's all U.S. people. And when we sign a contract, they want to make sure that it's going to be done in Montana and in Terrebonne. So there's no problem. Unknown Attendee: Okay. And with all these pharmaceutical announcements of new plants and data processing center, are these things that you could be potentially bidding in the short term? Or that's par for the course? Jean Paschini: Well, it's part of the next year bidding. Unknown Attendee: I guess it's fair to say with our friends at Hydro-Quebec going full tilt with the CapEx for the next 10 years. And our friend, Mr. Carney, our Prime Minister announcing all these infra that these are the 2 main, I guess, guiding avenues on which you're going to be focusing on in the next year or 2? Jean Paschini: Yes. And we will be focusing on all the projects in Canada. Unknown Attendee: Okay. And just -- this is more technical from an accounting point of view. The revenues and gross margins were more or less as expected, a little weak. But where the net income and EBITDA were down a lot because of the PSU and the DSU, I mean, these are like your stock performance units and your deferred share units. Is this going to continue being either an expense or the volatility of stock will determine how you account for that? Jean-François Boursier: Well, actually, I should be asking you the question because that depends on how the market reacts. So obviously, if the stock goes up, it means that we need to increase the -- our DSU and PSU provision because we need to carry the DSUs and PSUs at market value and market values is established per the stock price. So if the stock goes up, it means my provision goes up and my SG&A go up. If the stock goes down, provision goes down and the SG&A goes down. So it's sort of a good news, bad news. It's if the stock goes up, everybody is happy, just that it does have an impact on our SG&A provision and the provision we carry for those DSUs and PSUs. Unknown Attendee: Maybe to reassure the market because there was a lot of noise, as you know, in the last 1.5 years, what percentage of shares does the family own as we speak today? Jean Paschini: We own about 13 million shares. Jean-François Boursier: So it's about 40% of the total shares and it's 85% of the voting shares. Unknown Attendee: Okay. So it's fair to say you still have skin in the game? Jean Paschini: Absolutely. Jean-François Boursier: Actually a bit more than skin so... Operator: There are no further questions at this time. I will now turn the call over to Mr. Jean-Francois for closing remarks. Jean-François Boursier: Thank you for your interest and confidence in ADF. Again, we wish you to thank you for your interest and support of ADF Group. Have a nice day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Ignacio Sison: Good morning to all. Thank you for joining Del Monte Pacific's results briefing for the first quarter ending July of fiscal year 2026. Representing Del Monte in this call are Cito Alejandro, Chief Operating Officer of Del Monte Pacific and President and COO of Del Monte Philippines; Parag Sachdeva, CFO of DMPL and DMPI; and I'm Iggy Sison, Chief Corporate Officer of DMPL. This morning, we'll go through some financial and market slides just to provide an overview and then proceed to the Q&A. Parag Sachdeva will now present our results followed by Cito Alejandro. Parag Sachdeva: Good morning, everybody. Sharing with you on this slide, the key financial highlights. DMPL did sustain its growth trajectory in first quarter of 2026 following a strong Q4 performance in last fiscal year. Our sales of $203.7 million was up 13%, driven by both the domestic business in Philippines as well as international markets. Our net profit at $5.5 million increased from $0.4 million, driven by improved sales and margins. I would also like to highlight that effective 1st May 2025, the company's U.S. business has been deconsolidated from DMPL. Next slide. In terms of strategic priorities and outlook, very consistent with last quarter. DMPL remains focused on growing the Asian operations to drive long-term growth and profitability. DMPL's subsidiary, DMPI, continues to perform well with resilient consumer demand in both domestic and international business and supported by a strong and stable supply chain. The immediate key priorities include reinforcing market leadership in beverage, culinary and packaged fruit that constitutes our core business in Philippines. And we continue launching new products in adjacent categories to broaden the consumer base. From a channel perspective, convenience stores, away-from-home drug stores and schools continue to provide avenues of accelerated growth. On the international side, we continue to maintain leadership in fresh MD2 pineapples across North Asia. Operations also has been seeing very favorable trajectory and that's also reflected in our gross margins, which we will dwell into in a minute. And cost management-wise, the focus continues to proactively reduce waste, manage inventory and lower inventory write-offs. Capital structure, which is one of the biggest priorities for us. We continue working on all avenues to raise equity to lower leverage and offset the NPLs capital deficit resulting from U.S. impairments in fiscal 2025. And barring unforeseen circumstances, the company does expect to be profitable in fiscal 2026. Next slide. Now a deep dive into our first quarter results. Our turnover grew at $203.7 million grew 12.9% with a very good mix on both pricing as well as volume. From our Philippines market perspective, we achieved a double-digit growth in local currency, and that was equally helped by pricing, which was in line with inflation and wall mix, which grew at 7%. When it comes to international business, overall, we saw a growth of 6.4%, driven mainly by fresh, which grew double digit at 10.2%. In terms of our gross profit, the growth was significant at 32.8%, driven by improved pricing across both international business as well as Philippines, increased volume. We also saw favorability in mix. Let me give you an example of that. Our fresh business had higher sales of Deluxe variety, which obviously augurs well for us from a gross profit and margin perspective. And similarly, we saw sales of our key core businesses in -- in Philippines market to grow that have higher margins. On the plantation side and calorie side, we saw improvement in cost. That was driven by a favorable trend on processed pineapple productivity, which was at 150 metric tons per hectare. And more importantly, the trajectory of this has continued to improve in line with our previous commitments that Cito had outlined. So with that, gross margin driven by pricing, favorable mix and improved productivity across operations has meant that we improved by 490 basis points in the first quarter. EBITDA in line with gross margin improved and despite an unfavorable impact from unrealized FX loss of close to $5 million that has been booked in Q1, we achieved an 11% improvement in EBITDA. The unrealized FX impact was mainly due to devaluation of peso at the end of July, where it spiked to 58.2 versus average levels of 57. Net profit driven by operating profits, EBITDA at 5.5 million was significantly higher than last year. And debt also at $1.02 billion was lower by 5% as we continue to generate internal cash and stretch our working capital to lower our leverage. In terms of net debt to EBITDA, there was an improvement of 2.6x and cash flow from operations, as I mentioned before, driven by profitability and continued focus on working capital has improved significantly at $76.8 million. With that, let me hand it over to Cito and Iggy to cover the balance of the presentation. Luis Alejandro: Good morning, everyone, and welcome to this investor meeting. I shall now talk about the Philippines. First of all, the NPL sales, 13% up versus a year ago at $204 million. Philippines sales at $88.4 million, 10% in peso terms and 15% up in USD terms. We continue to realize growth in the Philippines, driven by strong demand across our core categories. And if you were to summarize our growth strategy, it would be twofold. Number one is market share grab, particularly in categories with deep competition. And the second is increased usage of the product among current as well as tapping into new users. In the beverage category, we continue to strengthen leadership by sustaining relevance with health-conscious consumers. 100% pineapple juice led by Heart Smart, reinforcing juice as part of a heart healthy daily habit. Also functional benefits such as digestive wellness with fiber enrich and immunity building with the 100% ACE juice. Innovation also took a part in our growth with the successful launch of our Fruity Zing and Fit 'n Right Green Apple, which expanded the company's footprint in the ready-to-drink PET segment, targeting younger lifestyle-driven consumers. In culinary, we drove penetration through -- by positioning most of our culinary products as a nutrient-rich ingredient with Lycopene, vitamins A and C and iodine to improve family nutrition. This was further supported by our nationwide Nutrilicious advocacy, which aligned the brand with the national agenda of addressing malnutrition by promoting nutritious, delicious and affordable meals for everyday consumption. In packaged foods, we are seeing traction in our sales and marketing efforts to extend usage beyond holiday occasions into year-round celebrations and everyday dessert. At the same time, nutrition-led campaigns expanded the role of pineapple as a super food for everyday cooking, highlighting its phytonutrients that support immunity when paired with proper diet and exercise, okay? Let's now go to the international business. Okay. Sales in International grew by 6% to $98 million. This was primarily driven by higher fresh pineapple sales, particularly in China and Japan, supported by improved product mix and better pricing. Our premium S&W Deluxe pineapple, which is now our hero product, if I may say so, continues to grow and now accounts for a higher share of the company's exported fresh pineapple. We have also introduced and are seeing some increased traction in our fresh cut-packs in China to further boost demand for the company's pineapple product. Pleased to note that S&W was awarded Supplier of the Year by Good me, China's biggest food chain with more than 10,000 stores across the country. And in Japan, fresh pineapple sales increased by 20% due to higher demand of fresh cut in retail plus the entry of the S&W Deluxe pineapple with a new customer. In summary, if I were to look at the market share of fresh in North Asia, we now have a commanding leadership share of 50% in North Asia. And this is driven by our leadership share of 72% in China, leadership share of 42% in Korea and our strong #2 position in Japan at 23%. So that about sums up our -- the status of our business, both in the Philippines and international. So Iggy, we will now open the floor to questions. Ignacio Sison: And Jennifer Luy will moderate the Q&A. Thank you, Cito and Parag. Jennifer Luy: [Operator Instructions] We have some questions sent in advance. So I will start with these questions first. The first question is gross margin increased significantly to 32.5%. Will this be the norm for the next 3 quarters? Or is it just an extraordinary instance? Parag Sachdeva: So thank you for the question. We expect the margins to sustain. And we are seeing the same trajectory, both from a revenue perspective as well as costs are also trending the same way, including commodities. So we expect the margin improvement to be sustainable in the coming quarters. Jennifer Luy: Thank you, Parag. Related to that, what kind of savings or cost reductions have been achieved at the DMPL holding level given only one remaining operating subsidiary? Parag Sachdeva: So we have a clear outlook and our focus, as you know, is mainly to optimize our leverage. That's what we are focused on, and that's reflected in our debt reduction. That's the majority of the cost that we have at the holding company level. And as you can see, over the last 12 to 18 months, the parent debt has considerably reduced, thereby having a lower interest cost at the parent level. So that's what our focus is when it comes to our holding company financials. Jennifer Luy: Thank you, Parag. For Cito, how sustainable is the growth in international sales? Luis Alejandro: It is fairly sustainable, if I may just summarize it. There are 2 components in international sales. The first component is the processed pineapple products, mostly canned products. That part of the business is very much sustainable because we anticipate an undersupply of the market in the next 3 to 4 years. And this is primarily driven by the lower tonnage -- pineapple tonnage right now in Thailand. And as you know, in Thailand, the farmers have shifted to other commodities where they would be more profitable and earn money. And more than 10 calories in Thailand have already closed down. So that is a critical development for us as far as sustaining our package business is concerned because in the past, Thailand was the #1 country, not just the #1 competitor, but the #1 country in pineapple tonnage. So that is the part of the packaged pineapple business, where there are really just 2 big players in packaged pineapple in Asia, meaning Del Monte Philippines or PhilPaC, which is our export operation and also the other big plantation in Indonesia, PT Great Giant. So that is going to be sustainable. The second part of the business in international is the fresh business. Even though we are seeing a lot of higher market share in the categories in the countries we compete in we have not yet exhausted the demand. As you know, the health consciousness of global consumers have actually escalated. In fact, even in other countries, you will see that more of the packaged fresh pineapple are the ones that are growing faster. And this is the same trend that we are seeing in Asia Pacific. From a fresh pineapple standpoint, we're not yet maxed out in China. We have not yet exhausted Tier 2 and even Tier 3, Tier 3 cities, we're not yet there. We're just in the core and entering the Tier 2 cities. And that is going to be our greatest driver. As far as competition is concerned, there are really 2. One is Fresh Del Monte, and they have a farm actually in Mindanao, but our tonnage and our spans of control is bigger. And the other one, of course, is Dole, which is predominantly focused on the Japan and the Korea market. And we are also selling in Japan and Korea. Beyond that, we also have shipments to the Middle East. So from a global or region demand standpoint, it is solid and growing. From a supply standpoint, it is undersupplied in packaged pineapple. But as far as fresh pineapple is concerned, we are the largest actually in Asia right now. We are ahead of Dole and Dole is the other player and other small players as far as hectarage and total shipments are concerned. Jennifer Luy: Thank you, Cito. Next question is with the deconsolidation of DMFI, does it mean DMPL will get nothing from this investment? Parag Sachdeva: That's what we are -- what we have assumed in our fiscal '25 results. We have taken a view that considering continued losses that have been incurred in fiscal '24, '25 and a significant increase in financing costs. Parent has decided not to invest. And accordingly, we have impaired our investments to 0 in our fiscal '25 results that have been recently finalized and were also shared with you on an unaudited basis at the end of July. Jennifer Luy: Thank you, Parag. Still on the DMFI, since DMPL still has significant ownership, what are the lenders, bondholders or the new Board doing with the DMFI? Were they able to turn things around or find a seller? Parag Sachdeva: As we know, the selling process is underway and is expected to conclude by November or December of 2025. So we will have to wait and see as to how the final process concludes. They have appointed -- the Board has appointed an investment banker to manage the process, and we continue to get updates through our Board members from time to time. In terms of performance, as we understand, the Board is focused on managing and optimizing cost, working capital and also focusing on growing the branded business and further downsizing any private label or nonstrategic businesses. Jennifer Luy: Thank you, Parag. On our loans of around $1 billion, what is the average lending rate? And how much will a 1% drop in interest rate affect the cost this year? And are the loans in U.S. dollar or in peso? Parag Sachdeva: Thank you, Jen. Most of our loans are in U.S. dollars. The split between U.S. dollar-denominated and peso-denominated loans would be around 80-20. That's the rough split. In terms of our average cost of borrowing, it's around 6.5% to 7%. That's what we are able to secure on our borrowings and 1% drop in interest rate would mean a reduction in interest expense by around $7 million to $8 million annually. Jennifer Luy: Thank you, Parag. Okay. Is there any update on capital raising activities such as the IPO of DMPI? Any time line for these activities? Parag Sachdeva: The process has been initiated by our DMPL and DMPI Boards. And clearly, this is a big priority for us. In terms of specifics due to confidentiality reasons, it would be difficult to share more details at this stage. Jennifer Luy: Thank you, Parag. From the internal cash flows, how much of our debt can be paid this FY '26? Parag Sachdeva: As we have demonstrated, our debt continues to be lowered. We were at $1.04 billion at the end of April. We are down to $1.02 billion to $1.03 billion. So we continue to lower our debt. But at this point of time, the main avenue of addressing capital -- addressing leverage would be some sort of an equity injection or a selected sale of assets. So that would be the main focus because there is a limit to which we can stretch working capital across the board, which we have done very well in the last 2 to 3 years. So main source would be of leverage reduction would come from equity raise, which we are prioritizing. Jennifer Luy: Thank you for the clarification, Parag. Our last question is, how much dividend is paid to the holding company to pare down the higher cost debt at the holding company last year? Is there any dividend payment policy for your subsidiary? Parag Sachdeva: Yes. In the last couple of years, our focus has been to upstream dividend from DMPI to DMPL so that the parent could continue meeting its obligations on a timely basis, which we have delivered on. Overall, the dividend payout has been between 75% to 100%. That's what we have followed and we think that would pretty much continue until we change the capital structure in the coming quarters or coming year. Jennifer Luy: Thank you, Parag. We don't have any more questions. So in case the audience has questions that they want to send, you can e-mail to me at jluy@delmontepacific.com, j-l-u-y@delmontepacific.com. Ignacio Sison: So thank you for [ joining ] our results briefing.
Operator: [Foreign Language] Good morning, ladies and gentlemen, and welcome to the Transat Conference Call. Please note that this call is being recorded. I would now like to turn the conference over to Andrean Gagne, Senior Director of Communications, Public Affairs and Corporate Responsibility. Please go ahead, Ms. Gagne. Andrean Gagne: [Foreign Language] Hello everyone, and thank you for joining us for our third quarter earnings call ended July 31, 2025. Annick Guerard, President and CEO; and Jean-Francois Pruneau, our Chief Financial Officer; will provide an overview of the quarter and comment on the current operational situation and commercial plans. Jean-Francois will also discuss our financial results in detail. We will then take questions from financial analysts. Questions from journalists will be taken offline after the call. The conference call will be conducted in English, but questions may be asked in French or English. As usual, our supplementary disclosure has been updated and is available on our website in the Investors section. Jean-Francois may refer to it when he presents the results. Our comments and discussion today may include forward-looking information regarding Transat, outlook, objectives and strategies that are based on assumptions and subject to risks and uncertainties. Forward-looking statements represent Transat's expectations as at September 11, 2025, and are therefore subject to change after that date. Our actual results may differ materially from any stated expectation. Please refer to a forward-looking statement in Transat's third quarter news release available on transat.com and on SEDAR+. With that, I would like to turn the call over to Annick for opening remarks. Annick Guérard: Good morning. Thank you for joining our third quarter conference call for fiscal 2025. Over the quarter, we improved our operating and financial performance with a 4.1% increase in revenue to $766 million and adjusted EBITDA of $81 million. These results are in line with our expectations. That said, the beginning of our summer season produced mixed results. On the one hand, we are pleased by the performance of our South program. Although this was the offpeak season, demand exceeded expectations as traveler preferences shifted away from the U.S. in favor of Mexican and Caribbean destinations. On the other hand, lower industry demand for transborder traveling resulted in a reallocation of capacity to transatlantic routes in addition to planned increases. This shift in supply created a more challenging environment for European destination in our peak season, but we have been able to hold our ground with a relatively stable yields. Looking at our operating metrics. Capacity expressed in available seat mile increased 2.4% over last year with capacity for transatlantic routes up 4.2%. Customer traffic expressed as revenue passenger miles increased 1% over last year, reflecting continued demand for leisure travel. Yield improved 2.6% year-over-year as a result of higher traffic and disciplined capacity growth, thus maintaining the positive momentum experienced since the beginning of the year. Our load factor stood at 85% compared to 86.2% in 2024. Turning to our Elevation program, benefits began to materialize as anticipated during the quarter. The positive impact of the program, combined with higher revenues, rigorous control of operating expenses and lower fuel cost resulted in improved operating profitability. Exactly 1 year ago, we launched Elevation with the goal of generating $100 million in annual adjusted EBITDA by mid-2026. We remain on track to achieve our target and drive results through cost reduction and revenue generation initiatives. Turning to our operations. I am pleased to report a fifth consecutive quarter of improved on-time performance. Our operational discipline rooted in our culture allows us to offer a quality experience to our customers while maintaining tight control over our expenses. We currently have a fleet of 43 aircraft, of which 6 are grounded due to the ongoing Pratt & Whitney GTF engine issue. We expect that number to gradually improve for the upcoming winter season. Needless to say, this burden has significantly affected our performance for over 2 years now, even though we are doing everything we can to minimize its impact. As announced last month, we completed a sale and leaseback transaction for 2 additional spare engines, which were part of the compensation received from Pratt & Whitney for grounded aircraft for 2025. Jean-Francois will provide additional details on the transaction in a few moments. Turning now to our network expansion. Since the last quarter, we announced new nonstop service from Toronto to Istanbul, Turkey, operating twice weekly starting in December. We have also established a partnership with Turkish Airlines to strengthen service between our 2 countries, offering consumers more travel options to destinations across the Middle East, Asia and Africa. We also announced new nonstop service to Rio de Janeiro, Brazil, with 2 weekly flights from Toronto and 1 weekly flight from Montreal, offering Canadian travelers more opportunities to explore South America. These additions are part of an extended winter offering, which includes 14 new routes. For next winter, we will also be adding frequencies on several existing high-performing routes to the South and across the Atlantic, reinforcing our commitment to strengthening our core network. Altogether, our enhanced winter schedule represents about 5% to 7% capacity increase compared to last year, mainly driven by the gradual return to service of aircraft currently grounded along with higher aircraft utilization. This expansion reflects our ongoing efforts to diversify the network and broaden our international footprint. We will be announcing additional destinations for 2026 in the coming months, further building on this momentum and unlocking new growth opportunities. We are targeting high potential markets with strong VFR demand and low seasonality, which help drive year-round traffic. Importantly, the strong performance observed to date of recently launched routes supports our diversification strategy. Longer-haul routes such as Rio and Istanbul play a key role in maximizing aircraft utilization and allowing us to optimize fleet efficiency. Finally, I am pleased to report that our brand and customer satisfaction continue to shine. Air Transat has been named the world's best leisure airline at the 2025 Skytrax World Airline Awards for the seventh time. This award is based on passenger satisfaction and reflects the unwavering commitment of our teams to placing the client at the heart of every decision we make. Thanks to our team's openness, attention to detail and constant desire to go above and beyond what is expected, Transat continues to stand out from its peers. Looking ahead, we anticipate recent trends to continue over the next few quarters, and we remain cautious in light of pressures on consumer discretionary spending. At this time, we are witnessing softness in our Q4 load factors, which are down 1.2 percentage points compared to last year. Yields are 3.1% above last year, although they are currently trending downward. As we enter our winter season, we continue to see strong demand for South destination supported by a shift in consumer behavior away from U.S. travel. That said, given the current environment, it remains difficult to predict how demand will evolve in the coming months. In conclusion, I want to once again highlight the significant progress made in terms of improving our balance sheet as the refinancing represents a major step forward for the long-term sustainability of Transat. We are also pleased with our results after 9 months. The results show us that we are focusing on the right thing. But we will continue to remain prudent going forward, considering economic and geopolitical uncertainty and a more challenging competitive environment. This concludes my remarks for today. Jean-Francois will now review our financial results. Jean-Francois Pruneau: Thank you, Annick. Good morning, everyone. Before addressing the quarterly results, let me review a few financial and operational highlights. On July 10, we completed the restructuring of the government debt. This agreement represents a major step forward to substantially deleverage our balance sheet and paves the way for Transat to further implement its long-term strategic plan. As you will hear from the results, this has significantly reduced our total debt at the end of the third quarter and resulted in a onetime gain on long-term debt extinguishment of $345 million. The sale and leaseback transaction for 2 Pratt & Whitney GTF spare engines acquired using credits received as competition for grounded aircraft in 2025 was completed at the end of July. The transaction, valued at USD 45 million, will allow us to increase liquidity while continuing to use spare engines to power our A321 LR fleet. Following quarter end, we used CAD 30 million of the proceeds to redeem 6.2 million Series 4 preferred shares held by the Canadian government for a total amount of $16 million. As a result, the number of outstanding Series 4 preferred shares was reduced from 9.9 million to 3.7 million. The remaining amount of proceeds of $14 million was used to repay a portion of the principal amount of the 2035 debenture held by the government. After these repayments, the government made $30 million available to us in the form of working capital advances, which we subsequently drew upon. As Annick mentioned, the Elevation program delivered its anticipated benefits during the quarter, which slightly contributed to our profitability improvement. These benefits were driven primarily by improvements in our call center operations, savings from reduced external expenses, targeted revenue management strategies and select organizational restructuring initiatives. Now let's take a closer look at our results for the third quarter of fiscal 2025. Revenues amounted to $766 million, up 4.1% from the third quarter of 2024. This growth reflects a 2.6% year-over-year improvement in yield expressed in airline unit revenues and a 1% increase in customer traffic expressed in revenue passenger miles. Following the agreement with Pratt & Whitney, we also recorded a noncash revenue amount of $7 million. Adjusted EBITDA reached $81 million, up from $48 million in the third quarter of last year. In addition to the contribution from Elevation, this improvement reflects higher revenues, increased productivity and a 14% increase -- decrease in fuel prices compared to the corresponding period in 2024. For the third quarter of 2025, the corporation reported net income of $400 million or $9.97 per share compared with a net loss of $40 million or $1.03 per share last year. This year's net income was mostly driven by the $345 million gain on the extinguishment of long-term debt. On an adjusted basis, we had a net loss of $12 million or $0.28 per share in Q3 2025 compared to a net loss of $36 million or $0.93 per share last year. Moving to our cash flow and financial position. Cash flow from operating activities was negative $105 million in the third quarter of 2025 compared to a negative $91 million last year. The variation reflects a reduction in cash flow generated by the net change in noncash working capital balances, partially offset by higher profitability. As for investing activities, CapEx was $30 million, steady from a year ago and proceeds from the sale leaseback transaction in Q3 2025 were CAD 62 million. After accounting for investing activities and repayment of lease liabilities, free cash flow was negative $122 million compared with negative $169 million a year ago. Still, after 9 months, we have generated positive free cash flow of $149 million, which includes 3 Pratt & Whitney sell and leaseback transaction in 2025 compared to $92 million -- totaling, sorry, $92 million compared to negative $20 million in 2024. Turning to our balance sheet. Cash and cash equivalents stood at $357 million as at July 31, 2025, compared to $260 million as at October 31, 2024. Cash and cash equivalents and trust or otherwise reserved mainly resulting from travel package bookings was $306 million at the end of Q3 compared to $485 million as at October 31, 2024, reflecting the seasonal nature of our operations. Long-term debt and deferred government grant stood at $384 million as at July 31 versus $803 million as at October 31, 2024. This decrease essentially reflects our debt restructuring agreement, including the full repayment of the $41 million principal balance of the secured government debt. Long-term debt and deferred government grant, net of cash and cash equivalents, is $27 million, down from $543 million at the beginning of the fiscal year. Additionally, in September, we extended the maturity date of our revolving credit facility to fiscal 2028. As we look ahead to Q4, it's important to keep in mind that last year's revenues included the financial compensation of $34 million related to the Pratt & Whitney engine situation. The amount recorded at that time was significant as it represented cumulative compensation for years 2023 and 2024. In contrast, this year's compensation will reflect only the number of grounded aircraft during Q4. We also anticipate a modest year-over-year decline in capacity in the fourth quarter, resulting in a full year increase of 1% for 2025, as previously indicated. Finally, unlike the first 9 months of the year, Q4 should not benefit as much from the tailwind of lower fuel prices. Conversely, we will take advantage of reduced interest and charges following the debt restructuring, and we expect benefits from Elevation to gradually ramp up. So this concludes my prepared comments. We will now open the call for questions from analysts. Operator: [Operator Instructions] First, we will hear from Konark Gupta at Scotiabank. Konark Gupta: On the yield side, first, I guess, you guys pointed out that the quarter-to-date yield is tracking 3% above from last year. And I think you also mentioned that there's a downward trend you are seeing in that number lately. Can you help us understand; a, was the yield in the early part of this quarter, fiscal Q4, was it higher than 3% and that started to kind of taper down? And did you see any benefits from the Air Canada labor disruption that happened in August? Annick Guérard: Yes. That is brilliant. Just to come back on Q3, the South market has remained highly dynamic throughout the quarter with yields that were up 7% year-over-year, driven by a shift in demand from transborder routes to Sun destination. For Q4, we continue to see strong demand, but with September and October, we are getting into a lower season. So bookings are slowing down, which is normal. As for Europe, in the context of significant capacity increase from competitors on our key markets, and considering the entry as well of a French Bee and -- on Paris and Virgin Atlantic on London, we clearly see disruptive pricing on key markets. We were relatively pleased by our performance so far as we were able to maintain a decent yield and RASM. Now as indicated earlier, if we look at Europe for September and October, pricing from competition has been extremely aggressive since mid-August, and that is why we have been seeing a trend downward on the yields. And as you express, we substantially benefit from AC in August. So our yields went up for a couple of days. Load factors are up to 100% on several flights. So that caused the yields to go up 3% compared to last year, and now we're dealing with more competition for September and October. Konark Gupta: Okay. That's really helpful. And then in terms of your planning the upcoming winter, I think you guys are expecting 5% to 7% growth in capacity. I understand a lot of that could be driven by the aircraft that's ungrounding after 2 years or so. But do you -- like do you see the demand being enough to support that capacity? Or I mean, do you plan to kind of launch new routes as you said, where you expect to sort of stimulate the market demand? Annick Guérard: Yes. So as you said, for next winter, the number of grounded aircraft is expected to decrease from 6 last year to 4 to 5 this winter and with the potential further reduction for next summer. So we've done a lot of schedule optimization, and we've launched as well as part of our network program, longer-haul destination that are further enhancing aircraft utilization and driving natural capacity growth. So as a result, we're looking at a 5% to 7% increase this winter. We're still working on the program, so numbers could change a little bit again, but this is what we're anticipating so far. And as for demand, of course, it's still early to have clear visibility, but trends are encouraging so far. We remain cautious as airlines are currently making several capacity adjustments. We are seeing a significant increase on South destination. So -- but we see the same trends as we've seen over the last summer in terms of U.S. demand shifting to South destination. So we are encouraged so far. Konark Gupta: Okay. And last one before I turn over. On the Elevation program, so congrats on achieving the full benefits. And I think, hopefully, you're expecting some or most of them to show up as we go ahead in the next few quarters. My question on the Elevation now is, I mean, over the last year or so you have clearly made a lot of efforts to realize this $100 million saving. Any changes like on the positive side or negative side you have seen as you hopped on those initiatives, whether from supply chain or, I don't know, from macro or even like any new opportunities that surfaced? Do you see the $100 million as a good firm number? Or do you need to adjust that number as we go forward from here? Annick Guérard: So far, everything is on target. As we are progressing, we see additional opportunities to improve our overall performance, but we still need to be quantified. But we're very pleased with what we've seen so far. We have -- we now have reached our implementation target with current initiatives in place expecting to deliver the $100 million in adjusted EBITDA by mid-2026. Overall, the majority of the plan initiatives have been implemented. There's a few remaining initiatives are still being rolled up and should be completed by winter. So progress is tracking well against our plan, and we remain confident of the final results. Jean-Francois Pruneau: If I may add just one comment on that in terms of modeling and financial modeling, I should say. It's not a linear path, obviously. So the way to look at the initiatives and the benefits hitting our P&L, it's not going to be linear. So I think it's going to be accelerating over time and more back ended. But as Annick mentioned, we remain very, very confident about the $100 million being generated by mid-2026. Operator: Next question will be from Kevin Chiang at CIBC. Kevin Chiang: Maybe just following on some of the questions Konark have asked. I guess if I think of the 5% to 7% capacity growth next year, is there a way to break that down between how much of that is like from haul driven? It sounds like reduced grounding of some of these aircraft will provide that opportunity versus how much of that 5% to 7% is just increased capacity into existing markets? I'm just trying to get a sense of if the length of haul is a bigger contributor to that 5% to 7% growth? Annick Guérard: Most of the increase comes from less grounded aircraft and due to Pratt & Whitney engine issue. So we're going to have 2 additional aircraft, the A321 LRs, and this is what driving capacity up. So I would say that accounts for maybe 75% of the increase. The other 25% is around having changed our program or optimize our program to increase aircraft utilization. As we said, we deployed more long-haul routes. We are using more aircraft as well in a period that we were not necessarily using them last year. So it's based on our ongoing commitment to increase overall productivity from an aircraft perspective, but people perspective as well. We want to make sure that we optimize overall operation, making sure we maximize our crews, maximize our aircraft utilization, and that -- this is what's bringing the capacity up. Kevin Chiang: Okay. That's helpful. And just maybe on the competitive environment, it sounds like some of the increased competition you've seen in the transatlantic market in -- maybe in the recent months reflects increased competition from European carriers, it sounds like European lower-cost carriers. Just wondering as you look into the winter season, are you seeing a similar competitive dynamic emerge where Southern carriers may be looking to take advantage of the shift in Canadian travel dynamics here as Canadians travel more towards Sun and -- more towards Sun destination markets outside of the U.S.? Just wondering if you're seeing something similar in the winter season as you saw in the summer season here from some of your foreign competitors? Annick Guérard: Well, we're definitely seeing increased capacity to South destination from Canadian carriers overall. We're looking at the 10% increase if we consider all the major players. So we are increasing our share as well counting on where we anticipate that demand will be. So it's going to be competitive. But again, I think it's pretty much in line with demand that we're seeing so far. The U.S. demand is down. And as we are looking into our booking curve right now, looking at yields and load factor, we're pretty confident that the market is going to be able to digest this capacity increase. Kevin Chiang: Okay. That's helpful. Maybe just a last one for me. Again, congratulations on getting through the Elevation program. It felt like a lot of the Elevation program was focused on kind of improving the optimization of your organizational structure, so a lot of cost initiatives. I guess what's next after here? I guess I've always thought that you've had an opportunity from a revenue perspective, whether it's improving your yield management, whether it's maybe looking at loyalty programs. Just wondering, as you've kind of completed Elevation, is there an opportunity here to maybe address some of the lower-hanging fruit from a revenue management perspective? Annick Guérard: The revenue management initially is our part of the -- or at the center of the Elevation program as much of the cost-cutting initiatives. So it's -- we started working on the revenue management initiatives back at the beginning of the year, around January, and it's been progressing very well. We started seeing some results this quarter. It's going well. It's been encouraging, as we've discussed in the past. There's about 5 to 6 initiatives being implemented to maximize the algorithms, to maximize the modernization, the program. We've got help from specialists as well. We finalized [indiscernible] implementation. So it's really at the core of the Elevation program as well. So things are going well on that side. Operator: Next question will be from Cameron Doerksen at National Bank Financial. Cameron Doerksen: I wonder if you can talk a little bit about what you're seeing from a consumer behavior point of view. It's one of the things you've kind of highlighted here is some, I guess, shifts in consumer behavior and I guess the maybe some consumer concerns around the economic backdrop. I mean what can you kind of point to that gives you, I guess, maybe a little bit of concern about the ability for the consumer to continue to travel? Annick Guérard: Well, we see a little bit more last-minute demand. We've been seeing this for the last, I would say, 6 to 9 months. So people hesitate a little bit. There's a little bit less confidence maybe in terms of economic trends. We'll see what's going to happen for next year. Economy seems to be confident that things will improve in terms of the consumer sentiment for next year, but this is something that we're watching very carefully as our customers, of course, spend on discretionary budget. But we're not too -- I would say we're pretty much positive right now in what we see. Cameron Doerksen: Okay. That's helpful. Second question, I guess, on your relationship with Porter. Just wondering if you can update how that's kind of progressed through the summer and I guess the fee traffic that they provided to you. But I also wanted to ask, I guess, a bit about some of the new routes they've announced back in June to Sun destinations, some of which look like they may overlap with traditional Transat markets to the Sun. So I'm just wondering how -- I guess, how you kind of work with them to avoid competing with each other? Annick Guérard: Yes. So, so far, for fiscal year 2025, we were able to capture a little bit more than 160,000 connecting passengers between Air Transat in the Porter, representing 3.4% of our total traffic. The target is set at 4% right now. So revenue generated was up 20%, a little bit more than 20% compared to last year. So we were very pleased about that, and we continue to align our networks, align our pricing strategy to maximize connecting flights. As for the South program, as you said, in June, Porter unveiled their first flights to Mexico, the Sun destinations, different Sun destinations for next winter. Their program was coordinated under the terms of the joint venture, complementing Transat's existing offering. So we're all doing this collaboration making sure that we maximize our footprint on Sun destinations. Cameron Doerksen: Okay. No, that's helpful. So you're basically working in conjunction with them to, I guess, offer the best schedule that you can between the 2 airlines? Annick Guérard: Yes, exactly. Operator: Next question will be from Benoit Poirier at Desjardins. Benoit Poirier: Just to come back on Porter, really nice to hear that you're been able to grow. Any impact from the sharp decrease we saw between Canada and the U.S. travel, or they've been successful to replace the capacity elsewhere? Annick Guérard: Yes. Well, the -- of course, the connections to the U.S. have declined, but this segment is not a major component of our overall connectivity. The majority of connecting traffic continues to come from Canadian routes. So connecting their national domestic network to -- with our European network. So difficult to pinpoint the exact impact on Porters, but they've been able to adjust the network schedule to maximize the connecting passenger with us. Benoit Poirier: Okay. That's great. And just talking about partnership, Annick, you've announced a nice partnership with Turkish Airlines back in June. So I think it will start from Toronto to Istanbul in December 2025 on a weekly basis twice. So could you maybe provide more granularity about the expectation? How sizable could be the partnership for you down the road? Annick Guérard: Yes. So it's a first season for us. It's the beginning of a new relationship. So we have -- there are mutual commitments. We want this to be successful. We've operated Turkey in the past. So we pretty know how successful factor to this route. The partnership we anticipate will grow over time. We start small, but we have the ambition to make this stronger. Benoit Poirier: Okay. Okay. And could you also maybe provide an update on the potential you see at the Saint-Pierre airport with Porter? And also if you could give an update on the loyalty program rollout that would be great? Annick Guérard: Yes. In terms of Saint-Pierre, we don't expect to operate the Saint-Pierre. So that's pretty clear on our side. It doesn't fit with our network. So that's going to be a separate business for Porter. As for the loyalty program, it remains a key strategic project for us given its strong value creation potential. It will provide for a strong leverage to develop airline, but also non-airline partnerships, and of course, we want to increase customer loyalty. So we aim to launch towards the end of fiscal 2026. That was the calendar. We're still on that calendar, and we are currently integrating the program with the selected financial institution and working and offering a strong ecosystem. So things are going very well. And again, it's part of our priorities for 2026. It's been a priority for 2025, but it takes time to develop such a program, but we will be really ready to launch in '26. Operator: [Operator Instructions] Next, we will hear from Tim James at TD Cowen. Tim James: I just want to return to the Porter discussion for a minute. And I'm wondering if you could talk about sort of going forward remaining opportunities, initiatives that you have with Porter. For example, them potentially selling packages down the road, which I think might be an opportunity, which they would do with your assistance and expertise. Just if you can remind us what are sort of the remaining kind of building blocks in that partnership? Annick Guérard: Yes. Well, as we are growing, of course, developing into domestic, in the U.S. as well, we are aligning more and more our schedules, our network to optimize and maximize connecting passengers. So that's our first goal. In terms of South, the South destination, as we said, they are launching their routes this winter, and we are doing this in coordination to maximize the impact in the -- on South destination. Looking forward, and we've talked about this, when we launched the joint venture, as part of the agreement, there is a piece where we will act as a tour operator for Porter Airlines. So these packages will be branded under Transat brand, but operated with Porter flights. So that's part of the overall joint venture agreement. It's not for this upcoming winter, but should be in place for next year. Tim James: Okay. That's helpful. And will there come a time really when basically all Transat flights and Porter flights are sort of part of the joint venture? Is that -- or that passengers can connect from 1 airline on to the other? I mean, is that -- I don't recall where Europe is at on that front, but is that the ultimate goal eventually? Annick Guérard: What we're looking at right now is to maximize the agreement. We want to grow more connections together. The final state, I think it's still to be determined depending on the performance that we see. We need to adjust. Sometimes, we create value -- sometimes, we create value together, sometimes better to stay apart. So -- in terms of flight. So as we move along, we analyze the performance and we adjust. Operator: And at this time, we have no other questions registered. Please proceed. Andrean Gagne: Thank you, Sylvie. Thank you, everyone. As a reminder, our 2025 fourth quarter results will be released on Thursday, December 18. Thank you, and have a good day. Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Q3 2025 Financial Results Conference Call. [Operator Instructions] Also note that this call is being recorded on Thursday, September 11, 2025. I would now like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead, sir. Bill Mitoulas: Thank you, operator. Good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the third quarter of the 2025 fiscal year. Thanks for joining us. With us today are President and CEO, Randolph Pinna; and Group CFO, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results with the latest perspective on the company's operations. Randolph will then provide his commentary on CXI's strategic initiatives, sales efforts and business activities, after which we'll open it up for your questions. Today's conference call is for shareholders, prospective shareholders, members of the investment community, including the media. For those of you who may happen to leave this call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI's Investor Relations website page, along with financial statements and MD&A. Please note that this conference call will include forward-looking information, which is based on a number of assumptions, and actual results could differ materially. Please refer to our financial statements and MD&A reports for more information about the factors that could cause these different results and the assumptions that we have made. With that, I'll turn the call over to Gerhard. Gerhard, please go ahead. Gerhard Barnard: Thank you, Bill, and thank you, everyone, for joining today's call. These results are presented in U.S. dollars and my overview of the company, CXI, will also incorporate the results of the discontinued operations of Exchange Bank of Canada. As a reminder, on February 18, 2025, the group announced its decision to seize the operations of its wholly owned subsidiary, Exchange Bank of Canada. All customer activity has ceased as planned by the end of August 2025 and preparation for administration and financial statements year-end audits are underway to submit an application to the Minister of Finance in Canada to discontinue Exchange Bank of Canada from the Bank Act. The application to discontinue is expected to be made in the fourth quarter of 2025 with the actual discontinuance of the bank being subject to receipt of all necessary regulatory approvals. Starting in the second quarter of 2025 and following the Board's decision to discontinue the bank's operations, the group updated its financial statement's preparation and presentation to predict continuing and discontinuing operations separately in accordance with IFRS accounting standards. Therefore, included in the group's financial statements are the results of the United States operations under continuing operations and the results of Exchange Bank of Canada under discontinuing operations. Now the group reported net income of $4.2 million for the third quarter, 8% higher than the prior year and this reflects net income of $5.2 million from continuing operations and a net loss of $1 million from Exchange Bank of Canada. These third quarter results included a net restructuring credit of about $100,000 related to discontinued operations in Canada. Now management anticipates that certain operating expenses and personnel costs that are currently shared with EBC will be 100% borne by CXI after EBC's exits from Canada and the current annualized estimated cost would be approximately $3 million after tax. This estimate is subject to change throughout EBC's discontinuance proceeds. Before we go into the results, I'd like to note that the group measures and evaluates its performance using several financial metrics and measures, some of which do not have standardized meanings under General Accepted Accounting Principles, GAAP, and may not be comparable to other companies. We call these measures non-GAAP financial measures and/or adjusted results. Management believes that these measures are more reflective of its operating results and provides a better understanding of management's perspective on performance. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2024. Management included a full reconciliation of the key performance and non-GAAP financial measures in the MD&A. When we refer to reported results, we refer to the results reported in the financial statements based on IFRS. And when we refer to adjusted results, such as adjusted net income, we refer to performance of non-GAAP measures. With that, here is a summary of the third quarter's results comparing this year's third quarter to the prior year's third quarter. Revenue grew to $21.3 million by roughly $1.3 million or 7%. Now operating expenses increased to $13.1 million or just under $1 million, close to 8%. Our EBITDA grew by -- grew to $8 million by $0.3 million or roughly 4% over last year, and our reported group net income grew to $4.2 million by $0.3 million or 8%. So that's an important one. Net income grew to $4.2 million by roughly $0.3 million or 8%. Adjusted group net income was $0.5 million or 10% lower than last year due to EBC's revenue tapering during the current quarter as a result of the discontinuance of its operations. Let's look at the consolidated performance of the third quarter of 2025 compared to the prior year's quarter. Our revenue growth was driven by 24% growth in the payments product line and 4% growth in the Banknotes revenue, primarily through direct-to-consumer channels. Now wholesale banknotes grew roughly $0.25 million or 3% and represents 44% of the total revenue. And while trading volumes declined due to a weaker consumer demand for foreign currencies, this product line grew 4% over the last year due to the continued addition of new domestic financial institution customers in addition to certain large customer transactions at the end of the quarter. Direct-to-consumer banknotes grew roughly $0.4 million or 5%, and this represents 40% of our total revenue with growth coming mainly from the OnlineFX platform due to increased demand for exotic and foreign currencies and the addition of 138 new airport agents in various locations. Our Payments revenue grew $650,000 or 24%, now almost 16% of our total revenue. The growth was supported by a 30% increase in trading volume activity for existing financial institution customers and the onboarding of new customers. Following is a highlight of operating expenses from continuing operations for the third quarter '25 compared to the same quarter last year. CXI's operating expenses increased about $920,000 or 8% compared to the same period in the prior year. Now variable costs, mostly our cost of goods sold, post the shipping bank charges, sales commission and incentive compensation, totaled roughly $3.3 million, a 4% decrease compared to the $3.5 million of the prior year. Salaries and wages increased mostly driven by Google Vault staff growth and the addition of company-owned branch locations, in addition to general inflationary increases. Legal and professional expenses increased due to audit and tax services as well as other legal and advisory services provided in the normal course of business. Marketing and publicity increased as CXI continued to focus on marketing initiatives, campaigns, retail investments and establishing a customer referral program that supports corporate goals with a focus on the direct consumer business growth. Net foreign exchange losses for the current quarter were primarily driven by hedging costs and foreign exchange losses in the prior quarter were associated with CXI's banknote holdings in the Mexican pesos. Bank services charges are primarily driven by the Payments product line. In the current quarter, CXI continued to process certain payment transactions via EBC's correspondent bank and received a chargeback allocated via intercompany allocations. Now it's important to remind that intercompany allocations are excluded from the results of continuing operations as per IFRS 5. It is relevant to mention that CXI's payment processing has fully migrated away from EBC's correspondent bank during August 2025. Stock-based compensation includes a noncash amortization expense related to the vesting of the company's equity-based stock options in addition to certain cash-based awards represented by RSUs and DSUs. CXI incurred a net expense in the amount of $73,000 related to DSUs and RSUs, which is lower when compared to about $185,000 for the same quarter last year as a result of the decline in the stock price in the current quarter compared to the previous quarter. Interest expense decreased as a result of the decline in the average borrowing of funding EBC's operations and working capital requirements, and it's tapering significantly following the decision to discontinue operations in Canada. Average outstanding borrowings for the quarter was about $1.3 million compared to $2.1 million during the same quarter last year. The average interest rate is also decreasing, and it was 6.7% compared to 7.7%. Income tax expense in the current quarter represents taxable income growth over the prior year and reflected an effective tax rate of 26%. Summarizing the results of continuing operations for the 9-month period ended July 31, 2025 and 2024. As stated in the beginning of this document, all earnings from continuing operations have been revised to exclude EBC's results and all associated intercompany transactions. Now for the 9 months for CXI, the continuing operations, revenue grew to roughly $52.5 million or $2.1 million of growth, roughly 4%. Operating expenses increased to $35.5 million, $0.5 million higher or 1% more than the prior 9-month period. And EBITDA grew to $16.7 million, which is about $1.3 million higher than the prior year or 9%. Reported group net -- group net income grew to $7 million almost $1.7 million or 33% higher, while the adjusted group net income grew to $7.5 million, about $100,000-or-so and 2% higher than the prior year. Deep diving into the 9 months ended July 31, 2025. CXI's Payments revenue. So now we're just going to look at the 9 months income statement revenue growth. Payments for the 9 months grew 16% or $1.2 million with a 27% increase in trading volume activity where business grading volumes for the 9 months was roughly $4.7 billion compared to $3.7 billion in the prior year. Direct-to-consumer and wholesale banknotes combined grew 2% or $940,000, driven by growth in customer demand for certain foreign currencies such as euro and the Mexican peso, which offset the declining volumes from other currencies, such as the Canadian dollar. During the current year, that's the 9 months, CXI added 192 new non-airport agents and 2 new states to the OnlineFX platform, reflecting increased volumes from exotic currencies. The group reported net income of $7 million versus for the 9 months again, including the results from discontinued operations compared to $5.3 million for the same period last year. This included net income from continuing operations of roughly $9.6 million compared to $9.9 million from the same period last year. As I mentioned, the group had an adjusted net income of $7.5 million in the current 9-month period, 2% higher than the prior year. Now looking at the results of discontinued operations. And again, this relates to the Exchange Back of Canada. The bank had a net loss of $1 million in the third quarter compared to a net loss of roughly $1.2 million for the same period in the prior year. For the 9 months ended July 31, 2025, the bank had a net loss of $2.6 million compared to last year's $4.6 million in the same period. Diluted loss per share from discontinued operations was a loss of $0.17 for the third quarter compared to -- and a loss of $0.41 for the 9 months ending compared to roughly $0.18 and $0.70 in the same period last year. The application to discontinue is expected to be made in the fourth quarter of 2025 with the actual discontinuance of the bank being subject to receipt of all necessary regulatory approvals. Now reviewing the balance sheet as at 31st of July 2025, due to the company's business being subject to seasonality, CXI is using a trailing 12-month net income amount to calculate ROE, which was a consistent 12% over the last 12 months and it includes the discontinued operations results. Now CXI has net working capital of $67 million and total equity of $84 million and 100% available, a 100% available unused line of credit totaling $40 million, all debts were paid. Maximizing the return on capital to our shareholders through share buybacks remain a key focus. During the 9-month period ended July 31, 2020, the group purchased for cancellation to 190,300 common shares at the normal market prices trading on the TSX for roughly $2.85 million under its second share buyback program or Normal Course Issuer Bid. On August 20, the group announced a retroactive increase in its second NCIB. The Board of Directors and management believe that the market price of the common shares may not, from time to time, fully reflect the long-term value of CXI and between August 1 of this year and September 10, yesterday, the group had purchased for cancellation an additional 92,100 shares for a total of about $1.4 million. Our total repurchase shares through to September 10 is now 282,400 common shares, equivalent to roughly USD 4.25 million. Now at this time, I will turn the call over to Randolph Pinna, our CEO, for his perspective. Thank you, Randolph. Randolph Pinna: Thank you, Gerhard, and thank you all on the call. I appreciate everybody being available and especially those out West who are up early in the morning. As usual, I'd like to start with EBC. I think you've heard clearly, we are in the final stretch of our discontinuance according to our approved discontinuance plan. It was a sad day to see the last transactions here in Toronto, where I sit right now. And we are in the final phase of completely exiting Canada. I'm sitting in the EBC office, which is mostly vacant. And this month will be the last month that staff are in this office. As whatever staff is remaining will be working from home as we discontinue Exchange Bank of Canada. We will be filing, as I mentioned, this year, and we will be then waiting for regulatory approvals. Moving to CXI. As you can imagine, with no longer having a wholly owned subsidiary bank, we are in the final phase of updating our strategic plan for the next 3 to 5 years. In this process, we actually have went out and recruited the voice of over 1,000 U.S. consumers to get the voice of the consumer, whether they want to exchange money at their bank, at a Bureau they change, at an airport or what have you. We also did a deep dive and got the voice of our customer, not just to the banks and financial institutions, but also our agent customers and other customers to understand the customers' needs and goals for the next 3 to 5 years as well. And lastly, we have done quite a few meetings with our shareholders. And we do have that incorporated in our strategic plan as well, the voice of our shareholders. We are going to focus for the fiscal '26 year on continuing to grow our revenues while also focusing on efficiency, utilizing automation and simplification efforts. We hope that the '26 year will be a clean year, won't have all the noise of continuing and discontinuing. And so we are excited to embark on our new fiscal year with our updated strategic plan. On the actual business itself, as you see, we are continuing to grow in our consumer area with our online store with the new states, we're now well over 90% of the entire U.S. population can be serviced through their home and office should they not want to visit their customer bank, I mean their bank or their CXI locations. We are continuing to selectively add company-owned and operated retail stores. The new market in -- the new store in Phoenix, Scottsdale, Arizona has opened and doing very well. We're adding another location in New York, and we will continue to add selective locations each year. And most importantly, our agent program, as you see, is continuing to grow. We really enjoy the agent relationship. It is a win-win-win situation for all involved, and we will continue to focus on our agents. Overall, our consumer business is healthy, but we feel there's a lot more growth, both in the online agent and physical stores by adding additional products and services, utilizing the same infrastructure in place. Moving to the Wholesale business. We will continue to always focus on selling banknotes to financial institutions that is both banks and credit unions, but we are also complementary selling the Payment product. As you can see, we continue to invest our sales efforts and successfully adding new locations to continue to allow our Payment business to diversify our total group revenues. And lastly, I wanted to just talk about M&A. Gerhard and I have been quite busy reviewing and investigating opportunities that are strategic and would be accretive to the company. There's nothing imminent. However, we are continuing to explore and always looking for an opportunity that will complement our business and accelerate our growth. That's all I have for the -- my mini update, and I thought the best thing now would be to open it up for questions that Gerhard and I can answer for you, so thank you. Operator: [Operator Instructions] First, we will hear from Robin Cornwell at Catalyst Research. Robin Cornwell: I wondered if I could ask the first question is, if you could expand on the EBC referral agreements? You indicated that it's over a 4-year term. I wondered if you could give us some idea whether it's the material amount you'd be expecting? And what kind of potential income that might be generated from that? Randolph Pinna: Thank you, Robin. I appreciate the question. We have 2 referral agreements in place, one with a financial institution here in Toronto that is focused on the wholesale banknote business. We have not yet received the first report from that company. Although I have heard, they seem to be doing well. And we do not predict or forecast future earnings. As you know, we don't give guidance. And so I don't have an estimate to provide to you, but I do confirm that the existing bank note referral agreement with the Toronto institution is in place and customers have migrated to them. And so we will know more as it is reported in our next quarterly report, which I don't think will be highlighted as a separate line item since to be a separate line item, it would need to be more than 10% of total revenue. So it will not be that large, but you will see additional fee income from that. The second referral agreement is with a money service business based in Vancouver to take over payment clients. This is not expected to be as material as the bank notes since only 3 employees and their "book of customers" migrated to the new company, so that referral agreement would be less material indeed. So that is all I can comment on the referral agreements. Did that hopefully help answer the question? Robin Cornwell: Okay. And one little quick question. The payments revenue was up quite significantly, had any of that volume was it related to tariffs and the front-ending of imports and things like that in the United States, could you comment on that? Randolph Pinna: I don't know the direct impact of any tariff activity. I do know that the tariff activity has reduced foreign demand to come to America. And -- but as far as payment revenue, it has -- I don't think has had a material impact on it. Our payment growth increases is because we're continuing to add new clients as a result of the integrations we've done with the software providers that run bank software systems. And so the growth that you're seeing is real growth from new and existing relationships. And again, I don't have any insight into whether some of that is because of prebuying of the tariffs. I don't believe it is. Robin Cornwell: Okay. And Randolph one more... Gerhard Barnard: Robin, maybe to comment on that point. As Randolph mentioned, we saw that about $0.5 million of that growth or, let's say, close to 2/3 was by adding new customers and that just creates an annuity stream for us and existing customers also grew in that payment space that we have. So as you saw, the volumes continue to pick up, the additional payments that we do, you look at those billions of dollars of money that we move, that gives you a good sense of Payments current velocity. Robin Cornwell: Terrific. Okay. Thank you for that extra thought. Randolph, I do have one question for you, and it's a broader-based question. It's planning or how you plan to grow perhaps the Software-as-a-Service capabilities because you've invested a tremendous amount of money in the SaaS and you're using it now. But do you have any more insights as to where you might drive your business with the software? Randolph Pinna: Thank you for that question. And just as a -- for the whole audience, we're going to try to limit questions to 2 per person. I'm happy to do the third one, Robin. But if there are more, please requeue just out of respect for the other people on the call. But yes, I'm very excited about the fact that we have got past our pilot where we have some clients paying a fee to utilize the software since it is true payment rails for both foreign currency wires as well as U.S. dollar wires. And so we expect in '26 that we will be seeing a noticeable new fee income from a software licensing as opposed to our current model of where our banks get our software in return for doing their wires with us. We are pivoting that way where we are going to be seeing additional income from our Software-as-a-Service. So I don't -- like the other, I can't forecast what that number is. But I do confirm that, one, you're right, we have invested and built out an excellent system for both foreign currency and U.S. dollar wires. And this is being sought by quite a few banking companies, lots of which are customers using banknote services. So we have a captive audience to continue to expand this business line. Operator: Next question will be from Peter Rabover at Artko Capital. Peter Rabover: I have a big one for you, Randolph, and then I have a housekeeping one for Gerhard. But maybe now that you're kind of unencumbered from Canada, could you just talk about the big drivers and kind of give a scorecard of your business as it stands today, the U.S. business? And what's most sensitive to? And what are you seeing out there so just the conditions? Randolph Pinna: Thank you, Peter. First of all, yes, it feels good to not be having spent as much time in Canada, which will be going down to 0 soon. And so that allows me 100% focus on our overall business in the United States. And as I said, with the updating of the strategic plan, it is focused on our core areas of expanding our relationships with financial institutions across the United States for both banknotes and payments. And as I was just telling Robin, our payments business line will continue to grow with additional new clients as well as Software-as-a-Service fee income. In the actual currency exchange business, as I had said earlier, we see a lot of opportunity online. We feel that the fact that we can service 90% to 95% of the whole U.S. population, we will be continuing to invest into marketing and growing our online presence and selectively opening new stores with possibly a new service that could add fee income. We are very focused on our agents. We see that as winning a large national retail chain, adding the new service of currency exchange will be significant for us. And as I said, the wholesale business will continue to grow because of the new customers we add and the expansion and diversification of the Payment revenue. And lastly, we are looking and have identified opportunities. But again, we will only do a transaction if it's accretive and in line to our existing business. The voice of the shareholder revealed that 1 or 2 shareholders just basically want to stay focused on our core business and not "chase a shiny object." So you will see that the next 3 years will allow for a clean business here in the U.S., and it will -- that growth in revenue will come from both the consumer channel as well as our wholesale channel. So Peter, is that what you were looking for or was there anything... Peter Rabover: I mean, I definitely appreciate the color what the business drivers are. I was actually asking more on like what's going on today, what you're seeing in the macroeconomic kind of competitive conditions, but this was just as good. So I don't want to -- I mean, I have one more small question to Gerhard, but if you want to answer my... Randolph Pinna: Yes. So Peter, I didn't get -- I can't forecast what the tariffs are doing or the people getting shot in America and what international visitors are thinking of America right now. So I can't guess as to what the year ahead will be from a macro level. We just know that our focus is we have a valuable service to potential clients. We have a good revenue stream with a lot of expenses supporting that. And so we feel that we continue to double down on our sales and adding new clients, all while Gerhard and the entire company focuses on efficiency through internal automation and even elimination of certain items now that we're no longer a bank group and so no longer having that bank group structure will allow for improved efficiency in our current business in the United States. So that's the macro comment. Peter Rabover: Okay. And then my follow-up is on the cash line. There's a $12 million line of cash to be paid to shareholders. Is that basically the release of funds of the cash that was held by the bank back to the group that will be more available to you that wasn't available in the past? Is that the way to read that? Gerhard Barnard: So Peter, you're referring to Page 18 of the financial statements. That 18 is definitely a portion of it because we have to be reminded that this is at the end of July 2025. We still got 2 months of business to run. We -- as I mentioned, we've repaid intercompany loan accounts. We have lower working capital requirements. So if you look at that number, you have to consider the fact that there is various other items that has to be run through the cash mill, if I can call it that until the end of the year. We are still heading towards a repatriation of some capital at the end of the year and the full -- and once the working capital decreases to close to 0 as the bank continues its discontinuance. Peter Rabover: Okay. I mean that's great. But just -- I just want to be clear. The way to read that is that cash was not available because it was held by bank as part of capital requirements. And now it will -- whatever that number will end up being, and now it is more available to you as -- to use for acquisition and share buybacks. Gerhard Barnard: Absolutely right. Yes. And obviously take out working capital, take out intercompany transactions and then just running the bank for the next 3 months. But yes, you're on the right track. Operator: [Operator Instructions] Next, we will hear from Stephen Ranzini at University Bank. Stephen Ranzini: First of all, congratulations on a pretty good quarter operationally in the United States. We're very happy with our investment in CXI, because of the good job that you are doing. We've increased our ownership to 12.44% at a cost of less than book value. So I was very pleased to see the increase in book value. My question relates to the discontinuance of the bank in Canada, and it had some licenses, particularly with the New York Federal Reserve that you guys had been utilizing for the whole business. How are you going to handle those things that you don't have now that you don't have a Canadian bank to help you gain access to it? Are you losing any functionality? Do you have plans to replace that functionality? What are you doing? Will it have any other follow-on impacts? Randolph Pinna: Thank you, Stephen. Yes, I want to just point out that the Exchange Bank of relationship with the Federal Reserve Bank of New York through the FBICS program is completely ceased. We have closed our accounts with the Federal Reserve. But that business did not help CXI whatsoever because the license that we have with the Federal Reserve prohibited Exchange Bank of Canada to sell or buy U.S. dollars in America. So CXI had 0 benefit from that. We, of course, as a group, established a relationship, and so I'm very proud to tell you that our payment business is a part of the Federal Reserve Fed Direct program, and therefore, it has enabled our payment business to be more attractive to U.S. financial institutions. And as you can already see, the Payment revenue growth is well underway. And as one of the previous questions alluded to, there is a lot of opportunity in the '26 year. The other capability that Exchange Bank provided us was that CXI processed the majority of its wires through Exchange Bank, and hence, its correspondent relationship. As Gerhard mentioned in his commentary, we have totally migrated all of that activity away from Exchange Bank as a part of our discontinuance plan and that is currently being processed by 2 U.S. financial institutions with their global network. But we are always looking for additional strategic relationships. But the Fed relationship at Exchange Bank was in a specific wholesale banknote business product which was bulk U.S. dollars and, of course, other foreign currencies selling. We have exited that business line in Canada, and CXI is not replicating international bulk U.S. dollar activity globally. While we do have some select relationships that are international based in our Florida office, but that is not the same as what Exchange Bank was doing with banks that we had in France, in U.K. and Switzerland and so forth, so that wholesale banknote business will not be replicated, at least in the next year or 2 at CXI. Did that answer your question, Stephen? Stephen Ranzini: Yes, completely. My follow-up question, second and final question is with respect to Crown Agents Bank. You had mentioned previously that you're working on setting up some relationships with them. How is that going? What functionality are you gaining from that? Is there good progress volumes? Is this helping your business yet or not? Or do you think it will be material in the future or not? Randolph Pinna: So as I said, we are always looking to have strong strategic banking relationships. Crown Agents Bank specialty is with exotic currencies around the world, which is not a top wire that we do. So we do have a relationship with them, but there are limitations to their capabilities. And so the 2 primary U.S.-based financial institutions that are currently our wholesale correspondent bank have been sufficient. But we do, I would call it, cherrypick with Crown Agents as they do have some strengths that are attractive to payment providers like ourselves. So we do work with them some, but not as much as I would think we could have done, but because of some of their limitations. Operator: Next question will be from Jim Byrne at Acumen Capital. Jim Byrne: I just wanted to clarify on the expenses, want to see the run rate from this quarter continuing operations. Is that what we should expect kind of going forward, obviously, given seasonality? I just wanted to clarify, given your comments about that $3 million in expenses that will be absorbed. I just want to make sure that, that has been absorbed in this quarter. Gerhard Barnard: Jim, good question. As we stated, continuing operations excludes currently any intercompany transactions. So if you look at the stranded cost that we are reporting, we'd probably be $3 million after tax. That consists of roughly 40% as bank charges. Of course, the correspondent relationship we have with EBC, and we have fully migrated that relationship in the middle of August to CXI, hence, in the fourth quarter, pretty much half of all the bank charges will actually be in continuing operations. So 40% of stranded cost bank charges, 40% of stranded costs is basically salaries and wages as we obtain the 100% portions, the non-100% portions of the FTE. And then we've got about 1/4 of computer and systems, insurance and licenses. So what you see right now with continued and discontinued operations is not fully incorporating all the stranded costs because there is still expenses running through Exchange Bank of Canada, that is in discontinued operations. So if you look forward, you would probably be able to add about $100,000 to $150,000 a month to our salaries and wages line, which moves you closer to about $2.4 million per month. And then if you look at bank charges, as I mentioned, 40% of that $3 million after tax will start spilling over to CXI when we -- as we fully operationalize that new relationship of us, but we are actively, as a management and a Board, going through all our various expenses as part of our strategic plan in really mitigating that enhanced cost structure that's coming through. Jim Byrne: Okay. That's helpful. And then just as a follow-up, I wanted to just doublecheck on your IT spend. It's come down and is that, again, kind of the continuing run rate that we should expect? Gerhard Barnard: IT spend is -- well, you know what constantly depending on the systems and any additional pushes that we do. We -- I would not predict that -- or I would not determine that what you currently see as the run rate going forward. IT is extremely important to us as well as our cybersecurity and we continue to invest in it. So not an increase, but don't see a decreasing run rate in IT. As we know our payments business are growing, our volumes are growing and IT for us is a strategic driver with OnlineFX platform and so forth. So that is one item that we are comfortable to make the necessary capital investments in to continue to grow our business. Randolph Pinna: I can confirm that we have a very well-structured IT department. Our Senior Vice President, Paul Ohm, has ensured that we have a fully capable team. So we won't be hiring any new IT gurus or anything like that. So I think what Gerhard is trying to show you is that while we will continue to do integrations and so forth, hence, we have a pretty fixed cost structure in IT, and we are not going to be hiring any additional people in IT that would significantly increase that. But because the banks closed, doesn't mean you'll see a big reduction in IT because our cybersecurity is always a focus. And so we have a pretty consistent IT team now, and I don't think there'll be any radical changes in either direction. Gerhard Barnard: Yes, maybe just to complement that point. If you really go through our operating expenses, you'll see that IT is either we hold it fairly stable. If I look at the 9 months, it's about $100,000 higher than the prior 9 months. And if you look at the quarter, you can say, depending on 1 or 2 things that we've specifically done in this quarter, it might be $50,000 to $100,000 higher than the prior quarter. So that $731,000 for the 3 months ending July versus $517,000 for the prior year on Page 31, I would say our quarterly $0.75 million gives you a fair indication of the future projections, taking staff increases and inflation and so forth into account. Operator: Next question will be from Yale Bock at YH&C Investment. Yale Bock: Two questions. First, regarding the agent relationships. There was a dramatic increase in, I guess, the AAA. And if you could just provide a little color on duty-free and maybe with the cruise industry, there was an announcement of a partnership? And then the second one is your thoughts on the Genius Act and stablecoins and potentially how that might impact the foreign exchange market over time and how you're thinking about it? Gerhard Barnard: Okay. Thank you, Yale. Good to hear from you. To begin with the agent growth that is because of the AAA relationship, continue to grow. If you're familiar with the AAA structure, they have their "clubs" in each market. And the nice thing is there's still several clubs that are not under our umbrella. However, as we do CXI and AAA headquarters have a strong relationship and is encouraged that all clubs migrate to CXI. So you will continue to see that. Duty Free is still a good customer. Unfortunately, because of the challenges that, that business has had, it has not afforded the attention we required for us to add all of their southern locations, but we do hope that in fiscal '26, we will be adding their locations down south. And we are always looking for additional agent relationships, especially ideally with a national provider -- national retailer that has good real estate and a good audience, but does not offer currency exchange. So we are going to continue to focus on that. On the payment side, we have spent quite a bit of time keeping up with the change with stablecoins. And we -- from a practicality where banks, our customers that are moving their customers, corporations, money around the world -- we don't see that there will be in the next 3 to 5 years, a material impact on foreign wire transfers. We're seeing the stablecoin being a U.S. dollar-centric push. And whether how fast the adoption rate goes to stablecoins or even broader crypto activity is unknown. We still are tapping into existing flows of payments, and we feel that there is a lot of upside potential in our current payment model, which does not incorporate utilizing a stablecoin. Operator: Next is a follow-up from Peter Rabover at Artko Capital. Peter Rabover: One of my questions was answered on the $3 million and whether that was absorbed. So I guess I'll ask a question or I know you won't really be able to answer the way I would ask it. So now that you're a mostly U.S.-based company, would you -- or soon will be, would you say it's inefficient for the stock to be traded on a Canadian exchange? Gerhard Barnard: We -- one, I confirm in fiscal '26, we will be only a U.S.-based company, regardless, even if for some reason that our bank did not get the final regulatory approval. As I said, our here, and I'm sitting in Toronto, our lease here ends October 31. We will be actually exiting the building sooner than that, and we are basically going to have a clean empty shell that will be audited at fiscal year-end, and that will be the crux is supporting the application to discontinue. So in 2016, we will be a U.S. company only and not a bank group. And as far as our Toronto Stock Exchange listing of the Ontario Securities Commission and the TSX has been a very good, solid market for us. We have a large Canadian shareholder base. We do recognize we have also a good U.S. shareholder base. And so NASDAQ is being evaluated as far as what additional costs and increased regulatory concerns because this SEC, we imagine is much heavier than the OSC. So it is not a plan to move right away to Nasdaq, but it is being explored as an alternative to where our stock trades. But right now, because of our upgrade on the OTC market, we have seen an improvement and reaction from some U.S. shareholders that is good step. And of course, I believe where you're headed with this is you think we should be on Nasdaq, and we would consider it. But right now, I've asked our team to evaluate the total cost structure, not only just the listing fees, but the legal implications of that as well as any other costs, like Director and officer liability costs go up. And so we have to do a wholesome review of the costs relative to the reward of being on the bigger exchange. Peter Rabover: Okay. Well, I think you know how I feel, I think the reward is pretty good if you for -- especially for our companies undervalued as you. But I appreciate the -- at least the consideration of it. Randolph Pinna: No problem here. We understand, and it would be nice if we did. It got big enough to be on the Russell 2000 and so forth. So we do see the upside, but it is only prudent of us as the guidance of our company and all of our shareholder money, we want to ensure that we understand the full cost and ramifications of a potential stock market switch. Operator: Next is a follow-up from Stephen Ranzini of University Bank. Stephen Ranzini: Yes. The last question prompted me to make a follow-up. So I would encourage you to discontinue the Canadian filings and go and stay on the OTCQB. We're also on the OTC markets. Our bank holding company is not the OTC markets. We're simply UNIB. Every investment bank that I talked to, every institutional investors that I talk to does SEC registration and in our company history, we were a SEC registered at one point for well over a decade. Isn't a good idea unless you're able to be in the Russell 2000 index? And you spend a significant sum of money doing all the SEC filings, but the market being made in Nasdaq versus the market being made in the OTCQX in your case, is not materially different according to investment banks. It's only if you get to the Russell 2000 that the full benefit of being a Nasdaq is actually unleashed. So I don't know if you have any reaction to that, but that's the advice that I'm giving. Randolph Pinna: Thank you, Stephen. And as I just told, Peter, that is why we need to take a holistic view. We need to understand all the costs and all the benefits. So we can -- the Board and I can make a final decision. So we appreciate that feedback. And I do confirm it is something that is on our radar to consider. But that is why we did upgrade on the OTCQX and so we're comfortable where we sit now. However, being fully American, it does indicate or imply that you should probably be on an American exchange fully. So we will consider that and it will be discussed in the upcoming Board meetings. Operator: And at this time, gentlemen, we have no other questions registered. Please proceed. Randolph Pinna: Okay. Thank you. I just want to thank all of our shareholders for their interest and support of CXI. I wanted to thank our entire management team; a special call out for Katie Davis, our Group Treasurer; as well as the interim CFO of Exchange Bank, who's done a fabulous job sticking to our discontinuance plan in ensuring all the many, many, many pieces of completely exiting Canada are done and on time. So a real hats off to her. So thank you for that. But again, and all the people in Canada that have unfortunately had to find new jobs here. It is a bit of a sad day. But again, I want to give a big thanks to all of us together, both the shareholders and the team for getting us where we are and having a clear path ahead in the '26, years to come. So thank you. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
Operator: Good afternoon, ladies and gentlemen, and welcome to Scancell Holdings plc Full Year Results. [Operator Instructions]. I would like to remind all participants that this call is being recorded. I will now hand over to Mary-Ann from Investor Relations to open the presentation. Please go ahead. Mary-Ann Chang: Good morning and good afternoon to all our listeners. It's my pleasure to welcome you to Scancell's Results Call for the year ended 30th of April 2025. My name is Mary-Ann Chang, Investor Relations for Scancell. With us presenting today, we have Phillip L’Huillier, our CEO and Sath Nirmalananthan, our CFO. Following the presentation, we'll be taking questions directly from analysts as well as written questions from our audience which you may submit at any point during the webcast. Next slide, please. Before we begin, I'd like to draw everyone's attention to this statement. Today's discussion will include forward-looking statements, which are based on current expectations and assumptions. Actual results may differ, so we encourage you to review our filings for more details. With that, I'll now turn the call over to our CEO, to get us started. Phil? Phillip L'Huillier: Hello, and welcome, everybody. Thank you for joining this business update and year-end results for Scancell. As Mary-Ann has just said to you, I'm joined to present today by our CFO, Sath. This slide gives you a snapshot of Scancell today. As a reminder, for those that have listened in previous presentations, but also a summary for anybody new that's joined us. During the term, we formed a major partnership with the cancer vaccine Launch Pad, just one of our highlights from the year. You are right to ask me what is new? And there's a number of important things to mention. First and foremost, from our SCOPE study, we selected the iSCIB1+ product to move forward within further development in advanced melanoma, just one snapshot of the data. For iSCIB1+, we're seeing the progression-free survival, the PFS at a level of 78% in our target population. If you compare this to historic doublet checkpoints or standard of care, that's around 46%. So there's a whopping difference that we're seeing here. I mentioned the PFS to you and focus on this because now we are progressing forward into further development. And as many of you will have seen, the FDA is very much focused on progression-free survival and overall survival in patients as we go into these later-stage developments. So this is what really counts as the end points going forward. Another aspect that is new is we told you back in July that we were going to accelerate our planning for further development, and we delivered on that. We have submitted documentation to the FDA and other regulators and have scheduled review meetings with the regulators about our plans for randomized studies towards registration for iSCIB1+. And I have to just give kudos to the Scancell team here. It's been a herculean effort to get the documentation ready, prepared in a very quick and very efficient way such that it's been submitted. We told you last time that we were going to go to the FDA. Of course, we need to do that. But also, we are in conversations with EMA and HRA, that's about being able to consider randomized studies in multiple territories, but it's also about hedging our bets in an uncertain world that's out there. What's also new is we've been able to confirm we've got a commercial scale manufacturing process now for iSCIB1+. It's a high-quality formulation, and the long-term stability that we're seeing with this formulation is really quite amazing. I hope you can see from what I've summarized here is we now have a focus and an eye on the registrational development of this drug, but also one eye on the stage after that, the commercialization. We'll talk you through more on the SCOPE study and iSCIB1+ as we go through the presentation. Let me also remind you that we have other assets in the pipeline, Modi-1 and GlyMab assets. Modi-1 is in the ModiFY study, a Phase II study being conducted across centers in the U.K., being tested in both head and neck cancer, and we shared some early data from that study showing a benefit over and above standard of care. And we also have a study running in renal cell carcinoma. And that study is recruiting well and looking good, and we anticipate sharing data from the renal cohort towards the end of the year. During the year, we also established GlyMab Therapeutics. This was a strategic initiative, giving us optionality about how we could develop that portfolio. To me, there's a little gold mine there that it was difficult as we were structured to apply significant resource to move that preclinical pipeline forward by forming GlyMab Therapeutics, putting the pipeline, the platform and the IP into that entity we can potentially bring focused investment but also focused management to move forward those assets. We did a financing late in 2024, raised GBP 12.1 million from new and also from some of our existing investors. And I want to acknowledge the support -- ongoing support of our investors. That financing was in fact, in my first 2 weeks. So it was a bit of a baptism by fire, but a successful financing for the company. And that gives us a strong financial position for us to move forward, and Sath will talk you through that later. We have upside on that cash runway from our partnerships with Genmab. And there are -- as I hope you can see multiple near-term and longer-term value creation opportunities here. Let me remind you of our pipeline as it stands today. And I'd like to go back and just mention the monotherapy study that was conducted in the adjuvant setting in melanoma with SCIB1. I raise this because monotherapy activity is an important pharma conversations in it. So an important study that the company has done. We're now, of course, developing in combination with checkpoints in the advanced setting. Why did we move from the adjuvant setting to the advanced setting? Well, adjuvant studies are pretty long-term studies and not easy studies necessarily for a biotech company to do. The readouts in the advanced setting tend to come more quickly, so hence moving into that setting. I touched on Modi in the ModiFY study in head and neck and 2 of the assets of several assets in the GlyMab Therapeutics pipeline. Let me remind you about our platforms, 2 very novel platforms in the clinical part of Scancell with some key features that are important to the overall success of the products and of the company. The first one is the ImmunoBody body platform, a DNA-based immunotherapy. And the second one is the Moditope platform, which is a peptide-based immunotherapy. Both have unique mechanisms of action and a very, very novel platforms, the lead out of the DNA ImmunoBody platform is iSCIB1+, and the lead out of the Moditope platform is the Modi-1 platform. As some of you have been -- that have been involved for a while, we'll, of course, recall, there are other products out of these platforms, but we've got those on the shelf at the moment whilst we're developing our leads. Some of the key features that are really important as we move forward to partner and to go into commercialization with these products is the fact that they are off the shelf. So that means they're straightforward in terms of cost, scale, et cetera. They are conveniently delivered to patients and accessible to patients. There are also -- we're seeing from the clinic excellent safety and the products are very well tolerated. And that means they are what I call easily combinable with other therapies, which is the way cancer therapy is going. And as I said to you, there's unique novel mechanisms or another way of saying it is, these are not me-toos. These are very, very novel products. Let me come back to iSCIB1+ and remind you, first of all, of the unmet need that's here in melanoma. The checkpoints have made a big difference to patients in melanoma, but unfortunately, still 50% of patients really do not respond very well or don't respond for long. And so there's a big unmet need still there. We're working with iSCIB1+ in the unresectable melanoma, the late-stage metastatic disease population. And we have calculated that, that's a market opportunity in the order of $3 billion. There are additional upside to this, and this is shown in the middle of the slide here. The potential to take the product into the neoadjuvant and adjuvant setting. So patients that could get surgery, have their melanoma removed and then have therapy after that. You can see that's an even larger market opportunity and that's where many of the pharmas have now focused their checkpoint therapies. So we want to also, at some point, explore the possibility of moving to this earliest -- earlier disease setting. So large market opportunities here. I want to pause on this slide because I think in one slide, it summarizes nicely the drug, the features of the drug that we have and the characteristics. So first of all, what's the product? iSCIB1+, the second gen of the SCIB drugs, the first gen was SCIB1, and it was designed to work in patients with an A2 haplotype. So a profiler, A2 HLA haplotype. Lindy Durrant and the team went back after seeing some activity with that drug and then designed iSCIB1+ where the i is an immune modification and the plus is additional HLA haplotypes for which it was predicted would stimulate T-cells in patients. And amazingly, it's doing what it says on the tin. We're seeing that it's stimulating T-cells and bringing clinical benefit to