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The Federal Reserve will release the minutes from its October policymaking meeting on Wednesday afternoon.
President Donald Trump purchased at least $82 million in corporate and municipal bonds between late August and early October, according to newly released disclosures.
Operator: Thank you for standing by, and welcome to the New Hope Group Quarterly Activities Report August to October 2025 Quarter 1. [Operator Instructions] I would now like to hand the conference over to Mr. Rob Bishop, Chief Executive Officer. Please go ahead. Robert Bishop: Good morning, everyone. Thank you for joining our call today. I'm Rob Bishop, Chief Executive Officer of New Hope Group. I'm joined here by Rebecca Rinaldi, our CFO; and Dom O'Brien, our Executive General Manager and Company Secretary. This morning, we released our quarterly report for the first quarter of the 2026 financial year, which includes our guidance for the year ahead. Hopefully, you've had a chance to go through the report. But in any case, I'll briefly step you through our key highlights before we open up the line for the Q&A. It's been a solid start to the 2026 financial year. Most importantly, our safety performance continues to improve with our 12-month moving average TRIFR decreasing to 2.63 at the end of the quarter, which was 18% lower than the previous quarter. It's pleasing to see our safety measures improve our successive quarters, and we continue to make this a key priority. Operationally, both sites performed well during the first quarter. We moved 17.1 million bcms at prime overburden, a 6% increase from the previous quarter, driven by improving mine conditions. In addition, we produced 2.7 million tonnes of saleable coal, an increase of 7% compared to the previous quarter, largely reflecting the easing of logistical and site stock constraints at Bengalla mine. Following significant weather events in the July quarter, Bengalla mine recorded improved operational performance and continues to focus on realignment of the pit sequence. Saleable coal production was 2 million tonnes while coal sales were 1.9 million tonnes, both increasing by over 20% compared to the previous quarter with the CHPP maximizing washed product ahead of its 7-day planned shutdown in December 2025. Following the increased coal production, Bengalla mine achieved an FOB cash cost, excluding royalties, of $83 per sales tonne, 18% lower than the previous quarter. At New Acland mine, the focus was on prime waste movement, which increased by 14% compared to the previous quarter. Saleable coal production was 0.7 million tonnes, and coal sales were 0.8 million tonnes, both lower than the previous quarter as we process some of the lower yielding coal on stock. In terms of financials, the group's underlying EBITDA for the quarter increased by 16% to $108 million, largely driven by increased coal sales at Bengalla. Our average realized price was AUD 137 per tonne, a slight increase from the previous quarter following improvements in both gC NEWC and the API-5 price. During the quarter, the group paid the FY '25 final fully franked dividend of $0.15 per share or $126 million and ended the quarter with available cash of $544 million. As I mentioned earlier, today, we released the group's 2026 financial year guidance, which is targeting saleable coal production of between 10.2 million and 11.5 million tonnes. This outlook reflects an increasing contribution from New Acland mine and production at Bengalla mine maintaining a relatively stable state, despite the flowing effects from significant weather and downstream logistics challenges which impacted the 2025 financial year. Overall, we are looking forward to a productive and safe year ahead and continue to remain a low-cost producer. I'll now hand over to the operator to start the Q&A session. Operator: [Operator Instructions] Your first question today comes from James Williamson from Bell Potter. James Williamson: I might just start with New Acland. Can you just elaborate on what you're now required to do following the Queensland government change in the Stage 3 conditions around the construction of the new rail loop? And what CapEx is required or potential CapEx savings as a result of that decision? Dominic O’Brien: Sure. I'll -- Dom O'Brien here. I'll take that one. Significant change recently was the Coordinator General's decision to delete the requirement for us to build a dedicated rail loop at the mine. This is probably the most significant change in the approvals process since we commenced our ramp-up activity really going back a couple of years now. The main issue with the rail loop was that it was originally proposed back when the footprint of the mine that we applied for was proposed to be much bigger. And as we went through a very protracted approvals process, we really, at the end of that, ended up with a suite of approvals that saw the mine continuing to operate at the same levels as it has done historically. So in that context, it didn't really make any sense to build a dedicated rail loop, and there was some very legitimate questions about the utility of it. So we explored with the Coordinator General the option of deleting that rail loop and looked at other conditions around enhancing the local road network that we would continue to use as we have done historically. And we also looked at some options around further enhancing community investment to deal with any impacts that were associated with that change. So we went through what we thought was a very useful and sort of sensible process, and we resulted in an outcome that was quite balanced through the deletion of that rail loop. And sort of most importantly as well, it's enabled us to scale back the footprint of the mine, and we also result in not having to disturb over 100 hectares of land. It will just remain as it is. So a range of benefits there. On the capital aspect to it, the headline number for building that rail infrastructure that we had estimated previously was about $120 million. So we save that upfront. There is, however, investment that gets repurposed into the local roads network, and that sort of smooths that capital profile over the life of it. James Williamson: Great. Maybe just another question on Bengalla. How should we think about the production and cost profile over FY '26 as a result of the pit realignment happening? And is the focus sort of in the first half on pre-strip with production and sort of cost to improve across the year? Robert Bishop: Yes. So as you would have seen in the quarterly and at the end of the quarter last year, we had significant rain events and logistical constraints, which impacted our FY '25 year, which that obviously, I guess, changed the profile of the mine planning for the pit last year and then that continued into the first quarter of this year. So for the remainder of this year, it's really aligning the pit, laying back the high wall to ensure we can get the pit back in sequence. So this year, you will see a slight increase on FOB costs, and that's really just driven by, I guess, a short-term heightened strip ratio off the back of that pit realignment. And then moving forward, once that's back in sequence, you'll see that the strip ratio will come off, and we'll achieve sort of that 13.4 million ROM, which was indicated as part of the growth project, and you'll see the unit cost come back down to a more consistent longer-term rate. James Williamson: Great. And then just another one, if I may, on balance sheet, and then I'll pass it on. But even if you remove the dividend payment, your cash balance is still down around -- I calculate around $37 million. Is that sort of just a result of CapEx and/or how should we think about the CapEx profile across FY '26? Rebecca Rinaldi: Yes, sure. So I mean, the cash balance is down because of the dividend, but also we acquired an additional 3% in Malabar. So that was around $36 million that transacted towards the end of September. So that kind of bridges that gap per the original for the previous quarter. I guess this year, we do have a heightened capital profile at Bengalla. There is capital in there that we are required to do over the next 12 to 18 months, and we're also looking at a fleet replacement for the trucks, which we've talked about in previous reporting documents. We are looking at financing those trucks to really smooth that cash profile, while the coal price is still sitting at a relatively low level. But overall, I think the balance sheet is in a pretty good state, and we'll continue to manage capital as we need. Operator: [Operator Instructions] Your next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just a couple. Firstly, any comments you can make around how we should think about New Acland, its costs in '26, say, relative to last year? Robert Bishop: Yes. No, it's a good question. I think Acland and obviously, guidance, we haven't included that in the past really because it's in ramp-up. So we'll obviously combine that into the group guidance moving forward. But for now, while it's in ramp-up, it probably doesn't send the right message with regards to costs. Once it gets to a steady state, it will sit in the low 90s for -- so that's the cost to put it on the boat, so FOB cost. And really, the difference between if you were to compare Bengalla and Acland is just the rail corridor. So it's not as efficient, smaller trains and less volume going down the trade line. So longer term, when we're running at about 5 million product, it will be in the low 90s at Aussie. Glyn Lawcock: All right. That's great. And then just the buyback, it's obviously been in place but inactive all year. You've been returning cash through dividends though. So you're still happy to return cash. Is there -- why the preference for dividends over buybacks once it was put in place but not used? Any thoughts? Rebecca Rinaldi: Yes, sure. So I guess, yes, we did turn the buyback on when we saw real volatility in the market around that March, April period. We've seen the share price come a lot higher than originally when we entered the buyback, and I think the average buyback price about $3.60. We are still active in the buyback, and we'll look for opportunity when it comes about. But at the moment, given where coal price is and the capital profile, the focus is to maintain a reasonable dividend profile and also utilize the franking account balance we have, which is about $900 million at the moment. So again, we want to put that in our -- the hands of our shareholders. So probably the preference at the moment is dividends. Glyn Lawcock: Okay. No, I appreciate that, Rebecca. And I guess if you have a windfall and prices go back up, then we may supplement it. But right now, just focus on the dividend and the banking. It's just a surprise to put it in place when you really had all that franking to start with, I guess. Rebecca Rinaldi: Yes, that's right. It's just flexibility really that we like to have. Operator: As there are no further phone questions, we will now pause briefly and address any questions from the webcast. Your first question from the webcast today asks, regarding future dividend payment, would the management consider to use a large amount of cash reserve as a backdrop to maintain high yield dividend than your competitors to attract more income-seeking investors? Rebecca Rinaldi: Yes. I guess that it's a good question. And I think one we consider a lot when we come to each reporting period and decide what dividend to pay in line with the Board's expectations. Like I mentioned earlier, we are in a soft period of coal pricing, and we do have a slightly higher capital profile for both operations over the next 12 to 18 months. That's probably where we see the most value is getting our sites, particularly New Acland, ramped up to that 5 million tonnes. So that is, by far, the best use of cash at the moment. Aside from that, in Bengalla's capital profile, then yes, we would look to reward shareholders with a strong dividend profile. We want to maintain that profile, and we do what we can when we look back over the past 6 months and look forward as to what coal price is doing. But in order -- I guess we did raise a lot of that cash for strategic opportunities. So I can't see us using all of it for dividends, but we would assess the situation at each reporting period. Operator: Your next question from the webcast asks, what mitigation strategies have you put in place to limit the logistics constraints at Bengalla? Robert Bishop: It's a good question. So those constraints arose during the significant weather events in the Hunter region at the end of last year, which I touched on before. Yes. We incurred significant rail cancellations during that weather, and there are also issues with labor availability and congestion at the port. So the focus has really been engaging with the major rail providers since those events. And certainly, we've seen some improvements, but certainly more improvement is needed. We look to other logistics providers as well just to ensure that we cover off any potential downside with a specific rail provider. And we've also looked to increase our overall haulage capacity. So that if there are more constraints, we've got more capacity to deal with. Operator: Your next question from the webcast asks, is the company considering increasing its stake in Malabar any further? If so, are there any active discussions in this regard? Robert Bishop: I guess, in short, no, with regards to active discussions. You would have no doubt recall, we've completed 2%, 3% increases in Malabar, and that's really been off the back of being approached by other major shareholders. So we're not actively looking for it. But if we get approached for an opportunity, we assess it on its merits. And in these 2 cases, we've executed on both 3% increases. But as I've said before, projects going well, and we're very happy with the skill set and knowledge of our of other major shareholders in that business. Operator: Your next question from the webcast asks, the proportion of high ash coal sales seems to be increasing in comparison to total sales. Is this trend expected to continue? Robert Bishop: So the -- I guess, the sales mix during the quarter was really off the back of sales from New Acland. So we are seeing, I guess, a higher portion of higher shipments scheduled in the quarter. But we will see that come down across the year. And then once we get to full production, you'll see it fall back to that sort of similar percentage split that we saw in Stage 2. So it's really just a timing issue at the moment where we are in the development of that pit. Operator: Thank you. There are no further questions at this time. I'd now like to hand back over to Mr. Bishop for any closing remarks. Robert Bishop: No problem. Thanks for dialing in, and thanks for your time today. Have a great day. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the New Hope Group Quarterly Activities Report August to October 2025 Quarter 1. [Operator Instructions] I would now like to hand the conference over to Mr. Rob Bishop, Chief Executive Officer. Please go ahead. Robert Bishop: Good morning, everyone. Thank you for joining our call today. I'm Rob Bishop, Chief Executive Officer of New Hope Group. I'm joined here by Rebecca Rinaldi, our CFO; and Dom O'Brien, our Executive General Manager and Company Secretary. This morning, we released our quarterly report for the first quarter of the 2026 financial year, which includes our guidance for the year ahead. Hopefully, you've had a chance to go through the report. But in any case, I'll briefly step you through our key highlights before we open up the line for the Q&A. It's been a solid start to the 2026 financial year. Most importantly, our safety performance continues to improve with our 12-month moving average TRIFR decreasing to 2.63 at the end of the quarter, which was 18% lower than the previous quarter. It's pleasing to see our safety measures improve our successive quarters, and we continue to make this a key priority. Operationally, both sites performed well during the first quarter. We moved 17.1 million bcms at prime overburden, a 6% increase from the previous quarter, driven by improving mine conditions. In addition, we produced 2.7 million tonnes of saleable coal, an increase of 7% compared to the previous quarter, largely reflecting the easing of logistical and site stock constraints at Bengalla mine. Following significant weather events in the July quarter, Bengalla mine recorded improved operational performance and continues to focus on realignment of the pit sequence. Saleable coal production was 2 million tonnes while coal sales were 1.9 million tonnes, both increasing by over 20% compared to the previous quarter with the CHPP maximizing washed product ahead of its 7-day planned shutdown in December 2025. Following the increased coal production, Bengalla mine achieved an FOB cash cost, excluding royalties, of $83 per sales tonne, 18% lower than the previous quarter. At New Acland mine, the focus was on prime waste movement, which increased by 14% compared to the previous quarter. Saleable coal production was 0.7 million tonnes, and coal sales were 0.8 million tonnes, both lower than the previous quarter as we process some of the lower yielding coal on stock. In terms of financials, the group's underlying EBITDA for the quarter increased by 16% to $108 million, largely driven by increased coal sales at Bengalla. Our average realized price was AUD 137 per tonne, a slight increase from the previous quarter following improvements in both gC NEWC and the API-5 price. During the quarter, the group paid the FY '25 final fully franked dividend of $0.15 per share or $126 million and ended the quarter with available cash of $544 million. As I mentioned earlier, today, we released the group's 2026 financial year guidance, which is targeting saleable coal production of between 10.2 million and 11.5 million tonnes. This outlook reflects an increasing contribution from New Acland mine and production at Bengalla mine maintaining a relatively stable state, despite the flowing effects from significant weather and downstream logistics challenges which impacted the 2025 financial year. Overall, we are looking forward to a productive and safe year ahead and continue to remain a low-cost producer. I'll now hand over to the operator to start the Q&A session. Operator: [Operator Instructions] Your first question today comes from James Williamson from Bell Potter. James Williamson: I might just start with New Acland. Can you just elaborate on what you're now required to do following the Queensland government change in the Stage 3 conditions around the construction of the new rail loop? And what CapEx is required or potential CapEx savings as a result of that decision? Dominic O’Brien: Sure. I'll -- Dom O'Brien here. I'll take that one. Significant change recently was the Coordinator General's decision to delete the requirement for us to build a dedicated rail loop at the mine. This is probably the most significant change in the approvals process since we commenced our ramp-up activity really going back a couple of years now. The main issue with the rail loop was that it was originally proposed back when the footprint of the mine that we applied for was proposed to be much bigger. And as we went through a very protracted approvals process, we really, at the end of that, ended up with a suite of approvals that saw the mine continuing to operate at the same levels as it has done historically. So in that context, it didn't really make any sense to build a dedicated rail loop, and there was some very legitimate questions about the utility of it. So we explored with the Coordinator General the option of deleting that rail loop and looked at other conditions around enhancing the local road network that we would continue to use as we have done historically. And we also looked at some options around further enhancing community investment to deal with any impacts that were associated with that change. So we went through what we thought was a very useful and sort of sensible process, and we resulted in an outcome that was quite balanced through the deletion of that rail loop. And sort of most importantly as well, it's enabled us to scale back the footprint of the mine, and we also result in not having to disturb over 100 hectares of land. It will just remain as it is. So a range of benefits there. On the capital aspect to it, the headline number for building that rail infrastructure that we had estimated previously was about $120 million. So we save that upfront. There is, however, investment that gets repurposed into the local roads network, and that sort of smooths that capital profile over the life of it. James Williamson: Great. Maybe just another question on Bengalla. How should we think about the production and cost profile over FY '26 as a result of the pit realignment happening? And is the focus sort of in the first half on pre-strip with production and sort of cost to improve across the year? Robert Bishop: Yes. So as you would have seen in the quarterly and at the end of the quarter last year, we had significant rain events and logistical constraints, which impacted our FY '25 year, which that obviously, I guess, changed the profile of the mine planning for the pit last year and then that continued into the first quarter of this year. So for the remainder of this year, it's really aligning the pit, laying back the high wall to ensure we can get the pit back in sequence. So this year, you will see a slight increase on FOB costs, and that's really just driven by, I guess, a short-term heightened strip ratio off the back of that pit realignment. And then moving forward, once that's back in sequence, you'll see that the strip ratio will come off, and we'll achieve sort of that 13.4 million ROM, which was indicated as part of the growth project, and you'll see the unit cost come back down to a more consistent longer-term rate. James Williamson: Great. And then just another one, if I may, on balance sheet, and then I'll pass it on. But even if you remove the dividend payment, your cash balance is still down around -- I calculate around $37 million. Is that sort of just a result of CapEx and/or how should we think about the CapEx profile across FY '26? Rebecca Rinaldi: Yes, sure. So I mean, the cash balance is down because of the dividend, but also we acquired an additional 3% in Malabar. So that was around $36 million that transacted towards the end of September. So that kind of bridges that gap per the original for the previous quarter. I guess this year, we do have a heightened capital profile at Bengalla. There is capital in there that we are required to do over the next 12 to 18 months, and we're also looking at a fleet replacement for the trucks, which we've talked about in previous reporting documents. We are looking at financing those trucks to really smooth that cash profile, while the coal price is still sitting at a relatively low level. But overall, I think the balance sheet is in a pretty good state, and we'll continue to manage capital as we need. Operator: [Operator Instructions] Your next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: Just a couple. Firstly, any comments you can make around how we should think about New Acland, its costs in '26, say, relative to last year? Robert Bishop: Yes. No, it's a good question. I think Acland and obviously, guidance, we haven't included that in the past really because it's in ramp-up. So we'll obviously combine that into the group guidance moving forward. But for now, while it's in ramp-up, it probably doesn't send the right message with regards to costs. Once it gets to a steady state, it will sit in the low 90s for -- so that's the cost to put it on the boat, so FOB cost. And really, the difference between if you were to compare Bengalla and Acland is just the rail corridor. So it's not as efficient, smaller trains and less volume going down the trade line. So longer term, when we're running at about 5 million product, it will be in the low 90s at Aussie. Glyn Lawcock: All right. That's great. And then just the buyback, it's obviously been in place but inactive all year. You've been returning cash through dividends though. So you're still happy to return cash. Is there -- why the preference for dividends over buybacks once it was put in place but not used? Any thoughts? Rebecca Rinaldi: Yes, sure. So I guess, yes, we did turn the buyback on when we saw real volatility in the market around that March, April period. We've seen the share price come a lot higher than originally when we entered the buyback, and I think the average buyback price about $3.60. We are still active in the buyback, and we'll look for opportunity when it comes about. But at the moment, given where coal price is and the capital profile, the focus is to maintain a reasonable dividend profile and also utilize the franking account balance we have, which is about $900 million at the moment. So again, we want to put that in our -- the hands of our shareholders. So probably the preference at the moment is dividends. Glyn Lawcock: Okay. No, I appreciate that, Rebecca. And I guess if you have a windfall and prices go back up, then we may supplement it. But right now, just focus on the dividend and the banking. It's just a surprise to put it in place when you really had all that franking to start with, I guess. Rebecca Rinaldi: Yes, that's right. It's just flexibility really that we like to have. Operator: As there are no further phone questions, we will now pause briefly and address any questions from the webcast. Your first question from the webcast today asks, regarding future dividend payment, would the management consider to use a large amount of cash reserve as a backdrop to maintain high yield dividend than your competitors to attract more income-seeking investors? Rebecca Rinaldi: Yes. I guess that it's a good question. And I think one we consider a lot when we come to each reporting period and decide what dividend to pay in line with the Board's expectations. Like I mentioned earlier, we are in a soft period of coal pricing, and we do have a slightly higher capital profile for both operations over the next 12 to 18 months. That's probably where we see the most value is getting our sites, particularly New Acland, ramped up to that 5 million tonnes. So that is, by far, the best use of cash at the moment. Aside from that, in Bengalla's capital profile, then yes, we would look to reward shareholders with a strong dividend profile. We want to maintain that profile, and we do what we can when we look back over the past 6 months and look forward as to what coal price is doing. But in order -- I guess we did raise a lot of that cash for strategic opportunities. So I can't see us using all of it for dividends, but we would assess the situation at each reporting period. Operator: Your next question from the webcast asks, what mitigation strategies have you put in place to limit the logistics constraints at Bengalla? Robert Bishop: It's a good question. So those constraints arose during the significant weather events in the Hunter region at the end of last year, which I touched on before. Yes. We incurred significant rail cancellations during that weather, and there are also issues with labor availability and congestion at the port. So the focus has really been engaging with the major rail providers since those events. And certainly, we've seen some improvements, but certainly more improvement is needed. We look to other logistics providers as well just to ensure that we cover off any potential downside with a specific rail provider. And we've also looked to increase our overall haulage capacity. So that if there are more constraints, we've got more capacity to deal with. Operator: Your next question from the webcast asks, is the company considering increasing its stake in Malabar any further? If so, are there any active discussions in this regard? Robert Bishop: I guess, in short, no, with regards to active discussions. You would have no doubt recall, we've completed 2%, 3% increases in Malabar, and that's really been off the back of being approached by other major shareholders. So we're not actively looking for it. But if we get approached for an opportunity, we assess it on its merits. And in these 2 cases, we've executed on both 3% increases. But as I've said before, projects going well, and we're very happy with the skill set and knowledge of our of other major shareholders in that business. Operator: Your next question from the webcast asks, the proportion of high ash coal sales seems to be increasing in comparison to total sales. Is this trend expected to continue? Robert Bishop: So the -- I guess, the sales mix during the quarter was really off the back of sales from New Acland. So we are seeing, I guess, a higher portion of higher shipments scheduled in the quarter. But we will see that come down across the year. And then once we get to full production, you'll see it fall back to that sort of similar percentage split that we saw in Stage 2. So it's really just a timing issue at the moment where we are in the development of that pit. Operator: Thank you. There are no further questions at this time. I'd now like to hand back over to Mr. Bishop for any closing remarks. Robert Bishop: No problem. Thanks for dialing in, and thanks for your time today. Have a great day. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
The S&P 500 (SPY) remains in a bullish trend, with recent volatility likely a shakeout rather than the start of a bearish move. Holding support while the Mag 7 stocks corrected sharply is a positive.
