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Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Acadian Asset Management Inc. Earnings Conference Call and Webcast for the Third Quarter 2025. [Operator Instructions]. Please note that this call is being recorded today, Thursday, October 30, 2025 at 11 a.m. Eastern Time. I would now like to turn the meeting over to Melody Huang, Senior Vice President, Director of Finance and Investor Relations. Please go ahead, Melody. Melody Huang: Good morning, and welcome to Acadian Asset Management Inc.'s conference call to discuss our results for the third quarter ended September 30, 2020. Before we begin the presentation, please note that we may make forward-looking statements about our business and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form 8-K filed today containing the earnings release, our 2024 Form 10-K and our Form 10-Q for the first and second quarter of 2025. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information or future events. We may also reference certain non-GAAP financial measures. Information about any non-GAAP measures referenced, including a reconciliation of those measures to GAAP measures, can be found on our website along with the slides that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment prospects. Kelly Young, our President and Chief Executive Officer, will lead the call. And now I'm pleased to turn the call over to Kelly. Kelly Ann Young: Thanks, Melody. Good morning, everyone, and thank you for joining us today. I'm thrilled to share our Q3 2025 results with you as Acadian continues to grow and reach new heights. Every milestone we hit reflects our team's discipline and dedication in executing the organic growth plan we articulated when I assumed the CEO role at the beginning of the year. We remain focused on expanding targeted product and distribution initiatives to deliver long-term growth and shareholder value. Beginning on Slide 3. Acadian is the only pure-play publicly traded systematic manager. Founded in 1986, Acadian has pioneered systematic investing, and we continue to lead the space through constant innovation. We have delivered sustained outperformance across various investment strategies and through numerous market cycles. We managed $166.4 billion of AUM and a pure systematic manager applying data and cutting-edge techniques to the evaluation of global stocks and corporate bonds. 95% of our strategies by revenue have outperformed benchmarks over a 5-year period with a 4.5% annualized excess return. Our competitive edge comes from a combination of world-class talent, data-driven insights and innovative tools, which enable us to generate unique research and risk-adjusted returns that help our clients achieve their long-term investment goals. Our investment team is comprised of over 100 individuals with the depth and breadth of experience across many disciplines of finance, statistics and economics and a shared culture of collaboration and innovation. We're implementing focused product and distribution initiatives to drive sustainable growth, which I will discuss in more detail. Slide 4 showcases Acadian's Q3 2025 strong performance. Our U.S. GAAP net income attributable to controlling interest was down 11% and EPS was down 7% compared to prior year due to increased operating expenses, driven by increased noncash expenses, representing changes in the value of Acadian LLC equity and profit interest. Our ENI diluted EPS of $0.76, was up 29% and our adjusted EBITDA was up 12% driven by significant growth in reoccurring base management fees as well as share repurchases. We realized $6.4 billion of positive net client cash flows in Q3 of '25, 4% of beginning-period AUM, the second highest in the firm's history, driven by enhanced extension and core strategies such as non-U.S. equities. AUM surged to $166.4 billion as of September 30, 2025, marking another record high for Acadian. Turning to Slide 5. Acadian investment performance track record remains strong despite a more challenging recent period. We have 5 major implementations, which comprise the majority of our assets. As of September 30, 2025, global equity, emerging markets equity, non-U.S. equity, small cap equity and enhanced equity have 100% of assets outperforming benchmarks across 3-, 5- and 10-year periods with 1 minor variation. Global equity markets delivered strong returns in Q3 of '25. However, crowding in lesser quality high beta stocks created a more challenging environment for Acadian's fundamentally driven quality-orientated approach. We have seen these periods before but remain confident in our approach and believe we are well positioned for when markets refocus on company fundamentals. Slide 6 details how our disciplined systematic investment process has weathered various market cycles and generated meaningful long-term alpha for our clients. Our revenue weight 5-year annualized return in excess of benchmark was 4.5% as of the end of Q3 2025 on a consolidated firm-wide basis. Our asset weight 5-year annualized return in excess of benchmark was 3.5% as of the end of the quarter. By revenue weight, 94% of Acadian strategies outperformed their respective benchmarks across 3-, 5- and 10-year periods as of September 30, 2025. And by asset weight, 90% of Acadian strategies outperformed their respective benchmarks across 3-, 5- and 10-year periods. Next, on Slide 7, I'd like to focus on Acadian's extensive global distribution platform, which has helped us achieve robust gross sales and will continue to be a major driver of growth in the years ahead. Acadian has had a strong global presence for many years with 4 offices headquartered in Boston, London, Sydney and Singapore. We have continued to expand our client and distribution team with over 100 experienced professionals, serving more than 1,000 client accounts in more than 40 countries. The team has established strong, deep relationships with many institutional lines as our average of client relationship length with top 50 clients is over 10 years. We work with over 40 investment consultants across market segments and geographies, leading to a diverse client base invested across multiple strategies. We have $39 billion of gross sales in the first 9 months of 2025, which has surpassed our previous record of annual sales of $21 billion in 2024. In tandem with expanding our distribution capabilities, Acadian's business and product development teams have been focused on expanding our strategy and vehicle offerings in high demand and growing areas where Acadian's systematic approach is particularly well suited. Our current pipeline remains robust after the funding of several large mandate wins in Q3 of 2025. Moving to Slide 8. Acadian standing is a highly regarded institutional asset manager is a testament to our proven investment process as well as Acadian's world-class investment and distribution teams. We have 5 clients among the top 20 global asset owners and 24 clients among the top 50 U.S. retirement plans. More than 40% of our assets are from clients invested in multiple Acadian strategies. Our client base is diverse with 43% of assets managed for clients outside the U.S. We offer over 80 institutional quality funds for investors. And we achieved $39 billion of gross sales in the first 9 months of 2025 and reached $166 billion of AUM as of September 30, 2025. Slide 9 highlights the sustained momentum in Acadian's net flows. We realized positive net flows of $6.4 billion in Q3 of 2025, the second highest in the firm's history, representing 4% of beginning period AUM. This quarter's net flow is diverse across products and client types. Both enhanced and extension equities generated strong NCCF and core strategies such as non-U.S. also saw meaningful net inflows. Year-to-date, we generated net flows of $24 billion. With positive flows of $1.8 billion in 2024, we have now generated 7 consecutive quarters of positive net flows. As indicated earlier, our current pipeline remains robust after the funding of a number of significant client wins year-to-date. I'm now going to turn it over to our CFO, Scott Hynes, to provide you with more detail on our financial performance this quarter and an update on capital allocation. Scott Hynes: Thanks, Kelly. Turning to Slide 11. Our key GAAP and ENI performance metrics are summarized here. As previously noted, we manage the business using ENI metrics, which better reflect our underlying operating performance. You can find complete GAAP to ENI reconciliations in the appendix. Let me now turn to our core business results. Starting on Slide 12. Q3 '25 ENI revenue of $136 million increased from Q3 '24 by 12%, primarily due to management fee growth, partially offset by a decline in performance fees. Management fees increased 21% from Q3 '24, reflecting a 34% increase in average AUM driven by strong positive NCCF and market appreciation. Moving to Slide 13. In Q3 '25, our ENI operating margin expanded 157 basis points to 33.2% from 31.7% in Q3 '24 driven by increased ENI management fees. Our Q3 '25 operating expense ratio fell 40 basis points year-over-year to 43.3%, reflecting the impact of improved operating leverage. Our Q3 '25 variable compensation ratio decreased to 41.5% in Q3 '25 from 43.3% in Q3 '24. We now expect that our fiscal year 2025 operating expense ratio will be approximately 44% to 46%, and while our fiscal year 2025 variable compensation ratio is now expected to be approximately 43% to 45%. Turning to Slide 14 on capital resources. I'll focus on our strengthened balance sheet and the refinancing of our $275 million senior notes. This morning, we noticed the redemption of these notes that were to mature in July 2026, will be funding the redemption with a committed 3-year bank term loan and balance sheet cash. The term loan will have a floating rate based on SOFR and does not require annual amortization or principal payment prior to maturity, and that it is prepayable at any time with no fees or costs. We expect the senior notes redemption to be completed and for the term loan to fund around December 1, 2025. As of September 30, 2025, prior to the senior notes refinancing, our gross debt-to-adjusted EBITDA ratio was 1.4x, and net debt-to-adjusted EBITDA ratio was 0.8x. As adjusted for our senior note refinancing, our gross debt outstanding declines from $275 million to $200 million, with our gross debt to adjusted EBITDA ratio moving lower to approximately 1x and our net debt-to-adjusted EBITDA ratio to approximately 0.9x. Stepping back, this refinancing transaction is consistent with our disciplined approach to maximizing shareholder value. It increases our balance sheet flexibility, enables further deleveraging and enhances cash flows to capital management priorities, including investments in organic growth, share repurchases and dividends. Moving to Slide 15. We have a track record of creating significant value through share buybacks in recent years. Outstanding diluted shares have decreased 58% from $86 million in Q4 '19 to $35.8 million and Q3 '25. Over the same period, $1.4 billion in excess capital was returned to stockholders through share buybacks and dividends. During the third quarter of 2025, we repurchased 0.1 million shares or $5 million of stock at a volume weighted average price of $48.58. Amy's Board declared an interim dividend of $0.01 per share to be paid on December 24, 2025, to shareholders of record as of the close of business on December 12, 2025. Going forward, we expect to continue generating strong free cash flow and deploying excess capital that maximizes shareholder value. I'll now turn the call back over to Kelly. Kelly Ann Young: Before moving to Q&A, let me recap some key points. Acadia is competitively positioned as the only pure-play publicly traded systematic manager with a nearly 40-year track record and competitive edge in systematic investing. Our investment performance track record remains strong this quarter with more than 94% of strategies by revenue outperforming over 3-, 5- and 10-year periods. Business momentum continued in Q3 of '25 with net inflows of $6.4 billion, the second highest in the firm's history and with record AUM of $166.4 billion. Q3 '25 financial results included record management fees of $136.1 million, up 21% from Q3 of '24 million. ENI EPS of $0.76, up 29% from Q3 '24, and operating margin expansion to 33.2%, up from 31.7% in Q3 of '24. Finally, capital management remained a focus in the quarter as we repurchased 0.1 million shares or $5 million of stock and strengthened our balance sheet with the announced senior notes redemption and term loan refinancing. Acadian is well positioned to continue to drive growth and generate value for shareholders through targeted distribution initiatives and new product offerings. Our talented and dedicated team is acutely focused on achieving these goals, and I look forward to building on the momentum we've seen year-to-date. This concludes my prepared remarks. Operator: [Operator Instructions] Your first question comes from the line of Kenneth Lee from RBC Capital Markets. Kenneth Lee: On the institutional pipeline, you mentioned that it still remains robust. Wondering if you could just talk a little bit more around the composition. Any particular strategies or strategy buckets that you're seeing demand from clients? Kelly Ann Young: As I noted, the pipeline continues to look very robust. And the things that I think we've talked about on these calls earlier in the year continue. So enhanced equity continues to resonate with a number of our clients, particularly, I'd say, our international clients outside of the U.S., although increasingly within the U.S. And we've seen a real pickup of interest in the second part of this year in our extension strategies. I would say that's primarily driven by U.S. clients. But again, we're starting to see some interest there outside with non-U.S. investors. So those are clearly 2 themes that I think have continued through 2025. And continue to see really robust interest in our core strategy, where obviously, we have very long-term attractive track records there. And particularly, I'd say international equity clients looking to allocate perhaps strategies that don't have U.S. dominated. So continuing to see a real interest there. So the pipeline looks very diverse by strategy, continues to look very diverse by client domicile. And we continue to edge closer to that 50-50 split of AUM between U.S. and non-U.S. clients that we have been targeting for some time. Kenneth Lee: Got you. Very helpful there. And just 1 follow-up, if I may. Any update around outlook capital management. You mentioned plans to redeem the senior notes as well as with the term loan relatedly, any plans about how you think about paying down that term loan over time? Scott Hynes: Yes. Ken, it's Scott. Thanks for joining this morning. It's good to talk again. In regards to capital management, I think, look, I would anticipate that we'll continue to be pretty athletic in this regard. So we feel really good about the senior notes redemption and landing with the committed financing we have in place with the new Term Loan A, a lot of flexibility there. And I think you'll see us look every quarter to steer at what's the best answer for our shareholders. recognizing we do have that prioritization as we've spoken about before about organic growth and prioritizing organic growth and then going from there in terms of return of capital to shareholders. So I think during the balance. I think we're really well positioned. I think we'll be looking again every quarter. And you saw this quarter, I think that's reflected. We have a lot, as you can see going on this quarter. Another great quarter of performance, strong free cash flows, but we did have this refinancing and yet we were still in the market doing share repurchases. So I think that's reflective. Again, my words, I think, are going to be pretty athletic in this regard. Every quarter, looking to step into the market when appropriate in terms of share repurchases, while still being mindful of that debt position. This was, as you can see, clearly, a deleverage move. We think that's the right position to be in. I would know in this regard that we also upsized our existing revolver. So I think we're marching to a place of continuing to have a little less leverage. So that $200 million Term Loan A is a lot of flexibility there for us to repay early, no fees or costs associated with that. So we'll be revisiting that every quarter. Does that make sense? Kenneth Lee: Yes, that makes sense. That makes sense. And actually, if I could squeeze one more question and really appreciate the detail around global distribution. Just curious, what's been driving the pickup, the meaningful pickup in gross inflows that you've been seeing over the last year or 2. Were there any specific initiatives or efforts within the distribution platform? Or is it more related to what you're seeing in terms of the client trends? . Kelly Ann Young: Sure. I think it's a bit of both, Ken. I mean, we've very thoughtfully added resources to our distribution and client service teams across the globe to continue to service our clients to the best of our abilities and obviously, continue to focus on sort of newer channels or channels that have been under-penetrated. So I do think that it's a testament to the quality of the team that we've built here. We've also very intentionally tried to build out a suite of pooled funds. We have a usage range that works very well for our non-U.S. clients. We continue to build out our Delaware and CIT ranges within the U.S. So again, I think making ease of access to clients. a lot better. And then I do just think as well as we talked about things like enhanced and extensions are capturing the imagination and satisfying client need at the moment. So I think it's a combination of all of those things. But again, being very intentional about adding to an already incredibly talented team here and being very intentional about that. Operator: Your next question comes from the line of John Dunn Tan of Evercore. John Dunn: I wonder you just talked about like the domicile mix of your AUM. Could you remind us of the geographic mix of your investment strategies? And then just any change you're seeing in the demand for non-U.S. exposure relative to the last year or so? Kelly Ann Young: Sure. Yes. Nice to talk to you again, John. Yes. So we have seen a real pickup in interest, I would say, over the last 12 months in international strategies. It's one of our core strategies here, I would say, alongside global and emerging markets. And is our longest track record at the firm. So again, Acadian is very much known for international investing and we have, I think, a strong brand advantage there. . What's been quite interesting, I think, for us is not just seeing a pickup in interest in these strategies from our U.S. domiciled clients, but starting to see some of our non-U.S. clients thinking in this more sort of international or ex U.S. space. So again, I think there are different drivers, but that's sort of the newer trend that we've seen. And I certainly think we're going to benefit from a tailwind there given our long-standing track record and the established brand in that space. John Dunn: Got you. And then relatedly, one of your competitors recently said that they've seen the other managers that kind of pulling back from emerging markets over the past year. Would you agree with that? And maybe just a little more on emerging markets specifically. Kelly Ann Young: Sure. Yes. I think if we've been talking in 2024, I would probably completely agree with that statement. I think through this year, we are seeing pockets of interest in emerging. Again, I think Acadian has established an emerging market managers since the early 1990s. So again, I think that very strong robust track record that dates back decade, means that perhaps we're kind of front and center when folks are thinking about systematic exposure to EM. I certainly don't think that we're seeing the level of demand that we are in things like developed international. I think that's a fair statement. Again, I think we're seeing -- we are seeing some pockets of interest be on the back of 2 or 3 years, I think, relatively flat demand. John Dunn: Got it. And maybe just one quick modeling one. Could you just kind of outline the puts and takes of the fee rate from here? Scott Hynes: Yes. John, it's Scott. Yes, I mean, as you know, we've -- and Kelly has already touched on it. We've seen a bit of a transition and it's purposeful given the amount of traction that enhance specifically, has gotten in recent quarters. And particularly in the second quarter, the prior quarter when we saw, as you know, another really strong quarter of inflows, particularly in enhanced. You saw a bit of downward pressure on the fee rate. And then for all and purposes, we're more of a run rate reflecting those inflows and enhanced in a large way in the second quarter and again in this quarter. As we said prior, in all candor, this is an output, and there's a lot of things that work here that are not in our control. So more specifically, broader market levels and where we're seeing client demand, as Kelly's said, Enhanced has gotten a lot of traction in recent quarters, and we're seeing at the pipeline, as you already articulated, it's still there. However, there are other products, and I would say to be clear that when we think about enhanced from the start of the year and the management fee rate in the, call it, upper 30 basis points, it would often be somewhat lower than that. But other products that we are seeing also traction in could be higher than that upper 30 basis points rate. So I say that and that we have seen some chunky installations, and it can move around quarter-to-quarter. So that's a long way of saying we have seen this direction of travel closer to the mid-30s range. I think all else equal, looking at the pipeline today, you could see another basis point to come lower perhaps next quarter, particularly if enhanced materializes the way that we're staring at now at the pipeline. But a few chunky wins and another product, which are very much on table could have a different effect. So that's a long way of saying there has been this dynamic. I think you could continue to see a little bit of downward pressure in the fee rate given the ongoing traction and enhanced in the fourth quarter. But I'll tell you, it's not something that I think we can continue to pencil in necessarily. There's just too many factors at work, particularly when we look at 2026 and beyond. Hopefully, that's a help. Operator: Your next question comes from the line of Michael Cyprys of Morgan Stanley. Michael Cyprys: A question for you on the platform today, clearly really a lot of momentum with your enhanced and extension strategy. But when you look at the platform, are there any capabilities, geographies in areas that are lacking today that could put intended to enhance your value proposition with clients. And just curious how you're thinking about inorganic versus organic initiatives as you look out from here. . Kelly Ann Young: Nice to speak to you again, Michael. Yes, as you've noted, enhance and extensions have been a great story for us as have our core capabilities. And I think being able to support clients as they're looking at different points on the risk curve has been very helpful for us from a business and organic growth standpoint. We haven't touched on systematic credit. But I think, as you know, we've been -- we very actively have built out an offering there. I think still perhaps over the medium term where we expect to see much larger flows there. We're coming up on our 2-year anniversary of our longest running strategy in that space next month. So as I -- as we think about pivoting away from perhaps some of that equity exposure, although, I do feel much more comfortable now than a couple of years ago with how diversified that is across the risk spectrum across geographies. Systematic credit is also something that the team is very focused on having some really interesting conversations with existing and prospective clients there as systematic becomes gains traction and is gaining attention in the in the credit space. So I think for us, over the sort of short to medium term, that's going to continue to be a strong area of focus. And again, are hopeful that we see assets follow those strong track records that we're building, be it that we're still sub-2s on track records as we sit here today. Michael Cyprys: And then just on the systematic fixed income, maybe you could elaborate on how that's contributing today? How you think about that evolving over the next couple of years? And what are some of the steps you're taking around to build that out? And do you feel you have the capabilities on the fixed income front, systematic capabilities to capture the opportunity set? Kelly Ann Young: Yes, absolutely. I mean we have -- we hired a gentleman, Scott Richardson to run this initiative 3.5 years ago who comes with an extraordinary pedigree in both equity and fixed income investing. So Scott has built out and handpicked I think, an outstanding team here today to a dozen or so people that have -- we feel very well placed. We've been very intentional about how we have gone to market with these strategies. As I say, our longest high-yield strategy will hit 2-year anniversary next month, closely followed by our global high yield and our U.S. investment-grade strategies all between a year and 2 years. So I think, again, we are -- we have certainly built -- very intentionally built the capability, those track records are still in, I'd say, incubation stage, but not early incubation. I think much more midterm. We know in fixed income, again, the expectations around returns are that much smaller than they are in equities. And so those 3 track records, I do think are going to be very important milestones for the clients to gain comformt. But certainly, when I look at the team that Scott has built, when I look at how integrated that is with the existing research team, the infrastructure of the firm here. I think we're going to be very well placed over the medium to long term in terms of generating meaningful return for our investors and meaningful cash flows as well. So again, I feel very confident about it as we sit here today, but with all the caveats that again, I think in this type of asset class, 3 years is clearly the benchmark that clients will be looking for in terms of gain comfort. But I do think that what Scott and the team have done in terms of building a very consistent positive performance month-over-month, quarter-over-quarter, is starting to really resonate. So I feel very confident where we are today. and the expectations of that platform being able to manage $10 million, $20-plus billion, certainly is the capability there over time. I just think I'd say that those 3-year track records are going to be perhaps more important here than they might be in some other more adjacent areas of our equity business. Operator: [Operator Instructions] And this concludes our question-and-answer session. I'd like to turn the conference call back over to Kelly Young. Kelly Ann Young: Well, thank you, everyone, for joining us today, and I wish you all a great day. Thank you. .
Operator: Ladies and gentlemen, welcome to Clariant's Third Quarter, 9 Months Figures 2025 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Andreas Schwarzwaelder, Head of Investor Relations. Please go ahead, sir. Andreas Schwarzwaelder: Thank you, Sandra. Ladies and gentlemen, good afternoon. It's my pleasure to welcome you to this call. Joining me today are Conrad Keijzer, Clariant's CEO; and Oliver Rittgen, who joined Clariant as Clariant's CFO on August 1 and participating in his first results call today. Welcome, Oliver. Oliver Rittgen: Thank you. Andreas Schwarzwaelder: Conrad will start today's call by providing a summary of the third quarter developments, followed by Oliver, who will guide us through the business unit results and savings program. Conrad will then conclude with the outlook for the full year 2025. There will be a Q&A session following our presentation. [Operator Instructions] I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, the conference call is being recorded. A replay and transcript of this call will be available on the Investor Relations section of the Clariant website. Let me now hand over to Conrad to begin the presentation. Conrad Keijzer: Thank you, Andreas. I'm pleased to report that Clariant achieved significant growth in EBITDA before exceptional items in the third quarter of 2025 showcasing the success of our performance improvement programs and effective price and cost management in a continued challenging market environment for our sector. We delivered sales of CHF 906 million. This represents a 3% decrease in local currencies and a 9% decrease in Swiss francs. Our EBITDA before exceptional items increased by 5% in absolute terms to CHF 162 million. We delivered a significant margin improvement of 230 basis points to 17.9%, driven by our performance improvement programs as well as price and cost management across all of our business units. Our savings program continued to support our performance in Q3. We achieved savings of CHF 19 million and booked CHF 3 million of restructuring charges in the quarter, taking our total savings to CHF 31 million in the first 9 months of 2025. As a reminder, this program is set to deliver CHF 80 million by 2027 with a significant contribution expected this year. We expect to book the total CHF 75 million of restructuring charges related to this program in 2025. Now turning to our 2025 guidance. We anticipate local currency sales growth at the lower end of our guided 1% to 3% range due to weaker industrial production and weaker consumer sentiment. We also confirm our 2025 profitability guidance of 17% to 18% EBITDA margin before exceptional items, underscoring our confidence in sustaining our improved levels of profitability. Last Friday, Clariant's Board of Directors decided to reduce its size from 11 to 8 members. This will be reflected in the nominations for the upcoming AGM 2026 on April 1 next year. Supporting these changes, 5 current directors will not stand for reelection and 2 new independent members will be nominated as appropriate ahead of the 2026 AGM. With this proposal, the Board aligns with Clariant's rightsized organizational setup, and it optimizes independence, tenure and gender diversity. The management team thanks the departing directors for their trustful collaboration over many years. Now moving on to more details relating to our financial performance in the third quarter of 2025. We delivered sales of CHF 906 million. In local currency, this represents a 3% decrease with the reported figure impacted by a 6% negative currency translation effect. We maintained pricing discipline across our portfolio with a year-on-year increase in Adsorbents and Additives and flat pricing in Care Chemicals and Catalysts. Volumes decreased at a low single-digit percentage rate in Care Chemicals and Absorbents and Additives, while Catalysts volumes decreased by 8% as the weak economic environment and utilization rates continue to trade below long-term averages, impacting refill timing. Turning to profitability. As I already noted, we had a strong overall performance with a 230 basis point improvement in EBITDA margins before exceptional items versus the third quarter of 2024. In total, the business units drove a 130 basis point improvement mainly from our performance improvement programs, price and cost management. The remaining 100 basis points was in corporate, with the majority related to phasing of provisions. In Care Chemicals, lower volumes were more than offset by a positive mix effect and contribution from Lucas Meyer Cosmetics. In Catalysts, lower volumes were partly compensated by price and cost management. In Adsorbents and Additives, profitability was positively impacted by pricing and mix effect despite slightly lower volumes. Reported EBITDA increased by 14% to CHF 159 million, representing a reported margin of 17.5%, including CHF 3 million restructuring charges booked in the quarter. With that, I now hand over to Oliver for further details on our business performance in the third quarter. Oliver Rittgen: Thank you, Conrad, and good afternoon, everyone. It's great to join the call today and present the first set of quarterly results as the CFO of Clariant. I look forward to fruitful discussions with our investors and the analyst community going forward. Let us now dive into the third quarter development by business unit, starting with Care Chemicals, where we recorded a strong margin uplift despite a weak industrial market environment. Sales declined by 3% in local currency, entirely due to lower volumes. We recorded high single-digit organic growth in Mining Solutions as we were able to cater for increased demand and compare against prior year, which was impacted by destocking. Sales in Oil Services increased at a mid-single-digit percentage rate, recovering from shut-ins in the first half of this year. As mentioned, the weak industrial market environment also impacted our industrial applications and base chemicals businesses, both recording a high single-digit decline suffering from tariff uncertainties. Finally, Personal and Home Care and Crop Solutions both declined at a low single-digit percentage rate. Regionally, sales in EMEA as well as the Americas decreased by a mid-single-digit percentage rate as destocking led to lower order volumes. Sales in Asia Pacific increased at a low single-digit percentage rate as the capacity expansion in Daya Bay, China drove local volume growth. We recorded an EBITDA before exceptional items of CHF 92 million, representing a stable performance compared to the prior year. This translated into a margin of 18.9%, representing 150 basis points improvement. Profitability was positively impacted by the strong operational performance of Lucas Meyer Cosmetic as well as positive mix effect and contribution from the performance improvement programs. In Catalysts, we were able to drive a margin improvement in a weak demand environment. Sales decreased by 8% in local currency, entirely as a result of lower volumes versus the prior year period. Low double-digit sales growth in Specialties did not offset declines in the other segments. The weak environment and utilization rates continuing to trade below long-term averages, impacting refill timings for Propylene and Catalysts in China in particular, leading to a high double-digit percentage rate decline. Sales in Syngas & Fuels as well as Ethylene were down by a mid-single-digit percentage rate versus a strong comparable in the case of Syngas & Fuels. Regional dynamics were driven by the refill delivery schedules of the business with sales in the Americas increasing at a high double-digit percentage rate, driven by deliveries in Propylene and Ethylene catalysts. In both EMEA and Asia Pacific, sales decreased at a high single-digit percentage rate, driven by lower sales in Ethylene catalysts in EMEA and lower Propylene catalysts in China. In the third quarter, EBITDA before exceptional items decreased by 13% to CHF 33 million, representing a margin of 19.3% versus 18.7% in the prior year. This was driven by gross margin improvement and contributions from performance improvement programs, which more than offset the impact of lower volumes. Moving to Absorbents and Additives, where we also drove a margin improvement of 130 basis points versus prior year, supported by our continued additives growth. Sales increased by 1% in local currency with pricing up 3%, while volumes decreased by 2%. By segment, Adsorbents sales decreased by a mid-single-digit percentage rate, while Additives increased by a high single-digit percentage rate. Regionally, we recorded sales growth in EMEA at a low single-digit percentage rate, driven by pricing. In the Americas, sales decreased at a high single-digit percentage rate as growth in Additives did not fully offset the decline in Adsorbents. Sales increased at a low double-digit percentage rate in Asia Pacific, driven by volume growth in both Adsorbents and Additives. EBITDA before exceptional items increased by 5% to CHF 42 million, with a margin of 17.2% versus 15.9% in the prior year. Profitability was driven by growth and mix effects in Additives as well as benefits from the performance improvement programs. Cost efficiencies and raw materials of 5% also contributed positively. Now turning to our Investor Day savings program. As a reminder, we expect full run rate savings of CHF 80 million from business unit and corporate actions to be delivered by end of 2027 for the savings program that we announced in November of last year. As Conrad mentioned earlier, savings achieved in the first 9 months totaled CHF 31 million with CHF 19 million delivered in the third quarter. Key measures aimed at helping us to deliver these savings are being implemented. These include headcount reduction of approximately 340 full-time equivalents as of 30th of September 2025 across the businesses and corporate functions. The closure of 2 production lines and 2 sites globally as part of our footprint optimization and procurement savings of CHF 15 million related to structural changes in qualifying alternative suppliers and best practice contract management. In the first 9 months of 2025, we booked CHF 63 million of the expected CHF 75 million in restructuring. And with this, I close my remarks and hand back to you, Conrad. Conrad Keijzer: Thank you, Oliver. Let me conclude with our outlook for 2025. There remains an increased level of risk and uncertainty due to tariffs and trade tensions, which has a negative impact on global industrial growth expectations and consumer sentiment. According to the latest assessment of Oxford Economics, the global GDP is mainly driven by AI investments and services, while industrial production is still lagging. In addition, the uncertainty created by tariffs and trade tensions is impacting consumer demand for durable and semi-durable goods. Oxford Economics global GDP growth projection for 2025 has slightly increased from 2.5% after H1 to 2.8% in October, driven by the AI boom in the U.S. On the other hand, the chemicals industry forecast further declined to 2.1% growth from 2.2% growth after the first half year in 2025 and from 2.9% at the beginning of this year. This weakened market environment assumption in the U.S. and Europe, in particular, aligns with our own experience, and we, therefore, expect local currency sales growth to be at the lower end of the 1% to 3% range for 2025. We expect slight local currency growth in Care Chemicals and in Adsorbents and Additives, with sales in Catalysts expected to be slightly below those of 2024. We continue to expect to deliver an EBITDA margin before exceptional items of between 17% and 18%. The continued profitability improvement in prior years and in the first 9 months of this year shows the effectiveness of the structural changes we implemented under our performance improvement programs. We also aim to further improve cash conversion towards our 40% target. Despite these current impacts, we remain committed to delivering our medium-term targets, supported by the continued execution of our targeted initiatives. With that, I turn the call back over to you, Andreas. Andreas Schwarzwaelder: Thank you, Conrad and Oliver. Ladies and gentlemen, we are now opening the floor for questions. [Operator Instructions]. Sandra, please go ahead. Operator: [Operator Instructions] Our first question comes from Thea Badaro from BNP Exane. Thea Badaro: Two questions from me, please. I'll start with the obvious one. You've clearly booked lower exceptionals in the quarter than most people expected. Are you still anticipating the full CHE 75 million to be booked this year? Or do you maybe expect some of it to be pushed into next year? And then my second one is on CapEx. I've noticed that you're now guiding to CHE 180 million versus 10% higher Q2 and 20% higher at the beginning of the year. Where is most of the cost coming from? And how should we think about it through to 2027? Conrad Keijzer: Yes. So I'll let Oliver comment on the one-offs, and I'm sure he also has some comments to be made on CapEx. But basically, if you look high level at CapEx, we're actually very pleased with, I think, a structurally lower level of CapEx when you look at Clariant compared to historic levels. The key reason is that after the opening, in fact, the opening next week of our new Care Chemicals plant, which was an CHE 80 million investment in China. And after the opening of the second line of the Additives line in China, which was a CHE 40 million investment, most of the CapEx, the gross CapEx is actually behind us. So you see now a switch towards more maintenance-oriented CapEx. And that is actually structural because if you look at capacities, we're actually quite happy now with the global footprint, and we don't target any sort of new greenfield plants in the foreseeable future. Maybe Oliver can comment on one-offs in the quarter and moving forward as well as maybe some more detailed comments if you have them on CapEx. Oliver Rittgen: Sure. Yes, I mean, you're right. We booked so far like CHE 63 million of one-offs year-to-date. Q3 was a bit of a smaller one with the CHE 3 million. But we still foresee, as we communicated before, that we're going to hit the CHE 75 million for the full year. And with that, obviously, delivering on the CHE 80 million savings that we envisioned. As we said, CHE 31 million of that we have seen in the first 9 months, and we still have the confidence that more than half of that will be delivered by the end of the year. Maybe one additional comment on CapEx. Yes, indeed, the guidance that we have given with the CHE 180 million is now lower than what we have seen in previous years and also beginning of the year. And additionally, to Conrad's comments, of course, that is also a function of the business dynamics that we're seeing right now and our commitment to deliver on our cash flow commitments that we have given with managing towards the 40% cash conversion that we have been communicating before. Operator: The next question comes from Katie Richards from Barclays. Katie Richards: I've got one on Care Chemicals, please, and then one on Adsorbents and Additives, if I may. So on Care Chemicals, could you just talk us through the margin bridge, please? If I take the 1% raw materials decline and higher energy costs, this looks to have been a slight tailwind for the quarter, maybe about CHE 1 million. And obviously, we have CHE 5 million add back, I think, from the inventory revaluation of Lucas Meyer not occurring this quarter. And then taking into account the volume headwind, it looks like the positive mix effect or the cost savings coming through must have been pretty significant this quarter. So just any color on the bridge here and how significant the positive mix effect would have been outside of Lucas Meyer and then on Adsorbents and Additives, I was quite intrigued by your comments that the Americas decreased high single-digit percentage rates driven by Adsorbents with volumes impacted by the U.S. renewable fuels regulation. I was under the understanding that the EPA was increased in the blending mandate and this would be a benefit for Clariant. So can you explain what's going on here? Is it just full utilization or regulatory uncertainty? Conrad Keijzer: Okay, Katie. Yes, thank you for those questions. I'll make some high-level comments on margins on Care Chemicals, but let Oliver also provide here some additional details, and I also will comment on the Adsorbents, slow demand right now in the U.S. So first of all, on Care Chemicals, we were extremely pleased actually with the step-up in EBITDA margin from basically before exceptional items from 17.4% last year to 18.9%. That is a combination of high level of pricing where actually we've been able to hold prices in an environment where raw materials were actually down by 1%. That is very consistent with our strategy. We are seeing some competitors sort of going out for volume, but we are actually able to hold prices in an environment where there's weak demand. And I think that's a testimony to the strength of our products, but also, I think, a big complement to our frontline sales leaders. Positive effect from pricing on margins, positive effect from mix where you see weakness in the sort of lower-margin segments like industrial applications and base chemicals. And finally, performance improvement programs that are contributing here. Adsorbents, the weakness in renewables in the U.S., yes, there is clearly a weakness right now. If you look at basically biodiesel where we do the purification with our Adsorbents, but also SAF where we do the purification. There were incentive packages that temporarily were taken away by the new Trump administrations. But under the new big and beautiful tax bill, there is actually incentives. There are incentives again. The challenge here is that these still need to be approved by Congress and the current shutdown of the government hasn't helped here. So it is not a structurally lower growth market, but there is a temporary weakness in markets for biodiesel and SAF, but we expect this to pick up actually early next year, yes. Katie Richards: And just one follow-up because you mentioned people going for volume. Some of your competitors have commented on increased agent competition, particularly in surfactants. Do you think you are making volume concessions to protect margins there? Conrad Keijzer: We're not making any concessions. We just are basically holding price. There's no need for us to lower the price on products that are differentiated enough that they add a lot of value to our customers. That's one effect. I think the other effect is the continued repositioning towards more premium, more specialty, more consumer-facing segments in Care Chemicals. Operator: The next question comes from Christian Faitz from Kepler Cheuvreux. Christian Faitz: Two questions, please, from my side. In your Catalysts business, is there any visibility into 2026, i.e., customers flagging, for example, that mothballed plants might be back and might need a Catalysts refill? And then the second question is actually on Lucas Meyer. I mean, well noted that this business continues to contribute nicely to the profit development of your Care Chemicals business. Can you please elucidate a bit if the business kept its high operating margins when it entered Clariant, I believe it was in the 40 -- actually in the higher 40% EBITDA? Or is consumer hesitancy also impacting the Lucas Meyer business a bit? Conrad Keijzer: Yes. Thank you very much, Christian, for these 2 questions. Well, first of all, yes, we're not giving an outlook yet for next year 2026 nor for Catalysts, but maybe I can maybe reference some of the industry data where basically, if you look at chemical production volumes this year, we're heading for, let's say, 2%, 2.5% growth overall globally in chemical production. That is actually a mix between flat growth in Europe, slightly up in the U.S. and, let's say, around a 5% growth in China. If you look, however, for next year, there is an anticipation of further slowing down in chemical production growth. So if you look at next year, the industry outlooks are more like a 1.5% growth for chemical production globally, which basically is an outlook that's based on, again, flat production volumes in Europe. Volumes turning slightly negative actually in the U.S. next year as a result of tariffs and people expect a further slowdown in China from currently, let's say, 5% growth to very low single-digit growth. So in terms of bottoming out, we're certainly not bottoming out this year for our Catalysts business, as you've seen in our numbers. We think though that next year with these outlooks, that is actually a bottom. And on a positive note, in '27, you should see a recovery actually, and that is for all of our businesses, a positive. At some point in time, consumers will start to buy durable and semi-durable goods again, people will start to buy new furniture, new electronics products, et cetera. And that means a recovery will come in chemicals, but it's delayed. Finally, on Lucas Meyer, yes, we're very pleased with the performance inside Clariant, and I can confirm that margins still are, let's say, mid- to high 40s in terms of EBITDA. Operator: The next question comes from Christian Bell from UBS. Christian Bell: Well done on the result. I just have 2 questions. My first question relates to your guidance, which I think I'll ask in 2 parts, if I can. So part of that, to meet your sales guidance, you'll need about 5% organic growth in Q4 to offset foreign exchange of about negative 5%, and that's coming off organic growth of negative 3% in the quarter just been. So just curious, where is that strength coming from by segment? It looks like you'll need a big fourth quarter for both Care and Catalysts. So is that market driven, keeping in mind, you've already indicated that, it doesn't seem likely. So -- or is it sort of specific projects? And then part B to that question is, after narrowing your sales guidance, you've left Q4 EBITDA margin range quite wide by my estimate sort of 14% to 18%. So what's behind that variability? And then I'll wait to ask my second question. Conrad Keijzer: Yes, Christian, the sound was not so great. Could you repeat high level the question in very crisp language because we couldn't hear it very well. Christian Bell: Okay. Yes. So it's about your guidance, what it implies for the fourth quarter, what you need to do to reach your guidance. On sales, it implies that you need to do about 5% organic growth. And I'm wondering where that strength is coming from. It looks like you need to do -- it looks like you need to have big quarters from Care and Catalysts, which seems difficult in the current environment. Conrad Keijzer: Yes. No, clear. Now let me comment on revenue, and I'll let Oliver comment on the profitability on the EBITDA guidance. If you look at revenue guidance for us to land at the low end of the 1% to 3% local currency growth, what we're guiding for. Indeed, you're correct, we need a pickup in the final quarter, not only sequentially, but also relative to prior year. Where we see mainly that happening is in Care Chemicals, where we actually had last year an unusual weak season for de-icing that was entirely weather related. This year, based on a normalized sort of pattern in terms of the weather, we should see a big pickup in Care Chemicals relative to prior year and also sequentially. On top of that, we actually see a strong pipeline in mining. You see that in our numbers, our Q3 numbers as well as in oil services. And both of these increases in Q3 were market share related, which should continue as a positive momentum in the fourth quarter. And finally, the Lucas Meyer business continues to do well, both in terms of revenue and margins. Catalysts is against a very strong Q4 last year. But based on the order book, we expect a solid quarter in Catalysts, both for PDH, propane to propylene orders in the book from China again as well as for ethylene. And finally, Adsorbents and Additives is slowing, as mentioned, but we expect there -- the pattern to continue consistent with prior quarters. But all in all, we do indeed expect a pickup from prior year, which should land us somewhere close to the bottom end of this guidance range. Maybe Oliver, some comments on EBITDA margins. Oliver Rittgen: Yes. Christian, maybe one addition to the top line, which also explains a little bit the bottom line performance. I mean you have seen the Catalysts volume decline of 8% in Q3. There was indeed a bit of a move from some of the orders from Q3 into Q4. This is why you see a softer Q3 in Catalysts. And then obviously, that will be part of that driver for the Q4 performance that we are expecting. And with that, based on the top line picture that Conrad was painting here, the growth in Catalysts, the growth in Care is going to drive margins in the fourth quarter. And then we have 2 counter effects. One is that we slowed down on production in Additives and Adsorbents as a measure also of optimizing our net working capital and staying committed on the cash flow performance. And the second one is the corporate cost phasing that we were mentioning in Q3, which is a different phasing of incentive provisions this year versus previous year. And you see that one coming back -- those costs coming back in Q4 then. And that's going to drive the margin performance and we expect, obviously, to land the margin in the guidance range that we have provided. Christian Bell: I think my question was slightly more simple in a way in that how come you've narrowed your sales guidance, but you haven't sort of narrowed your margin guidance for the fourth quarter. Why is the sort of margin guidance so wide in the fourth quarter alone? Oliver Rittgen: I mean we haven't really adjusted our guidance overall, as you know. I mean, the sales guidance is since second quarter, the 1% to 3% and the margin guidance is also still 17% to 18%. We didn't adjust any of the guidance ranges. So there's no particular reason behind that. Christian Bell: Okay. Cool. And sorry, if I could just squeeze in my second question. I think that sort of follows on from one of the previous ones, some of the commentary around -- from your peers in Care Chemicals segment. Just curious, is there sort of increased competition from Chinese players, a more recent development? Like -- and how do you sort of see that dynamic evolving in the near to medium term? Conrad Keijzer: Yes, increasing competition from Chinese players. We are actually seeing little of that in our segments. So Catalysts is a true specialty business, which requires a lot of IP and technology. We see very limited competition there from Chinese players. In Care Chemicals, certainly in the segments where we are playing, we also see very limited competition. Where we are seeing actually quite some activity is in the Additives area. And that is actually for local players, for example, for UV stabilizers, but even some local players for flame retardants. Now some of these are, frankly, the so-called copycats that are infringing our IP, and we're going obviously against that. But we are well positioned with local manufacturing for flame retardants there. But one of the things that we did see was for the UV stabilizers that we were no longer competitive with the plant out of Muttenz in Switzerland. And this is actually part of the recent restructuring line that we will actually transfer that production from Switzerland to India to become more competitive for these UV stabilizers. But in all of these segments, we have differentiated technology, but local manufacturing in China has become really a prerequisite to be competitive. Operator: The next question comes from James Hooper from Bernstein. James Hooper: The first one is around the Board changes. Can you give us a little bit more background on why you wanted to cut the numbers on the Board? And then also a little bit more on what you're looking for from the new Board members and what you're expecting the Board to do? And then the second one is a little bit about capital allocation. I think it was referenced earlier in the CapEx question that you've been taking CapEx down a little bit in order to protect cash flows. And given the low growth environment we find ourselves in and protected 2026, not a high year of chemical production, is there an extent that you need to trade off your kind of 2027 medium-term targets? You're making great progress on the margins, but are you going to have to choose a little bit between making growth investments in this macro environment or protecting cash flows? Conrad Keijzer: Yes. Thank you very much, James. I'll take the first question on the Board changes, and then Oliver will make some comments on capital allocation and CapEx specifically. Yes, if you look at the Board changes, what we have done recently over the years in the company is actually to right-size the company in terms of -- yes, delayering, in terms of taking out duplication in management. We used to have the decision-making metrics with functional directors, country directors, BU directors. We basically implement full P&Ls and 3 business units. But the Board basically in size has not adjusted. And the consistent feedback from proxy advisers recently has been that they perceive the Board of Clariant -- they perceived the Board of Clariant, I should say, as too large. The feedback from proxy advisers also has been that on gender diversity, we are currently not meeting the 30% target for a minimum representation of females on the Board. And finally, in terms of independent Board members, some of our Board members had a tenure above 12 years, and then they are no longer seen as independent. So it is these 3 elements that consistently have been brought up by the proxy advisers, the size of the Board, the diversity of the Board, the independence of the Board that actually are now being addressed with the reduction of the Board to 8 and by bringing in 2 new independent -- outside Board members. So it's not that we're lacking or we're lacking certain expertise to your question, it's really very much building on the feedback by proxy advisers. Oliver Rittgen: Okay. James, on your capital allocation question and without maybe hitting too much on the '27 because as we said before, we're not looking at specific numbers now for '27, but maybe more in general, how we will look at capital allocation. How we approach it is very much from focusing on a triangle of growth, margin and cash. And the decisions around capital allocation is pretty much balancing this off across the portfolio and the segments that we are having. And capital allocation, of course, is the strategy that we're having here is to fund innovation to drive the growth for the future. And with that also driving that, obviously, the cash generation of the company. In terms of capacity availability for a potential growth, then growth pickup in '27, this is what the industry indicates at the moment. There's capacity available for us. So therefore, we are also well prepared for a potential pickup in that time window. Operator: The next question comes from Tristan Lamotte from Deutsche Bank. Tristan Lamotte: A couple, which are kind of linked and high level. In Chemicals, I was wondering, is your view that something has changed structurally in Europe in H2 '25? Or is this kind of a global and cyclical weakness? I'm just trying to figure out if this weak Q3 level is kind of the new run rate or if there's something kind of exceptional in the H2 that will revert? And then the second part to that question is, I'm just wondering what your current views are on the levels of support that chemicals is getting in Europe and whether this needs to increase and what practically could be done in that regard? It seems there's been a lot of discussion on what needs to happen, but the follow-through to this state has been quite limited. Conrad Keijzer: Thank you, Tristan. Yes. So as far as your question, what has changed, if anything, structurally in H2? Well, I think we need to take a look a little bit back further. So what structurally changed for Europe is actually 2022, and we have no longer access to cheap gas from Russia. That is actually the reason that European production levels in chemicals in Europe are still about 20% below the last year before corona, whereas it has recovered basically in the U.S. and Asia is well ahead of pre-corona levels. So this is the structural change. It is affecting primarily the chemical industry that is high energy intense, which we're clearly not. And it is also affecting parts of the chemical industry that use gas as a footprint, as a feedstock, which we're also not. So, for us, we have a global footprint. We have 65% of our revenue outside Europe. And what we see is a shift of some production and consumption away from Europe, but we pick that then up elsewhere. So, for us, this as being truly specialty is all manageable, but it's fair to say that a good part of the industry is affected by this. To your change, what's Europe doing, I think there are some positive signs. So we had, first of all, the green deal, which was primarily a package of legislation and commitments to carbon neutrality in 2050. What you now see is the new European Commission has this clean industrial deal which is much more focused on the competitiveness of the industry. So Europe needs obviously a competitive industry to deliver the green deal. And I think there are some positive signs here. But in all fairness, there's still some ways to go. And the carbon taxation is obviously something that at the time that this came up was absolutely seen as the right instrument. There was, however, the assumption that other regions in the world will follow. That's one thing. And at the time, the industry was making money. I think 2 things have changed. The other regions have not followed with carbon taxation and the industry right now is struggling to a large extent and can then itself much more difficult it is then to fund this energy transition. So this is -- I think this is on the radar for the European Commission, but still some more work needs to be done here, I think. Operator: The last question is from Walter Bamert from Zürcher Kantonalbank. Walter Bamert: The first question is regarding the Board changes. And there it is mentioned that the 2 new Board members will be independent. Does this apply that these are not from SABIC, so the SABIC members will be reduced from 4 to 2. Conrad Keijzer: Yes, that's correct, Walter. The SABIC representatives have been reduced from 4 to 2. And I will also say that the German shareholders have representation of 2 Board members that also has been reduced from 2 to 1. And indeed, the 2 new Board members coming in from the outside will be independent Board members. Walter Bamert: Okay. And then can you please help me with the headquarter cost, which was very low in the third quarter. Should that be for the full second half be at the level of the previous year, so a reversal? Or should it -- is it rather that the fourth quarter only is at previous year level? Oliver Rittgen: Yes, Walter, indeed, this is a phasing between the 2 quarters, Q3 and Q4. So that cost will come back in Q4. We have a bit of a different phasing of incentives provision from previous year to this year. Walter Bamert: Okay. But I hope for you that the incentives will be at the same level as previous year. [Audio Gap] Operator: Ms. Glazova, your line is open. Angelina Glazova: I think I just have one left at this stage. Could you comment in a bit more detail of what developments you are seeing in the Crop Solutions end market? You have mentioned somewhat softer performance in Q3, but in part due to stronger comparable. How do you see that developing maybe into next year? Because again, some of your peers mentioned somewhat slowing momentum in the end market. Conrad Keijzer: Yes. In terms of Crop, Angelina, we basically compare against a much weaker prior year where there was still destocking. So for the full year, we still see high single-digit growth in Crop Protection. We indeed had -- in the third quarter, we basically had sort of low single-digit negative in Crop Solutions, but that was against actually a strong sort of restocking quarter last year. So underlying, we see good demand. There's nothing here to worry. We actually think for the year, we will end up high single digits. So yes, we -- it's actually a strong segment for us. Operator: We have a question from Ranulf Orr from Citi. Ranulf Orr: I'm just wondering about how you view Clariant's portfolio overall as a kind of combination of fairly discrete businesses. And in the context of a weak -- another weak year in 2026 and frankly, who knows for 2027, I mean, is now maybe the time to start thinking about whether there's value to be had in breaking Clariant up or doing asset swaps to improve your scale in some of the businesses and make the individual units more competitive on a global scale. Conrad Keijzer: Yes. Thank you, Ranulf. So if you look at the portfolio, high level, where we came from was a hybrid between, on the one hand, commodity chemicals and on the other hand, specialty chemicals. Over the years, we have successfully repositioned the business towards purely specialty chemicals. As you are aware, we divested our Masterbatch business. We divested more recently the Pigment business, even more recently, the North America Oil Land business. And what we have now is really a portfolio that really is truly specialty in nature, and we're actually very pleased with the businesses there. To your point, limited growth in '26, limited growth this year. There may, at some point, be a certain level of industry consolidation. That is certainly what most people are predicting. We obviously want to play an active role in that, but you've also seen that we've been very disciplined with the acquisitions that we've made in recent years. All of these have actually strengthened our core businesses and we have no intent to bring in businesses that sort of do not bring true synergy to the existing portfolio. Operator: We have now a question from Chris Counihan from Jefferies. Chris Counihan: I just wanted to come back to the Board changes and the reduction because I'm just sort of thinking back to a few years ago and the accounting investigation that happened, I think, in 2022. And as part of the investigations, you talked about more controls, financial controls over financial reporting, procedures, a lot in the finance side, but I also remember you at that stage talking about more active Board control and involvement in terms of controls at Clariant. So I'm just trying to marry the statements from a few years ago versus now the way forward of reducing the Board size because it almost feels to me like the Board's role in such controls is maybe reducing as well. Conrad Keijzer: Yes. No, Chris, this is totally unrelated. So we basically are in 2025 now. We had the accounting challenge that was actually very early on in my assignment. That was about the 2021 numbers and even 2020 numbers. Then indeed, you're right, Chris, and we discussed it at the time. We identified a number of serious gaps. We brought in a new CFO. We really strengthened our checks and balances and controls, including more appropriate involvement by including our Board members at the time. But no, this is in place now -- solidly in place for a number of years, and these recent announced Board changes are unrelated to that. Andreas Schwarzwaelder: So ladies and gentlemen, before we close today's call, we would like to ask for your feedback by scanning the QR code on the presentation or using the link, www.clariant.com investor/feedback, you will be guided to our feedback tool operated by Quantifier. We appreciate your views and your assessment and sincerely thank you for your support. So this concludes then our today's conference call. As I said, the transcript of the call will be available on the Clariant website in due course. The Investor Relations team is available for any further questions you might have. Once again, thank you for joining the call today, and good afternoon. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Welcome to HF Sinclair Corporation's Third Quarter 2025 Conference Call and Webcast. Hosting the call today is Tim Go, Chief Executive Officer of HF Sinclair. He is joined by Atanas Atanasov, Chief Financial Officer; Steven Ledbetter, EVP of Commercial; Valeria Pompa, EVP of Operations; and Matt Joyce, SVP of Lubricants and Specialties. [Operator Instructions] Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may now begin. Craig Biery: Thank you, Ellie. Good morning, everyone, and welcome to HF Sinclair Corporation's Third Quarter 2025 Earnings Call. This morning, we issued a press release announcing results for the quarter ending September 30, 2025. If you would like a copy of the earnings press release, you may find it on our website at hfsinclair.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Tim Go. Timothy Go: Good morning, everyone, and thank you for joining our call. I am pleased to report that HF Sinclair's strong third quarter results are underpinned by the measurable improvement in our operating and commercial performance, including the sequential increases in refining throughput and capture and continued reductions in operating costs. During the quarter, we returned $254 million in cash to shareholders and today announced a $0.50 quarterly dividend. We are pleased with the progress we have made on our key priorities and believe our year-to-date performance reflects the value of this strategic focus. Now let me cover our business highlights. In refining, we delivered another quarter of sequential improvements in throughput, capture and operating expenses per barrel. Gross margin per barrel benefited from strong cracks in our regions, along with small refinery exemptions granted by the EPA. The SRE benefit in the third quarter was comprised of $115 million in lower cost of goods and $56 million in higher revenue from the commercial optimization of our RINs position. We achieved a record low operating expense of $7.12 per throughput barrel, crossing over our near-term goal of $7.25 per barrel. Throughput was our second highest quarter on record, and we are on pace to establish many new annual records for the full year. Our Marketing segment delivered record EBITDA in the quarter of $29 million and realized an adjusted gross margin of $0.11 per gallon. We are very pleased with the growth we have achieved in our marketing segment, and we continue to unlock the value of the Sinclair branded stores, providing a consistent sales channel with margin uplift for our produced fuels. We have added 146 branded sites through third quarter '25 with more than 130 sites with contracts signed and expected to come online over the next 6 to 12 months. During the quarter, we returned $254 million in cash to shareholders, consisting of $160 million (sic) [ $166 million ] in share repurchases and $94 million in regular dividends. Since the Sinclair acquisition in March of 2022, we have returned over $4.5 billion in cash to shareholders and have reduced our share count by over 61 million shares. As of September 30, 2025, we still have approximately $589 million remaining on our share repurchase authorization, and we remain committed to returning excess cash to shareholders while maintaining our investment-grade balance sheet. Also today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share payable on December 5, 2025, to holders of record on November 19, 2025. Now I will cover some strategic updates. We believe we are well positioned to supply the growing needs on the West Coast. As I mentioned earlier, we recently completed the CARB project at our PSR refinery, which gave us the capability to produce more CARB gasoline or CARB components that we can ship to the California market. In addition to that, we are announcing a jet project at our PSR refinery this quarter that will give us the flexibility to produce more jet from diesel to supply the West Coast depending on what the market is calling for. This project will be complete and in service following the turnaround this quarter. Finally, yesterday, we announced we are evaluating a multiphase expansion of our midstream refined products footprint across PADD 4 and PADD 5. This initiative is designed to address the increasing supply and demand imbalances in key Western markets, particularly Nevada and multiple markets in California, resulting from announced refinery closures on the West Coast. HF Sinclair believes its geographic footprint and current infrastructure provide an advantaged position to quickly and efficiently deliver refined products where the market needs are strongest. Subject to Board and regulatory approvals, the proposed multiphased expansion projects under review are projected to enable incremental supply of up to 150,000 barrels a day of product into various West Coast markets. The first phase would increase capacity by a projected 35,000 barrels per day to move supply from our Rockies production into Nevada and is targeted to be online in 2028. This initial phase would include expanding the Pioneer Pipeline, a jointly owned pipeline with Phillips 66 from Sinclair, Wyoming to Salt Lake City, Utah and debottlenecking our wholly owned UNEV pipeline from Salt Lake City, Utah to Las Vegas, Nevada. These projects reflect HF Sinclair's strategic focus on asset integration and value chain optimization of our refining, midstream and marketing businesses and are examples of how we can leverage our competitive advantages and geographic footprint to support our efforts to deliver accretive long-term growth well into the future. In closing, we remain committed to advancing our strategic priorities and believe our focus on reliability, integration and optimization will drive future growth across our businesses. Looking ahead, we are constructive on the fundamentals of each of our businesses and in particular, believe the supportive refining backdrop positions us well as we head into 2026. With that, let me turn the call over to Atanas. Atanas Atanasov: Thank you, Tim, and good morning, everyone. Let's begin by reviewing HF Sinclair's financial highlights. Today, we reported third quarter net income attributable to HF Sinclair shareholders of $403 million or $2.15 per diluted share. These results reflect special items that collectively decreased net income by $56 million. Excluding these items, adjusted net income for the third quarter was $459 million or $2.44 per diluted share compared to adjusted net income of $96 million or $0.51 per diluted share for the same period in 2024. Adjusted EBITDA for the third quarter was $870 million compared to $316 million in the third quarter of 2024. In our Refining segment, third quarter adjusted EBITDA was $661 million compared to $110 million in the third quarter of 2024. This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions, which included small refinery RINs waivers granted by the EPA. Crude oil charge averaged 639,000 barrels per day for the third quarter, our second highest quarter, primarily driven by our continued reliability efforts. Crude oil charge averaged 607,000 barrels per day for the third quarter of 2024. In our Renewables segment, excluding the lower cost or market inventory valuation adjustment charge of $20 million, we reported adjusted EBITDA of negative $13 million for the third quarter compared to $1 million for the third quarter of 2024. During the quarter, we have recognized incrementally more in value from the producer's tax credit, and we expect to capture additional incremental value in the fourth quarter of 2025. Total sales volumes were 57 million gallons for the third quarter of 2025 compared to 69 million gallons for the third quarter of 2024. Our Marketing segment reported EBITDA of $29 million for the third quarter compared to $22 million for the third quarter of 2024. This increase was primarily driven by higher margins and high-grading our mix of stores in the third quarter of 2025. Our Lubricants and Specialties segment bounced back from the heavy turnaround workload in 2Q and reported EBITDA of $78 million for the third quarter compared to EBITDA of $76 million for the third quarter of 2024. This increase was primarily driven by improved mix and a FIFO benefit, partially offset by an increase in operating expenses. Our Midstream segment reported EBITDA of $114 million in the third quarter compared to $111 million of adjusted EBITDA in the same period of last year. This increase was primarily driven by lower operating expenses as we continue to integrate our midstream and refining businesses, partially offset by lower throughput volumes in the third quarter of 2025. Net cash provided by operations totaled $809 million in the third quarter, which included $31 million of turnaround spend. HF Sinclair capital expenditures totaled $121 million for the third quarter of 2025. During the quarter, HF Sinclair issued $500 million of senior notes at 5.5% due 2032 in order to redeem our remaining 5.875% notes due 2026 and 6.375% notes due 2027. This allowed us to lengthen our maturities and reduce our weighted average cost of debt. As of September 30, 2025, HF Sinclair's cash balance was approximately $1.5 billion, and we had $2.8 billion of debt outstanding with a debt-to-cap ratio of 23% and net debt-to-cap ratio of 11%. Let's go through some guidance items. With respect to capital spending for full year 2025, we still expect to spend approximately $775 million in sustaining capital, including turnaround and catalysts. In addition, we expect to spend $100 million in growth capital investments across our business segments. For the fourth quarter of 2025, we expect to run between 550,000 and 590,000 barrels per day of crude oil in our Refining segment, which reflects the planned turnaround at our Puget Sound refinery. We're now ready to take questions from the audience. Operator: [Operator Instructions] Your first question comes from the line of Manav Gupta of UBS. Manav Gupta: Congrats on a very strong print and a big jump in buybacks. I just wanted to start on this multiphase expansion on what you're looking to target is PADD 4 and PADD 5. Sir, there are some other projects that are also trying to do something similar. And of course, you have a strong refining footprint. So I'm trying to understand what's your competitive edge here? Why do you feel your project would be at an advantage compared to some of these other projects that are also looking to move product somewhere in the similar direction. So if you could talk a little bit about that. Timothy Go: Manav, thanks for the question. And let me ask Steve to jump in right away. Steven Ledbetter: Manav, yes, we're excited to make this announcement. We believe that we're in a pretty strategic advantaged place, both from a production and having infrastructure already in the ground that can be debottlenecked or expanded to bring product into a growing short in PADD 5 with the announced refinery closures in California. We think we can produce the product and deliver it at a competitive rate to compete with what is going to be a short and even compete with the growing imports. Whether or not it is the sole project or complementary to the other ones, we felt it was important to come to the market and be clear that we are looking to evaluate this and expand it. And we think we'll be successful doing that. Timothy Go: Yes. And Manav, this is Tim. I'll just chime in on what Steve said. We really do think this is complementary to the other 2 pipelines that were announced. The other 2, we're talking about really barrels from the Mid-Con and from the Gulf Coast really going in the South area towards the Phoenix area. We're really talking Rockies barrels going on the northern side into Nevada. And so we believe this is a different type of project. We think it's mostly with our equity barrels as opposed to open-season third-party barrels. And as Steve mentioned, we're utilizing a lot of our existing infrastructure with -- that we think will be quicker and have a lower cost to implement. Manav Gupta: Perfect sir. On refining, strong quarter improvement and further capture, I just wanted to understand your near-term or medium-term outlook for refining margins. We are seeing tremendous resilience in margins and some global capacity outages, Russia and other places. So how do you see the refining macro playing out for the next 3 to 6 months, particularly in the 2 regions you are actively involved in? Steven Ledbetter: Yes, Manav, we are very excited and pretty bullish on what the current market environment looks like. As you mentioned, it starts at a global macro basis. And today, I think year-over-year, we're net about 800,000 barrels a day short. When you look at the capacity closures as well as being outpaced by demand. When it comes into the U.S., supply is up, mainly in jet and diesel with gas being down, but demand of distillate is really supportive and part of that is justified by some lower RD production that is not online as a result of what's happened with the regulatory framework. In our region specifically, gas demand has been up slightly and diesel demand has been up. And we see particularly the distillate make in jet and diesel being very supportive through the end of the fourth quarter and into first quarter. So we're in max diesel mode, and that's part of the reason why our capture has continued to be improved and some of the projects that were mentioned earlier further enable us to flexibly move between the right products to meet the market demands that we see happening. So yes, we're pretty encouraged by the overall market structure for the next 6 months or so. Timothy Go: Yes. And Manav, just taking a step back from more of a macro standpoint, we do think that in 2026, demand growth continues to outpace supply growth. Our numbers still show that true as what we saw here in 2025, especially in distillate, we see distillate continuing to be short and why you're seeing, for example, in our West area, distillate demand at 5-year highs. Overall, we think the market is underestimating the impact of the Russia outages. We think those are significant and will take time to come back online. We think the market is underestimating the demand impacts that lower gasoline prices are having on increasing demand, and we think that's a positive for refining. And then we think the market is not fully appreciating the low product inventories that we continue to operate at as a result of trying to keep up with demand. People like to talk about high utilization. I think the low product inventories is a sign that despite the high utilization, we're still as a global balance, trying to keep up with global demand. Manav Gupta: So I agree with everything you said on the refining metal. Operator: The next question comes from the line of Ryan Todd of Piper Sandler. Ryan Todd: Maybe one starting out on small refinery exemptions. So just I guess a point of clarification on the quarter. So you had -- there was $115 million benefit and was it a $56 million benefit? Are those incremental to each other? Or -- how do we think about the clarifying of that? And then maybe at a higher level, I mean, can you talk about your view on the process from here given the guidance provided by the EPA earlier? How does this compare versus the process historically? And does this change your confidence on the ability to capture exemptions going forward? Timothy Go: Yes, Ryan, this is Tim. Let me take a shot at it. So yes, the third quarter impact that we -- that I mentioned in my prepared remarks, $115 million that are -- you can say are basically directly a result of the granting of the SREs by the EPA. That impacts cost of sales and roughly translates to, call it, $0.47 in EPS. The $56 million is additive to that. It goes into cost of revenue. And what I consider that is more of an indirect benefit of basically buying and selling RINs in the marketplace based on our RINs position at the time. So this is more trading benefits associated with our RINs position and what we think our RINs positions will need to be in the future. We don't disclose kind of what our strategy is or what we do. But in the third quarter, we had $56 million associated with that, which translates to about $0.23 on an EPS basis. First -- second of all, let me just say, we appreciate the White House and the EPA taking actions to recognize that small refineries face hardship and granting the SREs under the RFS program. As you know, there was a large backlog for many years that this administration took action on. Following discussions with the DOE and the EPA, we actually believe that the SREs that we submitted could be more. And so we added new and supplemental information and submitted or resubmitted applications for 5 refineries in our portfolio for the 2023 and 2024 years. So that's Woods Cross, Parko, Casper, Tulsa and Artesia. So going forward, we believe we have 5 small refineries that were exempted from the RFS in the past, and we believe qualifying for SREs going forward. And while we can't quantify future outcomes or probabilities, we do believe we have considerable upside on a future run rate basis. Ryan Todd: Good. Maybe a shift on refining margin capture. On the surface, it seems like you've gone from a number of -- the industry went from a number of slight headwinds in the third quarter to what might be modest tailwinds in the fourth quarter, whether it's from slightly widening crude differentials, lower crude backwardation, addition of butane blending, et cetera. You're a month into the quarter, any thoughts on how you see the various trends in the market potentially driving margin capture in the quarter? Steven Ledbetter: Yes. This is Steve. I'll take that one. I think we don't see a ton of help in terms of light to heavy differential widening. We do see some step-up in Q4. And as we've always talked about that we see towards the end of '26, the differentials coming back into play. And we were very backwardated in the quarter. That looks to be flattening out. So the roll, which is very impactful for us, seems to be in a better position. And then I think, ultimately, we have a good make and mix of our distillate components over gasoline. And so as the jet and the diesel cracks remain strong relative to some of the macro elements that we've talked about, low inventories, an uptick on a colder winter, some of the geopolitical concerns that we have internationally. Those all look good for us into the fourth quarter. And we look to go swell the gasoline pool with our butane blending that we have in the pipe. So overall, our Q4 looks for us to be more bullish than maybe we've seen in the past, and we'll look to take advantage of that and have a good strong run for Q4. Timothy Go: And Ryan, this is Tim. What I would just say is we're pleased with the progress we're making on capture. It's all the things Steve talks about, we're on pace for record jet production, premium, all the product mix opportunities that he's talked about in the past. And that's despite the headwinds that we're seeing on not just roll, but on crude diffs in general. And so with the outlook that we have that crude diff should widen, WCS, WTI in particular, next year, we do think there's some upside to continued improvement in capture. Operator: Question comes from the line of Doug Leggate of Wolfe Research. Douglas George Blyth Leggate: I'm sorry to beat up on this SRE issue. But just to be clear, so I'm curious, why didn't you break out the $115 million and the $56 million as nonrecurring? I'm assuming they were in your realized margins? Or can you explain where they show up in the numbers? Atanas Atanasov: Yes. Doug, this is Atanas. So the $115 million, which is the bulk of the impact shows in our -- as a benefit to our cost of sales. And the reason that's the case is because we had taken that expense in the past. So the company incurred those expenses recognized them in our previous EBITDA, lowered our EBITDA. And so we appropriately have captured those in our current EBITDA as an offset to that. The remaining $56 million is revenue, and it results from optimizing our RINs strategy. So that's somewhat different than the reimbursement of what I call prior expenses. And therefore, that $115 million goes in our cost of sales as credit. Timothy Go: And Doug, this is Tim. What I would just say is we don't view this as a onetime event. We view this as we will be assuming the SREs continue to be in the RFS legislation that we will be entitled to this. And as I mentioned in my earlier remarks, even more of an impact than what we've seen today. So we don't think it's a onetime event. Douglas George Blyth Leggate: No, I completely understand and completely agree with that. I guess -- sorry, Tim, maybe I'm being thick as a rock here, but can you just clarify, is this the single quarter impact? Or is this a cumulative recovery of the SREs for all prior years? Atanas Atanasov: Yes. This is cumulative based on the exemptions that we were granted. Douglas George Blyth Leggate: But taken in the third quarter? Atanas Atanasov: That's correct. Timothy Go: Yes. And I would just say that -- Doug, the $115 million, which we talked about in terms of cost of sales is the cumulative impact of the SREs that are being granted. The $56 million is just related to specific actions that were taken in the trading markets in the third quarter that attribute to revenue and which we consider -- we don't talk about the buying and selling of crude or our crude inventory positions or our product inventory positions quarter-by-quarter. And we think that $56 million for SREs fits into that same category for RINs. We just normal course of buying and selling of RINs in the course of the quarter based on our overall annual strategy. So that's how we view that. That's why we break out the 2 separately. Douglas George Blyth Leggate: Okay. That's really helpful. So the $0.47 is a bit that's nonrecurring then basically, if you want to call it that. Timothy Go: You can call it that, depending on what your view of future SREs are, the $0.23 associated with the $56 million of revenue, we just think is ordinary course of business. Douglas George Blyth Leggate: Great stuff. I'm sorry to have labored that. My follow-up is hopefully a quick one. Your capital spending run rate looks light relative to your full year guide. I guess, can you just reiterate for us what do you see as your sustaining capital for the total business, including turnarounds? Atanas Atanasov: Yes. First of all, Doug, to the first part of your question, this is just timing of CapEx spend. So we still stand by the guidance that we indicated in our prepared remarks. With respect on a sustaining basis, on a go-forward basis, we see probably about $100 million of benefit on a go-forward basis relative to what we have said so far, but we'll give more specifics later in the year. Timothy Go: Yes. Doug, we're not ready to give guidance yet. We'll do that in December like we normally do. But just like we said on previous calls, we believe that we have now passed our catch-up maintenance period in our overall turnaround process. Even -- we think we peaked in 2024, 2025 from a refining standpoint is actually lower on overall CapEx, but it's kind of masked a little bit because we had a larger lubes turnaround, if you remember, earlier this year. So we do think looking forward into 2026 that we'll see that substantial reduction in overall CapEx. We've talked about that before in terms of order of magnitude. Atanas is kind of giving you a ballpark, and then we'll come out with further guidance when we put the final numbers out in December. Operator: Your next question comes from the line of Phillip Jungwirth of BMO. Phillip Jungwirth: Can you talk about how you look to finance these pipeline expansion projects? Any difference between the first phase and if you ultimately go through the other phases? And we normally think of these as like 5, 6x build multiple projects. Is that at least within the ballpark of what you're thinking of? Steven Ledbetter: Yes. Phillip, Steve. We always like to say let's understand the project and the economics of the project and then figure out how we finance it. And we think we have multiple ways to do that, whether that's due to liquidity on our balance sheet. We have some joint venture partner options and some extensions of that. But we're not in a position to talk about how we're going to go put the capital to work to make these things happen. If and when we get to FID, which we are not at FID. Again, this is evaluating a multiphase expansion to go get to those Western markets. Timothy Go: Yes. And Phillip, this is Tim. While we need to make those decisions when the time is appropriate, we do think that the overall cost is significantly lower than the costs that at least are rumored or circulated to be on those other 2 lines. Phillip Jungwirth: Okay. Great. And then could you touch on specifically Medicine Bow pipeline review just because this currently serves the Denver market, which is a good market for you. What would be the rationale for the reversal, recognizing this isn't in the first phase of projects you're evaluating? Steven Ledbetter: Yes. So as you know, there's an expansion that is coming to the Denver market to be online in Q3 '26. And that pulls barrels out of the Mid-Con. We supply some of that. We also supply some of that from the Rockies. And so that goes down our Medicine Bow pipeline mainly. That 35,000 a day that gets into the Denver market is going to be less value once the expansion comes on bringing more barrels into Denver, which is why we are planning to go make this first phase happen, which is up to 35,000 barrels a day to move those barrels that we're getting into Denver West into higher graded markets. So depending on what happens, the timing of that, as we mentioned, we believe Phase 1 could come on in 2028. But that's really just to manage the overall value of that market. I think it's going to be a bit more oversupplied later in the year. So that addresses that first situation. Longer term, in the various phases of the project to move up to 150,000 barrels a day, we would reverse Med Bow and potentially expand it to go get more product out of a lot of equity production in our Mid-Con to move those barrels into PADD 5, both Nevada and eventually into California. Timothy Go: Yes. And Phillip, today, Medicine Bow is primarily moving equity barrels of ours, and we anticipate that continuing even through past the expansion. Operator: Your next question comes from the line of Paul Cheng of Scotiabank. Paul Cheng: I think you sort of answered that question. But in the first phase of your proposed midstream expansion or upgrade over there, the 35,000 barrels per day, should we assume that it's all going to come from your equity barrel? And so that from that standpoint, the first phase at least is going to be a goal because you don't need other people to come in? Or that do I get it wrong? Steven Ledbetter: No, Paul, I think the question was is the first phase all equity barrels. I would say a good portion of that would be equity barrels. Again, we will follow all the requirements that are laid out from the Interstate Commerce Act and the Federal Energy Regulatory Commission to make fair available for all. But a good portion of those barrels from origin point to destination point would be equity barrels. Paul Cheng: Yes. I guess my point is that should we assume that the Phase 1 regardless what's the open season outcome is a goal because that you will be sufficient of an anchor shipper that you actually don't need other people? Steven Ledbetter: Yes. I think that is a fair assumption. Again, we have not taken FID. We anticipate an FID decision by midyear 2026. And we do believe that we have enough equity production given the dynamics that I just mentioned to go support this project. Paul Cheng: Right. And what kind of tariff that we should assume? Steven Ledbetter: Sorry, can you repeat the question there, Paul? Paul Cheng: What kind of tariff that we should assume? What is the proposed tariff? Steven Ledbetter: Yes. So again, we're not commenting on tariff structure at this point. Once we get closer to take an FID, we'll come back to the market with more definitive set of potential guidance items and economics. Timothy Go: Yes. But we do think, Paul, that we haven't calculated tariff yet, as you know, but we do think that the overall cost and timing of what we're proposing can be quicker and more efficient than what others have announced just because of the existing infrastructure we have. And then on the equity barrel comment, the Pioneer Pipeline, as we talked about, is a joint venture between us and Phillips 66. And so while we can't speak for them, we would expect them to probably have some equity barrels to put on the line as well. Paul Cheng: Okay. And the second question maybe is that you can share with us that how is the lubricant market looks? And also that -- I know that you guys have continued to look for the bolt-on acquisition over there. How is that market condition also looks? Matt Joyce: Paul, it's Matt Joyce. The market is continuing to perform at a pretty healthy rate. You've seen our quarterly performance. We returned to a historic run rate, and we were really pleased with that. And the teams continue to execute on our strategy of forward integrating our base stocks into finished and specialty products, and you're seeing the benefit of a diverse portfolio that we serve with our customer base today. Looking forward, we're just continuing to manage and watch any sort of tariff upheaval that we may have. We've seen some slowdowns in forestry in Canada. But on the long of it, we're pretty confident that fourth quarter will be in and around our traditional run rates. Paul Cheng: How about on the M&A market and... Matt Joyce: With regards to the M&A -- yes, we don't have anything to speak about today, but we continue to explore options and opportunities that are interesting to us and help us build on our portfolio and build on our competencies and in particular, in the U.S. markets where we're looking to continue to grow at a nice pace. Timothy Go: Yes, Paul, I would just say, overall, we've talked about our lube strategy. We want to grow our finished business. We want to reduce our base oil length, and we want to rerate this business to a higher trading multiple based on the specialty business. We think what Matt and his team are doing is executing that strategy. We think there are opportunities to do some inorganic bolt-ons that will help us accelerate that strategy. And we think, as we've talked about, we've been a consolidator in this space in the past, and we think there's opportunities for us to continue that opportunity. Paul Cheng: Tim, I don't know if you can comment on that. But one of the major integrated oil company, they've been trying to sell their lubricant business and the media rumor is that they have been in some difficulty to get the price they want. Does it signal the valuation multiple on that business has changed? Previously, we all generally assume 10 to 12x EBITDA. Have you seen in the marketplace that, that valuation has changed? Timothy Go: Paul, we obviously can't comment on specifics because we don't know what's going on. I think you're probably referencing the Castrol process that has been in the news. All I can say is that we are quite different, our business than the Castrol business. Castrol is a much more global business focused primarily around passenger cars, where our business is much more North American-based and focused on the industrial side of the business. So I don't think I can comment on any of the other kind of speculations around the process they're going through, Paul. But what I can tell you is that we believe our business, again, with our strategy is a strong industrial base business and that we can continue to grow it and increase its trading multiple by growing the finished side of the business and reducing the base oil length. Operator: Your next question comes from the line of Matthew Blair of TPH. Matthew Blair: Could I circle back to the comment that you resubmitted SRE applications for, I think it was 5 refineries. Parko, Tulsa and Artesia are all well above 75 a day. So could you talk about how these refineries will be eligible? And I guess, going forward, would you plan to run these refineries at much lower utilization to be below 75 a day? Timothy Go: Yes, Matthew, let me just clarify on that. The Parko refinery, as you know, is actually can run higher than the 75,000 barrels a day, but it's close. And so yes, I think we would take that into consideration each year as we think about overall margins and overall product demand, and we'd factor that into our decision in terms of whether to run above a certain amount or not. The Tulsa and the Artesia refineries, as you know, are actually 2 separate refineries that are -- that we tend to report as one, but are actually 2 physically separate refineries. And there are other refineries, as you may know, that received small refinery exemptions that operate in a similar fashion. And so that's what we're talking about on those 2 refineries. Matthew Blair: Okay. Okay. Because you're right, because Tulsa was a combination of -- I think it was like a Sunoco and some other plant. Okay. That's helpful. And then I think it's interesting you're making investments in the Puget Sound refinery at the same time that there's a lot of proposals for more product headed to PADD 5. Could you talk about where Puget Sound would stand on the cost curve in terms of getting product into California? And I guess, what gives you confidence that these are going to be good long-term investments? Steven Ledbetter: Yes, Matt, this is Steve. As we've been watching the market dynamics in PADD 5 play out for quite a while. There's a good amount of jet that is imported today into California and PADD 5. And our -- one of our advantages of the Puget Sound refinery is our dock capability and access. So these projects are intended to provide flexibility to meet the demands of whatever is happening in the marketplace, including making CARB gas or the unfinished components that go into CARB gas, and we've been successful in improving that, and you're seeing that in our capture on the West. That's partially attributable to that. And then moving this next project to be able to swing barrels from diesel to jet. We believe that, that jet short will continue and growth will continue of that overall transport fuel stream. And so that gives us the availability to either place barrels in the local Puget Sound market or export them, getting them into California, but also into other markets that we found success into LatAm, et cetera. So this is really about product flexibility, which gives us a competitive advantage as the market dynamic plays out. And we're seeing the signs, and we're putting the capital to work -- small capital to work to go make these adjustments that are very accretive for us in the long run. Timothy Go: Yes. And Matthew, this is Tim. I'll just emphasize a couple of things that Steve said. These are small projects. They fit within the guidance that we've been talking about in terms of our growth capital that we guide to each year. And so we're not talking significant the CapEx required. And it's really about flexibility, as Steve mentioned. This gives us the flexibility. For example, the jet project that I mentioned, it gives us the flexibility to make jet or diesel depending on what the market is calling for and depending on whether the arb to California is open or not, right? So we -- it's going to give us flexibility to take more advantage of the different dynamics and the different arbs that are open at the time. The CARB gasoline project is the same way, just gives us the flexibility to take advantage of that. And quite honestly, this pipeline project that we're talking about, it's really all about flexibility. It's going to give us the ability to move barrels from the Rockies over to Nevada or not, just depending on what the market looks like. Operator: Your next question comes from the line of Neil Mehta of Goldman Sachs. Neil Mehta: One tactical question, one strategic. Just tactically, the Q4 guide, the $550 million to $590 million of crude charges, lower than it's been in a while. And I think you cited the turnaround at Puget Sound. Anything else that we should be thinking about there? Or is there some conservatism there? Steven Ledbetter: Neil, this is Steve. The guidance reflects our planned turnaround at a large refinery in Puget Sound, as you know, that started very late in September. But in addition, we were -- we pushed out a few small maintenance elements into a lower margin environment in Q4 to take advantage of the market in the higher margin environment in Q3. So the combination of those 2 get us to this $550 to $590 crude guidance, nothing more to it than that. Neil Mehta: Okay. And there any early thoughts on '26 turnarounds as we think about next year? Valeria Pompa: This is Valeria. So our turnaround guidance will be coming out generally, as we said before, we are through the peak and continue -- we've continued to level out our turnaround costs and our turnaround events. So next year, guidance will be coming out soon. I would expect lower -- anticipate lower cost and fewer turnarounds. Neil Mehta: Okay. Perfect, Valeria. And then the follow-up, Tim, just on return of capital, a very nice number this quarter. You've talked about in '26 and beyond, you want to get to dividends plus buybacks being 50% or higher of net income. So just talk about how you're thinking about return of capital levels on the go forward. Atanas Atanasov: Neil, this is Atanas. Thanks for your question. With respect to our payout ratio, really that 50%, we look at it as a minimum payout ratio, which we've exceeded consistently over the years, including this year. And our priority remains to -- shareholder return of capital remains a priority for us. And what does that translate into? Any excess cash flow that we generate over and above our nondiscretionary spend, which is our dividend, our commitments to safety and reliability, highly accretive organic growth. Anything over and above that, our target is to return to the shareholders. Timothy Go: Yes. And Neil, I'll just chime in with what Atanas said. We evaluate inorganic opportunities to grow. We evaluate these organic growth projects that we just talked about against our other options of returning cash to shareholders and look and choose to see what is the best decision for the business long term. So we're factoring all that in as we do our capital allocation strategy. But I will just point to our historical practice of returning cash to shareholders. And if you look back over the last 3 or 4 years, we've been 16% in '22, 12% cash returns in '23, 16% cash returns in '24, and we're 11% here in the third quarter, 7% year-to-date in 2025. And so I think our track record of returning cash to shareholders is strong. Operator: Your next question comes from the line of Jason Gabelman of TD Cowen. Jason Gabelman: Yes. I'm going to pick up on that last question, and I understand the kind of framework about returning cash to shareholders. But if I look year-to-date, it does seem like cash has built approaching $1 billion and debt has remained, I guess, somewhat stable. So it seems like there's been some build of excess cash. So should we expect a catch-up where more of that excess cash is returned? Or are you looking to stockpile cash for another reason? Or is there something else going on there? Atanas Atanasov: This is Atanas. Thanks for your question. We're not looking to stockpile cash and if you look at our -- increase in our cash balance, really a lot of the build occurred in the third quarter, which is a very strong quarter. Our goal is to return our excess cash to shareholders. We don't guide with respect to timing, but expect more to come in terms of capital returns. Jason Gabelman: Okay. And then my other question is on the SRE topic, which I know has been hit a few times. But I just want to ask a couple of clarifying questions. First, can you break out the margin benefit to each one of your regions so we get a picture of what the underlying margin was for the quarter, excluding the SRE benefit? And then to be clear, do you have now excess RINs on the balance sheet that you can sell back into the market? Or does that kind of $50 million or so that you mentioned get you into a place that you'd want to be to manage your RIN exposure moving forward? Timothy Go: Yes. Jason, this is Tim. I appreciate both of those questions that you're asking, but we don't provide that level of detail for either of those questions. So SRE breakdown across the regions or by plant, we've just never done that in the past, and we don't believe we -- it's in our best interest to do that going forward. And then we've never talked about our RINs position, whether we're RINs long or RINs short and -- just from the very beginning. And while we talked about it, whether to disclose that or not, we decided it's still in our best interest not to disclose that. Operator: I'd like to hand the call back to Tim Go for final remarks. Timothy Go: Thank you, Ellie. Before we close, I want to point out that our business is much different from just a few years ago, not just in acquired assets like with the Puget Sound Refinery, Sinclair, HEP, but it's also different in culture and performance. All of these are proof points that our strategy is working and enabling us to generate free cash and deliver strong shareholder returns. Looking ahead, we are constructive on the fundamentals of each of our businesses, including our renewable diesel business. And as always, our priorities remain the same to; one, improve our reliability; two, integrate and optimize our portfolio of assets; and three, return excess cash to our shareholders. Thank you for joining our call. Have a great day. Operator: This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.
Operator: Hello, and welcome to the Phathom Pharmaceuticals' Third Quarter 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded. With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead. Eric Sciorilli: Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's third quarter 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer. Robert Breedlove, our Principal Accounting Officer, will be joining for the Q&A portion of today's call. A couple of notes before we get started. Earlier this morning, we issued a press release detailing the results we will be discussing during the call. A copy of that press release can be found under the News Releases section of our corporate website. Further, the recording of today's webcast and the slides we'll be reviewing can be found on our corporate website under the Events and Presentations section. Before we begin, let me remind you that we will be making a number of forward-looking statements throughout today's presentation. These forward-looking statements involve risks and uncertainties, many of which are beyond Phathom's control. Actual results may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements. Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically, in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release. With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve? Steven Basta: Thank you, Eric, and thank you to everyone joining us today. I'll start with an overview of our financial and commercial highlights this quarter and then provide commentary on our shift to a greater gastroenterology focus and our current operating priorities. First, I wish to welcome 2 new Phathom leadership team members. Joining me on the call today is Sanjeev Narula, our new Chief Financial and Business Officer. Sanjeev brings to Phathom a proven track record of building successful profitable pharmaceutical businesses of significant scale. His experience and insights will be important to driving our growth. I'm delighted to have Sanjeev as a partner in building Phathom. I'm also pleased to announce that Nancy Phelan has recently joined Phathom as our new SVP of Marketing and Analytics. Nancy brings a wealth of experience in technology-driven marketing, tactical implementations of marketing to integrate with sales activities and both HCP and consumer promotion in the pharmaceutical industry. Nancy has successfully led marketing for several successful drugs. We have a solid commercial and financial team in place. Starting today with our financial highlights for Q3. Really pleased to report at the end of Q3, we've delivered 25% growth this quarter while reducing operating expenses by 43% and therefore significantly reducing our cash usage. We beat expectations on the revenue and on the operating expenses, and we're executing effectively throughout the organization on the plan that we set out 6 months ago. Net revenue for Q3 was $49.5 million, which represents 25% growth quarter-over-quarter. This is ahead of expectations of approximately $47 million and is in line with our revenue guidance for the year. As a result of the strength this quarter, we are narrowing our full year guidance to the top half of the previously communicated range. While growing revenue significantly, our cash operating expenses were $49.3 million this quarter, which is meaningfully better than our previously stated target of getting below $60 million in cash OpEx for Q3. You may recall in May, we set a target for the year of bringing our operating expenses on a quarterly basis below $55 million by Q4 of 2025. I'm pleased to report that we've achieved that milestone early in Q3. We've cut our cash OpEx by nearly 50% since Q1 while growing revenues ahead of expectations. We're quite pleased with the performance that the entire team has delivered through the course of the past 6 months. Our cash usage was less than $15 million for Q3. That's down 77% versus the Q2 cash usage number. One note for Q4. Our operating expenses for Q4 will be somewhat higher than in Q3, primarily due to the start of the EoE Phase II trial. But we do still expect to operate at below $55 million cash OpEx as we've previously stated, even with the additional clinical trial expense. My sincere thanks go to the entire Phathom team for their dedicated efforts to deliver both our continued revenue growth and our operating expense discipline throughout this period. I'm most impressed every day by the extraordinary talent and dedication of our team. A few notes on commercial performance for the quarter that might be helpful for folks. Launch-to-date, we have 790,000 filled prescriptions as of October 17. That's approximately 36% growth since our Q2 call. In Q3, we had 221,000 filled prescriptions. Of these 221,000 prescriptions in Q3, 144,000 were covered scripts, which grew approximately 23% quarter-over-quarter. For everyone who looks at our financials, recall this is the growth category that drives our revenue. We also had 77,000 cash prescriptions that were filled, growing approximately 38% quarter-over-quarter. The growth here includes the impact of having turned on Medicare patient availability on a cash-pay -- for the cash-pay program as of April. As we've previously noted, 70% of our prescriptions launched to-date have come from gastroenterologists. During the recent quarter, we are seeing stable payer coverage and expect that moving forward for VOQUEZNA. We've pivoted in the last 6 months to focus on gastroenterology target prescribers as our core growth strategy. The intent of this shift is to really target depth rather than breadth of writing. That is we want to get physicians who adopt VOQUEZNA to write prescriptions more and more frequently and grow their utilization of our product as the clear path to driving our growth. In alignment with that strategy, we have communicated that and have taken several steps over the past 6 months to align our sales activities to enable that greater focus on the gastroenterology customer. In May, we announced the strategic shift. Step one, which actually occurred in May as well in Q2, was to adjust our incentive compensation plan for our sales reps to more reasonably balance and focus on gastroenterologists who were previously had been focused on the primary care call point. Step 2, which we implemented in July, was to reset the sales territory target list to include all of the gastroenterology customers and take out unproductive primary care physicians from those target lists. That allowed the sales force to start spending more time in gastroenterology practices. We also implemented in July a modified incentive comp plan, which focused on growth of total prescriptions rather than focusing on growth of the new writer base. So it really is aligned with that strategy of driving depth rather than breadth of writing. Step 3, which we just implemented in October, just in the last couple of weeks, is a realignment of our sales territory geographies to enable better balance and better focus on our gastroenterology target call point. Let me describe that evolution for you a little bit in terms of the sales force structure. Prior to our October restructuring, we had approximately 280 sales representatives in place. But they were situated in territories that had been mapped at launch around total PPI volume, which is basically mapping them around primary care PPI volume because that was our prior strategy prior to the restructuring in May. As of 2 weeks ago, what we've done is we have realigned the base territory maps so that we consolidated territories that did not have enough gastroenterologists to focus the reps' time appropriately on those customers, and we created new territories where there was a high concentration of gastroenterologists. The transition of territories does create a bit of disruption in the field during this quarter. At full strength by Q1 when we filled the open territories, we expect to have approximately 300 sales representatives in place. The net effect at the end of this transition is to create territories that are better balanced to enable us to call on every target gastroenterologist with the desired frequency. This realignment in the sales force territories could have some temporary impact in Q4, which we've considered in updating our revenue guidance for this quarter and setting our updated guidance for the year. We believe the sales force realignment can accelerate our growth during 2026. It may take some time to see the full impact of the sales force realignment activity. The gastroenterology opportunity for VOQUEZNA includes a target universe of approximately 24,000 gastroenterology writers. And that includes 17,000 physicians and about 7,000 affiliated nurse practitioners and physicians' assistants. Collectively, those 24,000 GI targets write about 20 million PPI prescriptions every year. That's our opportunity set. At our current prescription run rate in GI, we believe we've converted approximately 3% of the GI PPI prescribing market opportunity of 20 million prescriptions a year. If we are able over time to convert 20% to 30% of that 20 million prescription volume, we believe that that penetration could potentially reach or exceed $1 billion in revenue per year within the gastroenterology target universe alone. Obviously, there's a much bigger opportunity than that, and that opportunity resides in primary care. And we do believe that in future years, our expansion back into more depth and time in primary care clinics could potentially drive revenue to an even higher number, possibly reaching $2 billion or more in revenue. A quick update on our clinical program. We have recently initiated our Phase II clinical trial in Eosinophilic Esophagitis. Screening of patients is currently underway in that study. So we've initiated study sites. We've initiated screening patients with the first subject enrolled in the study expected in Q4, as we previously communicated. Just as a quick reminder, the rationale for this study is twofold. First, in terms of market opportunity, PPI therapy is currently first-line therapy for EoE patients. There is an opportunity for VOQUEZNA, therefore, to play an important role in EoE treatment, potentially displacing some portion or a meaningful portion of that PPI usage in EoE patients if the trial is successful and if the program overall is successful. Second, if this Phase II study is successful, we believe that we have an opportunity or may have an opportunity to receive a written request from the FDA to conduct a Phase III study that includes pediatric patients, and that creates the potential for us to extend our regulatory exclusivity by an additional 6 months. That will be determined at the end of the Phase II trial as we have conversations with FDA at that time. We expect to report top line results from this study in 2027. As we're on the topic of regulatory exclusivity, just a quick reminder for everyone. We've updated the Orange Book or FDA rather, has updated the Orange Book to indicate that we have exclusivity through May of 2032. The mechanics of how that works actually provides us exclusivity into 2033 because an ANDA filing is not permitted until that May of 2032 date. So with a 10- to 18-month typical ANDA review timeline, we believe generic entry is unlikely until 2033. A note on the VOQUEZNA TRIPLE PAK update that we've previously discussed. We've had good progress here working with our supplier of the TRIPLE PAKs. You may recall from our update in August that there has been some risk of disruption to the availability of the clarithromycin component in our TRIPLE PAK from the supplier of that product. We have not to-date experienced any disruption in TRIPLE PAK availability and based upon recent communications, do not anticipate any near-term interruption, although there is still some uncertainty in this area. We will continue to monitor this closely and provide any updates that are needed. We are executing at Phathom with discipline and momentum to implement our GI-focused strategy. The financial picture of the company is in order with solid execution on our plan. We have a talented and engaged team throughout Phathom driving our revenue growth. I'll turn it over at this point to Sanjeev to provide more detail on the financials and the outlook for the year. Sanjeev Narula: Thank you, Steve, and hello, everyone. I wanted to begin by saying how privileged and excited I am to be part of Phathom Pharmaceutical at this critical inflection point for the company. As I thought about my next chapter, I focused on 3 questions. Does the work matter for patients? Can I help build something durable? And is the dream truly aligned with the mission? At the heart of it, I wanted to join a company where work being done has the potential to directly improve patients' life. Phathom and VOQUEZNA checked all 3 boxes for me. That's what drew me here. Early conversation with Steve made the strategy clear: sharper on focus and execute with discipline. The company is on a solid footing and the plan, growing the top line while being disciplined with expense management resonates with me. I'm especially aligned with the best among GI writers' commercial approach. I've seen the specialist-led bill playbook work for -- worked in my prior experience, and I believe it's the right fit for VOQUEZNA. My first weeks here have only strengthened that conviction. We are all in in our goal to become a profitable, durable GI company. The foundation is strong and I'm excited to help this team build on existing momentum. Before I dive into the results, I would be remiss if I did not thank Robert Breedlove for his effort during the transitionary phase while Phathom was searching for a CFO. Robert will continue to serve as our Principal Accounting Officer and as an important leader in our organization. With that, let me turn to results. We are pleased with our solid financial results for third quarter for 2025 and feel that clearly demonstrate the progress being made as a result of shift in our strategy. As Steve mentioned, we reported top line net revenue of $49.5 million in quarter 3. In connection with our strong quarter and year-to-date results, we're updating our full year revenue guidance to $170 million to $175 million. Q3 revenue represents a 25% increase compared to prior quarter, driven almost entirely by covered prescription, which grew approximately 23% during the quarter. Cash-pay prescription and changes to wholesale inventory had minimal impact to our quarterly results. For third quarter 2025, our gross to net came in towards the lower end of previously guided 55% to 65% range. Based on these results and our expectation for rest of the year, we're tightening our quarter 4 gross to net range to between 55% to 60%. Our gross profit for the quarter were approximately 87%, in line with our expectation. This margin, which includes product cost as well as licensing royalties, continues to be consistent compared to previous quarter. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation, of only $6 million. This is an 88% improvement compared to previous quarter. Overall, we believe our revenue results today reflect the progress of ongoing commercial efforts to focus on GIs. Now let's turn to operating expenses. As a reminder, in the scope of this discussion, when we refer to operating expenses, we will be referring to non-GAAP form of this measure, which excludes noncash stock-based compensation. For quarter 3, we reported operating expenses of $49.3 million, which excludes $9.3 million of stock-based compensation. Compared to the same period in 2024, this represents a decrease of 38%. The year-over-year decrease primarily reflects a reduction in personnel costs and a sharper focus on commercial activities that we expect to materially drive VOQUEZNA adoption. We believe these results demonstrate our commitment to disciplined cost management while it continue to grow revenues. In fact, we also achieved a meaningful reduction in spending this quarter compared to quarter 2 and quarter 1 of 2025. Our quarter 3 operating expenses reflect a $36.8 million or 43% decrease from quarter 2 2025 and $48.8 million or 50% decrease from quarter 1 2025. Importantly, this quarter, cash operating expenses were well within our previous guidance of below $60 million. For additional context, the main driver for decreasing spend between Q3 and Q2 were a reduction of approximately $19 million in advertising spend, primarily DTC was turned off as of June 30, $10 million in headcount and restructuring-related spend and $8 million in vendor costs. Looking forward to Q4, we expect expenses to be somewhat higher than Q3, primarily related to the initiation of Phase II EoE trial. Even with EoE included, we reiterate our previous guidance for fourth quarter operating expenses being below $55 million, excluding stock-based compensation. Based on our Q3 results and anticipated Q4 targets, we're refining our full year 2025 non-GAAP operating expenses to $280 million to $290 million. We believe our results clearly show a path towards operating profitability in 2026, excluding stock-based compensation. Net revenue this quarter have already begun to outpace cash operating expenses, and we believe gross profit will follow suit. In this event, we expect the operating profit generated to organically strengthen our balance sheet and provide an opportunity to further investment in our business. As of September 30, 2025, our cash and cash equivalents totaled approximately $135 million, reflecting only a $14 million reduction in net cash. This net cash usage reflect a significant 77% reduction compared to last quarter of approximately $63 million. Based on our current revenue outlook and operating forecast, we reiterate our belief that current cash balance can support operations through the anticipated point of achieving operating profitability in 2026, excluding stock-based compensation, without the need for additional equity financing. I feel very confident in our financial position and our path forward. We believe we have brought down expenses to a point that materially improves financial profile of the business in concert with anticipated revenue growth. With this improved financial profile, we expect to have the ability to modify or refinance our existing debt to provide greater flexibility. I'm excited to be at Phathom at such pivotal point in the company's journey. Our strong results this quarter are encouraging, and we remain confident in our ability to execute on our strategy for the remainder of 2025 and into next year. With that, I will now turn the call back to Steve for his closing comments. Steve? Steven Basta: Thank you, Sanjeev, for the helpful financial update. To wrap up, I'll just reiterate a couple of key points. And I realize we've already said some of this, but just in summary. We're really pleased with the way the third quarter went. Revenue was up 25%. Cash operating expenses were down 43% versus Q2 and cash usage was down by 77%. We are executing on the strategy that we laid out approximately 6 months ago on our May call. Our strategy to concentrate on our gastroenterology call points is being executed crisply. And with the momentum, both financially and operationally throughout the organization, we believe we are well positioned moving forward. My sincere thanks to our Phathom team members for their extraordinary dedication and diligence throughout this year and on an ongoing basis, and to the physicians and patients who trust in our products every day, and to our shareholders joining us on this call and all of our shareholders for your continued support. I'll now turn the call over to the operator for any questions. Operator: [Operator Instructions] Our first question comes from the line of Umer Raffat of Evercore. Umer Raffat: Congratulations on Sanjeev. I have 2 questions, if I may. First, if I look at your prescription growth over the last couple of quarters, it looks like you're tracking at about 48,000 in additional prescriptions in 2Q and 3Q. And per guidance, even if I take the high end of guidance, it looks like the guidance is baking in only 35,000 prescriptions in 4Q. And I guess that's my question, is that what you're baking in, that prescription -- that growth steps down in 4Q? Which leads me to the second question, which is the cost cuts and the discipline coming through is solid right now. The cost cut and discipline is very solid right now. But my question is, from those advertising cuts that Sanjeev spoke to, do you anticipate any impact as we head into 1Q and 2Q next year because they may not show right away? Steven Basta: Umer, thanks so much for dialing in. This is Steve. Appreciate the questions. First, on the growth, we are continuing to see really positive traction with all of our gastroenterology accounts in the context of the strategy to go deeper within gastroenterology. Our guidance for the full year was, in fact, narrowed to the upper end of the range. But we're trying to balance both the momentum that we're going to gain in the gastroenterology accounts with the fact that in Q4, we are going through the sales force transition. And so those 2 variables have somewhat offsetting effects, and we wanted to guide appropriately to something that we had significant confidence in. Sanjeev Narula: And Umer, to your second point about the expenses, I think the management has been very disciplined. The expenses that have been kind of streamlined were not driving the top line per se. I think that's the key point to note here. And we've been obviously very mindful of watching the script trends, watching the return on the investment, and we feel comfortable with the level that we have is sustainable. Obviously, Umer, our job as a management team is to make sure we maximize the top line, and we'll continue to watch the expense level. But right now, we feel we're not going to have any impact from the DTC that we paused at the end of second quarter, but we'll continue to watch as we go forward. Operator: Our next question comes from the line of Kristen Kluska of Cantor. Kristen Kluska: So with the strategy, I wanted to ask how much you are still focusing on those PCPs that you were having success with initially. I believe about 30% of the scripts you were seeing prior to this new alignment were on PCP. So was that mix from several PCPs? Or did you find that there were some that were higher responders? Steven Basta: So Kristen, that's -- thank you for the really important point that a large part of the PPI market has come from primary care. We are not ignoring that opportunity at all, and we are continuing to call on the customers that have already written scripts for VOQUEZNA. The PCPs that we took out of the call pattern during Q3 were primary care physicians who had not yet written a script. So anyone who had written a script stayed in the call targeting list. And what we're trying to do is shift time toward GI, but it's not 100%. So ultimately, where we want to get to is that 70% or more of our sales force time is being spent in gastroenterology practices. Now that leaves 30% of our sales force time to continue calling on the top decile primary care physicians, that is the primary care physicians who write the most PPI scripts and included in that call pattern set is the primary care physicians who have already adopted the product because naturally, a physician who's already adopted is an opportunity for meaningful growth. I do think in future years, you're going to see us, after we have deep penetration within GI, think about how do we grow our penetration in primary care. But for the coming quarters, certainly through 2026, our focus is going to be with an emphasis on GI, not excluding at all the PCPs that are adopting and growing. Kristen Kluska: Okay. Last question for me. You mentioned that there were new territories created where there was a higher concentration of GIs. I'm curious if these were doctors that the team was not visiting or perhaps they were outside of the main area, so they were still potential customers. They just weren't getting as much face time with them since that territory didn't exist before? Steven Basta: That's right. That's right. It's not that we have GI customers that we couldn't see at all. We couldn't see them with the frequency that we wanted to create the depth of adoption that we wanted. And so we had some territories that had 80 gastroenterologists in them. And if you think about the call pattern and the frequency that we want to achieve in order to really drive growth, that is a heavy call load that made sense to split some of those territories to be able to put 2 reps into that geography. We had other territories where they only had 10 gastroenterologists and they just can't spend that much time in 10 offices. And so that's where the realignment needed to take place. Operator: Our next question comes from the line of Paul Choi of Goldman Sachs. Kyuwon Choi: Congrats on all the progress. With regard to the opening up of the Medicare access and the cash-pay component of it, could you maybe just comment on how you think the mix of cash-pay as a mix of covered prescriptions and so forth will be evolving over the next few quarters? Any color on that would be great. And then my second question is with regard to repeat prescribers, particularly in the GI channel. Are you seeing any evidence of an increase in the number of repeat prescriptions that your existing prescriber base is offering now? Any quantification there would be helpful. Steven Basta: Paul, thank you. I appreciate the questions on both of those points. Let me first take the sort of cash and Medicare versus covered prescription mix question because we don't actually try to actively manage the mix or the ratio. And you'll see in the way that we presented the slides and the way that we've revised how we're talking about this, it's not about talking about total script numbers and what percentage is where, but rather the growth specifically in the covered scripts and the growth specifically in the cash scripts. And what we're attempting to do is drive growth in prescribing behavior, recognizing that both of those categories are going to grow. And we're not actively trying to manage in any way what that ratio is, whether it's 30% or 35% in a given quarter. That's not a part of the conversation set that we have with any physician. The conversation that we have with physicians is about what patients are most appropriate for them to consider starting VOQUEZNA and how they make that decision and how they evolve their prescribing patterns. So I think what you're going to expect to see is growth in covered scripts and growth in cash scripts, and we're not attempting to actively forecast that ratio. We want to drive continued growth in both on an aggressive basis. Sanjeev Narula: I think the other important point, Paul, to note is, as Steve mentioned in his prepared remarks, is our top line revenue is driven by the covered scripts, which is what grew 23% this quarter. And clearly that has got a direct relationship. And the other thing I keep in mind is you shouldn't think about that one is cannibalizing the other. Both are growing depending upon where the patient is right fit based on all the coverage that doctor and the patient decides. Steven Basta: Yes. I think that last point is a really important one. In no way does our cash script volume cannibalize our covered script volume that the incremental patient on Medicare who gets a cash script was never going to get coverage. So that's not lost revenue in any way. When that patient gets added, that's just a positive additional impact in terms of the patients being satisfied with the product, the physician being satisfied that their patient gets access to the product and the physician being more willing to adopt. So we actually think getting that extra Medicare patient started on VOQUEZNA increases the propensity of that physician to prescribe our product for their covered patients as well. The growth in one actually drives growth in both. So that's a part of the reason for turning on that opportunity. The second part of the question on sort of the repeat prescribing behavior and evidence for increase. We're not providing specific metrics, but you can imagine we are, in fact, tracking the metrics internally. What we've done is we have evolved our selling model and our coaching model for the sales territories around what we are referring to internally as the adoption ladder. And that is how do we grow physicians from trialing the product, using the product a few times every quarter to prescribing the product on average every other week to -- as an NRx to prescribing the product on a weekly basis to really making this a core part of their practice. And we are tracking physician growth up that adoption ladder. We're tracking it on a territory-by-territory basis. We're tracking it on a physician-by-physician basis. This is the coaching conversation that our regional sales managers are having with their territory managers as they are working through each conversation about each of their customers, and we are seeing evidence that we're growing utilization, we're growing more and more physicians into that regular prescribing adopter category, and we're doing that on a monthly basis. We're just not giving the metrics because there are so many different metrics and so many different ways of looking at it that it gets complex. One other sort of broad perspective is overall, as we described, the 20 million prescription opportunity in gastroenterology, we had 140,000 prescriptions in gastroenterology -- in the gastroenterology segment in -- as an estimated number during Q3. So annualize that and you get to something on the order of $600,000. You get to 3% of that $20 million run rate on an annualized basis. That's our growth opportunity. If we want to get to 10x, the current revenue in gastroenterology, we need to get to 30% rather than 3% of those 20 million scripts. That's the focus in every conversation, and we are starting to see evidence of that growth pattern on an account-by-account basis. Operator: Our next question comes from the line of Yatin Sunjea of Guggenheim. Yatin Suneja: Can you hear me? Steven Basta: Yes. Yatin Suneja: Congrats on pretty good execution. Maybe just 2 questions from me. As you are sort of trying to go more deeper into the GI community, can you just talk about the type of patients you are seeing right now? Can you also talk about the penetration you might be seeing in NERD versus GERD population? And how should we think about the duration of treatment that is playing out right now? And Sanjeev, congratulations on the new opportunity. Maybe if you can maybe help us understand how should we think about 2026 as the sales ramp up? How should we think about the OpEx there? Steven Basta: Okay. I'll let Sanjeev take the OpEx question at the end. Let me just jump into the types of patients that we're seeing and sort of NERD versus GERD within GI. The typical patient with either erosive esophagitis or non-erosive reflux, but the typical reflux patient that is landing in a gastroenterology practice has already been having conversations with their primary care physician for some time around their reflux. Almost always, they will be started on a PPI because they're complaining about heartburn to their primary care physician. Most typically, they'll be started on 20 milligrams of omeprazole. They might then be escalated within the primary care practice to twice a day omeprazole or to 40 milligrams of omeprazole every day or they might be adding Tums or other therapeutic modalities to their PPI whenever they have breakthrough heartburn. And it's when that patient is still experiencing significant pain and the physician has tried a couple of things and has not been able to resolve the heartburn, that's when they get the referral to gastroenterology. So the type of patient who lands in a gastroenterology practice is often a patient who has either tried BID dosing or has cycled through a couple of PPIs or has doubled their dose of PPI or is adding an H2 blocker or is adding antacids to their PPI and they're still having significant pain. So the patients who land in the gastroenterology practice and are being evaluated for their reflux are exactly the patients that should be switching to VOQUEZNA because they need more significant acid suppression. And we're hearing that in every conversation. I was just at ACG for a few days having a number of conversations with gastroenterologists over these past few days. And the commonality of the story that every patient who's landing in their office has already been on a PPI. Often they've been on it for years, often they've double dosed it. That's who they're seeing, and that's who they're switching. And that's why we think that we can capture a very meaningful percentage of that PPI volume in gastroenterology practices because that PPI volume is being prescribed to exactly the patients who need our drug. We don't have as clear a distinction on the breakout between non-erosive reflux and erosive esophagitis patients because physicians for a patient who is experiencing significant heartburn might prescribe 20 milligrams for patients in both categories. Our indication is specifically that the 20 milligrams should be for erosive esophagitis and 10 milligrams is the approved dose for non-erosive reflux, but it's really at the physician's discretion how they use one or the other. And one of the things we also see is that many patients who start on 20 milligrams never switched to 10 milligrams. They just maintain their treatment on 20 milligrams because if the patient is doing well, they just continue on with the treatment that's working for them. Which gets to the duration of therapy question, we are looking at that on an ongoing basis in an analysis that we did early on in the first 12 months of launch. We saw that we were getting 6 or 7 prescriptions from -- within a year for patients that converted. We are continuing to look at that on an ongoing basis to see whether or not that evolves in a meaningful way over time, and that analysis is ongoing. I would expect that we're going to get pretty good persistence over years with patients who are experiencing this level of heartburn because they get the positive reinforcement that when they take this drug, they feel better. That's going to cause someone to want to continue using it, but it's hard to predict exactly numerically how that evolves. Sanjeev Narula: Yes. And Yatin, thank you for your question. And obviously, we can't give you like 2026 financial guidance right now. We'll do that at the beginning of the year. But let me tell you a little bit qualitatively how we're thinking about next year. So let me start with the first on the top line. So obviously you saw strong quarter 3 with 25% revenue growth. You saw in Q2 we had a 39% revenue growth with the pivoting strategy go deeper in GI. We'll continue to see more prescriptions coming, very effective calls. So that percentage of revenue growth will continue. Obviously, it will moderate as the base becomes bigger and bigger, but you should expect that the top line will continue to grow next year quarter-by-quarter. Number two, I don't expect significant change in gross to net because we got a good coverage. And on where things are, there are going to be pushes and pulls, but I don't expect fundamentally a significant different gross to net, which will kind of give us a steady path to gross margin next year. Now coming in terms of the operating expenses, I think the way to think about that is in 2 kind of ways. One is what is the operating expense to run the base company with the indication and the strategy that we've gotten so far, which means pivoting to GI and going after the top decile primary care. I think we've reached that point with the expense level that we reached in this quarter or quarter 4. I think you will kind of see that, and that will continue in next year as we go forward. As a management team, obviously we'll be looking at all other investment opportunities which are revenue enhancing and have a payback. And then obviously we'll consider those. But all of this put in together, you've got one thing in -- we said that in the beginning of the discussion was we expect ourselves to be operating profit -- in operating profit position next year. And that's kind of what we are of course striving to. With the cash usage that we have of $14 million this quarter, I mean that goal is near to us. But again, we will be providing all that beginning of the year when we give the guidance. But I feel very good about what the momentum is right now where we are entering into quarter 4 and then entering into next year with a solid set of financials. Operator: Our next question comes from the line of Joseph Stringer of Needham & Company. Joseph Stringer: Just 2 from us, kind of a follow-up question, just given the backdrop of the 3Q print here where revenue came in higher than consensus and OpEx a bit lower. So in terms of hitting your goal of sustainable non-GAAP profitability in '26 without the need for additional capital, you've been pretty consistent in that messaging. So I guess what's your confidence in hitting that goal now to say, compared to your confidence level maybe last quarter or in the quarters past? And then secondly, with the -- curious to get your thoughts on the new marketing analytics hire. What have they seen? Or what are some of the initial insights or takes from looking at the analytics or what the analytics are telling you about the VOQUEZNA launch and the strategy there? Was there any area outside of some of your prepared remarks that surprised you or that could be optimized or areas where you could really drive uptake or growth going forward? Steven Basta: So Joe, thanks so much for both of the questions. First, in terms of sort of our confidence in getting to positive cash flow operations next year or positive EBIT as we've described it, we have remained consistent since May in the indication that we believe that that's achievable. And I think what we've done this quarter is just demonstrate that we are exactly on that path. So it's one more quarter of clear demonstration of exactly the path that we set out in May, which is we're going to continue to grow revenue. The thing that continues to drive revenue growth is sales force time in gastroenterology practices and driving growth and depth of adoption in GI practices. That remains unchanged. That's what we saw when we looked at the metrics back in May. That's what was working. That's what was driving our revenue. We've done more of that. We're continuing to drive revenue. My confidence that as we do more of that, we're going to continue to drive revenue is high. Similarly, as Sanjeev just mentioned a moment ago, we've brought down expenses we believe to a sustainable level in terms of our base operations and we might, on a discretionary basis, choose to make additional investments in certain areas if we want to do certain clinical trials or if we want to run a program. So we're not guiding on this call to what the expense level is going to be in 2026. We'll provide that guidance as we get towards 2026. But we are clearly vigilant about maintaining the expense level at a level where we can get to operating cash flow profitability next year and reaching operating profitability. And we wouldn't have said it if we didn't mean that we were going to try to work very diligently doing that and that we didn't believe we could do it. We absolutely do believe we can do it. From a marketing and analytics perspective, Nancy just started a couple of weeks ago. So I'm not going to speak for her as to what she's seen already, but our whole analytics team is spending a lot of time doing a deep dive on exactly how do we see detailed patterns, how can we direct the sales force time and marketing programs ever more efficiently and effectively. That's something that's not a 1- or 2-week exercise. That is something that is going to be months and, in fact, years of work on an ongoing basis. But I've just been delighted working with Nancy over the last couple of weeks, delighted working with Sanjeev over the last few weeks. And we've got a really solid team that is being very thoughtful as they work through the plan. Operator: Our next question comes from the line of Dennis Ding of Jefferies. Unknown Analyst: This is Anthea on for Dennis. Congrats on the quarter. I wanted to ask on the sales territory realignment. When do you expect that to complete? And as you ramp up the additional 20 reps, when do you expect to see their productivity reflected in the top line? And then second, in terms of expansion back into PCPs, what is the gating factor there? Or what would you want to see to consider taking that on again? Steven Basta: So Anthea, thanks so much for the questions. Two quick things on sort of thinking about the territory realignment. We've already executed the territory realignment. So all of the territory maps have been changed. All of the reps have their new territories. They are in their new territories calling on their new customers. But in the course of that, it does create some vacancies. We are actively recruiting for all of those positions. But obviously hiring doesn't happen in a week or 2. Hiring takes months. So we will be bringing folks on through the course of this quarter and next to fill the open positions. As we indicated on the call, I expect that by Q1, as we fill all of the open territories, we will get to a sales force strength of 300. But I actually feel really good about where we are already today that as the significant sales force strength that we already have is in the right territories, calling on the right customers, we're going to start to see that traction. But we'll see incremental impact as we fill those territories through Q1. And that should play out through 2026. And as I communicated, I think you're going to see an acceleration in growth through 2026 as we get more and more of that traction. The other element of sort of what drives us back into the primary care market, there's an organic phenomenon that's going to happen, and it's going to turn into revenue, it's going to turn into metrics that then drive when we make the decision. So one of the key metrics that we look at is NBRx per sales call. And that is how many new patient conversions are we getting relative to the amount of time that we're spending in a physician's practice. NBRx per sales call is much higher today for us in gastroenterology versus primary care, which is why we're driving sales force time into gastroenterology practices. NBRx per sales call is going to go up over time in primary care because primary care physicians will become more familiar with VOQUEZNA as more of their patients who've been converted on to VOQUEZNA and GI practices go back into the primary care office and talk to their physician about how much better they feel. Primary care physician had a patient in pain, sent them to a GI, came back. Their first question is naturally going to be in the next visit, well, how are you doing? How did that referral go? When the conversation goes to VOQUEZNA and they feel a whole lot better and a physician has heard from 5, 8, 10 patients, that's when that becomes a much softer target call for us to be able to drive conversions, and we'll see that NBRx per sales call number go up. At some point, that becomes really profitable to make an investment in growing in that space. Now I don't think that's a 2026 thing. I think that's '27 or '28. But at some point, when that metric works and we're getting positive ROI for that incremental investment, you'll see us expand into more time in primary care as well. Operator: Our next question comes from the line of Annabel Samimy of Stifel. Annabel Samimy: I think you guys have covered a lot already. But clearly you have a great opportunity within the GI community. Maybe you can, just on the flip side, talk about some of the reasons why physicians have not yet adopted. Is it a matter of awareness or one of reimbursement? And it seems like there is high-end awareness. So for the GI -- the new GI doc, what is the average number of calls that you need to convert these docs? I guess what I'm asking is, at some point, do you expect some inflection point in sales with this critical mass that you've now focused on GI docs? So that's my question. Steven Basta: Annabel, thanks so much for the question. And I agree, we do have a terrific opportunity within GI and that's an opportunity to get to really significant revenue. So there's not actually an impediment to first adoption within GI. In fact, the vast majority of gastroenterologists have already written prescriptions for VOQUEZNA. What we need to do is change behaviors to frequency of writing. And that happens gradually. The major impediment candidly is 30 years of habit. They've been prescribing PPIs for 30 years. They're comfortable with them. It's their sort of first inclination. It's the easy thing to do. And what we are trying to do is shift practice patterns away from ingrained 30-year habits that are easy and comfortable and familiar to a new product that provides a meaningfully better outcome for their patients. Their patients when they're on VOQUEZNA feel a whole lot better. And what it takes to change that is repetition of conversation, repetition of experience, feedback from actual patient experience. So we might get a physician to start writing, but only for the patients that have failed everything else. They switched them to between 3 PPIs, they switched them to double dose BID PPIs. And now they finally switch them to VOQUEZNA because there's nothing else to do. Soon if that patient tells the doc that they're feeling better, there's an opportunity for the sales rep to have a conversation about, doc, why are you waiting to switch through 3 PPIs before you use the product? Why don't we start using it on anybody who's coming into your practice who looks like this patient characteristic but doesn't need to go through all of that difficulty and challenge, you can get them started sooner. Maybe they start with their erosive esophagitis grade C and D patients because we've got clear clinical evidence of superior healing in those patients. And then after they see the significant healing, we start talking to them about their grade B erosive esophagitis patients and patients where they think they might not heal well enough on a PPI and they ought to convert. And as they get more experience, they grow their utilization. And then eventually, we're talking to them about patients that are having nighttime heartburn even though they have non-erosive reflux and how do you think about those populations. So it's really about growing the adoption pattern. It's not enough to get a first adoption. It's about changing patterns in broad categories of patients that happens incrementally with multiple sales calls. And we are seeing that happen. There's not an impediment to first writing. There's really just a habit change process that comes from reinforcement, multiple calls, multiple patient feedback experiences. And that's happening today, and it's happening organically. Annabel Samimy: Okay. That's great to know. So just one more question maybe for Sanjeev. So it's great that you turn on Medicare. And it's interesting that the average gross margins come down at the same time, while the cash-pay business seems to, I guess, come back up to about 35%. So is that -- I guess, if you are guiding gross to net to the bottom end of the range, is that suggesting that commercial will continue to grow faster than cash-pay? Are we understanding these impacts? Like I just want to understand what gives you confidence on the gross margin -- gross to net being at the lower end of the range with some of these dynamics going on? Sanjeev Narula: Yes, Annabel, thank you for the question. So actually gross margin, if you look at last 3 quarters, have been very consistent within the range and lower end of the range. I think this quarter as well, when I looked at the results, it came at the lower end of the range. And when I find comfortable with the 3 quarters in hand that we could tighten the guidance for fourth quarter from that perspective. As regard to cash-pay, the way the gross margin is calculated and everything, that does not have a material impact on our gross to net percentages. So as those percentages continue to grow, they will all be reflective of that because our bigger part of the gross to net is impacted by the covered script. And I don't expect that to change significantly between this year and next year. Operator: Our next question comes from the line of Chase Knickerbocker of Craig-Hallum. Chase Knickerbocker: A lot has been asked, but maybe just to stay on the topic of gross to net. Just as we think about it longer term, I mean should we think about that kind of tighter range as kind of the right way to think about medium- to long-term gross to net? Should we continue to see some improvement even potentially going closer to 50% from the bottom end of the range now? I mean, where do you think kind of gross to net ultimately mature to as your business matures over the medium to long term? And then, Sanjeev, just maybe any low-hanging fruit that you see on the gross to net to maybe continue to drive some improvement there from your past experiences? Sanjeev Narula: Yes, Chase, thank you for the question. So we obviously are very kind of focused on gross to net as every other line item. So I'd say -- I think one thing I'd say, I've seen very consistency. I think management has done a good job in getting access and managing all the contracts. And the 3 quarters results have been very consistent and they give me the confidence we can tighten this for this quarter. Going forward, Chase, I don't expect a significant change in how we look at it. Obviously, we look at it at the right time what kind of guidance we want to give. Maybe it will be a little bit tighter than what we had before, but we'll come back to that when we give the guidance. I -- there would be obviously pushes and pulls as you think about it. There is a potential for price increase. There are obviously rebates in the government sector that we got to be mindful of and everything else. But also we have things like DSA. As the company gets matured, we have opportunities for renegotiation some of those things. So there are pushes and pulls that are going to happen. We'll manage it. But I don't expect on an overall basis to be a significant change in our gross to net trajectory as we've seen thus far for 3 quarters this year. Operator: Our next question comes from the line of Matthew Caufield of H.C. Wainwright. Matthew Caufield: And welcome to Sanjeev. I wanted to ask, is there a sense of the proportion of patients that may be getting lost between having their script written by their GI, not being covered and then the patient not subsequently following up for BlinkRx, for example, and how that may be evolving or ideally improving? Steven Basta: So Matt, thanks so much for the question. I don't think we've ever disclosed specific numbers on the number of prescriptions that weren't filled. We obviously are tracking abandonment rates and looking at that pattern, actually overall are pleased that we're doing better than industry norms on some of the metrics. But one of the key advantages of offering the Blink service is that it improves that pattern. So if a patient goes to a retail pharmacy and their product isn't -- and their script isn't covered by their insurance, for example, and they get a higher-than-expected co-pay, they may walk away and not fill that script. If the patient goes to Blink and they are getting covered, they will get a $25 co-pay. And if they are not getting covered, they will be offered a $50 cash price. So that methodology enables us to significantly minimize that process. And as we're educating physicians about the fact that there's an advantage to sending their patients to Blink, it can just -- we can manage that cycle to reduce that walk away from a prescription to minimize the co-pay and minimize at all times the patient out-of-pocket payment so that you have the best likelihood of a patient getting access to the product. And one of the advantages of doing that is even if they end up with getting access to the product on a cash-pay basis, for example, if they've got a high deductible plan and their plan isn't going to covered or their payment is going to be too high early in the year, at some point several months later, they may actually get their script covered and we want to be resubmitting it and switch that patient to a covered category patient. And that advantage -- that whole process is streamlined and works better through Blink and through a retail pharmacy typically. Operator: Thank you. Ladies and gentlemen, that does end the Q&A session and conclude Phathom Pharmaceuticals' call for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Coeur Mining Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mitchell Krebs, President and CEO. Please go ahead. Mitchell J. Krebs: Good morning, everyone, and thanks for joining our call today to discuss our third quarter results. Before I kick off, please note our cautionary language regarding forward-looking statements and refer to our SEC filings that are on our website. The third quarter highlights on Slide 3 showcase our second consecutive quarter of record results driven by higher realized prices strong production levels and solid cost management. As a result, our cash balance is growing rapidly and is expected to exceed $500 million at year-end placing us solidly in a net cash position heading into 2026. Based on recent price levels, we now expect our full year EBITDA to exceed $1 billion and our full year free cash flow to top $550 million, both of which are higher than our prior estimates. Mick and Tom will provide some further operational and financial details in a few minutes, but a couple of other highlights I wanted to quickly mention. Our Las Chispas, silver and gold operation in Sonora, Mexico had another consistent quarter of production during its second full quarter, since the SilverCrest transaction closed back in February. Its free cash flow increased by 34% to $66 million in the third quarter. In addition to their solid operational and financial results, we issued an exploration update last month that highlighted several high-grade intercepts at Las Chispas. We couldn't be more pleased with the SilverCrest transaction and the addition of the Las Chispas operation managed team. It's a great example of well-timed M&A that has allowed us to significantly up-tier our asset portfolio by adding low-cost silver production and immediately bolster our balance sheet, which has put the company in a terrific position as we look ahead to what should be an even stronger fourth quarter and a record-breaking year in 2026. On the share repurchase program, we managed to get nearly 10% of our initial $75 million program completed so far, and we'll continue to evaluate our repurchase activities and overall capital allocation priorities with our board over the coming months. At Rochester, the team continued to make solid progress toward achieving steady state. We mentioned during our last call that we took extended downtime early in the third quarter to make some modifications to the crusher corridor, which have proven to be successful. Mick will talk more about the progress there in a few minutes. Finally, you'll see we fine-tuned our full year production guidance ranges and we also tweaked our cost guidance ranges. These narrower production guidance ranges resulted in a small increase to the midpoint of our full year gold production guidance and a slight decrease to the midpoint of our full year silver production guidance. The main drivers to these adjustments our Las Chispas, Palmarejo and Wharf being nicely ahead of plan, offset by some Rochester ounces being pushed into 2026 to reflect lower than planned crush tons so far this year. Before I turn it over to Mick, I just want to quickly thank the team. Our safety and environmental performance this year is among the best in our company's 98-year history, and the operational and financial results speak for themselves. It's great to see these themes all coming together at the same time, the impact of our recent investments in expansions and exploration, the SilverCrest acquisition and now these higher prices to generate these strong results for our shareholders from our balanced platform of North American assets. Mick, over to you. Michael Routledge: Thanks, Mitch. The third quarter was another solid step forward for Coeur, marked by strong execution and operating discipline throughout the business. Consolidated gold and silver production continued its 2025 trend of positive sequential quarterly increases, delivering over 111,000 ounces of gold and 4.8 million ounces of silver. Adjusted cash per ounce for gold and silver also continued that positive trend compared to Q3 2024 at $1,215 per ounce and $14.95 per ounce, respectively. Looking in more detail at each of the operations, rock solid, consistent production and cost performance with a balanced portfolio was the key takeaway in the quarter. Beginning with Las Chispas, the operation continues to perform exceptionally well, with silver production increasing to 1.6 million ounces and gold production to 17,000 ounces, generating $66 million of free cash flow, as Mitch mentioned earlier. The mine's outperformance to date and expectations for a strong finish to the year led us to increase the range of 2025 silver and gold production guidance. I'm also pleased to report that the full integration of Las Chispas is now complete, kudos to the entire team for a job well and safely done. Turning to Palmarejo. The mine delivered $47 million of free cash flow during the quarter with strong recoveries and mill throughput that reached their highest levels in 6 quarters. The pace of exploration activity has also increased in the East District outside the Franco-Nevada gold stream area of interest. Including drilling, mapping and site work in the highly prospective [indiscernible] and Guazapares trends, which we believe will be key drivers in Palmarejo's next leg of growth. Palmarejo's strong performance year-to-date and expectations for a good finish to the year supported an uptick in their full year 2025 production guidance ranges and driven by continued strong cost management a reduction in their full year 2025 cost guidance ranges. Turning to Rochester. The priority in the third quarter remained on building consistency and momentum through the 3-stage crushing line, which continues to drive steady sequential growth in production at a lower overall cost profile. Gold and silver production increased 3% and 13%, respectively, compared to the second quarter driving a second successive quarter of free cash flow of $30 million. I'm pleased to report that the average particle size continues to trend downward for material passing through all 3 stages of crushing from a P80 of around 0.92 inches in the second quarter to slightly better than budget levels of 0.84 inches in the third quarter and the related recoveries continue to track our PSD models just as we expected. As mentioned last quarter, the team took an extended down period in July to successfully implement several modifications after startup to further enhance the tremendous processing power and efficiency of the cushing train. We also managed through some premature beltway challenges in the secondary reclaim feeder during the quarter with a few more minor modifications to address this in the fourth quarter. This downtime resulted in a slight decrease in tons crushed compared to the prior quarter. However, total tons placed on Stage 6 in the third quarter increased over 9% to 8.3 million tons by utilizing our available fleet and supplementing crushed tons with direct to pad material. Revised 2025 production and cost gains ranges at Rochester reflect the cumulative effects of this year-to-date downtime and the expected timing of ounces coming from Stage 6. Moving to Kensington. The positive impact of the recently completed multiyear underground development program continues to shine through in the form of a stronger, more consistent production profile. Gold production increased for the third consecutive quarter exceeding 27,000 ounces. Cost per ounce at Kensington has shown similar sequential improvement in 2025 reaching $1,659 in the quarter. These positive trends contributed to free cash flow of $31 million, Kensington's highest quarterly cash flow in over 6 years. In light of strong results to date, coupled with greater flexibility and productivity taking route throughout the mine, Kensington's 2025 production guidance has increased and its 2025 cash per ounce range has been narrowed downward. Finishing up at Wharf, the mine achieved its third consecutive quarter of increased production and lower cost applicable to sales. Quarterly gold production increased by 16% to 28,000 ounces, leading to free cash flow of an impressive $54 million. This great year-to-date performance led us to increase full year gold production guidance by 3,000 ounces. At the same time, moving cash guidance down by $125 per gold ounce. As Mitch mentioned, the power of Coeur's balanced North American portfolio is fully enjoying this moment of record-setting metals prices. With that, I'll pass the call over to Tom. Thomas Whelan: Thanks, Mick. As highlighted on Slide 8, our strong Q3 financial results demonstrate the power of our 5 asset portfolio, which is delivering as expected. It was pretty exciting to see the surge in quarterly free cash flow and EBITDA margin during the quarter. Perhaps more exciting is the resulting dramatic improvement of the company's financial position in such a short period of time. Metal sales climbed 15% to $555 million during the quarter, driven primarily by a healthy increase in the number of ounces sold and further accentuated by the 15% higher silver price quarter-over-quarter. This strong top-line revenue growth, combined with overall solid cost control, led to several new quarterly financial records for net income, adjusted EBITDA, free cash flow and adjusted EBITDA margin. One neat metric to highlight is that Coeur's free cash flow party continued at a pace of roughly $2 million per day during Q3, and we expect this rate to increase with the expected higher Q4 realized prices. Turning to the balance sheet on Slide 11. Our cash balance grew to $266 million. We took advantage of our improving financial position to early repay $10 million of higher cost capital leases as we aim to drive down our interest expense even further. We have now repaid over $228 million in debt during 2025, driving our net debt below $100 million. We closed the quarter with a net debt ratio of 0.1x. We are prepared to declare victory on achieving our long-term goal of net debt to EBITDA of 0 during Q4 2025, which is nicely ahead of schedule. Included in our Q3 2025 earnings was a significant milestone around our $630 million of U.S. net operating losses. As the students of accounting on this call will appreciate, we recorded these U.S. net operating losses on the balance sheet during the third quarter. This accounting requirement resulted in a onetime $162 million noncash tax benefit for accounting purposes during the quarter, which is a reflection of the strong performance of the U.S. operations over the past 3 years on a cumulative basis. We have enhanced our guidance and disclosure relating to tax matters to provide additional color on the go-forward effective tax rate and on quarterly taxes paid. Speaking of guidance, we have fine-tuned our 2025 production and cost guidance as is the normal cadence after the end of the third quarter. As Mitch referenced, the overall production changes are truly minor tweaks and speak to our overall predictability over the past 3 years. Despite a stronger peso than we had budgeted and higher royalty obligations due to stronger gold and silver prices, we are particularly excited to lower our cost guidance at 3 of our 5 mines, which reflects the efforts of our business improvement culture and signs that our 2025 inflation estimates were conservative. With that, I'll now pass the call back to Mitch. Mitchell J. Krebs: Thanks, Tom. Before moving to the Q&A, I want to quickly highlight Slide 13 that summarizes our top priorities for the remainder of the year. We've made tremendous progress this year by delivering on our strategy and pursuing opportunities to further improve the quality of the business. We expect this discipline and focus to result in a strong finish to the year and to position us exceptionally well for a record year in 2026. With that, let's go ahead and open it up for questions. Operator: [Operator Instructions] Our first question comes from Mike Siperco with RBC Capital Markets. Michael Siperco: Maybe starting possibly with -- maybe starting with Mick on Rochester or I assume it's Mick anyways. Net of the guidance change and what you're seeing in the second half at the crusher, can you talk a bit more about what's needed to get the operation up to full capacity or steady state, let's say, into 2026 from a throughput perspective? Mitchell J. Krebs: Mick, do you want to go ahead and take that? Michael Routledge: Yes. Mike, thanks for the question. Absolutely. We telegraphed a little bit that we're going to do those extended shutdowns during July, and we did that. And we've got 3 really strong projects done, 1 on the primary, which was really to help us get more efficiently in and out of the primary to maintain that asset around a real system underneath the primary. So that allows us to then run more consistently at the primary level. On the secondary, it was about some modifications that we did to split the 2 secondary systems up, so that we can run 1 of the systems, while maintaining the other one, which also impacts the productivity improvements. And then the third key project that we did during the quarter was an auto sampler downstream around the tertiary system that allowed us to both drive uptime to get more tons through the pipe and to get better visibility of the size fraction online during dynamic operations. So all 3 of those projects have really driven the opportunity for more uptime for size control and productivity at Rochester. That was done in the third quarter, and we've seen some good things that that's getting some traction and we're looking forward to better results going forward. Mitchell J. Krebs: And just, Mike, to piggyback on what Mick just highlighted to get to the point of what's needed to get up to capacity out there and say that the unplanned downtime late in the third quarter regarding that conveyor belt under the secondary crushed ore stockpile that cropped up, which caused us to to lose a little bit of momentum there on the back of completing those projects that Mick just highlighted, that will get addressed here in November. And that should -- there's always going to be something I'm sure that pops up from time to time, but that's probably the 1 thing that we need to get behind us and then we'll hopefully have some clear runway on the backside of that. Is that fair to say, Mick? Michael Routledge: It's absolutely fair to say. The trend is positive. We're seeing some better numbers as we go through this month and year-to-date now that we've got those projects behind us, and we'll just continue to tweak. I'm really actually quite happy where we're at. It's not unusual that we'll do some of these modifications at the startup. And in relative terms compared to the industry average, it's been quite a lean set of modifications to be there. So, so far, so good. Mitchell J. Krebs: Does that help, Mike? Michael Siperco: Yes. And I guess just to follow-up on that, that was going to be my next question. I mean when you look at the issues that you have been addressing, either sort of planned or unplanned, would you say this is more normal course adjustment during a ramp-up of an operation of this size or are you seeing more with respect to either the conveyors or the wear or the material you're running that maybe needs more of a step back and some readjustment? Or is it both? Mitchell J. Krebs: I'd say it's much more of the former, Mike, things that when you run a large crusher train like this for a little while, if something pops up, you fix it and then you move on. Mick, fair to say? Michael Routledge: Absolutely fair to say. It's not atypical conveyors, belts, adjustments to shoots a little bit on strike up bars around the secondary that we'll make adjustments on that will give a bit more longevity on the belts, and we should see the benefits of that going forward. Michael Siperco: So then if I can ask and maybe without getting into guidance specifics, the original 2025 guidance that called for about 20,000 ounces of gold and 2 million ounces of silver in Q3 and Q4. Is that still a quarterly run rate that you feel confident can be reached next year? Mitchell J. Krebs: Yes, I'd say the step up from 25% to 26% will be pretty material out there, getting closer to that on a full year basis, that annual kind of plus 30 million-ton crushing rate, which is really where we need to be to achieve that kind of annual 7 million to 8 million ounces of silver 70,000 ounces of gold on an annual basis. So we expect to see some momentum in the fourth quarter heading in that direction. And then sustain that more throughout 2026, and that's going to give us a nice incremental step up year-over-year out there. Michael Siperco: Okay. Great. Maybe 1 more for me, and then I'll turn it over. Just [indiscernible] on growth, nice segue to M&A. Obviously, Las Chispas has worked out pretty nicely for you over the last 12 months or so. You seem to be anyway as well into cash harvest at this point. How are you thinking about other opportunities either producing or in development out there in the market? And maybe if you can address that in the context of how you're thinking about Silvertip in the longer term? Mitchell J. Krebs: Yes. Yes, sure. Thanks for the question. Look, we came into this year very internally focused on some clear priorities around closing and integrating SilverCrest, ramping up Rochester to steady state, paying down debt quickly. And now here we are almost in November, and you can say that we've either completed or are well on our way to checking the box on all of those. And we're always looking, right, at that things that we could do to potentially make this a better business up tier the quality of the company and the operations that we have not that much of a focus on going back into the development stage game, after having just come out of a period of pretty heavy investment at Rochester, Kensington in exploration, being in this free cash flow positive phase is somewhere where we'd like to remain for a while. And so, any opportunities that we look at, though, have to fit a fairly rigid set of criteria around being gold and silver and improve the quality of the business, sticking in our jurisdictions where we are. So we're always looking at those things. There's not a lot of those, frankly, that fit all those criteria. So we're always actively monitoring and evaluating those kinds of opportunities. Just turning to Silvertip for a second, that's very much a part of how we think about growth in the future, not necessarily in the near term, but looking out a bit longer term, that's a significant leg up in growth, in particular, on the silver side, that could bring in a pretty chunky amount of annual silver production, assuming Silvertip becomes a mine. I think, I said last quarter, we kicked off an initial assessment here to take a look at that project. We'll need to complete that next year, consider whether we move on to the PFS phase. And then if that clears -- if the project clears that hurdle and onto the feasibility study stage, obviously, permitting and then a lot of drilling. So all of those things take time. We don't want to do anything to cut any corners or any shortcuts. We want to make sure we get it right. Of course, Canada is providing a lot of support for critical minerals projects like Silvertip. So we're getting our arms around that and seeing how that might affect the overall time line. But -- so it's out there a few years, but it's something that we're continuing to advance. And I think it's probably going to look pretty attractive, especially at the -- in the current metals price environment. Operator: Our next question comes from Joseph Reagor with ROTH Capital Partners. Joseph Reagor: Mitch and team. So just first thing, I know you guys gave a little bit of guidance on how the tax rate is going to look this year. But what should we be thinking about as far as next year and beyond now that this is -- you have this deferred tax asset? Mitchell J. Krebs: Tom? Thomas Whelan: Sure. Thanks. We're taking bets on whether we get a tax question. So thank you. So again, it was critical to highlight the setting up of the tax asset. And so for years, we've really had basically a 0 effective tax rate on our U.S. earnings. And so that will change starting next year. The federal rate is 21%. The states are -- you might want to add in like 3% on average. And so that should be the go-forward kind of rate. We'll tweak that, of course. We have to wait and see how fast we choose through all of the net operating losses and trying to predict how fast that's going to happen with these increasing commodity prices has been -- it's a high-class problem to have. But we should even be in a situation, where we -- there's a potential to actually pay U.S. income tax, which in 2026, federal income tax, which was a pipe dream many, many years ago. So I don't know, if that gave you enough color, Joe, but that's how you should be thinking about it. Joseph Reagor: That's helpful. And then was a good quarter overall, but I did note Palmarejo and Las Chispas saw a little bit of a drop in grade -- was there anything to that? Or is it just sequencing? Is it Las Chispas -- was it related to the stockpiles that are processed, like any color you guys can give there for what drove that? Mitchell J. Krebs: Yes, I think you actually just almost answered the question with your answer there with your suggestions at least. Mick, do you want to give a little more color? Michael Routledge: Yes. I mean in underground [indiscernible] mines, of course, we're already always characterizing a little bit more ore as we go through the production phase. And when we do that, we then look to see whether that was economic. And then you can either stockpile that ore or you can run it through the pipe. With Palmarejo, of course, we've got upside in our mill and capacity there. So we chose to run some of that. We'll run about, I think, 6% more tons through the pipe in the quarter, and that helped to make those adjustments to the gains. But let's just ask for sure, we ran a lot of that historic stockpile down, and that's a great thing. So that we've now got a very clear view of the stockpile that we have sitting there at Las Chispas. Operator: Our next question comes from Kevin O'Halloran with BMO Capital Markets. . Kevin O'Halloran: So great to see the cost guidance coming down at most of the operations, and it looks like that's mostly on the back of higher guided production. But can you guys comment on what you're seeing from a unit cost perspective? And any main cost pressures that you might be seeing across the portfolio? Mitchell J. Krebs: Thanks for the question. I think we have that inflation slide in the deck that we typically include that shows from our perspective, we're still squarely in that sweet spot of strong rising prices and flat input costs into the business. I think, it's Slide 9, in the deck. Combined, those are close to, I think, around 60% of our total OpEx. And you can see that whether you look over the last 12 months or the last 24 months, it's a pretty attractive cost environment that we're seeing. So not a lot of pressure. There's no tariff pressure at all, at least yet. But I don't know, Mick, Tom, is there anything on the unit cost side that... Michael Routledge: Yes. I mean, look, we saw inflation 3 years ago or 2 years ago, when we put really robust cost controls in place at all of the sites and they're holding true. We're still focused on costs even in this nice price environment and being disciplined in that space helps to drive the margin. So yes, we're enjoying that. Thomas Whelan: Kevin, 1 thing to pile on is just from a royalty perspective, I mean, that's something that can impact costs. And so despite paying some higher royalties, even out at Rochester we've had a royalty that we'll start paying based on these prices. And so that drove a lot of the Rochester increase. But I think it's fantastic that we're able to lower the cost