patients in the clinic. This represents 80% of melanoma populations. Just a little bit of scientific detail, but here's the mechanistic understanding. And to me, in pharma conversations, they want to see the data, but they also want to know how this drug works, what's the translational data coming out of these studies. And we know that well here. We know that this drug is dual acting direct and indirect targeting of the CD64 receptor on activated dendritic cells. That's a unique mechanism. It was built with epitopes or peptides from 2 melanoma proteins, gp100 and TRP-2. These play key roles in melanin. And the epitopes that we've put into these 2 products were actually isolated from patients that had spontaneously recovered from melanoma. So we know the immune system sees them. Here's the real crunch, the clinical data. We've demonstrated effective monotherapy activity in the adjuvant setting, and we've now demonstrated a strong meaningful clinical benefit in the combination setting in metastatic disease. And just a few really important headlines of this data. We're seeing T-cell responses in 72% of patients to both TRP-2 and gp100. Why do I emphasize that? Well, that means because we're seeing T-cells to both of those epitopes that reduces the likelihood of immune escape. So it gives the prospect of a longer-term immune control. And again, I come back to the PFS, it's a whopping delta over the standard of care, and it's being well tolerated into the clinic. And then a feature that could be really important going forward, now that we know that the drug works on the patient profiles that it was designed to, we can actually reverse that and use that as a selection tool to select for patients into the Phase III that we know will respond. This basically enhances the chances of success. And it's very, very rare that you have a selection marker for an I-O therapy. Let me come back to some of the data. We shared this data with you on July 22, but it's worth going over it again. This is the combined data for the target population for both Cohort 1 and Cohort 3. Now ask me the question, why do I combine this data? Well, I know from my pharma experience, they want to see good, sizable data sets. And the only difference between the 2 cohorts here was one is SCIB1 and iSCIB1+, but they all are in the target population, all receiving our drugs on top of ipi/nivo at all having very much the same demographics. So I'd just remind you here that the PFS in this target population is 69% at 22 months versus a historic control population, which is shown here just as an illustration. This is not a randomized study for Checkmate-067. The medium PFS was 11.5 months. So that's 50% at 11.5 months, we are 69% at 22 months. That's a whopping delta. As one of my Board members said yesterday, if you're a metastatic melanoma, you would really want to get this stuff, wouldn't you? And another example that I was alerted to yesterday, antidote, could say for one patient. We had one patient that was on the study for a little over a year on the therapy. For whatever reason, the patient and the doctor decided to stop the therapy. And whereas when on therapy, there was good control of the tumor a few weeks after going off therapy, they have progressed. A nice example of the power of this therapy, this patient had probably an extra year of life. Now digging in a little bit more, we want to look at iSCIB1+ because that's the drug we're taking forward. This is the PFS curve in the target population, and this is impressive compared to the nontarget patients and also compared again to the standard of care. So here, 78% at 11 months versus 50% for this non-target population where the vaccine wasn't predicted to stimulate T cells. This really is very superior, the target population to the nontarget population and markedly better than the historic control. Let me come back to the SCOPE study and just remind you of this. Of course, Cohort 1, 2 and 3 are fully recruited, and we've got data coming in for those cohorts as we're showing you. Cohort 4, which is iSCIB1+ with accelerated dosing and with intradermal delivery is recruiting well, and we will have data coming out of that cohort later in the year. So really on track with this overall study. Let me come back to overall response rate and disease control rate. And this is the data we showed you in July, but I want to remind you of the waterfall plot on the left, but perhaps more importantly, the spider plot on the right, a patient responds, you see the lines go down and then they're pretty damn flat. This is impressive. You are right, the eagle eyed amongst you to ask me why is the overall response rate now at 65%. Let me show you that on this slide and explain that. We have now a full set of patient profiles. The patient demographics they are called and what we've seen looking at that data is our patients are very similar to Checkmate-067. And so we want to be able to really compare more precisely to 067. When we first put this data out we took out a couple of patients from the target population that had not -- that had progressed or died before their first scan. Now we realized that in Checkmate-067, that wasn't done. So we've put these 2 patients in the target population back into the data. So we can all strictly compare with Checkmate-067, and we've got 20 patients showing a response out of 31%, a 65% response rate we are still waiting for a further 7 patients to read out. We screened patients as they came on to the study for the target HLA Haplotypes, but we also took patients that were on target. And as it represents, the target population represents 80% of patients we did have some patients that were nontarget and that ended up to be 11 patients. And what we're seeing here is a response rate of 27%. And I showed you earlier the PFS curve there where it's at about 50%. So I do think that this nontarget population could be a representation of what the double checkpoints do without iSCIB1+ generating a response in this patient population. So now I think we didn't add up all the numbers in this cohort well previously. Now we're doing that. There's 50 patients in this cohort, 38 target patients and 11 nontarget patients and 1 patient got through screening with active brain mets. We've taken that patient out. Active brain mets were not included in Checkmate-067. This slide shows you the safety read out now. It's quite a bit of data here, but perhaps the message to take away is when we add iSCIB1+ or SCIB1 on top of the checkpoints, the drugs are very, very well tolerated. We're not seeing any major toxicities from adding these drugs on, which is great. We can combine them with these checkpoints or potentially in the future with other therapies. Let me summarize where we are with this program. We're seeing really good efficacy for iSCIB1+ in the wider population that represents 8% of melanoma patients, very strong PFS coming out of the study versus Checkmate-067 versus SCIB1 and perhaps iSCIB1+ is slightly better on PFS, reflecting the Avidimab modification. But PFS, as I touched on earlier, is the critical endpoint now for registrational studies. I told you we are confident about our commercial scale manufacturing. A reminder, we have the PharmaJet partnership for the Stratis needle-free device for intramuscular delivery. That's what we're moving forward within the further studies. And then I also told you about the biomarker or the selection tool that's available to us to use to select patients into the Phase III study, and that will likely enhance success. I showed you some commercial figures. What's the opportunity? What's the size of this opportunity. You can look at it in another way here that ipilimumab was available for this advanced melanoma populations, BMS the combination study adding nivo to ipi. And because of the delta out of that study, ipi/nivo has captured 65% to 70% of the U.S. market for metastatic melanoma, the delta or the advantage iSCIB1+ adds on top of ipi/nivo is not dissimilar. So it's a way of sizing the commercial opportunity that's here with us. Let me quickly summarize the other assets in the pipeline, Modi and GlyMab Therapeutics. And in some ways, a reminder, we are evaluating Modi in the ModiFY study in head and neck and in renal cancer. We showed you data from head and neck earlier in the year, showing a delta over standard of care, which is pembrolizumab, that cohort continues, and I expect data readout later in the year. But on top of that, we have the renal cell carcinoma cohort, which is Modi-1 on top of ipi/nivo going also and that cohort is recruiting well, and I anticipate having data readouts towards the end of the year from that cohort. So I'm pleased how Modi is going. We are seeing benefit in patients from Modi, and we continue to recruit and build that data set. I told you earlier that we have formed GlyMab Therapeutics with this set of assets, the anti-glycan antibodies. There's a unique expertise in Scancell to generate these high-affinity IgG1 antibodies to the -- the tumor-specific glycans on tumors. The lead is SC134 targeting fucosyl GM1 and in some ways, this is validated -- this is validated in the clinic from the work that BMS is doing. We've done a lot of work recently developing this as a T-cell engager and are moving it forward towards the clinic. SC27 is the second product targeting Lewis Y, and that targets a broader set of cancers. And we're developing that as an ADC and also moving that towards the clinic. And the team are also working on building other targets out of this platform. And of course, you'll remember we have industry validation here with the 2 licenses with Genmab. Let me pause now and hand over to Sath to talk to you about the financials and the outlook. Sathijeevan Nirmalananthan: Thank you, Phil. Next slide, please. I'm pleased to update you all on the financial results for the year ended 30th of April 2025, including some post-period highlights. Starting with revenue. We reported revenues of GBP 4.7 million in the period. This relates to the second commercial license agreement with Genmab for antibody SC2811. We received USD 6 million in total upfront payments and there are up to $630 million in further milestone payments with low single-digit royalties on commercial sales. To reiterate, this is the second commercial license deal with development of the first out-licensed antibody, SC129, also to Genmab on track for further milestone payments. Building on the success of these deals, we have established GlyMab Therapeutics. This is a wholly-owned subsidiary of Scancell Holdings plc with the intention it will hold our in-house portfolio of antibodies with a transfer of trade planned. This move provides us with strategic optionality as we look to unlock the right value in these assets. Research and development expenses were GBP 14.7 million, slightly higher than prior year. As a reminder, our R&D costs predominantly reflect expenditure on our in-house clinical, manufacturing and research costs. During the year, these were focused on SCOPE and MODIFY studies. We made an additional investment in the period to ensure readiness for the next stages of development. This includes the previously mentioned commercial scale iSCIB1+, GMP manufacturing process, which has resulted in a high-quality formulation and long-term stability leaving us well prepared for late-stage clinical development with iSCIB1+. Administrative expenses was GBP 4.8 million, lower than prior period, with a focus on controlled expenditure despite continued investments in our organizational capabilities, including the recruitment of our CEO and CMO in the period. This leaves our operating loss at GBP 15 million lower than prior year, primarily due to the revenue reported in the year. We recorded a small loss in finance and other income of GBP 0.3 million and recorded a tax credit of GBP 3 million, resulting a loss for the year of GBP 12.3 million. During the period, we also announced the extension of the maturity date of the convertible loan notes by 2 years. These majority dates are now August 2027 and November 2027 and following a small partial redemption, the remaining loan notes totaled GBP 18.2 million. Our cash of GBP 16.9 million at year-end was boosted in the period by a financing in late 2024 raising proceeds of GBP 11.3 million, with participation from new and existing life sciences investors. We anticipate this will be enhanced by the FY '25 tax credit, which will be at similar levels as in the past. This leaves our cash runway in line with previous guidance of Half 2 2026 beyond key developmental milestones and with a good runway for our ongoing partner discussions. We have upside opportunities on this runway, too, namely, the development of the first out-licensed antibody, SC127, which is anticipated within the next 12 months. Furthermore, I highlight the discretional nature of our spend, which allows us to take decisions if required. Next slide, please. Here are the key milestones for Scancell. As Phil has mentioned, we are making good progress across our programs with significant milestones already achieved from our clinical programs. In Q4, we expect further Cohort 3 data with iSCIB1+ and early Cohort 4 data. We expect this additional data to inform our development plans rather than prolong them which is why we are accelerating both regulatory and business development conversations. Regulatory discussions, as Phil has highlighted, are already scheduled with feedback anticipated this year, and we believe we have the right data set to generate partnering interest. Based on regulatory feedback and business partnering discussions, we will evaluate the right next step forward, including assessing out-licensing, partnering and further financing but all with timely development and shareholder value in mind. Outside of iSCIB1+, Modi-1 continues in the ModiFY study following early validation in head and neck cancer in early 2025 , highly anticipated clinical data from Modi is anticipated in Q4 in renal cell carcinoma in combination with the checkpoint inhibitors. And with the establishment of GlyMab Therapeutics, we highlight SC134 and SC27 as key assets we are looking to progress under GlyMab Therapeutics. Next slide, please. Finally, I'd like to end on why Scancell, why now? Firstly, we have compelling science that is now clinically and commercially validated. We have over 100 patient data in the SCOPE study with iSCIB1+ and SCIB1. This is supplemented by Modi-1 showing early clinical validations in the settings evaluating that. The licenses with Genmab provides commercial validation of the GlyMab platform also. We are well prepared for late-stage development. We have good data. We have manufacturing in place. We have a strategic license with PharmaJet covering development and commercialization and building the team with broad experience, ensuring we have the components for late-stage development. We believe all of our assets have substantial markets where there are unmet needs. iSCIB1+ has a clear development pathway to commercialization as well as growth areas in early disease settings. Modi-1 has the potential in multiple tumor types with the highly anticipated renal cell carcinoma data informing efficacy in the combination setting. And GlyMab Therapeutics cover a preclinical portfolio of antibodies, which as previously highlighted, has potential to be developed as T-cell redirecting antibodies, or ADCs. So we have a Phase III-ready asset with a clear pathway to market and other assets in Modi-1 and GlyMab Therapeutics providing our shareholders value creating opportunities in the near to medium term. Thank you for listening. I'll now turn over to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Julie Simmonds with Panmure Liberum. Julie Simmonds: Congratulations on the progress over the last 12 months, most impressive. A couple of questions. Firstly, with the sort of selection of the patients for the registration trial, I mean, it seems to make a lot of sense to recruit those who are most likely to respond. Is the HLA typing done as a standard test? Or would that be something that would be done specifically for use of iSCIB1+? Phillip L'Huillier: Thank you for the question, Julie. It is a standard or widely available test, and we would use that test to screen our patients. It's actually perfect in the sense that we don't have to develop a biomarker ourselves in parallel with the therapeutic. This is a test that's widely available. And there are examples of companies that use this type of testing. The Kimmtrak from Immunocore is an A2 specific product. So they are testing patients for A2 positivity before they go on to therapy, as an example. Julie Simmonds: Brilliant. That sounds very good news. And then on the manufacturing side of things, good to hear that, that process is -- has gone to plan. In terms of any -- is there any sort of lead-in period that's required in terms of the manufacturer for doing a clinical trial? Is that going to cause any delay in process once you've obviously got it signed off and anything to get the active product necessary? Phillip L'Huillier: That's a good question, Julie. No, we don't anticipate any delays. We're in fact, factoring in and it's factored into our runway that Sath just summarized further manufacturing to have material ready to start the Phase III study on the time line that we've laid out. Sathijeevan Nirmalananthan: And I'd just add, Julie, that's the investment that we made in the last period to make sure we were ready and could have a seamless transition into a late-stage study and not have good data and not be able to continue because we needed a better manufacturing process. So we will be yielding the benefits of that earlier investment because we've got a good process now that should be late-stage ready. Operator: Your next question comes from the line of Edward Sham with Singer Capital Markets. Edward Sham: Congratulations on your results. I think it's clear to see that you guys are on a journey to becoming a late-stage biotech. I've got a few questions. If I just start with the first one. So you say you're having accelerated discussions with the FDA, EMA and MHRA. I just want to kind of understand how aligned are those agencies in terms of trial design endpoints and data expectations? Phillip L'Huillier: Yes, that's a good question. It's early days. We haven't had the conversations yet. We are wondering to have the scientific exchange in the Phase II conversations all in parallel. So in fact, we could get to the point of having a single protocol for the study going forward. But sometimes, in my experience, you do find that there are some differences between agencies so you do end up with slight differences in the protocols that are there. We have -- we've developed a -- I think, a really robust study design. We've all seen recent activity from the FDA, and I'll mention one in relation to Replimune that didn't get their BLA, which surprised us all. So we're taking into account what we're seeing and hearing with the FDA and other agencies and have made sure we've got a robust design that I am very, very hopeful will satisfy all of the agencies that we're talking to. Edward Sham: That's really helpful. And then maybe just on the time line you've indicated. So you suggested you expect to initiate randomized studies in 2026. So is it safe to assume that you're confident in either a partnership or financing before that trial starts or the randomized study start? Sathijeevan Nirmalananthan: I'd say so, Ed. So yes, we are confident. We have the bulk of the data. We are in active conversations, and I think we've got the runway to get through the initial steps on regulatory as well. And I'd highlight we do have upside opportunities, as you know. So I think that gives us a good runway to make sure we're ready. Obviously, we need to find a partner and/or financing, but we're confident that we have the ingredients to move in a timely fashion. Phillip L'Huillier: Perhaps it's worth adding Ed, that we have accelerated the regulatory conversations for, of course, that time line for us, but also, perhaps more importantly, for the partnering and investor conversations, they're asking us the question, what does the FDA or EMA think of this study. So we have accelerated those conversations to coincide with our investor and partnering conversations also. Edward Sham: Great. That's really encouraging. And then just my last one is just on the Genmab licensing deal. So you've mentioned that you're now on track for near-term milestone payments. Is that a positive surprise? Is that something that's moved faster than expected? Or is that simply the timing you've always expected? Sathijeevan Nirmalananthan: I think we got a recent update, which is increasing our confidence that this is continuing on its development pathway. So I think that is something incremental I think we would obviously like development to move as quickly as possible, but we remain confident that these are going to happen. And to remind you, I didn't put that in my runway guidance, it is upside. But based on recent interaction, I think we're growing in confidence that this will happen. Operator: [Operator Instructions]. And it seems there are no further questions on the conference line. We will now address the written questions submitted via the webcast page. I will hand over to Mary-Ann Chang, Investor Relations to read these out. Mary-Ann Chang: So a question for Phil, and it's again about the discussion -- upcoming discussion with regulators. Is there a realistic accelerated or fast track route for iSCIB1+. And second part of this, how is it differentiated from Moderna and BioNTech's cancer vaccine program? Phillip L'Huillier: Thank you, Mary-Ann. So taking the first question, the answer is iSCIB1+ is yes, absolutely. There is a real possibility of breakthrough or accelerated development here. We -- for the FDA, we have to go through the conversation with the FDA, submit our IND and then be able to then have a conversation, first of all, about breakthrough, but then accelerated approval. But if you look at the data that I was sharing with you, then I think we are a very, very good prospect. Mary-Ann, sorry, there was a second part of the question. Mary-Ann Chang: Yes. That was on the differentiation between iSCIB1+ and Moderna and BioNTech's programs. Phillip L'Huillier: Yes. A couple of components to mention here. We are working in different settings of melanoma. So we're in advanced metastatic melanoma, unresectable melanoma. BioNTech and Moderna are working in the resectable, the earlier-stage disease setting. So we're talking about different markets, different patient populations. The other thing that I think is worth adding back to our platform that both of those are using personalized therapies with all the associated cost and time line to collect the material sequence, develop algorithms and then develop material to go back into the patients. That's a logistical hurdle to overcome, but also a very high cost of therapy. We are off the shelf. So I see us being more widely available to health systems once we get through to approval. So very different modalities also. Mary-Ann Chang: Great. Okay. One for Sath. How much of the planned iSCIB1+ registration trial is already funded and what's the expected financing gap? Sathijeevan Nirmalananthan: Sure. So we -- within our runway, the guidance I previously guided to, we have all of the regulatory spend planned and a little bit more in manufacturing to make sure we are ready to initiate the study. The actual study of funding the study we will evaluate our options following the active conversations we're having with partners right now. So based on those conversations, based on their feedback as well as the confirmation from the regulators that we've got the right study design, we will come back and update you on what that right financing will be. So we're confident we've got the runway to do it. We don't have it funded yet, but we have the data and the conversations ongoing, and we hope to update you in due course, not too long about how that next stage of development will take place. Mary-Ann Chang: That's great. Somewhat related to that, and Phil, you may not be able to fully answer this, but I'll go ahead with the question. Will you partner iSCIB1+ before 2026 randomized studies. You mentioned previously, you were revisiting discussions. How are these discussions progressing? Or are you preparing to do it alone? Phillip L'Huillier: Thank you for the question. I see my job always as taking a two-pronged strategy. The first being be opportunistic about the possibility of partnering. And with this data set and our push on regulatory conversations, we're very confident that we will have serious conversations about partnering and partnering in the broader sense. And also possibilities around investment further. But alongside that, the second part of the strategy is to make sure we have the resource in terms of the expertise and the people and the drug but also the finance to go it alone because we don't necessarily control the timing on partnering activities. So we -- I always want us to be taking this two-pronged approach. Mary-Ann Chang: Good. A question again, Phil. Can you indicate how long the iSCIB1+ trial will take? And when might it start? Phillip L'Huillier: Is this in reference to a randomized study? Mary-Ann Chang: I think it must be, yes. Phillip L'Huillier: Yes. Yes. So as it's designed, we anticipate starting in mid-'26. We've designed it to have an interim PFS readout 17 months into that study if recruitment goes according to the design. And then at 27 months, we'll have our readout of PFS and an early readout on OS. Mary-Ann Chang: Very good. Okay. Question for Sath. When is the next Genmab payment due? Sathijeevan Nirmalananthan: Yes. It's on IND submission, phase I initiation. So that's in the first antibody and the same milestones exists on the second antibody too. As I said in my answer to Ed, we've got a recent update and things are looking good, increasing our confidence, and I anticipate them within the next 12 months. Obviously, the timing is reliant on Genmab. Mary-Ann Chang: Great. Okay. And a follow-on for you. What was the logic of the CLN redemption and size? Sathijeevan Nirmalananthan: Yes. So firstly, I'd say Redmile are very supportive investor. They continue to hold their equity stake. The partial redemption relates to some old funds that were requiring a little bit of liquidity. And given our runway and our confidence in our runway, there was a small partial redemption. Mary-Ann Chang: Yes. Thank you. Okay. Comment on the Modi-1 renal study. There was a question, has the study been delayed a quarter? And why? Phillip L'Huillier: No, I don't think it has. It's certainly recruiting well, and we're collecting data from patients as we speak for that. I think we've signaled the second half of the year, and now we can be a little bit more precise on the timing of that. But there's been no delay in recruitment or readout of data from that cohort. Mary-Ann Chang: Good. Okay. Finally, we have one question for Sath. On the share price, the questioner is asking if there was a seller and if you can give any idea about whether or not that any exit that may have been happening has now been completed? Sathijeevan Nirmalananthan: Yes. I'll answer this as best I can. Firstly, I'd say I think we're all disappointed in our share price performance. I don't think it reflects our intrinsic value and the value that we are building in the company. And as a reminder, all 3 of our covering analysts have increased their target price in recent weeks. And so we strongly believe we are building value. And I juice based on my feedback and my interactions that this is related to low volumes and certain compliance nature of selling from large institutional investors who have been very historical supporters, but for various reasons, need to sell out. Nothing related to our data and the progress that we're making. We continue to work through some volume, but I'm confident that once that clears, that we will continue on the path to reflecting the right share price as well. So I'm confident about the future, and we're working very hard to make sure that the share price reflects our intrinsic value. Mary-Ann Chang: Great. Thank you, Sath. There are no further questions. So I'll hand back to Phil for closing remarks. Phillip L'Huillier: Good. Thank you. We're excited. As my CMO says, we've got an active drug in our hands here, and we need to get this to patients as quickly as we can. The next quarter or so, we're knocking on many doors to find partners and investors to help us move forward into the clinic for further development to get this drug to patients, and we'll develop the rest of our pipeline. So we continue to build our plans to execute the randomized studies towards registration, whether it's in partnership or going it alone. Thank you for listening, everyone.
Operator: Good morning, and thank you for standing by. Welcome to Zenvia's Q2 2025 Earnings Conference Call. Today, Shay Chor, CFO and Investor Relations Officer, will be our speaker. And both he and Mr. Cassio Bobsin, Zenvia's Founder and CEO, who will be available for the Q&A session. Please be advised that today's conference is being recorded, and a replay will be available at the company's IR website, where you can also access today's presentation. [Operator Instructions] Now I'd like to welcome Shay Chor. Sir, the floor is yours. Shay Chor: Hello, everyone. Thank you for being with us here today to discuss Zenvia's second quarter and first half 2025 results. I'm Shay Chor, CFO and IRO. Let's start with a snapshot of Q2 '25 performance where you can see all the main financial KPIs of the period. As we pointed out in our first quarter earnings call, the second quarter delivered the financial performance following the same trend we saw in Q1. It was another period of strong top line growth of 24%, mainly driven by CPaaS and also highlighted by the continued advance with the rollout of the Zenvia Customer Cloud. While we are making steady progress on the evolution of Zenvia Customer Cloud and on streamlining our operations in line with our plans, as I will detail in this presentation, it's important to recognize the environment we are operating in, especially on the CPaaS side. The market remains highly volatile and extremely competitive, which has been putting pressure on our profitability in the short term. Our SaaS gross profit showed an increase for the first time since Q2 of '24, with margins slightly up year-over-year, but this was more than offset by the CPaaS sharp drop of gross profit and margin. As a result, consolidated adjusted gross profit fell to BRL 69 million with gross margin down to 24%. Compared to Q1, this margin remained stable. That said, we see these pressures as temporary. With the initiatives already underway and with the continued scaling of our platform, we expect profitability levels to gradually recover and return to more normalized level by the end of the year. This drop in adjusted gross profit was partially offset by a decrease in G&A of BRL 9 million or 27% when compared to the same period of last year. The combination of strong top line growth and streamlining efforts brought our G&A to revenues ratio down to 9% of our revenues in the quarter. As a result of all these factors, our normalized EBITDA came in at BRL 11 million this quarter, below our expectations. We anticipate a progressive recovery throughout the year, and I will walk you through the reasons for that in the next slides. Here, you can see the breakdown between our SaaS and CPaaS revenues. SaaS revenues grew 3% year-over-year in Q2 mainly from SMB customers. As you know, we are ramping up Zenvia Customer Cloud, our new core business launched in October of last year and which is moving on as expected. We are proud to report that revenues from Zenvia Customer Cloud are up 23% in the first half of this year when compared to the same period of last year, accelerating from the 15% increase reported in Q1. We feel confident about delivering growth of 25% to 30% from Zenvia Customer Cloud in '25 as we said earlier this year. On the rest of our SaaS business, we continue to see a tough and competitive environment, especially the enterprise segment in Brazil for our SaaS legacy solutions, which have been partially offsetting the growth coming from the Zenvia Consumer Cloud. We believe that the strong value that Zenvia Consumer Cloud delivers sets us apart in this highly competitive segment, and we're already seeing proof of that with the first dozen projects in the last couple of months that will help strengthen our SaaS metrics in the next periods. Now talking about CPaaS, the revenues were up by 33%, coming mainly from customers with higher margins, and we believe this strategy will prove valuable over time as these accounts keep scaling without G&A costs. CPaaS accounted for 72% of total revenues, and this higher mix with low margin was the main responsible for the performance of our gross profits and margin, as we can see in the next slide. Here, we have a comprehensive view on how gross profit and margin performed in the quarter broken down by business segment. The first chart on the left shows the SaaS business. Adjusted gross profit was up 5% year-over-year to BRL 45 million in Q2, with adjusted gross margin also slightly up by 1 percentage point to 55%. This is the first quarter we are seeing positive gross profit expansion in SaaS since Q2 of '24, driven by the transition into Zenvia Consumer Cloud that I mentioned earlier. Another point I would like to go into more detail is the competitive landscape we are facing with enterprise clients in the SaaS business. As I mentioned earlier, this has been partially offsetting the performance of Zenvia Consumer Cloud. That said, as enterprises adopt Zenvia Consumer Cloud, they quickly recognize the benefits of earning their customer services on a fully integrated solution. For us, this has been translated into higher quality revenues and more profitable clients. The second chart in the middle of this slide shows the CPaaS performance that was again impacted by strong volumes from clients with lower margins, coupled with the cost increase from the carriers that we mentioned last quarter that is still being passed on to clients throughout the year. We expect to see CPaaS margins normalizing closer to 20% by Q4 of this year. Both performances is mainly explain the drop in consolidated adjusted gross profit and margin that you can see in the third chart. Moving on, let's now discuss our G&A, which helped offset a bit this increase in gross profit. When comparing first half of '25 with the same period in '24, G&A expenses went down 25% reaching BRL 48 million. If we exclude the BRL 8 million severance expense from Q1, this figure will be closer to BRL 40 million. We have been very diligent and strict with our expenses since the end of '22 when we started our streamlining efforts. Our current level is now 1/3 of what it was in the first half of '22 and less than half of what we recorded in the 9 months of '22. Also, as a percentage of revenues, G&A is now at 8.3%, down 6.2 percentage points from the 14.5% reported in the same period of '24. Excluding the severance, the ratio would be at 7% of revenues. At the end of '22, this ratio was around 18%. This strong performance is mainly related to workforce reduction of approximately 15% announced in January that is expected to result in cost savings between BRL 30 million and BRL 35 million in full year '24, already factoring in the severance expenses. Now looking into our EBITDA, we recognize this quarter came in below our expectations for the reason I just explained. However, when we look at the trailing 12 months in June in this chart, we can see a more resilient performance, especially considering the very volatile and competitive environment we have been navigating in the recent quarters. We are consistently delivering around BRL 100 million in normalized EBITDA in a 12-month period. In this sense, we are confident to be in the right direction to accelerate profitability from the second half of the year and create a solid foundation for 2026. Let me finish with the key takeaways to wrap up my prepared remarks. As we announced in January, when we disclosed our new strategic cycle, Zenvia Consumer Cloud is our new core business, and 2025 is the year that we are ramping up the platform in Brazil and Latin America. We knew this process will take a toll on our short-term profitability but we start to see first signs of performance already in this quarter. At the same time, we are making our operations leaner and stepping up our efficiency efforts with AI playing a key role. It is shaping both how we deliver for clients and how we operate day-to-day inside the company. So in a nutshell, our focus is clear: grow faster, scale smarter and keep deleveraging the company. As for the CPaaS, market dynamics will remain volatile, but we expect profitability levels to gradually recover and return to more normalized level by the end of the year. Back in January, we also shared that we are evaluating options to divest noncore assets. We see meaningful value in these businesses and selective divestments could be an important lever to optimize our balance sheet. Our goal with all these actions is to build a stronger company with solid metrics that translate into real value for our shareholders. With that, I'll wrap my prepared remarks and open the floor for your questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] Shay Chor: Hugo, there are some questions here on the webcast. I'll start to read them. We'll keep going. Can you put a bit more color on forward guidance for Zenvia Consumer Cloud? How is Q3 looking in Q4 in terms of bookings? How is the franchise channel doing? And are you still expecting to hit the BRL 200 million target with 65% to 70% gross margin range for the full year? Let me start here with some good numbers and then Cassio, feel free to add some qualitative points about Zenvia Consumer Cloud, and there are a couple of other questions on it. So in terms of numbers, as we said earlier in the year, in January, when we talked about the new strategic cycle and our focus on Zenvia Consumer Cloud, we disclosed that we were expecting this business to be around BRL 200 million in revenues with growth of between 25% -- around 25% and gross margin close to 70%. And we are keeping this. As you saw in our results here in the first half of the year, Zenvia Consumer Cloud is growing close to 25%. It grew 23%. So it is as we were expecting, and we continue to maintain our expectations of a business around BRL 200 million in revenues and gross margin around 7% growing close to 25%. No changes to that. Cassio, I think it would be interesting if you can share some thoughts on how is it going. There are other questions here about if we changed anything since we launched the business in October? There was an acceleration of the business now in the second quarter. Can you share us some qualitative points and your view on how -- where we'll go with Zenvia Consumer Cloud? Cassio Bobsin Machado: Sure. Although we have this seasonality on the CPaaS side, when we look at Zenvia Consumer Cloud, we're doing pretty well. We're very excited with the whole performance of the business as we look not only on the revenue growth, but also on the usage of the software, which is very important in a SaaS model that is based on how much companies use our software. We're seeing a very strong adoption on this side. For instance, Q2, we had around 80% increase in total usage comparing to Q1 with Zenvia Consumer Cloud, which means this [ block ] of the stream of adoption of the software is going to bring results on the mid -- short to midterm to our company. So it's doing pretty well in that sense. And about the franchisee model, we launched that in Q1. So we're still in the early days of this strategy, but it's already representing around 15% of our [ new MRR ] in Brazil, where -- it is the country that we launched first of this model. So it's -- even though it's in the early days, it's already making a difference, [ new MRR ]. We have around 30 so franchisees that made sales. We had 0 in January. So we now have around 34. And we're starting to test this model outside Brazil as well, where we have some partners operating in different countries, and they're going to evolve them into franchisees and the midterm. So we expect this strategy to be in the next couple of quarters. The main generator of [ new MRR ] for the business, which means we're building skill around Zenvia Consumer Cloud. And this is doing pretty well business-wise. That's why we -- when we see the targets that we're having for mid- to long-term Zenvia Consumer Cloud, it's been improved on the combination of new customers and software adoption, which, of course, translates into revenue. So we're very excited about these results. Shay Chor: Thanks, Cassio. Another question here. On the CPaaS side, are these tight margins the new level? Or should we expect some recovery? So as I mentioned, and Cassio also just mentioned the CPaaS has been very competitive. We saw -- I would -- and Cassio correct me if I'm wrong here, but the last time we saw business being that competitive was in the second half of '22 when we saw a lot of pricing pressure. And -- but we are navigating this and we understand that our strategy is the right one in terms of -- I know you've been accelerating revenues, which means we are competitive in pricing. That will -- obviously that put some pressure on margins in the short term, but that's important from a relationship perspective, and that business helps generating EBITDA after all. So it's important to keep that in mind. And also, first half of the year is usually when we have cost increases from the carriers and we pass that through prices throughout the year. So we expect later on the year closer to year-end and Q4 to have passed through most of the cost increase that we suffered from the carriers, and therefore, margins will stabilize at a higher level than it is right now. But it's commoditized business. It gets volatile. It gets pricing pressure from time to time. There was the logic behind -- one of the logics behind our decision to move in the last strategic cycle to move and to diversify revenues into a different type of business, and adding value to the pure channel, which was the business back in late 2018, 2019. So -- but it's still a good chunk of our revenues and it's important, although margins are under pressure, it's important because that business generates EBITDA. I don't know, Cassio, if you want to add anything on the CPaaS side and the market dynamics. Cassio Bobsin Machado: Yes, sure. We have been executing a long-term strategy, and we're sticking to the plan. There is, of course, the maturity of the CPaaS business model, which brings more pressure on the margins. It's highly competitive. And of course, there is the volatility that affects results. That's why we understand that when we compare with the SaaS business, which is also, of course, every business is competitive in software, but is more stable, and we can grow customer base and have a more recurrent revenue that's much more reliable in terms of forecasting. So I understand that this strategy is why we IPO-ed is the one that's been executing and is doing pretty well. With the acquisitions, are doing integrations. We launched the new product that consolidates all that, and it's performing pretty well. So I will see that although we have this volatility, we're sticking to the plan and it's working. Shay Chor: Another here for you, Cassio. On the enterprise side, how are you seeing the businesses on both Zenvia Consumer Cloud and the rest of SaaS, how the dynamics have been? Cassio Bobsin Machado: Sure. On the CPaaS, business is pretty mature. It's low margin, high volume and being able to keep enterprise customers as we are main player, the more robust reliable in Brazil. So we are able to keep the best customers on board. That's why we have all these big revenue on the CPaaS side. When you look at SaaS, especially Zenvia Consumer Cloud, we aimed initially into SMBs. That was the beginning of the launch of the product. But as we brought this product and our whole experience with enterprise customers to some of our customers, they started to adopt as well. That's why we are seeing the adoption of Zenvia Consumer Cloud by enterprise customers that wasn't the initial focus, but it's doing well. Of course, sales cycles are longer, production takes some more time, but we're seeing that the combination of SMBs and enterprise customers for Zenvia customers is also operating. So it's a good -- it's an upside on the initial strategy. And we're being able with the whole experience that the team has in serving these customers, being able to bring that to this new product. Shay Chor: Another one here. Could you -- this is for me. Could you please provide some color on cash flow and divestitures? Sure. So on cash flow, and we put on the presentation chart with it. If we look into our trailing last 12 months EBITDA, it's close to -- on a normalized basis, it's close to BRL 100 million, which is pretty much the same level that we saw in the last couple of quarters, which means thinking about pure cash flow. So EBITDA is about BRL 100 million in 12 months. There is about BRL 35 million, BRL 40 million in CapEx that you have to exclude from that EBITDA. So that leaves us with approximately BRL 60 million, BRL 65 million in cash flow to serve the debt, which is pretty much puts us close to breakeven by year-end. And that's why we've been analyzing alternatives to divest. There is not much we can add on selling assets on top of what we already mentioned in our prepared remarks. We've been analyzing opportunities and looking into alternatives. And if and when there is anything new to talk about it, we'll let all the market and investors know about it. As of now, there's nothing we can add on this. How should we think about the potential divestment of CPaaS? In an interview, the CFO had mentioned that they tend to sell for onetime revenue, which will be more than $100 million. Is that achievable? That would put the company in a net cash position if you manage to sell it. So again, we can't discuss specifically any of the divestments that we have possibilities. I did mention historical -- it is correct. I did mention historical transactions in CPaaS close to onetime revenue. But that's on a global basis, and it's very -- again, it depends on market conditions. It depends on macro environment such as interest rates, such as the volatility in the local market. So it's -- again, it could range in the -- we are looking more into divestment. It doesn't matter if it's CPaaS, if it's other SaaS that we don't see in the long term as relevant to the business. The reality is that the asset divestment has to do with deleveraging balance sheet. It should be opportunistic to the leverage balance sheet as simple as that. We understand that all our assets are important. They add value to our clients. So it's a matter of using this as a financial strategy to accelerate balance sheet deleveraging and being able actually to have a better capital structure to accelerate Zenvia Consumer Cloud. So it's as simple as that. We are not sharing any numbers, any valuation now. What we can say is we are looking in an opportunistic way to deleverage the balance sheet. Hugo, can you repoll to see if there is any questions live to be made? Operator: [Operator Instructions] So this concludes our Q&A session. I would like to turn the conference back over to Mr. Cassio Bobsin for his closing remarks. Cassio Bobsin Machado: Actually we have a question there. I'm not sure if I should answer this last one. Operator: Yes, it just came in. Cassio, what do you think the business will look like in 2 to 3 years? Cassio Bobsin Machado: Nice question. Well, what we've been working on is to have the core of Zenvia being built around Zenvia Consumer Cloud. And that means that we're working into provide companies a centralized way to manage all customer relationships, especially for B2C or massive B2B companies. And this means providing a software for marketing, sales, customer support, customer service and customer engagement. And this is over time, gets -- its kind of technology that will be -- although it's nowadays it's different providers, it's very specialized providers. This is getting more unified. So we're seeing this adoption of companies using just one provider to manage all of these relationships. And as we're building this software, we see that creates lots of benefits. When we put that in the context of AI and automation, the way we provide that for our customers is a way that helps them to automate and reduce costs, become efficient and provide more value to their customers. So when you look from a business perspective, we're on the right track to be the AI CX SaaS provider for these companies. And this means getting very sticky, getting recurrent revenues, which builds, of course, a strong business over time. We're not, of course, disclosing that in terms of finance. But we tend to move from this volatile revenues, low margins to a recurrent stable high-margin business. As we've been able to optimize the whole company, we're seeing that we're able to increase recurring revenues and reduce G&A, which brings, of course, a combination of not only the very strong growth, but with a high profitability in the whole business. That's what we're building. As the Founder and CEO, reviewing the foundations, and we've seeing the results of this strategy. That's why I see that in the next 2 to 3 years, it's going to be a very different company financial-wise. And we're seeing that operating in the early days of Zenvia Consumer Cloud. And we expect to have all this benefit in the next 2 to 3 years. So for that, I also close here the webcast. I thank you very much for all your attention and to seeing the evolution of Zenvia. We're building this strategy for long term. We're just starting a new strategic cycle with Zenvia Consumer Cloud at its core. And we expect that the next couple of quarters, we are going to understand how this is all playing out to be a very strong AI SaaS provider for Latin America and the whole world. Thank you very much. Operator: So this concludes our Q&A session. And I'd like to turn the conference back over to Mr. Cassio Bobsin for his closing remarks. Cassio Bobsin Machado: I already closed my remarks. That's it, guys. Thank you very much. See you next time. Operator: The conference has now concluded. Zenvia's IR team is at your disposal to answer any additional questions. Thank you for attending today's presentation. You may now disconnect. Have a nice day.