New York Federal Reserve President John Williams met with Wall Street's dealers last week about a key lending facility, the Financial Times reported, citing three individuals familiar with the matter. The meeting included representatives from many of the 25 primary dealers from banks that underwrite the government's debt, according to the report.
Americans would have higher pay and greater purchasing power if the Fed got its act together.
Tech stocks have been volatile in recent trading as fears about 'Mag 7' concentration in the S&P 500 and AI valuations have pressured trading. But stocks still remain near all-time highs, and Warren Buffett's Berkshire Hathaway revealed a stake in Alphabet, a company it said not too many years ago it had already missed the opportunity to invest in.
A recent WSJ-NORC poll found many Americans are comfortable pessimists: financially comfortable themselves but concerned about the economy's future. See where you fit in.
Stock investors may be in for an unsettling start to the week if doubts about the AI trade keep colliding with concerns around the upcoming release of backlogged economic data.
The current AI-driven market is not a bubble but rather a massive industrial buildout underpinned by real cash flows and cautious capital allocation. AI capex is surging, with hyperscalers and major tech firms investing trillions, yet financing remains disciplined and risks are increasingly priced in.
President Trump recently proposed $2,000 tariff dividend checks and 50-year mortgages. While these proposals may help consumers with affordability challenges in the near term, over the long term, they may break the market.
The S&P 500 ended the week flat, masking significant sector rotation and capital flows beneath the surface. Investors favored foreign markets, defensive sectors, and value stocks, while U.S. small caps, growth, and high beta names lagged.
Federal Reserve rate cuts are overwhelming deficit fears, boosting Treasurys and corporate debt.
Margin debt continued to climb to new heights in October, reaching a new all-time high of $1.18 trillion. When adjusted for inflation, the debt level was up 4.8% MoM, reaching its highest level in history, and is up 40.7% YoY.
Cockroaches and AI deals and stock prices, oh my! Today on the Big Take podcast: Opinion columnist and markets editor John Authers and host David Gura unpack the worrying — and reassuring — signals in the economy Jamie Dimon, JPMorgan Chase & Co.'s chief executive officer, said "my antenna goes up when things like that happen" in reference to the bankruptcies of Tricolor Holdings and First Brands Group.
Sverre Flatby: Good morning, everyone, and welcome. We have just passed an important quarter, and I'm really excited to take you through the highlights. First off, thank you very much for your feedback. We have sharpened the agenda and the key points according to your input. The highlights, this is what we're going to go through. The format stays the same, 30% updates, and presentations and then a Q&A at the end. And as always, don't wait. Post your questions during the session, and then we will get back to them at the end when we have the Q&A. So what is the main message? Well, the third quarter is very, very strong, and it gives us a platform, and it crowns the first half year, which also was strong and gives us a value creation platform that we have been longing for. And today, it is all about the momentum. And I will go through on the right-hand side, these points before my colleague, Einar, also will go through the financials and the next steps of our plan for intrinsic value creation. So let me start with the EBITDA margin. And of course, 30% EBITDA is a record-high margin. It is not only a record, it's also as expected. So for those of you, who paid attention when we guided in December 2024, you are probably not surprised by a 30% EBITDA margin. If you look around us, our peers, our competitors in our region, you will probably conclude that Omda is not only the leader when it comes to highly specialized software for health care and emergency, but we are also a leader when it comes to profitability in our region. And it's, of course, this quarter, this result, a strong stepping stone for the plans we're going to present to you today. And then over to an even more, I would say, predictable part of our business plan, the growth. And the growth this quarter compared to the same quarter last year, 14% growth. And what is that? It is a mix of the organic momentum we have, but it's also a small contribution from our relatively modest acquisitions we made a year ago. So as part of those 14%, the organic growth is 7%. And as you all know, we have guided in the interval between 5% and 10%. So 7% is as expected. And what is it? It is the activity among our business units with our long-standing customers, and in local currency, constant currency, the growth they have in their business. So -- and also if you look at the growth of recurring revenue, which probably for many, is very, very important. And the reason is, of course, that historically, the last 10 years, we have had about 2% churn, and that means -- or actually lower than that, and we expect that to be the same in the next 10 years as well. And that, of course, tells you something about the 15% growth in recurring revenue, what that means for the long-term recurring revenue. And also please remember, who is actually the counterparty here, public customers, large public customers with critical solutions in place that will stay there for decades. So I think this number is one of the most important, and it speaks for itself. Another good thing this quarter, it shows you a couple of things. 27% growth in Professional Services and what is that? It's actually a combo of 2 important things. One thing is the customer side. All of our customers are dependent on these critical systems. They have complex workflows. They have to add things to their current solutions. That could be integrations, it could be other things to be changed that are necessary to enhance their workflows. So one thing about this 27% is, of course, high activity among our customers. And that is a fundamental important thing. Another thing we announced a few quarters ago that we will increase the efficiency internally, when it comes to billable hours. So that combo, higher activity on the customer side and a more efficient use of our own resources gives you this growth of 27%. And I think, the one thing you need to know about Professional Services is, of course, that this is also recurring. If you look at this quarter, more than 90% of this Professional Services is sold to current customers with current contracts, so with customers that have been there for years. That means we have almost an extreme visibility when we are looking at next year and the years to come. And that brings us over to the guidance. As mentioned, we guided for the first time in December 2024. And when we guide, of course, we need to make sure that we have the intervals that we can control and based on the high visibility we just presented. And we have published earlier NOK 460 million to NOK 485 million for this year as the organic business sales. I think we're now ready to confirm that the sales will be in the upper range of this interval. So it would rather be around NOK 485 million than in the lower part. And also we stick to our current guiding, when it comes to EBITDA between 23% and 27% on average for this year, 2025. And please remember that we guide here and expect this to be the reported EBITDA that includes any type of one-offs. There was other things happening in the fourth quarter at the end of the year, but this is what we expect is going to be our reported EBITDA margin between 23% and 27%. But as mentioned, when we have the run rate for this year and into the fourth quarter, which we are now, then the ability to foresee what's going on in '26 is, of course, much, much stronger at this point in time. That means that we also would like to reiterate the interval we had, when it comes to the top line for 2026. So what we have concluded is that the published guidance for NOK 500 million to NOK 525 million, we stick to that, and you should expect that from us that the company sales for 2026 will be in that range. And also -- and I hope you all will see based on the 30% EBITDA margin delivered this quarter. This also represents the average expectations we have in our budgeting for 2026, that we will be within the range of 28% and 32% EBITDA for 2026. And of course, as you will understand implicitly that the cash from operations will be stronger and stronger, starting, of course, in the fourth quarter now and continuing with a strong '26, that not only the EBITDA, but also the cash EBITDA will be strong. So all in all, we have to say that a very strong quarter gives us the ability when we look at also the visibility for the rest of the year and next year to be quite confident, when it comes to these numbers. But that is one thing, a good news, of course. But not only that, there are more opportunities and more exciting things going on at Omda. And when I presented the third quarter this year with 30% margin, where did that come from? If you look at Omda's history, 18 acquisitions have been made and most of them actually with not a profitability history behind them. So why is it that Omda put together acquisitions like that, and in a proven way, can perform 30% EBITDA and also guide for that the coming years? Well, that is our buy-integrate-and-build philosophy, where we acquire customer code competence. We get to the best type of targets that fit into our industrial plan in addition to, of course, having the methodology to secure that we get into profitability. So on top of our already successful organic business, we have a very active pipeline these days. And of course, this database we've had for 20 years and a lot of those companies are relevant to us, some of them as these 2 on the graph to the left with qualified targets and targets that we have analyzed or working with. And the 2 on the right-hand side represents the way we have been working for years. We have sometimes dialogue over years and sometimes more active dialogues with specific targets. And I think you have to understand that Omda, of course, will continue the growth journey in addition and as an add-on to the successful organic business just presented. So that means we are quite confident that we will reach our goals, when it comes to M&A as well, not only in our organic business. So I think we should be precise. It has been a target for the next years that we will add roughly between 10% and 20% in inorganic growth on top of our current organic business. And for the next year, I think you also should expect it as a guidance that this 10% to 20% also applies as an addition to our NOK 500 million to NOK 525 million organic sales, as we just presented. So all in all, I must say that when we go through with a 30% EBITDA margin, 14% growth, and a guidance that stands strong, and with another set of extremely interesting opportunities on the M&A side, I think we are in a better position for Omda now than we've ever been. And is also a safe haven in a way for us, not affected by all these uncertainties in the world since our hospitals and specialists, our customers are really needing these solutions. So all in all, I have to conclude that the third quarter 2025 marks a very good performance as one, but also of course, a platform for the journey going forward. So next step now is that we will, of course, go into other topics. And Einar, it's now time to go through the financials. It's an even, you also have some ideas about the value creation plan going forward. Einar Bonnevie: Yes, I do. Thank you, Sverre. Let's take a look at the financials, a deep dive. First, the revenues, and as Sverre presented, the 14% increase from same quarter last year, split evenly between acquired growth and organic growth. That said, the recurring revenue, they grew 15%, and the strong momentum on Professional Services continued, up 27% compared to the same quarter last year. But speaking of Professional Services and recurring, recurring is more in software. We are taking a closer look at the Professional Services. And in the past, we have referred to this as semi-recurring, but taking a closer look, 92% of the customers in the third quarter, they were also customers of Omda a year ago on Professional Services. And year-to-date, the same number is 86%. So we can also view these customers since they have been customers for a very long time, and even more than a year ago, as recurring. They keep -- they are there, they want services from us. So applying this logic, we get a different picture and perspective of what is really recurring. So the real recurring year-to-date using the lowest number now, see that it's actually 94%. If I take the software recurring and the Professional Services recurring, we reached 94%. That gives an unprecedented predictability for us for this year -- for the guidance this year and for next year. Okay. M&A, Sverre mentioned M&A, and he mentioned the margin, the 30%. A quick recap there on the buy, integrate and build. We said this takes 12 months, 18 months, 24 months. And our focus has been and is on what we call turnaround or turn better candidates. And this is nothing new. This is a slide from when we IPO-ed 5 years ago. So we've been speaking of this all the time, we had a different -- slightly different time perspective, but this is nothing new. It's very integrated Omda for all the acquisitions we've done to acquire subperforming businesses, turn around, turn better. And this is how we present it today. So it has been with us all the way. And the thing is, the last 3 candidates they are -- that we acquired last year in the fourth quarter, we announced them, Predicare, Dermicus and Aveia. They are all in this category. And they were acquired in the fourth quarter. We closed them in the first quarter. So they have been with us, say, 6 to 9 months. And the first target in our bio-integrate-build philosophy is always to bring them to breakeven. That's the first target. So they're not bleeding cash. And using this logic, we see that how did it impact us. The sales from these 3 businesses, they amount to approximately NOK 30 million, out of this approximately NOK 360 million in total. So if I look then at the 2025 total, and look at the -- what would have been the margin excluding M&A, so they contributed with NOK 30 million in sales, but nothing in EBITDA. So excluding this, the margin would have actually been 2 percentage points better. And if I look at the Q3 in isolation, we see that the reported and the effect from the acquired businesses, they actually hurt us by 3 percentage points, or something like that. So the strong -- the 30% margin, the underlying on the business before we did the acquisitions is actually stronger than what we show you. Okay. So then you can say, why do we acquire subperforming businesses? The reason is very simple. Over the next 12, 18, 24 months, we will bring these businesses up to the same level as the rest of the -- rest of Omda. And the initial underperformance is part of the business case, is part of the plan, it has always been like that. And all the other acquisitions, the 15 acquisitions we've done before have been exactly the same. So this is what we do. And we think that for the long-term perspective, for the long-term investor, if you have a long apply, long-term perspective, this makes a ton of sense. And this is also where on the -- probably differentiates -- differs from the other serial acquirer or compounder or whatever you want to call us, that always say, we buy good businesses that perform well, and we pay them well, and we incentivize management, et cetera, et cetera, a very financial approach. We have a financial approach too, but we also have an industrial approach and industrial advantage because we know how to run this businesses. We think we have learned a thing or 2 after 20 years in this business and 18 acquisitions. So what we do is, we buy -- we look for turnaround or turn better candidates as we call them. It's a core element of our M&A strategy, and we think it makes a ton of sense. And I think we demonstrate today that we can indeed -- we indeed master this skill of improving these businesses, and again, we're not buying the performance of the past. We're buying the potential of the future because that is where we're going to stay for the rest of our lives. Okay. Now about M&A. Cash, you probably noticed that cash is on the -- is low, and it always is. It's a seasonality effect. It's always at the lowest point at this point in the year, but just want to assure you that in addition to the cash in the bank, we have an RCF -- access to an RCF, all of you that participated in the bonds. Know this that's a carve-out there, so for NOK 45 million. And cash like is the treasury shares we have also more than NOK 40 million, NOK 50 million. So in real accessible cash and cash-like instruments were more than NOK 100 million, and that is at the lowest point of the year. That said, those who have followed us, you know the seasonality effect, the net working capital effect. We are always very cash-rich at the end of the year because we invoice our customers annually or semiannually. So we -- so you saw the effect last year, you should expect that effect to be as pronounced or maybe more this year. So we'll be very cash-rich at the end of this year. And also you see that we haven't really -- we are not -- we are now cash breakeven on performance. So at an EBITDA of 20%, we are performing cash breakeven at 30%, of course, better, and that includes paying the interest. So the cash position, just like insomnia, nothing to lose sleep about. Okay. That was where we are. Let me take you through some of the long-term thinking. And I just want to be very clear here that I'm going to present you some long-term targets and the targets and I realize we haven't really been clear enough in the past on this, but the target is where we see ourselves so 3 to 5 years from now, right? The guidance as a milestone on that value creation journey. So the guidance is where do we -- on this value creation journey, long-term journey, where will it be one year from now? That's guidance. The long-term targets is exactly that. That is where we aspire to be. Okay. We see some opportunities on this long-term thinking. And the 3 main components here. Personnel expenses and continued margin expansion on other smaller things, and then CapEx, how much do we need to invest in our own software in order to have the 5% to 10% organic growth and to expand on other cost elements. And we couple that with continued organic growth, 5% to 10% and to continue to grow through M&As. Let's have a look at personnel expenses first. On the right there, you see a graph showing the development from 2018 to 2025. And you see a strong growth in revenues. That is, of course, that is organic growth. But first and foremost, it is acquired growth. Several acquisitions, several people coming along with those acquisitions. And also, we had, as you will remember, a centralized organization. Then in 2022, we announced that we would go from a centralized to decentralized operations, and that was very, very important for Omda. And we did that in 2 steps, as you will remember, one for everyone else. And then in 2024, we did the same for the business area emergency. And you see a clear reduction in personnel there and the orange line is personnel expenses in percent of revenues. One investor commented tongue in cheek that the only thing that seems to be more sticky than the recurring revenues were salary and personnel expenses, funny comment, but not quite true, as you can see, and it is coming down, and the trend is coming down. And we restate that salary and personnel should comprise 50% of total revenue, and that is in the not-too-distant future. Maybe we're already there in '26, but that is not a 5-year perspective. That is the reasonably short-term perspective it will come down. And you see the trend is very clear. It has been coming down from 2022. So a lot has happened already, and there's more to come. But that is not all. We can also look at the 2 other cost elements, cost of goods sold and other costs. Cost of goods sold. We have guided on -- for a long term, we have a target communicated 95% gross margin, 5% COGS total sales. If you look at the graph on the right there, you will see that it -- comparing to the third quarter '23, '24. And then this quarter, you see it is coming down, both in nominal kroner and in percent of total revenue. And this is nothing new, if you look back and look at the trend from 2018 to today, you see a very clear trend. Now the COGS that you can divide that in two. And one part is hardware like tablets for ambulances where you install the ambulance software, that will always be there. And then you have the second part is a third-party software that is part of a bigger delivery project. And that is typically inherited from when we acquire businesses. We often see a potential to replace it with our own software, but sometimes contracts need to be renegotiated. The customer needs to have time, or maybe we have to develop something. So part of the CapEx is also to develop functionality to replace COGS. It is done overnight, but as you can see, there's a clear trend there, and we expect this trend to continue. There's more to come. And then the other costs, we had a target, it used to be 20%. They had a target to bring it down to 15% of revenue. We've reached that target, and we've been there for a number of quarters now. So now we revise our target. We want to bring it down to 10% of total revenue. And this is driven by general cost reductions. The centralized operations is much cheaper, it's more efficient to run. We need fewer people centrally and also on top line growth. And the combined effort of this is not like -- it's not going to change the world. But it will contribute to a margin expansion. So 4% out of sales of approximately NOK 500 million, just to use a number -- round number, it amounts to NOK 20 million, and that is an EBITDA, and it's also a cash EBITDA, cash earnings. And how much that, pays for the interest on the bond loan for 5 months, for instance. So it matters. CapEx. That is another thing. If you look at the CapEx in percent of our total revenue, you see that has also been coming down. So in 2018, approximately 14%, and you see the trend is going down. And we think that CapEx can be compressed. It has come down from 14% to 9% in 2024. And we think this trend should continue, and it will continue. And why can we continue this trend. This answer very simple, increased development efficiency. So that is the decentralized model, makes it more efficient. It makes ourselves more efficient. We are more focused. The home sourcing, bringing the developers' testers closer to home, that makes it more efficient. And use of AI makes it more efficient. So the long-term target now is to bring CapEx from the previous guiding of approximately 10% of total revenue, down to approximately 5% of total revenue. How quickly can it happen? We've just showed you one example here. So say we spent 5 years to do that. We'll be there in 2030. Maybe we can speed it up. We shall see, but the main point is, we probably spend less time, invest less money in development, and we will maintain the organic growth target of 5% to 10%. So it will it will not impact the organic growth negatively. It will just impact the cash EBITDA, but in a positive way. Okay. So that is our long-term targets. So we are delivering good results for the very -- for the third quarter, but we think long term, they will -- there may be more to come. So let me wrap it up. On the margin delivery 30%, good growth, 14% and strong underlying growth on recurring. We maintain the guidance. We increased the guidance for the fourth quarter. We maintained the guidance for 2026. M&A, there's a lot in the pipeline, and we guide on 10% to 20% inorganic growth going forward. Very healthy financials, and on value creation, we have a plan for the future. As King said, we have a dream. Okay. Now we are ready for Q&A. Einar Bonnevie: And let me check if there are any questions here. And indeed, there are. Just we will attend to them, but if you have any more questions, just type them in, and we will attend to them. So there's one here on Professional Services. And I think this one goes to you, Sverre, and that is Professional Services has shown very strong year-on-year growth, but compared with the past 3 quarters, were at 23, 24, it declined to 18 in Q3. What explains this decrease relative to the strong level seen in the earlier year? Is there any seasonality that may be the key words, Sverre? Sverre Flatby: Yes, I think maybe answer to your question is actually in your question. Yes, there is a seasonality. And as you all know, if you look at the workforce we have with the Nordic employees is the most strong part of our business. And of course, the holiday makes this a seasonality thing. So yes, it is. Q3 contains the holiday months of the Nordics. So that is actually the simple answer. Einar Bonnevie: Okay. And then there's a question on the bond here. And the question is from Matt. Congratulations on a strong quarter. Thank you. The main item that now stands out in the P&L is the level of financial expenses, stated profitable in -- particularly in the light -- sorry, a little glitch on my screen here on my part, sorry. The main item that now stands out in the P&L is the level of financial expenses. Can you confirm that you will be able to refinance the bond maturing in November 2026? Okay. The bond, that is refinanceable, but not right now, it has a make-whole clause until December next year. So -- but we have every indication that it will absolutely be able to refinance on the back of much improved financial performance. We see that also the bond has been trading very well recently. So from -- it has -- the spread has come down to, say, 150, 200 basis points from where it were? So it is a huge interest for the bond. And so we absolutely think it will be able to do a tap issue, and we should be able to do refinancing of the bond. But the first real opportunity is approximately 1 year from now. Okay. And then we have a question -- another question here on the targets here, partly to me, this and partly to you, it says of the targets where you are in active dialogue, and I assume that is M&A, can you comment on the combined revenue and cash EBITDA of these opportunities? Additionally, how will the acquisitions be financed? So maybe you can -- what can you say about the targets without saying too much, and I can comment on maybe on the financing of them. Sverre Flatby: I think that's a good question and it is, of course, very important when you look at the targets, how they will impact our current operations. Part of our history, we've done many acquisitions at the same time, underperforming and then have very bad results in total that has been part of the history. However, as you saw from our numbers this time, the amount or the volume of our sales is, of course, changed dramatically and 10% to 20%, as I mentioned, as the guided target for 2026, will not impact us negatively if we look at those type of targets. We are -- it will be the companies that do not perform well when we take over, but then again, the size of that portfolio we're talking about is, of course, not big enough to rock the boat to put it that way. So all in all, there are very good targets with good recurring revenue, high-quality products, the same that we have, and we will use the buy, integrate and build to integrate them and secure that they get to 30% not overnight. But then again, very important. It will not dilute us very much. And the funding Einar, is your game. Einar Bonnevie: The funding. Yes, okay. There are many ways to skin the cat. So -- and you have seen in the past that we have paid in cash up front. We have paid through the seller credits and through earn-outs. And we think that a combination of all these 3 is how we will finance them. On the cash side, so one thing is our cash position will strengthen going forward, I mean, operationally, as we just explained to you. So that is one thing. But we also have access to -- we're able to do a tap issue on the current bond. So financing is available. It's available to reach the goal. And -- so not a question about M&A since we're on that topic, and that is just to use inorganic growth, contribution seems to be lower compared to the 2 previous quarters. What is the reason for this? Sverre Flatby: Well, organic growth is to look at our business, even if it's our own that we had for 20 years or its recent acquisitions, it's always in our business with the long-term customer relationships that we cannot measure those quarterly. So but if you look what happens with organic growth over time, it has always been between 5% and 10%. And in some quarters, you might end up having a negative organic growth because you had a very nice milestone that the customer paid for in one quarter last year. And then you compare it, and it looks very strange. So I don't think this is, think about Omda, other than all the types of systems we acquire and all of those we have from before, they will have a 5% to 10% growth on average in the years to come anyway. Einar Bonnevie: Okay. A question here about cash. So let's focus on taking a session on the cash. And the question is, can you clarify the drivers behind the persistently high quarterly cash burn, particularly, in light of the company's stated profitability. How should investors interpret this divergence? So first, there isn't a particularly high cash burn in each quarter, but as I said, if you look at the cash burn, if you like, this year, you must take into account that we have had -- so a 20% EBITDA, we are cash breakeven, if you deduct knock off 10% CapEx and then 10% interest, we are breakeven. 