at the other 3 mines despite the higher royalty pressure. And don't forget the peso as well, right? The peso has been very strong. And Mick and Sandra and the team down in Mexico have done a great job on costs. So really happy. Kevin O'Halloran: Great. Yes. That's helpful. Just moving on, kind of already touched on this at Palmarejo, but with higher metals prices, I think pretty much everyone in the industry is facing the decision of whether to send lower grade ore to the mill. Maybe it was previously considered waste and now with metals prices, it can go to the mill. You mentioned you're seeing a bit of that at Palmarejo. Are you seeing or facing any of those sorts of decisions at any of the other operations? And do you expect that impact going forward? Or do you expect to be sticking largely to the mine plans? Mitchell J. Krebs: Yes, Mick, do you want to... Michael Routledge: Yes. I mean, look, on an annual basis, we'll try our best to stick to the mine plans. We're always finding that marginal ore, and then we'll make a decision about that to stockpile that we run it. And the great thing is though we don't just look at that grid, we look at the recovery. So if you look at Palmarejo, for instance, similar lower grade material actually recovered better. And so the balance of play on that was good, and that's why you see that positive that positive outcome at Palmarejo. So just the grid by itself has to be coupled with the tons and the recovery performance. Operator: [Operator Instructions] There are no further questions at this time. Mitchell J. Krebs: Okay. Well, we appreciate everybody's time today. Thanks for joining our call. We wish you all a happy Halloween. Safe, healthy holiday season ahead. And we'll talk to you when we report fourth quarter and year-end results early next year. Thanks. Have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning and welcome to the Amneal Pharmaceuticals Third Quarter 2025 Earnings Call. I will now turn the call over to Amneal's Head of Investor Relations, Tony DiMeo. Please go ahead. Anthony DiMeo: Good morning, and thank you for joining Amneal Pharmaceuticals' third quarter 2025 earnings call. Today we issued a press release reporting Q3 results. The earnings press release and presentation are available at amneal.com. Certain statements made on this call regarding matters that are not historical facts, including, but not limited to, management's outlook or predictions, are forward-looking statements that are based solely on information that is now available to us. Please see the section entitled Cautionary Statements on Forward-Looking Statements for factors that may impact future performance. We also discuss non-GAAP measures. Information on use of these measures and reconciliation to GAAP are in the earnings release and presentation. On the call today are Chirag and Chintu Patel, co-Founders and co-CEOs; Tasos Konidaris, CFO; our commercial leaders, Andy Boyer for Affordable Medicines; and Joe Renda for Specialty. I will now hand the call over to Chirag. Chirag Patel: Thank you, Tony. Good morning, everyone. We are pleased with our strong third quarter performance, which represents another consecutive quarter of growth, with revenues of $785 million and adjusted EBITDA of $160 million. At Amneal, we focus on delivering innovative and affordable medicines that make a difference for patients and providers. Since our founding in 2002, we have strategically expanded from generics into specialty, injectables, biosimilars, GLP-1, and complex medicines. This portfolio diversification has driven significant and sustainable top and bottom line growth. From 2019 through now, Amneal revenues have grown 11% and adjusted EBITDA has grown 13% on a CAGR basis. With growth in each of the last 6 consecutive years, we are very confident our momentum will continue in the years ahead. Today there are multiple growth drivers that are shaping the future of Amneal. First, in Specialty segment, CREXONT for Parkinson's disease continue to outperform expectations. One year post-launch, CREXONT is delivering strong results across all key indicators. Notably, about 80% of prescriptions are coming from IR patients, underscoring the success of our strategy to expand into the broader patient population. We are confident in peak U.S. sales of $300 million to $500 million for CREXONT. Next, our BREKIYA autoinjector for migraine and cluster headache has now launched. This is the first and only product allowing patients to self-administer with the same medication used in hospitals. It addresses an unmet need for patients who have historically had to go to the hospital ER for relief. Second, in GLP-1s, our strategic collaboration with Metsera positions us very well to play a meaningful role in this very large therapeutic category over the time. Metsera's broad portfolio of injectable and oral weight loss programs continue to quickly advance through the clinical Phase. Third, in biosimilars, we are on track to have 6 marketed biosimilar products by 2027, led by our biosimilars to Xolair. With the U.S. market over $4 billion for this key allergy and asthma product, this represents our largest current biosimilar opportunity. Last month we submitted our BLA for Xolair biosimilar, and we are well positioned to be among the first 2 entrants in this growing market. Both in complex genetics and injectables, in our Affordable Medicine segment, we continue to receive approval for meaningful new products, including risperidone injectable, sodium oxybate, and Bimatoprost Ophthalmic Qvar among others. We expect this segment will continue to grow driven by our diversified portfolio of complex products and steady cadence of impactful new launches. Finally, our health care segment continues to provide diversification, stability, and growth, with a broad portfolio for government, distribution, and unit dose channels. In summary, our growing portfolio is creating meaningful value for patients by expanding access and advancing standards of care, and for providers by delivering a broader and more differentiated portfolio and for investors by driving consistent growth and margin expansion. Over time we have strategically evolved from generics to innovative and complex medicines and our current chapter of growth is the most exciting one yet. As we grow and expand our portfolio, we are advancing towards our strategic goal of becoming America's #1 affordable medicines company. I'll turn the call over to Chintu now. Chintu Patel: Thank you, Chirag, and good morning. As always, I will begin by thanking the global Amneal family. Your unwavering dedication and commitment continue to drive our success. The recipe for continued strong performance is clear: operational excellence, robust innovation, and strategic portfolio expansion. First, in operations, our global manufacturing network and leading capabilities remain a core strategic advantage. We continuously strengthen our operational efficiency through digitalization, automation, and cost discipline, while at the same time innovating in new complex dosage forms to expand our reach. Furthermore, with one of the largest U.S. pharmaceutical manufacturing footprints, Made in America remains a key differentiator for Amneal in the industry. In GLP-1s, our collaboration with Metsera is progressing very well. Leveraging our expertise in R&D and manufacturing, we are building 2 state-of-the-art facilities, one for large scale peptide production and another for advanced sterile fill-finish designed to produce prefilled syringes, cartridges, or vials. At the same time, Metsera's injectable and oral clinical programs continue to show strong efficacy and product profiles with timelines bringing us closer to entering this fast-growing market. In Affordable Medicines portfolio, we look to launch 20 to 30 new products each year. So far in 2025 we have launched 17 new products, with approvals for 13 more to launch in the future. Importantly, it is not just the number of new launches but the value of these recent launches and approvals and how they position Amneal for future growth. For years, our focus has been on complex generics innovation, including injectables, ophthalmics, inhalation, and other advanced dosage forms, essentially the most complex drug-device combinations in pharmaceutical. And as a result of years of hard work and strategic focus, we are in the midst of a concentrated wave of Affordable Medicines new product launches coming to market in the near term. To highlight all of these, we have a new slide in the earnings presentation with the list of some of the key launches ongoing now and coming up next. In the third quarter we expanded our portfolio with several important approvals across key therapeutic areas, including our first long-acting injectable risperidone extended-release in the mental health space, sodium oxybate for narcolepsy, and Bimatoprost for glaucoma, as well as new otic and injectable products like multidose epinephrine for hospitals. Just yesterday we were pleased to receive tentative approval for our first metered dose inhalation product beclomethasone dipropionate generic for Qvar. This is the first of several new inhalation products expected in the coming years as inhalation is a new growth vector starting in 2026. For years we have been discussing the strategic portfolio shift towards the complex products, and with so many meaningful launches, we are at an inflection point. Looking ahead, we have 69 ANDAs pending, of which 64% are complex products and 44 additional products in development of which 95% are complex products. We continue to focus our R&D on high-growth, high-impact products across dosage forms such as inhalation, microspheres, liposomes, and 505(b)(2) specialty injectables. With this strategic portfolio expansion and robust pipeline, we are reshaping our Affordable Medicine business and expect our strong momentum to drive meaningful growth and value creation for years to come. In biosimilars, we remain focused on building our leadership position over time. Our most exciting near-term opportunity is our biosimilar to Xolair, where we submitted our BLA in September, ahead of schedule. Alongside Xolair, we are advancing other key programs including denosumab, with multiple new biosimilar launches expected in 2026 and 2027. In Specialty, our CREXONT open-label Phase 4 study is progressing very well. We are very pleased with early results and look forward to sharing additional data later this year on real-world "Good On" time performance that further supports CREXONT's clinical value and differentiation for Parkinson's patients. We continue to work on several specialty R&D initiatives in focus area of CNS and endocrinology, and we look forward to sharing more as these programs advances. In summary, we are driving operational excellence, advancing our innovation agenda, and expanding our portfolio to deliver robust growth and leadership across our business areas. I will hand it over to Tasos. Anastasios Konidaris: Thank you, Chintu, and good morning, everyone. Q3 was another terrific quarter with continued and sustainable strong growth across our 3 business segments. The resilient and consistent growth is a testament to our strategic choices, diversified portfolio, and robust execution. In addition, we further strengthened our balance sheet with strong cash flow generation, reduced net leverage ratio, and increased our expected full year bottom line guidance. So all in all, an excellent quarter. As I usually do, I'll start with our Q3 and year-to-date results, move on to our balance sheet, and our updated 2025 guidance. Starting with the third quarter, total company revenues grew 12% to $785 million. Our Affordable Medicines revenue grew 8% year over year to $461 million, reflecting strong performance across our broad portfolio of more than 280 products. Key contributors to our growth this quarter were products launched in 2024 and 2025, which added $24 million in revenue and included a number of 505(b)(2)s that meet real customer needs. Specialty revenue was again very strong in Q3, up 8% year over year to $125 million, driven by CREXONT and UNITHROID. In the third quarter, as expected, AvKARE revenues grew 24% to $199 million, fueled by strong growth in the [ government channel ]. AvKARE's growth continues to be driven by strong underlying demographics as well as providing substantial savings to the government with timely access to innovative and very often newly available Affordable Medicines products. Moving down the P&L. Q3 adjusted gross margins were 42.7%, down 150 basis points year over year. However, margins on a year-to-date basis are up 130 basis points. We view our year-to-date gross margins growth as indicative of our underlying performance, and we're confident of growing our full year gross margin compared to 2024. The expansion of gross margin is primarily driven by the innovation and strength of new product launches as well as our relentless focus on driving operating expense efficiencies. Third quarter adjusted EBITDA of $160 million grew 1% driven by top line growth, higher gross profit, and higher commercial costs in support of CREXONT and BREKIYA. It is worth noting that our third quarter adjusted EBITDA includes $22.5 million of R&D milestone payment related to the Xolair BLA filing. Lastly, Q3 earnings per share of $0.17 grew 6% versus prior year on the back of lower interest expense. Let me now shift to our year-to-date performance where total revenue increased 7% driven by growth of 5% in Affordable Medicines, 11% growth in specialty, and 8% growth in AvKARE. Adjusted EBITDA grew 9% and adjusted EPS grew 35% year-to-date. The drivers of our year-to-date growth are very similar to those of the third quarter. Turning to the balance sheet. As a reminder, we're very pleased to complete our full debt refinancing in July which reduces interest costs substantially and extends debt maturities from 2028 to 2032. Also, net leverage at the end of Q3 was 3.7x, down from 3.9x at the end of last year. Overall, our capital allocation priorities remain consistent, that is, invest in higher-return organic revenue growth; number two, reducing net leverage below 3x over the course of time; and finally, remain strategic with business development opportunities that enhance our growth profile and value creation. Moving on to our financial guidance. We're pleased for the second consecutive quarter to update our guidance. For revenues, we continue to expect a range of $3 billion to $3.1 billion. We have raised the lower end of our adjusted EBITDA by $10 million to a new range between $675 million and $685 million, and we have raised the full range of adjusted EPS by $0.05 to a new range between $0.75 and $0.80. Lastly, we expect continued strong operating cash flow between $300 million to $330 million this year and further year-over-year debt and net leverage reduction. Looking to 2026 and beyond, we continue to expect top and bottom line growth supported by our diversified portfolio and multiple growth drivers including CREXONT, BREKIYA, new biosimilars such as Xolair, and a very strong wave of new Affordable Medicines and continued growth in AvKARE. Furthermore, our focus on profitable growth, operating expense synergies, and lower Interest costs are strong catalysts for strong shareholder value creation. With that, I'll turn the call back to Chirag. Chirag Patel: Thank you, Tasos. Our strong Q3 results and updated 2025 guidance underscore the continued momentum across our diversified business. We remain confident as we advance this chapter toward becoming America's #1 affordable medicines company. Let's now open the call for Q&A. Operator: [Operator Instructions] We will now take our first question from Matt from Goldman Sachs. Matthew Dellatorre: Congrats on the quarter. Maybe on the Metsera partnership, could you give us your latest thinking on how the acquisition by Pfizer may impact the agreement? I know you said prior you don't expect this to change anything, given there's a Change in Control clause and that you all collaborated with Pfizer in the past. So just curious on your latest thinking there. And then we obviously saw this morning there's another bid for Metsera by Novo at a higher price. So maybe your thoughts on that dynamic as well. And if there's any meaningful difference from an annual perspective in terms of who ultimately acquires the company. And then maybe secondly, FDA came out with new draft guidance yesterday that essentially removes the need for comparative Phase III efficacy studies for biosimilars. Just curious on your thoughts in terms of how this impacts Amneal and the broader industry and market dynamics going forward. Chirag Patel: Matt, I guess we chose the right partner. Metsera is doing well, I guess. And obviously there are 2 bidders now. And for us, it's really great. We've been working with Metsera for last couple of years and have devoted lots of resources from science, engineering, operations, manufacturing. Very close partner, great relationship, great company, and their programs are advancing well. As you know, Matt, I cannot comment on the current events between Pfizer and Novo, and either one of them, Amneal stands to win because of the higher name recognition on both brands with our partnership where Amneal has rights to 18 countries to market the products and agreement for supply, which is very meaningful as well. So stay tuned. And as it progresses, we'll keep you updated. Your second question, it's awesome. We've been experiencing that. We know from our partners what FDA is willing to do now since they have lots of data over last almost more than 12, 13 years, they have seen the biosimilars, the safety data, their biosimilarity data from the clinics as well. So finally, they are in agreement to push for more biosimilar approval, cut down the cost and time by half. And this is where Amneal's vertical integration would play a key role because it still will take 3 to 5 years for competitors to catch up. So it's great for the industry. Most importantly, it's great for the patients. It's going to create great access. And FDA and HHS is behind us, and entire CMS, to call out all the games that are being played by the brand companies and really promote and create a market for biosimilars. And then making those biosimilars in the United States will even further give the advantages for the companies that invest in America. So we're very excited. There are 117 molecules, only 30 are being worked on, 90 are not being worked on. And biologics, as you know, represents half of the value for the entire pharmaceutical spend. And most of those drugs are very expensive. Bringing affordable access, this is our mission, allows Amneal to take the leadership position. And what we've been saying is become America's #1 affordable medicines company, allows us, in the future if we get the vertical integration done as soon as possible, to have bigger, broader portfolio of 20 to 30 biosimilars and keep adding 5 to 7 every year. I hope that answers your question on where the biosimilars are headed. Very exciting. Operator: Next we will have our next question from Leszek Sulewski from Truist Securities. Leszek Sulewski: Just a follow up for each question, actually. On the biosimilars front, how does that change your overall strategy given this draft guidance potentially finalized as it stands. And then on the opposing side to that, do you see potentially for the increased competition where the price erosion curves ultimately resemble the traditional generics? And on Metsera, understand there are clauses in place with the current contract that you have. You're building out the facilities in India. How is your thinking about that sway the new change of control of the company and then potentially your commercialization rights in the emerging markets? Are there any safeguards in place for you to retain those? And I do have a couple of follow-ups. Chirag Patel: Thank you, Les. So let's expand more on overall strategy for biosimilars. So it would expedite the development timing, it would cut down the cost by almost half. And both are very encouraging. But you still need big biologics manufacturing site, you need the [ liters ] of capacity, you need the teams of hundreds of analytical people, manufacturing, engineering to get all these done and with the U.S. standards, so with FDA and then obviously EMA follows European standards are similar. So the companies, for example, Indian companies who are focused on emerging markets in biologics for years -- for 20 years -- they would have to build a brand new infrastructure that is for the United States and develop the products from the beginning for the United States. So if Amneal increases its footprint through the vertical integration, it will give us the advantage over next 5 years. Then your question on the pricing and competitors, yes, competitors will enter. But it's still expensive. We're not talking about $2 million development of complex generics or $5 million, right? We're talking still about $40 million, $50 million, $60 million, based on the molecule. And still it takes a lot of CapEx to have the infrastructure to produce those and science capabilities and engineering. So as you know, it's complicated manufacturing. The pricing of biosimilars are way higher than the small molecule. So even when you hear the tagline of 80% reduction, if your investment is $40 million to $60 million, you're still doing great. As long as you can execute, be there, and select the molecules which are 2 competitors, 3 competitors enter first so you have advantage of insurance coverage, working with private labels, doing buy and build model, all these 3, you have to have marketing setup as well, which Amneal does have. So that is how I see the biosimilar industry blossoming over next 1, 2, 3, 4, 5, I see it up to 10 years. Even with the competition, it's a great marketplace. As dollars are large, complications are very much there, and there are many molecules to go after. Now you can select $500 million molecule, you can select $1 billion molecule, then no need to just keep going after to the $10 billion and $20 billion that would face 10 competitors. So it is a competitive industry. It was supposed to be competitive. And it will create huge value for the patient and providers and complete backing of U.S. government, which is fantastic to push this, rightfully so. And that was the main intent when the law was passed. So we remain very, very big player and will be to win biosimilars for the United States market particularly, and it also allows us to go global as well. Metsera, your second question, it's the same answer, Les, that we cannot discuss much at this point. As you know we have a solid partnership with Metsera, and we look forward to work with whoever the new partner is, and we're very excited, actually. So stay tuned and we'll update you at the right time. Chintu Patel: And Les, just on a biosimilars I'd like to add a point to what Chirag was saying, first of all, this draft guidance is very encouraging for the entire industry. But unlike small molecules, still in large molecules there are multiple barriers of entry. So the speed to market still it's lot longer. Plus the capacity, unlike small molecule where there was a floodgate of people filing 20, 30, 40 ANDAs, it's not possible. There are 112, 115 biologics products where only 20 or 30 are being worked on. So still there are manufacturing, science, analytical is a very strong aspect of development, and the R&D does not allow you to take 5, 10 biosimilars a year. So still next 10 years if you have a head start and have a vertical integration, there's so many opportunities you can do. And with these new draft guidance, still 3 to 4 filing is max for most of the companies. Leszek Sulewski: Maybe just one more if I could squeeze it in for Tasos. SG&A 3Q run rate, a little bit of a pickup. Is this a good proxy as we move forward? And then second maybe high level. As you think about capital allocation, you're getting into that 3x leverage range over the next couple of years. What do you think of in terms of BD? Is it more transformative or continuation of tuck-ins or even on the biosimilars front, but just in general capital allocations priorities over the next couple of years. Anastasios Konidaris: Les, the answer to your first questions about the run rate of the sales and marketing expense, I think Q3 is pretty indicative where we are because it includes full commercialization expense for CREXONT, which was an additive this year compared to last year. It includes a little bit of a getting the market set up for the exciting new launch of BREKIYA. So I think that's a good run rate. Our priorities here have not changed, and that is, how do we balance building capabilities and products and diversification in a thoughtful, doing the right deals, and at the same time structuring the deals in a way that is affordable. So that was the case, for example, you go back to AvKARE. Many years ago, we acquired 65% of that business, did not acquire the whole thing. It was the right, smart thing from a balance sheet perspective. It also kept the management team engaged with a substantial skin in the game. And that allowed us to delever that business quickly. Then you saw the Metsera deal last year. Again, thoughtful deal, where the partner contributed substantial amount of cash. There's substantial grants that we are expected to receive from the India government, and the CapEx is over the course of time. And that's the way we're thinking about this. The right deal comes up. We've been very vocal for probably the last couple of years about our desire to vertically integrate in the biosimilar space. So we continue to look at that, and we'll update folks when there's something to updating about. But you can continue to expect discipline and doing the right deal at the right time. Operator: We will now take our next question from Chris Schott from J.P. Morgan. Ekaterina Knyazkova: This is Ekaterina on for Chris. So first just on RYTARY, any line of sight of when we could see generic entry. Just wondering if you heard anything from the channel on when Teva could potentially launch. And can you just remind us what you're embedding in guidance for the year? And then on CREXONT -- and then on '26 outlook, it's obviously early, but any initial thoughts on pushes and pulls investors should keep in mind for next year? Anastasios Konidaris: Ekaterina, I'll take the first RYTARY question and then if you don't mind repeating your second question on CREXONT. So a couple of things. So on RYTARY, we have no new indication of whatever may or may not happen there. Earlier on this month, we launched our own authorized generics with a partner. So this was part of a well-documented settlement years ago, and we are receiving the majority of potential profits that may come up on that authorized generic. So overall, the delay of Teva has always been a positive for us. And it's going to be positive I believe for both this year and next year. Chirag Patel: Yes. I think the second one, Ekaterina, is the 2026 as we mentioned in our script, momentum is already here. The approvals we listed it on Page 11 of the company presentation, it tells you that the excitement over the new product launches. Current business is performing really well. So we expect continued growth in 2026 and beyond. Operator: We will now take our next question from David Amsellem from Piper Sandler. David Amsellem: So just a couple for me. Wanted to pick your brain on the Xolair biosimilar. It doesn't look like a particularly crowded market potentially. So how are you thinking about that opportunity? So that's number one. Number two, can you just give us a better sense of how many biosimilars you're looking to file annually and specifically how you're thinking about Part B versus say Part D products and where your priorities lie in terms of whether it's a retail pharmacy setting or institutional setting? So just philosophically wanted to get your thoughts on that. And then lastly on the DHE autoinjector, how are you thinking about that opportunity, and what that market looks like, given that it's particularly crowded, acute migraine space? Chirag Patel: David, Xolair biosimilars, we're pleased that we have filed the product. Our partner has manufacturing capabilities right here in the United States, and it will have additional capacity outside of United States as well. So we obviously would maximize the assets. We use our relationship that we have built over 20-plus years to the same groups of buyers and with 300 products. So we have a deep relationship with whether it's CVS, Caremark, Optum, United, Express Script, Cigna. We enjoy very deep relationship as well as Kaisers and Primes and other smaller private labels. So one market we would be exploring is the private label, which could be very significant in 2-player market as the product by itself is growing 32% for the brand. So very excited about that. And then also there is when you are [ first to ], you typically have the bigger coverage from the PBM, so your other potential customers tend to use your products as well. So we'll maximize the market opportunity for Xolair for sure in advance of approval, which is expected in the fourth quarter next year. On your question on -- I'll continue on the market first, the Part B, Part D. So as you know, we've been vocal about the vertical integration is must, the licensing deals are pretty much dead. That business model will not work, and we I've said that 5 years ago, and it's not like I'm a very genius guy. It's just like what happened in generics. As you know, the complex generics or generics, the room for 2 margins in the United States market it makes it harder; harder for to have a real play in biosimilars. So whoever is vertically integrated is going to benefit big time, especially companies having current capabilities of working on 5, 7 biosimilars per year and filing those. Those will be the winner. And those are obviously filed globally. So I don't see any difference whether it's Part B, Part D. We're going to play in broader biosimilars. And obviously, once the vertical integration is done, we would obviously expand the capabilities into bispecific and ADC. If you're in biologics, then you can do more biologics. So that's where we will look forward to. And also FDA is considering a 505(b)(2) pathway for branded biologics. So that could be exciting as well to bring early access to some of these lifesaving drugs or critical drugs, critical medicines. So we're excited on that. We will play on Part B, Part D, private label, the smaller customers, the insurance coverage. We will be everywhere. I don't see any difference for us, Amneal or major competitors, to not be pretty much in all segments of the market. DHE, it is very exciting. You know the market, right. CGRP, the triptans. But there are almost -- our internal analysis we have put it out there. 132,000 patients fail those first- and second-line therapies. So they're being administered with the well-proven DHE autoinjection in the hospital. We made it autoinjectors so they can administer at home avoiding going to emergency rooms, wait time, travel time. So it's a very useful innovation for patients. And so far, we're getting -- it's very early in the inning but getting great feedback. We've got the team all engaged with the key headache centers and key KOLs. So remains -- you'll see our progress. I don't have any prediction. We've been saying the $50 million to $100 million peak sales. So we'll update as we go. Operator: Thank you. There are no questions waiting at this time. I will pass the conference back over to Chirag Patel for any additional remarks. Chirag Patel: Well thank you very much everyone. Have a great day. Thanks. Chintu Patel: Thank you. Operator: That concludes the Amneal Pharmaceuticals Third Quarter 2025 Earnings Call. Thank you for your participation. You may now disconnect from your line.
Operator: Good morning, and welcome to the Regal Rexnord Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Barry, Vice President, Investor Relations. Please go ahead. Robert Barry: Great. Thank you, operator. Good morning, and welcome to Regal Rexnord's Third Quarter 2025 Earnings Conference Call. Joining me today are Louis Pinkham, our Chief Executive Officer; Robert Rehard, our Chief Financial Officer; and Rakesh Sachdev, Chairman of our Board of Directors. I would like to remind you that during today's call, you may hear forward-looking statements related to our future financial results, plans and business operations. Our actual results may differ materially from these projected or implied due to a variety of factors, which we described in greater detail in today's press release and in our reports filed with the SEC, which are available on the regalrexnord.com website. Also on this slide, we state that we are presenting certain non-GAAP financial measures that we believe are useful to our investors, and we have included reconciliations between the non-GAAP financial information and the GAAP equivalent in the press release and in these presentation materials. Turning to Slide 3. Let me briefly review the agenda for today's call. Louis will lead off with opening comments and overview of our 3Q performance and an update on our data center business. Rob Rehard will then present our third quarter financial results in more detail, review our 2025 guidance, provide an update on tariffs and offer some initial thoughts on 2026. We will then move to Q&A, after which, Louis will have some closing remarks. And with that, I'll turn the call over to Louis. Louis Pinkham: Great. Thanks, Rob, and good morning, everyone. Thanks for joining us to discuss our third quarter results and to get an update on our business. We appreciate your continued interest in Regal Rexnord. Before discussing our third quarter results, I would like to make some brief comments about the news regarding my succession, which we announced last night concurrently with our third quarter earnings release. It has been an immense honor to lead the company for the past 6-plus years. We have achieved a lot, inclusive of two major acquisitions and the divestiture of the Industrial segment, transformation of our portfolio, significant revenue growth, gross margin expansion and free cash flow acceleration and have positioned Regal Rexnord as a valued partner serving our customers' most critical needs. We have assembled a strong team of leaders who have built great teams that are focused on leveraging the 80/20, expanding secular growth opportunities and driving continuous improvement. Our portfolio is well positioned to grow, especially when the ISM returns to an expansionary period for industrial production. With third quarter sales up about 2% and orders up about 10%, along with our improving top line momentum, there is a lot to be excited about. So with that, and in light of some personal decisions that I recently made, the Board and I have agreed that this is a good time to initiate a transition plan to pass the baton to a new leader who will guide Regal Rexnord through the next phase of our growth journey over the coming several years. I look forward to continuing to lead the company until the Board identifies my successor. Rest assured, we have a strong team, and we'll continue to execute on our profitable growth initiatives for the benefit of our customers, our associates and our shareholders. In short, it is business as usual. And now on to the quarter. Our team delivered solid third quarter performance, nicely ahead of our expectations on orders, and roughly in line on sales and adjusted EBITDA, driven by over execution in PES and strong execution in IPS and AMC. Performance would have tracked even stronger if it were not for larger-than-expected pressures from two items out of our control: additional tariffs announced in August just after our Q2 earnings call and incremental challenges in sourcing rare earth magnets. Looking forward, our growth potential took a significant step higher in the quarter, driven by strong orders. These results, plus our expectation for further order strength in fourth quarter are setting us up for solid growth in 2026. In short, good results, great momentum. So before continuing, I want to take a moment to thank our 30,000 Regal Rexnord associates for their hard work and disciplined execution. Our associates continue to overmanage the impacts of tariffs and rare earth magnet constraints and are doing a great job working our commercial funnels to drive improved orders and performance. Now let me provide some specifics on our third quarter. Orders in the quarter on a daily basis were up 9.8% versus prior year, and book-to-bill was 1.05. We ended the quarter with our backlog up 6% versus the prior year. As I will elaborate on shortly, in the quarter, we booked $135 million of data center orders and then an additional $16 million order in October. This is a market where we are clearly gaining traction, and we are investing to support further growth. We also saw strong order growth in discrete automation and in our air moving business in PES for the data center and semicon markets, while IPS posted its fifth quarter in a row of positive orders growth against the backdrop of generally sluggish end markets. Our sales in the quarter were up 70 basis points versus the prior year on an organic basis, in line with our expectations for an inflection to growth. In the quarter, we saw particular strength in energy markets, discrete automation and aerospace, net of headwinds in medical as well as some project timing in data center. The latter clearly temporary as recent orders show we are building tremendous momentum in our data center business. For reference, on a year-to-date basis, enterprise organic sales are up slightly and are expected to be up low single digits for the year. Turning to margins. Our third quarter adjusted gross margin was 37.6%, down 80 basis points versus the prior year period on mix and impacts related to rare earth magnet availability and tariffs. Adjusted EBITDA margin was 22.7%, roughly flat versus prior year and reflects an $11 million synergy benefit, mostly offset by mix, tariffs and rare earth magnet pressure. Adjusted earnings per share for the quarter was $2.51, up versus the prior year. And lastly, we generated $174 million of free cash flow in the third quarter, which was used primarily to pay down debt. We ended the quarter with no variable rate debt. In summary, a solid third quarter, during which we delivered strong orders and a rising backlog, which keeps us optimistic about accelerating top line and earnings growth in fourth quarter and into 2026. Next, I'd like to elaborate on the significant momentum we are gaining in the data center market, which we believe can be needle moving to our enterprise sales growth. On the left side of this slide, we provide an overview of our diverse capabilities in the data center market. You can see that all three segments play, but our largest presence today is in our Thomson Power Systems business in AMC, where we are providing switchgear and transfer switches to support standby and backup power in data centers. This was a $30 million business 5 years ago and is on track to hit $130 million this year. The traction we are seeing in this fast-growing secular market is being driven by the success factors listed on the lower left of this slide. It starts with the quality of our products, demonstrated over 5 decades of service. What differentiates us is our ability and willingness to customize the system designed to best meet the needs of our customer. Our lead times are competitive, and in a market being fueled by remarkable levels of AI investment, lead times matter a lot. Our enterprise scale has been critical to getting us in the door with new and larger customers because it helps them get comfortable that we can deliver on our service and delivery commitments. Aftermarket service capabilities are a growing part of our value proposition as we invest in our service footprint. Lastly, and highly relevant in today's market, we are willing and able to make investments to flex our manufacturing capacity, which supports future growth and bolsters our service levels. On the right side of the slide, we describe our recent wins in the data center market worth $195 million. We have been very focused on building our commercial organization, which combined with our enterprise scale has allowed us to grow our bid pipeline to what today is approaching $1 billion. We are also seeing good data center growth in PES, which won a $20 million order in the quarter to provide HVAC chiller subsystems to cool hyperscale data centers. For perspective, PES' commercial HVAC business has been benefiting from data center growth for some time, especially in North America. What is different with this order is its scale. In short, our value proposition of technology differentiated subsystems to achieve the high levels of energy efficiency required by data center operators is resonating. You may remember that part of our growth strategy for PES is leveraging proven technologies in new secular markets. While not mentioned on this slide, the PES team also won a $7 million project in the quarter for a semicon clean room customer that included multiple fan solutions, including fan filter units. Our PES team is gaining traction, growing its business in new secular markets. And as you can see on the slide, is currently working a $100 million data center-related bid pipeline. As you know, we have been directing the majority of our growth investment to secular markets. In data center, that has included funding portfolio expansion into modular electrical pods or e-Pods. These turnkey power management solutions can help expedite data center construction by making the installation of critical power management content more plug-and-play. These e-Pods would typically contain our switchgear, transfer switches, power distribution units as well as air moving content. Regal is also project managing assembly of these e-Pods, including content from third parties. So part of our value proposition is providing a single source of contact for the customer and allowing the customer to procure power management content with a single SKU. We estimate the market size for e-Pods is roughly $10 billion. There are two particularly compelling attributes of this opportunity. One, it helps customers expedite their installation of new hyperscale data centers today. And two, it positions us to serve a market that many expect will evolve towards a network of smaller data centers that sit closer to the applications they are supporting. These edge data centers are forecast to number in the thousands and will likely be constructed using a few modular building blocks that contain all the requisite data center content. Our commercial team has been actively engaged with potential e-Pods customers, and our bid pipeline currently exceeds $400 million. So nearly half of AMC's total $1 billion data center bid pipeline I referenced earlier. In short, a tremendous new product opportunity for our customers and for Regal. To support the growth we have secured in our bidding on, we are investing to expand our capacity, both in our legacy power management systems and to support e-Pods. As you can see on this slide, the current footprint for our data center business in AMC includes two locations, one in British Columbia and one in Mexico. We recently started developing new capacity by expanding our British Columbia footprint and also developing a new site near Dallas, Texas, which will grow our footprint by over 50%. The Dallas facility is scheduled to begin shipping product by mid-2026. As a reminder, this business is relatively CapEx light, and so our investment is centered on light manufacturing, assembly and test equipment as well as adding the talent to support our expanding operations. This is a good example of how our significant enterprise resources allow us to respond quickly to attractive market opportunities. While our data center business today represents a small percentage of our enterprise sales, it is growing quickly, and we are investing across the spectrum of resources needed to support and fuel further growth. Starting in the coming quarters, we believe our data center business can contribute a point or more of growth to our enterprise growth rate at company accretive margins. In short, a huge opportunity for Regal that we are extremely excited about. And with that, I'll turn the call over to Rob. Robert Rehard: Thanks, Louis, and good morning, everyone. Now let's review our operating performance by segment. Starting with Automation & Motion Control, or AMC. Sales in the third quarter were down 1% versus the prior year period on an organic basis, which was just shy of our expectations. The performance primarily reflects project timing in data center, weakness in the medical end market and further challenges sourcing rare earth magnets, which continued to limit our ability to ship certain high-margin products in the medical and defense markets. These headwinds were largely offset by strength in discrete automation and in aerospace. Regarding the challenges around rare earths, last quarter, we expected these were diminishing, especially for nondefense products, where we were making good progress with license approvals for exports from China and with our efforts to find alternative sources of supply. However, the situation worsened in the quarter as the rate of China license approvals slowed considerably. And it became clear that even in the absence of an official policy change, China was not approving export license applications for India, where we have a large facility making product for surgical applications. At this point, we are continuing to work on securing alternative sources of supply and making strategic production moves that facilitate exports from China. Given our experience navigating rare earth magnet approvals we've described, which is worse than we anticipated coming out of the second quarter, we now believe these headwinds will impact us through the end of the year and into early 2026. After which, we expect to see net benefits in the P&L from working down our past due backlog associated with these impacted products. I'll share more on this in the guidance section. Turning to margins. AMC's adjusted EBITDA margin in the quarter was 20.5%, which was on the lower end of our guidance range. The primary pressure was related to securing rare earth magnets. Orders in AMC in the third quarter were up a strong 31.7% versus prior year on a daily basis for a book-to-bill of 1.23. As discussed earlier, this performance is largely tied to winning two large orders in the data center market, worth a combined $115 million. Excluding these orders, orders in AMC would have been up 1%, reflecting strength in discrete automation with orders up 17%, net of weakness in medical and order lumpiness in the aerospace business. As Louis indicated earlier, this strong momentum in data center continued in October when we booked an additional order worth $60 million for a total of $175 million of recent data center orders in AMC. Of further note in the quarter, we received our first electromechanical actuator production order for eVTOL, and we booked $8 million of humanoid-related orders, adding to our momentum in both of these spaces. As a reminder, to the extent humanoid or eVTOL adoption grows, we are very well positioned to address this demand. Turning to Industrial Powertrain Solutions or IPS. Sales in the third quarter were up 1.6% versus the prior year on an organic basis, which was modestly above our expectations. The growth largely reflects strength in energy and metals and mining, with the segment's other markets relatively flat. Adjusted EBITDA margin for IPS in the quarter was 26.4%, about 50 basis points below our expectation and down slightly versus the prior year. Performance reflects synergy gains, offset by weaker-than-expected mix, including product and channel mix, along with the impact of tariffs. Orders in IPS on a daily basis were up 2.3% in the third quarter. This marks the fifth quarter in a row of positive orders growth for the segment and has contributed to the backlog growing 5% year-over-year. Book-to-bill in the third quarter for IPS was 0.96. Turning to Power Efficiency Solutions or PES. Sales in the third quarter were up just under 1% versus the prior year on an organic basis, which was in line with our expectations. The result primarily reflects strong growth in pool and in commercial HVAC. Within the residential HVAC portion of this -- of the business, which represents roughly 1/3 of the segment, sales of air conditioning units were down over 20%, which was offset by strength in furnace, resulting in residential HVAC overall being flat in the quarter. We would attribute the relative outperformance to our continued strong position in this market. Turning to margins. Adjusted EBITDA margin in the quarter for PES was 19%, which was above our expectation and up 120 basis points versus the prior year period, aided by favorable mix and strong cost management. Orders in PES for the third quarter were up 1.7% on a daily basis. As Louis highlighted in his remarks, this team is accelerating its growth in new secular markets such as semicon and data center. Book-to-bill in the quarter for PES was 1.02. Turning to the outlook on Slide 13. We are narrowing and lowering our adjusted EPS guidance to the range of $9.50 to $9.80 or $9.65 at the midpoint. Our revised assumptions are outlined in the table on this slide. Notably, our sales guidance is rising modestly, primarily to reflect initial revenue from our recent data center project wins and some additional tariff pricing net of incremental impacts from delayed shipments of products with rare earth magnets. Our adjusted EBITDA margin is now expected to be 22% versus our prior assumption of 22.5%, factoring what we now forecast to be net unfavorable tariff impacts in the year on a dollar basis and the mixed impacts of rare earth magnet-related shipment delays. We have also made some adjustments to certain below-the-line items, which are outlined in the table. With all of this said, the majority of our guidance changes due to margin headwinds caused by newly introduced and increased tariffs, along with additional rare earth magnet supply chain constraints. Regarding free cash flow, we are now expecting to generate $625 million this year. The decline versus our prior guidance largely reflects the impact of the following three items: one, higher tariff costs associated with the expanded scope of Section 232 tariffs, coupled with the significantly increased India tariffs; two, the impact of strategic working capital investments, particularly those tied to the large data center orders we announced, along with supply assurance inventory for rare earth magnets; and three, higher cash interest costs given the timing and amount of cash flows relative to prior expectations. We see both the tariffs and the working capital investments as timing related as we expect the impact of pricing on tariffs to flow through once that inventory is sold in the first half of 2026. On Slide 14, we are updating our expectations regarding tariff impacts. The gross annual unmitigated cost impact from tariffs as of our last update when we reported second quarter was $125 million. Based on tariffs in place today, that value has risen to $175 million, largely reflecting the rise in India tariffs to 50% and the expanded scope of Section 232 tariffs on steel, aluminum and copper. Given the extent of the tariff increases and the limited time left in the year to implement mitigation actions and price changes, we now expect to have a net tariff impact on a dollar cost basis of approximately $17 million this year. Furthermore, we now expect to be dollar cost neutral on tariffs by the middle of next year and to be margin neutral on tariffs by the end of next year. We see opportunity for this to accelerate, especially if the India tariff is meaningfully reduced. On the right-hand side of the slide, we lay out our principal mitigation actions, which we shared last quarter and which our teams continue to overmanage on a daily basis. On Slide 15, we provide more specific expectations for our performance by segment, on revenue and adjusted EBITDA margin for fourth quarter and for the full year. Let me outline the primary changes to our full year outlook since our last update by segment. For AMC, we are now expecting sales to be up low single digits versus flat to up single previously, reflecting stronger shipments in data center and discrete automation, net of impacts from rare earth availability on shipments to the medical and defense markets. Our adjusted EBITDA margin outlook for AMC is now 50 basis points lower at the midpoint, mainly reflecting incremental rare earth volume and mix impacts worth approximately $8 million, of which we recognized about $3 million in third quarter. We expect the recovery of rare earth magnet supply to continue into early 2026 versus by the end of this year, as discussed in our last earnings call, through resourcing efforts aimed at eliminating the need for China to approve export licenses for shipments to India. For IPS, our outlook for the segment's adjusted EBITDA margin is now 50 basis points lower at the midpoint, mainly factoring in an unfavorable net tariff impact, primarily associated with the expanded scope of the Section 232 tariffs. Lastly, for PES, our outlook for the segment's adjusted EBITDA margin is now 50 basis points lower at the midpoint, also factoring an unfavorable net tariff impact primarily associated with the increase in tariff rates on India to 50%, including a 25% penalty tariff added in August. While we are experiencing some margin pressures from tariffs and rare earths, we remain confident in our midterm ability to achieve our 40% gross margin and 25% adjusted EBITDA margin targets. Our teams continue to execute well on what is in our control. Finally, as I wrap up my prepared remarks, I would like to share a few high-level thoughts on our outlook for 2026. From a sales perspective, we are clearly building momentum as we enter next year, given our strong orders in third quarter, the order strength we're already seeing in fourth quarter, sizable 2026 shippable backlogs in our IPS and AMC segments and growing tailwinds from our cross-sell synergies. Tariff pricing should also be a tailwind, as with any recovery in our end markets, which, for the most part, we believe are at or near trough levels of demand. Given ongoing macro and tariff-related uncertainties, we are going to remain measured in our approach to framing out the year. And for now, we think sales in 2026 should grow at a low to mid-single-digit rate. From a margin perspective, we have an additional $40 million of cost synergies anticipated in 2026 and would expect upside from achieving price/cost and then margin neutrality on tariff headwinds. But again, the margin neutrality is not expected until the end of 2026. We would expect organic growth to lever at roughly 35% overall, higher in AMC and IPS and lower in PES, consistent with the gross margin differences between these businesses. Finally, from a balance sheet perspective, we expect meaningful further progress in 2026 on delevering and for our net debt leverage to end the year at roughly 2.5x. This assumes we generate almost $900 million of free cash flow in the year, which would represent free cash flow margins in the low teens. In short, we are increasingly enthusiastic about our prospects in 2026, especially the potential for improved top line performance, but also more broadly about an ability to drive improvements throughout the P&L, on the balance sheet and in our cash flow performance. And with that, operator, we are now ready to take questions. Operator: [Operator Instructions] The first question today is from Michael Halloran with Baird. Michael Halloran: First off, Louis, thanks for everything. Sorry hear you leaving, but you're absolutely leaving the company in a better spot, and I wish you nothing but the best moving forward. Louis Pinkham: Really appreciate that. Thanks, Mike. Michael Halloran: So first, I certainly appreciate Rob's comments on the puts and takes in the fourth quarter. Could you reframe that a little bit and talk more about what that looks like sequentially? What is accelerating from 3Q? How are you framing the furnace versus the air cooling piece within PES? How do the data center pieces roll in? And just maybe talk about what's getting better, what's getting worse and some of the assumptions around the sequentials. Louis Pinkham: Yes. Happy to do that, Mike. When you first look at PES, a solid third quarter. Fourth quarter, we're expecting resi-HVAC to be down low double digits. Air conditioning will be down closer to 30% though, but furnace will be up high teens. On top of that, we're expecting commercial HVAC to be up mid-single digits, pool down low single digits and general commercial should be slightly up as well. And so when you think about the sequential -- the biggest driver of the sequential change and why we're now guiding PES down about 1%, it's really the fact that resi-HVAC in the third quarter was flat, and it will be down low double digits in fourth quarter. If you then go to AMC, Mike, it's really -- a big part of the discussion is data centers. Data center actually was down for us in third quarter by 40%. It's going to be up more than 50% in fourth quarter. We have it in the backlog. It's just around timing and scheduled shipments. That's the biggest driver of what's driving fourth quarter and some nice improvements that we're continuing to see in discrete automation in aerospace, but we will continue to have headwinds in medical, and we're starting to ramp production in anything that uses rare earth magnets. And we saw some slight improvement in Q3, and we're getting stronger in Q4, as Rob commented in his prepared remarks. And then lastly, going to IPS and the sequential for IPS. It's really project orders that are in our backlog. Actually, distribution for us in Q3 was down. So aftermarket, we would define aftermarket was down about 1% in Q3. We're not expecting that to tick up in Q4. What we are expecting is to execute on our project backlog that's in the backlog. So that's how we're thinking about the guide for Q4. Michael Halloran: Yes. No, super helpful. And then a follow-up is just the data center content you put out there. I mean, obviously, those are some pretty big numbers you're putting on the table as far as what the opportunity set looks like. I think you said this year is somewhere around $130 million. You had $190 million plus of orders. What does that look like from a ramp in the next year based on what you see now? And then maybe more importantly, this $1.1 billion between the couple of segments of potential -- how does that shake out in terms of being meaningful to the Regal portfolio over the next few years? Like what kind of ramp are we talking to? What's the win rate, entitlement, things like that? Just kind of any framing that you can give us on a multiyear would be helpful. Louis Pinkham: Yes. Let me try to give you my thoughts on it. We're really excited. We're excited. We've been investing, and it's kind of all coming to some fruition here. First, I want to -- and I said in my prepared remarks, but our Thomson data center business has actually been growing at a very nice CAGR over the last 5 years. It's at about $130 million. We would expect that to actually grow maybe even double, over the next 2 years. And so that will give you a little perspective of how we're thinking that translates. The backlog is strong. We're winning because of our -- the scale of our company, our commitment to service, but also our willingness to customize to the specific needs of our customers. And some of our competitors are not as willing to do that. And so that has been a benefit. I think there -- and of course, right, we're investing in capacity expansion in both Texas and in our facility in British Columbia. Probably the biggest challenge in the market is the supply chain, though, of components and switching components. But beyond that, we feel really good about our potential here. And so we're -- as I said in my prepared remarks, we would expect this to have meaningful impact on our growth, maybe 1.5 -- 1 to 1.5 points for next year. And we'll continue to invest and grow here. I think it could be a large part of Regal Rexnord overall business for the future. Hopefully, that's helpful, Mike. Operator: The next question is from Julian Mitchell with Barclays. Julian Mitchell: Louis, sorry to see you go, but I wish you well and thanks for all the efforts down the years. Louis Pinkham: Thanks, Julian. Julian Mitchell: Just wanted to start off with the commentary sort of into next year. You've spoken to that low to mid-single-digit organic sales growth firm-wide. It seems like 1 to 1.5 points of that is coming from data center, so a couple of points from the rest of the company. So maybe a couple of things. One is, help us understand the sort of data center overall percent of revenue or dollar revenue this year, so we can understand the jumping off point into 2026. And then should we expect the operating leverage on that volume growth is very limited in the first half because of tariffs and rare earths and so forth? Louis Pinkham: Well, specific to data center, tariff in rare earth wouldn't have an impact, Julian. Data center for us today is -- the Thomson business, as I spoke to, is about $130 million. Outside of that, data center is about 3% of all of Regal. So you would say about an incremental $50 million. We do expect that to become a more meaningful part in '26 and as we move forward. I think that answers the majority of your... Robert Rehard: I think the only other part would be that the margins on the data center business will be roughly segment average. And so we see that to be accretive -- margin accretive for the enterprise. Louis Pinkham: Yes, great point. Julian Mitchell: That's helpful. And yes, just a follow-up, sorry. My question was on the operating leverage for next -- it was more around total enterprise because I guess you've got this extra headwind affecting the 2025 guidance from rare earths and tariffs for Regal firm-wide. So maybe help us understand kind of the phasing of that headwind to profits as we step through the next couple of quarters versus what you saw in Q3. I'm just trying to understand if there should be overall much margin expansion in the next few quarters from volume leverage, or it's all offset by the tariffs and rare earth headwinds? Robert Rehard: Well, overall, the leverage we expect around 35%, overall for the business. I'm going to give you -- there's two parts to my answer. 