Stephen Kelly: Today, I want to walk you through Cirata's results for the first half of our 2025 financial year and share how we're positioning the business for long-term success. I'm pleased to report that in the first half of 2025, Cirata delivered solid growth. Revenue rose to $4.8 million, up from $3.4 million a year ago, an increase of over 40%. Bookings increased to $3.8 million, a 58% year-on-year rise. Importantly, our cash overheads fell to $8.5 million, a sharp reduction from the $11.8 million of last year. This improved efficiency has had a real impact. There is further evidence of operating leverage. Our adjusted EBITDA loss halved, moving from $8.6 million loss last year to a $4 million loss this period. As at the end of June, we held $6.1 million in cash with a further $1.3 million in receivables, giving us the cash plus receivables position of $7.4 million as we move into the second half of the year. So we're encouraged by our progress we've made in reducing costs, focusing the business and strengthening our balance sheet. However, we still have to deliver results and consistent scalable growth with an emphasis on new logos and new customer names. A major driver of the growth and momentum is our data integration business, which is the core focus for Cirata's future. Bookings in this segment reached $3.1 million, up over 200% year-on-year. During the first half, we signed 20 contracts, including our first enterprise-wide license agreement with one of the world's top 20 retailers, a renewal with a top 5 Canadian bank and a new partnership win through our collaboration with Databricks. This first half momentum comes on the heels of our Q4 FY '24 announcement of our contract with a top U.S. bank. Q4 FY '24 and Q1 FY '25 were $3 million bookings quarters, and this level of performance showed some early signs of recovery. However, we need to demonstrate quarterly progress, and this was not the case with the Q2 results where we've expressed our disappointment. Successful sales into highly complex enterprise environments with our Live Data Migrator product is hugely encouraging. LDM Live Data Migrator addresses a real pain point for our customers. However, I'm not satisfied with the speed of execution, particularly as it relates to new customer acquisition. We know we need to execute better, both direct with the customer and working with our partners. We continue to strengthen our strategic partnerships. And in the second quarter, we signed an agreement with Microsoft Azure as part of their storage migration program. This opens up a new channel for bringing our Live Data Migrator product to more enterprise customers worldwide. In addition, we're pleased with our first DMaaS project data migration is with Databricks and a new partner for Cirata. As we exit the first half year, we continue our momentum. In August, we took an important strategic step by completing the divestiture of our DevOps assets to BlueOptima. This transaction will yield up to $3.5 million in cash and importantly, allows us to focus entirely on data integration, where we see the greatest growth potential for the company. The company was subscale to compete effectively with two totally different product sets into two totally different buyer communities. So along with this, we've taken decisive actions to align our cost base with our growth strategy. By the end of the third quarter, we expect our annualized cash overheads to be in the range of $12 million to $13 million, down from $16 million to $17 million earlier in the year and over 70% lower than the peak levels of 2 years ago. I know we still have much to prove, but it's encouraging to see the early operating leverage with increasing revenues with a cost base of less than 1/3 of the peak. The company's challenges have been well documented, and we've been transparent during the rescue and recovery phases. The top priority after hardening the product for enterprise workloads is the go-to-market, GTM as we call it. The company has failed to deliver consistent high-performance sales and marketing execution. Since I've joined pretty much the whole of the go-to-market team has changed. As a result, I'm very pleased to welcome Dominic Arcari as our new Chief Revenue Officer, who is appointed in July. Dominic brings 4 decades of enterprise software experience, and he's already making an impact by strengthening our sales execution in both North America and international markets. Our outlook remains unchanged from the guidance we shared earlier this year. We expect bookings to be weighted towards the second half of the year with strong growth in data integration continuing. We remain confident that with the actions taken, divesting noncore assets, cutting costs and focusing on execution, we will not require further working capital fundraise in FY '25. Our focus is for the data integration business to continue at triple-digit growth. Strategically, we've been working hard on looking at future enterprise data modernization demands. And as a consequence, we're broadening the applications of our live data migrator product, expanding into new use cases for large data modernization. This includes leveraging open table formats like Apache Iceberg and advanced orchestration capability that will serve enterprises undergoing digital transformation to become an AI-centric enterprise in an AI-centric world. This will be covered extensively in some new product announcements in the second half of 2025, which will expand the total addressable market and position Cirata for category leadership in the emerging data orchestration market. To sum up, the first half of FY '25 shows that Cirata is on a path to sustainable growth. Revenues and bookings are growing. Costs are coming down, and our data integration business is gaining momentum in some of the biggest brand name consumer companies in the world. Already, Dominic Arcari is having a positive impact on customer engagement, pipeline build and lead generation. The demand for artificial intelligence and advanced analytics is in creating an unprecedented need for secure, scalable, vendor-neutral data movement. Cirata is uniquely positioned to meet that demand. Finally, I want to thank our shareholders for your continued support, our customers for your trust and commitment and our colleagues for their passion and energy. Together, we are building a stronger, more focused Cirata, one that is set to exit FY '25 on a clear growth trajectory. Thank you. Unknown Executive: So turning to a short Q&A now. Stephen, the first half of '25 is now complete. How is the scorecard looking relative to your plan coming into the year? Stephen Kelly: We had a very strong first quarter. In fact, it was the strongest start for the company since 2019. We're also pleased to land our first enterprise-wide license contract with a major U.K. retailer and our first data migration project through Databricks. But our Q2 performance missed our internal plan. Despite a weak Q2, our first half data integration bookings were up over 200%. I'm also pleased that operating leverage is beginning to become very apparent. We've taken a lot of cost out of the business in the last couple of years, and this is always a challenging process, but we're growing revenues year-on-year on now 1/3 of the cost base. Also, I would add on the subject of leverage that the divestment of DevOps also signals further cost optimization and an important focus on data integration for the whole company. As we exit Q3, we can expect cash overheads to reduce further to between $12 million and $13 million from its current $16 million to $17 million per annum. Unknown Executive: Can you talk a little more about the decision to sell the DevOps assets? Stephen Kelly: Yes. Perhaps the first thing I should say is that we're delighted to find such a good home for the DevOps business and product and the team that supports it. BlueOptima is a first-class company that will continue to support and leverage the DevOps products and customers into their growth plans. Honestly, Cirata was subscale to support 2 different product lines selling into 2 different user profiles. And as we've shared, we completed the strategic review back in 2024. The headlines resulted in the divestment of the DevOps business and the new product innovation into the emerging data orchestration marketplace and more of that to come later in the year. The 2 obvious pluses for Cirata with this divestment are the resulting focus on data integration, which we view as our core growth opportunity and the further rationalization of the operating structure and progress in that part of the business. For the first time in my tenure, we have a company that has an operating structure and a product profile that is aligned with our singular focus on the growth opportunity ahead of us in the data integration marketplace. By divesting our legacy DevOps assets to BlueOptima, we've sharpened our focus on data integration. We've strengthened our balance sheet. We've reduced our running costs and removed any drag on growth. Unknown Executive: Now Stephen, you said in your prepared remarks and disclosures that you're not happy with the speed of execution. Can you expand on that? Stephen Kelly: Yes, I've been unhappy with our ability to source opportunities, accurately qualify and move them through the sales process and pipeline. We've not been doing the sales basics well enough. We need to accelerate the acquisition of new customers. This is now what we're demanding from our internal efforts in the go-to-market team. Key to us, and I think our investors is new logos. This is the land part of the strategy where we must do better. However, we've done a good job of rebuilding trust with our existing customer base and partners. We've demonstrated in the bookings announcements over the last several quarters, the expanding volume of data movement and new use cases with our blue-chip customers. This expand part of the strategy, I think we're showing good progress. So overall, the strategy of land and expand, more to do on land, but doing a reasonable and good job on the expansion with customers. Unknown Executive: Can you talk a little bit more about the go-to-market and the decision to appoint a new CRO? Stephen Kelly: Yes. Dominic Arcari joined the company in July. So it's early days for Dominic. However, he is a seasoned professional with over 40 years' experience in selling into complex enterprise environments and has held a number of leadership roles over that time. We were failing, as I said, to do the sales basics consistently and well. Now I've known Dom for close to 30 years, and I feel fortunate to have been able to persuade him to join us on what he and I believe to be an exciting opportunity. Dom will continue to develop the go-to-market function and have sole day-to-day responsibility for its execution from lead generation to pipeline build to closing contracts with customers. We can expect at the margin, our investments will be going into sales and marketing as we scale and grow the business. So lots of new energy, focus and importantly, experience going into the go-to-market function. Unknown Executive: Now in the last few quarters, you've talked a little bit about product development and new opportunities for Cirata. Can you expand on that? Stephen Kelly: Yes, I'm really proud of the efforts of the product, the engineering and customer success teams over the last couple of years. They've worked really hard to bring the existing Live Data Migrator product to a standard that is enterprise hardened and ready. The environment we sell into are complex, demanding and often mission-critical to our customers. Alongside this effort on our core data integration product, we have been planning for a growth future that addresses something we've referred to as data orchestration. More to come on that in the second half. In addition to Live Data Migrator core value proposition, we see opportunities positioning Cirata's product offering into a broader and deeper marketplace for enterprise-wide data orchestration at scale. We'll say more about this in the coming weeks and months, -- and I'm personally very excited by what the team have developed in the labs. So stay tuned. Unknown Executive: So Stephen, what can we expect from the second half of full year '25? Stephen Kelly: Well, as I have alluded to much more detail on product positioning and market opportunity, continued improvement in the operating cost structure and by extension, the sustainability of the business. We will also start to transition the KPI reporting metrics to better reflect the year-on-year improvements in the business as we exit FY '25, including annual contract values and revenues as well as looking at total contract values. This should allow the market and investors to get a better sense of our underlying growth rates and quarterly momentum. With the added KPIs, the growth trends will be clearer. However, our recovery will continue to be lumpy and nonlinear. Our outlook for the full year has not changed since our disclosure on the 9th of January 2025. And then as we said, the year will be back-end loaded. Obviously, I'm always pushing for us to be moving faster in the near term. However, we're making steady progress in product positioning on the cost base and the go-to-market. We've never been more focused or better aligned on the opportunity ahead of us. With the announcement on the product side in the second half of the year, we're very excited about the potential for the business and looking forward to the growth journey ahead.
Operator: Good afternoon, and welcome to the Kestra Medical Technologies Earnings Conference Call. This conference call is being recorded for replay purposes. We will be facilitating a question-and-answer session following prepared remarks from management. [Operator Instructions]. I would now like to turn the call over to Neil Bhalodkar, Vice President of Investor Relations for introductory comments. Neil Bhalodkar: Thank you. Thank you for joining this afternoon's First Quarter Fiscal 2026 Earnings Call. With me today are Brian Webster, President and Chief Executive Officer; and Vaseem Mahboob, Chief Financial Officer. This call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements. These statements are based on Kestra's current expectations, forecasts and assumptions, which are subject to the current uncertainties, risks and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results, performance or achievements expressed or implied by the forward-looking statements due to various factors. Please review Kestra's most recent filings with the SEC, particularly the risk factors described in our Form 10-K for additional information. Any forward-looking statements provided during this call, including projections of future performance, are based on management's expectations as of today. Kestra undertakes no obligation to update these statements, except as required by applicable law. With that, I'll turn the call over to Brian. Brian Webster: Thanks, Neil. Good afternoon, everyone, and thank you for joining us on today's conference call. We are excited to discuss the strong start we had to our fiscal '26 and the continued progress we have made in our key operational objectives. But before we jump into that, I'd like to again highlight the purpose behind the mission that drives the Kestra team. At the center of everything we do are the lives we protect each day and the impact we have on patients, their families and the providers who care for them. Recently, one of our territory managers or sales reps, gave an overview of the ASSURE system to a provider where they discussed how the ASSURE system tracks heart rate trends and how this capability can provide critical insights for identifying patients with previously undiagnosed arrhythmias. The fact that patients could trigger their own ECG recordings, with a simple push of a button on their wearable vest stood out to the provider. Soon after the impact of this capability came into sharper focus when the same provider prescribed the ASSURE system for a 53-year-old patient at elevated risk of sudden ardiac arrest. The patient had hypertension, non-ischemic cardiomyopathy, frequent extra heartbeats and a cardiac output injection fraction of just 34%. During the fitting, the patient's fiance candidly shared her anxiety about the unpredictability of her loved one's condition To provide reassurance the care team advised that the patient triggered heart rhythm recordings twice a day. Those recordings captured repeated irregularities in the patient's heart rhythm. The Kestra representative promptly pointed out the recordings to the physician illustrating the clinical value of patient triggered rhythm recordings and the broader role of the cardiac recovery system in guiding care. The insights were significantly enough that the patient was scheduled for a cardiac ablation. However, before the patient was able to undergo the cardiac procedure, lifesaving therapy was necessary. The patient laid down for a nap, after feeling unwell. While asleep, they went into a dangerous rhythm that quickly progressed into cardiac arrest. The ASSURE system detected this and delivered a shock saving the patient's life. In the critical moments that follow, our ASSURE Assist service quickly helped connect the patient to emergency care and the patient was safely transported to the hospital. The story illustrates the full continuum of care that our cardiac recovery system provides. Equipping providers with insights to guide treatment, protecting patients with life-saving therapy when it matters most, and ensuring rapid emergency support in the vulnerable periods that follow. And while this is just one patient's experience in the first quarter of fiscal 2026, our team and technology helped facilitate many similar life-saving events. We remain humbled by this responsibility and by the trust placed in us by providers, their patients and their families. With that, I would now like to turn to our recent performance. In the first quarter, we continue to reach more patients at risk of cardiac arrest, accepting over 4,200 prescriptions written for the ASSURE system, an increase of 51% year-over-year. Revenue grew 52% year-over-year to $19.4 million. Continued improvements in revenue per fitting from higher in-network mix and reductions in cost per fitting from volume leverage drove the seventh quarter in a row of gross margin expansion. First quarter gross margin was 45.7% compared to 32.9% in the prior year period. We expect continued gross margin expansion in FY '26 and remain confident that Kestra is on the path to 70% plus gross margins. With the strong revenue growth that Kestra is generating, we are seeing nice operating leverage in the business. This leverage supports the investments we are making in the company's key growth drivers that we believe will yield significant long-term value for Kestra and stakeholders. A quick overview of the 4 of those growth drivers. First, we continue to expand our sales organization with the goal of further penetrating existing accounts as well as calling on new potential ASSURE prescribers. We are targeting geographies in which a high volume of WCD prescriptions are being written and where we also have strong in-network payer coverage. As we noted on our last earnings call, we ended fiscal year '25 with approximately 80 sales territories. While this will not be a data point that we will be updating on a quarterly basis, I can say that our territory additions in the first quarter were in line with our hiring plan, and we continue to aggressively expand our sales coverage. Of note, we also have an updated commercial strategy that includes an expanded clinical specialist role that will complement our sales territory managers. We expect that this strategy will support further penetration of existing accounts. Second, we continue to make progress on improving our revenue cycle management capabilities while also bringing more payers in network. At the time of our IPO 6 months ago, approximately 70% of our fittings were for patients with in-network benefits. This figure is now approaching 80%. The higher in-network mix meaningfully increases our team's efficiency and positively impacts all key RCM metrics. It is important to note that there are over 3,000 payers in the United States. So there will be a long tail of regional and local payers we are working to bring under contract. The RCM activities that increase the speed and rate of our collections are process driven, and we expect to see further improvements over time. For example, in the early days of commercialization, we have a small RCM team that was not specialized. The same individual may have been tasked with following a claim from fitting all the way to cash. Our RCM function has grown significantly, particularly in the last 12 months with team members specializing in specific areas such as prior authorization, medical review, [home] management, et cetera. Third, as you all know, we utilize a lease business model, our substantial investment in our fleet of devices, each with the capacity for approximately 3 patient wears per year, enables the business to scale with our attractive unit economic profile. While our current asset pool can support our near-term business objectives, we are continuing to add to our fleet at a measured pace as we grow our field team. Fourth, we are continuing to build the body of clinical evidence supporting the safety, efficacy and benefits of the ASSURE system. We recently achieved a major clinical milestone with the conclusion of enrollment in our FDA post-approval study. This is a really significant achievement for the Kestra team and took a ton of really hard work by our entire team. We were also recently notified that our study was chosen for a late breaker presentation of our clinical data at the American Heart Association Scientific Sessions, which will be conducted in November. At the time that our post- approval study is presented, we expect this to be the single largest study ever published in the WCD category. This is the biggest stage in cardiology for our exciting results. All of these growth drivers further our mission of protecting even more patients that are at risk of sudden cardiac arrest. We have previously noted that despite the overwhelming evidence that an external fibrillation shock is effective at terminating dangerous cardiac rhythms, WCD therapy remains underutilized, reaching just 14% of the eligible U.S. patient population. That means 6 out of 7 patients that are indicated for WCD are not being protected by lung. Last quarter, I shared with you 2 examples of hospitals that transition from underutilization of WCDs to significantly expanding their use of WCDs by establishing therapy protocols with the ASSURE system as their preferred solution. I would like to share another data point that gives us confidence that the WCD market will continue to expand into a multibillion-dollar market over the coming years. The results of a large German WCD study sponsored by the incumbent competitor were recently published. The SCD PROTECT study evaluating the risk of sudden cardiac death in over 19,000 patients in the first few months after they were newly diagnosed with heart failure or post-myocardial infarction or heart attack. Despite wide overall use of guideline-directed medical therapy drugs, the study found higher-than-expected sudden cardiac arrest risk in this patient population, suggesting a need for greater WCD protection in the early high-risk period of the patient's journey. Investment in this study is further evidence that the incumbent is focused on market expansion to help make up for a lost share to Kestra. In conclusion, the simplicity of the Kestra story continues. We are competing in a large existing market that is growing consistently in both unit volume and price. We have an underserved medical condition where we offer a clearly superior solution. We have rapidly closed the gap on payer endorsement of our product and we are implementing a commercial expansion plan to rapidly grow the business. We are seeing strong execution across all elements of our business and the foundation we have built has positioned Kestra for strong growth this fiscal year and beyond. I would like to thank our incredible team in the field and here at the home office in Kirkland for their passion and commitment to the Kestra mission. I will now turn it over to my partner, Vaseem, who will discuss first quarter financial results in more detail and provide our updated fiscal year 2016 revenue guidance. Vaseem? Vaseem Mahboob: Thank you, Brian, and good afternoon, everyone. Total revenue was $19.4 million in the first quarter, an increase of 52% compared to the prior year period. Revenue growth was driven by a 51% year-over-year increase in prescriptions, reflecting market share gains with existing customers and activation of new accounts. Gross margin was 45.7% in the first quarter compared to 32.9% in the prior year period. As Brian mentioned, we have now expanded our gross margins sequentially for 7 quarters in a row. The continued expansion in gross margin was driven by the attractive unit economics inherent in Kestra's rental model, a higher revenue per fit from more in-network patients and a lower cost per fit, driven by volume leverage and our cost improvement projects. Cost per foot decreased approximately 20% compared to the prior year period, while adjusted revenue per foot increased approximately 20% compared to the prior year period. In the years ahead, you should expect to see steady and consistent increases in our gross margins as our rental model benefits significantly from the volume and depreciation leverage. We remain confident in our ability to achieve 70% plus margins over the next few years. As we have discussed previously, higher in-network mix unlocks the power of the Kestra business model. You can see this in our steadily expanding year-over-year conversion rate. We ended the quarter with a conversion rate of approximately 47% compared to an adjusted conversion rate of approximately 40% in the prior year period. The higher conversion rate reflected improvements in all 3 key drivers of our conversion rate, our prescription fill rate, our bill rate and our collections performance. As we continue to bring more payers in network and enhance our revenue cycle management processes, we will see benefits in our revenue growth, gross margins and our profitability profile. Moving on. GAAP operating expenses were $37.7 million in the first quarter and included $2.9 million of nonrecurring new public company costs. GAAP operating expenses were $22.6 million in the prior year period. Excluding those nonrecurring costs and our stock-based compensation expense, operating expenses were $30.3 million in the first quarter of 2026. The increase was primarily attributable to growth investments in our commercial and revenue cycle resources. GAAP net loss was $25.8 million in the first quarter compared to a GAAP net loss of $20.3 million in the prior year period. Adjusted EBITDA loss was $19.4 million in the first quarter compared to an adjusted EBITDA loss of $15.7 million in the prior year period. Cash and cash equivalents totaled $201.2 million as of July 31, 2025. We continue to expect our existing cash balance to be sufficient for Kestra to reach cash flow breakeven and profitability. I would also note that based on our trailing 12-month revenue, an additional $15 million tranche of our existing term loan has become available to us to draw on through July 31, 2026. At present, this tranche of $15 million remains undrawn. I will now provide our updated fiscal year 2026 guidance. We expect revenue of $88 million, an increase of 47% compared to fiscal year 2025. This compares to prior year guidance of $85 million. Underpinning this guidance is our expectation that we will continue to see strong growth in prescriptions as our market share increases with existing customers and as we activate new accounts. We expect revenue per fit to continue to benefit from a higher mix of in-network patients and improvements in our revenue cycle management capabilities. With that, operator, we have concluded our prepared remarks and are ready to proceed to the Q&A portion of the call. Operator: Certainly. Our first question for today comes from the line of Travis Steed from BofA Securities. Travis Steed: Congrats on a good quarter. Maybe to start on guidance. Nice to see a raise by more than the beat. Just helping us understand kind of what's driving the confidence to raise this much in beginning of the year and how to think about any cadence over the course of the year as we update our models? Brian Webster: Yes, Travis, thanks for the question. And I would say we certainly have a really strong Q1 and we're certainly bullish about the rest of the year. It's early in the year. So we're going to see if things play out over the next quarter or 2. But right now, we're comfortable with that guidance update. And I'm excited about marching into our second quarter. Travis Steed: All right. Great. And I wanted to maybe double-click on some of the in-network mix things you mentioned. Just kind of understanding like what you guys are doing on the ground to improve the mix, where the mix can be over the course of this year and next few years and maybe to think about the impact on gross margins as well as we go forward. Brian Webster: Yes. As we mentioned, at the point of IPO, we were about -- we have over 90% covered lives in the U.S., which just means that the total number of insurance covered lives in the U.S. We have about 90% of those under contract, but when you look at the actual patients that we're taking, that's the real -- that's where we get the real revenue from. And so we've seen that number go from 70% at the IPO to, as we mentioned here, about 80%. We think that will continue a slow incline as we add more payers. There is a long tail, as I mentioned in my comments, of some 3,000 payers. So it takes a while to engage with the local and regional players. And quite frankly, there are some payers that we're just not going to get there on price. And so we're going to continue to work those. But you'll see those gradually go up as we engage more payers. And I think it's important to reinforce our strategy around when we are adding sales territories, we're doing it, where we have known WCD demand and we have good payer coverage. So we're trying to be very efficient about territory expansion when it comes to that. But I think what you can expect is continuing gradual contribution from the in-network payers as we increase that. And then you'll see that impacting, overall, our revenue per fitting or per patient will continue to grow with that. Operator: And our next question comes from the line of Rick Wise from Stifel. Frederick Wise: Two things I'd like to follow up on a little bit. One, actually, you just touched on in your response to Travis, Brian, this notion, and you've said it from the beginning, this notion of expanding into areas where there's greater in-network opportunity or however, I should phrase the words. I know you know what I mean. Where are you in that process? And I mean, is there any way to quantify or give us a more granular understanding of like what happened in the last few months and what's going to happen now this year in terms of that kind of a move? So just so we better understand where you are. Brian Webster: Yes. Thanks for the question, Rick. It's obviously important to our business model. I don't think you can think of the payer additions in a straight linear line over time. You have to think of it more as sort of the sawtooth curve because in one period, we may add a good-sized regional payer in the next period it may be some smaller regional payers that we're trying to add to support specific territories where we have a lot of demand. So I think it will continue to go up and to the right as we get more coverage and that will continue to benefit the business model, benefit our ability to go after these territories. It's really impactful when you're in a territory and you're a territory manager trying to sell your product and the competitor has insurance coverage and you don't. That puts you at a disadvantage. And so what we're trying to do with that strategy is we're trying to make sure that when we make the investment to add new reps, we're giving them all the tools that they need, including insurance coverage so that they can be successful. Vaseem Mahboob: And Rick, can I just add one more comment to that. I think -- and we've kind of talked about it in the past and one of the big things that we want to remind everyone is when you think about the impact on the conversion rate as a result of the in-network mix, we have said it that we don't have to go to 80%, 90%. What's baked into our financial model is for us to go from the high 40s that we are in today to getting to the high 50s here over the next couple of years. So to Brian's point, as you provide coverage and conversions on that 3,000 towards a higher mix it will lend itself automatically to get to that higher conversion rate. But again, we don't have to get to all 3,000 immediately, it's just going to be a gradual process, and that's already factored into the messaging that we have had in the past. Frederick Wise: Great. And Vaseem, I just wanted to touch on the -- as we reflect on the quarterly flow, I mean, obviously, this is a good quarter. You had a solid raise, very encouraging setting the stage as I think about the rest of the year. But help us think about the quarterly flow and I mean, with these extra wonderful few million we're adding to our model, do we take our current models and -- is it more back-end loaded? Does it change the quarterly cadence? Just help us make sure our models are in the right place, if you would. Vaseem Mahboob: Yes, that's a great question, Rick. I think, again, what's really great about this quarter is now we've taken our guidance from being 42% year over growth to a 47% growth year-over-year. And as you guys have heard us communicated in the past, we are in a ramp. We are adding new territory managers, as Brian talked about. That's where most of the OpEx investment is going. So as we have said in the past, there is a start and that ramp that needs to happen. So we should expect not to be back-end loaded, but we see a really nice steady increase in our top line as we go through the remaining of the quarters for the rest of the year. But really, really excited about having to raise the guidance by the levels that we have and just based on, as Brian said, the comfort that we take in the performance of the business in the first quarter. Operator: And our next question comes from the line of Matthew O'Brien from Piper Sandler. Matthew O'Brien: Would love to talk about the prescription number in the quarter because that was really strong, up about 300 sequentially. This time last year, we were roughly flat. So I would just love to hear about the improvements that we're seeing on the prescription side of the business. And I think I think you're now roughly annualizing to about 14% of all cases that you're going after right now. So just where can we think about the company kind of exiting the year in terms of percentage of all prescriptions being written for ASSURE. Brian Webster: Yes. Thanks for the question, Matt. I think the good news in from my perspective in the prescription number is we -- because we are ramping the commercial team, we look at the metrics broken into a couple of different buckets. One bucket is what we call a base rep or a fully onboarded fully productive rep. And we look at the month-over-month, week-over-week, month-over-month, quarter-over-quarter metrics for those reps. And the good news there is the folks that have been here been in the seat for a while. The metrics continue to improve with those reps. Now that's not the full story, of course, because we're hiring a bunch of new reps. And so the question is, can you get those reps onboarded? Can they get up to some productivity levels in a reasonable amount of time. And so we really aggressively track those numbers as well. And what we're seeing there is a similar story, which is they're coming up the curve. They're hitting the kind of productivity numbers weekly, monthly kind of numbers that we're expecting. And so that bodes well. And that gives us confidence, which is why we continue to expand the commercial footprint. So the math you're seeing on the sequential growth is the impact of both of those effects on prescriptions. Matthew O'Brien: Okay. That's helpful. And then just kind of staying on that topic, Brian. Just the reps are coming in, are they really focusing on the low-hanging fruit, which is really just converting existing accounts over to ASSURE from the competitor? Or are some of the more legacy reps really being more successful in kind of doing both, which is converting market share but also expanding the market because your commentary about the competitor and the clinical trial, I thought was interesting too, just given how underpenetrated the whole category is. Brian Webster: Yes. We -- I think that study is important because it's all boats rise on the tide, right? And that's going to really shine a light on the ongoing need, especially in these heart failure patients. But Matt, when it comes to -- when it comes to getting these reps onboard, we're really trying to be focused on getting them -- if you're a new rep, you're coming in and literally the day you open up your Salesforce.com instance, you've got all the appraisal of all the high prescribers and you know exactly what your initial targets are, and they are absolutely going to go there first. Now the only caveat to that is some of these reps that we're hiring, they come in with preexisting relationships and they'll go to those relationships first. And some of those may not be the high prescribers. But I think in general, the strategy with the new reps is let's go where the business is and then go sideways from there and start to expand the market. As I said previously, with the pre-existing reps or the already ramped reps, they have already done that. And so they're focused on further penetrating those accounts. But what they're also doing is they're going into new accounts and they're opening up new accounts that have not been big WCD prescribers in the past. And so that's part of how we're growing the market. Operator: And our next question comes from the line of Lawrence Biegelsen from Wells Fargo. Larry Biegelsen: Two for me. One, on the conversion rate, one back on market share. So Vaseem, what does the guidance assume for the year-over-year increase in the conversion rate? It looks relatively small, a relatively small increase is assumed for the fiscal year versus the first quarter, which looks like about 700 basis points. And secondly, if I heard correctly, in-network is now almost 80%, which is relatively high. What are the drivers to get you to that best-in-class conversion rate that I think you said on the Q4 call was 76% from 47% today? Vaseem Mahboob: No, that's a great question. Thanks, Larry. So we've seen a consistent year-over-year increase in our conversion rate, and I'm happy to report that -- and as we've indicated here, we continue to make progress on all 3 elements of our conversion rate, and they're all trending in the right direction. Obviously, the biggest contributor of that conversion rate is the improvement in the in-network patient mix, and that has gone up 10 points since the IPO, which is really positive. And as Brian said, we'll continue to move that in the right direction. So our strategy is working. And I think the main focus areas for us on the conversion rate continues to be, as Brian mentioned, deploying the therapy managers into these high prescription and high [fare] regions. And that will organically happen as the commercial team expands and that will continue to that positive growth in the conversion rate. Secondly, we are focused heavily on, as Brian mentioned, again, on these Tier 2, for example, we signed Oscar Health last week, which is a nice small program. It's regional. And so there will be a lot of those that are in the queue and the market access team is working on those. Finally, not the least as we continue to invest in the RCM team and the capability they have on people and process, on systems. So we do all of that. What's reflected in the guidance here is about a 2.5, 3-point increase in our conversion rate. And we think it's very achievable. And obviously, we've got a lot of game to play here in the remainder of the year. So you'll continue to see that progress on the conversion rate. But again, what we have said in the past, we are -- the conversion rate is a year-over-year metric that we got to assess that, and we'll continue to drive improvements on the [indiscernible]. Larry Biegelsen: That's helpful. Brian, on market share, the press release talked about category leadership. So I guess my question is maybe back to Matt's 14%. Where do you think you are today? And is it prescription share, fitting share -- and what's the -- how long is it going to take to achieve category leadership? Brian Webster: Yes. Thanks, Larry. I think time will tell how long it takes us to get to that position. But I think there's a couple of different drivers that I would say. With regards to where we stand today, we're probably somewhere around 12% market share is my math. I would say that the key driver, now that we've got the insurance coverage in place and we've got -- a high percentage of our patients are coming in with coverage. That's not as big a focus as just pure sales coverage is. And right now, we're a little over 50% of the U.S. that we have covered in terms of actually having a rep in a territory. Now that doesn't mean we're 50% of the competitor. It means that in a city, like pick a city like let's call it, Minneapolis, we might right now, we don't have a rep there. They might have 3 reps there. So when we put a rep in there, we would say, at least we've got representation there. So right now, we're still just a little over 50% territory coverage in the U.S. So we've got a lot of room to go in terms of being able to cover the market. And we're going deep in certain territories that we know are high-producing territories now. but also, you'll see us starting to broaden that out and cover some of these other territories in the future. But that's going to be the biggest driver. The rate at which we do that will determine how quickly we can get to that category leadership position. Operator: Our next question comes from the line of Michael Polark from Wolfe Research. Michael Polark: Brian, I want to follow up on one of your prepared remarks comments about the expanded clinical specialist role to complement certain territory managers to penetrate existing accounts. I guess can you just help us better understand, I was under the assumption you had specialists already. what's the expanded role look like what is this person doing that's different? And how are they incentivized? And is this something you expect to deploy for all territories? Or is this going to be focused on the biggest accounts? Any color here would be helpful. Brian Webster: Yes, Mike, thanks for the question. So I will start by just going back to the service model that's inherent in this category. At the point in time that we receive a prescription from a prescriber, they are expecting that within 24 to 48 hours, we will have come in and fit and trained that patient and allow them to then discharge the patient to go home. So there's a heavy service model that has to be deployed here, which really informs the way -- the rate at which we bring in new territories and open up our commercial footprint. And so as part of that, what we recognize is as we get strong penetration into certain accounts, we can start to adopt a model where some of the account management responsibilities can be transitioned away from the sales representative over to a clinical specialist. And that allows then that sales representative to go and cultivate new prescribers and new accounts. And so that's the strategy. It's a partnership. What we will initially be doing is putting those roles in some of our high-performing territories where we've already demonstrated the ability to go in and capture significant market share so that we can give those reps some leverage to be able to go and expand beyond those accounts. And then as we see the progress we make in that, then we will -- that will really determine how far down the scale we go when it comes to adding those resources. But it's a -- I think it's a strategy that's not an unusual strategy in medtech. We've seen it in other categories. It's one that I think will be successful for us, but we will start with the high performers and kind of go from there. Michael Polark: That's helpful. The follow-up is on the late-breaker coming at AHA for your post-approval study. Can you remind us just some of the high-level specs of that post-approval study size, kind of focused patient the period in which it enrolled. And then without -- if you want to preview the data, great. But what would you hope this shows? Is this going to be a narrative changing on patient compliance? Is that the major hook? Is it simply just scale of quality data solidifies the pitch? Is it differentiated insights on the MI versus the heart failure patient, the post-MI patient. What the somewhat of this presentation will you hope, be what? Brian Webster: Well, shall I just read the whole presentation to you now, Mike, and then we'll just cut to the chase. Vaseem Mahboob: Obviously. You're free to do that. This is a public forum. Brian Webster: Yes. Yes, look, it's really a significant milestone for the company. We started the post-approval study soon after we launched the product. So we've been at it for about 3 years, and we expect that the study will have somewhere between 24,000 and 25,000 patients in it. And that's a huge body of work to be deriving clinical results from. The endpoints of the study include shock success rate, I call shock success rate. That's the primary endpoint and safety end point will be inappropriate shocks. And then we have other endpoints that we will report on around false alarm rate and also patient compliance. So those are sort of the big 4. Now as you start to peel back the onion on this incredible set of data, then you have the opportunity to report on some of the differences between the post-MI patients in the non-ischemic patients and lots of other data that we expect will be published out of this data set over the coming quarters and the next couple of years. So the report out at AHA will be -- it will be big news in that one of the biggest competitive points in our -- the incumbent competitor makes about Kestra is we don't have as much published clinical data as they have. Now when we bring a 25,000 patient study to the table, it takes that argument, and it buries it really deep in the sand because we now have an incredible body of clinical data that we can point to and we're really excited about putting that objection away once and for all. So we're excited about it. We don't have all the analytics completed yet, but we did recently get the late-breaker notification and it's a big milestone for the company and a big milestone for a lot of folks who have been working incredibly hard. And I think what you're going to find is that the promise that we've made with the ASSURE system is going to come to light in the form of that clinical data coming up just in a couple of months. Operator: And our next question comes from the line of Daniel Dams from Goldman Sachs. Unknown Analyst: Key topic at last week's HRX conference was on compliance rates and that it still remains a key barrier on WCD utilization. Can you just detail a little further what you are seeing and how compliance rates are evolving across your user base as experience growth? Brian Webster: Yes, sure. Thank you for the question. I would say that compliance in any at-home patient and any at-home category, whether it's blood pressure monitoring or drugs or wearables like ours. Compliance is the single biggest challenge. And the therapies don't work if the patients aren't willing to take them, use them wear them. And so compliance has been the single biggest priority for us as we designed our product. And we think about compliance in 2 different ways. We think about what is the daily average sort of the median daily rate wear time? And then is the -- what does that wear time look like as you go from 1 month to second month to third month and beyond. In other words, do they continue to be compliant. And so I think our metrics are pretty clear -- we've published before that our daily median rate is over 23 hours a day. That answers that question. very clearly that patients are willing to wear our product. And then the second half of that, which is what's the duration that they're willing to wear it and you see a downward slope in the curve, over time because they get sick of wearing it. And the answer to that is remarkably sound that once patients -- once they get past that sort of first week of wearing our device, they will wear it through the duration of their prescription. And that means that they can tolerate it, not just for the short term, for the long term, and that gives them the protection that they need. So these are the 2 goals that we had, as I mentioned, and we feel really good about the way our data is tracking for those goals. Unknown Analyst: That's very helpful. And just the second question is just on the cadence of OpEx investments through the course of the year. Last quarter, we had talked about some of the investments the new commercial offer was making. We've discussed the new territory manager expansion today, but any color on the pace of those investments through the rest of the year and what those might be focused on? Brian Webster: I think the name of the game is going to be steady and measured. We are adding to our commercial footprint, as we've talked about. I think last quarter, we talked about the prior quarter. We got a little bit aggressive with some of our OpEx because we had an opportunity to really invest in the leadership team and the training capability of all these new reps, et cetera. Now as we got into our new fiscal year, we have a business plan for the year. We're executing to it with pretty tight precision at this point. And what you're going to see is steady additions to the team so that we can consume those new territories and those new territory managers and provide them with all the support that they need to be successful. And I think that's really the strategy behind the base. This is not a -- this is not one of those categories where you can just say, hey, I'm going to go out and hire as many reps as I can, as quickly as I can. That's not the game. We want high-quality reps that are going to come in, do a great job of serving our customers and their patients and really build a durable commercial team. That's our strategy. Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Brian Webster, President and CEO, for any further remarks. Brian Webster: Okay. Thank you, and thank you for the great questions. I think, again, the story of Q1, we're off to a new start in a new fiscal year. And it's an exciting start, but we've got a business plan. We're executing to that plan. And I'm thrilled by the level of commitment that the Kestra team has and the culture that we're building around performance and commitment. And we're looking forward to getting back with you all in 90 days or so and give you an update on Q2. We continue to put a really bright shiny light on the focus we have around patients and the lives that we save every day, every week, we report on those to our team. Every Monday, we report on the patient's lives that were saved by our product last week. And that continues to be the guiding light for this company and will continue to be so. So thank you for attending today, and we look forward to updating you again in 90 days. Thank you. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon, ladies and gentlemen, and welcome to Scancell Holdings plc Full Year Results. [Operator Instructions]. I would like to remind all participants that this call is being recorded. I will now hand over to Mary-Ann from Investor Relations to open the presentation. Please go ahead. Mary-Ann Chang: Good morning and good afternoon to all our listeners. It's my pleasure to welcome you to Scancell's Results Call for the year ended 30th of April 2025. My name is Mary-Ann Chang, Investor Relations for Scancell. With us presenting today, we have Phillip L’Huillier, our CEO and Sath Nirmalananthan, our CFO. Following the presentation, we'll be taking questions directly from analysts as well as written questions from our audience which you may submit at any point during the webcast. Next slide, please. Before we begin, I'd like to draw everyone's attention to this statement. Today's discussion will include forward-looking statements, which are based on current expectations and assumptions. Actual results may differ, so we encourage you to review our filings for more details. With that, I'll now turn the call over to our CEO, to get us started. Phil? Phillip L'Huillier: Hello, and welcome, everybody. Thank you for joining this business update and year-end results for Scancell. As Mary-Ann has just said to you, I'm joined to present today by our CFO, Sath. This slide gives you a snapshot of Scancell today. As a reminder, for those that have listened in previous presentations, but also a summary for anybody new that's joined us. During the term, we formed a major partnership with the cancer vaccine Launch Pad, just one of our highlights from the year. You are right to ask me what is new? And there's a number of important things to mention. First and foremost, from our SCOPE study, we selected the iSCIB1+ product to move forward within further development in advanced melanoma, just one snapshot of the data. For iSCIB1+, we're seeing the progression-free survival, the PFS at a level of 78% in our target population. If you compare this to historic doublet checkpoints or standard of care, that's around 46%. So there's a whopping difference that we're seeing here. I mentioned the PFS to you and focus on this because now we are progressing forward into further development. And as many of you will have seen, the FDA is very much focused on progression-free survival and overall survival in patients as we go into these later-stage developments. So this is what really counts as the end points going forward. Another aspect that is new is we told you back in July that we were going to accelerate our planning for further development, and we delivered on that. We have submitted documentation to the FDA and other regulators and have scheduled review meetings with the regulators about our plans for randomized studies towards registration for iSCIB1+. And I have to just give kudos to the Scancell team here. It's been a herculean effort to get the documentation ready, prepared in a very quick and very efficient way such that it's been submitted. We told you last time that we were going to go to the FDA. Of course, we need to do that. But also, we are in conversations with EMA and HRA, that's about being able to consider randomized studies in multiple territories, but it's also about hedging our bets in an uncertain world that's out there. What's also new is we've been able to confirm we've got a commercial scale manufacturing process now for iSCIB1+. It's a high-quality formulation, and the long-term stability that we're seeing with this formulation is really quite amazing. I hope you can see from what I've summarized here is we now have a focus and an eye on the registrational development of this drug, but also one eye on the stage after that, the commercialization. We'll talk you through more on the SCOPE study and iSCIB1+ as we go through the presentation. Let me also remind you that we have other assets in the pipeline, Modi-1 and GlyMab assets. Modi-1 is in the ModiFY study, a Phase II study being conducted across centers in the U.K., being tested in both head and neck cancer, and we shared some early data from that study showing a benefit over and above standard of care. And we also have a study running in renal cell carcinoma. And that study is recruiting well and looking good, and we anticipate sharing data from the renal cohort towards the end of the year. During the year, we also established GlyMab Therapeutics. This was a strategic initiative, giving us optionality about how we could develop that portfolio. To me, there's a little gold mine there that it was difficult as we were structured to apply significant resource to move that preclinical pipeline forward by forming GlyMab Therapeutics, putting the pipeline, the platform and the IP into that entity we can potentially bring focused investment but also focused management to move forward those assets. We did a financing late in 2024, raised GBP 12.1 million from new and also from some of our existing investors. And I want to acknowledge the support -- ongoing support of our investors. That financing was in fact, in my first 2 weeks. So it was a bit of a baptism by fire, but a successful financing for the company. And that gives us a strong financial position for us to move forward, and Sath will talk you through that later. We have upside on that cash runway from our partnerships with Genmab. And there are -- as I hope you can see multiple near-term and longer-term value creation opportunities here. Let me remind you of our pipeline as it stands today. And I'd like to go back and just mention the monotherapy study that was conducted in the adjuvant setting in melanoma with SCIB1. I raise this because monotherapy activity is an important pharma conversations in it. So an important study that the company has done. We're now, of course, developing in combination with checkpoints in the advanced setting. Why did we move from the adjuvant setting to the advanced setting? Well, adjuvant studies are pretty long-term studies and not easy studies necessarily for a biotech company to do. The readouts in the advanced setting tend to come more quickly, so hence moving into that setting. I touched on Modi in the ModiFY study in head and neck and 2 of the assets of several assets in the GlyMab Therapeutics pipeline. Let me remind you about our platforms, 2 very novel platforms in the clinical part of Scancell with some key features that are important to the overall success of the products and of the company. The first one is the ImmunoBody body platform, a DNA-based immunotherapy. And the second one is the Moditope platform, which is a peptide-based immunotherapy. Both have unique mechanisms of action and a very, very novel platforms, the lead out of the DNA ImmunoBody platform is iSCIB1+, and the lead out of the Moditope platform is the Modi-1 platform. As some of you have been -- that have been involved for a while, we'll, of course, recall, there are other products out of these platforms, but we've got those on the shelf at the moment whilst we're developing our leads. Some of the key features that are really important as we move forward to partner and to go into commercialization with these products is the fact that they are off the shelf. So that means they're straightforward in terms of cost, scale, et cetera. They are conveniently delivered to patients and accessible to patients. There are also -- we're seeing from the clinic excellent safety and the products are very well tolerated. And that means they are what I call easily combinable with other therapies, which is the way cancer therapy is going. And as I said to you, there's unique novel mechanisms or another way of saying it is, these are not me-toos. These are very, very novel products. Let me come back to iSCIB1+ and remind you, first of all, of the unmet need that's here in melanoma. The checkpoints have made a big difference to patients in melanoma, but unfortunately, still 50% of patients really do not respond very well or don't respond for long. And so there's a big unmet need still there. We're working with iSCIB1+ in the unresectable melanoma, the late-stage metastatic disease population. And we have calculated that, that's a market opportunity in the order of $3 billion. There are additional upside to this, and this is shown in the middle of the slide here. The potential to take the product into the neoadjuvant and adjuvant setting. So patients that could get surgery, have their melanoma removed and then have therapy after that. You can see that's an even larger market opportunity and that's where many of the pharmas have now focused their checkpoint therapies. So we want to also, at some point, explore the possibility of moving to this earliest -- earlier disease setting. So large market opportunities here. I want to pause on this slide because I think in one slide, it summarizes nicely the drug, the features of the drug that we have and the characteristics. So first of all, what's the product? iSCIB1+, the second gen of the SCIB drugs, the first gen was SCIB1, and it was designed to work in patients with an A2 haplotype. So a profiler, A2 HLA haplotype. Lindy Durrant and the team went back after seeing some activity with that drug and then designed iSCIB1+ where the i is an immune modification and the plus is additional HLA haplotypes for which it was predicted would stimulate T-cells in patients. And amazingly, it's doing what it says on the tin. We're seeing that it's stimulating T-cells and bringing clinical benefit to patients in the clinic. This represents 80% of melanoma populations. Just a little bit of scientific detail, but here's the mechanistic understanding. And to me, in pharma conversations, they want to see the data, but they also want to know how this drug works, what's the translational data coming out of these studies. And we know that well here. We know that this drug is dual acting direct and indirect targeting of the CD64 receptor on activated dendritic cells. That's a unique mechanism. It was built with epitopes or peptides from 2 melanoma proteins, gp100 and TRP-2. These play key roles in melanin. And the epitopes that we've put into these 2 products were actually isolated from patients that had spontaneously recovered from melanoma. So we know the immune system sees them. Here's the real crunch, the clinical data. We've demonstrated effective monotherapy activity in the adjuvant setting, and we've now demonstrated a strong meaningful clinical benefit in the combination setting in metastatic disease. And just a few really important headlines of this data. We're seeing T-cell responses in 72% of patients to both TRP-2 and gp100. Why do I emphasize that? Well, that means because we're seeing T-cells to both of those epitopes that reduces the likelihood of immune escape. So it gives the prospect of a longer-term immune control. And again, I come back to the PFS, it's a whopping delta over the standard of care, and it's being well tolerated into the clinic. And then a feature that could be really important going forward, now that we know that the drug works on the patient profiles that it was designed to, we can actually reverse that and use that as a selection tool to select for patients into the Phase III that we know will respond. This basically enhances the chances of success. And it's very, very rare that you have a selection marker for an I-O therapy. Let me come back to some of the data. We shared this data with you on July 22, but it's worth going over it again. This is the combined data for the target population for both Cohort 1 and Cohort 3. Now ask me the question, why do I combine this data? Well, I know from my pharma experience, they want to see good, sizable data sets. And the only difference between the 2 cohorts here was one is SCIB1 and iSCIB1+, but they all are in the target population, all receiving our drugs on top of ipi/nivo at all having very much the same demographics. So I'd just remind you here that the PFS in this target population is 69% at 22 months versus a historic control population, which is shown here just as an illustration. This is not a randomized study for Checkmate-067. The medium PFS was 11.5 months. So that's 50% at 11.5 months, we are 69% at 22 months. That's a whopping delta. As one of my Board members said yesterday, if you're a metastatic melanoma, you would really want to get this stuff, wouldn't you? And another example that I was alerted to yesterday, antidote, could say for one patient. We had one patient that was on the study for a little over a year on the therapy. For whatever reason, the patient and the doctor decided to stop the therapy. And whereas when on therapy, there was good control of the tumor a few weeks after going off therapy, they have progressed. A nice example of the power of this therapy, this patient had probably an extra year of life. Now digging in a little bit more, we want to look at iSCIB1+ because that's the drug we're taking forward. This is the PFS curve in the target population, and this is impressive compared to the nontarget patients and also compared again to the standard of care. So here, 78% at 11 months versus 50% for this non-target population where the vaccine wasn't predicted to stimulate T cells. This really is very superior, the target population to the nontarget population and markedly better than the historic control. Let me come back to the SCOPE study and just remind you of this. Of course, Cohort 1, 2 and 3 are fully recruited, and we've got data coming in for those cohorts as we're showing you. Cohort 4, which is iSCIB1+ with accelerated dosing and with intradermal delivery is recruiting well, and we will have data coming out of that cohort later in the year. So really on track with this overall study. Let me come back to overall response rate and disease control rate. And this is the data we showed you in July, but I want to remind you of the waterfall plot on the left, but perhaps more importantly, the spider plot on the right, a patient responds, you see the lines go down and then they're pretty damn flat. This is impressive. You are right, the eagle eyed amongst you to ask me why is the overall response rate now at 65%. Let me show you that on this slide and explain that. We have now a full set of patient profiles. The patient demographics they are called and what we've seen looking at that data is our patients are very similar to Checkmate-067. And so we want to be able to really compare more precisely to 067. When we first put this data out we took out a couple of patients from the target population that had not -- that had progressed or died before their first scan. Now we realized that in Checkmate-067, that wasn't done. So we've put these 2 patients in the target population back into the data. So we can all strictly compare with Checkmate-067, and we've got 20 patients showing a response out of 31%, a 65% response rate we are still waiting for a further 7 patients to read out. We screened patients as they came on to the study for the target HLA Haplotypes, but we also took patients that were on target. And as it represents, the target population represents 80% of patients we did have some patients that were nontarget and that ended up to be 11 patients. And what we're seeing here is a response rate of 27%. And I showed you earlier the PFS curve there where it's at about 50%. So I do think that this nontarget population could be a representation of what the double checkpoints do without iSCIB1+ generating a response in this patient population. So now I think we didn't add up all the numbers in this cohort well previously. Now we're doing that. There's 50 patients in this cohort, 38 target patients and 11 nontarget patients and 1 patient got through screening with active brain mets. We've taken that patient out. Active brain mets were not included in Checkmate-067. This slide shows you the safety read out now. It's quite a bit of data here, but perhaps the message to take away is when we add iSCIB1+ or SCIB1 on top of the checkpoints, the drugs are very, very well tolerated. We're not seeing any major toxicities from adding these drugs on, which is great. We can combine them with these checkpoints or potentially in the future with other therapies. Let me summarize where we are with this program. We're seeing really good efficacy for iSCIB1+ in the wider population that represents 8% of melanoma patients, very strong PFS coming out of the study versus Checkmate-067 versus SCIB1 and perhaps iSCIB1+ is slightly better on PFS, reflecting the Avidimab modification. But PFS, as I touched on earlier, is the critical endpoint now for registrational studies. I told you we are confident about our commercial scale manufacturing. A reminder, we have the PharmaJet partnership for the Stratis needle-free device for intramuscular delivery. That's what we're moving forward within the further studies. And then I also told you about the biomarker or the selection tool that's available to us to use to select patients into the Phase III study, and that will likely enhance success. I showed you some commercial figures. What's the opportunity? What's the size of this opportunity. You can look at it in another way here that ipilimumab was available for this advanced melanoma populations, BMS the combination study adding nivo to ipi. And because of the delta out of that study, ipi/nivo has captured 65% to 70% of the U.S. market for metastatic melanoma, the delta or the advantage iSCIB1+ adds on top of ipi/nivo is not dissimilar. So it's a way of sizing the commercial opportunity that's here with us. Let me quickly summarize the other assets in the pipeline, Modi and GlyMab Therapeutics. And in some ways, a reminder, we are evaluating Modi in the ModiFY study in head and neck and in renal cancer. We showed you data from head and neck earlier in the year, showing a delta over standard of care, which is pembrolizumab, that cohort continues, and I expect data readout later in the year. But on top of that, we have the renal cell carcinoma cohort, which is Modi-1 on top of ipi/nivo going also and that cohort is recruiting well, and I anticipate having data readouts towards the end of the year from that cohort. So I'm pleased how Modi is going. We are seeing benefit in patients from Modi, and we continue to recruit and build that data set. I told you earlier that we have formed GlyMab Therapeutics with this set of assets, the anti-glycan antibodies. There's a unique expertise in Scancell to generate these high-affinity IgG1 antibodies to the -- the tumor-specific glycans on tumors. The lead is SC134 targeting fucosyl GM1 and in some ways, this is validated -- this is validated in the clinic from the work that BMS is doing. We've done a lot of work recently developing this as a T-cell engager and are moving it forward towards the clinic. SC27 is the second product targeting Lewis Y, and that targets a broader set of cancers. And we're developing that as an ADC and also moving that towards the clinic. And the team are also working on building other targets out of this platform. And of course, you'll remember we have industry validation here with the 2 licenses with Genmab. Let me pause now and hand over to Sath to talk to you about the financials and the outlook. Sathijeevan Nirmalananthan: Thank you, Phil. Next slide, please. I'm pleased to update you all on the financial results for the year ended 30th of April 2025, including some post-period highlights. Starting with revenue. We reported revenues of GBP 4.7 million in the period. This relates to the second commercial license agreement with Genmab for antibody SC2811. We received USD 6 million in total upfront payments and there are up to $630 million in further milestone payments with low single-digit royalties on commercial sales. To reiterate, this is the second commercial license deal with development of the first out-licensed antibody, SC129, also to Genmab on track for further milestone payments. Building on the success of these deals, we have established GlyMab Therapeutics. This is a wholly-owned subsidiary of Scancell Holdings plc with the intention it will hold our in-house portfolio of antibodies with a transfer of trade planned. This move provides us with strategic optionality as we look to unlock the right value in these assets. Research and development expenses were GBP 14.7 million, slightly higher than prior year. As a reminder, our R&D costs predominantly reflect expenditure on our in-house clinical, manufacturing and research costs. During the year, these were focused on SCOPE and MODIFY studies. We made an additional investment in the period to ensure readiness for the next stages of development. This includes the previously mentioned commercial scale iSCIB1+, GMP manufacturing process, which has resulted in a high-quality formulation and long-term stability leaving us well prepared for late-stage clinical development with iSCIB1+. Administrative expenses was GBP 4.8 million, lower than prior period, with a focus on controlled expenditure despite continued investments in our organizational capabilities, including the recruitment of our CEO and CMO in the period. This leaves our operating loss at GBP 15 million lower than prior year, primarily due to the revenue reported in the year. We recorded a small loss in finance and other income of GBP 0.3 million and recorded a tax credit of GBP 3 million, resulting a loss for the year of GBP 12.3 million. During the period, we also announced the extension of the maturity date of the convertible loan notes by 2 years. These majority dates are now August 2027 and November 2027 and following a small partial redemption, the remaining loan notes totaled GBP 18.2 million. Our cash of GBP 16.9 million at year-end was boosted in the period by a financing in late 2024 raising proceeds of GBP 11.3 million, with participation from new and existing life sciences investors. We anticipate this will be enhanced by the FY '25 tax credit, which will be at similar levels as in the past. This leaves our cash runway in line with previous guidance of Half 2 2026 beyond key developmental milestones and with a good runway for our ongoing partner discussions. We have upside opportunities on this runway, too, namely, the development of the first out-licensed antibody, SC127, which is anticipated within the next 12 months. Furthermore, I highlight the discretional nature of our spend, which allows us to take decisions if required. Next slide, please. Here are the key milestones for Scancell. As Phil has mentioned, we are making good progress across our programs with significant milestones already achieved from our clinical programs. In Q4, we expect further Cohort 3 data with iSCIB1+ and early Cohort 4 data. We expect this additional data to inform our development plans rather than prolong them which is why we are accelerating both regulatory and business development conversations. Regulatory discussions, as Phil has highlighted, are already scheduled with feedback anticipated this year, and we believe we have the right data set to generate partnering interest. Based on regulatory feedback and business partnering discussions, we will evaluate the right next step forward, including assessing out-licensing, partnering and further financing but all with timely development and shareholder value in mind. Outside of iSCIB1+, Modi-1 continues in the ModiFY study following early validation in head and neck cancer in early 2025 , highly anticipated clinical data from Modi is anticipated in Q4 in renal cell carcinoma in combination with the checkpoint inhibitors. And with the establishment of GlyMab Therapeutics, we highlight SC134 and SC27 as key assets we are looking to progress under GlyMab Therapeutics. Next slide, please. Finally, I'd like to end on why Scancell, why now? Firstly, we have compelling science that is now clinically and commercially validated. We have over 100 patient data in the SCOPE study with iSCIB1+ and SCIB1. This is supplemented by Modi-1 showing early clinical validations in the settings evaluating that. The licenses with Genmab provides commercial validation of the GlyMab platform also. We are well prepared for late-stage development. We have good data. We have manufacturing in place. We have a strategic license with PharmaJet covering development and commercialization and building the team with broad experience, ensuring we have the components for late-stage development. We believe all of our assets have substantial markets where there are unmet needs. iSCIB1+ has a clear development pathway to commercialization as well as growth areas in early disease settings. Modi-1 has the potential in multiple tumor types with the highly anticipated renal cell carcinoma data informing efficacy in the combination setting. And GlyMab Therapeutics cover a preclinical portfolio of antibodies, which as previously highlighted, has potential to be developed as T-cell redirecting antibodies, or ADCs. So we have a Phase III-ready asset with a clear pathway to market and other assets in Modi-1 and GlyMab Therapeutics providing our shareholders value creating opportunities in the near to medium term. Thank you for listening. I'll now turn over to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Julie Simmonds with Panmure Liberum. Julie Simmonds: Congratulations on the progress over the last 12 months, most impressive. A couple of questions. Firstly, with the sort of selection of the patients for the registration trial, I mean, it seems to make a lot of sense to recruit those who are most likely to respond. Is the HLA typing done as a standard test? Or would that be something that would be done specifically for use of iSCIB1+? Phillip L'Huillier: Thank you for the question, Julie. It is a standard or widely available test, and we would use that test to screen our patients. It's actually perfect in the sense that we don't have to develop a biomarker ourselves in parallel with the therapeutic. This is a test that's widely available. And there are examples of companies that use this type of testing. The Kimmtrak from Immunocore is an A2 specific product. So they are testing patients for A2 positivity before they go on to therapy, as an example. Julie Simmonds: Brilliant. That sounds very good news. And then on the manufacturing side of things, good to hear that, that process is -- has gone to plan. In terms of any -- is there any sort of lead-in period that's required in terms of the manufacturer for doing a clinical trial? Is that going to cause any delay in process once you've obviously got it signed off and anything to get the active product necessary? Phillip L'Huillier: That's a good question, Julie. No, we don't anticipate any delays. We're in fact, factoring in and it's factored into our runway that Sath just summarized further manufacturing to have material ready to start the Phase III study on the time line that we've laid out. Sathijeevan Nirmalananthan: And I'd just add, Julie, that's the investment that we made in the last period to make sure we were ready and could have a seamless transition into a late-stage study and not have good data and not be able to continue because we needed a better manufacturing process. So we will be yielding the benefits of that earlier investment because we've got a good process now that should be late-stage ready. Operator: Your next question comes from the line of Edward Sham with Singer Capital Markets. Edward Sham: Congratulations on your results. I think it's clear to see that you guys are on a journey to becoming a late-stage biotech. I've got a few questions. If I just start with the first one. So you say you're having accelerated discussions with the FDA, EMA and MHRA. I just want to kind of understand how aligned are those agencies in terms of trial design endpoints and data expectations? Phillip L'Huillier: Yes, that's a good question. It's early days. We haven't had the conversations yet. We are wondering to have the scientific exchange in the Phase II conversations all in parallel. So in fact, we could get to the point of having a single protocol for the study going forward. But sometimes, in my experience, you do find that there are some differences between agencies so you do end up with slight differences in the protocols that are there. We have -- we've developed a -- I think, a really robust study design. We've all seen recent activity from the FDA, and I'll mention one in relation to Replimune that didn't get their BLA, which surprised us all. So we're taking into account what we're seeing and hearing with the FDA and other agencies and have made sure we've got a robust design that I am very, very hopeful will satisfy all of the agencies that we're talking to. Edward Sham: That's really helpful. And then maybe just on the time line you've indicated. So you suggested you expect to initiate randomized studies in 2026. So is it safe to assume that you're confident in either a partnership or financing before that trial starts or the randomized study start? Sathijeevan Nirmalananthan: I'd say so, Ed. So yes, we are confident. We have the bulk of the data. We are in active conversations, and I think we've got the runway to get through the initial steps on regulatory as well. And I'd highlight we do have upside opportunities, as you know. So I think that gives us a good runway to make sure we're ready. Obviously, we need to find a partner and/or financing, but we're confident that we have the ingredients to move in a timely fashion. Phillip L'Huillier: Perhaps it's worth adding Ed, that we have accelerated the regulatory conversations for, of course, that time line for us, but also, perhaps more importantly, for the partnering and investor conversations, they're asking us the question, what does the FDA or EMA think of this study. So we have accelerated those conversations to coincide with our investor and partnering conversations also. Edward Sham: Great. That's really encouraging. And then just my last one is just on the Genmab licensing deal. So you've mentioned that you're now on track for near-term milestone payments. Is that a positive surprise? Is that something that's moved faster than expected? Or is that simply the timing you've always expected? Sathijeevan Nirmalananthan: I think we got a recent update, which is increasing our confidence that this is continuing on its development pathway. So I think that is something incremental I think we would obviously like development to move as quickly as possible, but we remain confident that these are going to happen. And to remind you, I didn't put that in my runway guidance, it is upside. But based on recent interaction, I think we're growing in confidence that this will happen. Operator: [Operator Instructions]. And it seems there are no further questions on the conference line. We will now address the written questions submitted via the webcast page. I will hand over to Mary-Ann Chang, Investor Relations to read these out. Mary-Ann Chang: So a question for Phil, and it's again about the discussion -- upcoming discussion with regulators. Is there a realistic accelerated or fast track route for iSCIB1+. And second part of this, how is it differentiated from Moderna and BioNTech's cancer vaccine program? Phillip L'Huillier: Thank you, Mary-Ann. So taking the first question, the answer is iSCIB1+ is yes, absolutely. There is a real possibility of breakthrough or accelerated development here. We -- for the FDA, we have to go through the conversation with the FDA, submit our IND and then be able to then have a conversation, first of all, about breakthrough, but then accelerated approval. But if you look at the data that I was sharing with you, then I think we are a very, very good prospect. Mary-Ann, sorry, there was a second part of the question. Mary-Ann Chang: Yes. That was on the differentiation between iSCIB1+ and Moderna and BioNTech's programs. Phillip L'Huillier: Yes. A couple of components to mention here. We are working in different settings of melanoma. So we're in advanced metastatic melanoma, unresectable melanoma. BioNTech and Moderna are working in the resectable, the earlier-stage disease setting. So we're talking about different markets, different patient populations. The other thing that I think is worth adding back to our platform that both of those are using personalized therapies with all the associated cost and time line to collect the material sequence, develop algorithms and then develop material to go back into the patients. That's a logistical hurdle to overcome, but also a very high cost of therapy. We are off the shelf. So I see us being more widely available to health systems once we get through to approval. So very different modalities also. Mary-Ann Chang: Great. Okay. One for Sath. How much of the planned iSCIB1+ registration trial is already funded and what's the expected financing gap? Sathijeevan Nirmalananthan: Sure. So we -- within our runway, the guidance I previously guided to, we have all of the regulatory spend planned and a little bit more in manufacturing to make sure we are ready to initiate the study. The actual study of funding the study we will evaluate our options following the active conversations we're having with partners right now. So based on those conversations, based on their feedback as well as the confirmation from the regulators that we've got the right study design, we will come back and update you on what that right financing will be. So we're confident we've got the runway to do it. We don't have it funded yet, but we have the data and the conversations ongoing, and we hope to update you in due course, not too long about how that next stage of development will take place. Mary-Ann Chang: That's great. Somewhat related to that, and Phil, you may not be able to fully answer this, but I'll go ahead with the question. Will you partner iSCIB1+ before 2026 randomized studies. You mentioned previously, you were revisiting discussions. How are these discussions progressing? Or are you preparing to do it alone? Phillip L'Huillier: Thank you for the question. I see my job always as taking a two-pronged strategy. The first being be opportunistic about the possibility of partnering. And with this data set and our push on regulatory conversations, we're very confident that we will have serious conversations about partnering and partnering in the broader sense. And also possibilities around investment further. But alongside that, the second part of the strategy is to make sure we have the resource in terms of the expertise and the people and the drug but also the finance to go it alone because we don't necessarily control the timing on partnering activities. So we -- I always want us to be taking this two-pronged approach. Mary-Ann Chang: Good. A question again, Phil. Can you indicate how long the iSCIB1+ trial will take? And when might it start? Phillip L'Huillier: Is this in reference to a randomized study? Mary-Ann Chang: I think it must be, yes. Phillip L'Huillier: Yes. Yes. So as it's designed, we anticipate starting in mid-'26. We've designed it to have an interim PFS readout 17 months into that study if recruitment goes according to the design. And then at 27 months, we'll have our readout of PFS and an early readout on OS. Mary-Ann Chang: Very good. Okay. Question for Sath. When is the next Genmab payment due? Sathijeevan Nirmalananthan: Yes. It's on IND submission, phase I initiation. So that's in the first antibody and the same milestones exists on the second antibody too. As I said in my answer to Ed, we've got a recent update and things are looking good, increasing our confidence, and I anticipate them within the next 12 months. Obviously, the timing is reliant on Genmab. Mary-Ann Chang: Great. Okay. And a follow-on for you. What was the logic of the CLN redemption and size? Sathijeevan Nirmalananthan: Yes. So firstly, I'd say Redmile are very supportive investor. They continue to hold their equity stake. The partial redemption relates to some old funds that were requiring a little bit of liquidity. And given our runway and our confidence in our runway, there was a small partial redemption. Mary-Ann Chang: Yes. Thank you. Okay. Comment on the Modi-1 renal study. There was a question, has the study been delayed a quarter? And why? Phillip L'Huillier: No, I don't think it has. It's certainly recruiting well, and we're collecting data from patients as we speak for that. I think we've signaled the second half of the year, and now we can be a little bit more precise on the timing of that. But there's been no delay in recruitment or readout of data from that cohort. Mary-Ann Chang: Good. Okay. Finally, we have one question for Sath. On the share price, the questioner is asking if there was a seller and if you can give any idea about whether or not that any exit that may have been happening has now been completed? Sathijeevan Nirmalananthan: Yes. I'll answer this as best I can. Firstly, I'd say I think we're all disappointed in our share price performance. I don't think it reflects our intrinsic value and the value that we are building in the company. And as a reminder, all 3 of our covering analysts have increased their target price in recent weeks. And so we strongly believe we are building value. And I juice based on my feedback and my interactions that this is related to low volumes and certain compliance nature of selling from large institutional investors who have been very historical supporters, but for various reasons, need to sell out. Nothing related to our data and the progress that we're making. We continue to work through some volume, but I'm confident that once that clears, that we will continue on the path to reflecting the right share price as well. So I'm confident about the future, and we're working very hard to make sure that the share price reflects our intrinsic value. Mary-Ann Chang: Great. Thank you, Sath. There are no further questions. So I'll hand back to Phil for closing remarks. Phillip L'Huillier: Good. Thank you. We're excited. As my CMO says, we've got an active drug in our hands here, and we need to get this to patients as quickly as we can. The next quarter or so, we're knocking on many doors to find partners and investors to help us move forward into the clinic for further development to get this drug to patients, and we'll develop the rest of our pipeline. So we continue to build our plans to execute the randomized studies towards registration, whether it's in partnership or going it alone. Thank you for listening, everyone.
Operator: Hello, everyone, and welcome to Aviat Networks' Fourth Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Andrew Fredrickson, Vice President of Corporate Finance and Interim CFO. Thank you, and you may begin. Andrew Fredrickson: Thank you, and welcome to Aviat Networks' Fourth Quarter Fiscal 2025 Results Conference Call and Webcast. You can find our press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com along with a replay of today's call. As a reminder, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including, but not limited to, statements relating to fiscal guidance, financial projections, business drivers, new products and expansions and economic activity in different regions. These and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast, and involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. Additional information on factors that could cause actual results to differ materially from the statements expressed or implied on this call, can be found in our most recent Annual Report on Form 10-K filed with the SEC. The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events. Additionally, during today's call and webcast, management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available on the IR section of our website at www.aviatnetworks.com in the financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information. At this time, I would like to turn the call over to Aviat's President and CEO, Pete Smith. Pete? Peter Smith: Thanks, Andrew, and good afternoon. Let's review the highlights from the fourth quarter. Total revenues of $115.3 million, non-GAAP gross margin of 35% (sic) [ 34.7% ], and record adjusted EBITDA of $15.1 million, up 27% (sic) [ 26.7% ] versus the year-ago period. This marks our third consecutive quarter of setting a new record adjusted EBITDA figure, non-GAAP EPS of $0.83, up 15% year-over-year. These quarterly results are a testament to our entire team and reflect the hard work, dedication and commitment we have to our customers and our shareholders. Let's discuss our end markets and key developments. In private networks, Aviat continues to deliver for our public safety and critical infrastructure companies including utilities and oil and gas companies with our reliable secure backhaul, complemented by our access and routing portfolio. In public safety, we remain a leader with sustained share of demand and expect a good environment in the year ahead. Industry research shows that overall city and state budgets for fiscal year 2026 are growing by 4% and 6%, respectively, even more relevant for Aviat allocations to city police and fire budgets are growing by 5%, and states are growing public safety budgets by 8%. This backdrop of funding growth aligns with land mobile radio or LMR network upgrades to better support video and data communications which creates growing demand for Aviat's suite of backhaul radios, routers and services. Our backlog in North America remains high, thanks to multiple large statewide public safety networks. Although our federal business is relatively small compared to our state and local government business. There are expanding opportunities as a result of the One Big Beautiful Bill Act, which has allocated $17 billion for the support of state and local law enforcement of border security and $6 billion for border technology. This will create opportunities for Aviat, given our leadership in public safety networks. Moving on to our mobile service provider market. The fourth quarter represented a rebound in spending from U.S. Tier 1 versus earlier in the fiscal year and strong revenues from certain APAC countries, our revenues from Pasolink are in line with our goal of $140 million in annualized revenues. We made a commitment to our shareholders that Pasolink revenues would be at this level exiting fiscal 2025, and we are happy to have delivered. Looking ahead, we believe that fiscal 2026 will have a broader set of opportunities for Aviat to grow versus fiscal 2025 based on mobile service providers' CapEx plans globally. Many emerging market operators are still early in building out their 5G networks, and we believe there will be opportunities for Aviat to participate in these network build-outs. The North American Tier 1 market should also be stronger than in previous years, thanks to efforts to build out fixed wireless access. Regarding our rural broadband business and the Broadband Equity Access and Deployment program, we see increasing utilization of wireless solutions for this segment compared to initial estimates which we think is wise given the speeds and capacity delivered and the cost and speed to deploy wireless versus fiber. For example, New Mexico's final BEAD proposal awards 40% of serviceable locations to fixed wireless access providers and Washington State awarded of 39%. Kansas awarded 50% of locations to hybrid and fixed wireless access solutions. This technologically neutral approach will create more opportunities for wireless backhaul, and we look forward to working closely with the states and rural broadband providers to service this program. We continue to believe that we will not see revenue impact from BEAD until calendar year 2026 and will not include it in any financial guidance until we have better visibility. Last quarter, we said that we anticipated an impact to Aviat from tariffs, but we had the goal of offsetting most, if not all, of the impact on our bottom line. Thanks to the tireless work by our operations, finance and sales teams, we have indeed seen minimal impact to Aviat's profitability as a result of tariffs thus far. We have moved nearly 1.5 million worth of supply purchases from China. We continue to execute on our plans to mitigate the impact of tariffs and are pleased with the progress Aviat has made. On the product development side, Aviat Networks recently introduced our new European Telecom Standards Institute Compliant or ETSI radio. This opens up a new market opportunity for us, thanks to industry-leading power which allows customers to build networks over longer distances with fewer towers and smaller end tenants which substantially reduces total cost of ownership. The radio is all-indoor design also simplifies maintenance, enhances safety, providing a reliable and cost-effective solution for mission-critical applications. This radio has been a leading solution in North America, and we are excited to bring it to our international markets. I would now like to turn the call over to Michael and Andrew to review the financial results of the quarter before coming back for closing remarks and our fiscal 2026 guidance. Michael? Michael Connaway: Thank you very much, Pete. I would like to say a few words before turning it over to Andrew. When I decided to join Aviat, it was because the company was successfully executing its strategy to scale in the wireless communication industry, had a strong technical offering for its customers, and was made up of great team members. All of these things remain true today. Aviat is in very good hands with Pete and Andrew at the helm. Andrew, over to you. Andrew Fredrickson: Thanks, Michael. I'll review some of the key fiscal 2025 fourth quarter results. Please note that our detailed financials can be found in our press release and all comparisons discussed are between the fourth quarter of fiscal year 2025 in the fourth quarter of fiscal year 2024, unless otherwise noted. For the fourth quarter, we reported total revenues of $115.3 million as compared to $116.7 million for the same period last year, a decrease of $1.3 million or 1.1% year-over-year. North America, which comprised 50% of our total revenues for the quarter was $58.0 million, an increase of $1.8 million or 3.2% from the same period last year due to growth in private networks. International revenues were $57.3 million for the quarter, a decrease of $3.1 million or 5.2% from the same period last year. This was driven by timing of certain international mobile network projects. Our trailing 12-month book-to-bill was over 1x, in the quarter. Backlog as of the end of fiscal 2025 was $323 million versus $292 million a year ago, up 11%. This growth signals continued demand for Aviat's products and services and sets the company up to execute on our growth plans in fiscal 2026 and beyond. Gross margins in Q4 were 34.2% on a GAAP basis and 34.7% on a non-GAAP basis. This compares to 35.3% GAAP and 35.9% non-GAAP in the prior year. The change in gross margin is primarily due to regional and customer mix in the quarter. Fourth quarter GAAP operating expenses were $30.6 million versus $35.7 million in the year ago period. Non-GAAP operating expenses which exclude the impact of restructuring charges, share-based compensation and deal costs were $27.1 million, a decrease of $4.1 million versus the prior year. This decrease is due to disciplined cost management and increased efficiencies at Aviat. Fourth quarter operating income was $8.9 million on a GAAP basis and $12.9 million on a non-GAAP basis. This compares to $5.5 million GAAP and $10.6 million non-GAAP in the year ago period. GAAP income before taxes in the fourth quarter was $10.2 million versus $4.6 million in the year-ago period. This is an increase of $5.6 million or 121% and represents a quarterly record for Aviat. The fourth quarter tax provision was $5.0 million. As a reminder, the company has over $450 million of net operating losses or NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. Fourth quarter GAAP net income was $5.2 million and non-GAAP net income which excludes restructuring charges, share-based compensation, M&A related and other nonrecurring expenses and the noncash tax provision was $10.7 million. Fourth quarter non-GAAP earnings per share came in at $0.83 on a fully diluted basis, up by $0.11 or 15.3% versus the year ago period. Adjusted EBITDA for the fourth quarter was $15.1 million or 13.0% of revenues, an increase of $3.2 million or 26.7% versus last year. This is our third consecutive quarter of setting a new record on quarterly adjusted EBITDA for Aviat. This achievement is thanks to the execution of the entire Aviat team. Moving on to the balance sheet. Our cash and marketable securities at the end of the fourth quarter were $59.7 million. Our outstanding debt was $87.6 million, bringing our net debt position to $27.9 million. With that, I'll turn the call back to Pete for some final comments. Pete? Peter Smith: Thanks, Andrew. We are happy that we were able to deliver another set of strong results for shareholders and close out fiscal 2025 with momentum heading into fiscal 2026. As part of our year-end audit, we did identify material weaknesses in our controlled environment. While we made progress in improving our control environment over the last year and remediating 2 material weaknesses identified last year, we still have more work to do in the year ahead. We will continue to invest further to improve our resources processes and testing to remediate our material weaknesses. Moving on to our fiscal 2026 guidance. Based on our current outlook, we see full year revenues to be in the range of $440 million to $460 million, full year adjusted EBITDA to be in the range of $45 million to $55 million. We expect that our business will build throughout the year with the first quarter being the lowest revenue quarter and the fourth quarter being the strongest revenue quarter. With that, operator, let's open up for questions. Operator: [Operator Instructions] One moment for our first question that comes from the line of Theodore O'Neill with Litchfield Hills Research. Theodore O'Neill: Great. I wanted to go back and ask about fixed wireless access for business and multi-dwelling unit opportunities. It seems like every telco is promoting this right now. And I'm wondering, is that -- do you have any sense if that's because they're discontinuing DSL over copper or it's BEAD funding or there's no fiber access? What's driving that? And what's making that work right now? Peter Smith: Well, I think one, the buildings in the U.S. our single-family housing is not being emphasized, but multi-dwelling units or when I was a kid was known as apartment buildings are being preferred and they achieve price points. So with that, that's what's driving the kind of the residential units. And then beyond that, with respect to access, it's -- in dense cities, fiber makes sense. But as you get away from the urban center, wireless applications become more interesting or more prevalent, is that helpful, Theo? Theodore O'Neill: Yes. And on the BEAD program, are you seeing any delays in there that are [ coming ] out by the government trying to delay certain funding of different programs? Or is that just moving along as you expect? Peter Smith: It's hard to say that the BEAD program is moving along as anyone would expect. But in our script, we noted several states that are taking advantage of the technological neutrality and changing the mix from fiber to wireless. So we're extraordinarily encouraged by that. With that said, we would also say the BEAD would be -- the BEAD funding will be impactful in calendar year 2026. So 1 of the problems with BEAD is it's always been a tomorrow story, a tomorrow story. We've never put it in to our guidance, it's still not in. But we're seeing the most positive signs around BEAD funding flowing that we've seen since the program was announced. Operator: One moment for our next question that comes from the line of Tim Savageaux with Northland Capital Markets. Timothy Savageaux: Congrats on another strong quarter. My question was relative to your outlook for fiscal '26. And in the middle of that range, I think you're at sort of 4%-ish type growth. And I want to try and relate that to some of the commentary earlier in the call. I think I can't remember the exact metrics, but you talked about funding increases, 5% to 8% in state and local, 11% backlog growth where it looks like you got basically 3 quarters in backlog. So I guess, is there anything out there that's going the other way that might meet that growth outlook, especially given the weakness you had in September a year ago that you would point us to relative to what appears to be a stronger environment. Peter Smith: Tim, it's a fair question. A year ago, Q1, we underperformed. And until we put that year-over-year quarter in the rearview mirror. We want to be conservative. I think you properly noted the environmental drivers, and we want to acknowledge that. And we also want to prove ourselves 1 more quarter, another quarter before we would get ahead of ourselves. Timothy Savageaux: Okay. Understood. And then with regard to the, well, Tier 1 carrier environment, and you could take this both North America and globally, do you see any kind of differing trends if you look at North American Tier 1s versus your global 5G customers from Pasolink. And then maybe any comments about the carrier versus private network market, do you see any meaningful difference in growth rates there in '26? Peter Smith: Okay. Let me start with the last one first. We would think -- we would anticipate better growth from the private network space compared to the carrier market. Unfortunately, I think we finished up the year a little bit over 55% private networks, 45% and -- that's about 55%, 45%. So fortunately, our portfolio is aligned with the higher growth segment. The North American wireless decline going back in 2024. And we see the back half of this year into next year, a slight growth. And it's harder to answer the international segment but we are weighted towards emerging markets which don't have the connectivity that say, more mature economies have. So that looks to be favorable and that will be -- we're project-based. So I think some quarters will be good and some quarters will be -- the demand will be digested. But we think they're set up -- we made a remark in the script about the setup for this year being better than last. And I would say it comes from public safety and utilities in our private network segment and the emerging economies and their connectivity and that would be on the network operator side. Operator: [Operator Instructions] Our next question is from Scott Searle with ROTH Capital. Scott Searle: Congrats on record EBITDA quarter. And Mike, I just want to say it's been a pleasure working with you, and congrats and best of luck in your future endeavors. Guys, maybe to just dive in on the quarter, the revenue mix was heavily skewed towards services, and higher gross margins on that front. I'm wondering if you could talk us through some of the dynamics in the June quarter that got us to that point. And then as we look out immediately into the September quarter, how are you seeing the product revenue correct and gross margins on that front? And then I had a follow-up. Andrew Fredrickson: Okay. Yes, Scott, so this is Andrew. On the services versus product for the quarter, services was strong. And really, the margins were good across all regions and had improved sequentially across all regions. And so part of it is just a mix of the products that we had -- or sorry, the projects we had in the quarter for being higher as a portion of overall revenue. But I'd note there, particularly that margins improved on our services really across all regions. Scott Searle: Got you. And then, Andrew, looking forward into the September quarter, how does that correct? And maybe to follow up on Tim's question earlier, it sounds like there's a lot of good in what you're seeing. It sounds like the demand environment seems pretty healthy. Private networks seem like they're starting to build both from a government federal standpoint, local standpoint as well as private as well. And it seems like the carrier environment is even recovering at least from a Tier 1 North American standpoint. So is it conservatism that you're just looking at the fiscal '26 outlook? Or is there something specifically going on from the services and more project-based revenues that just is for -- translate to some more immediate caution in the September and December quarters. Peter Smith: So Scott. Our business is "lumpy" or episodic or project based. And we see the build quarter-over-quarter. We see Q1 to be at the low point in the quarter. Q2 and Q3 are likely to be even with each other in Q4 should be the highest. So I mean it could be Q1 low, Q2 high, Q3 a little bit back and Q4, the highest again, which is our emerging pattern as we have -- as our portfolio we lap year-over-year, we're getting more used to operating core -- well let's go back in time, core Aviat, the Pasolink portfolio and the 4RF Aprisa. So that's why understanding the revenue cycles for each of those customer bases has been a bit of a challenge with respect to the seasonality or calendarization. And this is what we're feeling comfortable with given our history with the whole portfolio. Scott Searle: Congrats on the quarter. Operator: [Operator Instructions] As I see no further questions in the queue, I will conclude the Q&A session and pass it back to Mr. Smith for concluding comments. Peter Smith: Okay. Thanks, everyone for jumping on the call on short notice. We look forward to updating you after our September quarter gets done, and we get ready to publish our next set of results again. Thanks, everyone. Operator: And with that, we thank you for participating in today's conference, and you may now disconnect.