10% interest that is where we are currently. And then, in addition, this year, we paid almost NOK 20 million in acquisitions. So you need to adjust for the investments. So -- and then as I said, there is a seasonality in the working capital. If you look in the report, you see a graph on working capital. Actually, it has improved this year and this quarter as well, so we're consistently below our 10% or minus 10% target. But there is a huge seasonality. We're always more cash-rich at the end of the year and the beginning of the year because we pre-invoice our customers. So that is really the reason, but you need to look at the seasonality, the net working capital profile, and it also knock off any investments on M&A, and that's really how you do it. Okay. And then another question here on debt and EBITDA, so it very much relates to the same. The question is, what net debt-to-EBITDA ratio are you expecting for this Q4 and the end of 2026? And does the guidance includes acquisition? Or is it based on just organic growth? Okay. So first thing first. The net debt to EBITDA, what you should expect, as I said, we are going to invoice a lot at the end of this year and get it paid probably before the year's end, but if it isn't paid before New Year's Eve, it will be paid shortly thereafter for all practical purposes, the same. We will be very cash-rich at the end of this year. And how much? I think take a look at 2024 last year, and use that as an example, and add the added revenue and you can do your estimate. So it will be -- should expect at least the same or probably somewhat above the same quarter last year. And for 2026, we have -- when we have guided though 28% to 32% EBITDA, and we said that the CapEx of 10% or less because we have an ambition to bring it down, and sales of NOK 500 million to NOK 525 million, you can do the math. So if you use 30% as an example, and you knock off 10% for CapEx and 10% for interest, that leaves 10% in the bank. So that's -- so take that as a starting point. And does the guidance include acquisitions or just organic growth? The guidance of NOK 500 million to NOK 525 million is pure organic growth. So any acquisitions would come on top of that. Okay. And now some artificial intelligence. This goes to you, Sverre. So congrats on the margin expansion. Thank you. Please comment on how you address artificial intelligence, AI in a decentralized setup, both internally and customer-facing, how many AI projects are your subsidiaries working on currently? And what's to come, please? Sverre Flatby: That's a good question. And of course, AI is real. It might be looked upon as a hype in many ways, but it's definitely real. But on the other hand, you have to think about to start with our customers and our markets that these systems we have are critical. It's life and death, and the conservative part of our market, of course, they don't want to take any risk. So it's not going fast, when it comes to the customers' demand for AI functionality in all areas. However, some areas are very relevant. We had an example of collaborating with the university and designing an engine to, an AI engine to support the caller of the emergency calls to scan through millions of files to support -- give a support in a few seconds that you wouldn't get otherwise. So of course, we have such type of products in our areas where they are relevant. We have also specific products that uses AI, for instance, within the imaging to clarify and make a higher quality diagnostic use of those images, where you can use AI engines in our product as well. So some of those developments in some areas are going fast and are ongoing for us. Others are more future discussions with customers in a road map. So that's on the customer side. But of course, the question about decentralized use of AI, there is also of course, a central strategy that we help our business units with the methodology and the AI policies and also tools, of course, like Copilot, ChatGPT, et cetera. So we make sure that we have our own strategy to use these things. And we've seen that the highest efficiency, most important thing for us with AI has been the ability to give a much more efficient outcome of our development processes. We see that platform changes, et cetera, that you can get sometimes even up to 80%, 90% better outcome based on using tools like that, in some cases. In other cases, where we have advanced medical algorithms, we cannot do it that way. There are other things you have to do and work with the clinicians and researchers, et cetera, where you really not get that much help using AI. So there is a combination, and that is the good thing with Omda. We have the possibility to use AI as a positive engine and not as a threat. We don't foresee either because our systems are there for decades based on connection to the workflow processes. That means AI to us is, first and foremost, internal efficiency tool and also a development strategy for some functionality together with customers. Long answer to a complex questions. I hope that was okay. Einar Bonnevie: Okay. There's another question here regarding acquisitions and margins on dilution is very interesting from Matt. If you were to acquire a company representing 20% of your revenue, but generating 0% EBITDA margin, your consolidated EBITDA margin would dilute from 30% to around 25%. Is this a trade-off you are willing to make in order to accelerate growth? And that is a very good question, very relevant question because that's exactly where we are. And the simple answer is, yes, we are because we will only dilute the margin temporarily as we just presented on the buy-integrate-and-build strategy, we are acquiring something that at the time of acquisition as a margin of 0% and maybe they had that for several years before that. But during the coming 12, 24 months, we will improve the business. On the cost side, on the income side, on the way they do business, a number of ways. As we have on the 15 acquisitions we've done in the past, we've just shown you the 30% and the growth. And we'll do that with the recent ones, and we'll do that coming acquisitions. Again, we are not buying the performance of the past. We are buying the potential of the future, and we have a way to unleash that potential. So inside any of these businesses that we acquire that are subperforming and nonperforming. There's a little green frog, and his name is EBITDA, and he's just waiting to be kissed by the Omda princess. Okay. Another comment on the capital -- working capital and RCF. I'll take the working capital first. The question is, working capital was exceptionally strong in the fourth quarter last year. Should we expect a similar pattern amount this year? Simple answer, yes, you should. And then one more question here. We have 2 more -- 2 questions left. [Operator Instructions] Two more questions. One is related to the RCF. The question is the RCF available of NOK 45 million. This is an off balance sheet working capital facility. If I understood it correctly? Yes, it is. So in the third quarter, yes, we have just mentioned we have access to it. And what are the terms on the interest? A little less than the bond, just south of the bond. The current bond terms are around 10% and then a commitment fee of approximately 1%, and that is it. So that is the RCF. And then one more question, this one goes to you, Sverre, before I can round it off, if there's nothing else. And this is related to the number of employees or FTEs. The question is, you have reduced the number of FTEs from 293 last quarter to 260 this quarter. Should we expect FTEs to stay at this level? And how much increase in FTEs should we expect if you grow 10% organically and grow through M&As? What is a sustainable level? So one thing is how many people do we need to maintain and just maintain a 5% to 10% organic growth on this business. If we acquire another business, I mean, who knows if it's a small bolt-on, maybe there are no employees if there's a bigger transaction than maybe 50 employees. So that is a bit hard to say. But of course, let's focus on the current business. Is it sustainable with the current number of FTEs? Sverre Flatby: Yes, definitely. And it's even possible to have it slightly lower as well. I think the reason is the decentralization. And the way the new setup is definitely what we see. And that's why we guided as we did. We see that even for the years to come after, we don't think that there will be a lot of new FTEs because the efficiency we talked about, when it comes to AI, when it comes to development, but also the way that our business model is constructed, which is very, very important is that we deliver primarily binary software deliveries to somebody else that does the installation and put it into production in the huge area. So that means that since we are a software vendor, we are focusing on the copy and paste to put it that way, to sell software, one version of the software to many customers. So in that lies the fact that the current FTE level, and even with the potential to reduce slightly, would be the viable thing for our current business going forward with the current organic growth. And I agree with Einar that it's complex to answer what happened -- what will happen with the specific M&A target. What I can say is that we don't need any additional centralized resources to fulfill these additional 10% to 20% M&A that we have guided on for 2026. Einar Bonnevie: Thank you, Sverre. As a matter of fact, one thing I forgot to mention is that you also, through digitization of some working processes, say, in accountant, for instance, we are actually able to do more with less people at a higher quality and complete the tasks at a shorter time. So that is also something that we -- that takes down the need for employees, especially central employees. There's one more question that came in while you were answering this one. We still have 7 minutes. [Operator Instructions] But this is probably the last question. And it says it reads, congratulations on a strong quarter. Thank you. When looking out over the next 5 to 10 years, what do you see as the primary constraint on achieving your long-term targets? Is it the availability of suitable M&A opportunities attracting top talent? Or is it something else? What do you say, Sverre? Sverre Flatby: I think the answer lies in the question that you're quite right that the uncertainty, if there is any, is supposed related to our M&A strategy because you don't control, of course, although you have a lot of interesting dialogue going on all the time in the pipeline. And we are quite comfortable that it will be, as we said, when it comes to growth. However, that is the uncertainty. The organic part, we don't see any big challenges there given the fact that we have this low churn business with our counterparties of public customers in an uncertain world. So all in all, yes, the uncertainty, if any, is related to the M&A strategy. Einar Bonnevie: Okay. There seems to be no more questions. Let me give it just a second here. No. I think we're done. Okay. No more questions. Thank you for tuning in this morning. We hope you have enjoyed this presentation. So -- we will go back to work and continue to do what we do best and run this company. Tune in again on the 26th of February, when we will present the results for the fourth quarter of this year. And until then, take care, do your math and stay safe.
Operator: Good morning, and welcome to Localiza&Co.'s webinar on the third quarter 2025 results. Joining us today are Rodrigo Tavares, CFO; and Nora Lanari, Head of Investor Relations at the company. Please note that this webinar is being recorded and will be available at ri.localiza.com, where the full earnings release material are also available. The presentation is also available for download on the IR website. [Operator Instructions] Please note that the figures in this presentation are [ in millions of reals ] and follow IFRS standards. We emphasize that the information contained in this presentation and any statements made during the conference regarding business outlooks, projections and operation and financial targets of Localiza represents the beliefs and assumptions of the company's management as well as currently available information. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Now I will hand it over to Rodrigo Tavares, CFO of the company, to begin the presentation. Rodrigo Tavares Goncalves de Sousa: Good morning, everyone, and thank you for joining our third quarter 2025 webinar. In the third quarter of 2025, we maintained a consistent trajectory of executing our strategy -- our strategic priorities, focusing on restoring the ROIC spread and consolidating operational and financial efficiency gains. The results for this quarter adjusted for the effects of the IPI reduction reflect solid progress on this agenda. We reported net revenues of BRL 10.7 billion, EBITDA of BRL 3.5 billion, EBIT of BRL 2.3 billion and a net income of BRL 871 million. The annualized ROIC for this quarter reached 15.4% with a spread of 5.3 percentage points over the cost of debt. Guided by a long-term vision and a commitment to generating sustainable value, we continue to execute our strategy with discipline and focus on continuous transformation. Our investment in innovation drive improvements in customer experience and operational excellence across all divisions. In Car Rental, initiatives such as AI-powered virtual assistant Liza handled more than 4,000 daily interactions with NPS above 85, delivering agility and resolution in over 90% of cases without human intervention. Another highlight is FAST Digital Pickup, a benchmark in the industry innovation available in 252 branches, where 1 out of 3 individuals customer contracts in opened fully autonomously. This generates significant productivity gains and supports our trajectory towards reaching 1 million contracts in 2025. FAST customer report higher NPS scores for the pickup experience and indicate that this journey will influence their next rental decision. In Fleet Rental and Localiza Meoo, results are strengthened by initiatives that enhance our customer experience such as Localiza PitStop, which since 2019 has offered high-quality maintenance in private and comfortable environments. The process ensure excellence standards combined with cost efficiency, allowing customers to maintain their routine while their vehicle is serviced with convenience and agility. Additionally, the digital journey for this customer has evolved consistently, driven by vehicle connectivity, which improves management, enhance safety and delivers a smart solution for a more integrated experience. In Operations and Seminovos, we reaffirm our commitment to high standards of quality and trust through rigorous inspection carried out our 15 deactivation centers, where 360 items are evaluated by specialized professionals using cutting-edge technology, ensuring technical precision and operational excellence. These practices reinforce brand credibility and guarantee that every Seminovo delivered exceeds customer expectation. In the third quarter of 2025, we continue investing in the evolution of our technology stack, cloud solutions and artificial intelligence initiatives, positioning the company for the future. These advancements strengthen our competitive edge, elevate customer experience and increase the value delivered to all stakeholders. This quarter, we recognized the one-off effect of the IPI reduction in our results, totaling BRL 929 million in pretax impact, including BRL 137 million in impairment adjustments affecting EBITDA and BRL 792 million in additional depreciation. Unless otherwise indicated, year-over-year comparison, this representation will exclude these effects. To present the details of the third quarter of 2025, I'll hand over to our Head of Investment (sic) [ Investor ] Relations, Nora Lanari. Nora Lanari: Thank you, Rodrigo, and good morning, everyone. On Slide 2, we begin with the Car Rental division in Brazil. In the third quarter '25, net revenues for the Car Rental division reached BRL 2.6 billion, an increase of 6.2% compared to the third quarter '24, driven by the rise in the average daily rate despite of the strong comparison base and stable volumes. On Slide 3, we show the 5.7% increase in the average daily rate for the quarter, which ended at BRL 150. The utilization rate rose almost 1 percentage point, reaching 80.8% and reflecting efficient pricing and mix management. Moving to Slide 4. We present the Fleet Rental division, which posted net revenue of BRL 2.3 billion, 6% higher than the same period last year. We continued reducing exposure to severe usage vehicle contracts, which ended the period with around 20,000 cars versus 31,000 as of December 2024. The volume impact was more than offset by the increase in the average daily rate contributing to the recovery of return levels in this division. On Slide 5, we show the average daily rate of BRL 104, 8.5% higher than the third quarter '24. The utilization rate of 94.9% reflect the reduction in severe usage contracts, which require longer preparation and deactivation times. Moving on to Slide 6, we present the revenue evolution of Seminovos, which reached BRL 5.8 billion in the quarter, an increase of 14.6% compared to Q3 '24. Average selling price rose in both Car Rental and Fleet Rental divisions, mainly reflecting a better model/year mix. On Slide 7, we highlight the significant reduction in average mileage at sale. The company continues to reduce average mileage, especially in the wholesale, contributing to higher selling price and lower maintenance costs. The age and mileage of the sold cars continue to show a gradual downward trend over the coming quarters. On Slide 8, we present the car purchase and sale volumes. In the quarter, 77,344 cars were purchased, being 50,930 for the Car Rental division and 26,414 in the Fleet Rental. And 75,400 (sic) [ 75,473 ] cars were sold, a historical record for the company. After a second quarter impacted by the IPI reduction announcement, we saw a recovery in sales volumes in Q3, contributing to a slight reduction in the average age of the car sold in the Rent a Car division to 21.3 months. Following the decree that reduced the IPI tax for entry-level cars, we observed a gradual adjustment in Seminovos prices throughout the quarter. Despite the impact of the IPI reduction on the Seminovos price, we recorded an increase in the average ticket in Q3, mainly due to a better model/year mix. On Slide 9, we show the evolution of average purchase price and sales price. In the Car Rental, the average purchase price was BRL 82,500 and the average sale price reached BRL 73,600 in Q3, resulting in a fleet renewal investment of BRL 8,900 per car, significantly lower than the BRL 18,100 in Q3 '24, reflecting the gradual fleet rejuvenation. In Fleet Rental, the average purchase price was BRL 97,400 in Q3, while the average sale price was 83,100, resulting in a renewal CapEx of BRL 14,300 per car, lower than the 20,600 of Q3 '24, mainly reflecting the sale mix and the participation of trucks on the sale end. On Slide 10, we show the end of period fleet. The company ended the quarter with a fleet of 632,267 cars in Brazil, stable compared to Q3 '24. But in the Fleet Rental division, the reduction in the year of -- end of year period, fleet reflect portfolio optimization with reduced exposure to trucks to heavy use contracts. Moving on to Slide 11. The company posted consolidated revenues of BRL 10.7 billion, a 10.8% increase in Q3 '25 compared to the same period last year. Rental revenue grew 6.1%, totaling BRL 4.9 billion, while Seminovos revenue reached BRL 5.8 billion, a 15.1% increase year-over-year. On Slide 12, we present consolidated EBITDA. In the quarter, EBITDA was impacted by BRL 137 million due to the expected effects of the IPI tax reduction. Excluding these effects, adjusted consolidated EBITDA totaled BRL 3.5 billion, a 6.8% increase year-over-year. In the third quarter '25, the adjusted EBITDA margin of Car Rental division was 67.7%, a 3.5 percentage point increase year-over-year, reflecting rental pricing improvements, combined with efficient cost and productivity management. Rental revenues increased BRL 151 million, while costs and expenses decreased BRL 37 million. Maintenance and preparation costs saw a significant year-over-year reduction. On the other hand, SG&A increased due to the higher provision for doubtful accounts and increased technology spending, mainly related to artificial intelligence. In Fleet Rental, the adjusted margin was 73.4%, a 3.5 percentage point increase compared to Q3 '24. The margin was positively impacted by accelerating tax credits with a one-off effect of BRL 50.6 million. The SG&A increase reflects higher provision for doubtful accounts showing cautious regarding the macroeconomic scenario. Seminovos posted an adjusted margin of 2.6%. In Q3, we again saw increases in sales volume and average prices, contributing to the dilution of the selling expenses, which dropped from 5.6% of the net revenue in Q3 '24 to 4.8% in Q3 '25. This quarter, BRL 118 million was recognized as an adjustment of the book value of the cars available for sale whose selling prices were impacted by the IPI reduction, affecting the accounting margin of the quarter. On Slide 13, we show the evolution of the annualized average depreciation per car. In Q3, the average Car Rental division posted annualized average depreciation per car of BRL 7,652, excluding the effect of the IPI reduction, a slight sequential increase as expected by the company. Including the IPI effect, depreciation would have been BRL 15,177. In Fleet Rental, annualized depreciation per car was BRL 8,602, excluding the IPI effects, following the upward trend signaled by the company. Including the IPI effects, depreciation totaled BRL 12,298. On Slide 14, we show adjusted EBIT of BRL 2.3 billion, an 11.2% increase year-over-year. The impact of the IPI reduction in the quarter totaled BRL 929.2 million. To present net income, I will hand over to Rodrigo. Rodrigo Tavares Goncalves de Sousa: Thank you, Nora. On Slide 15, we present adjusted net income of BRL 871 million, excluding the effect of the IPI reduction. The 7.3% increase in adjusted net income in 3 quarter -- in the third quarter of 2025 compared to the third