35% in the business. It's roughly 40% to 45% for AMC and IPS and lower for PES. The way that would phase in is you'd get a little better benefit in the back half, obviously, as we become more -- as we get to margin neutrality. So it would be more back half weighted than front half weighted. But overall, about 30% to 35% for the year is what our expectation would be. But the first couple of quarters will be margin challenged as we expect to be dollar cost neutral, as we talked about, by the time we get to the end of the first half of next year and margin neutral, not until the back half. So that's the way it would phase from half to half. Operator: The next question is from Jeff Hammond with KeyBanc. Jeffrey Hammond: Louis, best of luck, and I'll echo Julian and Mike's comments. Louis Pinkham: Thanks, Jeff. Jeffrey Hammond: Just maybe staying on the margin dynamic. I think you said $40 million of integration savings. And then, Rob, I think you said you think the tariff thing is maybe a net -- or price cost is maybe a net tailwind into '26. So how should we think about price cost or this tariff noise maybe getting less bad or better, and the rare earth kind of fixing itself in terms of a delta '25 to '26? Robert Rehard: I think it's a bit early to get too specific at this time. I think that the -- we do absolutely expect that rare earths, we will get through the rare earth challenges early in '26. That should not be a problem. As I said, we've got about $13 million now of rare earth headwinds as we exit this year, which is an incremental $8 million from what we said coming out of the second quarter. We do think that most of that we'll be able to get through pretty quickly, maybe by the first half of next year, and then we'll move through the back half at a much better rate than we're seeing first half. But as far as more detail than that, we're not ready to get to that level of detail until we put out fourth quarter results and provide official guidance. Jeffrey Hammond: Okay. Great. And then I guess as your tariff -- I know India may come down, but I guess as your tariff pressure kind of moved higher, are you finding it harder to get price, and maybe more particularly in PES, given the customer concentration? And then just separately, if you could just touch on what's driving the furnace growth? I don't know if there's share gains or there's no destocking dynamic or what? Louis Pinkham: Yes. So let me comment on tariffs first, outside of PES. We will be price -- we will be tariff neutral, and we'll work to be margin neutral. It's just the timing of that, the 232 derivative tariff coming out right after our last earnings call, it just takes time to implement for IPS and AMC. And so we would expect, as Rob said, that will ramp in the first half of next year. Same for PES. However, a little bit more pressure because of the India influence. And so we feel good about -- and we've talked about this, our global footprint and the differentiation of that global footprint. If tariffs stay at 50% for India, we will need to move that production. But we have not made that decision yet. But if we have to, we will. And so I'm not worried about our ability to offset it. But to Rob's point, it will be margin neutral by the end of next year, and cost neutral by the middle of next year. That gives us a little time to manage. Now let me address your furnace question. Furnace is about 40% of our resi-HVAC business. And I'll just remind you that furnace was down pretty significantly in '23, a little bit stronger in '24. And we think there's actually some more room to return to normal levels. We believe our outperformance in this market, though, is we are gaining share due to our differentiated and IP-protected technology. And so from that standpoint, we feel very good about furnace and our position in that marketplace. Hopefully, Jeff, that helps. Operator: The next question is from Kyle Menges with Citigroup. Kyle Menges: And Louis, sad to see you go. It was great working with you and best of luck. Louis Pinkham: Yes, thank you. Kyle Menges: Yes. I mean I would love to just maybe unpack the $1 billion or so of data center pipeline that you identified. I suppose how did you guys kind of arrive at that figure? And then just what's your sense of what? Win rate could be -- or maybe what a respectable win rate would be for you guys, would be helpful. Louis Pinkham: Yes, Kyle, it's really quite a great question, but it's hard to give you a very clear answer. I can tell you though that the funnel is made up of a number of large projects with a number of customers. We have been investing significantly in our commercial team. And so this is not a focused view. There's a number out there. There's a couple that are -- big projects that are hyperscale related. We've also invested pretty significantly in expanding our portfolio into e-Pods and being able to provide that solution set. To give you a number on win rate would be tough. It really would. The recent two really nice bigger orders that we received, we were hopeful in negotiating and feeling good, but that was a big win for us. And so I think where I would go with this for now is be assured, we're investing -- we've invested in our commercial teams, we're investing in capacity, and we're going to continue to drive growth in this space. And so we believe it will be a meaningful part of Regal for the future. And then we'll have to come back to give you a little more clarity on how we think about win rates after a bit of time. Operator: Makes sense. And then maybe turning to free cash flow. I can appreciate some of the reasons why free cash flow guide was lowered for this year. But I am just curious, your confidence level in free cash flow being better next year and then ability to execute on further deleveraging. And I guess, it would be helpful to hear a ballpark of how much lower interest expense could potentially be next year as well. Robert Rehard: Yes. So the free cash flow going into next year, so if we bridge off of this year, which we're saying $625 million, and I said in my prepared remarks that we expect to be at almost $900 million next year. The way we get there is we would expect some growth, so some EBITDA expansion, and then we would expect maybe another $60 million, $70 million coming through working capital to help us bridge the gap a bit, along with lower cash restructuring. Cash interest comes down, we expect by a good $40 million next year. And then there's some offsets, of course, on cash taxes and a bit of CapEx, but those are the main bridge items to get to $900 million. So we feel pretty good. I mean the free cash flow this year was certainly hampered by some of the inventory challenges that I've talked about. And while we're still expecting this year that we'll get some improvement in working capital as we close out the year, it was not where we expected it to be as we entered the year from a working capital standpoint. And so we feel good about next year being able to drive out more of that inventory and bridging more of that gap. As far as the leverage standpoint. From a leverage standpoint, we expect that we'll end next year at roughly 2.5x. That incorporates the $900 million that we have in free cash flow. Helping to pay down the debt, we have a bond that's coming due, that we are currently working through the -- and finalizing the strategy. Here, we expect to have that done here in the next month or so. And then we will have a term loan that is also prepayable. We expect that to be as much -- maybe about $900 million. And so that should execute in the first quarter, and we will then make progress paying down that loan, which would come from the $900 million of free cash. So that's the way we're thinking about it. And so our ability to get down to 2.5x, we think, is very good. And we do expect that we can generate this cash flow and have good visibility on how to get there. Operator: The next question is from Tomo Sano with JPMorgan. Tomohiko Sano: This is Tomo. Louis, although we have only just recently met, I wanted to say thank you for your leadership and wish you continued success. Louis Pinkham: Thank you, Tomo. Thank you so much. Tomohiko Sano: My question is, could you share more details on the CEO succession process, including timeline, criteria for the new leader, and how you are ensuring continuity in strategies and execution, please? Louis Pinkham: Yes. Tom, thank you. And I'm actually going to pass it initially to Rakesh Sachdev, our Chairman of the Board, who has some prepared remarks that he'd like to share. So Rakesh? Rakesh Sachdev: Thanks, Louis. Yes. I think as you look at where the company is and the work that Louis and the team have done over the last 6 years, it's really quite remarkable, the transformation that has taken place. This is a company that is now very decentralized. There's a strong bench of leaders. You can -- you heard Louis talk about the cash flow generation in this business. It's a high gross margin business. We've got scale, and we are at the heels of seeing some significant growth. So we are in a great place. Louis and the Board, we've been having this discussion about the next phase of growth in this company for the next several years. And we decided this might be a good time. And we have started a process. We have recruited a leading executive search firm. We have kicked off the process just now. And we'll be very thoughtful and very deliberate in appointing the succession -- successor to Louis. And Louis is, of course, going to stay on, and he's -- as we said, it's business as usual until we find and appoint the new CEO leader. So I expect it will take about 4 to 6 months before we appoint somebody, but there is no rush. We want to make sure we find and appoint the best leader. We have a search committee in the Board. There are four of us, three CEOs, one active CEO, two former CEOs. So we've got some great eyes on making this decision. And rest assured, we will find a great person to fill in this role. So with that, Louis, I'll turn it back to you. Louis Pinkham: Yes. Thanks, Rakesh. And Tomo, just to emphasize Rakesh's point there and as I said earlier, we are going to ensure it's a smooth and orderly transition. And with our team -- our team has never been stronger, deep into the organization. And the message is business as usual. That's where we're going to be focused on what's in our control and continue to execute as we have done in the past. So hopefully, that was helpful, Tomo. Operator: The next question is from Nigel Coe with Wolfe Research. Nigel Coe: Maybe a question for the Chairman again. Are you fully committed to an external candidate? Or are there other internal options as well? And when you think about the profile of the person you're seeking, would it be with a very similar background to Louis in terms of operational chops? Or are you looking for maybe slightly different attributes? Rakesh Sachdev: Thanks for the question. Yes, absolutely. We are doing a comprehensive search. We are looking at external candidates. We're not going to rule out internal candidates, but you can imagine that this is going to be a very comprehensive search, a thoughtful search. And yes, we will be looking for a candidate who has demonstrated strong leadership skills, like Louis has had, running complex global businesses. We're going to be focused on growth. Operations has always been in the DNA of Regal Rexnord, and we've got some great folks who are leading that. But we also need commercial and growth leadership, which we'll be looking for in the next leader who is going to lead this company. So -- and the cultural aspect is also very important. We have created a great culture in this company, and we want to make sure that whoever leads this company will continue to foster that culture going forward. Nigel Coe: That's great. And Louis, look, I've covered the stock for 20 years. And the last 7 years have easily been the best. So you've done an incredible job of really changing the game for this company. So it will be sad to see you go. Louis Pinkham: Thank you, Nigel. Nigel Coe: But no [Audio Gap] the data center. I mean I know we've [Audio Gap] how should we think about the contribution margins on the backlog you're building? And can you maybe just be a little bit -- kind of a bit more precise on when you expect to have this new facility up and running? Louis Pinkham: Yes. So we're -- so I'm going to go backwards. And Nigel, you're cutting out a little bit, but I think I got the intent here. We are initiating the program for setting up that new facility as we speak. We will be hiring personnel through this quarter into next, starting training. And we would expect that we will have product flowing through the facility in Q1, but not shipping until Q2 and later part of Q2. That's the initial project plan. From a contribution margin perspective, all of our evaluation at this point, Nigel, based on what we've bid and quoted is that this will be fleet average margins for AMC, which is actually accretive for Regal. This will be a benefit for Regal as a total business. Now realize, when you think about these pods, a big part of the bill of material is our Regal product, our parallel and switchgear, our automatic transfer switches, our PDUs. And also, I want to emphasize that we're going to put our air moving products in these systems as well. And so we feel really good about where they're positioned and the margins that we will receive. Robert Rehard: And I would just add that, the investments we're making today that we mentioned earlier are very CapEx light. This is more of assembly and test. And so that's important to note. This should not weigh on margins as we move forward. Operator: The next question is from Christopher Glynn with Oppenheimer. Christopher Glynn: Louis, it's been a pleasure working with you and best of luck there. Louis Pinkham: Thanks, Chris. Christopher Glynn: And it sounds like we'll be with you for a couple more quarters anyway. I had a question on the discrete automation orders. I think you said they're up 17%. Just curious how you characterize that narrow, big project, lumpy or pretty diversified? Is it a hockey stick? Or did you have a pretty -- an easier comparison? I can't recall 3Q last year. Is this just a significant sequential move, is really kind of the [Audio Gap]. Louis Pinkham: [Audio Gap] And on top of that, that -- and we talked about this at our Investor Day, we did lose [Audio Gap]. We are starting to get orders, and this is just another indicator of we are investing more in technology. We're trying to expand our served market and feel really good about our position in discrete automation. But again, probably the one piece I would call out to emphasize the point is, defense was quite strong in the quarter. Christopher Glynn: And then a quick follow-up on the eVTOL initial order there. Is that going to be kind of very sporadic? Or is that starting to ramp? Louis Pinkham: It's sporadic for now. It's not ramping. The point of emphasizing it, though, and I know you all know this, but in the aerospace industry, when you start a production order, that means you're moving forward. And if you listened to some of the announcements, for example, the LA Olympics has a contract out for 50 eVTOLs for taxis. We'll see if that comes to true fruition. But this is a market that if it accelerates, Regal Rexnord is well positioned. So that's why we shared it in the prepared remarks. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Louis Pinkham for any closing remarks. Louis Pinkham: Thank you, operator, and thanks to our investors and analysts for joining us today. Our team delivered strong performance in third quarter in all segments for what was in our control. Most importantly, strong orders in the quarter and order strength in fourth quarter should set us up for solid growth in 2026. Stronger growth, anticipated additional margin gains, including improved tariff and rare earth mitigation, expectations for further cash flow growth and plans to reduce net leverage ratios below 3x means we are poised to create increasingly significant value for our shareholders and other key stakeholders in 2026 and beyond. Thank you again for joining us today, and thank you for your interest in Regal Rexnord. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: [Audio Gap] Good afternoon, ladies and gentlemen. Welcome to our earnings call to discuss BPI's results for the third quarter and 9 months of 2025. I'm Haj Narvaez, your moderator for this session. We are conducting this briefing in a hybrid manner with our BPI speakers and panelists here in our headquarters at Tower 2 Ayala Triangle Gardens Makati City. We also have the rest of our participants dialing in remotely. I am pleased to introduce you to our speakers and panelists this afternoon. First, TG Limcaoco, President and CEO; Eric Luchangco, CFO and CSO. They will be joined in the panel for the Q&A by -- there Maria Theresa, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Luis Cruz, Head of Institutional Banking; Jenelyn Lacerna, Head of Mass Retail Products; Dino Gasmen, Treasurer and Head of Global Markets, is unable to join us today, but representing him and the group will be Jethro Sorra. We are also joined by the rest of the BPI leadership team in this call. So moving on. This afternoon's agenda will begin with opening remarks from our President and CEO, TG Limcaoco; followed by our CFO and CSO, Eric Luchangco, who will walk you through the third quarter and 9 months performance highlights as well as the digitalization updates. The floor will then be open to questions from the audience. Please note that this call is being recorded and legal disclaimers apply. Now let me turn you over to TG for his opening remarks. Jose Teodoro Limcaoco: Thank you very much, Haj, and a nice afternoon to all of you, and thank you for joining us this afternoon. As we reported last October 16, our financial results remain robust, demonstrating that our strategy of broadening our client base, growing the share of our noninstitutional loans in our loan book, investing in our distribution channels and technology that our digital branches, our digital platforms and our unique agency partners now with close to 7,000 stores, which all allow us to serve more customers more efficiently and delivering service that is truly customer-obsessed. All these are delivering results as we expected. 9-month net income of PHP 50.5 billion, that's up 5.2% versus last year, which delivered an ROE of 15% and a return on assets of 2%. Our net income was driven by strong revenue growth of 13.2% and managed operating expenses, which grew 10.3%. Our net interest income, which comprises about 77% of total revenues, grew 16.2% as a result of loan growth that was over 13% and NIM expansion of around 30 basis points. All these numbers, our CFO, Eric Luchangco, will restate with more detail along with details on our balance sheet growth. The analyst community has expressed some concern on NPL and provisions, not only at BPI, but for the industry as a whole. Eric and the team will walk through some of the numbers that should evidence that our strategy of expanding our consumer book, which is the reason for the slightly higher NPL numbers is truly paying off. The team present today will be more than happy to give more details on these as well as our policy on provisioning, which follows the output of our expected credit losses -- of our expected credit loss models, which we believe are forward-looking and are independently vetted and verified by third parties. We would also be more than happy, of course, to provide you with our outlook on these markets going forward. Finally, Eric will provide what I call snippet updates on our digital initiatives, including that of the use of AI in our first project, the breadth of our agency banking rollout and our expansion of our wealth business. Again, thank you for joining this afternoon, and allow me to turn the floor over to our CFO, Eric Luchangco. Eric Roberto Luchangco: Okay. Thank you, TG, and good afternoon to -- and thank you to everybody joining us today on our third quarter earnings call. As usual, I'll start off with an update on our financial performance to be followed by some updates on key initiatives of the bank and then move on to taking some questions as part of a panel. This quarter's results extended the pattern of growth from previous periods, highlighted by the following. For the first 9 months, -- for the first 9 months, the bank generated record income of PHP 50.5 billion, up 5.2% from the prior year, driven by revenue growth. The bank also generated a record quarter income of PHP 17.5 billion, up 7.4% quarter-on-quarter, largely driven by loan expansion in the non-institutional segment. Indicative return on equity stood at 15% and return on assets at 2%. The balance sheet continued to expand with loans up 13.3% year-on-year and 1.8% quarter-on-quarter, while deposits were up 7.7% year-on-year and 2.5% quarter-on-quarter. Liquidity ratios remained robust, while the capital position further strengthened from strong income generation with the CET1 ratio at 14.9% and CAR at 15.8%. With the NPL ratio at 2.3% and NPL cover at 96.5%, credit quality remains under control and favorable versus industry averages. We delivered earnings per share of PHP 9.55 per share for the first 9 months, and we are on track to pay improved dividends for the second half. Net income reached PHP 50.5 billion for the first 9 months, up 5.2% year-on-year, driven by strong revenue growth that offset higher operating expenses and provisions. Net interest income rose 16.2% year-on-year to PHP 109.1 billion, driven by a 13.3% loan growth and a 27 basis point increase in NIM. Trading income increased 13.5% to PHP 3.38 billion against the backdrop of declining interest rates. Fee income was up 6.5% to PHP 28.1 billion, reflecting transaction activity growth. Total revenues reached PHP 142.3 billion, up 13.2% year-on-year, sustaining the positive jaw versus the 10.3% rise in OpEx to PHP 65.5 billion. Provisions were up 145% from last year, reaching PHP 11.75 billion, tempering net income growth to 5.2% at PHP 50.5 billion. Looking at it on a per quarter basis, net income reached PHP 17.5 billion, up 7.4% quarter-on-quarter. Total revenue rose to PHP 49.8 billion, up 4% from the previous quarter, driven by net interest income of PHP 37.9 billion, up 3.2% quarter-on-quarter despite a slight decline in NIM for the period. This growth underscores the continued momentum in noninstitutional loans, which offset the flattish performance for institutional loan volume for the quarter. Fee income of PHP 9.55 billion, up 2.8% quarter-on-quarter and trading income of PHP 1.8 billion, up 50.5% quarter-on-quarter. Moving on to the next slide. For the first 9 months of the year, earnings per share reached PHP 9.55 per share, reflecting a 5.2% year-on-year increase. Profitability remained strong with an annualized return on assets of 2%. Return on equity remains solid at 15%, demonstrating sustained value creation for shareholders. Moving on to the balance sheet. Total assets reached PHP 3.5 trillion, reflecting a 9.3% year-on-year increase. Loan portfolio expanded to PHP 2.4 trillion, up 13.3% year-on-year and 1.8% quarter-on-quarter, driven by sustained credit demand across segments. The deposit base expanded 7.7% year-on-year, primarily fueled by growth in time deposits. Both loan and deposit growth outpaced industry averages, contributing to further gains in market share. The CASA ratio was at 61%, while the loan-to-deposit ratio stood at 90%, reflecting efficient funding utilization. Managed deposit growth, combined with a 450 basis point cumulative reduction in the reserve requirement ratio since October of last year supported liquidity and lending capacity. The loan book grew 13.3% to PHP 2.4 trillion, indicating continued positive momentum. Notably, the non-institutional segment now accounts for 30.8% of the total loan book. This puts us about 1 year ahead of the 2021 plan to hit a 30% ratio by year-end 2026. Net interest margin for the quarter was 4.62%, easing 5 basis points quarter-on-quarter, the first quarterly decline since the rate cuts in October last year. During the quarter, asset yield rose by 1 basis point as the positive impact of higher loan volume and an 11 basis point increase in loan yields was offset by lower yields from investment securities. As shown by the red line on the right-hand chart, loan yield actually continued to increase, reaching 8.16%. Meanwhile, cost of funds rose 6 basis points quarter-on-quarter, driven by an increase in time deposit volume, which outweighed the benefit of lower TD rates and other borrowing rates. Overall, credit demand remained resilient and BPI's growth continued to outpace industry. Gross loans increased by PHP 283.3 billion or 13.3% year-on-year. Non-institutional loans accounted for over half of that growth, rising PHP 159.4 billion or 27.2% year-on-year. The growth in noninstitutional loans was led by business bank loans up 72.3%, personal loans up 31.4%, credit card loans up 30.6%, auto loans up 28.7%, mortgage loans up 19% and microfinance loans up 16.8%. These reflect robust growth momentum, especially considering the higher base following successive years of strong growth. On funding, we continue to optimize our funding sources by shifting from time deposits to bond issuances, leveraging incentives under BSP Circular 1185 for green and sustainable financing. This approach offers a lower effective yield compared to that of top rate time deposits. While deposits remain our primary funding source, we saw a 34% increase in borrowed funds, which now account for 7% of total funding. Funding ratios remain stable with loan-to-deposit ratio at 90.3% and loan to total funding at 83.7%. We continue to prioritize strengthening our deposit base with focus on CASA. Our CASA mix remains predominantly retail, comprising 77% of the total, including contributions from microfinance and SMEs. Growth in CASA is being driven by the core mass market and mid-market, reflecting client base expansion and higher average balances. Asset quality. On asset quality, credit quality remains manageable despite expansion into higher-yielding segments. NPLs rose PHP 55.01 billion, and the NPL ratio remained broadly stable at 2.29% as the new rate of NPL formation slowed. Provisions reached PHP 4.5 billion for the quarter, bringing year-to-date credit cost to 68 basis points. NPL coverage remains adequate at 96.5% and further strengthened to 122.3% under BSP Circular 941, ensuring a solid buffer against potential credit losses. Across segments, the institutional, business bank, mortgage, microfinance and auto loan segments posted declines in their respective NPL ratios. Personal loans NPL ratio rose by 123 basis points quarter-on-quarter to 7%, while credit cards increased by 32 basis points to 4.65%. The increase in personal loans NPL is primarily from the universe expansion initiative, which included lowering the income requirement in 2023. To mitigate further delinquencies, we tightened the credit score cutoff starting May 2025, and this adjustment has proved effective as accounts booked post tightening show a lower NPL ratio of 5.5%, 4 months after booking. Teachers loans, which account for 33% of personal loans also contributed to the delinquencies, even though 28% of the loans classified as NPL are still paying regularly due to a system implementation under depth rules. Excluding these technical NPLs, the adjusted NPL for teachers loans would improve to 6.6% -- for personal loans would improve to 6.6%. The increase in credit card loans is 55% from depositor programs and 45% from regular programs, covering mostly younger segments, lower income, and new to credit. Similar to PL, we tightened the credit score requirements starting August and we'll only be able to measure the impact after 6 months. Microfinance NPL ratio rose by 250 basis points year-on-year, reaching 13% due to the test program that granted higher loan amounts to existing clients and extending loan tenors. However, recent bookings have shown improved performance following the tightening of credit score requirements. Business banking NPL ratio remained stable quarter-on-quarter, up 180 basis points year-on-year, primarily due to the strong loan growth last year. BB loan balances doubled in 2024, which suppressed the NPL ratio. With the recent tapering in loan growth, the NPL ratio has now adjusted to the 7% to 8% range, which reflects more normalized levels for business banking. In addition to NPL coverage, we report ECL coverage at 102.5%, as shared during our previous earnings call, our provisioning approach is anchored on ECL, which provides a forward-looking estimate of potential losses. The shift from an NPL-based approach is driven by two key considerations. One is provisioning against NPL is reactive as it occurs after loans have become NPL. And two, under PFRS 9, we're required to maintain reserves that adequately cover the ECL. Additionally, we maintain surplus reserves for performing loans through the GLLP or general loan loss provisions. Together, these provisions reflect a prudent and forward-looking credit risk strategy, ensuring our financial statements present a realistic view of expected losses. Moving on to Fee Income. Fee Income for the quarter reached PHP 9.55 billion, up 2.8% quarter-on-quarter and 1.7% from last year, driven by continued growth in core businesses. Card fees surged 17.3% on a 21% increase in billings, 17% increase in transaction count and 3% increase in average ticket size, supported by a growing card base, which increased 7%. Wealth management fees grew 7.5% with AUM reaching PHP 1.8 trillion. 88% of the increase came from client contributions, reinforcing our market leadership in trust assets and mutual funds, where we continue to gain market share. Income from the insurance business rose just 1.5%, primarily due to a decline in equity income of our insurance subsidiaries given challenging market conditions. Excluding this impact, insurance fee income grew 6.8% year-on-year. These gains were partly offset by lower fees on retail loans due to outsized housing loan penalties charged last year. Remittance fees declined due to lower transaction count amid increasing competition. Bank service charges dropped as clients continue to shift from branch transactions to online channels. Digital channel fees also declined despite a 10% increase in API partner volumes, mainly due to the termination of e-wallet loading services to GCash and Maya. Operating expenses rose by 1.7% quarter-on-quarter and 7.9% year-on-year, primarily driven by manpower, premises and other expenses, which includes marketing, rewards, business volume-related expenses and third-party fees. These investments have strengthened the bank's position. We added nearly 2 million new customers since the start of the year, bringing our total customer count to 17.8 million. We achieved strong volume growth across the bank and gained market share in key areas, including loans, deposits and wealth management. We achieved operational efficiencies with the cost-income ratio continuing its steady decline. Although we expect expenses to show the usual spike in the fourth quarter, our cost-income ratio is currently trending close to 1 percentage point lower than last year. Moving on to capital. Our CET1 capital reached PHP 402 billion, driven by strong income accretion despite the June dividend payment. The capital position remains robust with indicative CET1 at 14.9% and CAR at 15.7%, both well above regulatory and internal thresholds, providing ample capacity to support continued loan growth and strategic expansion. Loan growth at 13.3% year-on-year versus growth -- RWA growth of only 7% was due to the application of fill ratings for some eligible issuers and corporates lowering their risk weights from 100% to between 20% to 50%. The CET1 ratio is estimated to close the year at 14.7%. This table shows the revenues associated with loans covering the first 9 months of 2025 and the first 9 months of 2023 and the respective net NPL formation for each loan book for the two periods. From 2023 to 2025, revenues across the loan books increased by PHP 30.9 billion, which is nearly 4x higher than the PHP 7.75 billion increase in net NPL formation. The non-institutional segment contributed PHP 25.1 billion in revenues, surpassing the PHP 13 billion increase in net NPL formation, a pattern observed consistently across all loan segments. The total revenue uplift is driven by the sharp growth in non-institutional volume, which in turn drove the shift in loan mix toward higher-yielding segments and the increase in fee income associated with higher loan volume. Revenues have outpaced the cost. Despite the rise in provisions, the pivot toward non-institutional loans has delivered value and validates the bank's direction to grow the share of noninstitutional portfolio in the loan mix. While institutional loans are and will remain a core part of our portfolio, non-institutional loans have proven to be a segment with greater growth opportunity, consistently delivering loan yields above 12%, twice that of institutional loans. Even after factoring in credit cost or net NPL formation, which are both around 3%, noninstitutional loans continue to grow -- continue to show greater risk-adjusted returns. Non-institutional loan growth has outpaced institutional loan growth, contributing to the uplift in overall profitability as there is greater availability of untapped opportunity in that market. Within the unsecured space of our noninstitutional loans, a substantial share of our loan releases has been directed towards existing clients, leveraging insights drawn from their customer profiles, transaction history and cash flow patterns. In credit cards, 81% of new clients onboarded in the first 7 months of the year were already BPI clients. For microfinance and personal loans, year-to-date loan releases also show strong bias toward existing clients with 69% for microfinance loans and 74% for personal loans. This data-driven strategy prioritizes existing clients with stronger financial behavior, thereby enhancing credit quality while supporting loan expansion. The bank achieved strong loan expansion through lending programs, programs with clearly defined parameters to test the viability of new credit models, borrower segments or loan products prior to a full-scale rollout. Here, we provide a glimpse of how we structure our lending programs. Each program has a dedicated budget, which has ranged from PHP 300 million to PHP 3 billion with an expected level of delinquencies aligned to the risk profile. These initiatives are data-driven, leveraging extensive historical client data. Since the launch, 54 programs have been conducted, of which 24 have been regularized or fully implemented, 17 have been decommissioned, while 13 are still ongoing. The impact is significant. Regularized programs now account for 16% of the outstanding non-institutional loans. This approach supports the bank's long-term growth strategy, rather than focusing solely on short-term asset quality metrics, we prioritize sustainable portfolio expansion. And as the portfolio continues to grow, the relative impact of NPLs from these lending programs is expected to lessen over time, given the smaller relative size of a lending program to the overall book. As part of our commitment to digital leadership, the bank continues to operate seven client engagement platforms with steady growth in enrolled and active users, as shown at the bottom of the table. Transaction volume is increasingly shifting to digital channels, driven by our efforts to expand partnerships, introduce new functionalities and enhance the overall customer experience. The newly launched features for each platform are highlighted at the top of the slide. As of October 2025, we now have 136 API partners, up from 74 in 2019 and offer more than 17,000 brands, up from only 749 in 2019. Delving into the BPI mobile app. From 2023 to 2025, the new BPI app has evolved from offering basic services to delivering comprehensive digital banking solutions that allow clients to move, protect and grow their money. Key enhancements include Under Move, the introduction of mobile check deposit, cardless withdrawal and pay via QR as key features to deposit transfer and make payments. Under the Protect, the card control features now allow clients to manage their card usage by themselves, including either temporarily or permanently blocking a card or securing a replacement and securing a replacement without the need to contact the call center. If you've ever misplaced your wallet, but you know where it's somewhere safe or left your credit card at a restaurant, you can now temporarily block it until you retrieve it without needing to replace the card. Under Grow, clients can now open time deposit and investment accounts and get personalized financial advisory with a track and plan feature. Key milestones for the app include 8.7 million enrolled users with 4.8 million active users, 90% of what would be branch transactions are now done digitally. 51% of new-to-bank clients since January have been onboarded digitally and an app rating of 4.8 and 4.5 for the Android and iOS apps, respectively, after the introduction of prompted ratings. One of the bank's first initiatives in artificial intelligence is the launch of the BPI Express Assist Intelligence or BEAI, BPI's generative AI-powered platform designed to serve as a digital companion for our unibankers. BEAI enhances productivity by searching and summarizing information from the bank's knowledge base up to 3x faster than manual document searches, enabling unibankers to respond to customers with greater confidence and efficiency. In its first year, BEAI received 99% positive feedback and achieved an app satisfaction rating of 9 from its initial 1,800 users. One year post launch, over 8,000 users have been defined to access BEAI and engage with the platform by asking over 300 questions per day. On screen now is a sample response from an inquiry posted to BEAI, asking for the minimum age to open a time deposit. BEAI can communicate not only in English, but also in Tagalog and Cebuano, 2 of the most widely spoken languages in the country, enabling it to connect with a broader user base through a more natural through more natural and personalized conversations, resulting in higher user engagement and satisfaction. Moving on to Agency Banking, where we continue to expand the bank's customer reach in underserved areas through technology-enabled service delivery. For the third quarter of 2025, our partner base has increased to 33 brands from 25 brands, mainly from additional banner stores under the RRHI Group. We now have 6,943 partner stores, 637 of which can process cash-in, cash-out transactions. Agency Banking continues to demonstrate strong momentum with product sales reaching 170,000 in the third quarter, a 20-fold increase from just 8,500 in the first quarter of last year. This translates to an average of 1,847 products sold per day. Deposit and withdrawal transactions also rose significantly to over 48,000, effectively expanding the physical presence of BPI without having to build a physical branch ourselves. Moreover, product sales per store accelerated, rising to 24.9 in the third quarter, up from 13.8% in the previous quarter and just 1.6% from the first quarter of last year, highlighting improved productivity and deeper client engagement at the store level. Earlier this month, the bank marked a major milestone in its regional expansion with the opening of BPI Wealth Singapore, strategically located in the Marina Bay District, authorized by the Monetary Authority of Singapore, and operating under our capital market services license, BPI Wealth Singapore is equipped to manage investment portfolios, conduct investment research and execute trade transactions. Initial offerings include global portfolio accounts under both discretionary and nondiscretionary mandates with a minimum amount of USD 2 million. This launch represents a major step forward in BPI's mission to bring its wealth and asset management expertise to a broader client base. To close, let me highlight a few points. We delivered another strong revenue-led performance for the third quarter, reflecting solid execution across our businesses. Our balance sheet remains healthy with ample liquidity and strong capital levels. Asset quality continues to be manageable with adequate allowance maintaining and maintaining BPI's strong credit culture, and we continue to accelerate growth through digital leadership. We remain focused on executing our strategic priorities and navigating the continuously evolving operating environment. Thank you, and we will open the floor to questions. Operator: [Operator Instructions] So joining here in front with TG and Eric are our senior leaders, Tere Marcial, Head of BPI Wealth; Ginbee Go, Head of Consumer Banking; Louie Cruz, Head of Institutional Banking; Jenny Lacerna, Head of Mass Retail Products; as well as Jethro Sorra of Global Markets. We've received some questions in the Q&A box. So we'll start off with the first question. Actually, it's from Rafa Garchitorena of Regis. Rafa's question is, what is driving the higher cost of funds? And the second part of the question is why is deposit competition intensifying given policy rate cuts and RRR cuts? Eric Roberto Luchangco: So, on the higher cost of funds, what we're seeing is that we're continuing to see some reduction in the CASA ratio. And obviously, the time deposits being higher priced affect that total cost of funds. And so that's what's leading to the to the higher overall cost of funds. But the actual cost of the time deposits has not really been going up. And in fact, our time deposits have come down, but it's just the percentage, the increase in the percentage that's driving that up. Operator: Okay. Thank you, Eric. We have a question from the Zoom actually. It's actually from DA Tan of JPMorgan. Daniel Andrew Tan: It's DA here, can you guys hear me? All right. Awesome. A few questions from me. First, on the loan mix, right? We're already at 30.8% noninstitutional. Just want to understand how you guys are thinking about the mix and actually the growth going forward, let's say, for the balance of this year and next year? Eric Roberto Luchangco: Okay. So basically, we will at this point, we're not seeing ourselves at the end of the tunnel, right? At the end of the road. This 30% was the target that we had set back in 2021 for the end of 2026. We continue to reevaluate at what point we think this would come. But we're from what we see, we're not close to the end of the road yet. We think there's still a lot of room for continued growth. As I mentioned, this is an area that we think still has a lot of untapped opportunity. At this point, we aren't giving out new guidance for, let's say, the next 5 years. But as we're seeing it now, we're not close to the end. So certainly, up to 35% is something that we think should be well within reason. But we will continue to evaluate as that proportion grows, we'll continue to evaluate, mainly looking at where the opportunity, if the opportunities continue to remain. Jose Teodoro Limcaoco: I don't think we should be looking at a mix of institutional versus noninstitutional as a target. I think we run the business separately. We look at our noninstitutional business, and we have invested a lot in that because we believe that there is significant margins to be made there. We have invested in data to try to build that business up. And to the say, our growth in our noninstitutional business is just sub-20-- 20%. It's really driven by credit card growth, auto loan growth, personal loan growth, and SME loan growth. Then you look at the other side and you take a look at institutional lending, which is today growing about 8%, 9%, maybe 10% depending on whether we land a couple of large deals, whether our corporate clients want to build up their working capital based on their outlook of their industries. Those 2, we look at independently, we will continue to focus on those 2. And if it happens that non-institutional will grow at 20% and institutional growth at 10% and the mix today is 70-30, then you can do the math and see what will happen a year from now. That the ratio is just falls out from the math. Operator: Thank you, TG. Before we proceed with some more of the online questions, I just wanted to check if anyone from the audience had questions. Gilbert? You're good. Okay. Okay. We have a few more online questions in Zoom actually. The next question comes from TG Kiran of White Oak. On the NPL coverage front, could you help us understand why coverage is higher in institutional loans versus business banking? If you reference Slide 11, NPL cover for the institutional book is at 124% versus business bank's 87%. Jose Teodoro Limcaoco: That comes out of the fact that the way we provision is based on the ECL model. So we run ECL expected credit loss models on every portfolio. So the number that comes out for ECL for institution book is X, and that X just happens to be 120% higher than the current NPL ratio. The ECL number for business bank is Y, and Y just happens to be what's number 70 or 80-something percent of the NPL. Now, the reason the ECL numbers might be less than the NPL numbers is because the SME book is collateralized. A lot of the loans there have collateral against it, whereas in the institutional book, a lot of the large corporate loans are not collateralized or clean. So if a loan there goes bad, then it's 100% loss. Operator: Thank you, TG. Okay. Shifting gears a bit. We have a question on funding from Emuel Olimpo of Metro Bank Trust. His question is, can you describe any deposit competition or I guess, intensified deposit competition that we envision or anticipate through to the year-end? Ginbee Go: Yes. That's typical. Every year-end, you see a ramp-up for deposit towards year-end, primarily because the banks would want to make sure that we have enough liquidity crossing the year-end. And we also expect loans to increase towards year-end. And that's why we see intensified competition towards year-end. Nevertheless, immediately after year-end, we also see this coming down. And that, again, is the natural wave of deposits and loans through the year. Operator: Thank you, Ginbee. We have a question. It's actually focused on the credit card business. There are actually 2 questions here from Chan Kei Hong of JPMorgan. He asks, how much of the credit card receivables are on regular rates versus SIP? How has this mix shifted over the years? And the second question is on the NPL ratio for credit card receivables with regular rates versus the SIP... Jenelyn Zaballero Lacerna: So on the first question, SIP actually has been gaining a lot of share over the years because I think at the end of the day, it gives the customer the flexibility to use it other than at point of sale. We actually offer SIP on a selective basis. This is for customers who actually, for example, do not use the card so often or have the tendency to actually just use the card for very simple purchases. So we do proactive offers to those customers because the need might not just be really at point of sale. And we see that coming up over the past couple of years. And the second question is? Operator: Yes. The second question is the NPL ratio. Is there, I guess, any difference between SIP and credit card receivables on regular rates? Jenelyn Zaballero Lacerna: No, we don't really see a huge difference in the NPL coming from the SIP loan availers and from the regular availers of a credit card, which uses it at point of sale or online. Operator: Thank you, Jenny. The next question actually it's back again, DA Tan of JPMorgan. Given the current mix and trend that non-institutional is growing faster, do you have updated credit cost outlook for this year and next year? Eric Roberto Luchangco: So I think what you're looking at into the end of the year is credit costs that are fairly similar to what we've seen in the last couple of quarters. That's generally where you would expect to see it. Even though the book continues into the end of this year, so just in the fourth quarter, right, the movement in the mix probably won't be enough to move the credit cost significantly for the last quarter. Obviously, as that continues to expand into next year, then you'll start to see some changes in the credit cost. Operator: Okay. Thank you, Eric. We have another question, I'll go back later, Chan Kei, but there's a question from Ana Aligada of Standard Chartered. She's wondering if we have any guidance on the NPL ratio and NPL coverage by the year-end? And the second part of your question, is there a cap or threshold for the NPL ratio given the expansion of the noninstitutional loan portfolio? Eric Roberto Luchangco: So generally the NPL ratio has been fairly consistent over the last couple of quarters, same for the NPL coverage. Again, the driver is going to be ECL rather than NPL coverage per se, but it will probably remain at about the same level. And on the second question, there's no cap to it, right? But we will continue to monitor the performance of the portfolio, and we will scale back as needed if we see that performance isn't as we expect or as we want. But there is no cap per se. But given that we expect to continue to apply the standards that we're applying now, we should probably expect the NPL ratios to not go much up from where we are right now. Jose Teodoro Limcaoco: I think it's very hard to try to characterize the way we run the bank with a single number. I am really getting. I think we need to be very clear that we operate the bank today, looking on a granular level. We look at the different products. We understand the NPL levels of each product, and we build the programs around this product based on the profitability of each product. So when we look at a business like personal loans, and we begin to see that the NPL level is beginning to go higher than we had expected, then we ramp down and we begin to put controls there. Is there a maximum limit for the whole bank, a single NPL? No, but we have limits on each product. For example, I would tell Jenny, if credit card NPL goes over 6.5%, she's got a problem, right? But at 4.5%, we're very happy to continue to grow the book there. So I think let's be very clear that we're very comfortable with the current NPL levels where we stand, but that current NPL level of 2.25% is really driven because it's just the math that comes out from the different NPL levels from the different products. We watch each product. And as we said, the NPL cover is just math coming out of what is known as ECL cover. ECL cover is the amount of provisions we put in each product based on what an expected credit loss model says we would lose on that product in the future. So we're covering for losses in the future. NPL cover is just covering the past. We are covering for the future as well. Operator: Thank you, TG and Eric. We actually have a couple of participants who have raised their hands. So the next question actually comes from Claire Diaz of Phil Equity. Sorry Claire, are you there? Okay. We'll probably go back to you first. We'll come back to you later. We can go ahead. The next question actually is from Priya IR. Unknown Analyst: This is Sam here from Con [indiscernible]. So a couple of questions. One was, can you help us reconcile the difference between the rise in the loan yield versus the asset yield because the loan yield was up almost 11 bps Q-o-Q, while the asset yield was just up 1 bps. So, is there any repricing that is still pending, which is why it is not yet reflected in the overall asset yield, and the benefit of which would come in going forward? Jose Teodoro Limcaoco: Yes. So loan yields have been rising, but the rise in the loan yield was held back by, we increased the holdings in securities that were lower yielding, right? So, as you can imagine, a lot of government securities are going to be lower-yielding than some of the loans that we're extending, and the increase in our holdings there brought down average loan yields. Unknown Analyst: Is there a particular reason? Jose Teodoro Limcaoco: No, loan yield, right? Loan yield is the yield on our client loans. Asset yield is the blended yield of both the loan yields and the securities we hold in the book for investments or liquidity. So the fact that loan yields have gone up faster than asset yields means that as rates have come down, obviously, securities yields have reacted faster because they're market-driven. Right? And it shows that we have been able to hold our loan yields, and that's primarily because a lot of our loans are consumer loans, which are very sticky. Unknown Analyst: Right. So would that mean that we would have a bigger impact incrementally going forward, where there would be some pressure on the loan yields because of the declining interest rates? I'm just trying to understand whether... Jose Teodoro Limcaoco: Yes. We've always said that in the long run, as policy rates come down, obviously, loan rates have to come off because our corporate clients reprice their rates. And the top corporates are price sensitive. So if we don't react quickly to the top corporates, the Ayalas, the SMs, Aboitiz, those loans will leave us. So those will reprice over time. But there is a lag because they reprice on the average, maybe 6 months, whereas consumer loans hardly reprice. Maybe auto loans never reprice, mortgage maybe reprice maybe 1 year or maybe 3 years, 5 years, depending on the repricing term cards never reprice, right? So the greater the share you have of noninstitutional loans, the less sensitive your loan book is to falling policy rates. Eric Roberto Luchangco: And I also Sorry, if I can just add, the rising proportion of consumer and SME in the loan mix has also lifted that. So as TG mentioned, there is overall like downward pressure on interest rates because of the easing interest rate environment, but this has kind of been counteracted by our increased loan mix in the consumer and SME portfolios. Unknown Analyst: So incrementally, when we look at the NIMs going forward, where do you see the NIM settling down based on the current interest rates, assuming that there are no further cuts. Do you see your NIM settling down at these levels, or do you see maybe another 5 to 7 bps decline before it settles down? Just trying to understand the dynamics as and when they play out. Eric Roberto Luchangco: Given our current situation, we shouldn't be seeing much NIMs coming off much because as the repricings on the corporate work themselves into our book and they will, right? Some of the recent rate easings have not yet filtered into our book, and they will over time, but these will be counteracted by the fact that our loan mix continues to skew towards the consumer and SME portfolios, and that will provide a counterbalancing force to the downward pressure because of lower interest rates. Unknown Analyst: So as a follow-up on that, since our -- the noninstitutional part of the book is growing faster, should the fee income from transactions also move in tandem because ideally, that would be the key ROA driver going forward as your noninstitutional part of the book grows faster? Eric Roberto Luchangco: So overall, yes, but there are other -- I mean, the fee income is composed of many things, right? And so one of the things that we've been seeing come off lately is, as I mentioned, some of the transaction fees came off because we discontinued the e-wallet loading. And so that resulted in some of the fees coming up. And so moving forward, we expect continued pressure to reduce transaction fees, payment fees. And so that will provide some downward pressure on fees overall. But as you mentioned, there are opportunities to raise it, our growing card business, our increasing consumer loans as well as our growing wealth management business. Unknown Analyst: So do you think the roadway would be, say, maybe three to four quarters at least before we see the fee income growth in line with the noninstitutional book growth? Or do you think that, that road map would be a little further down the year, not four quarters, but more? Eric Roberto Luchangco: Depending on when some of these -- I mean, some of these things come into play, right? I mean, as I mentioned, BSP is pushing towards zero P2P fees. It's not yet in effect. We think it's coming in the near term. If that comes in tomorrow, then obviously, there would be higher downward pressure on NIMs -- sorry, on the fee income. But if it comes in two years from now, then we'll put that off for a while, right? So it's a very dynamic scenario because there are just so many variables in it. Jose Teodoro Limcaoco: Maybe to help you think through the way we look at fees, consider the major fee drivers of our business. Number one is cards. The cards business provides us about 30% of our fee business. And the card fees are really driven by the billings from interchange fees, annual fees from cardholders and I guess, penalties and things like that -- sorry, late fees, right? So all of that is driven by card usage and card -- the numbers in your cardholder base, right? And that we expect to continue to grow. I don't think there's significant pressure on interchange fees because Mastercard and Visa are dictate those fees, right? Then you take a look at the second fee driver, which is wealth management, which is about 15% of our fee business. That one will grow as we continue to grow AUM in our book. And we continue to be very bullish about that segment. We continue to build up our AUM, get more corporate clients, handle more pension funds and also are pushing our UITFs and our mutual funds down into a broader market by digitizing the ability to subscribe and redeem on our app as well as on our distribution channels, such as the agency, the partners and on GCash and Maya, right? The insurance business is the third that contributes about 10% to 12% of our business. We believe there's much promise still in insurance, the country and our client base is still underinsured. And we are looking at programs not only on the life insurance part, which is generally the most profitable or generates the most fees for us on the life insurance, but there's significant potential as well on the non-life. And my bank assurance team is very focused on getting more of our clients on to non-life insurance based on our bancassurance channel. Then the others, which used to be the big drivers before are now smaller, for example, bank service charges, minimum balance, client statement fees, which they go in the branch are clearly falling because we are digitizing most of our transactions. So people are able to get statements online. People are able to transfer without having to go to the branch. And we've also rationalized our deposits where we have many deposit products today that have no maintaining balance because we are after really the transaction fees that they might generate in terms of bills payments and InstaPay fees, right? The other one is the digital fees, which used to be growing very fast, particularly because of InstaPay fees. But obviously, there's been competitive pressure there. We used to be PHP 25, then we moved to PHP 15 and now we're down to PHP 10. And I believe that sooner or later, the BSP will come out with circulars that will basically make most banks bring that fee down to zero. Then the rest are very small. Remittances should continue to grow, but as you get competition from people like Wise or Remitly that will fall. And then you have, I guess, securities brokerage, and then asset sales. So those are small. So that's the way I would think about it in terms of how our fee business is growing. I don't think it's necessarily correlated with the growth of our non-institutional loan book. It really will be correlated with the growth of our customer base. Operator: Okay. Actually, there's a question sent in earlier. It's actually in relation to BPI Wealth. So this would be for you, Tere. How do we envision leveraging on Singapore's regulatory and market environment to differentiate our offerings for Filipinos as well as regional investors? Do we have a… Maria Marcial-Javier: I'd rather have answer that to the person directly... Operator: Yes. Okay. We have another question. I actually referenced this earlier, but there's another question from Chan Kei. How much of our credit card receivables are SIP in percentage terms? Jenelyn Zaballero Lacerna: The receivables of SIP loans is about maybe 30%. Yes. So from the total outstanding receivables, about 55% are SIP. But from the SIP portfolio, there are also merchants that are in SIP. These are the one that you buy on 0% and there the portfolio also that are on loans. So that's 30% and 20%. Then the 50% are, in fact, retail transactions. The revolvers, there is about a good 40, close to 40% and transactors about 10% to 15%. Operator: Okay. Thank you, Jenny. We have a question from Julian Roxas of Philippine Equity Partners. He asks, how should we view the lower tech OpEx growth of 3.2%. This is 3.2% year-on-year in 3Q versus the overall total OpEx growth. Are tech investments already plateauing? Or will this accelerate again given continued digitalization efforts? Eric Roberto Luchangco: I'd love to say that it has plateaued, but I think what we'll see is we'll see a bit of a spike up in the fourth quarter so that the growth in tech expenses will probably be similar to prior years. So we're not yet plateaued on that. But we are implementing some improvements that we think moving forward after 2025 are going to probably lead to a slowing in the pace of growth on the tech side, but not yet in 2025. I think it's more of a timing issue. Jose Teodoro Limcaoco: Yes. I think what Eric is saying is that these tech vendors, they always send their invoices pretty late. They do catch up at the end of the year. So that's when a lot of it gets booked. So you'll notice also that we have a lot of spike in December, that's mainly marketing and tech expenses that come to the fold. But as Eric has intimated, we are making several changes in our tech vendor program and our tech providers that we believe we will see significant reductions going forward next year. Operator: Thank you, TG and Eric. Actually, there's another question sent in is actually from Elizabeth Santiago of Abacus Securities. He's actually asking maybe just for us to comment already in terms of how big the teacher loans book is so far, I guess, as of September and perhaps maybe comment on the growth as well. Jenelyn Zaballero Lacerna: So the teachers loan is about PHP 15 billion in loan books, and that's about 81% growth if you look at it year-on-year since we got it in 2024. From a size standpoint, there are about 900,000 teachers and our penetration today is just about 7%, but that's already coming from 4% last year. So we're continuously growing in teachers loans. So a lot of things that went into 2025 and 2024 when we got it is that we have, in fact, turned the agents, our sales agents into in-source salespeople and that have actually improved the performance by about 30% per individual. We also situated our agents and our offices in more strategic locations to be able to cover the schools. We also set up operational centers so that it's easy for our salespeople to go to the depth and to also go to the teacher because we have found out that there's really areas where in the commute are so long between a depth and the school premises. So we also have mapped that out. And more importantly, the structure by which we actually manage our salespeople are closer and tighter. We have put in monitoring tools to be able to track performance on a team basis, on a regional basis, on a division basis. So that collaboration with -- that better collaboration with our salespeople, in fact, resulted to about an 81% growth in our outstanding receivables. And I think there's really so much potential. We also have intensified our relationship with the debt. We have assigned relationship managers per region so that we can, in fact, have more closer coordination when it comes to booking our teachers' loans because as we're finding out, it really is very highly dependent on the divisions in each of the regions to be able to process and approve the loans for endorsement for teachers loan to, in fact, allow us to disburse. So those are the few big things that we've done that resulted to really a double-digit -- almost 100% growth in outstanding receivables. Operator: Thank you, Jenny. Actually, just a clarification again from DA regarding the credit card split, transactors, revolvers and installment. If we get the split. Jenelyn Zaballero Lacerna: So from the retail and SIP, it's about a 55-45 split. Between the 55 SIP, there's a 30% loans and the 20% point-of-sale. This is the one that you actually use to be able to buy refrigerators, big ticket items. And of the remaining 45%, a good 30% of that are revolvers, a good 10% to 15% are transactors and the rest are your receivables coming from your delinquent accounts. I hope that clarifies the question. Operator: Thank you, Jenny. Okay. We have another question from, so the question now is from Gina Rojas of Macquarie. He's asking, in the last 2 months, we've seen some downgrades on the GDP growth outlook for the rest of the year and going into 2026, brought about by concerns about public spending. So they're just wondering if that is -- some of this is already reflected in our ECL models. Eric Roberto Luchangco: I would suspect that the ECL model gets - what's the word, recalibrated, we build every -- at the end of September. And then every -- at the end of every quarter, we put in the new economic forecast. But this September, there was a new model that was built. So the model that we have today is probably the most -- at the September time point, that's probably your most accurate model going forward. Operator: Okay. Just wanted to check again if there are any questions from members who are here on site. Unknown Analyst: How are you really impacted by the flood control? I mean if you can describe in greater detail, especially Louis Cruises business. Unknown Executive: First, let's talk about the outlook. I think your boss' question really was also thinking what's the outlook. In fact, that's one of the questions that we discuss a lot. We're trying to look at signs of whether there's any stress, right? Anecdotally, we're beginning to hear from research pieces who cover the other that September was fairly weak. But when we look at our September numbers in billings, our credit card billings for September were actually quite strong. But we need to really drill down, but the data on merchant usage comes 60 days later. So we won't be able to see it. But there's anecdotal evidence that retail was fairly weak in September relative to, let's say, even, maybe Louis can give a little color on what's happening on the institutional banking side, particularly as it relates to, I guess, the flood control issue. Are we seeing particular clients holding back on working capital? Luis Geminiano Cruz: Great. Thank you, Gilbert. For the overall first, the overall exposure of the portfolio is less than 1%. So basically, we'll continue to closely monitor that. What we're also looking at is really the indirect exposure wherein we might have clients, suppliers that may have flows coming in from BPWA. So that's where we are monitoring. But in terms of our exposure in terms of the issue, it's less than 1% but I think the concern really more for our clients is the government spending as a whole, right? Given this, there might be some slowdown or restrictions when it comes to specifically to infrastructure-related spending. But for some positive side of it, though, if you look at there's one side of the government that's where it's doing quite well, and this is the energy sector. The JAP program, I think we're in the Phase 4 already. A lot are bidding for it. And that's where you see conglomerates still bidding for it for the private sectors. And the good thing about it also, you see also some foreign investors bidding for it, bidding for those projects. So, we still see a good sign for it, a good sign in terms of spending and support from the government and partnership between private and the other sector that we're seeing is that because of this BPWH issue, there's the shift in funding towards Department of Education. And that's where what we're hearing that they might really pump up the spending and increasing the classrooms, the building of classrooms. And again, we're seeing some private companies, private sectors bidding for that. So those are good signs and also opportunities for us to take part of. And then this is actually related to our driver for our growth also for next year. Unknown Analyst: So is it fair to assume that it's not really that bad. Like PPPs, do you still see hope there? Unknown Executive: For certain sectors and industries, we still see... Unknown Analyst: Even outside of renewable energy, like airports? Unknown Executive: Yes, yes. The answer is yes. it's bad for that issue because perception towards the country as a whole, it doesn't give a good light, right? But specific to certain sectors, industries as mentioned, I think there's still an opportunity for companies to grow and opportunities for projects within private can still take part of. Unknown Analyst: And you're prepared to give an outlook number? Unknown Executive: For my growth for next year, okay. We're looking at 10% to 12%, same range as last year, if that is acceptable to my boss. But I think 10% to 12% is something that we're looking less of the ICI. Yes, so far because I think we have basis for that. We have a good healthy pipeline. I think if you look at it quite objectively, maybe the flood control was the gimmick, how people were able to steal money, right? But what it's done in the near term is it's made the government really slow down on real projects. And therefore, it's possible that many of our clients who provide, let's say, cement or steel bars will slow down a little bit because the projects are not there. But those projects will eventually come back. In fact, when I remember that distinctly was one of our steel clients whose major product was the steel sheets for flood control, and that's completely stopped. But the reality is those sheets are used. I don't know how effective they are, but then they just have to repurpose right? So, there will be a temporary pause, but you need to believe that roads will continue to be built and PPP projects will be awarded once the government gets comfortable again through this scandal. Unknown Analyst: And last question. On the consumer front, mortgages, high-end residential, you're seeing a slowdown. Jenelyn Zaballero Lacerna: Mortgages, we continue to see very positive growth in ours. Unknown Analyst: Including the very high end. Jenelyn Zaballero Lacerna: Including the very high end. We don't have 500 million. Unknown Analyst: So, you don't lend. Jenelyn Zaballero Lacerna: No. But really, we've seen our loan releases in the housing loans has increased by over 30%. That really tells you that there's a good demand still. But we're also very deliberate in our approvals in our lending programs and making sure that we're lending to end buyers rather than just simply investors because for flood control issues, it's usually the investors that slowdown in terms of their purchases because consumer confidence is. But in our case, a lot of our buyers are really end buyers for occupancy. So, we're still foreseeing growth in our mortgages book. Second is on car sales. Car sales have actually slowed down in the industry, but we've seen strong growth again on our auto loans business, growing by close to 20% in loan releases. Unknown Analyst: It's slowing down even with the EVs. Jenelyn Zaballero Lacerna: The EVs is growing. Unknown Analyst: You don't want to finance EVs. Jenelyn Zaballero Lacerna: We do finance EVs. BYD, we finance Kia EVs, we finance even hybrids, and that's where the growth has been. But overall, we've seen extremely strong growth coming also from our branch channel aside from dealer channel. Our branch channel has actually outpaced our dealer-generated auto loans book, which means that our own depositors are the ones who are actually buying cars. And that's why we have better quality as well. And these are the ones who would most likely go for EVs. Unknown Analyst: And how is the portfolio that you inherited from our bank, the motorcycles? Jenelyn Zaballero Lacerna: Very strong growth. In fact, that's the other area that we see a lot of potential in. From a demand standpoint and opening it just imagine, our Robinsons Bank had over 150 branches. Now it's open to over 800 branches. We've doubled our loan releases and our loan book on motorcycle loans, and there's still demand. Operator: Okay. Just wanted to check if are there any other questions from the participants who are here outside. So actually, yes, that just about does it so far with no other questions from our participants online. So, I wanted to thank everyone again for your questions. Of course, we at BPI are always welcome with your feedback and take them into careful consideration. So, before we end the call, maybe call on TG for some final thoughts. Jose Teodoro Limcaoco: Just to reiterate our thank you for participating in this call for the very open questions and thank my colleagues here for also participating. And we look forward to engaging with you. Again, as usual, if there are any questions or follow-up questions, our team would be more than happy to answer them. And then looking forward to seeing all of you again in 3 months. Operator: Okay. Thank you, TG, Eric and the rest of the BPI senior management. Ladies and gentlemen, that concludes today's earnings call. Thank you again for your participation. To those joining us online, you may now disconnect. And for those who are with us on site, please do join us for some refreshments. Thank you.
Operator: Greetings, and welcome to the LSB Industries Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kristy Carver, Senior Vice President and Treasurer. Thank you. You may begin. Kristy Carver: Good morning, everyone. Joining me today are Mark Behrman, our Chairman and Chief Executive Officer; Cheryl Maguire, our Chief Financial Officer; and Damien Renwick, our Chief Commercial Officer. Please note that today's call includes forward-looking statements. These statements are based on the company's current intent, expectations and projections. They are not guarantees of future performance and a variety of factors could cause the actual results to differ materially. For more information about the risks and uncertainties that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K. On the call, we will reference non-GAAP results. Please see the press release posted yesterday in the Investors section of our website, lsbindustries.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. At this time, I'd like to turn the call over to Mark. Mark Behrman: Thank you, Kristy, and good morning, everyone. As a company, we pride ourselves on safety first. And while our teams continue to focus on safe operations, as evidenced by our first 9 months of the injury-free performance, it is with great sadness that I have to report that in early October, a contractor working on our Pryor facility was fatally injured. Our hearts go out to his family and colleagues. This is a tragic reminder about why we put safety first and the importance of the need to remain focused on safety in everything we do. I am confident that our team will learn from this tragedy as we work together to ensure that everyone on our sites remains safe every day. With respect to third quarter financial results, market conditions remain constructive in both our industrial and fertilizer businesses. After increased CapEx spending in 2024 and through the first half of 2025, where we elected to execute on several growth projects, we are back to generating free cash flow. We expect to finish the year having generated solid free cash flow, and we're well positioned to keep investing in our strategic priorities. We recognize that there's more work to do and we see opportunities to continue to enhance our performance across the business. Now I'll turn over the call to Damien to review current market dynamics and pricing trends. Damien? Damien Renwick: Thanks, Mark, and good morning, everyone. Turning to Page 5. During the third quarter, we completed our transition out of high-density AN for fertilizers and into AN solution for explosives. This moves us towards our stated goal of optimizing our sales mix. As a result, we are now supplying 100% of our AN solution contractual obligations to our customers. We continue to see strength in our industrial markets. Demand for AN for explosives is robust, particularly in the mining sector where strong gold and copper prices are boosting activity worldwide. Demand is also benefiting from quarrying aggregate production for infrastructure upgrade and expansion activity. We are seeing continued increases in domestic production of methylene diphenyl diisocyanate, or MDI, as a result of tariffs and antidumping duties on imported MDI. As a result, our nitric acid sales remain strong. Turning to Page 6. Pricing for UAN averaged $336 per ton on a NOLA basis in Q3, up 65% over Q3 2024. Prices continue to be supported by steady exports, lower imports and strong demand leading to below average inventory levels throughout the U.S. We expect these favorable dynamics to continue in the near term and position us well as we head into 2026. Urea prices moderated somewhat during the quarter driven by the resumption of Chinese exports. However, with the results of the latest India urea tender now known, Chinese participation was minimal and it appears that future exports will once again be restricted, supporting tight supply and higher prices. The ammonia market is healthy and pricing remains at attractive levels. Tampa ammonia increased by $60 to $650 per metric ton for the November settlement. Tampa ammonia has now increased by almost $260 per ton or 65% since hitting its 2025 low of $392 per ton in June. The market continues to be dictated by ongoing unplanned supply disruptions from the Middle East, the higher cost of production in Europe and continued delays in the start-up of new production capacity in the U.S. Increased natural gas curtailments and other issues in Trinidad are also maintaining the pressure on global supply. In the U.S., we expect to see a typical fall ammonia application season, subject to seasonal weather outcomes. Now I'll turn the call over to Cheryl to discuss our third quarter financial results and our outlook. Cheryl Maguire: Thanks, Damien, and good morning. On Page 7, you'll see a summary of our third quarter 2025 financial results. Solid third quarter volumes and net sales reflect the progress we are making on our reliability journey along with the absence of no planned turnaround activity during the quarter. Page 8 bridges our third quarter 2024 adjusted EBITDA of $17 million to our third quarter 2025 adjusted EBITDA of $40 million. Higher pricing and increased sales volumes were somewhat offset by higher natural gas and other costs. Costs were higher in the third quarter, primarily related to the transition out of the HDAN business, along with higher maintenance and operating costs. On Page 9, you can see that our balance sheet remains solid with approximately $150 million in cash and net leverage at approximately 2x. After several quarters of heavy investment, we are back to generating free cash flow with approximately $20 million of free cash flow generated year-to-date and approximately $36 million in the third quarter. And we expect to continue to build on that in the fourth quarter. Turning to the fourth quarter outlook. Tampa ammonia settled at $650 per metric ton for November, up from $590 per ton for October, and NOLA UAN has averaged above $300 per ton so far this quarter. Additionally, Henry Hub natural gas cost is averaging approximately $3.45 per MMBtu but is expected to trend higher as we approach seasonally cooler temperatures. With the transition of our HDAN business into industrial grade AN, approximately 35% of our natural gas costs are passed through in our selling price to customers. This provides improved visibility into our earnings profile. Overall, we'd expect the fourth quarter of 2025 to be higher than the prior year fourth quarter due to higher selling prices and higher production, somewhat offset by higher variable and other costs. And now I'll turn it back over to Mark. Mark Behrman: Thank you, Cheryl. Page 10 is an overview of our low carbon project at our El Dorado facility. We continue to expect the technical review of our permit to be completed in the first quarter of next year with operations to then begin by the end of 2026. We're excited about this opportunity as we expect to generate approximately $15 million in annual EBITDA from the project, with the majority of it beginning in 2027. Our El Dorado CCS project is a good example of how our industry can decarbonize and provide customers with low-carbon ammonia and derivative products in a cost-effective manner. We have made strong progress in the first 9 months of 2025 driven by increased production volumes of ammonia, UAN and AN and expect to end the year in line with our total sales volume targets set out at the beginning of the year. We've also continued to successfully shift our sales mix towards more contractual industrial sales, which allows us to pass through natural gas cost to our customers and provides us with greater earnings stability and visibility. At the same time, we've reduced our outstanding debt, continue to maintain a healthy cash balance while we evaluate several growth opportunities and continue to invest in the reliability and efficiency of our plants. I remain extremely optimistic about the future of our company, both for the remainder of the year and looking ahead to 2026. The market outlook remains robust, and we are well positioned to continue to improve our operational and financial performance while delivering sustainable growth and profitability. Before we open it up for questions, I'd like to mention that we will be participating in the NYSE Industrials Virtual Conference on November 18 and 19. We look forward to speaking with some of you at this event. That concludes our prepared remarks, and we will now be happy to take your questions. Thanks. Operator: [Operator Instructions] Our first question comes from the line of Lucas Beaumont with UBS. Lucas Beaumont: So I just wanted to sort of start on the ammonia market. I mean it's been tight sort of with the limited supply and the ammonia contracts continue to kind of move higher. I mean sort of depending on what we assume there for December, it looks like pricing could be up $130 sequentially, if not more into the fourth quarter. So I guess just kind of what's your view on the market there generally to begin with. And then assuming we see sort of a large kind of increase somewhere in that range, how should we think about that flowing through to your fourth quarter pricing? Mark Behrman: Lucas, so at a high level, it is a tight supply and demand market globally. On top of that, clearly, we've got some issues going on in Trinidad that are affecting the market today and could have long-term effects on the market. I think also, while it's a little early, we feel like we're going to have a really healthy fall ammonia application season. So I think everything is really setting up to have good demand certainly in the United States and globally. A bit tighter supply, and that's why you're seeing pricing move up. But I'll let Damien give a little bit more color on the market itself. Damien Renwick: Yes. Lucas, again, like Mark said, this is a story about lack of supply more than anything else. You've got issues in the Middle East with the Ma'aden plant in Saudi Arabia having a very extended outage for a significant volume of tons, other issues as well. And then you've got the news coming out of Trinidad with production coming out of the market for who knows how long. And the market is just reacting to that. So how long does that continue for? Well, look, it will continue for as long as that supply is out of the market. And then the wild card is when does the new capacity come online in the U.S. Gulf. And there's indications that some of that could be up later this year or early next year. But who knows? The proof will be in the pudding when that happens. Mark Behrman: And I think just to add on to that, I mean, while it has been well known that, that production is coming online and we can have some more supply in the marketplace, I think the wild card now is Trinidad and what happens there and could that offset all or just partial some of that new supply coming on. Cheryl Maguire: Yes. And Lucas, in terms of how that pulls through in the financial results, as you know, we are tied to Tampa ammonia. And so you will see that pull through in our pricing for the fourth quarter. Lucas Beaumont: Right. And then I guess just thinking about UAN as we're kind of headed into the spring here. So I mean, we've sort of been seeing some sort of softness in pricing there a bit as urea has sort of come off and we're out at a kind of high period of seasonal demand so far. So I mean, it seems like that's probably going to continue to soften here a bit through the fourth quarter. But last year, we had pretty strong price increases and tight local supply-demand conditions as we sort of got into the spring. So I was just wondering if you guys could talk us through how you see that set up the 2026 there. Damien Renwick: Well, look, Lucas, I think we're a little more optimistic on UAN. We're well sold forward. Are prices softening at the moment? I mean, yes, sure, urea has softened a little bit. But I think that's set up for a recovery shortly as that market tightens as Chinese exports exit their short entry in the last few months. And then the UAN market, I think, producers are pretty comfortable here in the U.S. We all came out of last season with very little inventory and there's been turnarounds, et cetera, in the last few months. And I think that tight supply is set up to continue. And we're confident that prices will be pretty healthy heading into Q1 and then into Q2 into the application season. Lucas Beaumont: Right. And just wanted to ask one on the volume side. So there's a bit of noise this year sort of with the shift in the turnaround timing and kind of just the impact on sort of volume and the product mix between 3Q and 4Q. It seemed that was probably like flowing through to sort of costs in a few different ways as well. So I was just wondering if you could kind of help us understand sort of the impact that you saw there in the third quarter and how you see the set up for the fourth quarter on the sort of the volume and the cost side due to that. Cheryl Maguire: Yes. So I mean, if we're thinking about the third quarter, we did have some mix changes flowing through with the transition of HDAN into AN solution for the industrial markets. We did see some higher costs related to that. I believe that's what you're alluding to. Part of that is, look, we're switching railcars and with that comes higher maintenance costs as we move and change out the fleet. We've got to restore the other cars to original state, which does lead to some higher maintenance costs. And you do see that pull through in the third quarter. As we're thinking about the fourth quarter, I think we would expect to see our ammonium nitrate, nitric acid volumes kind of in line with the third quarter. Ammonia as well and UAN, I would suspect, would be a bit higher in the fourth quarter as compared to the third quarter. Operator: [Operator Instructions] Our next question comes from the line of Andrew Wong with RBC. Andrew Wong: With the stronger industrial demand which appears to be continuing, how does that impact your negotiating position for contracts and the margins you're able to secure? Damien Renwick: That's a tough question, that one, Andrew. Look, I think it's really going to depend on when those particular contracts expire and what's happening at the time. I mean, at any one time, we do have contracts rolling off, but they are typically smaller than some of our more substantial ones which are under longer-term duration. So again, it would just come down to the specific situation. I think at the moment, prices are healthy and the broader happenings with Tampa ammonia and natural gas makes the environment well set up to maintain or even increase prices if and when contracts expire. Mark Behrman: Yes. I would just say that healthy overall nitrogen prices certainly help negotiating new contracts or renewal of new contracts when they come up for sale. Andrew Wong: Okay. Great. That's helpful. And then just in terms of growth for LSB, just given that stronger industrial backdrop, is that a path that we can expect to see LSB take in terms of spending on more upgrade capacity? And if you were to take that path, do you maybe need to have some sort of backstop on like longer-term contracts to guarantee a certain return on those projects? Mark Behrman: Yes. Andrew, we're constantly looking at ways that we can increase our production capacity. So we did a urea expansion up at our Pryor facility. There is a second urea expansion that is in the early stages of evaluation. And that might not necessarily just go to UAN. We could enter the DEF market, which would be an industrial product. So I think we're evaluating whether we want to do that or not. At El Dorado, we've talked in the past about an ammonia expansion there, and that ammonia expansion would probably add in the neighborhood of 100,000 tons. So we are down the pathway to evaluate and really do our engineering studies to see if that really makes sense for us. Would we backstop that? I think at 100,000 tons, we're probably pretty comfortable. If we did a big expansion, I think we would want to backstop it as is a lot of our risk aversion for trying to lock in some returns for the investment of capital. So I think we're not prepared yet to talk about the expansion. I think we'll wait until we get through our engineering studies. And then if it makes sense and the Board supports it, then we'll certainly announce it. Operator: Our next question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: Two, if I may. First, on the industrial market side of your business, can you just give a baseline for your seasonality going into next year with the current mix of contracts? And then how do you think about extending the amount of preselling if there is any sort of fly up in ammonium nitrate prices? And secondly, with El Dorado, what's your current thoughts around changing your offtake structure or signing more offtake agreements as the project gets closer to completion? Mark Behrman: Well, Damien, I'll let you handle the first one. Damien Renwick: Yes. Okay. So seasonality, Laurence, most of the offtake through the year is fairly ratable. We do see some seasonality in our AN industrial business for explosives. And that's simply related to weather. I mean, we've got sales up into the northern parts of the U.S. and into Canada. And when it gets cold, it becomes more difficult for those miners to blast. And so that does mitigate some of that demand. But we're well set up to manage that with our current infrastructure and arrangements with our customers. Mark Behrman: As far as the project at El Dorado, Laurence, are you referring to the carbon capture and sequestration project? Or are you referring to if we were to expand our ammonia production capacity? Laurence Alexander: Sticking to the CCS project. Mark Behrman: Yes. So the CCS project, we've already got a negotiated per ton of CO2 sequestered rate with our partner, Lapis Energy. So that's already locked in. And as you know, we're generating the CO2 today. We're just venting it in the air. So the project here is to capture it, dehydrate it, compress it and then sequester it in a well that is actually already drilled on our property. So the real gating item here is just the permit, the Class VI permit from the EPA to allow Lapis to really sequester the CO2. Obviously, once we get that, we need to build a compression facility. But again, there are lots of those around the world and so that's not complicated technology. So whether we sign additional AN solution contracts or nitric acid customer contracts for those products at a premium, the team is working on that and certainly engaged in conversations with customers. The other thing that we could do, and we spent a fair amount of time looking at, is you could sell in the interim the environmental attribute. And there's a value to that as well. So I think we're looking at all avenues to monetize the low-carbon ammonia and the environmental attribute that is associated with that. Operator: [Operator Instructions] Our next question comes from the line of Rob McGuire with Granite Research. Robert McGuire: Could you please talk about UAN volumes? It looks like they're down around from 150,000 to about 135,000 year-over-year. Cheryl Maguire: Yes, Rob. So we did have a bit of miss on our UAN production in the third quarter. I would say we didn't quite meet our expectations. We would expect to be in line with our expectations in the fourth quarter. Robert McGuire: Okay. Great. And then can you talk -- what's your revenue mix of ag versus industrial now that your HDAN is being sold as ANS into the mining markets? Cheryl Maguire: Hard to look at it on a revenue basis, Rob, because revenue is really going to be driven by what the pricing looks like at any given time. I think it's probably better to look at it from a volume or a tons perspective. And so I think from the industrial side, we're probably 40% to 45% with the balance being on the ag market side. Robert McGuire: And then you talked about the proposed antidumping duties on imported MDI. Can you just give us a little more color around the dynamics around that topic? Damien Renwick: Yes. Rob, so that evaluation is currently working its way through all the typical formal proceedings here in the U.S. I think there's a preliminary determination that's out there and we're awaiting the formal determination. And that will then officially put in place the antidumping duties on Chinese MDI. And so the effect of that is we're seeing domestic producers ramp up their MDI production as much as possible. And nitric acid is a raw material into that production chain, which is pretty complex so I won't try and explain it to you. But yes, so we're seeing some pull-through there and certainly efforts to increase production where possible. Robert McGuire: Wonderful. And then just one last question. Can you give us an update on your value creation initiatives? Mark, you told us about what may be up and coming, but just of what's left, where you're at in terms of your progress? Mark Behrman: Oh boy, we have a lot left. So I would say on our reliability and maintenance efforts, we've still got a fair amount of opportunity out there. So maybe we're somewhere between 25% and 50% complete with that. But I think I really do believe we have a lot of opportunity to not only improve our reliability and therefore the production tons, but do it in a much more efficient manner, so lower cost. And so we're focused on both of those. When it comes to profit optimization. I think we outlined that there was probably $20 million or so that we expect to come from that. And we're somewhere, again, between 40% and 50% when it comes to that. As far as some of the other initiatives that we have, I think the greatest thing about all of this is we're like kids in a candy store here. I mean, every day, we're trying to solve for issues or improve the overall profitability of the company. And you sort of peel that onion back and then you find two other things that you can work on to really create value. So I think it's a never-ending process, to be honest. But I think we'll give a lot more color, Rob, on our fourth quarter conference call, our year-end conference call of exactly where we are and what we expect to achieve in 2026. Operator: Mr. Behrman, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments. Mark Behrman: Great. Well, as always, thank you, everyone on the call, for their interest and great questions. As you can tell, we're really excited about the business and where the markets are today. And so stay tuned. Thanks so much. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good afternoon. This is the conference operator. Welcome and thank you for joining the Technip Energies Third Quarter 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Phillip Lindsay, Head of Investor Relations. Please go ahead, sir. Phillip Lindsay: Thank you, Maria. Hello and welcome to Technip Energies financial results for the first 9 months of 2025. On the call today, our CEO, Arnaud Pieton, will discuss our 9-month performance and business highlights. This will be followed by CFO, Bruno Vibert, who will discuss our financials. Arnaud will then return for the outlook and conclusion before opening for questions. Before we start, I would urge you to take note of the forward-looking statements on Slide 3. I will now pass the call over to Arnaud. Arnaud Pieton: Thank you, Phil, and welcome, everyone, to our results presentation for the first 9 months. Let me begin with the key highlights. I am pleased to report that Technip Energies has delivered a solid financial performance for the first 9 months of this year. We recorded year-over-year revenue growth of 9%, we maintained strong profitability and we generated a significant uplift in free cash flow. These results reflect our disciplined execution, the strength of our asset-light business model and the commitment of our teams worldwide. Based on these results, we confirm our full year guidance. On the commercial front, we strengthened our global leadership in LNG and modularization. Notably, we were awarded a major contract in U.S. for Commonwealth LNG using our modular SnapLNG solution, a topic I will expand upon shortly. Finally, in line with our strategy to enhance our Technology, Products and Services segment; we announced the acquisition of Ecovyst's Advanced Materials & Catalysts. The transaction broadens our capabilities across the catalyst value chain and upon completion will be immediately accretive to T.EN's financial profile. Turning now to our theme for 2025 and our foremost priority, execution. On Project Delivery portfolio, it continues to deliver solid progress as evidenced by year-to-date revenue trends and margin resilience. We are transitioning into pre-commissioning activities for the first of our 4 trains on the NFE project. Simultaneously, we are intensifying activities on the adjacent project, NFS, which continues to ramp up. Alongside this progress, we are advancing towards completion of downstream projects, including the Assiut cleaner fuels refinery in Egypt and the Borouge ethylene plant in the UAE. In TPS, we have been achieving important milestones across a range of decarbonization projects. We have successfully started up the first plant deploying our innovative Canopy by T.EN solution for Carbon Centric in Norway. And for the TPS scope of Net Zero Teesside, we are progressing with the CO2 absorber module fabrication at our facility in India. In summary, the third quarter has seen strong execution across important energy and decarbonization contracts. Let me now provide an update on our recent commercial successes, which have further cemented T.EN's global leadership in LNG and modularization. I am delighted to confirm that we signed another major LNG contract in the U.S. with Commonwealth LNG. This milestone follows the execution by T.EN of the front-end engineering and design. The delivery model for Commonwealth LNG leverages SnapLNG by T.EN, our innovative modular pre-engineered and standardized solution. The Commonwealth LNG facility will feature 6 identical liquefaction trains to deliver a total capacity of 9.5 million tons per annum. We have initiated the project under a limited notice to proceed. This allows us to begin preliminary activities such as placing purchase orders for key equipment. It is important to note that the full value of this contract will only be reflected in our order book upon issuance of the full notice to proceed, at which point it will make a significant contribution to the company's backlog. In conclusion, a very positive development for T.EN, one that enables us to enter the U.S. LNG market on our own terms through early engagement, the application of modular solutions and a disciplined contractual approach. Beyond our recent success in the U.S., I would like to draw attention to several other important awards in LNG and circularity markets. First, our position as a leader in deep offshore floating gas liquefaction has once again been reaffirmed. In August, we secured a large contract for Coral Norte, a floating LNG unit in Mozambique for Eni. This initial scope covers preliminary activities with further order intake anticipated upon full contract award. Second, our early engagement approach continues to be a cornerstone of our success. It positions us strongly for future awards and helps derisk project execution. In line with this strategy, we have been awarded 2 FEED contracts for the Abadi LNG development in Indonesia for INPEX. First, for the liquefaction facilities to deliver annualized production of 9.5 million tons and the second is for the modularized floating gas infrastructure. We remain very confident in our medium-term outlook for further LNG awards. Lastly, we have secured a key service role for the Ecoplanta waste-to-methanol project in Spain for Repsol. This award builds on the strategic collaboration between Technip Energies and Enerkem and illustrates the strength of the partnership in accelerating the deployment of circular solutions at scale. Turning now to September's announcement of the acquisition of Ecovyst's Advanced Materials & Catalysts, AM&C. The acquisition supports Technip Energies' strategy for disciplined growth of our TPS segment. It demonstrates our value-driven approach to M&A, it is financially accretive and it benefits from positive long-term market trends. It will bring in differentiated capabilities in catalyst technologies and advanced materials, enhancing our ability to deliver high performance process critical solutions to our clients. It also adds a new dimension to our catalyst business, unlocking avenues for product development and market expansion. Post completion, a talent pool of 330 people will join Technip Energies bringing complementary skills and expertise into the company and we will ensure the entrepreneurial culture and business momentum of AM&C is preserved through the integration process. Now importantly, the deal will have no impact on our investment-grade credit rating. T.EN will retain a substantial net cash position providing capital allocation flexibility for other opportunities. Before passing to Bruno to review our 9-month performance, I'd like to take a moment to outline how the AM&C acquisition will, following completion, materially enhance our TPS offering across the asset life cycle. With catalyst IP at the core of many process technologies, catalysts serve as a key differentiator in process technology development and are highly complementary to our existing offerings. One of the compelling aspects of catalyst is their consumable nature, which opens multiple recurring revenue streams throughout the OpEx phase. Where T.EN would typically sell process technology once per project, catalysts are replenished multiple times throughout the lifespan of a plant. As such, around 70% of AM&C revenues are tied to operating expenditures, which will improve our long-term revenue visibility. In terms of financial impact, the addition of AM&C will increase the technology and product component of our TPS revenues from 40% to over 45% based on 2024 pro forma. Furthermore, AM&C generates EBITDA margins substantially higher than our TPS segment. In summary, the transaction is all about advancing TPS, accelerating its growth, enhancing profitability and providing T.EN with a platform to unlock further value for all stakeholders. I will now pass to Bruno to discuss the financials. Bruno Vibert: Thanks, Arnaud. Good morning and good afternoon, everyone. I am pleased to present the key highlights of our solid financial performance for the first 9 months of 2025 reported on an adjusted IFRS basis. Our revenues increased by 9% year-over-year reaching EUR 5.4 billion. This growth was underpinned by strong activity levels across our LNG portfolio and offshore projects. Recurring EBITDA rose also by 9% to EUR 478 million delivering a healthy margin of 8.8%, which is stable versus last year. The improvement in TPS profitability was notable although it was offset by a rebalancing of the project delivery portfolio towards more early stage work. EPS recorded a modest increase of 2% year-over-year supported by strength in EBITDA. This was partially offset by lower financial income and an increase in nonrecurring costs mainly attributable to planned investment in Reju and other strategic initiatives, which are more capital allocation in nature. Excluding these strategic investment costs, EPS growth would have been double digit. Free cash flow conversion from EBITDA remained robust at 87%. This strong conversion rate supported free cash flow growth in the midteens compared to last year. In summary, a very solid first 9 months and I'm pleased to confirm that we are on track to achieve our full year guidance. Turning to the performance of our segments. Let me begin with Project Delivery. Revenues have grown substantially rising by 16% year-over-year to reach EUR 4.1 billion. This uplift has been driven by strong activity across LNG projects and growth in contribution from recently awarded projects, including GranMorgu and Net Zero Teesside. On profitability metrics, both recurring EBITDA and EBIT have recorded strong increases with growth rates at or approaching double digits. Recurring EBITDA margins experienced a modest contraction of 30 basis points year-over-year. This movement primarily reflects portfolio rebalancing with a higher proportion of early phase projects, which typically contribute limited margin at this stage. We continue to see the full year EBITDA margin to be consistent with the 9-month performance at around 8%. Finally, our backlog remains reassuringly strong at over EUR 15 billion equating to more than 3x our 2024 segment revenue. This resilience persists despite the absence of major awards during the third quarter and the impact of adverse foreign exchange movements. Encouragingly, our commercial pipeline remains well populated with good proximity to major awards in the coming months and quarters. In summary, Project Delivery continues to demonstrate robust momentum underpinned by solid revenue growth, a healthy backlog and very strong positioning for future opportunities. Turning now to our Technology, Products and Services segment, TPS. TPS revenues declined by 9% year-over-year. Strong volumes in consultancy services and studies and ramp-up of assembly on our carbon capture products were more than offset by a lower contribution from our ethylene furnace deliveries. Additionally, foreign exchange movement had a significant impact on our revenues. In fact approximately half of the overall revenue decline can be attributed to these currency effects with the weaker U.S. dollar being a notable factor. Despite the reduction in revenue, recurring EBITDA increased by 6% year-over-year driven by an impressive 200 basis point margin expansion to 14.8%. This improvement was driven by a strong performance in our productivity activities. Furthermore, catalyst supply and strength in project management consultancy also contributed to this margin expansion. Looking at our order intake. The book-to-bill ratio on a trailing 12-month basis remained above 1, which is a positive indicator. Nevertheless, commercial activity through 2025 has been affected by the broader macroeconomic environment leading to some delays in the awarding of several anticipated larger product and services contracts. As a result, TPS backlog has reduced by [ 16% ] since the start of the year standing at EUR 1.7 billion as of period end. Despite these short-term headwinds, our teams are actively engaged with clients and we see healthy pipeline of tangible opportunities across our core markets. Turning to other key financial metrics beginning with the income statement. Corporate cost for the first 9 months of 2025 totaled EUR 46 million with a return to more normalized pattern in Q3 following the specific factors that impacted long-term incentive plans in the first half of the year. Net financial income remained very positive at EUR 70 million, but trending modestly lower compared to the prior year aligned with the broader movement in global interest rates. Finally, on the P&L, nonrecurring expenses has increased year-over-year presenting a headwind to our EPS growth. As I highlighted last quarter, the majority of these costs are associated with capital allocation decisions. Approximately EUR 35 million relates to the investment in adjacent business models, including Reju, as well as strategic initiatives such as M&A activity. Moving on to the balance sheet. Our financial position remains very healthy. Key line items, including cash, debt and net contract liability are stable compared to our year-end position. Before handing back to Arnaud, let's take a closer look at our cash flows. Free cash flow, excluding working capital, totaled EUR 416 million for the first 9 months corresponding to a robust cash conversion from EBITDA of 87%. This strong result underscores our disciplined execution, the strength of our asset-light business model and the favorable contribution from net financial income. Working capital year-to-date is slightly positive. Capital expenditure at EUR 60 million was modestly up compared to last year. The main investments were directed towards the ongoing expansion of our Dahej facility in India as well as the continued modernization of our facilities and labs. Finally, despite a foreign exchange impact of EUR 201 million, cash and cash equivalents at the end of September stood at EUR 4.1 billion, which is consistent with the year-end position. With that, I now hand back the call to Arnaud. Arnaud Pieton: Thank you, Bruno. And turning now to our outlook. Last November at our Capital Markets Day, I spoke about the global megatrends of population expansion, urbanization and rising economic output; all driving demand for more energy and infrastructure. I talked about the need to supply more energy derivatives like fertilizers and plastics and about producing more with less emissions and less waste. In other words, the critical need for a pragmatic decarbonization with greater circularity. Despite the macroeconomic and geopolitical backdrop, these trends are robust and enduring and as T.EN has the solutions to these challenges, we see opportunities across our markets to build upon our growth potential. Traditional energy sources, particularly natural gas, continue to play a vital role in ensuring energy security and affordability for the foreseeable future. This reality is creating compelling opportunities for T.EN in the near, medium and long-term horizons, notably in LNG and selective offshore developments. The chemical sector, especially ethylene where T.EN is a leader, is seeing early signs of recovery. Plans for greenfield projects and retrofit work are firming up with major investments ahead, notably in markets like India. In decarbonization, the blue molecule space is already a source of opportunity for T.EN where carbon capture remains the preeminent solution for decarbonizing many sectors, notably power generation and cement. In summary, T.EN remains opportunity rich, naturally hedged and positioned to thrive in any energy scenario. So to conclude, our performance for the first 9 months delivered solid year-over-year growth in revenue, EBITDA and free cash flow. We have very notable near-term prospects with potential to strengthen our medium-term outlook and we have excellent visibility for 2026 with already close to EUR 7 billion scheduled for execution next year. As we pursue further growth, we remain disciplined in managing the company's capital allocation and our cost base. We are focused on building for the long term, investing to enhance our differentiation and delivering value creation for our shareholders. With that, we can now open for questions. Operator: This is the conference operator. [Operator Instructions] The first question is from Sebastian Erskine of Rothschild & Co Redburn. Sebastian Erskine: The first one just on TPS and the performance so far. So I'm thinking about the full year, it looks towards the bottom end of the EUR 1.8 billion to EUR 2.2 billion. I'd appreciate to get your thoughts on specifically what's kind of disappointed year-to-date versus your expectations. And then I was intrigued to note in the presentation, you mentioned kind of early signs of recovery in ethylene. I'm just thinking kind of given the supply of polyolefins driven by China and some kind of supply consolidation in Europe and North America, it appears a difficult market. So I appreciate some more details on that and what you're seeing so far. Arnaud Pieton: So let's start with the TPS performance. I'll start with making a bit of a statement in a sense that, yes, TPS 2025 is a bit of a blip, we may call it this way, in a sense and I'll remind everyone of a few things. Technip Energies we were creating in 2021 and since our creation, we have dedicated our investment R&D efforts to low carbon solutions. So we have invested with notable successes and continued successes to bring to the market new solutions and new solutions were mostly in future growth markets such as SAF, carbon capture, circularity for example. And it's fair to say that the environment in 2025 hasn't really been supportive of more CapEx in those areas. But when I look at what is coming our way, I must say that the trend is undisputed. So it's a bit of a game of resilience. We, as a company, must find the right solution, make them investable and affordable for our clients and everyone around. So in the short term, this has impacted 2025. You've heard from Bruno that the services part of our TPS segment has remained really strong. The blip or the disappointment is more coming from the amount of CapEx in solutions for decarbonization and SAF and carbon capture in 2025. But we remain extremely confident for the future. Again, the trend is undisputed. So I will take advantage of your question and my answer to your question to also say that in the short term, this CapEx trend for low carbon solution may impact the growth momentum for TPS in 2026 as well. So in the same way as we have been trending towards the bottom end of the 2025 guidance for this year, I think it might be fair to consider that the same trend will apply to 2026. So maybe calling for a bit of a rebaseline for TPS towards the bottom half of the 2025 guidance for 2026 on a pure organic basis. I'll take advantage of your question as well to remind everyone that during our Capital Markets Day, we also said that we needed to continue to invest in our traditional markets. So in 2026 you will see, I would say, a larger share of our R&D investment being directed towards what people may consider more traditional markets so a bit less decarbonization and a bit more ethylene maybe even though even in ethylene, we are innovating through low emission furnaces. And we continue to invest in all markets, hence also the acquisition of AM&C, which covers both the traditional and the future growth markets. So really, look, the important is maybe a little bit of a blip in terms of the top line, but TPS should not be about top line. It should be about bottom line and we are delivering on the bottom line for TPS as well as for the whole company. And it highlights again the benefits of our model, which combines long cycle Project Delivery and a short-cycle TPS. So I think it speaks to the strength of the company overall. In terms of ethylene, yes, indeed, we see an increased visibility on ethylene and we are anticipating order intake in 2026 based on our various discussions with series of clients. This includes green and brownfield opportunities. The key ethylene opportunities with technology and license selections will happen as early as Q4 2025 so in the weeks to come. Of course if it's pure technical license selection, it will not have a significant impact to our order intake just as yet, but it will follow with potential proprietary equipment award in 2026 and this will be more clearly visible in our order intake for TPS next year and the main areas, as indicated, are India, Middle East, China and Africa. The global ethylene industry today has a capacity that is north of 200 million metric ton per annum and again, ethylene is GDP led and with the expansion driven by demand in packaging, construction, automotive, consumer goods sectors. The global growth forecast at 3% to 4% per annum of this GDP would see the industry capacity grow to north of 300 MTPA by 2040. So there's a large volume of work that is required in terms of greenfield and brownfield in the ethylene sector and we are starting to see those early signs of work and recovery coming our way. Operator: The next question is from Bertrand Hodee of Kepler Cheuvreux . Bertrand Hodee: So I have many question on your LNG potential awards. You've been highly successful commercially, but yet there are significant awards that are not yet in the backlog. And probably can you give us some color on U.S. Commonwealth LNG? Specifically, you've been ordered limited notice to proceed. The project is very close to FID, but had a setback 2 weeks ago in terms of permitting in Louisiana. Maybe you can share your view on that and also whether you think that the client could be in a position of taking FID without having these permits on board? And then if you can give us some color also on Coral, why it's not, I'd say, in the backlog as Eni has taken full FID? And then probably the last one to make the world too on Rovuma LNG, it looks like Exxon is targeting now an FID in Q1. Can you confirm that you've performed the FEED and that the FEED is complete? And probably if you can also give us some color on the FEED, whether it is on the SnapLNG concept or not? Arnaud Pieton: So I'll start with stating that our overall environment and commercial pipeline has not really changed. You're right to say that we haven't seen large awards in Q3 or even through 2025 with the exception of our very large -- I mean the largest blue ammonia plant in U.S. that we signed in Q1. But 2025, we always stated that it would be a year of execution and that not controlling the FID, awards could come very late in '25 or could actually be in 2026. But the long-term fundamentals and the medium-term fundamentals of our markets really remain strong. So the commercial pipeline has not weakened at all and it's not the first year in 2025 where we are seeing a bit of a weak order intake until FIDs are coming, in which case, all of a sudden there is a very nice spike of new awards coming to -- making it to our backlog. So specifically on Commonwealth LNG, first of all, the team is mobilized. We are progressing the work through limited notice to proceed and we continue to be very confident with the project. We obviously don't control the FID. Whether it's this quarter or next makes very little difference for us. We continue and our client is very confident that they can address the small concern that was maybe caused by a permit situation and they are very confident that there is no impact whatsoever on their path to FID from this permit vacation. I will also state that earlier this year, the project was really strengthened with Mubadala Energy agreeing to acquire about 25% stake in the project. So it's giving a lot of credibility to this project. And I mean our contract with Commonwealth LNG also allows for, I would say, a next or an extended limit notice to proceed if the FID is not reached in the weeks or months to come or before year-end. Then we will enter into another phase of limit notice to proceed with, I would say, more money being spent and more investment being made into the project and the team continuing to progress the project. So I would say what you're hearing from me is a high level of confidence in this project because of its progress, its stakeholders and the money that is flowing into progressing the work at this stage. On Coral floating LNG, why not in the backlog? There has been a lot of press about this one. FID has been taken. It's not yet in the backlog because there's a bit of an administrative technicality that needs to happen for the full notice to proceed to be provided. In other words, there's a bit of SPV or special purpose vehicle in Mozambique that needs to be formed and we will receive our purchase order, if I may say, from this SPV. It's a pure administrative exercise and we are very confident that it will happen in the early part of next year. So it will come into -- join our backlog by then. On Rovuma LNG, a very exciting project for Exxon in Mozambique. We have indeed executed the FEED and so therefore, following our guiding principles, we are competing for the project execution. It's a competitive process, as you know, it's all over the press. So our association with JGC is competing against another consortium or JV and we are in, I would say, final stage of finalizing our price. That will be submitted to Exxon in the weeks to come. The concept that is selected is, I would say, very similar to SnapLNG even though it's not totally Snap because there are a few variations in technologies, but nothing major. So it's a concept that we like and that we know really well now because we've worked on the field for the past couple of years. Bertrand Hodee: And just a very small follow-up. Obviously there is some market concern on the low level of revenues for TPS in Q3. I noted that you have EUR 480 million something of revenue for execution for TPS in Q4. It looks to me that something around EUR 500 million or even above is likely within reach for Q4 for TPS now? Arnaud Pieton: Yes. And that's why you've heard from Bruno and myself that we are confirming guidance for the year. So we will be within the range that we provided for 2025, absolutely. Operator: The next question is from Alejandra Magana of JPMorgan. Alejandra Magana: Just 2 quick ones from my end. After the Ecovyst AM&C deal, are you seeing other bolt-on opportunities at similarly attractive multiples or does it make more sense to focus on integration before adding more? And my second one, what is the current share of recurring technology and services within TPS currently? Arnaud Pieton: So to start, I'll start with AM&C and then I'll hand over to Bruno on the level of recurring revenue within TPS. So AM&C, it's a super attractive acquisition that we are making. We are focusing in the short term on integration of course; first of all on the closing and then