Operator: Thank you for standing by, and welcome to the Haivision Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Mirko Wicha, President and CEO. You may begin. Miroslav Wicha: Thank you, Rob, and thank you, everyone, on the call for joining us today to discuss the third quarter of our fiscal year 2025, which ended back in July 31. As mentioned on our earnings call, way back in January, we are now well into our 2-year strategic plan. And now we are demonstrating the company is delivering the double-digit revenue growth, we have been discussing in the past several calls. Our double-digit revenue growth will also help us return Haivision to our historical CAGR growth rate of approximately 20% per year, since the founding of Haivision. The focus this year and the next is all about building high revenue growth. As mentioned, 9 months ago, we have seen the bottom of the revenue curve back in January. Our key fundamental business model for the controller market, which is the move away from being an integrator to manufacturer, has been complete for a couple of quarters now. We are seeing a solid increase in our long-term sales pipeline. Our business forecast is compelling, and we are seeing strong orders and a revenue increase in this market, not just in the U.S. but worldwide. In fact, our poor product revenue in this market has now surpassed our revenue levels, which included all the third-party products such as the screens, which make up most of the deal revenues. As you are aware, we have been investing in many new product development initiatives and introductions throughout this year and some which are yet to come during our fiscal 2026. Now back in May, we also launched an exciting next-generation AI-based hardware tactical edge processor for the defense and ISR markets called the Kraken X1, the KX1 for short. It was extremely well received as it delivers incredible performance of AI-enabled and coding in real time. The KX1 is a ruggedized and AI-capable video processing appliance engineered for demanding ISR deployments, combining real-time encoding, transcoding, metadata processing and NVIDIA powered AI capabilities in a fanless and compact design. Now we expect the KX1 to be available and shipping in volume by the end of this quarter, and should create lots of excitement within the ISR community during fiscal '26 and beyond. We have also successfully showcased our next-generation transmitter platform called the Falkon X2, at the NAB Show back in April. And we are demonstrating it all this week at IBC show in Amsterdam. The Falkon X2 is also planned to be shipping in volume by the end of this quarter. Now the Falkon technology and platform is the beginning of our transition for our entire line of transmitters to advanced 5G private networking capabilities. We have incorporated some revolutionary technologies and create a lower cost structure, which will result in a better price performance and highly competitive product offerings for the future. This is another initiative that will help maintain our healthy margin profile over the long-term. Haivision has also won the prestigious IBC Innovation Award, the past 2 consecutive years, thanks to our strategic role for live 5G video at the Paris Summer Games last year, and we are poised this week to potentially win for a third straight year, which would be a rare feat as we are nominated and featured in the IBC Accelerator program to showcase what's named Conquering the Air Waves private 5G from land to sea to sky. Now this is really a first of its kind workflow, which was proposed by OBS, which is the Olympic Broadcasting Services, [indiscernible] with Neutral Wireless and of course, Haivision. This project looks to take private 5G to the skies, unlocking new creative possibilities by harnessing dynamic mobile connectivity for broadcasters to bring audiences closer to the action, while also enhancing athlete safety and event coverage. Now strategically, the company is landing landmark defense contracts installing large multinational operational controlling deployments, demonstrating clear leadership in private 5G networking and gaining industry recognition for our technology leadership. All these efforts are already bearing fruit as seen from our Q3 results and will continue throughout our fiscal 2026 and beyond. Now in closing, I would like to finish with a time glimpse into our fiscal 2026 direction, which happens to begin in about 6 weeks. Now our plan is to maintain a flat OpEx over 2025, while delivering double-digit revenue growth. This will obviously result in a healthy increase to our overall EBITDA as our cost structure and gross margins are well in control. Now double-digit EBITDA and double-digit revenue growth is what we expect for 2026 and 2027 and 2028 and 2029. This is what we have been working hard towards the past 18 to 24 months. In summary, I couldn't be happier with our Q3 double-digit revenue performance as we reiterate our continued focus and attention on revenue growth and higher profitability. Dan, please continue with the detailed financials. Dan Rabinowitz: Thank you, Mirko. Good morning, everyone, and thank you for joining us today. On our last call, I described the quarter as the end of the transition and the start of momentum. This quarter, we're beginning to see that momentum show up in the numbers. While there still work ahead, our third quarter demonstrates profitable growth and a stronger foundation for the future. Let's begin at the top line. Q3 fiscal 2025 revenue was $35 million, that's up 14.3% or $4.4 million over last year. Year-to-date, revenue was $97.5 million. That's still 1.9% behind last year, but we've made up a lot of ground since the weak first quarter. Both Q2 and Q3 exceeded prior year levels, closing the gap. Exchange rates, which helped us last quarter normalized this quarter. So unlike Q2, where FX tailwinds gave us a top line lift, Q3 performance came from the business itself. Importantly, revenue from our control room solutions, excluding third-party components has now surpassed last year's levels with those components. For the 9 months just ended, third-party component sales are down to 1/3 of last year's level, and we expect it to remain at that low level going forward. Our recurring revenue from maintenance, support contracts and cloud services continues to be a bright spot. This quarter, recurring revenue was $7.3 million, that's up 12% year-over-year. And year-to-date, it's at $21.5 million, an increase of 12.4%. Recurring revenue now represents 20.9% of Q3 revenue and 22.1% of year-to-date revenue. We continue to expect to see sound year-over-year growth in recurring revenue, as our total revenues continue to build. This is healthy, sustainable growth and because these contracts tend to be sticky, that give us visibility and stability looking ahead. Gross margins in Q3 were 72%. That's 300 basis points lower than last year. The biggest factor was the timing of deliveries under our U.S. Navy contract. On a year-to-date basis, margins are 72.3% essentially in line with our long-term average and only slightly below last year's 73.1%. As we've mentioned in prior calls, some quarter-to-quarter fluctuation is expected based on the timing of Navy deliveries, the seasonality and the mix of products shipped and software-only or virtual machine deployments, which have higher-than-average gross margins. Total expenses this quarter were $24.9 million. That is up $3.1 million from last year. The main drivers were about $900,000 in sales compensation and trade show activity, reflecting stronger selling efforts, roughly $800,000 in additional R&D investments consistent with our plan to add engineering resources for new products and business opportunities. About $500,000 is related to currency impacts from the weaker Canadian dollar and another $500,000 from noncash share-based payments, which can vary based on the nature and the timing of those grants. Adjusting for foreign exchange volatility, operating expenses have leveled off. While trade shows can shift the timing quarter-to-quarter, the underlying expense base is relatively fixed. Looking ahead, fiscal 2026 third quarter brings a significant milestone, the 4-year Anniversary of the CineMassive acquisition, which we now refer to as Haivision MCS. At that point, the technology purchase as part of the acquisition will be fully amortized, reducing amortization expenses by at least $600,000 per quarter or more than half of our quarterly amortization. For the 9 months, expenses totaled $75.6 million. That is up by $8.1 million from last year, but the increase reflects a number of factors. $1.9 million from currency impacts, although FX has stabilized, we've launched hedging programs on euro-denominated assets and liabilities to reduce the Canadian dollar exposure to such fluctuations. And this is going to be in addition to our hedging program for U.S. denominated assets and liabilities as well. $1.7 million of the increase is related to the nonrecurring litigation expenses related to the Vitec case. Although Vitec has appealed the judge's ruling, we have recorded the full liability, including damages, interest fees and trial costs. As a reminder, the award represented just 0.5% of Vitec's claim, a clear victory for Haivision. $1.7 million in incremental sales and marketing, again, primarily related to commissions, but it also included travel expenses and an increasing marketing calendar. And then $1.5 million in operations and support, we had built up our operations and support investments late in fiscal 2025, which continued through fiscal 2025. And then finally, or I should say, in addition, $1.4 million were those planned R&D investments that we conveyed earlier this year in support of new product introductions. And then lastly, $800,000 from non-share -- noncash share-based payments. The higher revenue in Q3 contributed to an incremental $2.2 million of gross profit, but with expenses up $3.1 million, operating income came in at $300,000 trailing last year by about $800,000. Year-to-date, the modest revenue shortfall reduced gross profit by $2.2 million, about 1/3 of which relates to year-over-year margin differences. Expenses had risen by $8.1 million for the reasons I outlined earlier, the result is an operating loss of $5.1 million compared to operating income last year. That's a swing of $10.3 million. We believe, though, adjusted EBITDA gives a clearer view by stripping out noncash and nonrecurring items like depreciation, amortization and share-based payments. So for Q3, adjusted EBITDA was $3.5 million compared to $4.1 million last year. The adjusted EBITDA margin was 10.1%. On a year-to-date basis, adjusted EBITDA was $5.8 million compared to $14.4 million last year. Now much of that decline in year-over-year adjusted EBITDA is tied to our first quarter. Revenue in our first quarter trailed the prior year by $6.4 million, resulting in gross profit trailing prior year by $4.9 million. The result of the revenue shortfall was that adjusted EBITDA in just that first quarter of fiscal 2025 was only $400,000, down $4.8 million from the prior year. That single quarter accounts for more than half the year-to-date gap. I think third quarter performance now demonstrates that we are back on track. We ended Q3 with $10.9 million in cash, that's down $900,000 from last quarter. Key drivers to the decline were a $2 million reduction in payables, a $1 million increase in trade and other receivables, $1.6 million that we spent repurchasing shares, $600,000 in loan and lease repayments and $300,000 in capital expenditures. These were partially offset by the $3.5 million of adjusted EBITDA and a modest $600,000 increase in our line of credit balance. So far, in fiscal 2025, we purchased about 885,000 shares for cancellation for an investment of $4 million. Over the last 2 NCIB programs, we purchased about 1.7 million shares for cancellation at a total cost of $7.6 million. Our credit facility remains strong at $35 million, with only $8 million drawn today and room to expand if strategic opportunities arise. Total assets at quarter end were $139.1 million, a modest decrease of $2.2 million from the end of fiscal year 2024. The decrease in total assets is largely related to the $5.6 million decline in cash, the $3.2 million decline in tangible assets, largely the result of ongoing amortization expense. And these declines were offset by increases in our income taxes and receivable and other receivables totaling $6.2 million. Total liabilities at quarter end were $47 million, that is an increase of $2.5 million from the end of fiscal 2024. The increase in liabilities is largely the result of the $5.7 million increase in the amount outstanding on the line of credit, but was offset by decreases in deferred revenue, lease liabilities and term loans and decreases in other payables. I suppose, at this point, no earnings call is complete these days without a few words about tariffs. So as a reminder, as a Canadian company, our proprietary products are covered by the USMCA trade agreement. So currently, there are no tariffs on products manufactured in Canada when sold into the U.S. Our transmitters, on the other hand, are still manufactured in France and as of August 29, are subject to a 15% U.S. tariff. For now, the impact is limited since transmitter sales into the U.S. are still an early initiative. And we're actively planning ways to mitigate the impact of these 15% tariffs with upcoming transmitter product launches. So for the time being, we intend to stay the course. So to summarize, in Q3, we delivered double-digit revenue growth, solid recurring revenue expansion and stabilized operating expenses. With that momentum, we've returned to double-digit adjusted EBITDA margins. And as growth continues, we're confident in reaching our long-term goal of 20% adjusted EBITDA. Although still in the planning stages for fiscal 2026, we expect overall revenues to approach volumes that will clearly illustrate the operational efficiencies we've discussed on earlier earnings calls. With that, I'll turn it back to Mirko for Q&A, and thank you again for joining us on today's call. Miroslav Wicha: Thank you, Dan. Rob, let's open up for questions. Operator: [Operator Instructions] Your first question today comes from the line of Robert Young from Canaccord Genuity. Robert Young: I thought I'd maybe lead off the question with a question just around guidance for the full year, if that's something that you're -- if I missed it, sorry, but I was hoping that you could update that. Or if not, is that expectation of double-digit growth, double digits EBITDA? Is that something we should be thinking about for this year or next year? Maybe you can put some time line around that, some consistency expectations quarterly, that would be very helpful for modeling. Dan Rabinowitz: Well, I think we are looking for double-digit revenue growth for 2026 and beyond. I think we're going to be knocking on that magical $150 million number that will actually be able to demonstrate that we can get to that EBITDA margin of 20%, although I just want to caution everyone when we threw out that $150 million number as where our belief would be to be able to recognize that 20%. That was a number of years ago. And that number may have gone up a little bit because of inflation and increased costs overall. But I think that is where we're looking at 2026 at the moment. We'll continue to be growing the EBITDA margin. We'll continue to be growing revenue at double digits, and that should set us up for a very buoyant 2027 and beyond. Robert Young: Okay. That's very helpful. Second question would just be around the -- if you could give us a little bit of insight into the growing commitments with NATO and where those would map to opportunities in your business? I know there's a number of products, a number of projects and programs that you have running with U.S. government in different ways that might be used by other NATO partners. And so I was hoping you could just maybe widen that out and give maybe a broader explanation of the opportunity there? Miroslav Wicha: Well, I can probably try to tackle that. I mean I think right now, what we're seeing is definitely an increase in activity within our international group, which includes obviously NATO and The Five Eyes. I think it's still a little bit too early to give any kind of indication, but we're seeing a very good strength in the U.S. as well as all throughout NATO. So it's all positive. We're also, by the way, seeing an increase in activity in just pure security, not just defense related, which is encouraging. So as defense ISR are proving to be strong, we're also seeing it in the cybersecurity, the banking industry, the utilities industry. So within our enterprise sector, where we have a huge customer base for control rooms, that's really picking up steam as well. So we're seeing it in all fronts. Robert Young: Is there a way to segment maybe give a rough idea of how much revenue today is driven by those end markets? Miroslav Wicha: Dan, I think that's some dissection, but we don't really go that deep. From a mission perspective, overall, we're roughly about 2/3 of our revenue, right, and 1/3 is our live sports and broadcast. Dan, do you have any other color you can add that? Dan Rabinowitz: Yes. I think it's -- I think it's a little bit difficult because we're seeing growth in both areas. And so we're not seeing that one area is outgrowing the other in any significant fashion. But I do think that we've been seeing the size of our pipeline growing. Those are the number of opportunities that are in front of us growing and the number of larger opportunities are also growing. So those are our signposts for future backlog and perhaps future sales, I should say, backlog that will eventually result in future sales. Miroslav Wicha: Yes. I mean the challenge, Robert, we have is that also the challenges, I would just add that within the mission market or the controller market, it's a much longer lead sales cycle, right? So that's very different from all of our other businesses. So it's kind of hard to -- at the moment to gauge exact revenue impact. What we're seeing is we're seeing a nice increase in the pipeline/forecast/bookings, but it translates into revenue a little bit longer than something like in our broadcast sports market, right, or our traditional encoder market. Robert Young: Okay. That's all very helpful. And then maybe last question for me would just be around the gross margins. I know there was the slight decline. You gave a bunch of drivers, Dan. Like there's one specific thing or maybe like are there a couple of things that might have driven that decline just to be more precise there? And then I'll pass the line. Dan Rabinowitz: Well, I would say that the timing of the Navy deal was -- had the largest impact on gross margins year-over-year. Sales or deliveries are tend to be a little bit bulky. And depending on which quarter they hit, they can have a big impact or a smaller impact on the business. I think when we were giving guidance before, we believed that most of the deliveries would take place in the fourth quarter. We had significant deliveries in the third quarter that brought down the third quarter margin earlier than what we had expected. So our fourth quarter expectation is that our margins will be a little bit better than what we had anticipated internally, but it doesn't change our overall view that the Navy transaction would impact margins by about 60 basis points for the year. Robert Young: Great to see the return to growth. Operator: [Operator Instructions] Your next question comes from the line of Jesse Pytlak from Cormark Securities. Jesse Pytlak: Just a single question for me. Just hoping to maybe get an update on how the training program is going with your international channel partners with respect to the MCS business? Miroslav Wicha: Good question. We've actually had several training sessions already in Atlanta, we actually built a professional training center in our facility. And we've been holding nonstop training classes now for the last several months. So it's ongoing. We're getting a lot of people through it. We did try to prioritize the U.S.-based partners in the beginning, but even though they do have reach into international, and we are now starting to see some of the international partners flow through. So it's progressing very, very well. I expect it's going to continue to be booked solid right through for at least the next 6 months because we're already backlogged on the training that's already being requested. So all in all is doing good with our new release 4.4 that we launched. That's what it's all -- the training is all based on. So we're very encouraged. Operator: And there are no further questions at this time. I will now turn the call back over to Mirko for some final closing remarks. Miroslav Wicha: Perfect. Well, thank you very much. That was like the least amount of questions I think we've ever had. Dan Rabinowitz: We gave them all the answers... Miroslav Wicha: I guess in close -- I guess, so I'd just like to say in closing, again, we're committed, right, to maximizing long-term value for all of our shareholders. And we're confident in our ability to execute on our strategic revenue growth plan and deliver solid growth for the future as promised. And I just want to thank all of our shareholders and analysts on the line today for their continued support of Haivision and look forward to speaking with all of you in around mid-January when we will discuss our Q4 performance as well as our entire 2025 year-end results. So thank you very much, and speak to you in January. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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: Good afternoon, ladies and gentlemen, and welcome to the First Quarter Evertz Conference Call. [Operator Instructions] This call is being recorded on Wednesday, September 10, 2025. I would now like to turn the conference over to Mr. Brian Campbell, Executive Vice President of Business Development. Please go ahead, Mr. Campbell. Brian Campbell: Thank you, Constantine. Good afternoon, everyone, and welcome to Evertz Technologies conference call for our fiscal 2026 first quarter ended July 31, 2025, with Doug Moore, Evertz' Chief Financial Officer; and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on SEDAR and on the company's investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz results. I'll begin by providing a few highlights, and then Doug will provide additional detail. First off, sales for the first quarter totaled $112.1 million, including $51.6 million in software and services revenue, representing 46% of total revenue. Our sales base is well diversified with the top 10 customers accounting for approximately 50% of sales during the quarter with no one customer accounting for more than 9% of sales. In fact, we had 114 customer orders of over $200,000. Gross margin in the quarter was $68.8 million or 61.4% up from 59.4% in the prior year. Net earnings were $11.9 million, up 22% from the prior year, while fully diluted earnings per share were $0.15 for the quarter. Investment in research and development totaled $37 million in the quarter. Evertz' working capital was $202.6 million, including cash of $124.3 million as at July 31, 2025. At the end of August, Evertz' purchase order backlog was more than $252 million and shipments during the month of August were $41 million. We attribute the strong financial performance and robust combined shipments and purchase order backlog to channel and video service proliferation, increasing global demand for high-quality video anywhere, anytime, the ongoing technical transition to IP, IT and cloud-based architectures in the industry and specifically to the growing adoption of Evertz' IP-based software-defined video networking solutions, Evertz IT and cloud solutions, our immersive 4K, 8K ultra-high definition solutions and Evertz' state-of-the-art DreamCatcher IP replay and live production suite with BRAVO Studio featuring the iconic Studer audio. Today, Evertz' Board of Directors declared a regular quarterly dividend of $0.20 per share payable on or about September 25. I'll now hand over to Doug Moore, Evertz' Chief Financial Officer, to cover our results in greater detail. Doug Moore: All right. Thank you, Brian. Starting with revenue. After a slow start in May of 2025, sales were $112.1 million in the first quarter of fiscal 2026, a slight increase compared to $111.6 million in the first quarter of fiscal 2025. Hardware revenue increased quarter-over-quarter from $55.7 million to $60.5 million, while software services revenue decreased from $55.9 million to $51.6 million in the current quarter. Revenue from the Software Services segment there represented approximately 46% of the total revenue in the quarter. Looking at regional revenue. Quarterly revenues in the U.S./Canadian region were $79.5 million compared to $73.9 million in the prior year, while quarterly revenues in the international region were $32.7 million compared to $37.7 million in the prior year. The International segment represented 29% of total sales in the quarter as compared to 34% last -- the same period last year. Gross margin for the quarter was 61.4% as compared to 59.4% in the prior year and slightly above our target range. While the gross margin was above our target range for the second quarter in a row, that's largely being driven by product mix, including a relatively high proportion of higher-margin software service revenue in the quarter. Turning to selling and admin expenses. S&A was $18.6 million in the first quarter, an increase of $1 million from the same period last year. And selling and admin expenses as a percentage of revenue were approximately 16.6% as compared to 15.8% for the same period last year. Sequentially, S&A is down approximately $2 million from Q4. That's largely driven by the non-reoccurrence of NAV, which we attended in April of this year. R&D expenses were $37 million for the first quarter. That represents a $0.3 million decrease over the same period last year. As a percentage of revenue, R&D expenses were 33% compared to 33.5% in the prior year. The higher percentage is largely being driven by softer revenue in Q1 this year and last. Investment tax credits for the quarter were $3.3 million. Foreign exchange for the first quarter was a gain of $0.7 million as compared to a foreign exchange gain of less than $1 million in the first quarter last year. U.S. dollar closed at approximately $1.38 on July 31, not significantly different from its closing rate as at April 30. Turning to a discussion of liquidity of the company. Cash as at July 31 was $124.3 million, increasing compared to cash of $111.7 million as at April 30. Working capital was $202.6 million as at July 31 compared to $206.9 million at the end of April 30. The company generated cash from operations of $33.5 million. That includes $18 million change in noncash working capital and current taxes. The effects in the change in noncash working capital and current taxes were excluded from the calculation, the company would have generated $15.5 million in cash from operations during the quarter. The company used $0.5 million for investing activities, which was principally driven by the acquisition of capital assets of $1.4 million and partially offset by proceeds of disposals of $900,000. The company used cash and financing activities of $20.2 million, which was principally driven by dividends paid of $15.1 million and the repurchase of capital stock under our NCIB plan of $3.8 million, which translated to approximately 317,000 shares purchased and canceled in the quarter. Finally, looking at our share capital position as of July 31. Shares outstanding were approximately 75.5 million and options and share-based RSUs outstanding were approximately 2.1 million at the end of the quarter. During the quarter, approximately 2.7 million options expired. Weighted average shares outstanding were 75.5 million and weighted average fully diluted shares were 76.6 million for the year -- or the period ended July 31, 2025. That concludes the review of our financial results and position for the first quarter. Finally, I would like to remind you that some of the statements presented today are forward-looking, subject to a number of risks and uncertainties, and we refer you to the risk factors described in our annual information form and the official reports filed with the Canadian Securities Commission. Brian, back to yourself. Brian Campbell: Thank you, Doug. Constantine, we're now ready to open the call to questions. Operator: [Operator Instructions] Your first question is from the line of Robert Young from Canaccord Genuity. Robert Young: First place I'd like to start is the gross margins, strong. Can you remind us what your target is and whether there's any intent to adjust that? And then I think you said that software was down in the mix year-over-year in the quarter, but you also said that the gross margins were driven by high-margin software. So if you could just maybe provide a little more color around, you may bridge between those 2 things so I can understand what's going on there. Doug Moore: So first of all, note that there's a lot of volatility in our margin. It's driven by product mix. So we haven't -- we're not changing our target at this point. It's 56% to 60%. We have had 2 quarters now that have exceeded that. But of course, just 3 quarters ago, we were at 57% before we adjust our target range, we had a greater track record of variance there. Yes so the comments on the -- driven by the software and service revenue. So first of all, that includes software and services. And year-over-year, you're correct, it's down the software and services year-over-year, even as a proportion. But as a proportion over the past 3 quarters, it's increased. So our software revenue is generally higher margin than, of course, services or hardware. And being at 46% is part of the reason why that product mix pushed it up. So even Q1 last year was high 59s, so with a high proportion. But it's not a direct mathematical calculation, but there's certainly a correlation between higher proportion of software and services and margin. Robert Young: Is there anything worth calling out like product-wise, what is the -- like what is the product that is driving the high margin? Like a category you'd highlight? Doug Moore: No. I mean there's a significant portfolio of products that are within software and services, right? So I will remind that there's 2 different types of software and services recognized that's some over time. So whether it's SLAs, warranties, and then there's other components that are -- could be a software site acceptance that triggers a release of revenue. So it is -- fortunately, it's a fair mix of products that go into that category. Robert Young: Okay. So what could have happened here is like a milestone in software revenue recognition at high margin or something like that? Is that good... Doug Moore: That happens every quarter projects that get released in that manner. Robert Young: Okay. And then the other notable thing that jumped out to me was the cash balance, quite high. Maybe I know that you always say that it's a decision driven by the Board, but I was hoping you can give us some insight into the thought process, how you would go about deploying that capital, whether it's M&A or dividend. If you can give us a sense of the thought process, that would be helpful. Brian Campbell: So Rob, the thought process is quite consistent. We have distributed via regular quarterly dividends, which have been increasing in each of the last 5 years. Now cash has been building up to a very significant level. We are -- we do continue to look at acquisition opportunities. But again, the acquisitions have to align with our growth and long-term strategic plan such that they provide very good shareholder value over the long haul. And those -- that thought process is what the Board considers each quarter. Doug Moore: I will also highlight that Q2 often has a large negative cash flow swing in working capital. Last year in Q2, we used cash from -- and working capital of $30 million, including $20 million payables. That's coinciding with looking ahead to past Q2s are forward and behind. That's often we pay our incentive plans out in Q2, which is cash. Looking ahead, we're also looking at acquiring a building that we are currently leasing for CAD 2.5 million to CAD 3 million. So there is some significant today, the cash balance, but we do expect the cash to decrease over the next quarter. Brian Campbell: And not a normal course issuer bid is in effect. Robert Young: Okay. And then the last question before I hand it off to someone else. Just a high-level product question, 2 part. You're just fresh at IBC. But maybe you could give us a sense of what the areas of interest in the Evertz product lineup are? And the second part would be just everyone is looking at the Oracle results this morning and there's enormous amount of infrastructure build in the data center. And I thought maybe there's an opportunity for you to talk about potential applications for your IP switching product given the deterministic nature and if there's an application inside of that data center build or something that you're looking at, and then I'll pass the line. Brian Campbell: So Rob, IBC does begin on Friday. So yes, we are looking forward very much to seeing our customers over the weekends and resuming the relationships. So we're very excited by the lineup of products that we're releasing and reinforcing our long-term commitment to investment in R&D and innovation. Of course, the IP-based and cloud-based solutions are a very integral part of our product portfolio and a big driver. So we are excited by those opportunities and not just in the data center, but in customer facilities as well to on-premise and in the cloud. Operator: The next question is from the line of Thanos Moschopoulos from BMO Capital Markets. Thanos Moschopoulos: Just with respect to M&A opportunities, we've heard the comments from some other companies that there's kind of more stuff available as of late. PE has been kind of looking to monetize assets and so forth. Are you seeing more M&A opportunities in the past or anything you see on that front? Brian Campbell: Thanos, you were breaking up. I didn't hear all of your question, but I believe you asked, are we seeing more opportunities than in the past? Thanos Moschopoulos: Yes. Brian Campbell: I would say it's a fairly consistent level of acquisition opportunity. So there are targets available. And as I said, we do investigate and analyze those opportunities, but we're very selective in terms of ensuring that we've got alignment with Evertz' portfolio of products and our growth areas that we're looking at, whether it's in our core markets or adjacent markets. And so that is an ongoing process. Thanos Moschopoulos: Okay. Can you update us on your U.S. expansion, how that's proceeding and whether we should be mindful of any cost or margin implications as that continues to ramp up in the near term? Doug Moore: So I can give you an update for sure. So our location in India, Pennsylvania, just outside Pittsburgh, we're continuing to ramp up capacity there. It's not fully operational in the sense that we can't manufacture everything there at this point, but we're continuing to ramp that up. To date, we've -- in that part of that expansion, we've incurred about a little over $2 million in costs that we've already incurred. And then we do -- that's a building we currently lease that we will be planning on purchasing and hopefully closing this quarter, which will cost an extra $2.5 million to $3 million. I'm sorry, I don't know if there was a second part of that question, but... Thanos Moschopoulos: Yes, just whether we should still got any margin implications as you continue to ramp up production there and that becomes maybe a larger part of the relative mix? Doug Moore: There will be certainly some additional -- as there already is, some additional costs incurred by having some, say, redundant staff, you would say, having people here and there doing similar things. But at this point, it's not overly material. So it's not -- I'm not able to specifically quantify a significant impact. I don't expect a significant impact at this time. Thanos Moschopoulos: And any update you can provide in terms of what you're seeing from customers outside of broadcast and media, so be it in AV or in other parts of other end markets? Brian Campbell: So we continue to have good traction and success in the adjacent markets, specifically our Evertz AV. However, the press releases are somewhat sparse from that customer set. Oftentimes, government and military installations do not provide those press releases. So that is very much a focus of part of our business and a successful part. However, I can't provide you additional color. Thanos Moschopoulos: On a relative basis, can you comment on whether that's growing any faster or slower than the broadcast media market? Brian Campbell: It has greater potential for us as it's a newer market. Operator: Thank you very much. There are no further questions at this time. I'd like to turn the call back over to Mr. Brian Campbell for closing comments. Brian Campbell: I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during Q1 of fiscal 2026, which saw sales of $112 million, including $51.6 million in software and services revenue. Strong gross margins of 61.4% for the year, up from 59.4% in the prior year, along with continued investments in R&D totaling $37 million in the year. We closed the first quarter of fiscal 2026 with significant momentum fueled by combined purchase order backlog plus August shipments totaling in excess of $293 million, by the growing adoption and successful large-scale deployments of Evertz' IP-based software-defined video networking and cloud solutions by some of the largest broadcast, new media service provider and enterprises in the industry and by the continuing success of DreamCatcher BRAVO, our state-of-the-art IP-based replay and production suite. With Evertz' significant investments in software-defined IP, IT and cloud technologies, the over 600 industry-leading IP SDN deployments and the capabilities of our staff, Evertz is poised to build upon our leadership position in the broadcast and media technology sector, providing high reliability reliable, innovative solutions to customers and delivering to shareholders. Thank you. We look forward to having many of you join us on Wednesday, the 1st of October at our Annual General Meeting. Good night. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Matthew Oppenheimer: Good afternoon. I'm Matt Oppenheimer, Co-Founder and CEO of Remitly. Thank you for joining us today in New York and around the world at our first-ever product launch event, Remitly Reimagine. Archbishop Desmond Tutu, one of my personal heroes, once said, "My humanity is bound up in yours for we can only be human together." That belief is as true in global migration as it is anywhere. Miles may separate us, but our humanity binds us together. For as long as humans have moved, they have carried more than just themselves across borders. They've also carried their families' futures and their obligations to those back home. From the earliest migrations built on the hope of prosperity to modern journeys for work, opportunity and freedom. People have crossed oceans and continents to build new lives. And with every step, our customers live that truth every day. They leave behind what is familiar, not only to build a better life for themselves, but to support the people they love. In this world of division and angst, it's easy to think we are so different. But what I found running Remitly is that our core drivers are identical, providing for our families, creating success during our limited time on earth and having pride in making your corner of the world better, even for our customers if it means leaving it. Their duty, their courageousness, their generosity remind us that sending money isn't just a transaction. It's an expression of connection, of responsibility, of humanity. That is why Remitly exists. To transform lives with trusted financial services that transcend borders. For the last 14 years, our customers have trusted us with one of the most important financial responsibilities, sending money across borders. We make global transfers fast, affordable and convenient so they can support loved ones and participate in the opportunities of a connected world. That trust has fueled us. We have built one of the best global payout networks in the world, connecting billions of bank accounts and mobile wallets, hundreds of thousands of cash pickup locations in more than 170 countries, all supported by world-class regulatory expertise and compliance. And most importantly, a trust of over 8.5 million customers earned one transaction at a time. Here's one story. Earlier this week, I had the privilege to talk with Guadalupe, a Remitly customer who moved to the U.S. from El Salvador a few years ago. Since then, she sent money back home to support her kids twice a week. For Guadalupe, Remitly isn't just an app. It's how she pays for her kids' food. It's how she keeps them in school. It's how she ensures their futures. In her own words, my children are my savings and investments. Guadalupe's story is one I've heard from many of our customers. Around the world, our customers already look to Remitly to move money quickly in urgent moments to manage their finances across borders and to grow towards long-term goals for their families. It is a powerful reminder of our vision, but it also challenges us to do even more. On that note, we stand at the precipice of one of the most pivotal moments in financial history. The era of instant payments, digital wallets and stablecoins make it possible to radically deliver on our vision, a world where anyone can access the money they need anywhere they are. And now 2 innovative technologies are accelerating this future, AI and stablecoins. Let's start with AI. I believe AI is one of the most transformational technologies in history, and we are already using it to solve real-world customer problems at scale. Last year, we launched our first proprietary AI assistant. It now handles millions of customer questions, freeing up our support team to focus on the toughest issues. This spring, we brought that assistant to WhatsApp, the most popular messaging app in the world. Customers can check exchange rates, ask questions, even initiate transfers in the same app where they talk to their loved ones. Sending money just became as easy as a conversation. But this is just the tip of the iceberg. In an AI-powered world, the most valuable resource isn't models or computers. It's data tokens. Not crypto tokens or payment instruments, but the small pieces of structured information that AI models can read, learn from and act on. I believe many tokens that train AI models like publicly available information on the Internet will become commoditized. Companies with proprietary tokens will have a significant competitive advantage. At Remitly, every token we generate is based on data protected by the same rigorous safeguards that we apply across all of our services. Three types of tokens are especially powerful. First, transactions, which are billions of secure signals from payments across 170 countries that help us understand and predict flows. Second, identity or how customers prove who they are, which lets us increase speed and trust while reducing fraud. And third, usage patterns around the world, when and where money is moved, which helps us improve security and anticipate customers' needs. These tokens enable us to enhance our AI tools and deliver smarter, more secure customer experiences. We can make creditworthiness assessments more accurate and expand access to credit. We can speed up transaction times while reducing friction. We can create support experiences that feel familiar and personalized. And we can keep finding and solving problems for our customers at scale. The knowledge we've gained from 14 years of delivering for our customers is the foundation that makes this possible. Tokens plus trust, that's our edge in the AI era. At the same time, stablecoins unlock the ability to hold and move value 24/7, 365 days a year in something stable like the U.S. dollar. This solves a real need in emerging markets where local currencies can lose value overnight. With one of the most capable global payout networks in the world, we can do what others can't, turn stablecoin savings into everyday value. Where other stop of the blockchain, Remitly can deliver school fees in Turkish lira, rent in Argentine pesos or protected savings in Zimbabwean dollars. Given the strong foundation we've built and the tremendous opportunity ahead of us to enhance our global platform with AI and stablecoins, we have raised our sights and inspired our teams to do the same. To evolve Remitly from a cross-border payments provider to a trusted financial partner, our customers can rely on every day, a partner that helps them move, manage and grow their money with the same peace of mind they already expect from Remitly, further expanding their ability to share in global opportunity. At the heart of all of this is trust. In consumer financial services, trust is not optional. It is everything. It's earned transaction-by-transaction, relationship-by-relationship. And today, we are beginning the next chapter with the launch of Remitly One, a financial membership built for global life. Remitly One is built on the strength of our global platform, accelerated by AI that powers everything from fraud protection to customer support to personalized experiences and strengthened by stablecoins, which make value more stable and accessible across borders. Remitly One launches in the U.S. today, laying the foundation for the next decade of Remitly innovation. Just as we began with one remittance corridor when we founded Remitly, U.S. to the Philippines and grew into a global network spanning over 170 countries. Today's launch is the first step towards bringing this membership to our customers worldwide. And to show you what this looks like in practice, the launch of Remitly One here in the United States and the road map for what comes next, I will hand it to Remitly's Chief Product and Technology Officer, Ankur Sinha. Ankur Sinha: Thank you, Matt, and thank you all for being here. For the last 14 years, our customers have trusted us to deliver on some of their most important financial responsibilities. That trust sets a high bar. It gives us both the permission and the responsibility to grow with our customers. We've proven we can deliver in the moments that matter most, but the dreams of our customers extend far beyond a single transaction. They want stability when life is uncertain. They want tools to manage their money across borders. And they want opportunities to grow wealth and secure their families' futures. Today, we honor them with something transformational. We are launching Remitly One, a trusted financial membership for global life. This all-in-one experience brings together a suite of Remitly products in the same app customers already trust and can now use to build a strong financial future. Remitly One launches today with a set of benefits and 3 core products designed to meet the financial needs our customers face every day. Flex, Wallet and Cards. To bring these products to life, you'll be introduced to Sophia, Annika and Matteo, whose stories are inspired by thousands of conversations our teams have with customers that shape what we built. They illustrate how Remitly One will help people move, manage and grow their money with the same peace of mind they've always expected from Remitly. The first product, Remitly Flex, is designed to help customers move and manage their money across borders in urgent moments. Moving to a new country often means starting from scratch without a credit history or a financial safety net. When cash is tight, even small emergencies can quickly turn into big ones. Flex was built to change that. Remitly Flex is our flexible funding solution that lets customers send now, pay later with a no interest cash advance up to $250 for free with funds available in 3 days. But Remitly One members unlock more value, instant access to funds, multiple withdrawals up to their approved limit and flexible repayment on their own schedule. To show you how Remitly Flex can add more breathing room to our customers' everyday financial lives, meet Sophia, a sales associate in San Diego. Sophia gets an urgent WhatsApp message from her father in Mexico. His car has broken down and needs help paying for repairs. Cash is tight until her next paycheck. In the Remitly app, Sophia sees the option to send now pay later with Flex. By becoming a Remitly One member, she gets instant access to a no interest cash advance. She sends her dad the money he needs immediately right inside the app, she already trusts. No transfer or wait time required. After sending her dad the money she needs, she turns on AutoPay, so she doesn't have to think about it again later. We began testing Flex with customers this year and early results are strong. Repayment rates are high. Most customers who try Flex come back. And when they do, they also send more with Remitly, deepening their relationship with us. That kind of engagement tells us that we're solving a real problem in a way that earns trust and deepens our relationship with customers. We will continue building on this foundation, exploring ways to use AI to strengthen risk management and underwriting as our offerings expand, always with customers at the center. The second product we're launching today is Remitly Wallet, built to help customers manage and grow their money. Wallet is our store of value product, offering a secure place to hold funds inside the app our customers already trust to send money. For many, it's the first time they've had a reliable store of value that works seamlessly across borders. Remitly Wallet is free to use. And with Remitly One, it delivers even more value with a 4% annual boost cash reward on USD balances, turning everyday savings into steady progress towards future goals. Later this month, we'll also start to roll out access to multicurrency accounts, including the ability to store funds in USDC stablecoins, offering more options to plan, save and stay in control. To show you how Remitly Wallet can help our customers' money go further, let me introduce you to Anika. Anika is a nurse who wants to contribute something special to her sister's wedding in India. She has used Remitly in Canada to send money to her grandparents in India. With 8 months until the wedding, she opens Remitly Wallet with a USD balance and joins Remitly One, earning a 4% annual boost on her balance. Because her wallet is connected to Remitly's global payout network, she's able to access her funds whenever she needs to. As we were building the Remitly Wallet, I spoke with Alberto and Diana, a couple whose lives are split between the U.S. and Mexico. They travel often to see each other, and they need a simple way to use their money in both countries. In Diana's own words, if I can pay by card, I prefer to use the card. Their experience showed us something important. Sending and saving money is not enough. Our customers also need everyday access to it. So we built it. This is the new Remitly card. We're starting to roll this out to Remitly One members in the U.S. starting today. They will be able to spend directly from their wallet anywhere with a debit card that has no foreign transaction fees. Just add it to Apple or Google Pay and tap a checkout. And while this may sound like a simple convenience to many of us using a card with value to spend easily, we know that for many of our customers who lead global lives, instant global access to funds can be a hard thing to come by. Imagine Matteo, for example. His permanent address is in the U.S., but he travels often and works from different countries. He wants to grow his savings, but he needs easy access to multiple currencies. So he keeps extra cash in his Remitly wallet, steadily growing with annual boost rewards. Now Matteo would be able to add his Remitly debit card to Apple Pay and tap at the checkout counter in Boston or Bogota, instantly using the money is already stored safely in his wallet with no FX surprises and no waiting. And every time he does, he will earn rewards. If Annika, the nurse we met earlier, wants to pay for lunch in Vancouver or a gift for family in Mumbai, she can tap thematically debit card and pay instantly. No transfers, no hidden fees. In addition to Flex, Wllet and Cards, another way we grow towards a stronger financial future is with rewards that turn everyday actions into steady progress. Members can earn cashback every month through simple things they're already doing to manage their finances, like adding funds to their wallet or setting up AutoPay for Flex. Annika and Sophia, 2 customers navigating very different realities are both earning a little extra money to use however they choose. Cashback is one of the first rewards we're offering members, but it won't be the last. We're already testing new rewards as well as third-party benefits like identity protection and credit monitoring. These benefits are powerful on their own, but together, they're the start of something much bigger as we establish deeper, more meaningful relationships, supporting our customers' ability to achieve their dreams. Here's what's next for Remitly One. For many of our customers, arriving in a new country means becoming credit invisible. In the U.S. alone, more than 30 million people have little or no credit history. They may be working hard to earn a living, but the lack of history can be a huge barrier to rent an apartment, finance a car or even qualify for jobs. We wanted to change that. Starting next spring, Remitly One members in the U.S. will be able to access a line of credit designed to help establish their credit history through simple activities by reporting everyday financial activities like sending money home to a U.S. credit bureau will help customers establish the recognized credit profile they need. Starting this month, Remitly One members will also be able to store value in USDC stablecoins in their wallet. And later this year, they'll be able to send it to compatible wallets. We've partnered with Circle and Bridge to harness the power of stablecoins for cross-border payments. Long term, this will enable us to move value instantly, reduce friction in liquidity and treasury and give customers the ability to hold their savings in something stable like the U.S. dollar. Remitly has spent 14 years building the compliance and regulatory frameworks, FX capabilities and local partnerships that make stablecoins practical for customers. Holding USDC in a wallet is only valuable if you can easily use those funds in your local economy. Remitly's robust global payout network spans billions of bank accounts and mobile wallets and hundreds and thousands of cash pickup locations worldwide. That last mile access is what turns stablecoin savings from an abstract idea into something people can rely on in their daily lives. With Remitly One, we're building on the trust our customers have placed in us, fulfilling that responsibility by giving them borrowing power in urgent moments, savings that grow steadily, everyday spending that works seamlessly across borders and rewards that add up over time. Remitly One launches at just under $10 per month and customers can join the waitlist today by going to remitly.com/one. Remitly One will enable us to deliver on our audacious vision to transform lives with trusted financial services that transcend borders by strengthening the most valuable part of our business. The relationship we have with our customers. By offering everyday tools to move, manage and grow their money with confidence, customers will engage more consistently and stay with us longer. Remitly One will become our highest value customer offer, bringing current and future services into a single holistic membership and driving deeper customer engagement and retention. With Remitly One, we've taken the first step in our evolution from a payments provider to a true financial partner, helping customers prosper, build better lives and share in the opportunities of global innovation. We'll meet customers in the moment they choose us to move money and stay with them from covering an emergency expense to planning for a child education, Remitly One will be there. This is how we move from transactional to transformational. This is Remitly One, a financial membership built for global life and a foundation for the next decade of Remitly innovation. Let's watch it come to life. [Presentation] Ankur Sinha: Thank you all for coming.