quarter of 2024 reflects the BRL 224 million increase in EBITDA, partially offset by BRL 175 million increase in net financial expenses due to higher CDI and debt balance during the period. On Slide 16, we present free cash flow before interest. In the 9 months of 2025, cash generated from rental activities were partially consumed by CapEx for cars and other fixed assets as well as reduction in accounts payable to automakers. Free cash flow before interest totaled BRL 4.5 billion. On Slide 17, we show net debt movement, which ended in the quarter in BRL 31.1 billion, a 3% increase compared to the debt of the same period of the end of last year. Moving to Slide 18, we present the debt profile. The company ended the quarter with BRL 12.3 billion in cash, enough to cover short-term debt and accounts payable to automakers. We continue active debt management to capture cost reduction and duration extension opportunities. On Slide 19, we present debt ratios, highlighting the net debt to fleet value at a comfortable level, even with a reduction in fleet value due to IPI tax cut. The net debt-to-EBITDA ratio continues to improve, reflecting our price recovery and cost efficiency agenda. Finally on the Slide 20, we present the ROIC spread. In the 9 months of 2025, the company posted an increase in adjusted ROIC, which closed the period at 14.3%, contributing to a spread of 4.5 percentage points over the cost of debt. It is important to highlight that the third quarter of 2025 brought an annualized ROIC of 15.4% and a spread of 5.3 percentage points, in line with the company's goal to restoring return levels. Before we start Q&A, I'd like to point here our view about this quarter. This was a very strong quarter in our view. The Rent a Car has strong performance, the all-time productivity here. Our utilization is also in one of the highest of our history, and we presented a sequential growth both in volume and prices. Fleet, we continue a consistent improve in our portfolio. The target segments are already at the right ROIC spread, and those segments are growing in double digits in terms of revenue. Depreciation in both Rental a Car and Fleet Rental are under control. Seminovos, we're posting record volumes. Gross margins are at healthy levels. SG&A are being diluted with focus on productivity. We see Seminovos margin stable going forward, even though there is [ IPVA ] discounts in the fourth quarter. Issuance and cash flow showed a very strong cash generation, and we are continuing to reduce the spreads and increase the duration of our debt here. On a final remark, yesterday, we issued a material fact informing about the selling of Voll, a travel tech that we invested in 2021. This was a very strong investment for Localiza. The return was 5.1x the invested capital in just 3 years. With us, the company grew its revenue sixfold and reached breakeven. We're going to maintain a partnership through the commercial agreements, and I also would like to highlight and thank the founders for this incredible journey and wish the best luck and success to Warburg Pincus and the founders going forward. Now we're going to be available for the Q&A session. Operator: [Operator Instructions] Our first live question is from Mr. Filipe Nielsen from Citi. Filipe Ferreira Nielsen: Congrats on the results. So my question is all regarding depreciation. So it's -- we saw that it is trending according to what you've been guiding in past quarters. It's gradually increasing, but I was wondering if you have any indications on how this is going to trend in the fourth quarter and into 2026. You mentioned that Seminovos is healthy, but just wondering if any -- maybe you're accelerating the pace of Seminovos sales and fleet turnover, this could enable some reductions in depreciation already next year? And maybe if the car market continues going stable or even improving, you should maybe prefer to see all those IPI adjustments in high-end depreciation going into a higher Seminovos margins or you would prefer to reduce depreciation faster and maintain a stable Seminovos margins? Rodrigo Tavares Goncalves de Sousa: Thank you, Filipe. First of all, like we see now as the market behaves, the depreciation is under control, both in Rent a Car and Fleet Rental. In regards of the movements of depreciation going forward, we would like to see the Seminovos margin going up first before we actually reduce depreciation. So what we should see in order to question if the depreciation should be reduced is first an upward trend in the Seminovos margin. Before we see consistent increase in the Seminovos margin quarter-over-quarter, I think it's premature to talk about reduction in the depreciation. Having said that, at least the way we're seeing the market, we see the depreciation under control in both our segments. Operator: Our next question comes from Mr. Guilherme Mendes from JPMorgan. Guilherme Mendes: I have 2, both on the Rent a Car segment. The first one is on tariffs. I just wanted to pick your brains on how much more room you see on tariff adjustments. We saw sequential -- a small sequential acceleration. So I wonder if you see much more room for increases in real terms going forward. And the second is on margins, something that we have been discussing for the past conference calls that you do expect margins to accelerate by the time you rejuvenize your fleet. And assuming the run rate once you fully renew your fleet to a younger age, what can we expect in terms of margins on the Rent a Car division? Rodrigo Tavares Goncalves de Sousa: Guilherme, thank you. First thing, it's very important that we look at the tariffs, but we cannot look at the tariffs alone. We have to look at utilization altogether, right? If you control for utilization, we see that we are gradually progressing our tariffs. If you do even more than that, if you look at the tariff divided by the total cars, that's the one that really matters, right? You're going to see that also we have been improving our efficiency consistently across quarters. If we look -- of course, the last quarter is a very strong quarter in terms of seasonality. So you have tariffs going up just because of that. What we just noticed, especially in the mid of September is a little bit of change in the behavior of some competitors, especially on the daily rentals that we saw some pressures on the daily rentals' tariffs here. This is not a segment that we are highly exposed. So the impact for us is not that relevant. But we're going to continue to price based on the willingness to pay of the customer, our return and, of course, the competitive dynamics. Once again, the last quarter will be a strong quarter in terms of tariffs because of seasonality, but specifically on the daily rentals, we're starting to see some competitive pressures here, okay? In terms of the more long-term trend, it is important to highlight that you're right, as we accelerate the sales of Seminovos, we are going to collect the benefits of the rejuvenation of that fleet, mostly in the cost of preparation of the car and the cost of maintenance, and there are some percentage points in EBITDA margin to be captured. Nora Lanari: Yes. A couple of points, if I may add, Guilherme, and thank you for your question. First, on the tariffs, I would like to point that with the level of tariffs, actually, we grew volumes on a quarter-over-quarter basis by more than 4%, and we added average rental rate with increasing utilization. So it was a very positive quarter on our view in that sense. But more important than that is the ROIC spread already in the band in the Car Rental division. So it points for a more mild need to increase prices. And we go for Q4 with appetite for daily rentals, okay? On the second part of the question, margins, more important than the margins per se is the ROIC spread. Why am I saying that? We do have some room to optimize the costs in the Car Rental division based on the renewal of the fleet. We do have, of course, some still pricing lever. But if the interest rates decline next year, we can adjust to that. So pretty much the major KPI for the company is the ROIC spread. And as I said, this quarter, we entered in the historical band of the company. Operator: Our next question comes from Mr. Andre Ferreira from Bradesco BBI. Andre Ferreira: A couple of questions from my end. So first, regarding the provision for bad debt in Rent a Car and Fleet Management, the worsening that you referred to in the release was year-over-year, but there was actually an improvement quarter-over-quarter. So if you can comment on what drove this in Rent a Car and GTF. In the case of GTF, if it's still more related to the heavy segments and if you're seeing improvements or deterioration in both segments at a marginal level? And my second question is related to the gap between the average purchase and selling price of cars closing quarter-over-quarter. If you can just break this down in what is mix and what is actual comparable improvement? And also if in the latest weeks, you see this gap closing or widening? That's it from my end. Nora Lanari: Thank you for the questions, Andre. And let me start with the first one. End of last year, Q4, we started raising the provisions for bad debt, considering the macro, the hike in the interest rates and so on. So we've been seeing some deceleration in economic activity. But since Q4, we increased the provision for bad debt. So it's a year-over-year comparison. I think Q4 will be an easier comp. Having said that, when we look to the evolution of the bad debt provision, it declined from BRL 100 million last quarter to roughly BRL 75 million. So we are seeing improvements in that sense, mostly explained by trucks. Remember that trucks increased the allocation of bad debt because of a couple of clients. We increased a bit the number of repossessions of trucks, and we are reselling those trucks now. But the trend is positive, and we are seeing improvement on a quarter-over-quarter basis, not only in Q3 but also in Q4, okay? Rodrigo Tavares Goncalves de Sousa: Most of it was in the first half. I think that now in the second half, we see a more positive scenario, okay? So as Nora said, the comp of the third quarter of last year was a strong one. But sequentially, we see that most of this happened in the first half. In the terms of the price gap between the acquisition and the sale. This trend is supposed to happen, right? As we renew our fleet, especially in Rent a Car here, we're going to see that gap closing, right? So this happens most because of a mix of a model year. Just to give you a sense, we started selling the 2024 cars last year in November. This year, we started in June. So this brings prices up and reduce that renewal cost, okay? So of course, there can be a quarter-over-quarter mix adjustment, but the majority here is the fact that we are starting to sell the cars at a younger age and in a model year that represents the model year of the current year. So this is an effect that was already expected and it's happening. Operator: Our next question comes from Lucas Esteves from Santander. Lucas Esteves: I have 2 questions. The first one regarding the recognition of tax credits on GTF, even though you mentioned a one-off effect of circa BRL 50 million in the period. I would like to understand what could we expect about the recurrence of this tax credit recognitions going forward since in my understanding, you were not accelerating depreciation in a share of your fleet related to Locamerica before the system integrations due to a matter of tax efficiency. And now you would recurrently recognize this accelerated depreciation for the whole fleet. So just to get the sense of this tax credit recognition going forward and the impact on GTF margins. And on a second matter, I would like to hear more about Seminovos margins since you recognized a one-off fleet depreciation in the period, also continued gradual increase in normal depreciation, while it seems from your current results that the scenario improved a bit more than you expected and as we can see margins. So could we expect a margin overshoot over the next quarters in your view? Rodrigo Tavares Goncalves de Sousa: Thank you, Lucas. I think you pointed correctly, the tax credits before the incorporation, we were not taking accelerated depreciation for a part of the fleet, the part that remained at Locamerica. Of course, this is -- reflects our owner mentality. It doesn't make sense for us to recognize the credit just for accounting purposes. And now we did that. Of course, then in the first quarter that you start to accelerate, you have a small, let's say, one-off effect here. But going forward, the tax recognition should be higher than it was before the incorporation for Fleet Rental, okay? So we should expect this to be a positive influence of the margin of Fleet Rental going forward. In the Seminovos, as I said, we have recognized the IPI. We see so far, the market is behaving well. We see so far at least stable margins going forward. We have to see more probably a positive scenario to see this margin overshoot. That's not our main expectation at least in the short term, okay? There is an impact in the fourth quarter that its commonly, companies tend to give the discount of the IPVA, right? This is relevant, 1% of the price. But even with this discount, we think that the margin should remain stable at least for the last quarter of this year. So it's a positive trend, but I wouldn't assume an overshoot at least in the short term. Operator: Our next question comes from Mr. Daniel Gasparete from IBBA. Daniel Gasparete: Can you hear me? Can you hear me? Nora Lanari: Yes. Yes, we can. Daniel Gasparete: So 2 questions also. The first one, I'd like to ask Rodrigo, his view regarding the size of the impairment. Looking right now after a couple of months since the first announcement, how conservative do you think that this impairment is? I mean you are on the -- close to the top of the range that you provided. And so far, we have seen [ FIPE ] and comments not only from you but from other peers in the industry that Seminovos are behaving well. So I would like to get your view about how conservative this is. And secondly, I would like to ask you a little bit more about how do you see the severe use going forward and how that could benefit margins as well, please? Rodrigo Tavares Goncalves de Sousa: Thank you, Gasparete. First of all, once again, the incremental depreciation is a technical adjustment here. We just replicated exactly what the IPI decree car by car here, and that was the effect that we booked. We really hope that this is conservative. I think only time will tell. Usually, the markets do not adjust everything at once. So of course, that the market is behaving well, but it is a bit too soon to judge if that was conservative or not. Once again, it was a technical decision with no judgment from the company just replicating what the decree had an impact on the new, assuming that all the impact of the new cars would be replicated in the used cars. So that was basically the methodology. Once again, I hope that this is conservative, but we have to wait to see if these prices will not be impacted going forward. The severe usage -- the main effect is not just in the EBITDA margin, I think, because usually, they tend to be priced higher, but the Seminovos and the depreciation are much higher. So the main benefit is actually in the ROIC and the ROIC spread here, right? Because not only you have a higher capital base, but the depreciation is much, much higher than the average. We started this year with roughly 31,000 cars. We're probably going to end up this year with half of that. And going forward, we're probably going to reduce another 50% next year. So gradually, this severe usage will not have a major impact in our balance sheet. I believe that in 2026, we're going to see a much cleaner results of fleet with just a remainder of those cars in our balance sheet. Daniel Gasparete: Rodrigo, if you allow me just to follow up something that you mentioned in the first part of your answer. How much time do you think we should take in order to see Seminovos prices reflecting the IPI reduction? You said that it usually takes a few months. How much time do you think that we should wait until we see stabilization? That will be the first follow-up. And the second follow-up would be -- first of all, please go on this first one and then if there's time, I make the second one, sorry. Rodrigo Tavares Goncalves de Sousa: I think it's hard to precise what we saw in 2023 that it took more than 6 months, right, to see that. So I think that at least in the beginning of this year, the next year, we have to wait to see if there are some evolution here. But it's hard to give you an exact date. But I think that by the beginning of next year, we should know clearly what was the effect, the total effect of the IPI tax on the used car market. Daniel Gasparete: Perfect. And if you allow me, just a second follow-up. Since you are buying cars cheaper, given they had their price reduced, but you're not seeing Seminovos prices coming down. Is it fair to assume that you're seeing that your purchase sales spread is improving? Rodrigo Tavares Goncalves de Sousa: We are not only buying it cheaper, but we're gaining additional discounts as well. Once again, that will depend -- okay. In the short term, we may see that an improvement in the gap of the price that we buy and the price that we sell. But as I mentioned before, a part of it actually comes from the fact that we are selling younger cars and the cars of the 2025 model rather than the 2026 -- 2024 model. Operator: Our next question comes from Alberto Valerio from UBS. Alberto Valerio: One question on my side here also on Seminovos. I remember that Localiza Day when you announced the impairment last year, you guys mentioned a spread to the car that you bought that you'll be selling this car for 2% and 4% -- between 2% and 4% negative. It used to run at positive space. And with the current depreciation that you are presenting after this impairment of this year, we estimate that this gap would be more close to the minus 4% than the minus 2%. Is that the correct -- is how we should think for the future for modeling for next year that the depreciation is at the correct level at this moment? Or we should see some difference in the future? Rodrigo Tavares Goncalves de Sousa: Thank you, Alberto. I think if you run the math the way that you do, okay, you can get to this minus 4% or minus 5%. But one thing that you have to consider is that today, we're not selling cars with 15 months old, right? It's cars that is 21, 20 months. So we have actually to consider the impact of not only the price of a younger car, but there is an impact on the channel that you sell the car. So not only to sell a younger car for a higher price, but you sell a proportion in retail that is much higher than you would sell otherwise, okay? So in order to run your math, you have to consider a little bit these adjustments. And if you consider that, you may reach a number that is below the minus 5% that you're reaching right now. But if we consider the 19, 20, 21 months, I think your numbers seems pretty reasonable. Alberto Valerio: Fantastic, if I may have a follow-up as well on tariff for next year. We see some competitors a little bit more optimistic about tariff for next year. Localiza has the same idea that is still some space for increased tariff for 2026? Rodrigo Tavares Goncalves de Sousa: Competitors are always optimistic. Having said that, we see that it will depend on several factors, right? First of all, is the interest rate, right? That is a major driver. We look at ROIC spread, right? We don't look at the tariff individually. We don't look at EBITDA margin individually here. We look at our ROIC spread. I think the company has been very ready for the next cycle here. Our efficiency, our utilization is very strong. As I said, we are ready to focus more on the daily rentals here, even if the competitive environment is a little bit tougher on that specific segment. So it will depend on all the sector -- on all these parameters here. But I think the macro will have a very strong implication here. Having said that, we, for the first quarter, in Rent a Car, we reached the band of ROIC spread. It's the lower end of the band, but it's the first time that we reached the band. The next quarter is a stronger quarter in terms of seasonality. So once again, I think the company has done its homework and it's ready for the next cycle. Operator: Our next question comes from Mr. Lucas Marquiori from BTG Pactual. Lucas Marquiori: Two questions as well. One is still a follow-up on this yield on Rent a Car trends overall. And I know we have been focusing on the tariffs' dynamics. But I mean, since that you guys are buying cheaper cars. So if I were to look to yield trends, right, and how much are you pricing on top of kind of a cheaper fleet cost overall, can we say that actually yields are on the margin better going forward, right? So I'm not looking to the nominal kind of a price, but actually looking to the yields assuming that you're buying cheaper cars. This is the first question. And of course, if you could kind of throw that trend for '26. And question number two is on the cost agenda, guys. And I know you have been kind of talking about that for a while now. And I mean, when should we start seeing the real benefits of the integration? And do you believe, for instance, a strong season like Q4 and maybe Q1 is maybe the time for us to start to see better margins on both Rent a Car and Fleet besides the tax credits and some kind of cost gains on that end as well? Just to kind of hear your thoughts on that. Rodrigo Tavares Goncalves de Sousa: Okay. I'll start and then Nora can complement here. First, Lucas, for me, especially in Rent a Car, yield is not the best metric that we can follow, right? I can give you several examples. If I rent a monthly rental of 5,000 kilometers a month, that will have a very high yield, very poor return. Usually, economic cars have a higher yield because, of course, the fixed costs are much higher for an economic car. So for the store, for the rent, for everything that I have, I need a higher yield. So yield is really not the best metric. If you have to look also, you should consider the whole fleet, not just the rented fleet or the operational fleet to check that. So I'd much rather see the returns than the yield. But having said that, as I said, we have been delivering a strong price increase if you adjust by utilization or even without adjusting for price utilization. You're talking about the benefits of this integration. The benefit mostly is on fleet, right, because you have some operational procedures that are simplified here. Of course, there are some challenges, too, when you change the system and you incorporate. But -- and the only thing is that we are already seeing a lot of these benefits, right? You see margins increasing. You see costs under control, right? We are allowing ourselves to do more investment, especially on technology. So I think it's going to be gradual. We're not going to see a one-off thing in the next quarter or the quarter after that, but it's going to be something gradual. But the main, main lever here is rejuvenating our fleet, is renewing our fleet in Rent a Car. I don't know if you want to point something, Nora. Nora Lanari: Yes. Just to add a couple of points here on the yield part and both in the integration. But let me start with the last one, Lucas. We just concluded the integration of the systems in the Fleet Rental. We should be able to see some additional synergies being captured in Q4. But having said that, we mentioned in the release that the ROIC spread of the targeted segment is already in our goal. So it means that we don't need to raise much more EBITDA margin because we are more or less on track. If we assume that the interest rates tend to decline, we can actually have the benefit of that. So that's why we say the ultimate metric is the ROIC spread, not the margin per se. Having said that, growing on the subscription is one of the segments that are growing faster, and this segment uses a little less the car, so the depreciation is lower, so we can adjust the margin based on that. So just to reinforce the point here. But we do have some margin gains going forward. We continue with a very strong cost and efficiency agenda that should help on the margin. But again, we'll follow up on the ROIC spread and pricing eventually. And that leads to the second point on the yield in the Car Rental. Conceptually, as little as possible impact on the pricing would be great to help on the demand front. So we are doing our homework on the cost side to be able to impact as little as possible the rate. So yield is definitely not the best metric for us. We have to consider the yield plus the cost, the productivity and by the end of the day, the capital invested so we can get the full picture of the ROIC spread. Operator: Our next question comes from [ João Frizo ] from Goldman Sachs. Unknown Analyst: I have 2 quick follow-ups. The first one relates to used car sales volumes. You guys are now running around 76,000 cars sold per quarter. Just wanted to get a sense from you what should be the level to get the age of the cars sold back to 14, 15 months? And how long should it take for you guys to get to this level of car sold per month? And the second question relates to the negotiations with the OEMs for 2026. Just wanted to get a sense from you guys on how are those going, if anything, you could comment? Rodrigo Tavares Goncalves de Sousa: So thank you, João, for your question. First of all, we're delivering, as you said, 75,000, 76,000. We continue to push to increase that number. This is something that probably will happen gradually. To get to the 15 months, we need something close to 85,000 per quarter, okay? This is the number that we need to reach to get to this 15 months. And we expect -- we have -- once again, this is a long journey. We are increasing. This quarter was the record in terms of sales for Localiza. We have been able to increase quarter-over-quarter and deliver good