on the integration. Now I want to characterize a little bit AM&C. AM&C is a business that is, first of all, self-sufficient and performing. That's why in my prepared remarks, I really insisted on the fact that we will be focusing on making sure that we are through integration, maintaining AM&C's ability to operate and be, I would say, entrepreneurial and provide them with the means to invest. So there isn't, I would say, too much integration to do and therefore, I think this speaks in favor of preserving nicely AMC's ability to perform. This addition actually opens the door to actually more avenues and things we can now contemplate to complement the AM&C offering. So it's probably not the end of the journey. But with always some prerequisite, as Technip Energies, we want to preserve investment grade. We will remain selective and disciplined and our M&A targets are focusing on techno product and catalyst and maybe opportunistic in services, but the technology is our priority. So we are contemplating adding complementary technologies and solutions to AM&C and our existing portfolio. So yes, we continue to scout like any good and healthy company is probably doing and we feel really good about AM&C in particular as there isn't a massive herculean effort of integration to do. We will preserve the AM&C objective, if I may say, once it is part of the Technip Energies family. Bruno on... Bruno Vibert: Yes, sure. So on the recurring revenue aspect and contribution within TPS to your point. And as Arnaud mentioned in his remarks, one of the attributes for AM&C and the quality of earnings was the fact that this was 70% OpEx related in terms of revenue generation, which is for us something which is interesting because today, we would be far below in terms of this. When it gets to the current TPS portfolio in terms of services, we may have a few master service framework and we may have very limited operation and maintenance services. So the bulk of our services are really associated to new CapEx. And in the variation of revenues that we've seen this year and the 9% reduction of TPS, as I said, part of it -- almost half of it is FX. But a significant component was the fact that over the last couple of years, we've had a low petrochemical cycle so ethylene cycle, which has resulted to some extent in this movement. So as explained in the CMD, the replication of the ethylene model was I think a good way for us to derisk that we were less dependent on the cycle so to have carbon capture, sustainable fuels, circularity. All these are building blocks to make us a little less dependent on one industry cycle. But second, to your point, yes, having a bit more exposure to the OpEx element such as the catalyst and what it brings in terms of proximity to clients, that's an interesting bolt-on and add-on as a platform to our revenues. So that will absolutely increase the quality of earnings of TPS. Operator: The next question is from Richard Dawson of Berenberg. Richard Dawson: Just a couple of follow-ups from my side. So margins in TPS actually have been running above the top end of guidance year-to-date. Clearly, you had a very strong result in Q2. But looking into Q4, do you still see pretty good sort of solid margins there for TPS? And then secondly, just coming back to the U.S. LNG opportunities and particularly Lake Charles. We saw the client delay FID to Q1 2026, which, to your point, doesn't really matter for earnings estimates going forward. But does this have anything to do with the price refresh campaign on that project concluding? Bruno Vibert: Richard, I'll start with the first question and I think Arnaud will cover the second one. So on TPS margin, yes, to your point, we've seen high margin. That's why at the end of H1 in July, we upgraded guidance in terms of EBITDA percentages and we're absolutely on track there. It was the outcome of good performance from the services aspect of TPS that you should absolutely expect this to continue. And the fact that by the delivery of the furnaces and some of that, we had a bit less contribution from the top line, but then more contribution from the bottom line. As Arnaud mentioned, I think the trajectory and the kind of rebaseline, we are around the same track is in continuity. So yes, although revenues are expected to pick up from TPS on Q4 versus Q3 in terms of bottom line, the bottom line of TPS should continue to be strong. And then when the closing of AM&C is done, we will have a further upside coming from the contribution from AM&C, which will be a further improvement of TPS margin. Arnaud Pieton: So on U.S. LNG and your follow-up question. So we have 2 opportunities in the U.S. on LNG. The first one, which I discussed a bit earlier, which is Commonwealth and on which we have a team already mobilized and therefore, working on this limited notice to proceed. By the way, this limited notice to proceed is the same, I would say, avenue or system that is being used by Eni to allow the progress to happen on Coral Norte. So it's not unusual. And there's on Commonwealth again, money spent and there isn't subject around price or budget. The price verification campaign, that was a contractual phase agreed with our client on Lake Charles LNG, was completed. The good news is that you may have heard from Lake Charles LNG themselves, our client, that the price that we came up with was actually well per expectation for the lack of better word. So this price verification done, the ball is in the hands of our clients and no concerns with regard to cost. The price verification results basically to qualify it as per our client was right. So that's super encouraging. And obviously while we don't control FID, we are hopeful and very hopeful that this FID will be taken next year. Operator: The next question is from Victoria McCulloch of RBC. Victoria McCulloch: And just to follow-up on that point about Lake Charles. Does that mean the price verification that you've done lasts until the end of 2026? Is there a time that you can give us that that lasts for? Obviously we've seen lots of delays to the U.S. LNG FIDs and with respect that continues. So it would be helpful to understand when exactly the refresh lasts until. And then we haven't really talked about SAF today. Can you give us a view on the contracting outlook maybe for the next 6 to 12 months? I think there has been discussed a reported opportunity coming up at some point in this year. Has that slipped again to the right into next year? That would be helpful. Arnaud Pieton: So again, on Lake Charles, the price verification comes with, I would say, the mechanism for price adjustments depending on the delay or the time the client takes from the submission of the price refresh and the actual time for FID. So there is a frame and we are absolutely within the frame in a very controlled manner. So everything is accounted for, if I may say, and planned. So the validity remains because the contract allows for the price adjustment depending on the timing between submission of the budget and actual FID. So no exposure for T.EN and I would say, a constant monitoring of the situation there. When it comes to SAF, so indeed, you're right. We had signaled that SAF was and is an opportunity. So I'm happy to report that SAF remains an opportunity for 2025 and 2026, but including for Q4 2025. So yes, let's see. We are well advanced with one, which I won't share too much on right here, but many and good building blocks for potential FID within this quarter. And more generally speaking, when you think about SAF and you need to think about scale, the SAF projects are kind of feedstock constrained and most will be local plants serving local needs. So don't expect big export projects like for LNG for example. SAF is not about that scale, but there's a lot of SAF needed going forward with -- it's a theme for the long term for sure. EU is 6% by blending by 2030 and 20% by 2035. So that's 15 million ton per annum by 2035. So it's a huge investment required. So even if there was to be a bit of a slowdown as policies can be challenged, there's still a massive potential and it's important to know that T.EN is part of it and it remains an opportunity, including for this quarter. Operator: The next question is from Guilherme Levy of Morgan Stanley. Guilherme Levy: I have 2, please. The first one on a topic that we haven't spoken about today, Reju. You talked about the pace of -- you talked about the nonrecurring expenses this quarter related to this one. So I was just curious about the pace of spending there over the coming quarters. And if you can provide us with an update on FID conversations in terms of service [ Reju ] partners, that would be great. And then the second one thinking about your backlog. Can you quantify to us how much of the TPS backlog and how much of the Project Delivery backlog are denominated in euros or U.S. dollars? Arnaud Pieton: So I'll start with the easy part, if I may. So on Reju in particular, before handing over to Bruno, a bit of -- I'm happy to offer a bit of an update on the progress. So we've continued to progress on Reju development and this progress is coinciding with progress on regulation and policies, which is extremely encouraging for our Reju initiative and the brand that we have created. So in this quarter, we've produced from our demo plant in Germany the first batch of yarn made of RPET or recycled polyethylene and this yarn was subsequently converted into fabric. And we have now the first Reju fabric that has been made available to a series of brands for them to conduct their testing and, I would say, the characterization and the qualification of the product. So really super encouraging and good progress on Reju this quarter and more to come. All that progress is taking us closer to FID of course. Now as we've mentioned in the past, FID remains dependent on of course the level of subsidies that we will and we can benefit from and from the countries in which we've applied for subsidies and contemplated the installation of the first plant. So that is work in progress and we are a few months away from, I would say, finding out what and how many subsidies will be coming our way. Bruno? Bruno Vibert: Yes. So on the FX, of course it's a moving element because of project change and so on and they have a bit of a different setup. On project, most of the projects are delivered with what we call multicurrency, which means back-to-back we invoice to the client the cost of our cost base in a specific currency and this is then recharged as part of the selling mechanism. So a lot of USD, but there is a bit of a hedge which is made through these elements. So Project Delivery is slightly less impacted to some extent by FX on a given year. For TPS, and as I said, about half of the year-on-year movement can be assessed to be associated to FX. When we do services in the U.S., in the Middle East; it's very much USD denominated. So that's why year-to-date you would have close to 50%, for instance, of TPS that was run through USD services. Arnaud Pieton: Maybe on Reju and nonrecurring, Bruno Vibert: Yes. Sure. On nonrecurring, so EUR 49 million and what I said about EUR 35 million being Reju, also adjacent business models and also cost for the quarter that we've incurred notably for consulting and so on for the AM&C transaction. I think it was a very good investment. Part of when I recall the question earlier on having good multiples, it's also the very thorough due diligence that we made on all aspects to get to this point and to cover our base. So overall, I think Reju and adjacent business models are well on track. I think we said EUR 50 million max as an expenditure for 2025. That's what we expressed at the time of the CMD. We are actually on a run rate slightly lower than that. I think we are closer to EUR 10 million over the last couple of quarters as a run rate. And the incremental for this quarter, it was a bit of summer, was around the ad hoc expenses associated to the transaction. The rest of nonrecurring is as always some small restructuring and so on, which is as we have our backlog shift and so on, we always slightly addressed. We are not presenting EPS on an adjusted basis so that's why when you have such an increase in EBIT or EBITDA at 9%, you don't see the full -- this doesn't follow through to the bottom line. But as I said, if you take out the EUR 35 million, which are really investments in capital allocation, you will have close to 15% actually of EPS growth year-on-year. So that's where you see the traction. Arnaud Pieton: We are really investing for the future here and I think it's one of the attributes of Technip Energies is that we have the ability to invest for our future and unlock future value creation. Operator: The next question is from Guillaume Delaby of Bernstein. Guillaume Delaby: I have many questions, but I'm going to stick to one. If I understand correctly, since the beginning of the year within TPS, you've been actually surprised by your carbon capture business, but slightly disappointed by your ethylene business. If I understand correctly, this is about to reverse, i.e., over the coming quarters ethylene could accelerate while CCUS may or might slow down a little bit. Just a confirmation that my understanding is correct. And second point, I understand that there are only very early signs, but should we assume that the provision -- the forecast you made for the ethylene market at the Capital Market Day is still valid? Arnaud Pieton: Yes. So first of all, the forecast is still valid as far as we see. Yes, absolutely. So back to TPS. I mean you're right to say that in the year we've seen some acceleration recently in carbon capture and while ethylene was low and it is about to reverse. Very clear early signs of reengagement and new investments in brownfield and greenfield and also decarbonization with the replacement of furnaces by low emission furnaces for existing infrastructure. Now I wouldn't be, I would say, so negative as to say that carbon capture will slow down. Carbon capture, we have some significant opportunities on the horizon with FID in 2026 probably for projects of significant size. So it's still there. For sure, I think where we would have hoped further acceleration, it's in the space of green hydrogen for example where the business plan is not exactly as we would have expected despite the fact that we were successful last year with the largest green ammonia project in the world in India. Well, the momentum is we have those spikes, but I would say it's not a very recurring trend of awards in that space. So a bit of a disappointment in some of those new markets. Now I think the 2035 trajectory is there for decarbonization. It's here to stay. It's happening maybe not at the pace that we would have preferred or we could have hoped, but it's happening. So I think the fundamentals are here and it's important to -- it's a bit of a game of resilience as I explained earlier. Operator: The next question is from Paul Redman of BNP Paribas. Paul Redman: Two questions, please. The first one is I can see some phasing going on in the backlog for TPS so it looks like some phasing forward. There might be other movements. I just wanted to see whether from '27 into '26, whether you can give any guidance on kind of what's going on there? And then secondly, I just want to ask about the conversations you're having with possible LNG customers and whether you're hearing any growing concerns about gas price outlook in the next decade 2030 plus and whether you think that could have an impact on LNG project sanctions from here? Arnaud Pieton: I'll start with LNG and then I'll hand over to Bruno on the phasing of the TPS backlog. So LNG, the sentiment, as you read the press, is indeed on a potential surplus. But as far as we are concerned, what we're observing is that the energy demand and the coal to gas switching will continue to support the long-term demand growth for LNG. A reminder of the fact that LNG is a supply-led market and very long cycle. So while there might be an oversupply in 2028 when the new trains currently under construction are coming on stream or a lot of them are coming on stream. Well, we are not LNG producers and our customers, they take their investment decision not based on an oversupply that will be probably temporary. They take their investment decision based on their Vision 2040 to meet the demand by then. So LNG is a supply-led market long cycle. If prices do soften, then it will attract a new breed of customers and buyers of LNG and therefore, it will trigger another wave of investment. So we continue to see the total liquefaction capacity needing to be around or north of 900 million tons per annum by the middle of the next decade. So a very healthy pipeline for Technip Energies in spite or despite the short-term softening on price of LNG. And this is not exactly what we are subject to at Technip Energies. The investments are really for the long term and when you take investment decision in 2025, you start producing depending on the size of your project in 2030. So you really look beyond the short-term softening of the price and, if anything, it would just attract more customers. And gas would be a good idea to replace coal and displace coal and gas is very needed for all the data centers. And so yes, that's why we've put and we are putting this 900 million ton number out for the middle of the next decade. Bruno? Bruno Vibert: Yes. In terms of TPS and phasing and backlog scheduling, as always, TPS is a shorter cycle. So you will always have more of the TPS backlog incurred over a short period of time. And usually you have basically the backlog, which represents about 1 year of revenues. In terms of services, you may have some services which are spread out for master service agreements or master services. And then we've seen a bit of acceleration for some project management consultancy. Now where you have somewhat an extended backlog in TPS, it's for construction scopes of equipment and here I think, as I said in my remarks and as Arnaud mentioned also, the work done for the TPS scope of Net Zero Teesside has started well notably at our fabrication yard in India. So firming this up meant that we've been able to reassess the backlog scheduling and certainly more on moving it forward versus backwards due to good progress and good execution. Arnaud Pieton: And I know we are reaching the top of the hour, but I want to take maybe 1 more minute to insist again on the quality of the coverage that we have for 2026 Technip Energies and notably in Project Delivery. We have a large and qualitative coverage for 2026 at EUR 7 billion as I stated during my prepared remarks. So it's putting us well ahead of the curve, if I may say, for achieving our 2028 framework that we declared last year at our Capital Markets Day. So it speaks to the strength of the model we have. And it's not the first time that we see delayed FIDs, but this is not a source of anxiety for us. We continue to remain calm and focus on the right opportunities, the derisked one and those that are compatible with the level of financial performance and profitability that we want to achieve as Technip Energies. Operator: Mr. Lindsay, I'll turn the call back to you for closing remarks. Phillip Lindsay: Thank you, Maria. That concludes today's call. Please contact the IR team with any follow-up questions. Thank you and goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.
Operator: Good day, and welcome to Medallion Financial Corp. Third Quarter of 2025 Earnings Call. [Operator Instructions] Also, please be aware that today's call is being recorded. I would now like to turn the call over to Val Ferraro, Investor Relations. Please go ahead. Val Ferraro: Thank you, and good morning. Welcome to Medallion Financial Corp.'s Third Quarter Earnings Call. Joining me today are Andrew Murstein, President and Chief Operating Officer; and Anthony Cutrone, Executive Vice President and Chief Financial Officer. Certain statements made during the call today constitute forward-looking statements. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued yesterday and in our filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. In addition to our earnings press release, you can find our third quarter supplement presentation on our website by visiting medallion.com and clicking Investor Relations. The presentation is near the top of the page. With that, I'll turn it over to Andrew. Andrew Murstein: Thank you, and good morning, everyone. We are pleased with the strong performance we delivered in the third quarter of 2025. As compared to the third quarter of last year, our net income was $7.8 million, $11.3 million when excluding a nonrecurring $3.5 million charge related to the redemption of preferred stock at Medallion Bank, supported by a 6% increase in net interest income to $55.7 million and continued momentum across our core lending verticals. We also saw a further improvement in net interest margin on both gross and net loans, which is reflected in our earnings. During the quarter, we redeemed the Series F preferred stock at Medallion Bank. While that resulted in a onetime $3.5 million charge to earnings, it lowers our ongoing cost of capital at the bank and positions us well going forward. Across the portfolio, we continue to execute effectively with meaningful contributions from our recreation, home improvement and commercial lending lines. Total loans reached $2.559 billion and loan originations came in at $427 million for the period, an increase from both the previous quarter and year-over-year. This improved performance reflects the continued strength across our lending segments, driven by disciplined execution and strategic positioning, which I will now walk through in further detail. I'll start with consumer lending, our largest and most profitable business line, which continues to anchor our performance with interest income of $74.1 million for the quarter, growing 5% as compared to the same period of last year despite consumer lending originations being $201.4 million as compared to $235.6 million a year ago. Within the consumer lending segment, the recreational loan book grew 3% to $1.603 billion at September 30, 2025, representing 63% of our total loans. Originations also grew slightly to $141.7 million compared to $139.1 million a year ago, and interest income rose 4% to $53.6 million. Delinquencies of 90-plus days were just 0.57% of gross recreational loans and the allowance for credit losses was 5.1% to reflect expected seasonal and economic dynamics as compared to 4.53% a year ago. The home improvement loan book decreased modestly to $804 million at September 30, 2025, representing 31% of our total loans. Originations were $59.7 million versus $96.5 million last year. Delinquencies of 90-plus days were just 0.16% of gross home improvement loans and the allowance for credit losses was 2.55% compared to 2.42% a year ago. Importantly, we are originating loans to individuals in these niches that have strong credit quality with average FICOs on new originations now 688 for rec and 779 for home improvement. The vast majority of our book falls within super prime to near prime, which has moved up over the years. Moving on to our commercial segment, which continues to deliver meaningful equity gains. We had new originations of $17.5 million during the quarter, and the portfolio grew to $135.1 million with an average interest rate of 13.71%. Additionally, as of September 30, we had nearly 3 dozen equity investments with a book value of just $9.3 million on our balance sheet. These equity components are a result of our long-term strategic investments. And while the timing of exits is inherently unpredictable, we remain confident in our pipeline. During the quarter, gains from equity investments were modest, generating $300,000 of income, but have generated $15.8 million year-to-date, and we do expect more realizations in the coming quarters. Our strategic partnership program, whereby we earn an origination fee and about 3 to 5 days of interest on holding loans before selling them back to the partner had its fourth straight quarter of over $120 million of originations, reaching a record level of $208.4 million this quarter. Total loans held as of quarter end under the strategic partnership program were $15.3 million. Most of these loans are outside of rec and home improvement and are mostly offered as employee benefits by large employers and loans for unplanned or elective medical procedures. Although this program represents a small part of fees and interest generated from Medallion Financial, approximately $1.5 million in total this quarter, it has nearly tripled from a year ago and continues to expand each quarter and represents further diversification of our income sources. We continue to do work on our growing pipeline of new partner prospects and expect to add new partners over time. Furthermore, we are taking a very methodical approach to growth to ensure we continue to do it the right way. Turning to our taxi medallion assets. We collected $6.1 million of cash during the quarter, which resulted in net recoveries and gains of $3.4 million. Net taxi medallion assets declined to just $5.1 million and now represents less than 0.2% of our total assets. Despite the small size, these assets continue to generate cash. And with more than $150 million of charge-off medallion loans, a majority in New York City, we believe there continues to be recovery opportunities. From a capital allocation perspective, we remain committed to returning capital to shareholders. During the quarter, we paid a quarterly dividend of $0.12 per share. And although we did not repurchase any shares this quarter with $14.4 million remaining under our $40 million repurchase program, we would expect to see additional purchases in the quarters to come, enhancing the return we provide to shareholders. From a credit perspective, we continue to benefit from a diversified portfolio, prudent underwriting standards and attractive returns on our lending activities. Our approach is highly analytical and data-driven, supported by advanced digital tools that help optimize underwriting, origination, servicing and overall portfolio visibility. These capabilities allow us to assess risk with precision and maintain consistently strong performance across operating environments. With solid execution across our businesses, a disciplined approach to credit and strong demand for our loan products, we believe we are well positioned to deliver sustainable growth and attractive shareholder returns over the long term. With that, I'll now turn it over to Anthony, who will provide some additional insights into our quarter. Anthony Cutrone: Thank you, Andrew. Good morning, everyone. For the third quarter, net interest income grew 6% to $55.7 million from the same quarter a year ago. Our net interest margin was 8.21%, up 10 basis points from a year ago. Our total interest yield increased 17 basis points from a year ago to 11.92%, and the average interest rate on our deposits was 3.82% at the end of September, up just 1 basis point from the prior quarter. During the third quarter, we originated $141.7 million of recreation loans at an average rate of 15.77% and $59.7 million of home improvement loans at an average rate of 10.9%. We continue to originate both recreation and home improvement loans at rates above our current weighted average coupon in these portfolios with new originations in October at rate averaging around 15.5% for rec loans and averaging around 10.5% for home improvement loans. Our loan portfolio reached a value of $2.559 billion at September 30, up 3% from a year ago and included both loans held for investment and those loans held for sale. Total loans included $1.6 billion of recreation loans, $804 million of home improvement loans, $135 million of commercial loans and $15.3 million of strategic partnership loans. For the quarter, the average yield on our total loan portfolio increased 27 basis points from a year ago to 12.39%. Consumer loans more than 90 days past due were $10.2 million or 0.43% of total consumer loans as compared to $9 million or 0.39% a year ago. Our provision for credit loss was $18.6 million for the quarter, a decrease from $21.6 million in the second quarter and a decrease from $20.2 million in the prior year quarter. During the quarter, we increased the allowance for credit loss in the commercial loan portfolio by $300,000 as well as increasing the allowance for credit loss on our consumer loans given both seasonality and economic uncertainties, which resulted in additional provision of $3.9 million, $3.8 million of which was related to recreation loans with the remainder tied to home improvement loans. Additionally, the current quarter provision included $1.7 million of benefits related to taxi medallion loans. Total net benefits related to taxi medallion during the quarter were $3.4 million. Net charge-offs in the recreation portfolio during the quarter were $12.9 million or 3.36% of the average portfolio and were $2.1 million or 1.03% of the average home improvement portfolio. Turning to expenses. Operating costs totaled $20.7 million during the quarter, up from $19 million in the prior year quarter. The $1.7 million increase over the prior year included costs associated with technological initiatives surrounding our servicing platform and capabilities, resulting in higher third-party professional services and higher depreciation expense. As we've said in the past, the upgraded platform allows for greater flexibility in the servicing of our consumer loans with a fair amount of self-service tools, which we believe will add to an improved customer experience and greater efficiencies long term. Again, as previously disclosed, these costs are expected to remain elevated in comparison to prior years as we continue to expand our capabilities and incur the cost of the customized platform. Employee costs increased roughly $700,000 from a year ago, both as a function of retaining talent as well as enhancing our talent pool. For the quarter, net income attributable to shareholders was $7.8 million or $0.32 per diluted share. Net income to shareholders included a nonrecurring charge of $3.5 million, an impact of $0.14 related to the redemption of Medallion Bank Series F preferred stock. Excluding this nonrecurring charge, earnings would have been $11.3 million compared to $8.6 million or $0.37 per share earned in the prior year quarter. Our net book value per share as of September 30 was $17.07, up from $16.77 a quarter ago and $15.70 a year ago. Our adjusted tangible book value, which excludes the value of goodwill, intangible assets and the correlated deferred tax liability associated with both was $11.64 at the end of the quarter, up from $11.32 a quarter ago and $10.17 a year ago. That covers our third quarter results. Andrew and I are now happy to take your questions. Operator: [Operator Instructions] And our first question here will come from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Anthony, was the operating EPS $0.46 a share? Anthony Cutrone: Yes. So $0.32 and $0.14 on that $3.5 million charge on the redemption of the bank's Series F, that would get you to $0.46. Christopher Nolan: And then were there any loans sold in the quarter? Anthony Cutrone: No. No, we still have -- other than within the strategic partnership program, we still have a fair amount of recreation loans that we do anticipate selling. I don't know if it will happen in Q4, but we are targeting sometime in the next couple of quarters. What we're seeing is with the capital levels we have at the bank, that might not be necessary. So we'll -- as something comes together, we'll determine whether or not we want to bring those back and hold them or if we want to continue to sell them. Christopher Nolan: Okay. And then I noticed that on the income statement, noncontrolling income increased quarter-over-quarter. And on the balance sheet, noncontrolling interest decreased. Does that relate to the Series F redemption? Anthony Cutrone: Yes. So the decrease in the -- on the balance sheet is the redemption of the Series F, that's correct. And on the income statement, we broke it out. So you've got the $3.5 million on the redemption of the Series F and also the interest -- the dividend -- the preferred dividend on those on the SBLF and the Series G, that's going to be recurring. That's 9% of that noncontrolling interest. That's what we would expect to see going forward. Christopher Nolan: So we should see -- what should be the noncontrolling income quarterly going forward on a run rate? Anthony Cutrone: It's the $2.33 million. Christopher Nolan: Versus $1.5 million, which was roughly the run rate earlier, correct? Anthony Cutrone: Right, right. So in our noncontrolling interest, the preferred stock of the bank has increased over the last year, so it's gone up. And the Series F a year ago had an 8% coupon. The Series G has a 9%, which is higher than last year, but lower than what the Series F stepped up to in Q2. Christopher Nolan: Got it. Final question, and I guess for Andrew. Given the government shutdown, do you guys have exposure to government employees? Anthony Cutrone: No. Andrew Murstein: Yes, nothing that would affect us at all. Operator: And our next question will come from Mike Grondahl with Northland Securities. Logan Hennen: This is Logan on for Mike. First, congrats on the continued growth of the strategic partnership loans. Could you give us some color on how you guys are viewing strategic originations and fees in 2026? Andrew Murstein: That's been growing for quite some time now. We're pleased with the way it's been performing the last several quarters. We're going to try to bring on 1 or 2 new partners in the next 1 to 2 quarters. And therefore, I think, you're going to see a continued increase in performance there. The volume should go up significantly probably if we're able to contract with those firms. And even if we don't, I think, the volume is just ramping up nicely on its own. Logan Hennen: Great. Then can you provide some color on why recreation originations were flat year-over-year and what your outlook is for that segment? Andrew Murstein: Part of it is just the capital. We were -- we raised our credit standards in the last several quarters. We didn't complete our offering. I think it was May or so. So we were just cautious. We didn't know if we were going to be able to successfully close the transaction. We thought we would. But until it's in your -- money is in the bank, so to speak, you never know for sure. But now that we're able to use that money and leverage it up with low-cost deposits, I think, you're going to see accelerated growth in the next several quarters. Logan Hennen: Got it. And then with the Fed cutting rates yesterday for the second time, how should we be thinking about margins going forward? Anthony Cutrone: Yes. I think the trend we saw in Q3 with margin expansion is something we would think continues. We're currently writing loans at rates above where our WACC sits. So we would expect our yield to continue. We should start to see some drop in cost of funds over the next couple of quarters, but it might take another quarter or 2. So I wouldn't expect any additional compression, but we should start to see some expansion -- further expansion in the coming quarters. Logan Hennen: Got it. And then one last one from us. How do you feel about overall loan growth going forward? Andrew Murstein: I think we all feel pretty positive about it. It should grow closer to what it was several years ago when we had the excess capital. And again, we have it now. We also brought in a significant group that was doing home improvement lending. And they just started with us a couple of weeks ago. And I'm hearing great things about their names and reputations, and we may put out a release about it in the next few weeks, but that should really be a supercharge for us. I think if they can perform like we believe they can, I think that's going to really accelerate the home improvement lending. Operator: And with that, we will conclude our question-and-answer session. I'd like to turn the conference back over to Andrew for any closing remarks. Andrew Murstein: Thank you. Before closing the call, as many of you know, the Board of Directors appointed me into an expanded role as CEO starting January 31, 2026, and I'm truly excited about this opportunity to build on our momentum and continue driving the company forward. I'm going to continue to work closely with our leadership team to assess performance across all of our business lines, identify new opportunities and ensure we remain agile in a rapidly evolving market environment. Over the past quarters, our focus has been on executing our strategic priorities, strengthening our operational foundation and positioning the company for sustainable long-term growth. As we approach the end of the year, we're proud of the strong performance we've achieved so far in 2025 and remain confident that we will continue to deliver solid results in the final quarter of this year. Moving forward, we plan to maintain the growth strategy that has guided our lending business successfully over the past several years. Our commitment to our shareholders remains strong, evidenced by our consistent earnings, our strategic buyback and our dividend. Thank you again for your investment and interest in Medallion, and have a great rest of your day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, good morning, and welcome to the Bel Fuse Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jean Marie Young with Three Part Advisors. Please go ahead. Jean Young: Thank you, and good morning, everyone. Before we begin, I'd like to remind everyone that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2025. These statements are based on the company's current expectations and reflect the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially from those projected by these forward-looking statements due to a number of risks, uncertainties and other factors. These material risks are summarized in the press release that we issued after market close yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations is discussed in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our quarterly reports and other documents that we have filed or may file with the SEC from time to time. We may also discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me today on the call is Farouq Tuweiq, President and CEO; and Lynn Hutkin, CFO. With that, I'd like to turn the call over to Farouq. Farouq Tuweiq: Thank you, Jean. And we appreciate everyone joining our call this morning. Thank you. During the third quarter, we continued to see robustness across most of our end markets, particularly within the commercial aerospace, defense and networking sectors, with continued steady rebound within our distribution channel and consumer lines. Our profitability this quarter surpassed our expectations, thanks to the continued dedication and discipline of our global team. This strong performance reflects our global team's dedication from pursuing strategic business opportunities and investing in key customers to effective procurement cost management, operational efficiencies and improved fixed cost absorption resulting from increased sales volumes. As part of our ongoing commitment to operational excellence, we are continuously reviewing our global footprint with an eye towards scaling Bel for long-term performance. In October, we made the strategic decision to transition operations from an additional facility in China to a subcontractor during the fourth quarter of 2025. This move follows a thorough evaluation of internal manufacturing costs versus outsourcing and outsourcing in this instance, proved to be the better alternative. We expect the transition to largely be completed by December 2025, with a fair amount of annualized cost savings to be occurring as we head into next year. We're also progressing with the restructuring initiative at our Glen Rock, Pennsylvania facility. Following the sale of the building in the second quarter of 2025, we are now transitioning the remaining manufacturing operations to other Bel sites, with full completion expected by early 2026. The Glen Rock initiative is projected to incur minimal incremental restructuring costs in Q4 2025. And throughout this process, we have already realized significant annualized savings as we had previously discussed. To put this in perspective for some of our newer investors, our restructuring efforts over the past 4 years have resulted in 7 facility consolidations in addition to the sale of our Czech business in 2023. These actions have resulted in an over 600,000-plus net square footage reduction on our manufacturing lines while leaning into automation and investing for the future of our factories. And I recall that, again, just to put a pin on it in terms of where we are heading, which is the more important part. As we approach the end of 2025 and look ahead to 2026, our focus is and has been firmly on our go-to-market strategy and driving growth, both organically and inorganically. Throughout the past few months, we have been meeting with Bel's key leadership across the world to identify the areas, methods and resources needed to better achieve top line growth. While we're in the early stages of strategic planning, I want to emphasize the exciting collaboration and energy within Bel's extended leadership team as we chart our next chapter. One of the common themes emerging is shifting our historical focus from products to end markets and customers to ensure we are delivering the totality of Bel to them. This mindset shift will take a while to cement, but is a logical step for a company such as Bel given the impressive breadth of our product portfolio. This is an exciting effort, and one that is key for a long-cycle design business such as Bel. In addition to driving growth, we're investing in the foundational structures that support our business, especially around IT systems and data infrastructure. To give you an example of some of the current initiatives, we are in the process of updating and implementing the CRM platforms, travel management software, developing various dashboards tools for key financial and operational metrics and KPIs. These enhancements will enable our leaders to make faster data-driven decisions, strengthen accountability and improve overall performance. Standardizing our processes and terminology will also allow us to scale efficiently and seamlessly integrate future acquisitions. In summary, there is a tremendous amount of activity and excitement underway at Bel, all aligned to our common goal of growth and continued maturity. With that, I'll turn the call over to Lynn to run through the financial highlights from the quarter and some color on the Q4 outlook. Lynn? Lynn Hutkin: Thank you, Farouq. From a financial perspective, we delivered another strong quarter, marked by continued margin expansion and robust sales growth across all segments. Third quarter 2025 sales totaled $179 million, representing a 44.8% increase compared to the same quarter last year. In addition to the $34.4 million of incremental revenue in the current quarter related to the Enercon acquisition, each of our 3 product segments achieved double-digit organic growth over last year's third quarter. Profitability improved alongside sales, with gross margin rising to 39.7% in Q3 '25, up from 36.1% in Q3 '24. This margin expansion was driven by improved absorption of our fixed costs in our factories with the higher sales volumes and by strong execution within each of our segments and maintaining discipline around the SKU level profitability. Turning to some details at the product group level. Power Solutions and Protection delivered another exceptional quarter, with sales reaching $94.4 million, representing a 94% increase compared to the third quarter of last year. Excluding A&D, organic sales grew by $11.3 million or 23.2%, reflecting strong demand for our power products in key markets. Sales of power products for networking applications increased by $11.4 million. Growth within the networking market reflects both rebound in demand following a long period of inventory destocking and new incremental demand driven by AI. As we've noted in the past, it is difficult to isolate exactly how much of this growth is AI-driven. But to provide a comparable metric to prior quarters, our third quarter sales into AI-specific customers were $3.2 million in Q3 '25, up from $1.8 million in Q3 '24. Other areas of strength within the Power segment were seen in sales of our fuse products, which were up $1.8 million or 41% from Q3 '24, and an increase of sales into consumer applications of $2.3 million or 39% from Q3 '24. As an important note, fuse products and consumer-facing products have very short lead times and are generally the first areas where we see the pickup in intra-quarter turns, which is a positive indicator for the overall business. As an offsetting factor, eMobility sales were $2.2 million in Q3 '25 versus the $3.4 million in Q3 '24, and sales into the rail market were $8 million in Q3 '25 versus $9 million in Q3 '24. Gross margin for the segment came in at 41.8% for the quarter, up 240 basis points from Q3 '24, largely driven by the higher sales volumes and better absorption of fixed costs at our factories. Turning to our Connectivity Solutions Group. Sales for the third quarter of 2025 reached $61.9 million, up 11% compared to Q3 '24. This growth was primarily driven by strong performance in commercial aerospace applications, where sales totaled $18.8 million, an increase of $6.3 million or 50.5% year-over-year. Connectivity product sales into defense applications also continued to be robust in the third quarter, with sales rising $3.6 million, a 31.2% increase from the prior year quarter. Contained within our defense number here are sales into space applications, which amounted to $2.5 million in Q3 '25, up 25% from Q3 '24. While connectivity sales through the distribution channel were down $1.9 million or 9.7% versus Q3 '24, it's important to note that this reflects the shift of an end customer out of the distribution channel and we are now servicing directly. Profitability within the connectivity segment continued to improve, with gross margin for the group rising to 40.3% in Q3 '25 from 36.6% in Q3 '24. This margin expansion reflects the benefits of operational efficiencies achieved through facility consolidations completed last year and a more favorable product mix. These positive factors were partially offset by minimum wage increases in Mexico and foreign exchange pressures related to the peso. Lastly, our Magnetic Solutions group delivered a strong quarter, with sales reaching $22.7 million, an 18% increase compared to Q3 '24. This performance was consistent with the expectations we shared on our last earnings call and was primarily driven by higher shipments to a major networking customer. Gross margin for the group improved to 29% in Q3 '25, up from 27.3% in Q3 '24. This margin expansion was supported by higher sales base and the benefits of facility consolidations in China, which helped reduce fixed overhead costs. These gains were partially offset by minimum wage increases in China and unfavorable foreign exchange impacts related to the renminbi. At September 30, 2025, R&D expenses totaled $7.5 million in Q3 '25, representing an increase of $2.1 million compared to Q3 '24. This increase was primarily attributable to the inclusion of Enercon's R&D costs, which amounted to $2 million during Q3 '25. Looking ahead, we anticipate that R&D expenses in future quarters will generally remain consistent with the Q3 '25 level as we continue to invest in new technologies and solutions to support our customers and drive long-term growth. Our selling, general and administrative expenses for the third quarter of 2025 were $32.8 million or 18.3% of sales, up from $26.7 million in Q3 '24. Importantly, SG&A as a percentage of sales declined from 21.6% last year, reflecting continued progress in managing our cost structure as our business grows. The increase in total SG&A dollars was primarily driven by the inclusion of Enercon's SG&A expenses, which contributed $6.6 million to the quarter and our U.S. medical claims continued to be high in the third quarter. As noted in prior quarters, our legacy level of SG&A expense was maintained during our period of reduced sales, such that we believe we are already spending the right amount on fixed SG&A infrastructure needed to support future growth. Turning to our balance sheet and cash flow. We closed the quarter with $57.7 million in cash and securities, down $10.5 million from year-end. This decrease was primarily driven by our proactive efforts to strengthen the balance sheet, including paying down $62.5 million in long-term debt, resulting in $225 million of total debt outstanding at September 30, 2025. Additionally, we made $2.5 million in dividend payments and invested $8.6 million in capital expenditures to support growth and efficiency initiatives. These outflows were partially offset by $7.8 million in proceeds from property sales and $1 million from the sale of held-to-maturity securities earlier in the year. Looking ahead to the fourth quarter of 2025, we continue to see strength across all 3 segments. Historically, we have seen seasonality in the fourth quarter with fewer production days due to the holidays being celebrated around the world. In light of this historical trend and based on the information available as of today, we expect Q4 '25 sales to be in the range of $165 million to $180 million. We noted in the second and third quarters that the trend of intra-quarter sales has resumed, and this range assumes that trend continues into the fourth quarter. And with that, I'll now like to turn the call back to the operator to open it up for questions. Operator: [Operator Instructions] The first question comes from the line of Bobby Brooks from Northland Capital Markets. Robert Brooks: Just wanted to circle back on those last -- the last piece that Lynn, you were touching on for the fourth quarter guide. Obviously, something that caught my eye was, yes, bucking kind of the historical trend of 4Q being lower than 3Q. And you mentioned that trends of intra-quarter sales have resumed and that the range assumes that continues in the fourth quarter. I was just wondering if we could just discuss what other factors might be at play, driving that outlook a little bit more detail because I feel like that's a really kind of exciting development for you guys. Farouq Tuweiq: Yes. Bobby, I'll let kind of Lynn jump in here with more details. But I just want to kind of call out a comment that caught my ear here, which is this kind of step down over Q4. I think you said bucking the seasonality trend. I think if you look at -- we see a potential of that, if you just look at the range that we put out there, $165 million to $180 million versus, let's say, the $179 million that was delivered, so possibly. But when we look at the range, I think it's broader than that in the sense that we do expect some seasonality, right? I mean, at the end of the day, we're going to have fundamentally less working days as we head into the holiday season and year-end and as we look kind of around the world and also just various holidays, whether it be kind of Golden Week and/or some of the holidays, for example, in Israel. So, I just want to be mindful that we just do have less working days. So, could it happen? Sure. I think the good news is we're expecting it to be a good quarter, but maybe we beat Q3, but I just want to be mindful of that. And I'll turn it over to Lynn here. Lynn Hutkin: Yes. So just to add to what Farouq said, I think that we are seeing continued strength in areas like commercial air, defense, AI, space. We are continuing to see the rebound coming through in networking and distribution. So, all of these trends are continuing from Q3 into Q4. So it's definitely end market strength continuing. But to Farouq's point, just mathematically, there are fewer production days in the quarter. So there's Golden Week in China, which was the first week of October, and then there's Thanksgiving and all of the winter holidays throughout the world in December. So it's really -- those are the pieces. So, I mean, if you stripped out the holidays, the messaging would likely be different. But if you look back at our trend historically, having a dip from Q3 to Q4 is pretty natural for us. So... Robert Brooks: Yes. I really appreciate that color. And I guess more so, it's just -- I definitely can appreciate that, yes. A lot of the ranges would be 4Q being coming in lower than 3Q. But I guess what just caught my eye was the guidance that you gave matched what the guidance was for 3Q. And usually, your guidance is for even the high end of the range being lower than what 3Q was. But I can appreciate those puts and takes you just laid out. The other piece is just like on those legacy customers and kind of the order trends. Is it fair to assume that -- it seems like it's fair to assume that those are still trending positively. But maybe could you give some more context as to like how to think about where they could go? Like obviously, we're coming off like trough levels in '24. But do you think they can -- do you feel like they are like continuing to improve? Or are they just at an improved level now stabilizing? Just curious to hear more on that. Farouq Tuweiq: I think if we look -- if we zoom out and we look at kind of, let's say, the last 5 years, 2020-2025, I think the industry would generally agree with the statement that has been anything but normal. In terms of the extreme extended lead times that happened in the earlier part of the time frame, I just laid out to an extended dip, if you will, where the industry was kind of down for a longer time than normal. And then you overlay a lot of geopolitical and economical uncertainties, let's say, right? So, I think the reason I point that out, I'd say, is it's still a little bit, I would say, not normal. And I think what we're seeing is a little bit of a maybe hesitation, if you will, on the parts of the customers and kind of robustly coming back. So the good news is that the attitudes have changed a little bit, I think, from a historical perspective. But what we are seeing in our business and we look at backlog and discussions, there's definitely a positive outlook, right? I think maybe if you look back at -- again, we have a lot of customers in a lot of places, so just general terms here. But generally, we'd see people maybe coming back a little bit stronger. And I think if you look at the industry-wide, and I was at a conference last week, there's a little bit of timidness. So, people are maybe not investing as much in a buffer stock and really more kind of just ordering as needed. But what we really look at is the end demand, right, our customers' demand. We're in a B2B business. So, what does their demand cycles look like? Where are their products going? And are they growing? And the answer is yes, as is reflected with our number and with our guide. So, we like the outlook, but I think it's hard to generalize that everybody is feeling all yippie about the world. So nonetheless, we like our positioning. We like our -- where we are with our customers. And I think we'll have pretty good outcomes here. Lynn Hutkin: And just to add, our book-to-bill was positive again this quarter. So, that's the third consecutive quarter of a positive book-to-bill ratio. And I mean, we haven't seen that trend since back in 2022. So, I think just generally, we're seeing more activity, which is positive. Robert Brooks: Got it. And then just last one for me is, I was really impressed, Lynn, when you were going through each kind of segment of power, and it really seems like power was driven -- these robust results in power were driven across many different segments. And it was nice to hear you break out what Enercon was as well. And just curious on Enercon, is the integration of them into you guys kind of wrapped up now? Or is there still a bit more to go? And then just curious on -- obviously, you guys are working on long lead time projects, but any early reads on kind of cross-selling opportunities maybe starting to bubble up here? Farouq Tuweiq: Yes. So, I would say, I think we want to be just mindful of the word integration because the plan was never kind of a, let's say, classical approach to integration. right? So from our -- when we think about integration, it's really around alignment from a go-to-market and tackling opportunities and co-selling and making sure that we are kind of creating opportunities together. And obviously, in Europe, it's a little bit of a different playbook as we talked about in the past, right, just in terms of trying to manufacture a little bit more there and be more present in our customers' backyards. But putting all that aside, I think we're definitely moving in the right direction. There's definitely obviously more work to be done, but we are seeing some nice, let's say, early sparks of where one side of the house is bringing an opportunity to the other side of the house. So I think our, let's call it, lead sharing, co-tackling is better, but we do have more room to go, keeping in mind that while we also want to do that, it is a very busy market, right? So step one, we got to do our day jobs and get out and push, and we're seeing the benefits of that strategy, but also want to make sure that we're more aligned. So, I would say we like what we're doing. We can do a little bit more, and we plan on doing a little bit more. Operator: We take the next question from the line of Theodore O'Neill from Litchfield Hills Research. Theodore O'Neill: Congratulations on the good quarter. Lynn, you mentioned in your prepared remarks, you saw a shift -- you had a shift of a customer out of distribution to service directly. And I have 3 questions related to that. How often does that happen? What determines the shift? And how does the distributor feel about it? Farouq Tuweiq: So, I would say -- first of all, thank you for the question there, Theo. I'd say we've kind of talked about in the past, distribution is a very dynamic channel and they're great and key partners for us and within our industry. And it's really hard to paint this in a broad stroke, but I'll try my best. Some customers, while we may design and work with them directly, ultimately, they want the distributor to aggregate all their purchases, right? So, we may start the relationship direct and it goes into the distribution channel to give them some kind of fixed fee. And the inverse of that also happens where a customer comes to us through distribution and then we develop something together, and it can be distributed and worked through the distributor or sometimes it does come out. So it happens both ways. And I would also say the -- some of the guiding principles on that include minimum order quantity. So if it's something smaller, we wanted to go through distribution. So sometimes we push people into the distribution channel to really maximize our cost to service these customers' model. So, I would say it's definitely a dynamic channel. And I would say when we look at distribution, it's a great discovery channel for new customers. So, I wouldn't say we're doing anything unusual in our industry because at the same time, we're not looking to burn the relationships, right? So this is pretty standard, I would say. The other thing is not all distributors are the same. There are some folks that really focus on kind of low quantities and as things scale, they don't want you in the channel, so you take it out directly. Other folks more if it's big and opening up doors. So, I'd say the answer is it depends, but I wouldn't say anything unnatural or odd happened here. Theodore O'Neill: Okay. And what's the M&A opportunity looking like for you right now? Farouq Tuweiq: Yes. I mean, I think we've been very clear. We like our balance sheet. We continue to pay down our balance sheet. We like where the direction of just paying down more heading into Q4 and into next year is going. So, we feel like we are in a very good position to do an M&A deal. I think really the question as we kind of think about is how big and what is it. And when I say how big, it's both in terms of just size and scale, complexity and also purchase price, right? So today, I would say it's still not a healthy M&A environment, but I think we are seeing a step-up in terms of opportunities versus Q1, Q2 this year. So, we are seeing more shots on goal. I would not classify it as normal yet, but we definitely have some opportunities ahead of us that we're kind of working through. I would also say is it feels like if you look at our course of a quarter, we always have something live. The question is, do you want to strike and do you like the business fundamentals? So, that kind of -- hopefully that answers your question, Theo. Operator: We take the next question from the line of Jim Ricchiuti from Needham & Company. James Ricchiuti: I apologize if you gave some of this detail in the presentation. I joined a little late, but I did hear something regarding the ongoing transition with some of your manufacturing footprint, I think. Did you say you're divesting a facility in China if I understood you correctly? Are you partnering with a contract manufacturer on these products? And if I missed it, did you provide any detail on which product areas are affected? And to what extent this is going to have an impact on margins? Or is it fairly small? Lynn Hutkin: So Jim, it's within our Magnetics segment. And we are -- we basically went through an analysis of whether it was more cost efficient for us to be manufacturing internally versus outsourcing that manufacturing. And in this case, we chose that outsourcing was the better alternative. As far as impact on gross margin, that would be about $1 million a year. Farouq Tuweiq: Yes, give or take. Obviously, we're in the process of moving that, but it will be positive. And more importantly, I'd say than that, Jim, is allow us to focus on the things that we excel at, right? So hopefully, it unlocks more bandwidth than beamwidth for us to pursue things that have a better ROI for us. James Ricchiuti: Got it. And the strength you're seeing in networking, I was wondering if you could maybe drill down into that a little bit. Is that being driven by just the increased AI investment that we're all hearing about? Or is it simply the distribution channel having just burned off the excess inventory that was out there or maybe it's a combination of both. Lynn Hutkin: Yes. So in networking, and if we talk about -- are you asking about a particular segment or just in general, Jim? James Ricchiuti: I'm talking about networking because you did highlight that as one of the areas. Lynn Hutkin: Yes. So, that was right. So if we're talking about the Power segment, we mentioned it's really a combination of both of those factors that you just said. So, there is some rebound happening coming off of the couple of years of destocking that we went through. But then we're also seeing new incremental demand related to AI. So it's a mix of those 2 that's driving the growth in networking. James Ricchiuti: And Lynn, you mentioned, I thought book-to-bill was above 1. Is that right? And did you -- can you characterize the bookings by the 3 main product areas, whether there was much variability among the 3? Lynn Hutkin: So, each of the segments were above 1. We saw positive book-to-bill across all 3 segments. Operator: We take the next question from the line of Greg Palm from Craig-Hallum. Danny Eggerichs: This is Danny Eggerichs on for Greg today. Congrats on the solid results here. I think just first off, maybe kind of a broader question on demand you're seeing from your -- each of your respective geographies, anything to call out in terms of outperformance, underperformance? And then maybe specifically on China. I know last quarter, we saw kind of the pause and then the resumption of order patterns. So, maybe just kind of what you're seeing current day and whether those have kind of just returned to business as usual. Farouq Tuweiq: Yes. I'd say, Dan, that's a good question. I think, giving our end markets -- so understanding, right, kind of taking a step back and saying we're -- the numbers move around a little bit. But by far, 2/3 plus of our business is kind of exposed to U.S.