Gavin Ferrar: Good morning, and welcome to the Central Asia Metals Half 1 2025 Interim Financial Results. We'll start off on the results summary slide, where I'll just run you through some of the production and finance highlights. We can move to the next slide, please. Thank you. Next one. I'll start off with a summary of production and financial highlights. And you can see on the right-hand side of your slide there that we produced 6,218 tonnes of copper from our Kounrad operation in Kazakhstan, and from our Sasa lead zinc mine in Macedonia, produced 8,692 tonnes of zinc and 12,613 tonnes of lead. All this was done in a very safe fashion. We're very pleased that we achieved 0 lost time injuries for the first half. These operations drove a good financial performance. We generated revenue of $99.5 million, and EBITDA of $39.9 million for a margin of 40%. Importantly, today, we announced a dividend at 4.5p and supplemented by a $10 million share buyback program, which will commence today. That keeps our cash returns to shareholders consistent and comparable to the half 1 2024. We have a strong balance sheet and positive cash flow, $47.7 million in the bank, and that will be boosted by returns received related to the New World Resources transaction of both the break fee plus also the sale of shares in that company. Kounrad maintains its position on the cost curve and capital projects at Sasa effectively completed for the year. Now that gives you the backdrop to the financials that Louise is going to run you through right now. Louise Wrathall: Thanks, Gavin. If we go to, yes, market conditions slide, thank you. So yes, if we just spend a minute looking at the market conditions, which frame the results that we're announcing this morning. In terms of commodity markets, we saw a lot of volatility in middle of the period due mainly to the Trump trade wars. Taking everything into account for the full 6 months and comparing that with H1 2024, we saw a 3% increase on the average copper price we received, a 1% increase on the average zinc price and a 7% decrease on the lead price that we received. In terms of treatment charges, right now, it's a good time to be a miner rather than a smelter. And I think as we've mentioned before, our treatment charge contracts run from April to April. What we are seeing is a reduction in treatment charge for this year versus last year of around about 40%. And for the first half of this year, that translated into a reduction of treatment charges of around about $3 million. Looking at foreign exchange, some good news for us and bad news for us at Kazakh tenge that weakened by about 10% period-on-period, and that helps us when we come to report our costs in U.S. dollars. On the flip side, though, the Macedonian denar, which is pegged to the euro, was stronger versus the U.S. dollar. And that adversely affects our U.S. dollar costs for the Sasa operation. So looking now at the income statement. As Gavin mentioned, we've reported revenue of $99.5 million. That was very similar to revenue for the first half of last year, just 2% lower. And that reflects lower sales volumes across all the metals, but that was impacted on the positive side by the lower treatment charges that I just mentioned. Cost of sales were up by 14% or around about $7 million. Lots of factors at play there really, a lot of those related to the Sasa operation. We had an increase in the revenue royalty that we pay in North Macedonia for the metal that we produce called the concession fee. That increased from 2% to 4% from January. And that accounted for over $2 million in fees, up from $1.2 million last year. We also had higher wages at both operations, although at Kounrad, that was mitigated largely by a weaker tenge. There was the currency effects that I've just mentioned of the weaker dollar versus the Macedonian denar. We also have some additional depreciation because now we've started using the dry stack tailings plant and landform that we completed in the first half, and we also paid over $2 million extra for the silver that we buy for our silver streaming commitment. We see that effectively canceled out on the higher revenue number as well, but that does contribute to an increased cost of sales. If we look at our admin costs, they look like they were up quite significantly at 24% increase. But that relates to -- that works out at just less than $3 million. And all of that really is related to our business development activities, $2.3 million of that additional BD costs, which was related to the New World Resources attempt to acquire that company. We also spent $1.1 million on exploration both for CAML X and Sasa, and that was up from around $0.3 million in the first half of last year. And we also disposed of Copper Bay, and we incurred fees for that of $0.4 million during the year as well. So all in all, taking the revenue and costs into account, we've announced this morning EBITDA of $39.9 million at a margin of 40%. If we look quickly at the profit after tax, that's adversely affected by some quite significant noncash share-based payments, which we changed the way we report those as effectively cash settled rather than equity settled last year. We had a $1.8 million swing on foreign exchange. And we also look like we've got a higher effective tax rate. That's really due to consistent taxable profit in Kazakhstan, where our CIT is at 20%. If we look at the cost of the two operations. At Kounrad, we had a very good result cost-wise for the first half, where our C1 cost base in absolute terms decreased by $0.6 million. That's mainly due to the Kazakh tenge devaluation, but also there were some lower variable input costs, mainly reagents, and that was both usage and cost of those as well. Our C1 costs rose by $0.01 per pound, and that's just due to the slightly lower copper production versus the first half of last year. We did give our workforce an 8.5% wage increase, which was based on inflation figures, but that's largely been mitigated by the devaluation of the Kazakh tenge during the period. So all in all, we reported a margin of 72% for Kounrad, which is exactly the same as H1 last year. Turning to Sasa. Our run of mine costs increased at Sasa during the first half of this year from around $60 a tonne last year to about $65 a tonne this year. That's about an 8% increase. We've already covered some of the reasons why that was. There was the weaker dollar. There was also increased salaries and pay rises. We also incurred some higher costs for the new tailings disposal method. So we had a full period of operating the paste backfill plant, and we also began to operate the dry stack tailings plant and the landform as well. Also, our electricity costs were higher than the first half of last year by just under $1 million as well. If we look at our C1 cost base, though, that was actually only a 3% increase from $31 million to $32 million, and that was positively impacted by the lower treatment charges that I've already mentioned. And for the first half of 2025, we've reported an EBITDA margin of 26% for Sasa. Capital expenditure for the period, we've spent $7.4 million. Of that, $6.3 million was sustaining CapEx at both of the operations, $4.2 million at Sasa and $2.1 million at Kounrad. That's higher than the usual run rate at Kounrad, but we've had a good program of replacing anodes and cathodes and that cost us about $1.1 million there. We also, I think, previously told you, we're planning on moving some material called Dump 15 further away from a railway line so we could easily leach that. We spent some additional money there, moving the material in Dump, 15 and we've since completed that post the period end. Our capital projects are basically concluded now at Sasa. We spent $1.1 million on those, and that was really finishing off the dry stack tailings plant and the landform as well. We are still expecting to spend the additional $11 million to $14 million of CapEx this year. We only just started the raise boring program that just commenced in the first half of the year, and that will go -- carry on throughout the second half. We've got an extension to the landform that we're planning to get started on this year. We still have some additional underground equipment to buy and also some additional underground development. So all in all, we are reiterating our CapEx forecast and guidance for the year of $18 million to $21 million. Looking at our balance sheet. Just a few things to pull out of interest for you there. PPE looks like it's increased considerably notwithstanding depreciation, and that really reflects the weaker U.S. dollar versus the Macedonian denar. Our group cash balance of $48 million, that includes the cash and also $0.3 million restricted cash. It excludes $1.8 million of what through the audit process we clarified as being cash in transit. We had added that into the cash figure that we reported in the Q2 production numbers. So that's been adjusted for these results. It's worth pointing out that post the period end, we sold the shares that we had acquired in New World Resources to try to push ahead with that transaction. We sold those for $18.7 million. We also received a break fee of $1.6 million. So our cash position has been bolstered by that plus the cash in transit. Bank overdrafts, we built up an overdraft to $6.6 million as of 30th of June. That's substantially reduced by now around about $1 million as it stands now. One of the small things to point out, we did have a line in the balance sheet, assets classified as held-for-sale. That was Copper Bay. That's now quoted as nil for the 30th of June position because we sold Copper Bay in April. Final slide for me. Looking at our cash flow and our free cash flow. We generated $34 million cash from our operations during the first half of 2025. We paid $20.6 million in dividends. That was the 2024 final dividend. We paid taxes, that's income tax and withholding tax of $16.3 million. That was $8.1 million higher than it was in the first half of last year. We spent $7.4 million on CapEx that we've talked about, and we spent the $16.7 million on buying those New World Resources shares during the first half as well. We drew down $5.9 million of our overdraft. So we ended the period with a cash of $47.7 million. In terms of our free cash flow, we're reporting adjusted free cash flow of $16.2 million. And just to reiterate that post the period end, we have received the USD 18.7 million in cash from selling the shares, the $1.6 million break fee and the $1.8 million of cash in transits as well. I'll hand back to Gavin now, who will run through the operations. Gavin Ferrar: Thanks, Louise. So we kick off on Kounrad. Some of the highlights there really, just yet another consistent and reliable performance from Kounrad over the period with that 6,218 tonnes of copper that we produced. And that means we're on track to meet our guidance of 13,000 to 14,000 tonnes for the year. As I said, steady as you go. So not a huge amount to report yet. The solar plant, though, if you remember, we built that and commissioned it back in November '23. That's actually playing around 17% of our power requirements at Kounrad now. So that's really starting to pay for itself with some of the electricity costs going up there. And we actually received -- sorry, achieved a record in May, where we actually produced 22% of our electricity requirement from that little plant of ours. So that's all gone quite well. But as I said, steady as she goes at Kounrad, producing really well. And if we look at the next slide, We -- as Louise said, that relocation of Dump 15, that's all complete now. And we've had some additional CapEx. And part of the reason for that is just to maintain production and keep the plant fully invested so that we can extend it all the way to the 2034 and potentially beyond. If you look at that leach curve at the bottom there, the Western Dumps are outperforming and the Eastern Dumps have also outperformed over their life. So all of that points to the original forecast of 79,000 tonnes that we still have. We're calling that now the minimum recoverable given the outperformance of both West and Eastern Dumps. So that might lead us to think about extending the life of that license at some point as well. But there's quite a lot of work to be done around that. Sustainability activity, still a good part of our business. We think it's important to support local communities, and we do that through the foundations plus also some other donations. But most importantly here, we've had 0 LTIs, lost time injuries at Kounrad since May 2018, which is a simply amazing achievement and when you think about the various hazards that exist around mining projects and assets. Some of our sort of newer activities include a biodiversity management plan that's been put in place at Kounrad. And we've also instituted a big safety and occupational health assessment there as well. As I said, local communities remain important. And through cultural, medical, educational and youth initiatives, we continue to support the local communities around Kounrad. If we move on to Sasa. As we mentioned earlier, we produced 8,692 tonnes of zinc and 12,613 tonnes of lead. If we look at the table on the right-hand side, I'm pleased to report that the tonnages of the ore mine has actually gone up 8%. And if you recall from last time we presented to you, that was one of the key targets that we set ourselves, to get back up to that sort of 800,000 tonne level. That's what we've been targeting. Unfortunately, you'll notice that the grades for both zinc and lead are lower. And that's because we're still having a few teething problems with the new mining methods that's causing a little bit of dilution. And we're also encountering variable geology at depth in the mine, and we'll talk about that on the next slide. But you would have seen this was apparent through H1 with both lead and zinc production being down when we announced back in July. So we've reduced our guidance modestly and currently on track to achieve that guidance. If we go to the next slide. So what we've done at Sasa because of these issues is effectively implemented a full strategic review. We started this in about middle of H1 just to have a look at the whole operation at Sasa. We expected the ore body to narrow at depth, but -- and which is one of the reasons we're putting these new mining methods in place. But what we did encounter and what we weren't expecting was a high level of variability, both in terms of geometry and also grade as we moved into the lower levels of the mine. As I said earlier, there was a little bit of dilution from the new mining methods. And as we get better at doing those, that will reduce. But we really need to understand that ore body better. So we're drilling more holes. We're creating more drill platforms and making sure that we understand the ore body so we can plan ahead and utilize these mining methods to their best abilities. We're also tightening up on grade control and we're reviewing all aspects of the mine. This goes mining, processing, laboratories, admin, the works. And we've also -- in addition to a lot of internal initiatives that we've come up with, we've also had some external consultants just as a fresh pair of eyes over the operation as well to assist us. We're basically coming up with some recommendations. And we've already started implementing some recommendations. We'll continue to do that through H2 looking to sort of improve that performance at the Sasa operation. Sustainability, again, we've got 0 LTIs for the half, which is a good result for Sasa, much more complicated than Kounrad, underground operations, lots of moving equipment and a full sort of more mechanical looking plant, plus 2 new plants as well. So a really good result from the guys on site there. As Louise said, we've now completed our dry stack tailings plant, and we've placed around 60% of our tailings during the first half either onto that dry stacked landform or back underground as cemented paste. And that's getting us some way towards approaching our target of 70% that we're looking to achieve by 2026. We've tested an emergency alarm system that relates to the wet tailings facility, the TSF 4. That was partly due to the GISTM conformance that we announced about this time last year plus also some local regulations, and that's gone really well. And we've also continued educational support both on-site and in the communities around us as well as starting a little kick-starter program for businesses in the region as well to formulate some longer-term sustainable programs there. In terms of exploration, as you know, we've got 2 programs underway here. One is the investment in Aberdeen Minerals in Scotland, looking at their Arthrath nickel copper cobalt project, currently drilling what we call Phase 2b, that's following up on Phase 2a. Phase 2a effectively prove the geological hypothesis that there was mineralization at depth. Now it's basically chasing that mineralization and looking to sort of bulk it up into -- and guide us towards resource development there. And we expect to make a decision on whether or not we invest a further GBP 2 million into the business by the end of the year, and that will be based on the results from that Phase 2b drilling program. Early-stage exploration in Kazakhstan. We've got 4 licenses active there. We've done a lot of surface work there both in terms of geophysics and geochemical surveys, which have been completed on 2 of the licenses and underway on the other 2. Those will hopefully lead to us being able to make decisions on whether or not to drill these licenses in 2026. So good progress in Kazakhstan as well. And we've also set up an entity in Kazakhstan to look at more advanced projects than these early-stage exploration things as well. And there's some very interesting projects coming into that pipeline as well. Right. So going on to capital allocation which, as I mentioned earlier today, there's a few changes there. So we've got the 4.5p dividend and we're compensating that with that $10 million share buyback. Total cash returns, around $21 million, and that is comparable to several previous periods where we've paid these dividends. And that brings our total shareholder returns that we've announced to over $400 million since IPO. Over time, we're looking to revert back into our dividend policy of 30% to 50% of free cash flow. But we remain committed to capital returns to shareholders whilst the company is looking to find a future growth opportunity as well. So a little bit of a change there, but similar returns with the ultimate goal of getting back into policy and setting the company up for future growth. So in summary, as I said, Kounrad is on track to achieve its full year guidance. Sasa is on track to achieve guidance, but there are challenges there, which I said we're basically looking to confront over this half and improved productivity and production at Sasa. Capital allocation, just talked through that. We've got sustaining CapEx at both projects now, now that the actual capital projects are complete. We've got that 4.5p dividend up to the shareholders this morning plus that $10 million buyback, which is active right now. And we're still looking for a material growth opportunity. Now the New World Resources activities over the first half, which I'm sure many of you followed closely, basically prove a few things now. I think as a business, we're able to identify these opportunities outside of sort of usual auction processes or things like that. We're able to finance them and we also got really positive feedback from our major shareholders at the announcement of that potential transaction because we thought it was accretive and a good thing to do. And then also the timing of our withdrawal just demonstrating that sort of discipline and fiscal discipline that we've always shown as a business. Our balance sheet remains flexible with a strong cash position, as Louise talked you through earlier. And that will allow us to access debt and to finance growth in future. So at that point, I'll stop and invite questions from the floor. Thank you very much. Operator: [Operator Instructions] First, we have a question from Will Dalby from Berenberg. William Dalby: Yes. Just a couple of questions for me. Maybe starting with Sasa, just looking to maybe get a bit more color in light of that review you've had with external consultants. How should we be thinking about the mine plan there now? Is this sort of adapt and rebase lower situation in terms of grades and mining rates? Or is it more kind of wait and see how these improvement measures turn out? I guess more specifically, what sort of grades and mining rates can we expect from Sasa going forward? That's the first one. Gavin Ferrar: Yes. Thanks, Will. I think the mining rate certainly as we demonstrated are -- it's possible to get back up to that 800,000 sort of level with the new mining methods and potentially beyond that. But I think what we're trying to do is identify the areas that we can improve, not only in mining, but also processing right the way through to laboratory and other processes that we've got on the operation. So we just thought it was worth having a look at everything there. Clearly, we'll be prioritizing those things towards production initially and then rolling out the rest at the appropriate times. In terms of the grade, yes, we have confronted slightly -- being confronted with slightly lower grades, but also a highly variable ore body. So we just need to make sure we understand that a little bit better, and that will improve the dilution metrics I was talking about earlier and also our planning as we go ahead. So we'll be running additional mine plans and various other things in the background just to make sure that we still got a good handle on the asset. But at the moment, I think what we're trying to do is stick to the current plan and just make all of these improvements to ensure that we can get the metal out of ground within that guidance range. William Dalby: And then second, just on Copper Bay. So what's -- just interested to get your understanding of the development progress there given the contingent payment structure, where -- when are you modeling receiving those payments? Gavin Ferrar: Look, I mean, I think we sort of handed over a project that was fully permitted and with a full DFS. Now it's completely up to the new owners as to the -- whether they're going to reconfigure any of that project or whether they're just going to start constructing. I think they're probably still in a process of getting their team together and putting a construction team together. So really, the best outcome there would probably be, if you think about standard construction periods for these things, it's probably going to take them 18 months to 24 months to construct. And then there's ramp-up. And as you recall, the milestones on those payments are related to actual copper produced. So we got to wait for them to produce that amount of copper. So it could well be 3 years up plus. William Dalby: And then I think just the last one and I'll then free up the line is around the dividend buyback decision. I just -- obviously, the shares have had a bit of a negative reaction this morning. Kind of reading into that potentially could be some of the commentary around returning or looking to return to the dividend policy of 30% to 50%. I just wonder whether you could maybe give a bit more color on your rationale behind opting for the buyback. I know the buyback plus the lower dividend sort of nets out sort of the run rate that you've had in recent periods. But yes, I think it would just maybe be helpful to have a little bit more color there. Gavin Ferrar: Look, I mean, I think it's been a big debate at the Board for the -- the last few times we've debated the level of dividend. And I think what we've got to do is sort of balance the shareholder returns against our sort of strategic ambitions as well. And I think that is one of the key areas that we thought with the share buyback, we had a little bit more flexibility around that. So we put the share buyback in place. and ensure those returns to shareholders that are consistent. But if we had a large transaction to finance, then we'd have the option to deploy that cash in that direction. And it just gives us a little bit more flexibility. But I think the sort of overall philosophy remains fairly similar in terms of both returns to shareholders, plus also in the absence of a material transaction, then we have the option to sort of either continue that buyback. And if something comes up, then we can pause it or put it in a band somehow. So I think it just gives us a lot more flexibility around the capital returns program to our shareholders. Operator: And up next, we have a question from Julio Mondragon from BMO Capital Markets. Julio Mondragon: So just a couple of questions from my -- on my side, sorry. In terms of the operational review performed by external consultants, right, you just mentioned that to Will, but what are the key outcomes of it? I think like what things are to improve at Sasa? And also, is there any material CapEx or OpEx related to these improvements? Or how do you expect to see the results of these improvements? Gavin Ferrar: So look, I think the first point I'd make is that there's a combination of both an internal review, which has been undertaken plus the external review. And the recommendations are a compilation of both of those really. I'll answer your second question first. There's no material CapEx around this. I think what we're trying to look for is a lot of incremental improvements in terms of the way we operate in order to achieve the tonnages we're targeting, get the throughput through the mill at the sort of optimized rate as well and, therefore, produce as much metal as we can. So I think that's the overall philosophy. One of the areas that might take a little bit more understanding, as I said, is the geology, which has actually turned out to be -- the deeper we drill, the more different it turns out to be than our original interpretations. So we need to look quite carefully at that and just make sure that we've got a better handle on the geology and the lower levels of the mine so that we can, a, plan ahead appropriately and b, deploy the correct mining method to the geometry and width of the ore body that we're confronted with. Julio Mondragon: Perfect. And one more question, if I may. So in terms of your operational costs, what's the outlook for the rest of the year, right, what in H2 '25 -- I mean, into 2026? And what is your exposure to domestic currency at both operations? Gavin Ferrar: Well, I can talk a little bit about the cost. I think we're looking to -- I'd love to say we're going to improve those costs, particularly at Sasa, but I think we've still got some work to do there. So there's -- we're clearly looking to save money where we can and improve things as quickly as we can at Sasa, but some of these programs may take a little longer to roll out. In terms of the 2026, I think, is when we're going to start seeing -- again, I'm sort of open to correction here, but I think that's when we start looking at improvements late '25, early '26 really to start coming through on that front. In terms of the proportions of exposure to local currency, have you got those numbers? Louise Wrathall: About 60% to 70% in Kazakhstan. And then effectively, it's a large number. It will be a pretty significant number, probably higher than that in Macedonia because a lot of the costs are either denar or euro. Obviously, in Kazakhstan, we've actually seen the tenge continuing to weaken into the second half. So that would have a positive impact. But actually, unfortunately, we've seen the opposite with the denar and the euro. So that's continued to strengthen versus the dollar into the second half. The only other thing I'd point out is that the dry stack tailings plant and landform, we've run that for our part of the first half. And obviously, in the second half, we're going to be running that for the full 6-month period as well. Electricity, we are hopeful that, that could come down, and we could get some savings there. But a lot of the other aspects will be sort of pretty much fixed in. But just to add to what Gavin said about the strategic review that's underway with both our internal ideas and external consultants, that's focused on both productivity improvements and cost improvements as well. So it's not just productivity that we're looking at. Operator: [Operator Instructions] And we have another question now from Laura Chan from RBC Capital Markets. Laura Chan: My question is about the New World acquisition and, I guess, with not being successful in it going through, I guess just keen to hear your thoughts about learnings moving forward and acquiring something else and what could you have done differently? Gavin Ferrar: Thanks, Laura. Look, we're all really disappointed by the outcome there. But I think, ultimately, what we were confronted with was an interloper with very deep pockets and absolutely determined to purchase this asset at whatever price. So could we have done anything differently? I think probably not in this case because ultimately, it was always going to come down to price. And we got to a point where we thought, looking at it from various angles, the acquisition cost, the risks of execution of the project, risks around CapEx, various other things, it was starting to get to a point that it no longer made sense for our shareholders. So that's the decision we made then was we thought a rational decision to pull out. And I think the -- but what it did demonstrate, as I said earlier, is our ability to identify, finance and then present something to the market that had a positive impact on our business. So I think we'll be taking a lot of comfort from that moving forward. And as we repopulate that business development pipeline, we've got a fairly good handle given the interaction we had with our shareholders through the process of where their sensitivities lie, where our sensitivities lie and, therefore, how to configure the next one when it comes along. Operator: Thank you. And as there appears to be no further questions at the moment, I would now like to hand the call back over to you, Mr. Ferrar, for any additional or closing remarks. Gavin Ferrar: Thanks. So thank you very much to all of you who attended this morning. The presentations are available on our website. I think there's going to be -- this presentation will be uploaded as well at some point. But we appreciate your continued support and interest in the business. Thanks very much.