results, but this will be gradually. But once we reach this 85,000 mark, first, we have to surpass the 80,000 mark. We're going to get to the time that we can get to the fleet to the optimal level again. In terms of the OEMs, still a lot of the negotiations going forward. So it's a bit early to tell about the conditions, but we don't expect anything to change significantly going forward. Nora Lanari: João, just adding up to what Rodrigo just commented on the first question. We sold the record 75,500 cars this quarter. We are in a pace more or less at this level of 19 months, 19 to 20 months or so. So we are not yet in the pace of 15 months. For us to get that, we have to reach a bit over 80,000 cars. But I wanted to add the point that we are increasing the ROIC spread, and we will continue to increase the ROIC spread in spite of getting back to the 15 months. Once we get, we have even more room here to adjust pricing and eventually accelerate growth. Operator: Our next question is from Jens Spiess from Morgan Stanley. Rodrigo Tavares Goncalves de Sousa: Jens? Operator: Jens, you can talk now. Your audio is open. Jens Spiess: Sorry, I was on mute. Can you hear me now, right? I just wanted to make a question building up on the previous question on the amount of cars you've been selling. So first of all, congrats on improving the pace of cars sold and getting towards your target. I was just wondering, should we expect like for modeling purposes, that you will continue to be able to increase that pace in the next few quarters? Are you seeing favorable dynamics in October, November so that we can already assume slightly higher number? Or should it be relatively similar to the current number that you just reported? That's on the amount of cars sold. And my second question goes regarding the IPI tax impact on the used car market. Just to clarify, you mentioned that it still remains to be seen if the impairment was conservative or not. And I just wanted to ask, have you seen no impact whatsoever of the IPI tax? Because we did see several models depreciating at a higher rate to the typical monthly rate according to FIPE data. So just wondering how much of an impact you've already seen. And maybe if you could elaborate on how much like the monthly depreciation was in the past few quarters would be very much appreciated. Rodrigo Tavares Goncalves de Sousa: Thank you, Jens. First of all, it is -- we don't provide any type of guidance in terms of amount of cars that we're going to sell going forward. Seasonality -- the third quarters is usually a strong quarter in terms of seasonality, okay? October is a strong month. November and December, not so much. So it will really depend here. But having said that, we don't expect anything to happen to be gradual, okay? Nothing major, either up or down, we don't expect anything major to happen here, okay? In terms of the IPI tax, definitely, we're already seeing some impacts. If you consider that the regular depreciation should be these 50 bps, the 0.5%, any number that you look, you're going to see that the cars are depreciating more than that. This is already a reflection of the IPI. So the past 3 months after the IPI, the cars have been depreciating more than it's usually have. So -- but it is still not everything of the IPI impact. So that's why I said that we still have to wait going forward to see if this trend will continue or if the cars will come back to depreciate the average of 50 bps per month, okay? Nora Lanari: Sorry, Jens, just one quick comment before you follow up, if I may. On the Car Rental, we still have number of locations to open, okay? We will -- Q4 is a quarter that we usually concentrate some of the openings. So we are working on increasing capillarity, but more important than the capillarity per se is the productivity per salesperson and commercial efficiency here. So we do expect a gradual improve in the volumes of cars sold, but not necessarily in Q4. Q4 usually delivers a very strong October, but some deceleration in November and December as vacation and summer peak season hit. But sorry, I interrupt you. You're going to ask something else, right? Jens Spiess: Yes. So pace of cars sold basically should trend gradually higher, but there could be a bit of seasonality going on. Yes, that's fair. Now on the IPI tax. So of the impairment you did, like how much is already -- how much already happened? How much like cushion do you still have from the impairment? Like is it 80%? Is it 50%? Is it 90%? Just a sense of how much room there is still. Rodrigo Tavares Goncalves de Sousa: It's more like 3 quarters, we're already seeing. Nora Lanari: And there is one question here in the Q&A, if I may, Daniel Spilberg. Rodrigo, Nora, next year, the market is pricing an easing cycle starting in January. In a scenario of lower interest rates and ROIC spreads converging towards 7 or 8 percentage point, is there any reason that could prevent Localiza from applying the long-term strategy of volume growth and market consolidation? Great question, Daniel. I think in that sense, if ROIC -- if interest rates decline and the ROIC spread follow to the right pattern, soon, we can resume the growth mode of the company going forward. Rodrigo Tavares Goncalves de Sousa: We look forward to having this strategic dilemma, right, that when we reach the 7 and 8, and then we're really going to have here, maybe you can resume to grow to another cycle of growth here in market consolidation. We have a strong balance sheet that will allow us to do whatever strategic optionality that we want. But if really the interest rates converge, it's a matter of a decision if the company would like maybe to overearn a bit or to increase growth, passing through part of this interest rate efficiency through tariffs unlocking additional growth. Operator: Our next question comes from Rogério Araújo from Bank of America. Rogério Araújo: One follow-up here on the ROIC spread subject. As I understood, the idea is not that Localiza is going to pass through interest rate reduction to consumers before the company reach 7, 8 percentage points. Is that correct? Or if the interest rates start to drop, we could already see some kind of fare reduction or fare increase below inflation or some sort like that? That's the first one. And the second, if you could elaborate on your expectations for new car prices. And there was a [ 5% ] currency appreciation recently in Brazil. There are some Chinese brands coming to Brazil and producing locally. So if you could talk a little bit about your expectations for car prices and also any change in mix for OEMs that Localiza usually buys vehicles from because the market is changing, right? I want to know if Localiza is going to follow somewhere closer to the mix of the market within brands or not in the foreseeable future? Rodrigo Tavares Goncalves de Sousa: Okay. Thank you, Rogério. In the first question, like we have first to reach our target in terms of profitability first before discussing actually passing through efficiency of interest rates through the tariff, okay, in a scenario that, of course, the rates fall sharply. And now we are surpassing our goals here of profitability, then we can discuss eventually to reduce or to increase the tariffs lower than inflation to unlock a new growth cycle, okay? In terms of the OEMs, of course, that there are some changes here, but we don't see the dollar is depreciating [ in the real ]. So we don't believe that car prices will go up more than inflation, but it's difficult to see at least the public or the transactional prices going down. OEMs are not making a robust profit in Brazil. Of course, they are healthy, but it's not that they have a lot of margin to burn here in Brazil. So we expect here a dynamic that's somewhat stable. Of course, there are new entrants. In the terms of our portfolio, we're always assessing based on expected profitability. If we understand that we can have a return better by switching or adjusting our portfolio, we will do so. But all the decisions in terms of the adjustment of our portfolio will be based on our expected profitability on those buys. Operator: Thank you. Now to close, I will hand back to Rodrigo Tavares. Please go ahead. Rodrigo Tavares Goncalves de Sousa: Okay. I would like to thank you all, and we remain available if you have any other questions. Thank you very much.
Operator: Good day, everyone. Welcome to the BioLargo Q3 Earnings Results Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Brian Loper. The floor is yours. Brian Loper: Great. Thank you very much. Good afternoon, everybody, and welcome to this quarterly conference call for the months ended September 30, 2025. This call is being webcast and is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-Q, which we fully expect to be on record by Monday at market opening, our Form 10-K and in other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. And with that, I now hand the call over to BioLargo's CEO, Dennis Calvert. Dennis Calvert: Okay. Brian, thank you very much, and thank you, everyone, for joining us. And we've got quite a bit to share on business updates as well as the performance for the last Q. And I know everyone has been anxious to see this information, so we're glad to do it. So at BioLargo, we make life better, purpose-driven innovation across a number of fields. We're really a portfolio company, and we've been at this for some time, and we're finally at the spot where we're able to begin realizing some of the fruit of our investments that have been made over an extended period of time. Okay. So let's see. Here we go. Safe harbor. We've covered that. So who are we? Innovators, scientists, engineers, passionate about sustainability and human health, driven by a purpose, focused on best-in-class solutions. We believe each of the portfolio assets that we're investing in have a chance to be transformative in their respective markets. We're certainly focused on filling the gap in the market, find the gap, fill it, solve a problem, make impacts, get paid for it. We aim primarily through partnerships and spin-outs to capitalize the IP. One of the fundamental value propositions in our company is that we're investing in assets that have an extraordinary functional long life. Some of them have been very difficult to get to market. Everybody knows that, and we're going to talk about that in great detail. In the portfolio, of course, we have Energy Tech, which is focused primarily on battery. It's a transformative battery for the long-duration storage industry, that's grid scale. Clyra, that's antimicrobial products focused on infection control and wound care, finding its way to market now, very excited, long investment cycle. We think a shining star in the portfolio that's finally coming to commercialization. ONM, that's odor and VOC, that's air quality control. Of course, everybody knows about Pooph. We're going to talk quite a bit about Pooph and the frustrations that we felt there and some of the disappointments we just had recently. And then, of course, our PFAS solution is finding its way to market in a very, very significant way. Early recognition of the technology. So I'd call it still in the early adopter stage, but we're heading into significance, and we'll talk about the developments there. People always ask me, how are we doing, right? How are we doing? And given the most recent frustrations over Pooph, the answer is somewhat a little different, which is we're 95% awesome, 5% pretty much kicking our butt. And I hate to say it that way, but that's about the way it feels. It's a pretty tough scenario, and I think we're handling it well, but critical, critical the way we're handling it as well. We'll talk about the detail in Pooph. The unseen value, right? This is the #1 challenge as the company, right? So just think about it. We're doing venture stage investing with a mark-to-market microcap company. It's pretty hard to do. In fact most people wouldn't do it. Part of it came out of the evolution of the company. Part of it came out of really the need to diversify to create a portfolio effect across a number of assets that could do two things, minimize risk for the timing and the adoption rate for one of the assets in any given moment and also allow us to invest in an incredibly highly qualified staff. We've got, I don't know, 10 or 12 PhDs and 30-something engineers, and reportedly we always say the same thing. We can do just about anything. And of course, not literally. But the concept is highly qualified people that are skilled in this art of innovation, finding the gap, getting these technologies seeded in the market. And there's a lot that's unseen. We're going to talk about some of those things that you want to know about that helps illuminate what can be seen. And the principles are really simple, unmatched technology, conserve your capital is the most precious asset, highly qualified people and driven by purpose, all very, very critical to the ongoing support. Now this is a relatively new slide, and it really is the sum of the bull case debate. A lot of our investors see it because they track the company carefully. We did a presentation at LD Micro, and I think it's the first time we presented this publicly. It was also filed under a press release and an 8-K. It's not brand-new information, but it's pretty close, week, 10 days ago, maybe 2 weeks ago. The basic argument is that the company, given its recent transactions and an argument because it's really a lot of argument, we should be valued somewhere around $200 million. And yet we have a market cap that's trading somewhere in the $50 million range and with some pressure on it as well. And so that's very frustrating. It's very frustrating for management. It's very frustrating for all the stockholders, including our staff. Sometimes it's disheartening actually. But here's what happens. We know that the fundamental value sits in our company. And we know what the assets are because we've been living them every day, and we're advancing these to some sort of commercial adoption. So these mark-to-market transactions are really important. The battery technology, we've raised money at a $44 million valuation. That's a mark-to-market, although not public. We believe the valuation will go from $44 million to $400 million as we get to the next adoption cycle. We'll talk about that in a minute. The medical has just raised about $2.2 million as total invested capital over the last 12 months is about $7.6 million, and the current valuation is at $95 million. Now I'm just going to point out to you real quick on a $95 million valuation, BioLargo owns approximately 48%. So that's a little bit of an error in this deck. 48%, I think, is the last count because we raised another couple of million dollars from family office investors, very, very important, significant investment, significant investors and the company is heading into an institutional grade investment scheme, okay, the plan. There's a good argument on the bull case to date that the asset that we own in Clyra Medical justifies our entire market cap. The entire market cap is justified by what we've done at Clyra. Now of course, visibility means show me the revenue, show me the expansion of growth, see the market, find adoption with these technologies. And we certainly know that, that's here and on its way. We believe in this portfolio approach that, that opportunity to create an exit value is likely to exceed and should exceed greater than $0.5 billion and has a chance to push $1 billion, okay? Now just think about that, BioLargo owns roughly 48% plus we own a royalty. That means that asset that's currently valued at about $100 million justifies our $50 million market cap. And yet the portfolio has so much more including the battery tech, our PFAS solution. Now [indiscernible] real quick, PFAS. We put a $60 million number, and that's an argument. I don't have a mark-to-market transaction. We're going to pursue investment from strategics that are north of $60 million. We haven't closed them yet. But given the technical advancements, the level of adoption and the pipeline we've accumulated, we believe we can command that kind of number. And then, of course, in odor, we used to say it's going to be worth at least $100 million. Of course, the Pooph has set us back, and we're going to have to reposition that asset. But it's pretty easy to argue something around $40 million. After all, it allowed us to support Pooph that generated $50-plus million last year and 60,000 positive reviews based on our technology. And that technology is ours, it's not theirs, don't forget it. And that needs a repositioning, it's painful. We're going to talk about that in a minute. And then, of course, the upside, as we find adoption, these assets have a future potential, we would argue, in the $4 billion range. And it's a big vision. But make no mistake that that's what we're investing in. And we believe these assets will find that kind of market traction. The bull case debate, we'll have that debate on and on, okay? So we just did a press release about Advanced Solutions. It's a really nice situation. Advanced Solutions is a great company. There's a cultural fit. They've got a nationwide presence in their heat map. They cover the domestic U.S., okay? That means they have representatives that are organized under the umbrella of Advanced Solutions who are technical specialists in selling wound care products. That's what that is, wound care products. They're wound care specialists. That's a subset of our bigger market, okay? Remember that we have two categories we're primarily focused on, the surgical suite and wound and burn, which is really wound, wound care, wound and burn is the same. Also potentially tissue therapy. Those are kind of agglomerating into that category. Now in the marketplace, this is a big market. And if you layer on the surgical suite, which everyone knows that we've signed a major partnership with a global leader. We're under NDA, our partners said, until you're ready to ship product and we're ready to push the button on launch, you need to honor our NDA and keep the name silent, quiet. So we've honored that. It's a lot of pressure for us, a very difficult thing to do, but we're doing it, and we're doing it because we have to, okay? Now all of those assets are coming to market, and we're going to talk about timing. We have a shot to see first orders before the end of the year with Advanced Solution, a shot. Product is in production, which is great, right? Assuming everybody stays on track, we can see first orders, shipment, delivery. Remember, we don't recognize revenue until it's delivered. So we'll just see how that goes when we come into the end of the year. But it's a nice start, and it's a nice start with a high-quality firm that has a great reputation, a highly trained sales force, and they are stocking distributor. And so we're very proud of that relationship. Also, you'll see soon Advanced Solution generate its own social media to promote the product and its relationship with Clyra. And again, a very exciting development. And as we had indicated before, the surgical suite products have extraordinarily high bar of performance before they go to market, and we have been successfully clicking off the list to achieve that. We did a press release about 2.5 weeks ago, I think October 7, and then we just did this one just yesterday, and we've achieved success in the milestones, in preparation for the last filing of paperwork to the FDA, the last filing of paperwork. Remember that the technology -- the core technology has already cleared FDA so that means label changes, indications changes, refinement for the sterile field. That's what we're talking about, okay? With the shutdown of the government, unfortunately, we don't have a good sense of what the FDA is going to do on response time. And therein lies another level of uncertainty about the timing because we just don't know. So we believe that we'll finish our testing for stability and ruggedized testing for the package design that will come in hopefully before the end of the year, at which point then we prepare for filing of the paperwork with the FDA. We coordinate with our partner. We go through the logistics, then we begin production and then we launch. That's all coming to bear. It's just very exciting. And the other thing that we mentioned in the last press release, just briefly that I want to just highlight, we're also doing significant work with clinicians. And so remember, in this industry, clinical work is required to help validate the experience for patient experience and outcomes as well as physician experience who witness the product going to work and witness and have evidence to support safety. Both of those are super critical. And so that clinical work is expanding rapidly. And if you go to Clyra Medical's website, you'll see a key opinion leader list. And we believe in Q1, what we'll begin to see next is the rolling out of clinical data presented by the clinicians that do the work with their summary of experience as well as their opinions about the efficacy and the safety that they've experienced in the use of the product. And that is a great moment. And so we're very excited to see that activity now come to public view that should begin to have public visibility in Q1, and it's a critical piece of the puzzle. I also remind everyone that we talked about the UAE in the past, the work that we're doing for Europe and Northern Africa and the Middle East. And in that scenario, it's very important to understand that we have to have a CE mark. A CE Mark is a certification that is required, which is primarily a safety confirmation to the specification is designed by the EU, okay? CE Mark, that's what that's called. So we're in the process of doing that. It does require clinical evidence, which thank God, we have now, and we're advancing that clinical evidence, and we're checking off the boxes. And as soon as we get clearance on the breadth of the market for the distributor, we'll be announcing that transaction and get going on the European and Africa and Middle Eastern opportunity as well. Big deal, big deal. Now again, I'm just going to remind everybody, this is a technology idea that's 18 years in the making -- that's up 18 years in the idea stage more, 13 years investing, 6 years to get to FDA. And then you have to do product design and compete. This is -- I just have to remind you, it's a transformative technology for patient care at a global scale. Number one, make no mistake, we're claiming #1. It's #1. It provides broad spectrum efficacy. It's got efficacy proven for duration in 3 days in a closed environment. It's got efficacy proven through studies for biofilm disruption. And the basic fundamental claim is it delivers this support for patient advocacy, patient care, health, infection control, supporting the process of healing, okay, in a way that does no harm with no local or systemic toxicity. And that claim set makes it #1. And so now it's about getting the word out and getting distribution and supporting our selling agents throughout the world. And finally, we're knocking on the door, ready to go. I'm going to highlight real quick the liquid sodium battery because I still believe it's probably the largest, most significant asset in the portfolio. Imported is a funny word. If you measure imported by money making, yes, it's got a chance for that, for sure, because it's so big. Transformative potential in the marketplace, yes, it fits that bill. I think in terms of mass opportunity and our plan, we've got a great piece of technology that works, and we're continually derisking that. And our business model is to sell factories, not sell batteries. So we form joint venture partners around the world. And its role in the world is extraordinarily valuable in this time -- on this planet at this time in the world. At this moment, we're talking about a $1 trillion investment cycle, and we're going to play a significant role. So that takes us to the battery long-duration energy storage industry as a general, okay? We quote this article all the time. It's about a year old now, expected to grow between $1 trillion and $3 trillion by 2040, trillion, okay? Long-duration energy storage. In the last 3 to 6 months, you're going to watch some companies that have had extraordinary climbs in valuation. And we would argue with not nearly the technology that we offer. Now some of these companies have significant infrastructure investments. They're producing at scale. They're supplying the market. They're in commerce. And so the R&D dollars, which just about killed them to get there is long behind them, and now they're in the process of commercializing successfully. Unfortunately, we believe they're not going to be able to keep up with our technology. And the market is so big, it is so big and so demanding at this time in the world that not one company can possibly keep up with the demand. So it's important for us to get going. And so what do we need to do, right? We're going to talk about what we need to do to accomplish that. But we fill a void in the market, and I'm going to just highlight, lithium is highly explosive. You're seeing communities now ban the production of lithium batteries and storage of batteries, all kinds of stuff going on, not well suited for long duration, highly temperature-sensitive, internal degradation, which creates instability. Instability creates fire risk and Runaway Fire Risk is the idea that one cell lights another. They have poor environmental outcomes. The biggest thing, though, is China global supply chain risk. It's an intolerable situation. We've seen the trade war recently with the administration and the push and the pull with China. And you'll notice that in the battery tech, many Chinese companies are state supported and they're dominating the world by subsidizing every piece of the supply chain, but it's not a sustainable strategy. And yes, they're big. And yes, they're formidable and they're selling batteries that are cheap, but they're not as good. And as this expands, quality, safety, durability, sustainability, durability and efficiency are going to be the key marks that make the market. That's where we fit in. It's a better battery. The punchline is we've got a better battery. And we've derisked it to a large extent, I'm going to talk about risk in a minute. The key claims, I leave this for a lead behind. Don't focus on all this detail right now. Energy density at 2.9x the energy density at a higher voltage. Without the loss of energy, we've got 95% round-trip efficiency. It's a better battery for long-duration storage. That's the punchline. And we can also make it to scale. Now we haven't proven that. That's a thesis. That's one of our challenges to prove that. What do you do with these? We're talking about big batteries, big batteries next to the house or the neighborhood, big batteries next to data centers, 20-foot trailers full of cells, okay? That's what we're talking about. I'm not going to go through the thesis of why we need batteries. It's sufficient to say we need -- the market is going to go to the multitrillion dollar market over the next few years. But data centers are number one, resilience. That's the idea never down. So mission-critical operations need batteries. So when the grid goes down, they don't. You got to interact with the grid that's balancing, arbitrage is buy it low, sell it high. And of course, if you're in the renewable energy phase, battery storage is super critical. People often ask, well, what's taking so long? Why is it taking so long, right? I say, well, number one, we bought the technology. We didn't invent it. We had to redo it. It took about 2.5 years to redo. And that's important, 2.5 years to recreate what we already knew was working. But we had to redo it so that we could claim it as our own. People would say to me, does the battery work? We say, yes, pretty sure it works. And they say, pretty sure it's not going to be cut it? I said, well, I don't have anything else, but pretty sure until we do the work. So we completed the work in the first half of this year, about 2.5 years' worth of work, recreated the cells and brought in a third-party validation. We did a press release on 06/18, and we have a third party confirming the claims associated with the cell. Okay, similar work to do. We're about halfway through that sort of this schematic, which basically is prove the cell, scale the cell, right? Continue testing, bring in some money and form partnerships to build factories around the world. That's all underway. It's actually quite exciting, and we've gotten the attention of the industry in a big way. That means there's two buckets. There's two buckets of opportunities that are presenting themselves. The first bucket is people that need batteries. The second bucket is people that need factories that with all the goodies that come with factories like workforce development, employment, economic development, net export, commerce, high-tech manufacturing, factories, they want to enforce -- reinforce investment in that area. And then there's the other group, they want the batteries, okay? And it's fascinating. And so who wants batteries? Well, data centers, right? In fact, I had a data center developer who says, I've run the numbers. If we build a factory, you'll save us on our data center, you are ready, $1.2 billion in CapEx. The factory is a $170 million, right? So this thesis can be summarized in the following way. Have we done enough work to be credible so that investors will support the building of a factory. And we believe that we've done a lot of that work, yes. The critic would say, always more. Yes, always more. And so as we continue to advance that thesis, every day, we get better, and it's a matter of time between now and adoption. As we find the first factory partner, we get started. When we get started, we make money. And this is really important in the business model, very, very important. We're being paid to build a factory. We're being paid to install technology. We're being paid to provision the equipment to work, to start it. We're being paid to train the force and kick off a factory that's making Cellinity batteries. We get paid throughout the process. So when a project gets financed, we're making money as opposed to burning cash from our balance sheet. It's a great business model. It kind of looks like a franchise when you step away from it. It's not a franchise. It's a joint venture strategy. The response we're getting from the marketplace is astounding. And here's the model. I'm not going to go through it all, but a 6% royalty, 19% carried interest as you get factories up and running, you make a lot of money. That's the point. And we've done some economics. We published these. I'm not going to go through them now, but I'll tell you the punchline. For $170 million factory, once it goes live, it takes about 1.5 years to go to full scale. It generates about $80 million to $90 million a year. Okay. So that's 2-year to 2.5-year development cycle, goes live another 1.5 years, you pay for the operation in 2 years after you build it. It's a very profitable business. And that's the point, plus you're getting battery tech coming out of that, it's transformative for the marketplace. So the business model is simple. You don't do a factory, you do a dozen. We modeled it at 7. On a 7 model -- 7 business factory model, our net present value is about $1.5 billion, okay? Now we're raising money at $44 million. I just want to make sure everybody understands that. So we're not saying it's worth $1.5 billion. What we're saying is the model teaches that if you execute the plan and you secure the financing and you show that you can execute that plan, you're talking about a $1.5 billion net present value on a discount model, okay? So this is where we're headed, and that's the point. This is where we're headed. Is it worth $44 million? You bet you, you bet you it is. We're proving that every day. So we've got MOUs, four MOUs signed, a whole bunch of more in the works. You kind of get to where MOUs don't mean much because you really just want to get them into definitive contracts. We are not there yet. We are not at definitive contract stage, but we do believe it's coming. The other thing that's happened is because we're continuing to advance our thesis and get exposure around the world, we now have very large companies and investors that need batteries that have lots of money and want them. And so that's a good recipe, okay? So we look at them and say, right, here's -- you're ready? How many batteries do you need? They say, how many can you make? I say how much money you got? I'll build you the factory. We can build you the factory, get all the batteries you want, okay? And you're going to finance it, and we're going to build it for you and we're going to get paid to build it, and we're going to get a piece of the action, 6% royalty, 19% carried interest. That's a globally scalable business model, and we're proving it every day. I believe that's going to yield fruit. And we've got a shot to do some of that pretty soon, but it's always subject to show me the money. And so yes, that's our risk factor that we're dealing with, and it's very exciting, primarily because the demand for batteries is insatiable. The competitive profile does not compete. We need to shore up infrastructure to prove that we can produce to scale, very much like we had to do for Clyra. And as we do that, we'll realize -- we believe we'll realize not only the capital resources, but the valuation that's associated with it. And so we're pushing hard to get that through. And I'm going to show you later in our economic profile that we're able to do such a significant innovation with relatively small amounts of money. Compared to what we're doing because it leverages over our existing infrastructure in such a nice way -- in a nice way. Okay. AI solutions, okay? Just everybody knows about AI, right, artificial intelligence, that's data centers. Data centers have massive need for batteries. They got -- they need supply chain independence because it's kicking everybody's tail end. They use massive sums of water. And then remember, we've been doing water recycling for data centers for 3 years with Garratt-Callahan. This is a significant value proposition of the portfolio. We believe we'll find its way to market. And then the other thing is PFAS and contaminants. When these data centers use this water, they're using lots of chemistry and lots of the surfactants that they use in some of the chemistries are laden with PFAS and then fundamentally got a recycling issue. If you're in the data center business, you got an end-of-life concern. right? Those batteries have to -- you have to do something with them when you're done. And so that's becoming a regulatory thing that's happening all over the world as well. And we're particularly well suited at that 1, 2, 3, 4, 5 punch in the market. PFAS. Okay. So we have performance breakthroughs. We just did a press release about a week ago. I can't remember, yes, 11/03 and on 09/29, very important, very, very important technical advances. We've advanced the thesis for controlling and removing ultrashort chain molecules. Ultrashort chain molecules are not regulated yet, but they will be. And the reason we know this is because they're the super small contaminants that are associated with highly concentrated PFAS waste streams like the people that make PFAS material. That's what we're talking about, very, very concentrated, and our system works particularly well at that plus long and short-chain molecules, and we achieved less than 4 parts per trillion and non-detect status. It's an astonishing plan. The most recent reduction in cost is associated with 90% reduction in the AEC energy cost. If you took a profile of this pitch that we made to the marketplace, which is all real, which says we can reduce your consumption of your waste stream production for handling waste and disposal by 40 -- 1:40,000, one part versus 40,000. We now can also say and we've reduced the operating expense of our energy consumption by 90%, which is a value enhancement that will allow us to say to the market, we are the #1 technical performer with no breakthrough, small waste print to non-detect status or for parts per trillion or nondetect depending on what you need and low energy, which means our OpEx will become competitive, in the combination of total operating expense, we can be the high-value performer at the lowest net cost. And that is a winner. And so with this claim, we've gone back to our proposals. We've got over $200 million worth of projects that have been bid, spec'd and priced. And while the market was trying to figure out what to do, whether they had the capital, whether regulators were enforcing compliance or whether they needed to reply to state requirements or litigation, all of that is continuing to move forward. And so we're in a great spot, and we're also negotiating with a number of strategic -- very large strategic partners, which we think is a great plan. Let me see, I must have skipped over that. Yes, it's okay. Let me make sure I didn't miss it. Yes, that's okay. Let me move on to the next slide. Here we go. A lot going on with PFAS. So stay tuned for more information. And we'll talk about Lake Stockholm in a minute. Lake Stockholm is prepared to go -- be provisioned and go live. We think it's going to be in the next weeks, not months and all kinds of delays, but most beyond our control between state, shipping, regulatory, EPA shutdown, government shutdown, general contractor, on and on and on you go, client, the customer, we're now in a spot where the last piece of the puzzle is being installed, we think showing up on Monday, then there'll be a couple of week provisioning, then they'll begin to test and modify. EPA will come in, the state will come in. All of this activity is now coming to a crescendo, which is great. And here you go. Rest assured, on the PFAS for Lake Stockholm, it works, and we'll make sure it works, okay? So finally, finally in that success mode. Okay. Everyone knows what's up with Pooph. We filed a lawsuit on November 11, and it speaks for itself. So I'm not going to go through all the detail, but we have allegations that we're committed to defend. We believe that our claims in the case are supported by evidence. I can assure you this is not about ego. This is not about ego. It's very frustrating, disappointing to say the least. And we would argue unnecessary, okay? But it is what it is. And we're forced to deal with it in such a way that we truly believe we had no choice. We had no choice. We must protect our intellectual property, and we are. And we believe that the -- their unwillingness or inability to pay us now $3.9 million is unacceptable. It's just real simple. It's unacceptable. So the good news is in the Pooph situation is that the asset -- the technology has proven that it can establish a national brand. The marketing was great. They did a good job, okay? 60,000 positive reviews on Amazon. You don't get 60,000 positive reviews on Amazon without a product that actually works. It's just that simple. It works. And it needs to be used as instructed, and it needs to be sold properly, okay? And all this other noise that comes with this dispute, okay? We fully intend on defending our position, and we've taken legal action, which we think is fully justified in our response. So what are we going to do? We're going to make sure our technology is safe. We believe that their actions are not excusable. The court is the proper venue. That's great. We'll reposition this asset to redeploy, and we will likely come in with new partners that can share our commitment to quality and transparency and integrity. So we're in a repositioning mode with that asset, but make no mistake, that's what we're going to do. By the way, the lawsuit is public record. I don't know if you can pull it down online yet, but it's public record. So be sure and look for it. It's quite informative and replete. Again, what are we saying? Built a national brand with consumer products and proved it could be done, and our industrial odor control business is continuing and stable. We're also really good at saving for a rainy day. So we think we're in a great spot to deal with the case and with the demands that's going to put on us. Don't forget the engineering group. By the way, the engineering group is never for sale. Somebody says will you sell [indiscernible] because they're the centerpiece of innovation. They support all these innovations throughout the company, and they're really, really good at it, plus they're inventing new technology. And so it's just -- we're so thankful. They are also breaking revenue records, which is great. I'm going to remind everybody when you see the financials, because they're an intercompany balance, they do a lot of the R&D for BioLargo and that's booked as revenue, but then taken out in consolidation. And because of that, since they're doing R&D for BioLargo, they almost can never turn to profit. If they were -- if we were a third party paying them for services, they'd be profitable, but the skin, the value to us is just enormous, okay? So that's it for the forward-looking sort of the synopsis of the business. I'm going to ask Charles Dargan to now step in and take a stab at the next two slides on the financial results and provide some commentary. Charlie? you're up. Dennis Calvert: Okay, Dennis. Thanks so much. And when you do dig into the quarter 3 numbers, the 800-pound gorilla is the Pooph's credit loss that we took in the quarter of $3.85 million. So the revenue, as you see here for the 3 months is down. It's also down about 50% in the 9 months from about $14 million to $7 million. And with that, it has run through the rest of our statements, producing the net losses that we have up on this slide. I'd want to make a specific point towards the SG&A. Again, most of our -- or a good portion of our SG&A is noncash. We continue to issue stock options and in some instances, stock to our consultants and to employees as a potential reward. So not all of the SG&A is at cash expense. Looking at our cash flow, again, the Pooph loss is running through our cash used in operations. I also want to point out that even without Pooph, we did increase our receivables by about almost $2 million. So the business is performing without Pooph. The other element in our cash flow statement is in our investing, i.e., our capital expenditures, and those are down significantly, much of which is we are coming to the end of the capital expenditure cycle with Clyra. And again, we've been able to finance that through Clyra's financing most of their needs on their own through the issuance of the preferred stock, Class B preferred stock, some debt and then some warrant issuances and exchanges. So we've been able to maintain our cash position, which is very strong at the moment of $4.5 million and our total assets come to a little over $9 million. Again, Clyra is financing itself largely. And with that, BioLargo itself has very little debt. So we were able to maintain a stockholders' equity of a little over $3 million. And let's take a look at the next slide. And so what we wanted to do is look at the major components of our net loss. And you can see, once again, it's Pooph dominating both in the 3 months and 9 months and Clyra. But again, I want to focus that Clyra is at the end of its CapEx cycle. It's also at the end of large operating expenses. And therefore, we believe in a really good position for us going forward. If there's something to kind of take away from all of this, we obviously took a big hit with Pooph, but we survived it. And we survived it in the same time frame that we're also increasing capital expenditures and regular expenditures, getting Clyra ready for its market launch. So the bottom line here is, yes, we took the punch, but we've survived it, and we continue to stay resilient by some ability to raise additional cash and by our ability to manage our operating expenses. So Dennis, that's sort of the summary of where we are in the quarter 3 financials. Dennis Calvert: Yes, I think that's right, Charlie. And thank you. Yes. And again, I'll just make notes. I sit with analysts all the time. and we talk about Pooph and their typical response is most companies couldn't take the hit. And again, I think it points to a couple of things that are really worth noting. One is diversified portfolio is really critical, all centered around a core competency. That's number one. Number two, we do save for a rainy day. We'll not spend for us. We don't waste money. We put money to work for assets that we believe have fundamental value and every day we prove it and then eventually, we get to reap harvest. Okay, Clyra. I mean people -- it's really easy for people to say, Clyra is not valuable because it doesn't make money. Well, guess what, that's not true. We just proved it by raising $2.5 million and a $95 million valuation. It's extraordinarily valuable and wait till it makes money? And so again, it just points to that underlying investment thesis of the hidden asset value, the underlying value of technology, has transformative nature. It also points to the resilience that our company has with diversity and lean. We do more with a small amount of capital than most companies are ever going to see. That's an argument. But I'll take that argument on any time. So let's open it up to questions, Brian, if we can and see what we got next. Brian? Hello, Brian? Okay. Charlie, are you there? Brian Loper: Okay. So we have a couple of questions on Clyra. So the PR regarding Advanced solutions noted that it was an exclusive partnership. So with their annual sales around $5 million, is there any concern that Clyra has limited Bioclear's growth potential by this exclusivity? Dennis Calvert: Who's revenue is around $5 million? Brian Loper: I believe the question is saying Advanced Solutions is. Dennis Calvert: Yes, I don't think that's correct. Yes. So they're much bigger than that. They're moving quite a bit of product. They've got a nationwide footprint. And so in that situation, we have belief and confidence that they're going to generate meaningful revenues for us. It's also a sub niche market of wound care, very technical, hands on. And so we'll have our product in the bag associated with reps that will be covering the nation on a nationwide coverage. So yes, so we think it's going to be a good thing. And then relative to all the details of the terms, both companies, of course, at this stage of the game, want to go prove the market, find the channel. And in this case, our partner has expressed a desire to really prove themselves with significance, and so our contracts allow for that sort of relationship to work out pretty well for both of us, and it's something we're going to grow into. So we think it's a great way to get started that requires the hands-on frontline touch that Advanced Solutions can bring. So that's why we chose them. We also think they're a great character and somebody we can trust and depend on. So no, we haven't limited ourselves. We think we're in a really nice spot to win. Brian Loper: All right. Another question about it. For the Clyra pipeline, so the investor said, well, I believe we have heard about the manufacturing investment that has happened for the surgical partner and that switch can flip as soon as the partner is ready for the other products. How long will it take to get manufacturing ready and what type of production capacity will Clyra have in 2026 for these other products? Dennis Calvert: Yes, it's a good question. So there's a whole menu of products. So let's talk about that first. The first category of products is liquid chemistry in some kind of container. Okay. So now let's just distinguish those. There's the containers that go into the surgical field, and that's called for use in the sterile field, and that would be for the surgical suite. That is an extraordinarily high bar, very technical, very special product designs. It's one of the reasons it's taken so long, but we're hitting the mark. And it did take us some extra time. Delay noted, okay? And everybody got frustrated with it, I get it, but we've plowed to it, and we've survived that journey to be successful now. The other products do not require that same level of precision. Now they do require FDA manufacturing capability, but not the sterile field. And so they can be produced by a number of co-packer -- FDA-certified co-packers. We have a number of relationships that do that, and we can do it on ship-point, we can do across the nation. And so our scalability is unlimited. Okay. Now let me just note, there's a whole bunch of other product designs. So potential gels, additions with other products, coatings, surface materials, bandages, all that. All of those have different manufacturing techniques. We're not there yet. We intend on exploiting and pursuing those designs. But really, we're at the spot where let's just get in the game, put the core technology to work, generate some sales, generate some cash flow before we tackle the financial burden of positioning those additional products for the market, but they will come, and they're extensive, and they go on and on and on. So remember, platform technology. So surgical suite, wound care, burn, tissue therapy. Next, what's next? Dermatology, dental, right? And then sub applications in all these different categories, eye care, on and on, on and on, it can go. So it's pretty awesome. Okay. Next? Brian Loper: All right. Yes. let's switch gears, talk about water. So were the Lake Stockholm delays due to BioLargo or supporting infrastructure built by others? Dennis Calvert: Well, we've met every deadline that we were asked to meet ahead of time. And so that's how we get paid. So that's what we did. And so the execution then there is a whole series of things. The government shutdown was part of it because you got to have an EP on site, both state and federal. And then you've also got general contractors that have their delays, which is permitting, which also gets impacted at the local level, not by us. So local permitting, I think, is the number one delay. It just took what it took. And so the general contractor says, I'm waiting for permits. What do you want me to do? And remember, this is New Jersey. You don't touch that stuff without a permit. And if you're not union, you can't do the work. So this is public works. It's the nature of public works. And then we've had other things happen, but shipping, we had some -- a part that was damaged, but that's not the issue for the delay. That's just another incidental thing that happens along the way. So if somebody wants to find cause, just chalk it up to this is the way the world works. I mean, really. It's a lot of moving parts, and it's pretty typical in sort of public work scenarios. But I can just assure everyone, if someone says hop to, it's mission-critical, there's nothing more important, we're in. And we're really close to finally getting that thing launched. So it's a good situation. It should have been 9 months ago, but we couldn't control any of that. So here we are. Brian Loper: All right. Switching gears to battery. So are there any battery factories currently being built? Dennis Calvert: No, the pilot facility we have, some people have expressed frustration about the early confusion, which is fine. I really do empathize with that, and we don't need to do that. We believe actually the factory in Oak Ridge will eventually have the ability to produce batteries that can be sold, okay? Right now, the problem is that the economics are in scalability. So just because they can, doesn't mean you want to. I mean it's one of those scenarios where you really need to push off 1.5 gigawatt hours of batteries a year, okay? So that's like six 20-foot trailers a day, that scale, that scale, and each one of those will sell something like $300,000 a pop, okay? So that's a business. Making a battery pack with 3 cells or 10 cells is certainly doable. I'm not sure it's economically really justified now. Let me just say that there's a number of opportunities where that sort of design can prove concepts for us that allow for the bigger design to happen, and we fully intend on pursuing those. And we've got a couple of projects that are