Operator: Good morning, everyone. Hello, and welcome to James Fisher and Sons plc 2025 Interim Results Earnings Call. [Operator Instructions] Finally, please note the disclaimer on Slide 2. And with that, I will now hand over to our Chief Executive, Jean Vernet. Jean Vernet: Thank you, Sam, and good morning, everyone. Thank you for joining our 2025 interim results earnings call. I am joined by our Chief Financial Officer, Karen Hayzen-Smith, and we'll start by walking through our business highlights for the 6 months ended June 30, 2025. Karen will provide an overview of our financial results at group and division level, and I will conclude by giving an update on our turnaround progress and how we are positioning the group for the future. This will then be followed by our outlook before we turn back to Q&A. So let's start with the highlights. We have delivered a solid first half performance. I am encouraged by the trading with our turnaround progressing as planned. We are committed to following our principles of focus, simplify and deliver with improved synergies being achieved through the One James Fisher model. We have a clear plan in place to achieve our vision, while we are building our resilience to adjust course if it becomes necessary in a world of growing uncertainties. Our path to 10% underlying operating profit margin will be delivered through executing on supply chain integration, self-help, turning around underperforming businesses in our portfolio and scaling JFD. We are making progress across all these priorities. Conditions in our key end markets have been largely supportive through the first half of 2025 despite growing macro and economic uncertainties. This, alongside our focus on business improvement, enabled us to deliver a solid financial performance with steady revenue and encouraging operating profit levels after adjusting for the impact of disposals. We also have seen an improvement in underlying return on capital employed, the key metrics for our group. Covenant leverage at the half year was 1.6x, slightly above our target range of 1 to 1.5x. This reflects 1H investments in key Energy and Defense subsegments where we see opportunity for growth. The first stages of our turnaround have helped us rebuild the fundamentals of our business, resulting in a strengthened balance sheet and a simplified portfolio. We are a leaner, more coherent company with a stronger culture of accountability and performance across the business. While we continue our turnaround, we have a number of exciting accelerators we discussed at the last year-end that are positioning the group for growth. These have driven the Defense order book up 45% year-on-year to GBP 350 million. I will cover on this in more details later. We are James Fisher. We presented a snapshot on our activities at our year-end results in March. Let me quickly go through our portfolio. Across the three division verticals, we solve our customers' complex challenges in the blue economy in a unique, innovative and agile way. The Energy division helps our customers to meet growing energy demand globally, more efficiently, safely and sustainably as they progress through their energy transition road map. The Defense division supports and rescues lives underwater, thanks to our global leadership in submarine rescue, stealth mobility solutions for special forces and rebreathers for combat divers. We deploy and serve our customers wherever they need us in the world, promoting a viability and interoperability across partner nations. Maritime Transport ensures on-time delivery of critical energy products for coastal shipping in selected geographies, but also enables ship-to-ship transfer of oil and gas third-party cargoes globally. We have the highest reputation for safety and quality, and this explains why we have many customer relationships extending over decades. I will now hand over to Karen, who will walk us through the financial results. Over to you, Karen. Karen Hayzen-Smith: Thank you, Jean, and good morning, everyone. I'm pleased that we have been able to make progress in the first half of the year and to deliver a solid set of results. The business has stabilized from the disposal of RMSpumptools and Martek last year, and we have managed to reduce costs as appropriate given the drop in revenue, whilst also bringing new capabilities and investing in CapEx and new innovation to position the group for growth. I will start today with the headlines. Disposals in '24 have had an impact on the financial comparatives, and therefore, it is more appropriate if we consider the results adjusted for these and illustrate movements on a like-for-like basis. Revenue was steady across the group when compared to the H1 '24 period with an operating profit up 14.4%, resulting in a margin of 5.8%. Net debt was GBP 72 million on a covenant basis to give a net debt-to-EBITDA ratio of 1.6x at June '25. This is slightly above our target range but reflects investments in growth made in the first half. Lastly, return on capital employed also increased slightly to 5.1%, a 20 basis point uplift. The next slide shows the movements in revenue over the period. The overall decline in revenue related to the disposals that we made in the second half of '24. Excluding these, though, revenue was up, but this was more than offset by the impact of FX. Overall, there was good revenue growth in Energy Services, which continued to have a strong performance in Well Services and also in renewables through the Bubble Curtains product offerings. Maritime Transport Tankships had a solid performance, but Fendercare was down as a result of low LNG market despite an increasing demand in Brazil. Moving on to operating profit. We saw an increase in profit to GBP 11.1 million and a net increase in margin contribution by GBP 2.2 million as a result of improving underperforming businesses and cost reductions. The H1 period in '24 included a GBP 3 million one-off gain on the sale of life of field assets, which offset a GBP 3 million loss on the decommission business. This business has now turned to profitability, which represents a GBP 3 million uplift on the prior period. We've also made cost savings across the group, such as reduced insurance premiums, audit legal fees and savings associated with restructuring of businesses and functions to consolidate and reduce duplication. However, we have used part of these savings to invest in areas required for growth, such as customer excellence, including strengthening sales teams together with technology and innovation. Therefore, overall, we have made around a GBP 5.2 million improvement on '24. The overall net result is a margin improvement to 5.8%. And there are, of course, more opportunities to reduce our cost base as we continue to simplify the group whilst we build capabilities required to position for scale. The next slide shows the margin improvement that we have made on a like-for-like basis over the last few years. We have been focused on turning around businesses and becoming more efficient to provide a platform for growth and achieve our 10% margin target. The margin dropped following the disposals, but is increasing in the period. And as outlined previously, there are steps we will take to increase margins further, which Jean will talk about in more detail shortly. If we now turn to look across the divisions, overall, Energy had a solid first half with revenue slightly down. However, if revenues adjusted for the impact of the legacy Mozambique port project, which will not repeat and was completed in the period, revenue would have actually been up 6.9%. This contract had around GBP 7 million higher revenue in H1 '24 than in '25. Energy Services had a good performance throughout the period with continued demand for compressors and Well Services. We have experienced a delay in some projects in Africa moving to '26, but otherwise, markets have been robust. In Renewables, there was improved revenue from offshore wind construction activities, which uses our Bubble Curtains technology, and we have managed to turn around the decommissioning business, which is now profitable with an increasing pipeline of opportunities. On a like-for-like basis, operating profit was up just under 17% as a result of the stronger performance in the restructured Subsea and Decommissioning business with a margin up 180 basis points to 11.3%. We continue to see demand for all activities across both oil and gas and renewables and across the existing markets of the Middle East and Asia. The U.S. offshore wind market has seen projects paused and resumed as they are reviewed by U.S. administration, but this is not expected to impact revenue materially in '25. Moving on to Defense. Revenue increased year-on-year by 3% to GBP 37.6 million, driven by solid performances across the majority of the product lines together with an increase in operating profit. Submarine Rescue was down slightly as a result of the phasing of customer exercise schedules. The H1 outturns do not fully reflect the revenue generation from the orders secured in Q4 '24, and we should start to see progress coming through in the second half as activity on the contracts build given a higher percentage of secured revenue going into the second half. The order book at June '25 was GBP 315 million, up 45% compared to the prior year. We are investing in development expenditure for innovation and new product development, and we have incurred costs investing into new markets such as the U.S. The Defense market continues to be supportive, and we continue to see growth potential in Defense across all product lines. Moving on to the Maritime Transport division. Tankships saw revenue up 5.9% as a result of improved rates and good utilization to GBP 42.8 million. The Cattedown business had a solid period with petroleum and dry cargo volumes remaining consistent through the port. And on a like-for-like basis, Fendercare's revenue was down 10.8% to GBP 25.7 million in the first half. Results for the business, though do not fully reflect the improvements made in Fendercare in the first half with a restructured team and our focus on increasing sales and building new customer relationships. Brazil had a good performance, and we have entered operations in Uruguay, having our first operation in September, and Fendercare should see an improved second half. I'll now pick up in some other areas of the income statement. The benefit from the debt reduction and refinancing last year can now be seen clearly in the period with finance charges, including lease interest, down from GBP 14 million to GBP 8 million. The GBP 8 million comprises of GBP 4.4 million of bank interest expense, GBP 0.5 million of facility fees and around GBP 3 million of lease interest. The tax expense on underlying profits from continuing operations for the period is GBP 4.1 million, with the increase in the prior period coming mainly from increased taxable profits in Brazil. Given that we've not been able to take credit for certain tax losses across the group, the calculated underlying effective tax rate is significantly higher than you would expect. The effective tax rate, though, is still around 29% when companies with tax losses are excluded. If we turn to the statutory reporting figures, the majority of the costs here relate to transformation and restructuring of the group, including redundancy costs and certain project costs. There were also various legal costs related to the finalizing of disposals in previous periods and some other ongoing matters. On to cash flow. Working capital continues to be a focus with DSO days below previous levels, but they have increased slightly to 45 days from 42 days in '24, which was mainly the result of the timing of payments in Africa. CapEx, including development expenditure, was GBP 19.2 million, and this reflects investment in further compressors to meet continuing demand and expenditure on our new products across the group. Net finance interest paid was GBP 3.7 million with an average interest rate of around 8.5% for the half year, made up of GBP 4.8 million bank interest, offset by around GBP 1 million interest income. Lease interest payments with interest increased in the year as a result of entering into a longer vessel lease and also contracting additional vessels. As outlined at the trading update, net debt increased in the period from 31st of December '24 by GBP 7.2 million, largely reflecting the first half weighting of CapEx and development expenditure together with working capital phasing on certain contracts. I'll now turn to look at our borrowing position. The significant reduction in debt was outlined in detail in our year-end results in March early this year. And this slide shows the impact of the drop in debt and interest costs from where we were last year and emphasizes the progress made. And although net debt has increased in the period, it is as a result of investment for growth. Right-of-use liabilities increased due to new vessel leases in Tankships and in Fendercare's Brazil operation, where we sought to secure a vessel given the increased volume of work in the region. Looking forward to the remainder of '25, trading to the end of August has been in line with expectations and guidance for the '25 year is unchanged. Just a few points of technical guidance to finish. CapEx and development expenditure is expected to be at similar levels as previously guided at GBP 30 million to GBP 35 million. We remain focused on affordability payback and meeting our hurdle rates before expenditure is approved. On bank interest, a rate of around 8.5% is expected before any base rate reductions. And lease interest in H2 is expected to be similar to H1, assuming a similar vessel portfolio and terms. And on tax, we are continuing to guide to a tax rate of around 29% in respect of tax payable entities. But as outlined earlier, the tax rate could be impacted by not recognizing tax credit on losses. Therefore, just wrapping up on the financial update, the first half delivered a solid set of results. This included turning around the decommissioning business to profitability, and we continue to assess those other businesses not performing to our hurdle rates. We have reduced costs, allowing us to increase margins and strengthen in areas such as commercial excellence and product innovation, and we'll continue to do so. And we have also been investing for growth, but in a measured way to maintain debt levels. I'll now hand back to Jean to take us through the rest of the presentation. Jean Vernet: Thank you, Karen. Now let's look at the progress on our turnaround. The last 2 years, we're focused on fixing and stabilizing the businesses, and we achieved a lot. Everyone contributed to driving and executing on this agenda through incredibly hard work. And I would like to take this opportunity to recognize our employees for their grit and resilience. I'm immensely grateful for their efforts. We fixed the financial foundations of the business and are gradually improving our UOP margin and ROCE, while we have reset our debt leverage down to more normal levels. We have made good progress to define, refine and establish our core model. We remain committed to delivering on the remaining priorities of the turnaround, building on what we have completed so far in prior years while kicking off initiatives that position the group for growth. These are enabled by creating a culture where our people can thrive, harnessing innovation and technology and bringing new products to market across the globe, expanding our reach and market presence. Let's discuss the progress on these priorities we shared with you during our full year results. Exceptional safety remains our #1 priority, and it is central to our business model. This is measured through a reduction in total recordable case frequencies, which is a standard measure of safety. And while the numbers do not yet reflect the change of culture so far, when I look at where we are after 3 years of efforts, I can see a deep positive shift across the enterprise. Customer excellence places our customers at the center of the business. We are implementing a commercial framework of the highest standard consistently across all our divisions. We are progressing against these profitability targets underpinned by revenue growth. On people, we continue to execute on our 5-year strategy to attract, retain and invest in our talent and expertise. We gauge progress through our engagement score, and we are on track to deliver our annual employee survey in 4Q. I will delve deeper into some of our people strategy shortly. In new product development, we are driving technology and innovation through a pipeline of unique products and solutions. This is monitored through the market introduction of a number of products every year and are measured by revenue vitality. We are progressing with discipline, but a lot of work remains to be done, and we will communicate vitality levels at the year-end. In strong supply chain, we are building on progress we started in 2024. We are continuing to build and integrate a stronger supply chain, which is measured through our cost savings and is a key contributor to gross margin and ROCE improvements. We are on track to achieve our 2025 targets and with further potential areas identified. I will now walk through the bridge to achieving our 10% UOP margin, a key measure of our turnaround. We have 4 tactical levers in achieving our 10% OP margin, each equally balanced as far as their contribution. The slide shows how we are tracking progress starting with business performance. Every component of our portfolio must achieve the returns above our hurdle rates. We have seen good performances in Energy Services and Maritime Transport Tankships. Our efforts on the commissioning are paying off, while we continue to focus on improving other parts of the portfolio such as IRM, James Fisher Renewable and Fendercare. We also see additional opportunities to improve performance across the board. In 2024, we also launched a self-help program to calibrate and reshape our support functions, providing better support to the division as they scale, driving productivity that will lead to higher profit fall-through. We are seeing positive progress aligned to our geographic growth plans. Number three, as we move to Defense, revenue has been subscale. And whilst the first half of this year has seen an improvement in revenue, we still expect to achieve a lot more. As Karen mentioned earlier, we have booked some early successes for JFD and our order book continues to grow. This step-up in revenue will result in a healthy fall-through to operating margin. The unprecedented commitment for larger Defense spending around the world is attracting sharper competition, but our focus is on regaining our leadership in this dynamic environment. Finally, we started a 3-year supply chain transformation journey to integrate and strengthen the function. We are making good progress becoming a leaner, fitter practice that can strategically support our business as it positions for growth. Now we will not intend to stop our ascent once we get to 10% UOP margin, but we must first reach that first milestone. As part of our transformation journey, we are now positioning the company for growth. We are doing this in three ways: first, aligning closely to our strategic markets for Energy and Defense, while Maritime Transport provide predictable cash flows; second, focusing on developing our people to leverage our innovative and global culture of service as a key differentiator. And third, accelerating the introduction of new products to markets where we can drive the value to our customers, supporting the megatrends of security, autonomy and electrification around the world. Now let's spend a few minutes on each one of these. When it's about aligning to strategic market, within Energy, in the first half, we have extended our decommissioning offering into offshore wind, initially with the development of the world's first mono pile removal system in partnership with a major developer. In Norway, we are contributing to the country's decarbonization ambitions, investing in electrifying the rig through our well service fleet. We made good progress on key contract wins in renewable and decommissioning while maintaining our market-leading position for Bubble Curtains in the U.S. and in Asia. We also established a new base of operation in Guyana. Now in Defense, we have invested in new product development across tactical diving vehicles, submarine capabilities and our next-generation stealth multiple rebreather. We also have won long-term contracts in defense diving and submarine solutions across the U.K., the U.S. and Asia. This includes a large contract award with submarine platforms, an important win and a large contract award with the U.K. MoD. In the U.S., we were awarded a foreign comparative testing contract for our Carrier Seal tactical diving vehicle, and we secured an important rebreather order for combat diving as part of the 5-year replacement program. We also have sealed a strategic collaboration agreement with Saab for the Swedish and international markets. Geographically, we opened two new bases in Australia and entered into a U.S. special security agreement anticipated to complete in the second half. Now in Maritime Transport, we have continued with our fleet replacement construction with 4 vessels due over 2026 and 2027. We started embedding new product development with the first market introduction for Fendercare due for launch in the second half of this year. We also secured a memorandum of understanding with the U.K. MoD to provide support in times of needs. Last year, we pioneered the world's first ammonia STS transfer, which we repeated in the first half in Holland. We also made -- sorry, we have also acquired 2 new vessels, cementing our commitment to the Caribbean coastal shipping market. Geographically, we opened a new base in Uruguay to underpin our expansion in Latin America for Fendercare. I'm also pleased that we have made progress on our One James Fisher geographic expansion, including the launch of our Japanese entity in the first quarter of this year, acting as a support to all three division developments in that country. I'll move to the next slide to outline how we are investing in our people to enable that growth. Today, we employ around 2,000 people globally across 25 countries in most major operating regions. We differentiate as trusted adviser to critical customers with deep expertise working in complex and hazardous environments. This is demonstrated through credibility, superior service and our ability to innovate. We continue to invest in our strategy to attract and retain talent. Our recently appointed CHRO is doing a fantastic job at building the foundations of our people strategy. By embedding robust HR and talent management frameworks, we are equipping the team at every level with tools, support and our opportunities to perform at the best. We are launching our One James Fisher leadership framework that will see nearly 400 current and future leaders complete this 2-year program. This initiative contribute to building a strong pipeline of talent who will execute our strategy. We are a service technology company at heart, and our people are the driving force of our business. Now moving on to our technology and innovation. James Fisher is naturally innovative. That's innate to us, but our past approach was inconsistent, and we were slow to commercialize new products. Following the appointment of our Chief Technology Officer in early 2024, we have developed and embedded a new product development approach that is being deployed across the entire company. This discipline follows a strict process that enables us to translate our customer needs into innovative solutions that solve their most critical issues. By levering partnerships with customers, academia and supply chain, we can deliver an agile innovation pipeline, and I'm happy to report that the progress made on that front are ahead of my expectations. In 2025, as I touched on earlier, we have maintained a sharp focus on new product development that will support our growth ambition across the three divisions. Initial launches are expected across all divisions by the end of the year. So in conclusion, we delivered a solid first half financial performance in 1H '25, and we continue to progress our turnaround. Our focus remains on delivering our priorities and positioning the group for growth. Innovation forms a key part of our growth plans, and we made great strides in the first half with new product development with encouraging engagements from our customers. We will continue to target investments in these growth areas where we have the greatest opportunity to differentiate ourselves and accelerate our offering to customers, mostly within Energy and Defense verticals. We are now a leaner, more agile group with a strengthened balance sheet and a simplified portfolio. We are well placed to achieve efficiencies and synergies with a more coherent enterprise. This enables us to consider a broader range of investment opportunities. The market was largely supportive in the first half. And looking ahead, we anticipate that some growing macroeconomic uncertainty may affect oil and gas in the second half of the year. We remain cautious, but do anticipate the market will return from 2026 onwards. For now, the second half started with trading to date in line with management expectations, reflecting our second half weighing seasonality. With a continued focus on cost discipline, continued self-help and driving our strategic priorities, our outlook for the year remains unchanged. So we have concluded our half year 2025 presentation, and we'll now turn to questions. Back to you, Sam. Operator: Our first question comes from Gerald. He types, what is involved in the U.S. special security agreement? Is that market really open to non-U.S. companies? Jean Vernet: So we have had some ongoing business in the U.S. either directly from overseas, from the U.K., from Australia for years, but these were by definition limited. And we also have promoted our products through local channels, in particular, in the rebreather segment. By establishing the special security agreement, which is attached to our JFD North America company, we can now directly interface with the various military organization in the U.S., be it under our name. And because of what we bring is being so unique to the market, in particular to the U.S. market, we see that as a fantastic future opportunity for growth. The size of the market is massive. And this will require for us to increase our local presence for sure. But because of the special security agreement, it kind of breaks some boundaries that we were subject to before. So it's actually quite an important milestone for us. Operator: We have a couple of raised hands. We'll start with Thomas Rands. Thomas Rands: Well done on the results. Just three questions from me, if I may, I'll take them individually just to help you, if that's all right. The first one was just, could you give us a bit more detail on this -- the U.S. award for the foreign comparative testing contracts and the Carrier Seal tactical diving vehicle. Is there any more kind of info color you can give? I know you just made a comment around the U.S. special agreement, but more detail would be great, please. Jean Vernet: Yes. So the framework of this award is a purchasing program from the U.S. military to overseas supplier directly. So that's an example where we contract from our entities here in Europe directly with this program. For, in effect, assessing, testing in situ and training the special forces to use our craft, we see that as a fantastic bench for the community to validate that our product really fits their needs and hopefully gives way to being the provider -- the special provider of this type of product for future years in the U.S. Thomas Rands: Okay. And then linked to the rebreather contract that you mentioned, in the same kind of bullet point there about the new 5-year replacement program. Is that linked to the previous rebreather contract that you won that then got canceled? Or is this a separate one? And also, could you just talk around the selective investments you're making in next-gen rebreather, please? Jean Vernet: Right. So this award is a different product than the one we discussed in prior years. This one is for special force combat diving, so more shallow diving. It's part of a 5-year program, which needs to be rebudgeted every year, but that's really a 5-year program replacement for which we were awarded the opportunity and this year was the first year of the 5 years. Your second question was -- sorry, what was it? Thomas Rands: On the investment in next-gen rebreather. Jean Vernet: Yes. So this is a launch we did back in May. If you happen to visit DSEI in London, you see some -- you'll see a sample of it. This is the next-gen system that allows for deep as well as shallow long diving. That's why it's called multi-task. It's totally stealth for demining application. It's a product that encompass all our expertise and knowledge in terms of easiness of use, easiness of breathing. But the key element of it is its versatility. It's a product that can be configured to different missions and embeds a whole new generation of technology around monitoring, around sensors and fantastic product. If you have the chance to go to DSEI, you'll see the product on our booth. Thomas Rands: I'm going this afternoon after this call, so I'll have a look. And then the third one was just around the decommissioning opportunity in renewables. Obviously, we're mainly focused on kind of putting new turbines in the ground, not taking old ones out. So I was just wondering how big the opportunity is and what sort of time frame we should be thinking about for that kind of that new opportunity. Jean Vernet: Right. So this job was decommissioning of a pile, which had -- which was just part of fixing a construction challenge that the customer faced. What's unique in it is the size of the pile and how smooth the job went. And it was a fantastic sea trial for us to demonstrate that our technology developed and used for oil and gas, which is in itself a massive market, can be cross used for offshore wind. As the wind farms reach the 20 years of age, they must be decommissioned and refurbished. To give you an idea, by 2030, there's going to be about 34 gigawatts of capacity of offshore wind farm that will reach their end of warranty. That doesn't mean they need to be yet decommissioned, but this gives you an order of magnitude, 34 gigawatts. That's about 40,000 piles, that when they reach 20 years, will have to be decommissioned, right? So it's potentially a massive market. Like oil and gas, it's immune to the cycle because it's by regulation, those things have to be decommissioned after 20 years. And we are gearing up for that. Operator: Our next question comes from Alex Paterson. Alexander Paterson: I've got three questions for you as well. And again, it might be easier if I ask them individually. Firstly, if I think about your Defense business, you've made very good progress in that. You've signed an agreement with Saab. And I'm just wondering if there's anything that you think that you can do that you've not been able to do that can expedite sort of contract awards in that area. And I'm just sort of thinking, is it that you would benefit from increased distribution in any market or other partnerships a bit like the one that you've done with Saab? Jean Vernet: Yes. Alex, thanks for the question. This is an example of, first of all, the trust and credibility we bring to the space through this partnership with a major OEM provider of submarines and other subsea technologies. So that for us allow not only to approach in a much deeper, broader way, some of the Scandinavian navies, but also to go along with this partner around the world through their international expansion. I see that both as a fantastic amplifier of our reach around the world, one of many, but also as a great opportunity to deepen where we can make a difference through tailored innovation to a particular configuration of OEM, right? So it's really for us a double whammy. But I really want to stress that it reflects years of past cooperation with Sweden, with Saab and the Swedish Navy, which allows us to reach that stage. Alexander Paterson: Understood. The second thing I was going to ask was the -- you mentioned that there had been a reduced timetable for submarine rescue exercises in the first half of the year. Can you give any indication of what sort of financial impact that had? And also what the outlook for exercises is, i.e., does it stay subdued for a while? Or do you expect it to pick up again? Jean Vernet: So the submarine rescue exercises are part of the long tail of what I call aftermarket service opportunities that we have with the navies we supply. And from -- these are typically once a year or twice a year exercise depending on the various navies. And from time to time, it happens that one of them has to be either postponed or delayed or shortened for various reasons, one of them being weather, by the way. So I wouldn't take this as a significant pattern. It's just those things happen. But certainly, because these are quite high stake, it impacted our revenue. But that's kind of a reason of some of the revenue in H1, but those actually have resumed since then, right? So it's just a one-off. Alexander Paterson: Got it. Understood. And then the last question I was going to ask was, can you say a bit more about your -- the Japanese entity that you've set up? Is that -- did you establish it because you're seeing some activity in Japan and you think that you can accelerate that with -- by having some more resource there? Jean Vernet: Right. So Japan is important for us for many reasons. One of this is that it's located in Northeast Asia, which both for offshore wind and Defense are critical markets. And that's what drew the impetus of setting that entity because our approach to customer engagement is wherever it's possible to have a direct engagement. So a little bit like in the U.S., we have had decades of business with Japan in the past, mostly for commercial diving, saturation diving. But we see both on the defense side and the offshore wind side, a huge chasm in the sense of on the military side, massive increase in defense spending. On the offshore wind, this is one of the only way together with nuclear energy where Japan can decarbonize. And it's an inflection point for us in this market, very much like in Korea, by the way, South Korea or other places in that region. And to succeed in Japan in a deep way, I believe that we have to have a direct connection with the military, a direct connection with the developers very much like what we have created in the U.S. So we look at this with extreme excitement. Operator: Thank you. There are no more questions at this point. And with this, we will now close the call. Thank you for joining, and you may now disconnect.
Operator: Good morning, and welcome to the Matrix Service Company conference call to discuss the results for the fourth quarter of fiscal 2025. [Operator Instructions] As a reminder, this conference call is being recorded. I'll now like to turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations for Matrix Service Company. Kellie Smythe: Thank you. Good morning, and welcome to Matrix Service Company's Fourth Quarter Fiscal 2025 Earnings Call. Participants on today's call include John Hewitt, President and Chief Executive Officer; and Kevin Cavanah, Vice President and Chief Financial Officer. Following our prepared remarks, we will open the call up for questions. The presentation materials referred to during the webcast today can be found under Events and Presentations on the Investor Relations section of matrixservicecompany.com. As a reminder, on today's call, we may make various remarks about future expectations, plans and prospects for Matrix Service Company that constitute forward-looking statements for the purposes of Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent annual report on Form 10-K and in subsequent filings made by the company with the SEC. The forward-looking statements made today are effective only as of today. To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings and on our website. Finally, all comparisons today are for the same period of the prior year, unless specifically stated. Related to investor conferences and corporate access opportunities, we will be participating in the D.A. Davidson 24th Annual Diversified Industrials & Services Conference in Nashville, Tennessee, September 17th through the 19th. If you would like additional information on this event, I would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. I will now turn the call over to John. John Hewitt: Thank you, Kellie. Starting with safety at Matrix, the physical and mental safety of our employees as well as that of anyone on our project sites or in our offices is core to who we are, an expectation for all employees and a commitment we uphold for all stakeholders. Today, I want to talk [Technical Difficulty] similar to airport security today, if you see something that does not look right, that could create a hazard for yourself or fellow employees, then please say something. At Matrix, this is not only a right our employees have when they come to work for us, but it is an obligation and expectation for everyone, and we expect our leaders to listen and act without retribution. This authority is a critical part of our culture and creates a safer work environment. And we find many times in near misses and incidents that the use of Stop Work Authority or the honoring of that authority by leadership could have been avoided an incident. In fiscal 2025, we made significant improvements in both our total recordable incident rate, or TRIR, and our DART rate, which is a measure of injury severity and stands for days away, restricted or transferred due to an injury. Our TRIR improved from 0.91 in fiscal 2024 to 0.51 in fiscal 2025, and our DART rate improved from 0.28 to 0.21 for the same period. And while we are proud of these achievements, we understand that achieving and maintaining a 0 incident safety performance is a relentless journey, and we will continue to prioritize safety in everything we do as we work towards this goal. So as we conclude fiscal 2025, on behalf of the company's leadership team, I would like to thank everyone at Matrix as well as our subcontractors and others on our project sites and offices for your unwavering commitment to our safety journey and building the kind of culture that we expect. The effort you invest in fostering a safe work environment at work and at home makes a profound difference. And together, we can achieve our goal of 0 incidents. And to our team members, remember, Stop Work authority is a right, an obligation and an expectation for everyone. As I reflect on fiscal 2025, the financial results certainly did not meet the expectations we had at the start of the year nor does it accurately portray the positive underlying performance of the business. It is essential to look behind the numbers to recognize the progress achieved and the fundamental strength in the business. It is important to understand that the impact from a single isolated event alongside a couple of legacy legal issues from 2021 and restructuring costs incurred to improve the organization does not reflect the company's underlying performance or its future potential. Kevin will provide more detail on these impacts in his remarks. But before he does, I want to highlight a few key takeaways. First, our project teams are executing well and producing strong consolidated results on our projects and maintenance activities across the enterprise, as evidenced by an above-plan DGP level, even including the labor productivity issues from a crude storage project that was noted in our earnings release. In short, we are executing on the backlog and new awards above plan on a consolidated basis. Second, while the full year's revenue was below our expectations, over half of the revenue shortfall was related to the late start on previously booked work, which is now in full flight and significant weakness in the planned growth for our T&D business, which led us to exit that service line in the back half of the fiscal year. The trend of growing revenue did occur as expected [Technical Difficulty] quarter-over-quarter, just not to the level we anticipated, and we expect revenue to continue to grow in fiscal 2026. Third, awards in the year of $726 million allowed us to maintain a near record backlog of approximately $1.4 billion. As a result, we are entering fiscal 2026 with approximately 85% of the planned revenue booked with nearly all of that underway. Additionally, this year's awards support our core market objectives in specialty storage, LNG facilities and electrical infrastructure, some of which are directly associated with the East Coast data center build-out and its demand for reliable power. These new awards and performance on existing backlog are creating new and reinforcing existing client relationships, which will lead to more award opportunities as the demand for energy, power and industrial infrastructure continues to heat up. Many of our clients are looking to commit to contractors that they trust and have high-performing teams to ensure their work gets built. Finally, as the year unfolded, we took steps to make sure the business is prepared for what we see as a strong future, a future of opportunities and growth in our target markets. We looked at the business core strategic pillars of win, execute and deliver to assure that every part of the business, from sales to operations to shared services to administrative support is properly aligned. In the end, we flattened the organization, closed underperforming offices, consolidated operational support services, restructured business development to better align with core market and growth objectives and integrated our engineering and construction operations to improve competitiveness, market alignment and delivery. While we did incur some costs associated with these initiatives, the changes are crucial to ensuring Matrix can capitalize on the significant opportunities ahead. As these efforts begin to bear fruit, they will serve as a key catalyst for our continued strategic growth and solid execution in 2026 and beyond. Now let's talk about strategy. Our strategy begins with our people, our purpose and the core values of who we are as a company to deliver on this purpose, we must ensure a culture of safety, both physical and mental and imperative to our business, maintain our Great Place to Work environment, especially considering the demand for talent for professional and craft, remain growth focus to gain scale and durability, achieve consistent performance, excellence in all aspects of our operations, including safety, quality, timeliness and margin outcomes, innovate and lead in the application of technology, including AI and face change with a positive attitude, and finally, create value for all of our stakeholders. These objectives are central to how we lead, set expectations and create value and are embedded in the pillars of when, execute and deliver which underpins our strategy. Our win pillar is not only about awards, building backlog and growing organically, but also making sure we pursue awards with the right risk and financial profile aligned to our strategic market focus areas. In addition, win also means hiring the best talent, having an industry-leading brand and building strong client relationships. Our strategic market focus can be broken into 2 categories: our current business with the opportunities for consistent and stable revenue combined with specific growth opportunities that are available in markets that fit our brand profile, skill sets and leadership, in engineering, construction and maintenance for LNG, NGS, ammonia, midstream and downstream energy products, mining and minerals, aerospace and electrical and new high-growth markets where our presence is currently limited, but opportunities are significant. Our experience and skill sets overlap for baseload and backup power generation, fuel storage, electrical interconnects and mechanical systems that are being driven by growth in power demand from fleet retirements, electrification of everything, expansion of AI and data centers and advanced manufacturing. Our opportunity pipeline of $5.9 billion is largely made up of our current business market focus areas. Over time, we will add to this pipeline with new high-growth markets, which will provide further strength. Both our current and new high-growth markets are supported by numerous multiyear megatrends in line with our long-term financial targets and provide the expectation for organic and inorganic growth of the business in 2026 and beyond. Moving on to our execute pillar. We must take the work that we win and execute it with 0 safety incidents, high quality, in line or better than budget on time and with overall outcomes that strengthen our brand and client relationships. The realignment and streamlining of our organization, which has been strategic and intentional has been key to ensuring we continue to win and execute at a high level. Finally, the deliver pillar of our strategy is really the culmination of the first 2 winning and executing our work and a consistent and high-quality manner that allows us to deliver value to all of our stakeholders, invest in our company, our people and fixed assets, providing a fuel for inorganic growth, growth opportunities for our people, supports the community and a return to our shareholders. As it relates to inorganic growth, we have said previously that our focus has been on returning to profitability. We are at that inflection point now. Looking forward, our priorities to ensure durable return-focused growth through organic, supplemented with focused M&A. As we move through the year, we will become more intentional and active in the search for inorganic opportunities that meet the strategic needs of the business to support our market objectives. We expect fiscal year 2026 full year revenue to be between $875 million to $925 million, representing year-over-year growth of 17% at the midpoint of the range. This outlook is underpinned by the strength of our current business, a healthy bidding environment and a robust backlog. As mentioned earlier, at the midpoint of our guidance, approximately 85% of expected fiscal 2026 revenue is supported by backlog already in hand and nearly all that backlog is related to projects that have already broken ground or risk of delay is minimal. 2026 will be a crucial year in our strategic journey marked by revenue growth, a return to profitability and continued execution against our strategic priorities. We are forecasting the first quarter of the year to be similar revenue level to the fourth quarter of fiscal 2025 with a steady improvement in revenue and profitability through the course of the year. With our strong financial position, our realigned organizational structure, backlog and robust opportunity pipeline, we are confident in our ability to leverage the significant ongoing infrastructure investment cycle to continue our transformation into a scalable and resilient growth platform. Kevin will now provide more details on the numbers. Kevin Cavanah: Thank you, John. Yesterday, we released our results for the fourth quarter of fiscal 2025. Those results were revenue of $216.4 million, EPS of a $0.40 loss and adjusted EBITDA of a $4.8 million loss. Those results included 4 items that masked the continued improvement in the ongoing business. First, we lowered our recovery expectations on a legacy project that is currently in a dispute resolution process, which resulted in a $6.4 million reduction of revenue and operating income. This was related to a crude terminal project that we completed back in calendar 2021. The project was impacted by the COVID pandemic and incurred significant project scope changes directed by the owner. We've been pursuing our outstanding contract balance from the customer since that time. Arbitration proceedings occurred last month, and we are awaiting that final decision in fiscal 2026. While the outcome of legal proceedings is uncertain, we believe we have appropriately reserved for our exposure on this issue and expect a positive cash inflow upon resolution. Second, we incurred an additional $3.8 million charge on a crude project impacted by lower-than-anticipated labor productivity. You may recall we discussed this project last quarter when we began to incur productivity issues. While we work hard to avoid any issues during our projects and our industry, issues will occur from time to time. When they do, our focus is on reducing any financial impact and maintaining our strong relationship with our customer. We are pleased to report that the team worked through the issues, completed the project earlier this quarter as planned and did so in a manner that further solidified our relationship with an important customer. Third, we incurred a $1.3 million charge related to an unexpected court decision on a project completed in calendar 2021. In this case, a subcontractor of ours failed to pay certain vendors even though he had been paid by -- even though we had paid the subcontractor. As a subcontractor is no longer able to pay their obligations. The court ruled, we had to make good on the amounts owed to the vendors, effectively requiring us to pay the obligations twice. Finally, we incurred $3.4 million in restructuring costs related to the organizational improvement actions John previously discussed. As those actions continue to fiscal 2026, we expect to incur a similar amount of restructuring costs in the first quarter. These actions were mainly designed to improve operational efficiencies, but they also reduced our annual overhead cost structure by approximately $12 million as we have experienced higher inflation for the past couple of years and other cost pressures, these changes will allow us to keep our annual cost structure flat during a period of strong revenue growth. The combined impact of these items was significant to the quarter. It decreased our revenue by $6.4 million to the reported $216.4 million, which was just below our implied fourth quarter guidance range. It negatively impacted EPS by $0.53, which resulted in the $0.40 loss I previously referenced, and it decreased our adjusted EBITDA by $11.5 million to a $4.8 million loss. We believe discussing the results in this manner is necessary to demonstrate the fundamental performance and improvement in the underlying business. We have previously discussed our fiscal 2025 focus was to improve operating results and return to profitable performance due to the growth in our revenue run rate, effective project execution, and leverage of our overhead cost structure. The revenue grew each quarter of the year as large projects ramped. That growth continued in the fourth quarter with revenue being 31% higher than the start of the year. The revenue run rate has now reached a level that supports positive earnings. As previously mentioned, our project execution was strong enterprise-wide as the underlying business produced double-digit direct margins, excluding the items discussed. We have a quality backlog, and we'll continue to focus on effective project execution. The leverage of our cost structure improved throughout the year but the impact of the under-recovered construction overhead reducing from 620 basis points in the first quarter to 160 basis points in the fourth quarter. Finally, SG&A leverage also improved from 11.2% of revenue in the first quarter to 8.1% in the fourth. As we move through fiscal 2026, additional revenue growth combined with the efficiency actions taken will allow us to materially eliminate the under-recovery of construction overhead to further leverage SG&A toward our 6.5% target. Moving to the segments. Storage and Terminal Solutions segment revenue increased 37% to $96.1 million in the fourth quarter of fiscal 2025 compared to $70 million last year due to increased volume of work for specialty vessel and LNG storage projects. Gross margin in the fourth quarter of fiscal 2025 reflects improved operating leverage resulting from higher revenue. However, gross margin was a negative 1.1% in the fourth quarter compared to a positive 3.1% last year as a result of labor productivity issues on crude terminal project and lower recovery expectation on the legacy project, both of which were discussed previously. Utility and Power Infrastructure segment revenue increased 12% to $73 million in the fourth quarter compared to $65.3 million in the same period a year ago, benefiting from a higher volume of work associated with natural gas peak-shaving projects. Gross margin was 9.1% in the fourth quarter compared to 4.2% last year, an increase of 4.9% due to strong project execution and improved construction overhead cost absorption. The fourth quarter gross margin was also impacted by a $1.3 million charge related to the unfavorable court decision discussed previously. Process and Industrial Facilities segment revenue decreased to $47.3 million in the fourth quarter compared to $54.2 million last year, primarily due to lower revenue resulting from the completion of a large renewable diesel project last year. In addition, we have lower revenue from thermal vacuum chambers, partially offset by higher revenue volumes or refinery work. Due to the change in mix of work, gross margin was 5.9% in the fourth quarter of fiscal 2025 compared to 15.4% last year. Now let's discuss backlog, which stands at almost $1.4 billion as of June 30, 2025. Project awards totaled $186.3 million in the fourth quarter resulting in a book-to-bill ratio of 0.9. While economic uncertainty has impacted the timing of project awards overall, the Utility and Power Infrastructure segment had a strong quarter with $121.9 million in awards and a book-to-bill of 1.7. These awards were related to LNG peak-shaving projects and substations. The year-end backlog level is supportive of strong revenue growth in fiscal 2026. And moving to the balance sheet. Our cash increased an additional $39.1 million in the fourth quarter related primarily to working capital changes. For the year, our cash balances increased $109 million to $249.6 million as of June 30, 2025. Available liquidity has increased to $284.5 million and is comprised of $224.6 million of unrestricted cash and $59.8 million of borrowing availability under the credit facility. The company also has $25 million of restricted cash to support the credit facility, and our debt position remains at 0. Subsequent to year-end, the company executed an amendment to the credit facility, which extends its term until September of 2029. The company entered fiscal 2026 in a strong financial position, that provides liquidity needed to support the execution of our backlog and to deploy capital towards growth. With that, I would like to turn the call over to John for some final remarks. John Hewitt: Thank you, Kevin. In closing, I'd like to reiterate the following takeaways: First, despite some legacy legal issues and other noise during the fourth quarter, our team grew revenue consistently quarter after quarter, through the year and is executing above plan from a direct gross profit perspective on the work on hand. Second, our strategy is working. We are winning work in our key focus areas, maintaining our near-record backlog even in the face of the uncertain macroeconomic environment, our organizational realignment is strengthening our platform and positioning the company for sustained profitable growth, both organically and inorganically. And third, our momentum into fiscal 2026 is strong with robust backlog and a strong opportunity pipeline. We're guiding to 70% revenue growth next year with 85% of that revenue from backlog that is already in progress. So with the tremendous momentum that exists across the business, we believe we are entering a prolonged period of growth. Above all, we remain committed to delivering sustainable shareholder value by building a platform capable of consistent profitability, backlog growth and cash generation. I'm proud of what our team accomplished in fiscal 2025 and even more excited about the road ahead. By remaining disciplined, focusing on safety and quality and continuing to improve our operations, we are confident in our ability to drive growth, create long-term value for our shareholders as we successfully win, execute and deliver. With that, we'll open the call for questions. Operator: [Operator Instructions] And our first question comes from the line of John Franzreb of Sidoti & Co. John Franzreb: John, last quarter, you kind of referenced the fact that some of the jobs are being pushed to the right due to economic uncertainty. Are you still seeing that? John Hewitt: Yes. I mean it's -- I would say there's kind of an overhang across our industry. And -- but we're only really -- I say we're really only able to point a finger at a couple of projects that were in our sites that you could say we're directly impacted by what's going on with tariffs and some of the global events and I think it just sort of feels like there's an overhang. And most of those projects are probably really related to things that have more of a global involvement, meaning things that are exporting some kind of energy product, let's say, the internal stuff, the LNG peak-shaving and backup fuel supply, there continues to be a lot of energy around those, no pun intended, and that I think the large -- we're still seeing a lot of smaller projects kind of come through the pipeline, the major projects. Those are just timing things, and they come and go and they take a while for those to germinate. But we have some of the larger LNG peak-shaving projects in our sites. And it just takes some time for those projects to develop. So from a domestic standpoint, I think we see -- we feel pretty good about the timing of an opportunity for rewards there. Certainly, there's more attention from our clients around material escalation from tariffs and those kinds of things become part of how we price and how we negotiate our contracts with various clients. But we've been fairly successful working through those risks with our new and existing clients. John Franzreb: Got it. And when you look at the opportunity profile and you just referenced some larger jobs that are out there maybe, do you expect to exit fiscal 2026 at a near 1.0 book-to-bill or is that too much to ask? John Hewitt: No, I think -- I certainly think that opportunity is out there. You've been around us long enough that you know the timing of those awards certainly have a major impact if things can slip a month here or there. And -- but certainly, what we see in our pipeline, the opportunity for us to book inside the, let's just say, our guidance range -- revenue guidance range. I think those projects are out there. And the thing -- when we have these big upticks in our backlog, they come from a major project that we booked that's in the $300 million, $400 million kind of range where we have a couple of those in our backlog today, and we're looking for opportunities to replace those and build on those moving forward. So this year, I think our award cycle is going to be made up of smaller kind of -- or normal sort of bread-and-butter projects, but smaller projects that are in $50 million to $150 million kind of range. But we think those are out there and the opportunity for us to windows and hit a book-to-bill of 1 is certainly available to us. John Franzreb: That's good to hear. And -- just what's your confidence level of returning to profitability and that kind of time line? How does that play out as the year progresses? John Hewitt: I would say our confidence is high. We feel good about the quality of the backlog we have and the fact that the high-quality backlog is in flight and that how that backlog is going to roll out over the course of the year plus even some of the backlog that we added in fiscal '25 helps to fill some of the holes in fiscal '26 already. And so I think we feel pretty good about our revenue levels and after revenue levels we're projecting, we're going to be in a position to be able to return to profitability. John Franzreb: And one last question, I'll get back in the queue. The cash position is building. Just could you just talk a little bit about how much is that advance payment from customers and how much is Matrix? Kevin Cavanah: So I'll take that. The cash position has built considerably this year. We've got a lot of long-term projects where we have seen some upfront money, but the balance sheet is strong. So we'll definitely use a good portion of that $250 million of cash for the projects. But we probably have cash available for just a normal level. If you look at what the working capital investment is currently what the cash level is of $50 million to $70 million that's kind of built up cash for just operating the business and it could also support growth activity. So we feel good about where we've got this balance sheet. Operator: And our next question comes from the line of Brent Thielman of D.A. Davidson. Brent Thielman: I guess first question just would be kind of back to some of the moving pieces of the quarter. Are you able to comment on other potential COVID era legacy jobs that you're in dispute that we need to keep in the back of our minds? Or do we feel like we're kind of beyond this at this point? John Hewitt: I think we're -- I think anything of any materiality works pretty much beyond. This one -- Particularly this one particular project that we're talking about that took the $6 million charge as Kevin had noted, we've been fighting that. We reached mechanical completion on the job back in early '21. And we've been in a dispute with a client since then. And we have attempted numerous occasions to get that settled and was unable to do that and ended up in, as Kevin said, in arbitration last month, but yes, that's really kind of the final material legacy pandemic issue that we've got. Brent Thielman: And then maybe a 2-parter to the restructuring actions you're taking would be, one, Kevin, if you don't mind just your expectations for the cost savings impact you should get from this and I guess, two, any early indications or evidence of some of the things that you're doing that's allowing you to win more work. Where are you seeing the positives of what you've been doing here to potentially, I guess, the bookings or any other measure we can look at? John Hewitt: So I'll hit the second part of your question, and Kevin can hit the first part. So we made a lot of significant changes over the last 5 months. And right now, we are kind of settling in -- so we moved people around in the seats and got rid of some of the seats and so it created opportunities for some of the people in the organization to step up and take some different new leadership roles. So I think we've created a lot of energy in the organization. You can feel a lot of energy in the organization. Like we said, we've flattened and streamlined the decision-making process and so we are still kind of settling in the key strategies and objectives with the organization. We just met with the Board 2 weeks ago and reviewed our strategy and our plans with them. And so -- but I think we're already seeing an improved alignment between different elements of the business and what we need to do to support each other, what we need to do to win work, what our real focus areas are from a market perspective. And so I think this change and as recalling a realignment in the organization is really going to bear some fruit for not only on how we win work but our ability to execute work, particularly around work that's EPC-related where we've got the critical engineering deliverables and then the -- our ability to execute that work on our projects. Kevin Cavanah: And when you look at the cost, we -- as I mentioned, we've cut out about $12 million with these most recent actions. That's split about 50-50 between construction overhead and SG&A. So it will -- we -- our SG&A has been running just under $18 million a quarter in fiscal 2025. I think you'll see it in the $16.5 million range per quarter in fiscal '26. The construction overhead impact will help us address the construction overhead, combine a little bit lower cost structure with the increasing revenues. We'll continue to focus on eliminating the COH. So I think we made the right steps in the last couple of quarters. Brent Thielman: Okay. I guess my last question is a little bigger picture, John. There's been some fairly significant announcements here over the last few days and then related to the data center theme. And I guess the question for me would be, maybe if you could just elaborate. Where does Matrix play into this, whether directly or kind of second derivative of the things that are happening in that market that only seem to be getting bigger and bigger as we look out over the next few years. Where do your cards deploy? And how does that pipeline that you have? What is it -- how does it inform you about your opportunity there? John Hewitt: Yes. Good question. So I mean, we are not going to be the person who builds the data center, right? That's just not -- that's not who we are. We don't envision being out there doing that. That's a fairly highly competitive light industrial kind of market. And so to make that step would be a pretty big leap. But where we are going to play a role in both directly and indirectly is the demand for additional power generation everywhere and the demand for backup power and the fuel for that power related -- directly related to data centers the AI computing, advanced manufacturing. So we see significant opportunities there. And if you recall, you've been around us long enough, I mean, we had a position in the gas-fired turbine construction market, both for in simple cycle mode and in combined cycle for baseload generation. So we have those skill sets. We turned our focus to other areas of construction as that market 5, 6 years ago kind of went in hibernation. But this growing demand for power, which we don't see as something that's going to stop. And so it's related not only to the increased demand related to what we talked about here in data centers and AI. But just in general, the general electrification of everything, it's just requiring more power generation, you've got more -- in spite of some of the rhetoric coming out of Washington, we're still probably going to be retiring coal fleets and moving more to our gas-based power generation economy. So -- and then you got the opportunity for interconnect, for substation work, we've done -- for a couple of data centers, we've done the substation work and the interconnect work for them. A lot of those data centers have high demand for cooling. And so some of that is more of a -- more complex process installation than what you might normally have in a light industrial facility, which could create opportunities for us. So our opportunities and our work around there will be a little bit more on the fringe. And then just the demand for generation, not only the installation of baseload generation and backup generation, but also the gas required to fuel it, pushing that back into the utilities with the work that we're doing and peak-shaving facilities, the work that we're doing in and backup fuel supply for utilities, the upgrading -- a couple of our awards in the quarter here were related to existing LNG peak shaving facilities that hadn't been updated for 30 years. And so we're going in and doing -- in some cases, the full EPC to update the process equipment and not even necessarily the storage, but the process equipment of those existing LNG [Technical Difficulty]. Operator: I'm showing no further questions at this time. I would now like to turn it back to Kellie Smythe for closing remarks. [Technical Difficulty] Please standby. Your call will begin momentarily. And I see you are back in line. You may begin. Kellie Smythe: Marvin, this is Matrix. Can you hear us okay? Operator: Yes. You're back. Kellie Smythe: Okay. We think you have dropped off the call. Operator: Okay. No closing remarks? Kellie Smythe: Yes, we do. We were still answering our question. Kevin was still answering our question. We're going to finish the answer to that question. Operator: Okay. You're back on that. Kevin Cavanah: Well, so I think we're back online. Sorry about that. We had some technical difficulties. Brent, I was going to follow up on if you're still there, a follow-up on the cost question you had. An important aspect of what those actions do it is also decreases our breakeven point. The amount of revenue we need in order to get to breakeven performance. In the past, we've talked about that. It was around $225 million per quarter with these reductions. Now it's down to $210 million to $215 million per quarter and so that's definitely a benefit to us increasing the earnings power of the business as we move forward. So I just want to follow up with that and turn it over to Kellie for closing remarks. Kellie Smythe: Thank you, Kevin. As a reminder, we will be participating in the D.A. Davidson 24th Annual Diversified Industrial & Services Conference in Nashville next week, September 17 through the 19. If you are attending, we look forward to seeing you there. Additionally, if you'd like to have a conversation with management, please contact me through Matrix Service Company Investor Relations website. You may also sign up to receive MTRX news by scanning the QR code on your screen. Thank you so much for your time. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.