really fascinating where it's almost like the cost doesn't matter. They just want the solution. And I mean, not within -- I don't want to take that to an extreme level. It doesn't matter as in they'll pay premium. okay? So right now, if somebody said, make me a battery pack to operate my home, okay? We can do that. We're not going to make any money. It's like prototype 101 off the line cost you $1 million and then 102 costs you [ $1,000,001, $1 ], right? It's like the economy hits in when you get to scale. So we've done this for quite some time. And that's what we're really working on with the cell, the factory concept. And we're also working with some potential federal funding, maybe military to really help us get into the game of building packs and taking those through the regimen of testing. But I still believe that we can argue that for an investor partner skilled in this art that we're prepared to move forward with the building of battery factories. Now maybe we can prove that with the deal, maybe we can't. right? That's just to be done. That's just the way it works. Now I got a lot of people who want to do it. And so we're pushing through all those barriers. I can say that if you had, as we say, $7.5 million plus another $40 million, you can derisk that scenario so that when you go to say, let's build a factory, everybody is comfortable that it's been derisked sufficiently to not have concern that the money is going to not yield what they want. Of course, well, that's work. That's called working capital, right? You have to have the capital, you have to do the work. All of that's happened at the same time. I think the most unusual claim that's really a value proposition for BioLargo is simple. We have core competency. We've got great technology. We've got people. We've got a plan, okay? So what's really missing? Well, proper capitalization. That's why we talk about openly that we're raising money, $7.5 million Series A, $40 million Series B. That's into the venture, not into BioLargo. And so you say, well, who does that? Well, that's what Clyra did, and here we are. And again, so a critic, we got plenty, that's fine. Critic would say what, don't dilute BioLargo's parent company. Well, we're not. We're financing future ventures with very high valuations that all drive value to BioLargo. That's the point. It's exactly the point. There's no other point. So don't miss it, right? So we say we're going to do a battery tech, and I think our total invested capital is somewhere around $3 million. We brought in about $1.3 million or $1.5 million. And so the other money has come from BioLargo, right? So what's the agenda? Finance the subsidiary so that BioLargo doesn't have to finance it all. Of course. That's, of course, what we're doing. And so the answer is get the money. get the money, execute the plan, and we've got a chance of creating $1 billion plus worth of value. And right now, BioLargo is 95%. So let's say we brought in the money as we've outlined in the deck. That would be $47.5 million, roughly a 28% dilution on the battery company. Post-money valuation will be north of $150 million, probably pushing more like $400 million, okay? And we'd own 75% of that. It's worth 6x our market cap. How else are you going to finance it? So that's what we're doing. And by the way, it's a great plan, and I do believe it will work. I believe we're going to have success here. You know why? Because we have the right plan, the right people and the right technology at the right time in the world in the $1 trillion investment cycle. Listen, the people we're dealing with want those batteries so bad, you can't even get your head around it. And so they say, let me just paraphrase real quick. Does the battery work? Yes. Can you build a factory that works? Yes. Now here's the question. It's not bad. How can you help me get comfortable that that's true? There you go. That's the question. And you know what we say, real simple. You need to bring your technical experts and your engineers to Oak Ridge, Tennessee, sit down with us for 2 days. And when you walk out, you're going to say, this is all doable, right? Now what else could you do to make that work? Spend money. spend the money to do the work so that it's third-party verified at a level that people can be confident in. So this is not rocket science. This is pretty basic, blocking and tackling at this moment. But you have to do it. And so is it a mistake to aim high early? No. I'll take that debate on any day. No. Because you know what, we've got the real deal. We got the technology, we can transform the market. That's what we have. And I say this every day. I go out to the world, I say, tell me I'm wrong. You know what they say, if it's true, it's right. Okay, so I need to find somebody who believes it's true. And then I need to do everything in our power to back that up so that they know it's true, right? And that's what we're doing. It's not rocket science. Same thing with Clyra. I'm sorry -- really, I'm sorry it took so long. It's over 13 years of investment. We're going to make $0.5 billion or more, and we're going to change the world. That's what's going to happen. It's happening. It's right in front of you. Brian Loper: All right. Yes. so one question here about Pooph. Switching gears again. Why are we still seeing commercials? Can your legal team stop them from advertising? Dennis Calvert: Well, the -- as they say, the long arm of the law has a long reach, but a slow-moving thing. So welcome to the U.S. jurisprudence system, okay? So the answer is yes, we'll do what we can to make it accelerate, okay? So that's part of the plan for sure. Don't mistake that that's the plan. We also think that the more that this activity continues, it's -- we think it's a sad commentary on the business, on the entire situation. It's just -- so we're very unhappy about what's going on. We are taking action to correct it. And we believe our case will be defended successfully in court, and we believe in our assertions, and I would encourage everyone on the phone to read it. And there you go. Brian Loper: All right. Last category of questions here about the financials. So could you help me understand the impairment charge shown on the slide. How did that increase net loss? Dennis Calvert: Yes. So that's an accounting question. I'll let Charlie talk about it. Dennis Calvert: Do you want me to handle that? Yes. So once it was decided by management that the assets we were carrying, accounts receivable and a note receivable from Pooph were no longer the same value as we had on the balance sheet, then we had to make a decision as to what the value is. And through conversations, internal discussions, the decision was that the value at this moment was little. And in accounting terms, what that means is you have to reduce the value and our decision was to reduce the value by $3.85 million. And in so doing, the charge doesn't just reduce the asset. The charge goes ahead and you have to run it through your profit and loss. So that's why it shows up in the profit and loss. Brian Loper: Okay. Last question here. Business developments have taken longer than expected. What can you say to your investors to acknowledge their frustrations and help rebuild their confidence in BioLargo? Dennis Calvert: Yes. So yes, absolutely, it's frustrating. I mean some of it's like almost inconceivable. I mean, like Clyra, it's just crazy. Now I guess Clyra is a great example. You have this idea, which started out 13 years ago with an idea -- it's actually more than that. It goes back 20 years. And then we started investing in it about 13 years ago. And you say, here's this incredible discovery that has a chance to make life better for people, right? Heal wounds, help heal wounds, provide that support and then infection control worthy and you start this journey, okay? And it's fascinating because I think the story with the FDA is just sort of the epitome of the challenge. So we did a lot of work, and we presented our data, and we came to the FDA and said, we need to get approval for this under a 510(k) clearance. And I was there. I've been here a long time. I was there on every call with all the big boys listening to this journey. And I remember hanging up a call, we had 27 people on the call. And I said to our internal team, I said, I think we have a really big problem. And he said, what's that? I said, they think we're lying. Okay. Now hear me clearly. They think we're lying, okay? In other words, let's go through the psychology of that real quick. The most careful skeptics in the world are trained to not believe. And then we show up with a claim, that's unbelievable. Okay. Welcome to BioLargo. I've been hearing it for 18 years. It's too good to be true. And here's the deal. It's all true. Everything we've said is true. Everything in the asset is true, everything it can do is true, and we prove it and we prove it and we prove it, meaning we have to go through a cycle to get through from early adopter to mainstream adoption. This is textbook adoption. This is in class books, classroom books, read a book on innovation. This is normal. And so I guess, right? So you'd say, but it's so important, right? And then you have companies like Theranos, right, where people commit fraud, people go to jail and you have skeptics -- the investment community is some professional skeptics. I get it. I'm not offended. I understand. And so what happens is, right, you continue to advance your thesis with additional evidence. You never stop proving it. In fact, as I say, it takes you 10 years to get credibility and a minute to lose it. You have to prove it every day. That's what we're doing. The beauty is we stayed alive long enough to do it. And the other beauty is it's real. For God's sake, it's real. I don't know how to say any clearer. And same thing with battery tech, right? And so hopefully, we can shrink the adoption cycle. So how would you do that? Well, you do it as part of the way we're doing it. You diversify your base of potential partners. You focus on things not just I need batteries, I need workforce, I need other things that get you financing. You do things like advanced third-party verifications. You muscle up with some equity to do the kind of testing necessary to prove to people that what we're saying is real and true and trustworthy, okay? So that's it. And a lot of it is money, okay? Another part of it is being in the right place at the right time for the right opportunity, okay? So odor is a classic. Our odor control does what it's supposed to do. It's an oxidizer, it's safe. It doesn't hurt anybody. And with the molecule and the chemistry, when it comes in contact with an organic molecule that causes odor, it's going to break it down. period, not maybe, done, but you have to get in contact with the molecule, okay? So now you've got all the stuff going on, environmental interference, wind patterns, mountain heaps of trash, some odors that are not organic. I mean you got all kinds of things that come against you. That's fine. So this is an artful practice. In order to win in that market, you have to be artful to know how to deliver it to accommodate the task, okay? So how do you get that business? You do it over and over and over and over, okay? So it's easy to sit back and say, the medical should have been at market faster, okay? I don't think so. Show me a company that transforms the market. That's because they were talking about, transforms the market, right? Number one, they can transform the market at the level we're talking about that's done in less than 10 years, never happens. So I don't know. I mean, I would argue aggressively that we put our capital to good work, and we've advanced our knowledge base, our talent base, our credibility base, our testing base. And now what you're seeing is the culmination of really almost 20 years of work, achieving critical mass in both knowledge and talent and technology and validation and adoption and everything. And so say a prayer that we can take the battery technology into a more rapid adoption cycle. I don't want to spend another 10 years doing it. If I thought it was going to take 10 years, I wouldn't be doing it, okay? But yes, we need some capital. And yes, we need the third-party validation, and we need to build the units to scale. Now let's just go to PFAS real quick, okay? Show me a competing technology in the emerging market that actually has a customer. None. I mean people don't realize it, none, okay? So who got the customers? Well, ion exchange and carbon. Okay. Well, how is that working out? Well, it doesn't work out very well, okay? Now we believe, to somebody just point to you real quick, we believe that our technology in that space has a chance to actually replace the installations of carbon and ion exchange that have already been done. What? Did you hear what I just said? So we're working on that thesis now. And of course, it will require some financing because what happens is people go out and they spend $5 million or whatever it is on the system. And then they pay for it the rest of their life. And how do they pay for it? 40,000x the waste stream, okay? That's money. And ours is 140,000 and now has the lowest energy -- lower the energy consumption by 90%, meaning our total operating cost is a fraction of what this other system costs, which means we're going to be able to justify the swap out of old technology for ours. Now I don't think that's tomorrow, let's be clear. We're going to go where they don't have installations first. But over time, as our technology becomes more and more accepted because you have to get through the early adoption stage, you have to continue to establish your credibility, partner with the right people, find the channel, get multiple installations, verify with the Feds, verify with the state, okay? Now make no mistake, look at our debt, we project that, that asset is going to be worth at least -- not least, I shouldn't say that way, has a chance to be worth $750 million or more, okay? Right now, we've invested, I'd say, about $3.5 million. okay? Now just track with me. If we raise money at $60 million, and we've invested $3 million, what's our ROI? It's off the chart, okay? Meaning we're able to innovate in a way that most people can't even conceive, right? We do it with less money, less burn, and that thesis is now proving out across the entire portfolio. And so what's the trick? Get them to market, monetize them, got the right partners and go for it. And again, we've been at it for so long. Now we're able to see the fruit. I think being in an OTC market is a problem. It's a thinly traded market. That means we're appealing to less than 2% of the total capital available for an investment thesis in the world. That's a problem. We have mark-to-market. People get impatient. They want to take tax loss selling. Got it, I understand, can't deal with it, right? Shame, you're going to miss it. And you say, how do we know? Well, you don't. That's the risk. You won't know until we perform. This deck right here that you're looking at is trying to help people get their head around. The fundamental value of our business is arguably around $200 million. And so now we're going to see some significant assets come into the market and transform them in the near future. I want to be a stockholder, right? All right. Yes. Brian Loper: All right. Yes. Those are all the questions we have. And thank you again for all the information. Dennis Calvert: I'll wrap it up. Sure. Yes, let's wrap it up real quick. So we'll have this recording or deck performed. We'll do an 8-K on the deck. You're welcome to see it, of course. Please read the lawsuit. It will be very informative for anyone that's questioning strategy. It's right there in writing. You can't miss it. And it's going to shock you. I'll just tell you, you're going to go hmm. And it's going to show you what we've been dealing with for now for about a year, and we're not happy, right? We will survive it, and we think that we can reposition this asset in a meaningful way. So stay tuned as we get that done. We're already seeing a lot of people express interest in that whole situation, which could be very, very good for BioLargo and our stockholders. And again, we think about our company, we're not spendthrift. We save for a rainy day. We're lean at the corporate level, and we try to invest capital where we get a high-yield return, and we think we're demonstrating this. So we hope you go along with us, and thank you for your attention and look forward to speaking to all of you soon. All right? Thank you. Operator: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Good morning, ladies and gentlemen. Welcome to the EZCORP Fiscal Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded. I'd now like to turn the conference over to Sean Mansouri, the company's Investor Relations Adviser with Elevate IR. Please go ahead, Sean. Sean Mansouri: Thank you, and good morning, everyone. During our prepared remarks, we will refer to slides, which are available for viewing or download from our website at investors.ezcorp.com. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides contain certain forward-looking statements regarding the company's expected operating and financial performance for future periods. These statements are based on the company's current expectations. Actual results for future periods may differ materially from those expressed due to a number of risks or other factors that are discussed in our annual, quarterly and other reports filed with the Securities and Exchange Commission. And as noted in our presentation materials and unless otherwise identified, results are presented on an adjusted basis to remove the effect of foreign currency fluctuations and other discrete items. Joining us today on the call are EZCORP's Chief Executive Officer, Lachie Given; and Tim Jugmans, Chief Financial Officer. Now I'd like to turn the call over to Lachie. Lachlan Given: Thank you, Sean, and good morning, everyone. Fiscal 2025 was a transformative year for EZCORP. Outstanding operating and financial results on the top and bottom line drove exceptional shareholder value creation. We materially grew the store base across the 5 countries in which we operate, while retaining a highly liquid and lowly geared balance sheet. We achieved record revenue of $1.3 billion for 2025, up 12% year-over-year and adjusted EBITDA of $191.2 million, up 26%. EBITDA margin also expanded to 14.7% from 13%. Net income surged 30% to $110.7 million. Turning to Slide 3. EZCORP is a leading provider of pawn transactions in the United States and Latin America. Founded in 1989, we operate 1,360 stores across 5 countries with approximately 8,500 team members. Our model expands access to financial services through neighborhood retail locations and promotes the circular economy by recycling preowned merchandise and jewelry. The fundamentals of our pawn product continue to resonate powerfully with customers who need immediate access to cash. Our loans are nonrecourse, meaning customers have no obligation to repay. They can simply walk away and forfeit their collateral with no further consequences. We don't check credit scores. We don't require bank accounts or employment verification. We never engage in collection activities, and we don't report to credit bureaus. These small short-term transactions serve millions of Americans and Latin Americans who are underserved by traditional financial institutions that need immediate cash solutions delivered in a highly respectful and efficient way. Moving to Slide 4. We added 24 stores in the quarter, opening 17 de novo stores in Latin America, 11 in Mexico, 4 in Guatemala and 2 in Honduras. We also completed the acquisition of 7 stores through our Monte Providencia and Tu Empeno Efectivo transaction in Mexico, plus acquired 1 store in the United States, offset by 1 consolidation. Our store count has grown from 1,148 stores in fiscal 2021 to 1,360 stores at fiscal 2025 year-end. Post fiscal year-end, we acquired 14 additional stores in Mexico and 3 in Texas and entered into a definitive agreement to acquire 12 more Texas locations. We ended the quarter with earning assets of $549.1 million, up 18%, comprised of record PLO of $303.9 million and inventory of $245.2 million. The PLO balance represents an 11% increase year-over-year, driven by strong consumer demand and increased average loan sizes. Our PLO to inventory ratio remains healthy at 1.2x, demonstrating disciplined lending and inventory management. Our cash position of $469.5 million increased materially from $170.5 million at fiscal end 2024, reflecting the $300 million senior notes offering completed in March 2025. We remain well positioned financially to unlock further scale and accelerate organic and inorganic growth. Slide 5 and 6 highlight our strong financial performance during the fourth quarter. Tim will walk through those in detail shortly. On Slide 7, it provides an update on the strategic initiatives fueling our consistent growth across 4 of our fundamental operating metrics. Under the strength in the core, we delivered double-digit growth with record revenues and record high PLO, powered by our customer-centric approach and robust consumer demand. The team's ongoing commitment to operational excellence continues to support exceptional profitability. Adjusted EBITDA grew 33% to $47.9 million, while margins expanded 210 basis points to 14.3%. On team members, we implemented a targeted incentive compensation campaign in Q4 that successfully improved merchandise sales, results we plan to replicate periodically throughout fiscal 2026. We've also completed enterprise-wide talent and succession planning and launched structured retention programs that are already enhancing early engagement and reducing workforce attrition. Our customer focus initiatives are gaining significant traction. Our strategy is delivering measurable results. Digital transformation continues to accelerate omnichannel engagement and operational efficiency. EZ+ Rewards membership is up 26% to 6.9 million members, driving loyalty in local neighborhoods we serve and repeat transactions. We continue to broaden engagement across platforms, with our website traffic increasing 49% to 2.6 million visits this quarter. Importantly, Net Promoter Scores improved dramatically, rising to 61% in the U.S. and 62% in Mexico, while we maintained Google review ratings above 4.7 across all geographies. Finally, our innovate and grow initiatives delivered tangible expansion this quarter. In the U.S., we collected $34 million in online payments, up $10 million or 42% year-over-year growth, demonstrating strong customer adoption of digital platforms. We expanded our view-online purchase in-store capability to all U.S. stores as of October 2025, seamlessly connecting digital discovery with in-store transactions. Additionally, our instant quote tool, which provides real-time loan estimates for electronics is now operational in 66% of U.S. stores, driving both customer engagement and conversion. In Mexico, we're seeing rapid digital adoption with 22% of extensions and layaway payments now processed online, creating convenience for customers while improving store productivity. As we continue to scale these digital initiatives, we're unlocking meaningful operational leverage while enhancing the customer experience. This omnichannel approach positions us at the forefront of digital innovation in our industry, while digital engagement successfully translates into increased store transactions and reinforcing our market leadership position. I'll now turn it over to Tim to walk through our detailed financial results. Tim? Timothy Jugmans: Thanks, Lachie. As we transition into the detailed financial highlights section, I want to emphasize that fiscal 2025 represents not just a strong quarterly performance, but the culmination of multiple years of operational improvements, strategic investments and disciplined execution. The results demonstrate the significant earnings power of our platform and our ability to generate consistent profitable growth while maintaining strong financial discipline. Turning to Slide 9. PLO of $303.9 million increased 11% or 9% on a same-store basis, driven by an increase in average loan size, reflecting higher gold values and the increase in value of general merchandise. Inventory increased 28% to $245.2 million due to increase in PLO, layaways and purchases. Aged general merchandise increased 83 basis points to 2.6% of total general merchandise inventory, demonstrating disciplined inventory management. Merchandise sales of $176 million increased 9% with same-store sales up 7%. Merchandise margin remained steady at 35%. PSC of $125.6 million grew 9%, primarily driven by same-store PLO growth. EBITDA reached $47.9 million, up 33% year-over-year with margins expanding 210 basis points to 14.3%. General and administrative expenses of $23.4 million increased 13%, primarily due to higher incentive compensation. On Slide 10, total revenues increased $26.9 million or 13% to $238.9 million for the U.S. Pawn segment. Approximately half of this is attributable to scrap sales benefiting from higher gold prices and increased jewelry purchases. Earning assets increased $66.5 million to $419.4 million, driven by PLO growth of $19.5 million to $233.8 million and inventory growth of $47 million to $185.7 million. The 9% PLO growth on both a total and same-store basis reflects strong performance across our markets. On Slide 11, our 545 stores across 19 states are concentrated in large urban markets. Texas remains our largest market with 247 stores, followed by Florida with 95 stores. During the year, average loan increased 13% to $209, supported by higher gold prices and increased value of general merchandise. PLO composition continues to shift towards jewelry, now 68% of PLO, up 220 basis points. Jewelry inventory composition increased 310 basis points to 65%. This shift enhances our ability to capitalize on elevated gold prices through scrap sales, which contributed significantly to our 27% segment EBITDA growth. Slide 12 details U.S. pawn financial performance. Merchandise sales of $117.3 million increased 6% overall and 5% same-store. Merchandise margin remained steady at 37%. Segment EBITDA of $55.2 million increased 27% with margin expanding 250 basis points to 23%, driven by higher gross profit, including incremental scrap gross profit of $5.7 million and disciplined expense management with same-store expenses up just 3%. Turning to Latin America on Slide 13. Fourth quarter revenues were $96.9 million, up 17%. Earning assets of $129.7 million increased 15% with PLO up 17% to $70.1 million and inventory up 12% to $59.6 million. Slide 14 shows our 815-store footprint across 4 countries. Mexico remains our largest international market with 622 stores. We opened 17 de novo stores in the quarter and acquired 7 stores in Mexico. For the year, average loan size of $88 decreased 4% as reported, but increased 3% when adjusted for foreign exchange. Jewelry composition increased. PLO jewelry composition up 450 basis points to 41%, inventory jewelry composition up 850 basis points to 39%. Slide 15 provides detailed metrics. PLO grew 17% with same-store growth of 9%. Merchandise sales increased 16% with same-store up 10% and merchandise margin remained steady at 32%. Segment EBITDA of $14.2 million increased 18% with margins improving to 15%. Store expenses increased 19%, driven by new stores, while same-store expenses increased 11%. Slide 17 and 18 capture the exceptional transformation we have driven over the past 5 years. Since fiscal 2021, we fundamentally transformed EZCORP's earnings profile. Net income has increased more than 5x from $21 million to $110 million. EBITDA has grown nearly 3x from $68 million to $191 million. Revenue has grown from $729 million to $1.3 billion, while EBITDA margin expanded from 19% to 15%. On Slide 18, PLO has grown from a pandemic low of $176 million today's record $304 million. The portfolio has shifted towards jewelry now represented 62% of PLO versus 54% in fiscal 2021, contributing to our high average loan size of $145 compared to $114 in fiscal 2021. Slide 19 illustrates our inventory management evolution. Inventory has grown to $245 million with aged general merchandise up slightly to 2.6% of inventory. Inventory turns are 2.5x, partially reflecting higher jewelry balances. While inventory as a percentage of PLO is growing, we remain comfortable with the metrics given our increase in purchasing and the impact of our 10-month layaway program. Slide 20 illustrates our merchandise sales evolution over the past 5 years. Merchandise sales grew 69% from $426 million in fiscal 2021 to a record $721 million in fiscal 2025. While merchandise margin normalized from 42% in fiscal 2021 to 35% in fiscal 2025, within our targeted range of 35% to 38%. Merchandise sales gross profit grew 36% from $185 million to $251 million. On Slide 21, our strategic investments continue delivering strong returns. Cash Converters International has returned $14.2 million in dividends over 5 years, of which we have used $10.7 million to increase our ownership to 43.7%. During quarter 1 FY '26, we committed to maintain our ownership percentage by investing an additional $5.7 million through a rights offering, while also receiving an additional $1.8 million dividend. Our investment in Simple Management Group through Founders is performing well. SMG generated $171 million in revenue for the 12 months ended September 30, 2025, up 23% with gross profit of $88 million, up 18%. Our preferred equity structure provides a 20% cumulative preferred return plus 50% participation in distributions above certain thresholds. Looking ahead to fiscal 2026, we remain focused on growing PLO, improving inventory efficiency and scaling operational best practices across all geographies. We are very pleased with expense management to date. However, we do expect a sequential increase in total expenses through the year. Based on the current gold prices remaining steady, we expect similar scrap sales gross profit as we have seen in the last 2 quarters to continue into quarter 1 and then for scrap margins to decline sequentially during FY '26 back to normal levels. Our M&A pipeline remains very active with multiple opportunities in various stages of due diligence. The fragmentation in our industry continues to create attractive acquisition opportunities where we can leverage our operational expertise and robust balance sheet. Each opportunity is evaluated through our rigorous framework focusing on strategic integration complexity and return on invested capital. Back to you, Lachie, for closing remarks. Lachlan Given: Thanks, Tim. Fiscal 2025 was a defining year for EZCORP. We delivered record financial performance, improved our scale, continued our relentless focus on operational discipline by focusing on our people and our customers and enhanced our balance sheet with the largest financing in our history. Thank you to our 8,500 team members, their dedication to serving our customers with respect has driven these exceptional results. We are very well positioned with a highly resilient, exciting growth platform to capitalize on organic and inorganic opportunities to drive further superior returns for our shareholders. With that, we'll open the call to questions. Operator? Operator: [Operator Instructions] Our first question or comment comes from the line of Brian McNamara from Canaccord Genuity. Brian McNamara: Congrats on another strong year here. So we get a lot of questions on gold prices. I'm sure you guys do. How -- what's kind of your message to investors and prospective investors maybe assuming that a lot of this benefit is maybe short-lived. And obviously, nobody can predict what the price of gold will do. But like from a managing the business function, like should investors worry about a potential decline in gold price? Like how should we -- can you kind of frame that for us? Lachlan Given: Yes. Look, I think, Tim, you can comment as well. But I think we run this business over, obviously, many, many years in very different gold environments. I think a rising gold price is clearly helpful. I think we had some real tailwind in this year's numbers clearly from scrap gross profit. But ignoring gold, we still had a phenomenal year. I think the core business across all that we're doing, whether it's lending, sales, the business is doing extremely well. And I think the rising gold price just added to that performance. I think we've spoken to you a lot in the past about the fact that these are short-term loans that we offer, and so we're able to adjust very quickly no matter what gold does. So I think when we speak to investors, we obviously say that a large part of our PLO and inventory is gold, and a rising gold price is helpful. But that said, a change in that, clearly, a very significant change quickly, you would have some short-term issues. But I think in the long term here, no matter what gold is doing, we have a very resilient business model that we can adapt very quickly to a change in price in gold. Tim, I don't know if you'd add any more to that. Timothy Jugmans: I think we have to remember that this business is driven from a PLO perspective. And you're saying, well, the customer is in need for cash. And so that need for cash ignores gold price. So just because the gold price is up or down, doesn't change the customer's need for cash. It just changes what they're bringing in. And so I think that's just an important part of the business to remember that just because gold price has doubled, it doesn't mean our average loan size has doubled in the past year. And so the average loan size is where the demand is for the product. It's not in the gold price. Brian McNamara: Got it. That's really helpful. Secondly, on LatAm, obviously, a really significantly improved performance there over the last couple of years. Like what inning are we in there in terms of improving that business? It seems like a lot has been done over the last couple of years. Lachlan Given: Remember, I'm a cricketer, not a baseball player, Brian. So I'll take my best crack at that. Look, I think we have built really fantastic momentum, particularly in Mexico in the last, call it, 1.5 years. But it's still early down there. When Blair walks into a store, there's opportunity every single time. And so I think down in Latin America, it is still early in the innings. We have got a lot to do in gold and jewelry generally. I think historically, we've been a GM business down there, particularly in Mexico. And so our teams are learning how to lend a lot better on jewelry. So I think there's some real upside around that. I think digital adoption down there is early. So we're seeing some real momentum now in online payments and extensions, but I think we can do more there. So I think you're right to point out the momentum because it's -- every quarter, we're seeming to deliver just fantastic results. And it's not just the key metrics down there. I think what's really important is you're seeing a truly balanced business. So you're seeing the metrics move strongly, but you're seeing them move in the right way. For example, PLO is growing faster than inventory. And aged looks good and so turns look good. And so I think it's growing well. It's in a balanced way. So -- and I think there's still plenty to do down there. I think we've got a big M&A runway down there. I think we're well capitalized to take advantage of that. So there's plenty to do on that front as well as you've seen us build 40 stores last year. I think we would -- while we don't sort of commit to a number, our intention is to grow our de novo business down there at a similar rate, pending what happens on the M&A front. So I think on all fronts in Latin America, we have got a lot more to do. So very pleased with the momentum. Brian McNamara: Got it. And then just finally, on the M&A pipeline. Last quarter, it sounded like you had a pretty robust pipeline. You did some -- you acquired some stores in Q4. It sounds like you acquired some stores subsequent to the end of the quarter. How does that look? How does -- how should investors be thinking about M&A as it relates to 2026? Lachlan Given: As you pointed out -- thanks, Brian. As you pointed out, it was super pleasing to see the momentum there. As everyone knows, M&A by nature is opportunistic. So you can never kind of plan for when it comes together. But across the board, Latin America, we did a really good acquisition down there in the quarter. And then subsequent to that, we've done some really exciting stuff in Texas in October. So I think things are coming together there. But as I said, we have a lot more to do. The pipeline remains extremely robust. But I think as we say every quarter, we do this in a disciplined way. Even though we've got plenty of cash, we look at this on a return on invested capital basis and whatever is best for our shareholders. So while the pipeline is robust, I think you're going to see more of the same from us. It's going to be done in a disciplined way. And -- but we are excited about what we've managed to do in the last 3 or 4 months. Operator: Our next question or comment comes from the line of David Scharf from Citizens Capital Markets. David Scharf: Just a couple here. First, focusing on LatAm. I know there's always a lot of questions about just minimum wage inflation, other dynamics within Mexico. I'm kind of wondering if you're seeing any impact on the ground in terms of pawn loan demand based on what's going on in the U.S. remittance industry. I mean we've seen a clear slowdown in money transfer volume based on immigration enforcement actions here. Are you able to ascertain whether or not that's actually increasing demand in store in Mexico and throughout LatAm? Lachlan Given: Well, I think it's a good question. We get asked this quite a bit. And our evidence is more anecdotal because we're not doing any money transfer. But you're seeing very robust lending in our Latin America business. And whether that's as a result of the money transfer business or other factors, I think the good news for us is that lending across all regions in that part of the world are very strong. Tim, I don't know if you'd add any more to that. Timothy Jugmans: And it also is -- some of this is short term. When these money things change, some months is a little bit higher than others. And so it does move over the place, and it does move between different countries that we've seen. So just because in Mexico, it's slightly lower, it doesn't mean the other Latin American countries we are operating in are lower as well. It is something we do look at, but there's not an immediate correlation there. But we know that the demand for the loan product has been strong in Latin America, especially over the last 18 months, but a lot of that is really to do with operational changes that we've made. David Scharf: Got it. No, I appreciate the color. Just quickly shifting to the U.S. I appreciate the previous comments about gold prices and ultimately the impact on borrowing demand. But given that half the U.S. revenue growth is obviously, as you noted, related to scrap sales this past quarter, is there any kind of benchmark for U.S. top line growth you'd be willing to offer up for fiscal '26, just given the kind of the scrap and underlying gold assumption... Lachlan Given: We don't guide. All I can tell you is that our intention and our objective is to continue with robust revenue growth. I think your point is well made that scrap gross profit was a significant part of particularly the last couple of quarters. But we still see real opportunity in our business outside of just that. So I'd say to you, we're not going to guide specifically, but our objective is to continue this relatively robust revenue growth and particularly profit growth. Operator: Our next question or comment comes from the line of Kyle Joseph from Stephens. Kyle Joseph: Congrats on a nice quarter and year. I just wanted to -- most of my questions have been taken, but if you don't mind, kind of walk us through your -- the loyalty program and some of the marketing efforts and walk us through some of the results you're seeing in those in terms of whether it's increased foot traffic or increased transactions per consumer? Lachlan Given: Thanks, Kyle. Yes, look, I think this 2026 is a big year for our marketing effort. I think it's sort of the culmination in a couple of years of real focus on what we're doing there, particularly digitally. So you pointed out the rewards program. As we said in our opening remarks, we are now across all stores, offering all of our inventory online, so consumers can see all what we're doing online and come into the stores and buy it. I think we're leading the industry in that area. We are now doing instant quotes online. So if you've got an electronic good, we can give you a quote online for a loan or for a purchase. I think that's leading the industry. I think you're going to see us very, very active across social channels. We're already active across YouTube and Facebook and TikTok and Instagram. But I think you'll see some more focus, some more spend, particularly around video in those areas. We're having a lot of success with SEO, SEM in our digital marketing program. So I think for the first time, we are now kind of entering a year where we're firing on all cylinders from a marketing perspective built on all of these initiatives we've been talking about the last couple of years, but they're finally sort of launched and we're ready to see the impact. So look, we're really excited about those things. We think it's both going to drive, as you say, traffic, but it's also what the customer wants. You can't pick where you're going to meet your customer, they pick where they want to meet you. So we want to be able to meet them, whether it's on the phone, online, in-store. And so we're providing all of these channels for the first time across all that we're doing. And I think we genuinely lead the industry in that area. So I think this is the first year that you're going to -- that we're going to really be able to measure those benefits. In terms of the rewards program, it continues to build quite nicely. We are almost 7 million members now, I think. And it's sort of getting a bit more mature. But I think we are now running really exciting, targeted marketing programs to those members. So we're learning much more about each member. We're using data to target them better to increase sales, increase turns, increase margin. So I think it's a really good question, and we're kind of -- we're quite excited about that part of the business this year because I think this industry generally, including us, have sort of ignored that part of the business for decades. And I think customers have become much more savvy, particularly younger customers. And I think EZ has -- we've taken a real position here to focus on this part of the business, hire a great team. And I'm hoping that this year, we're going to see some pretty strong results come out of those efforts. Kyle Joseph: Got it. Really helpful. And then just one follow-up for me. Going back to the M&A pipeline. You guys recently made an acquisition in the auto pond space. Just want to get a sense for how that's performing and if you have more appetite there? And then in terms of geographies, should we think about your M&A pipeline kind of in existing geographies or willing to expand beyond those? Lachlan Given: Both good questions. Thank you, Kyle. So let me start with the second one on the M&A side. Look, there's a lot to do in our existing markets. So I think we're certainly focused there. That said, we are always open to new markets, new geographies. But with that, obviously, comes risk. And we've got great existing teams in our existing markets. So my own bias is to those markets. I just think it's less risk. We've got a better chance of strong execution. So I think our bias is definitely to our existing markets, and we've got plenty to do there. But that said, I think there are some new exciting markets that we can open up, but we're going to do that in a disciplined, not a casual way. So I think really the answer to your question is, first, the existing markets and then maybe some new ones. And then on the car lending business in Mexico, it started well. So we are really firming up our processes around that product, whether it's underwriting, whether it's collections, in the pawn lending business down in Mexico. I think we are now assessing how we're going to roll that out into our existing stores. I think it's becoming quite a large pawn product in the Mexican market around our competition. So I think we bought a really good solid business to start with that's performing well. And now our team is assessing how quickly we roll that out in which stores, in which markets in Mexico. So I think 2026 should be a really interesting year for that business. Operator: Our next question or comment comes from the line of Raj Sharma from Texas Capital. Raj Sharma: Solid results. Congratulations. My question was, are you -- all the digital initiatives that you have made to the business, are you seeing -- what changes are you observing in your business on these digital initiatives? Does it serve -- is it serving a younger cohort that's more stressed? Or are you doing more layaways as a result of all these initiatives? And my question really is around -- do you need to track economic indicators like delinquencies and credit card balances? Or do you just see it clearly in your store traffic online flow and then I have some follow-on question. Lachlan Given: Thanks, Raj. Look, on the second question, on the tracking of metrics, look, Tim certainly looks at macro metrics. But I think our focus is really what we're doing. And that means our operating initiatives in the stores. That's where we focus. We look at the macro at times when we're asked, but I think we can't control that. What we can control is what we're doing for our customers in the stores. So that's really our focus. And on the digital initiatives, you're seeing genuine change as a result of those initiatives. If you look at extensions and paying loans online, it's just sort of phenomenal growth as to our customers who are wanting to do that. So that's not only exemplary customer service, but it's making our stores more efficient so that our people in our stores are actually looking after customers on the lending and the sales side rather than just extending loans. So I think you can see very, very high growth in those metrics where people are taking that option to pay or extend online. That's sort of one of the digital initiatives that's really changed significantly in the last couple of years. And then on the other digital initiatives, obviously, you've got the loyalty program, and we think that, that's very, very helpful in us growing market share. So I think that digital initiative has been super important. And then really just your core website, social marketing, paid search marketing. I think we're just -- we're gathering more and more customers across the regions in which we're operating, the new way. It used to be that you would just put up a big sign that said pawn and you had good customer service. They were the 2 ways you'd market in a pawn shop. I think now you've just got to be a lot more diverse than that because that's where you're going to meet your customers, whether it's through social, whether it's paid search, whether it's SEO, I think you've got to be doing all these things to ensure that your customer base is growing. So look, I think there's -- customer growth is an obvious outcome from these digital initiatives, I think making our stores more efficient, so giving our people more time to serve our customers instead of doing the brand kind of loan extensions or loan payments. And I think customer loyalty and retention through the rewards program is the other major outcome here from concentrating on these digital initiatives. Raj Sharma: Got it. Got it. That's very helpful, very descriptive. And then just one other question is in the U.S. Pawn side, the PLOs were up 9%. The inventory was up more. Inventory turnover was down. Is that -- can you explain the inventory was up more than the PLO growth? And is that layaways? Is that... Lachlan Given: Yes, it's a good question, that one. I would say to you that we're still happy with these metrics. And what's driving that is partly doing more purchases. It's partly doing more longer-term layaways. But I would say it's an opportunity for us is to increase turn. So we've got various operating initiatives in place, which we started towards the end of the year and going into the new year where we are designing bigger, better incentive programs for our store staff to sell more. We are putting more talent into this function, which is the selling function. I think EZ has always been a fantastic lender first. And I think our current team has taken a more balanced approach to that. It always starts with the loan clearly, but you have to flush that inventory and flush it quickly. So look, I think you point out, it is a metric that is an opportunity for us. I think there's good reason for inventory growing the way it's been growing. But I think we have got initiatives in place for 2026 where we want to improve those turns. Timothy Jugmans: I think also remember that, that inventory increase, a majority of that is jewelry. So if we wanted to tomorrow, go scrap a whole lot and improve that turnover, we could. But we see that selling that gold in the stores is an important part of the long-term growth of the stores. So you're selling it back to the neighborhood. And so that -- our focus is on the long term and not a short-term gain. And so you'll see that inventory growing a little bit more just because we have more jewelry and that jewelry price -- gold price has obviously significantly increased. Yes. Raj Sharma: Got it. So it's not necessarily a concern for you, more of an opportunity. It reflects more of a gold price rise and increased gold jewelry being taken in. Timothy Jugmans: Correct. So jewelry obviously sells at a little bit slower rate. That's why the inventory turnover is down. Obviously, with the gold -- quickly gold rising price, lots of people come in and sell their gold more than in the usual period. So that drives the inventory as well. And then we've also talked about our 10-month layaway program that is just for the first time this -- in quarter 4 lapped from last year. So it's not quite apples-to-apples yet. But over the year, we'll start seeing a more like-for-like comparison. Operator: Our next question or comment comes from the line of Andrew Scutt from ROTH Capital Markets. Andrew Scutt: Strong results. Most of my questions have been answered. So just one quick one for me. In recent months and weeks, we've heard that the U.S. consumer has been a little bit constrained. We're also going through a long government shutdown. Have your store managers in the U.S. seen any change in consumer behavior or maybe a different profile of customer coming in store? Lachlan Given: Look, thank you, Andrew. I think -- look, we are certainly seeing, as you can see from the results, strong demand for the line product in our U.S. stores. What that is a result of, I can't really comment whether it's government shutdown, whether it's difficulty in getting loans from alternative providers. But we are seeing the customer continue to be under pressure. And I think you can see that in the U.S., in our really strong lending profile. We're also doing a good job on the sales side. So I think the business is firing on all cylinders. But to your specific question on government shutdown, all I can point you to is our lending results and they're robust. So maybe it is part of the situation. Operator: I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Lachie Given for any closing remarks. Lachlan Given: Thank you, everyone, for joining. It was obviously a phenomenal year for us. We're very proud of the results. We're very grateful to our 8,500 staff members for delivering these results, and we're also very grateful for everyone's support here on the call. So look forward to talking to you all more through the course of the next day and week. Thanks for joining. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.