-based customers, right? And when we look at those, we also see that A&D is our largest end market today, which kind of lends itself both to the U.S., Israel and Europe. So when we look at geographies with the lens of the end markets, I'd say the kind of U.S.-based customers and Israeli-based customers are probably leading the way. And then also combining the networking side, also, those are the vast majority of the people we spend time with. Asia is our smallest exposure and then Europe/Israel is in the middle, right? So from a mathematical perspective, we're going to really kind of move the needle as we see our, let's say, U.S. and Israel business moves predominantly. In terms of demand environment, I'd say the U.S. seems a little bit more healthier, broadly speaking. When we look at Europe, I think it's a little bit of a mixed bag. So, our rail business is a fair amount in Europe, for example, right, we talked about. So, that was a little bit down. EV and eMobility, which sits in our Power group tends to be more European exposure. Obviously, there's other things going in the sector. But Europe, I'd say, is a mixed bag. It really depends on what it is you're talking about in terms of end market exposure. Asia is kind of an interesting place for us. It is a small place, but we have throughout this year, invested in the senior leadership within our sales organization in Asia. And I think we're seeing some nice opportunities coming out of that. So, we like what we're seeing, but Asia generally is a smaller play for us. And also keep in mind that for us and the end markets we play in, right, we're not really a heavy consumer market business. We're not auto. And obviously, we're not a race to the bottom on pricing. So, Asia for us is a selective strategic play where we pick our spot. So, we can do more in Asia. We are planning on doing more in Asia. But I'd say that, that's going to just round robin there on geographies. Danny Eggerichs: Yes. Got it. That's all really helpful. Maybe if I can hit on the Power segment and specifically kind of the gross margin there, I think it's kind of the same thing we saw last quarter where even this quarter, you see even a bigger sequential step-up in revenue, but that gross margin kind of stays flat or maybe even slightly steps down. I know last quarter was kind of the legacy business outgrowing Enercon and kind of being a negative mix factor there. So, I guess how should we think about that as Power continues its growth trajectory? And when should we think about kind of that gross margin hooking up with the revenue growth and seeing some expansion there? Lynn Hutkin: Yes. So, I think on the gross margin side for Power, I mean, there's a few different factors going on. Obviously, the Enercon acquisition is additive to our legacy Power margins. I think the one thing to keep in mind, both in Q3 and going forward here is there are 2 currencies within the Power segment where there could be margin pressure. So, we have the Israeli shekel related to the Enercon business and then also the renminbi related to the China facility that we have within Power. And we don't have a natural hedge in place. We do have some hedging programs, but they're not hedging in all exposure. So, that's something that we just need to be mindful of because that can move margins a little bit. Farouq Tuweiq: And then also keeping in mind some of our other margin businesses like eMobility and rail are down and those tend to be higher margin. I think the bigger -- I think discussion is today, we're at a point where I would say we're at great levels of gross margin. And if we're trying to think about growth, right, what is the opportunity there to expand to new customers, new offerings and new products versus having an extremely strict line on gross margin, right? So that's kind of something we're thinking about kind of how do we smartly think about that to ultimately drive EPS all the way down. Because as we've said in the past, to a large degree, there is some -- our SG&A and R&D are relatively range bound. So, how do we really get some operational leverage from that cost structure to continue to drive the top line. So, these are kind of things that we're all kind of thinking about. But I would say today, we're definitely up there in terms of performance on margins. Danny Eggerichs: Okay. Yes. And maybe that kind of plays into my last question here, which is kind of the Q4 guide and the gross margin range. Just looking back year-to-date, the gross margin has kind of been at like a 39%. And obviously, revenue levels in Q4 that suggests higher than -- quite a bit higher than what we saw in the first half at the midpoint here. So, I'm sure it's a lot of those factors that you just talked about, but any other things within that gross margin assumptions, maybe mix or maybe there's a little bit of conservatism built in there? Any thoughts there? Lynn Hutkin: So, I think it's a couple of factors. One is our Magnetics group has been depressed over the last couple of years, right? So as that rebounds, it is our lowest gross margin segment. So if you're looking at our gross margin in total on a consolidated basis, that would have some downward pressure on it as Magnetics grows into a larger piece of the overall pie. So, that's one piece to keep in mind. I think the -- if we're looking at Q3 sales to Q4, seasonally, we're down a bit in Q4 versus Q3. So if that happens, you have less leverage within your fixed cost absorption, so that could have some potential gross margin pressure. And then as I mentioned, on the FX side, with the peso, the renminbi and the shekel, those do directly impact our margins. So, those are some of the factors that come into play when we are putting out our guide for margin for the fourth quarter. Operator: We take the next question from the line of Christopher Glynn from Oppenheimer & Company. Christopher Glynn: Congrats on the nice results. Just curious in terms of the development of the commercial multiple that you've described in some detail, where are you seeing the kind of leading end of progress, early adopters, so to speak, in terms of design cycles, new business opportunities generating? It seems like AI, maybe defense. You noted a little progress in Asia. Maybe there's some other cross-sections to bring into the discussion as well. Farouq Tuweiq: Thanks for that, Chris. I think your question is just more commercial across the business and where they're coming from, the new wins? Christopher Glynn: Yes. Yes, exactly. And maybe a little color on new business opportunities, what's the growth there year-over-year? Farouq Tuweiq: Yes. So in general terms, right, as an engineering-led organization and we've talked about this, we're a medium to long-term kind of design cycle business. So really, the actions and the results that we're seeing today in Q3, you can almost got to look back at least 1 to 2, 3 years to see what was done then and kind of seeing where these wins have come, right? So I would -- obviously, as Lynn said, we do have some intra-quarter turns that do happen. But generally, I would say what happened in Q3 here is probably not a whole lot in large in terms of new business that things that happened in Q2, maybe some Q1 stuff, okay? So, this puts a big pressure on us to make sure that today, in Q3 or Q4 here, we're working for Q2, Q3, Q4 next year and beyond. So the question is, okay, well, how are we as a team tackling go-to-market and what is our sales initiatives and what is our data side of things to help lead those kind of tip of the spear activities. When we look at the activity around new developments and new wins that we saw, for example, in Q3, it's definitely exciting for us, to be honest with you. We're seeing some nice new wins, some bigger wins than maybe we historically have, some new customers that we, historically, were not maybe competitive or didn't kind of co-tackle it appropriately. Obviously, with the customers we've had for a very long time, we, I would say, probably constantly win new programs, right? When we look at, obviously, defense, which is our biggest kind of market nowadays, it's not like there's a whole lot of primes in the U.S., right? So really, there, we look at, are we getting more shots on goal? Are we getting new opportunity design wins? And I think the answer is yes. When I speak to the teams across Bel Fuse, I think there's a pretty fair aggressiveness in terms of hunting for the new. We are defining what new is. We want certain margin profiles of business and learning how to win. Again, we've always done this throughout our 76-year history, but I think we're putting more fire around it in recent times. And this was kind of my earlier commentary here, Chris, where when today, our business is really kind of -- we think about things to some extent from a product perspective, but we have a lot of products that go to the same customers. So how can we align ourselves more robustly to deliver solutions to our customers to ensure that we're not missing a cable or a connector or a fuse sale because we're selling a power system. So when we look at our product portfolio, I think we can do more with it. And this is back to also my earlier commentary around we got to invest in the systems and structures that we can make sure we're going after highest ROI opportunities and really measuring performance. It was a little bit of a new muscle for us, but I think the early signs and the wins we're seeing today, we kind of got to look back probably before 2025, to be honest with you. Christopher Glynn: Okay. Great. And then just curious on Enercon, if they're caught up on shipments. I think they had a little delivery snags last quarter. And did the quarter include some catch-up? Or is that just the sequential scaling that the business is generating? Farouq Tuweiq: Yes, both. It continues to kind of go from strength to strength. There was a little bit of catch-up, but also just kind of depends on where the catch-up we're talking about is. The biggest issue end of June, as you may recall, just flights stopped coming in, specifically from India and out of Israel. So, that's kind of the catch up, but it wasn't a very long pause, right? And obviously, there was local consumption that happened inside of Israel. So, there was some catch-up, but also, yes, growth, whether it be sequentially or year-over-year. Operator: We take the next question from the line of Luke Junk from Baird. Luke Junk: Farouq, I want to circle back to gross margins and maybe more of a philosophical but bigger picture, certainly. If we look at the gross margin trend this year, it's been above the high end of guidance 3 straight quarters, 39% plus in general. And just love to get your thoughts on kind of your feel for volume leverage in the business on a go-forward basis, especially as you continue to layer on those new design wins just relative to your understanding of the improved cost structure and kind of what that can mean incrementally as you do add volume? Farouq Tuweiq: No, I appreciate that question, Luke. It's a question we've been thinking a lot about in general is where should you be, right? And I think by all accounts, putting aside our mix between Magnetics and the other segments, yes, we're seeing an uplift in margin as sales grow and we are getting operational leverage. The question is now that we are really trying to shift our mindset away from just operations and cost efficiency, which always just become regular way table stakes, how do you drive growth? So as we launch new products and go after new customers, invest in new relationships and new technologies, we need to be honest with ourselves and say, okay, what is the pricing strategy on things. So for example, right, let's say there's a very nice piece of business that was, I don't know, $1 million, $2 million that was a little bit below corporate averages. But over time, we can scale it up and also get new opportunities. Would we take that business? I think we really need to consider that if it's a strategic relationship. I think the gross margin strategy, let's say, has not been one that was available to us through our history. So now we got to look at it as an asset and as a tool. Now keeping in mind, we work very hard to get our gross margins here, right? We don't want to arbitrarily kind of get it further into that 37%, 39%. So, I think there's a little bit of self-discovery, to be honest with you, as to where we should be. I think when we look at gross margins today, we want to make sure we're not picking out too much and just really missing the boat on EPS growth, given that we talked about the range boundness of our SG&A and R&D. So that's, I think, the sense of maybe a little bit of conservatism there. I think the -- I appreciate in public markets that everybody is looking to manage a certain level of expectations. But our intention, and we've talked about this internally, is we want to land in range, right? We don't really want to blow the range on the top or on the bottom. So, I think our -- and we give the optics here in the last 2 quarters to your point, I think we could see some conservatism. That's fair. The question is, okay, as we go throughout next year, where do we want to be? The good news is we have a lot of -- we have a buffet of options to play while delivering good returns, good gross margins to our investors, and that's kind of the front and center. So it's a little bit of a self-discovery journey we're going through to be honest. Luke Junk: That's all very helpful. Second question on -- just curious if we could double-click on networking and AI specifically in terms of the design win activity and just tilting the organization to growth overall. I guess I'd be especially interested in Power and just how you think going forward? I mean, we're seeing this rebound, obviously, in demand from an inventory standpoint and whatnot and those direct AI sales. But as you think about building the pipeline, just the opportunity set within Power specifically? Farouq Tuweiq: Yes, no. I mean, today, with an improved cost structures and the investment that has gone into the factories from an automation perspective, the improvements R&D teams that have done in terms of moving quicker to launch products, our sales team being more mindful of what we're going after. I think today, we're in a better position to go after opportunities and be a little bit maybe more serious about it than we have been able to in the past, okay? So as a result of that, as we think about networking, there's obviously a -- and as Lynn talked about earlier, we know where our AI products are going, but that's a floor, right? And we know that we sell to some other networking folks that are servicing directly AI. So, we know that our products that we're selling to networking guys are probably also being impacted by AI. How do you measure it is a different complexity to it, right? Because our products are high-end products that can go to AI or other applications. But I think it's hard to say that all things going on in AI data center world is not positively impacting us. The other thing I would say is with the improved operational structure and more focus on the markets is we have, I'd say, started to open up doors with some customers that maybe in the past, we were not cost competitive or we're not focused on, maybe a little bit too much in our comfort zone. So, we're seeing some of that newness as well. The other thing I would say in the networking side, given that there's a lot of investment and focus on it, broadly speaking, we are seeing new entrants into the markets with newer technologies. So all that, I think, at the end of the day, is additive for us from a networking perspective. So, we want to make sure that we're not just simply waiting for the same customers we had 3, 4 years ago to come back. Yes, that's a benefit, obviously. But I would also say we want to make sure we're investing in new relationships. And within the existing relationships, I think we're doing a little bit of a better job learning how to more service our customers to more ingratiate ourselves into that relationship and get more opportunities on goal. Because if you look at some of our big customers, we can do so much more. The question is, how can you do so much more, right? And that's kind of what we're trying to really push the team. And quite frankly, we're seeing some nice results of that. Luke Junk: All really great color. Just a quick one for my last question. And then you called out for the second straight quarter that there was some increased medical expense in the SG&A line. Just how we should think about that sequentially into the fourth quarter, if you have any visibility? And then going into next year to the extent that, that doesn't repeat, would it be reasonable to assume some normalization in SG&A? Farouq Tuweiq: Yes. I would say the -- just can I give some context here? We're really talking about the U.S. side of the business. And obviously, we all read and feel what's going on in all things world of health care and medical care. We are a self-insured plan, right? And whenever we do kind of market checks on it, it still is the most cost advantageous way to do it. So every kind of few years, we go out there and check and make sure it's the right. So today, we are self-insured. The downside of self-insurance is there could be variability in claims that come in the door, and we're seeing that in Q2 and Q3. But the variability is hard to get a read on it, right? We just don't know when somebody is going to have a major medical issue that comes our way. The plus side of going to a regular way health care is you have a fixed cost, but every year somebody comes and the health care companies will give you a big increase, right? So from our perspective, we're still in a cost advantageous way, but it does introduce variability to your point. The other thing I would say is as just the overall age of our organization, right, medical claims are not unexpected. So, what does that mean for next year? I think that's a tough question to answer for us, and we obviously saw a spike in Q2 and Q3 a little bit here. Operator: We take the next question from the line of Hendi Susanto from Gabelli Funds. Hendi Susanto: Congrats on strong results. My first question is you talk about rebound in networking and distribution customers. Can you talk about rebound or sign of rebounds across other areas, specifically, let's say, in Magnetic, Connectivity and then some major areas? Lynn Hutkin: Sure. So, I think for -- so you're looking for a breakdown by product group, Hendi, or just other end markets aside from networking? Hendi Susanto: Yes. I think like where -- like besides networking and distribution channels, are there like early signs of inventory rebound, customers rebuilding their inventory or maybe whether you have some outlook or expectation on where rebounds would start to take place in other areas? Lynn Hutkin: Yes. I think the other 2 areas that we've been seeing a rebound, which had been depressed in prior periods is in the consumer end market. If you recall, last year, that was the end market that was impacted by one of our large suppliers in China. And so that had been depressed for several quarters. We did see a rebound in that business in the third quarter. So, that was nice to see now that we have some new suppliers identified, getting product back out into the market at this point. So, there's been a rebound there. And then also on the fuses side -- I mean, fuses go into everything, but that's something that had been softer in the past and we're seeing that rebound now. So, I think those are probably the other 2 areas in addition to networking and distribution. Hendi Susanto: Got it. And then Magnetics sales is still significantly below pre-COVID levels. Any puts and takes in terms of expectation on Magnetics sales, let's say, like going forward, like where the recovery is somewhat -- is likely in the short to midterm? Farouq Tuweiq: Yes. So, I think when we look at Magnetics, Hendi, I think when we look at the industry and we've seen this in our Power, right, there was a very unnatural spike that happened back in 2022-2023, where customers were literally buying and renting new warehouses just to store a lot of these components. So, there was a, let's say, unnatural behavior there today. So if we were to kind of put a range on where we've been, let's say, it was $175 million to roughly $75 million, we would look at peak to trough, roughly speaking. I would say $175 million is probably not in the cards for the next few years because also remember, we walked away from certain business and we are being prudent after what business we're going after. And also keeping in mind that the Magnetics, as we talked about there, there is a product concentration and 2 end market concentration, which is networking and distribution largely. So if we look at the ranges of $75 million to $175 million, I would say the -- or I should say $70 million, sorry, the range was $180 million to $70 million. So, I'll let you kind of decide where we are, but we're seeing the year-over-year over growth. But 2022 at $180 million was extremely unnatural, and we've slimmed down the business since then. So, I would not really anchor to that. So, I'll leave it at that, but we do think that we got some ways to go here. Hendi Susanto: Got it. And then, Lynn, may I ask how we should think and project the pace of potentially early debt payment? Lynn Hutkin: The pace of debt payments going forward? Hendi Susanto: Yes. Yes. Lynn Hutkin: So, I mean, barring an M&A opportunity coming up or anything like that, we've been running at a rate of, call it, $20 million to $25 million a quarter just based on our cash flows. So, we would continue to pay down debt. That would be our first priority, barring anything on the M&A side. Operator: Ladies and gentlemen, with that, we conclude the question-and-answer session. I would now hand the conference over to Farouq Tuweiq for his closing comments. Farouq Tuweiq: Again, I want to thank everybody for joining us here and a very big thank you for the Bel Fuse team around the world and our customers that helped us deliver this great quarter. And we'll put our head down to continue to work throughout the year here and heading into 2026. Wishing everybody a great holiday season as we head into year-end, and I'm sure we'll be talking soon. Thank you very much for joining us this morning. Operator: Thank you. Ladies and gentlemen, the conference of Bel Fuse Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Good morning, everyone. Welcome to the Vulcan Materials Company Third Quarter 2025 Earnings Call. My name is Bo, and I will be your conference call coordinator today. Please be reminded that today's call is being recorded and will be available for replay after today's call later today on the company's website. [Operator Instructions] Now I will turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Please go ahead, sir. Mark Warren: Thank you, operator. Joining me today are Tom Hill, Chairman and CEO; Ronnie Pruitt, Chief Operating Officer; and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, vulcanmaterials.com. Please be advised that today's discussion may include forward-looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation and other SEC filings. During the Q&A, we ask that you limit your participation to 1 question. This will allow us to accommodate as many as possible during our time we have available. And with that, I'll turn the call over to Tom. James Hill: Thank you, Mark, and thank all of you for joining our call this morning. Mary Andrews and I are happy to have Ronnie joining us today as we discuss the third quarter results and what lies ahead for the remainder of 2025 and moving into 2026. The third quarter financial results clearly demonstrate the consistent solid execution of our teams across the footprint. Gross margin and unit profitability expanded in each segment and adjusted EBITDA margin expanded 310 basis points. Adjusted EBITDA of $735 million improved 27% compared to the prior year. Thankfully, this year, we were not confronted with the same extreme weather events as the prior year. Aggregate shipments increased 12% in the quarter, resulting in 3% higher shipments on a year-to-date basis. Aggregates cash gross profit per ton grew 9% in the quarter through a combination of commercial and operational execution. As anticipated, the prior year acquisitions and a higher percentage of base shipments contributed to 150 basis points of mix headwinds in our aggregate freight adjusted selling price. Mix-adjusted pricing improved 5% in the quarter and 7% on a year-to-date basis. Our Vulcan Way of Operating efforts continue to benefit our cost performance. Aggregates freight-adjusted unit cash cost of sales was 2% lower than the prior year in the third quarter. I'm proud of the way our operators are adopting new tools and disciplines to drive plant efficiencies. And I'm excited about the runway ahead for continued profitability improvements, especially as private demand recovers. Currently, strong momentum continues in public construction activity. The private nonresidential end use is improving, while residential demand remains weak. Since there has been little relief and affordability to date, single-family housing starts and permits continue to decelerate across most U.S. markets. With our leading footprint, we are confident we are in the right markets to benefit from an eventual single-family residential recovery. In multifamily residential end use, current data is more varied across geographies. Some states are already showing growth in starts, which should begin to help offset weakness in single-family activity. Private nonresidential construction activity is improving. Overall starts in our markets are positive on a trailing 6-month basis. Data center activity remains robust with approximately 60 million square feet under construction and another 140 million square feet proposed and in the planning stages. Nearly 80% of data center projects in the planning stage are within 30 miles of the Vulcan operation. For both data centers and large project opportunities like LNG, which are also gaining momentum, Vulcan is in the right markets and well positioned to supply these projects and help create value for our customers. The same is true on the public side. Growth in public contract awards in our markets continues to outpace other markets. Trailing 12-month awards are up 17% year-over-year in our footprint. And importantly, there's a long tail to public strength since approximately 60% of the IIJA funds are still yet to be spent. Given shipment trends year-to-date, coupled with the demand I just described, we now anticipate full year shipments to increase approximately 3%, yielding full year adjusted EBITDA of $2.35 billion to $2.45 billion, a 17% increase over the prior year at midpoint. Now I'll turn the call over to Ronnie to discuss our continued execution of our aggregates-led two-pronged growth strategy. Ronnie? Ronnie Pruitt: Thank you, Tom, and good morning. Over the last 24 months as Chief Operating Officer, I've been highly focused on growing the profitability of our existing business in addition to shaping our portfolio for optimal future growth. In the third quarter, our trailing 12 months aggregate cash gross profit per ton was $11.51, 27% higher than just 2 years ago. Our commitment to the Vulcan Way of selling and the Vulcan Way of Operating has supported this growth. Our organic growth, coupled with disciplined M&A and portfolio management positions us well to continue compounding results and creating value for shareholders. In early October, we completed the disposition of our asphalt and construction services assets. We believe that these downstream positions that we strategically built over time are now more valuable to the acquirers than to us, and we will redeploy the proceeds into attractive growth opportunities in the future. I'll now pass the call to Mary Andrews to provide some additional details on our financial results and capital allocation before we share some of our preliminary views about next year. Mary Carlisle: Thanks, Ronnie, and good morning. The aggregates unit profitability improvement that Ronnie and our division teams are driving each day is foundational to our cash generation, overall growth and return on invested capital. Over the last 12 months, our free cash flow has increased by 31% to over $1 billion, and our conversion is 94%. Complementing our free cash flow with incremental debt of $1 billion, we have grown our franchise through over $2 billion of acquisitions and returned approximately $300 million to shareholders through dividends and share repurchases, all while maintaining our adjusted EBITDA leverage ratio just below our targeted range of 2 to 2.5x and improving our return on invested capital by 40 basis points. We are poised for additional profitable growth. We also continue to prioritize reinvesting in our franchise. Year-to-date, we have deployed $442 million toward maintenance and growth capital expenditures and plan to spend approximately $700 million for the full year. Our trailing 12 months SAG expenses were $566 million and consistent with the prior year's trailing 12 months as a percentage of revenue at 7.2%. We are pleased with the results our investments in technology and talent are yielding in the business. I'll now turn the call back over to Ronnie to provide some preliminary thoughts on 2026 before Tom makes some closing remarks. Ronnie Pruitt: Thank you, Mary Andrews. Tom shared earlier our views on the current demand environment, and we anticipate those trends to continue into next year, consistent growth in public, improving private nonres and lingering softness in residential. Overall, we expect organic shipments to return to growth in 2026 and improve modestly year-over-year. We also anticipate mid-single-digit pricing improvement. We will maintain our focus on efficiency gains and cost discipline through our Vulcan Way of Operating efforts to continue to deliver expansion in aggregate cash gross profit per ton that exceeds historical averages. Before I turn the call back over to Tom, I would like to express my gratitude for the opportunity to lead this organization and leverage the strong foundation Tom has built over the last decade. He has cultivated a culture of continuous improvement and created meaningful value for our shareholders. I'm excited about what lies ahead, and I'm confident Vulcan Materials will continue to deliver. Tom, back over to you. James Hill: Thank you, Ronnie. I want to thank all the men and women of Vulcan Materials for living out the Vulcan Way each and every day, doing the right thing the right way at the right time. Our safety and financial performance are evidence of their commitment to excellence and to continuous improvement. We are ready to finish the year strong and to continue our long track record of durable growth as we move into 2026. And now Mary Andrews, Ronnie and I will be happy to take your questions. Operator: [Operator Instructions] We'll go first this morning to Trey Grooms with Stephens. Trey Grooms: First, I want to say congratulations, Ronnie, on your new role, well deserved. And also to Tom, it's been a pleasure working with you over the last several years, and we wish you the best on your next chapter. And I guess with that, Ronnie, maybe if you could highlight some of your top priorities that you have for the Vulcan Materials team here as you take the reins and transition into your new position? Ronnie Pruitt: Sure. Thanks, Trey, for the question. First and foremost, I'm going to continue to build on the culture that Tom has grown through his leadership of Vulcan. Our culture is based on safety is our foundation and our people own and drive our results. Our strategic approach will continue to focus on enhancing our core through Vulcan Way of Operating and Vulcan Way of Selling and strategically, we'll continue to expand our reach. through disciplined aggregate-centric acquisitions as well as greenfield initiatives that are going to continue to complement our aggregate leading positions in our network. Operator: We'll go next now to Tyler Brown with Raymond James. Patrick Brown: First off, congrats, Ronnie. Congrats, Tom. But, this quarter's volumes were obviously great, benefited, obviously, from some pretty calm weather. We have the Wake Stone comp. But you guys are guiding kind of towards the low end for the full year. Can you just talk about the trends into Q4? What's kind of driving towards the low end there? And then I appreciate the look on '26. But when you say modest improvement, can you put a finer point there and maybe talk about some of the puts and takes in the 3, call it, the 3 big end markets? James Hill: Yes. I think you got to look back a little bit at the third quarter before we go to Q4. Weather definitely cooperated in the third quarter. Volumes were up obviously double digit. But the big jump in volume was a combination of pent-up demand from the first half of the year, easy comps from last year and then importantly, strong and growing public demand and improving nonresidential demand. Now Q4 weather last year was very good. So tough comps in Q4. We predict 3% volume growth for the full year. With the exception of single-family construction, we see demand in other sectors getting better. I would tell you that October supported the full year guide of 3%. But Ronnie, why don't you talk a little bit about '26? Ronnie Pruitt: Yes, Tom, thanks. As Tom said, I think single-family will continue to be challenging until we get some of the affordability issues behind us. Public is quite strong. And as we look into public into 2026, we'll continue to see improved funding. And I think the more mature DOT execution from the states to get that money put in play. On the private non-res side, our starts have been positive in our markets for the previous 6 months. And as we look internally, our bidding activity, our bookings and our backlog really support demand growth as we go into next year. Operator: We'll go next now to Garik Shmois at Loop Capital. Garik Shmois: Congrats to you both on your new roles moving forward. I wanted to ask just on the pricing, both the growth in the quarter and your confidence in the outlook in '26, it ticked down sequentially. Is there anything specific driving that? And how should we think about pricing in a little bit more detail into 2026? James Hill: As expected, 5%, 150 basis points of mix in there, which we talked about last quarter. Obviously, acquisitions have been a drag on prices, but pricing in those markets continues to improve, I'd call it as planned. In the quarter, we had 20% more base driven by really good highway work in data centers. And while base is lower price, it's also lower cost. So we kept our unit margin momentum. I'm pleased with our -- I'm very pleased with our ability to take that price to the bottom line and then some as you saw costs go down in the quarter. And if you -- looking forward, I think growing highway demand and improvements in nonres will support higher prices and unit margins in '26. But Ronnie, why don't you talk a little bit about '26? Ronnie Pruitt: Yes, Tom is correct. I mean improving demand in public and private nonres will definitely support 2026 pricing. We sent out our letters in September for effective January 1. So we're in the middle of having those conversations now. I've been encouraged with those conversations. And that's really around the fixed plants, 40% of our business. On the bid work, our trailing 3-month backlog prices are showing acceleration. And most of that work will ship in next year. And so still work to be done, but this, coupled with our operating performance should still provide us with continued superior unit margin growth over historical norms. Operator: We'll go next now to Brian Brophy at Stifel. Andrew F. Maser: This is Andrew on for Brian. I had a question about the unit cost down 2% in the quarter. How much of that was Vulcan Way of Operating versus lower inflation versus volume benefits? And then additionally, as you're looking at next year, do you have any preliminary thoughts on how you're thinking about inflation or the cost piece into 2026 following such a phenomenal year this year? James Hill: Yes. Short answer, we've got no relief on inflation. I mean things -- no prices have come down. They're not going up as fast. But I would really point it to the Vulcan Way of Operating, if you look at the whole year. I'm very pleased with our operating performance cost in the quarter and the year, we're seeing improved operating efficiencies, but still early innings of Vulcan Way of Operating. And remember, in the first half of the year, we had weather issues. We had volume issues that actually hurt costs, but Ronnie and his team were still able to keep the cost down. In Q3, we probably had some tailwinds from efficiencies, volume and more base sales. I think Ronnie and his operator operating, and he should be pleased with this performance. Ronnie Pruitt: Yes. Thanks, Tom, and I know our operators will appreciate those comments. First and foremost, our safety performance is really good and is continuing to improve. [ And our ] investment in technology, they're working, and that's the Vulcan Way of Operating. There's still improvement ahead, and so we'll continue to focus on those disciplines as we get into '26. But I've got confidence in our people and our processes and our disciplines and our technology. And I think it will be exciting to watch the Vulcan Way of Operating as we continue to go selling and as far as growing our margins, and I think our margin growth will continue to be even more dependable in the future. Operator: We'll go next now to Anthony Pettinari at Citi. Asher Sohnen: This is Asher Sohnen on for Anthony. Congratulations all around. Just -- you guys talked about stronger backlogs, but I was wondering if you could maybe walk through some of your key geographies and what you're seeing there on an individual or regional basis. James Hill: Yes. Actually, it's pretty widespread. I can't think of any that are down at this point. Probably the healthiest is going to be the Southeast, which is a benefit for us because that's probably where the higher unit margins are. But we've really seen a turn in the nonres side of the business. Data centers have helped that and really strong growth in public demand. And I think that growth continues to accelerate for the next 2 or 3 years. So a good story. Obviously, single-family is still a drag for us and probably will be for a while. Hopefully, that turns next year. But in the meantime, the other sectors are taking up for that. Operator: We'll go next now to Kathryn Thompson with Thompson Research Group. Kathryn Thompson: First off, Tom, it's been a pleasure working with you over the years. Look forward to keeping up with you and Ronnie. We go back a couple of companies, and congratulations on starting in CEO role in January. So yes. So looking forward, you had -- did a great job of shaping your portfolio as was highlighted in the quarter you just reported. How are you thinking about what fits in your portfolio and maybe what may not or who may be a better owner? And can you approach it from thinking about from either a product type which was we saw this quarter or a geographic focus. So just maybe thinking bigger picture about kind of how you're thinking about that portfolio shaping going forward. Ronnie Pruitt: Yes, Kathryn, this is Ronnie. I'll take that question. I'm continuing to be really pleased with the downstream business that we have. In the asphalt business, those businesses are really heavily influenced by the public funding and the strength in public funding. And so we're going to continue to focus on, one, safety as well as our financial performance. And we talk about the concrete and the divestiture that we announced this week. I mean, that's our strategy. And we said early on when we bought Superior that we were going to evaluate that business, and we would decide whether that was a business that we wanted to be in long term. We continue to see challenges on the private side in California. And so we thought the acquirers, it was a business that was going to be more valuable to them. I'll remind you that since the acquisition of U.S. Concrete, we now only have a couple of plants left in the Virginia, D.C. area that are integrated with a very successful Vulcan legacy concrete business, but we've also retained all those aggregates. So it complements our strategy of being aggregate-led, and we're going to keep the expertise of both the asphalt and the concrete business. So if those businesses, as we look in the future and M&A presents those to us, we're not scared of that. But it's going to continue to be aggregate-led. I think that's our strategy, and you'll see us continue to be focused heavily on those aggregate-led businesses. Operator: We'll go next now to Phil Ng with Jefferies. Jesse Barone: This is Jesse on for Phil. Congrats to Tom and Ronnie. Just real quick on M&A., can you just kind of help us how you're thinking about the pipeline? You obviously will have quite a bit of dry powder given where your leverage is and post the divestitures. Just any geographies that you're particularly targeting? Ronnie Pruitt: Yes, this is Ronnie. I would tell you that we're still in process. Greenfields for us is a strategy of growth it takes time. We'll -- those will be timed with both market-driven as well as the timing of permits. And so we still have that going -- when we talk about M&A opportunities, it's been a quiet year. We continue to have a really good list of targets out there, but the timing of those targets are really driven twofold: One, by the seller and their readiness and then also by the market conditions. And so I would tell you, M&A this year is not surprising to us. We knew through some of the uncertainties with tariffs and other pauses in the interest rates that M&A was going to be paused. But I can assure you that we're still very active. We have a really strong list, and those M&A opportunities are going to continue to be aggregate-led. Operator: We go next now to [indiscernible] with Truist. Keith Hughes: Congratulations, Tom, on a tremendous run here. And I do have a question for Ronnie. You had talked about '26 kind of from a high level of continuing this just a wonderful run of cash gross profit per [ ton ]. Just from a general level, would we -- from what you know today in the market, will we see something similar to the last couple of years with the numbers you've been putting up? And what could potentially take that higher? Ronnie Pruitt: What was the last part of that, Keith? Keith Hughes: And what we get higher? What kind of things would you need to see something that would set even better than what we've seen in the last couple of years? Ronnie Pruitt: Look, we're coming off 3 years of muted demand in our markets. And so what we've been able to accomplish over the last 3 years with growing our cash gross profit has been twofold. One, the inflationary stuff helped our pricing early on. And this year, we've had some momentum on the cost side of our business. And so as we said earlier, demand is going to help. Some recovery in demand is going to help our pricing story. And when we look forward to that. But the Vulcan Way of Operating and the Vulcan Way of Selling both support that from a cost side as well as the commercial side. And so I would tell you, as I said earlier in my comments, I think our cash gross profit will continue and I think both sides of it, the cost and the commercial efforts will play a role into that. But some demand will definitely help the pricing side of our story. Operator: We'll go next now to Brent Thielman at D.A. Davidson. Brent Thielman: Congrats to the team as well. I guess bit of a 2-part question, I guess, just in terms of thinking about that mid-single-digit price growth in 2026. Part of the question is just that, is that consistent with the annual price increases you're planning for next year? And then the other thing I was wondering is just around that, how much sort of volume do you bring into 2026 from acquisitions that sort of lack of a better word, underpriced and you're pushing towards that Vulcan Way of sort of Selling? Ronnie Pruitt: Yes. I would tell you the 5.5% to mid-single digit is a combination of what we're seeing both with our backlog as we go into the year. So our bidding work, which accounts for about 60% as well as the announced letters that we have out with our fixed plants, which is about 40% of our business. And so those conversations, like I said, are happening now. Those letters were sent out in September. Those fixed plant increases will go into effect in January. When I look overall at how that is going to shape up, I think our backlogs, and I said on a trailing 3 months, our bookings prices have been accelerating. And so it's a combination of that bid work and what opportunity we're seeing, especially around the private nonres side as well as we still need some help on single-family. And so I feel good about our pricing going into next year. I think there's opportunities on both sides on the public and private side, but that's where we're at. And I think those conversations are going well. As far as acquired volumes, I think it's about 10 million tons of acquired volume coming out of last year, which was both Wake and Superior. And so as we've said before, it's taken us time. We're on that campaign. It's going as expected as far as North Carolina goes. And so I would anticipate that gap being made up with our normal Vulcan markets and what we're seeing in Raleigh, that gap will continue to be made up over the next 12 months. Operator: We'll go next now to Steven Fisher with UBS. Steven Fisher: Congrats, Tom and Ronnie. Just first, a clarification. Have you changed your pricing expectation for the full year of 2025? I'm not sure if I missed that. And then on the volumes, the 1% reduction, is that basically just single-family? And within your '26 outlook, are you starting -- if it is single-family affecting '25, do you assume that -- sort of that's still a drag on the first part of '26 and then a more accelerating part of the second half? I know it's still early, but just curious how you're seeing those dynamics. James Hill: Yes. So on pricing, I would call fourth quarter probably very similar to third quarter as we continue to enjoy the big base volumes. Like I said, while they are at lower price, they're also at lower cost and very good margins. So happy to have that work with the data centers and the big highway work. If you look at nonres going forward, I think it continues to grow. Public is very good. I think we probably see headwinds from res for a while, but it probably starting to bottom sometime in '26. Operator: And we'll go next now to Angel Castillo at Morgan Stanley. Angel Castillo Malpica: Ronnie, Tom, I echo everyone's congratulations and well wishes and looking forward to working with you, Ronnie. Just regarding your quoting activity and projects pipeline, the acceleration you talked about, I was wondering if you could kind of dive a little deeper into that. Maybe just kind of as a starting point, just putting a finer point on the magnitude of what you saw in October versus perhaps 3Q levels? I know you've given kind of the last 3 months, but just if we could kind of split that up. And maybe if you could expand also just on what's driving or what you think is driving kind of the acceleration here in activity. The reason I ask is because I feel like we've kind of heard about project backlogs and quoting activity being robust the last couple of years and conversion rates and delays and shipments have kind of disappointed a little bit. So trying to understand, I guess, what gives us confidence that something has changed that will result in kind of the letting of projects moving faster? And within private, if you could expand a bit more, like is that -- are you seeing it happen outside of data centers and semiconductors as well? Or is it primarily just those 2? James Hill: Yes. So look, we talked some in the first part of the year about projects, pricing projects and then kind of getting postponed or pushed the pause button. We're not seeing that anymore. In fact, we've seen a lot of those projects actually go at supporting growth in our backlogs. If we put it in our backlogs, we're pretty sure it's going to happen. It's very rare that once we put them in there, the projects don't go. So I have very good confidence that our backlogs will be shipped and those -- that growth will support growth as we look at 2026. I think that if you look forward, I think the nonresidential continues to grow. Ronnie, why don't you talk a little bit about kind of volume drivers in '26 and the momentum we carry into that? Ronnie Pruitt: Yes. I mean when I look at starts on the private nonres side, as Thomas said, in Vulcan-served markets, in September on a trailing 6-month were up 7%. [ Trailing 3, ] we were up 8%. And so that momentum continues. As I look at the subsegments of our private nonres, office data, stores and warehouses, institutional are all up. And our quoting activity and our bidding are on the same trajectory. And so as we look at it, I mean there is a lot of data center work out there. That subcategory itself is up 26%. But we've also booked 2 LNG projects. We've booked a couple of manufacturing projects. We booked some retail. And so it's a combination. Data centers has definitely been a very good tailwind for us. But there's other sectors within the private nonres that also give us confidence as we look in 2026. James Hill: Yes. I would tell you that I think that is Ronnie, Mary Andrews, as we all look at '26, pretty good confidence we'll see volume growth the public side, I can't tell you how strong the public side is. It's very, very good. We've seen the turn in what we thought it was going to be. We think warehouses is now probably turning to growth in most of our markets. So as we talk a lot about single-family, it's still a headwind, but I think it continues to probably -- it will get better as we march through next year. So I think our confidence level, that's pretty good. Operator: We'll go next now to David MacGregor at Longbow Research. Joseph Nolan: This is Joe Nolan on for David. Congrats on a nice quarter. I was just wondering on public infrastructure, Slide 5 shows a nice acceleration in contract awards. I was just hoping you could break it down in some of your key markets and give any detail on how fiscal year '26 DOT budgets look there. James Hill: Yes. I would tell you, in our markets, it's very widespread. The public side, I can't underscore it, it's good and getting better. Remember, we're in year 4 of IIJA, and it took 2 years to really get that started, which frustrated everyone, including us, but to be as expected, so now we're seeing the state DOTs mature into substantially increased federal and state funding. All of our -- our top 10 DOTs are all up for fiscal year '26. Trailing 12-month highway starts, as we said, are up 17% in Vulcan states and 5% in other states. So we are where the DOTs are growing. I think simply put, the DOTs are putting that money to work now and they continue to get better at it. And remember, only 40% of the IIJA funds have been spent. So there's a long tail to this past '26. Ronnie Pruitt: Yes. And I think, as Tom said, that those funds will carry us well into '26 and '27 and beyond. And I would tell you there's 3 rules around reauthorization: One, it never happens on time; two, it will happen; and three, it's historically always been larger than the bill before. And so we're anticipating that. We think public will continue to remain strong. And if you think about the infrastructure of the country, we still got a lot of work to do. And so we're happy with where we're at on the public side, and we think that's -- it's going to continue strong in the future. Operator: We'll go next now to Michael Dudas at Vertical Research. Michael, you might be on mute. James Hill: Michael, we cannot hear you right now. Operator: And we'll circle back around to Michael. We'll go next now to Adrian Huerta at JPMorgan. Adrian Huerta: Thank you Tom, congrats and best wishes. It was a pleasure to work with you all these years. Welcome, Ronnie -- and welcome, Ronnie. I know you for a few years on -- since U.S. Concrete, and I'm sure you're going to deliver very good results as well. Quick question on the cost. It's been quite impressive what you guys have been doing on the cost per ton side over the last couple of quarters. I think you mentioned that you're still in the early innings on many of these measures that you're taking. Can you give us a sense on the actions you've been taking and for how many more quarters we can see very good performance on cost as we have seen in the last few quarters? Ronnie Pruitt: Yes. Thank you for the question. I would tell you, we're still in the early innings, and we've talked about Vulcan Way of Operating. The technology investment is complete within our top 127 plants, which represents over 70% of our production as a company. Where we're at today is really in the final stages of the human behavioral side. And so we have a lot of training going on with our plant operators using the tools, the process intelligence, the scheduling systems with our labor focus. And so my anticipation is we've got a long ways to go, but it's really exciting to watch. And I would tell you that as I look at what's transpired this year and then what we're forecasting for next year, these tools, these investments we've made and the processes that we go through around our operations and focusing on our critical size production and the yield on that and the labor side, labor savings, I think we've got a lot of room. And I'm excited about it. And I think more importantly, our operators are the ones that are driving this. And so a lot more to come, but I would tell you, my anticipation is '26 is going to be even more momentum than it was in '25. James Hill: I would say that it's not just a quarter thing. This is years of marching forward with operating efficiency improvements. I think that Ronnie and his team, as I said earlier, should be very proud of their performance this year. And they got help from weather and volume in Q3, but they did not in Q1 and Q2. In fact, surprisingly, how good the cost was given the conditions. But I think they have years of improvement ahead of them. Operator: We'll go next now to Ivan Yi at Wolfe Research. Ivan Yi: First congrats to Tom and Ronnie. I just want to go back to the aggregate pricing again. price per ton in 3Q was the smallest in a few years. And I get that there's some negative mix in there. But why is the year-over-year growth decelerated in recent quarters? It had been double digits, and now you're guiding to 5% in '26. Just some color there. James Hill: Yes. I think that a couple of things there. Obviously, we had headwinds from acquisitions. We had in the first part of the year, we had headwinds from lower volumes in the Southeast driven by weather. That helps -- that got back more normal in Q3. But you're sitting here on 3 years of negative volume, and that does put some pressures on price. I think that's -- so we're kind of probably at a low point. I believe that the continued acceleration in public and now visibility to the private nonres going up really helps our conversations for pricing and our backlog pricing as we look into '26. Ronnie called that out that we've put out January 1 price increases. We're having those conversations. They're going well. But importantly, before that, over the last few months, we're seeing acceleration in our backlog pricing, which is a very good foreshadowing for what's going to happen in 2026. Operator: We'll go next now to Michael Dudas at Vertical Research. Michael Dudas: Yes. I hope the mute is off here. Congrats to Tom and Ronnie. Also congrats, Mary Andrews for the great cash generation and the great cash flow numbers [indiscernible] maybe just as we get close to wrap up here for Ronnie, as you look into your tenure here for the next several years, maybe even a decade or so, as you look out maybe past 2026, how much different or not will Vulcan look like? And do you see the sense of the industry fundamentals and where we are and given what you're seeing from competitors and from clients that this type of growth and sustainability in volume, pricing and certainly profit per ton growth is sustainable over the next several years? Ronnie Pruitt: Yes. Great question. I mean I think if you look out past '26, '27, '28 and the future, Vulcan is going to look very similar. And I would tell you, we're going to continue to be led by our strategy around enhancing our core, which is really investing in continuing to invest in Vulcan Way of Operating and Vulcan Way of Selling, which is going to really complement our margin growth, and it gives us confidence in that margin growth with those tools that we've invested in. And then on the strategic side, when we talk about expanding our reach, we're going to stay aggregate focused. And both within the markets that we serve and building the franchise that we have and also as we look at geographical expansion, it's still going to be an aggregate-led company. And so the future, you're going to see anything different than what Vulcan has continued to execute on. Those growth opportunities will be there, and we'll be right in the middle of it, but we're going to be very disciplined on what we look like and how we -- what those businesses are going to be led by is always going to be aggregates. Operator: And gentlemen, it appears we have no further questions this morning. Mr. Hill, I'll turn things back to you, sir, for any closing comments. James Hill: Thank you, and thank you all for your time this morning. As I step back and look at Vulcan's future, I feel both pride and excitement. Vulcan has fantastic talent and bench strength throughout the organization and particularly in leadership. Ronnie and Mary Andrews and their teams are seasoned, talented industry experts who are armed with a superior set of tools and disciplines embedded in the Vulcan Way of Selling and the Vulcan Way of Operating. Putting that together with our continuous improvement culture will take Vulcan's to remarkable heights. I'm very proud to have represented the men and women of Vulcan, and I look forward to supporting Ronnie and Mary Andrews in the future. Thank you all for your interest in Vulcan and your friendships. Keep you and your families safe and healthy. Thank you. Operator: Thank you very much, Mr. Hill. Again, ladies and gentlemen, that will conclude today's Vulcan Materials Company earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Silicom Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact Silicom's Investor Relations team at EK Global Investor Relations at 1 (212) 378-8040 or view it in the News section of the company's website, www.silicom-usa.com. I would like to hand over the call to Mr. Kenny Green of EK Global Investor Relations. Mr. Green, would you like to begin, please? Kenny Green: Thank you, operator. I would like to welcome all of you to Silicom's quarterly results conference call. Before we start, I would like to draw your attention to the following safe harbor statement. This conference call contains forward-looking statements. Such statements may include, but are not limited to, anticipated future financial operating results and Silicom's outlook and prospects. Those statements are based on management's current beliefs, expectations and assumptions, which may be affected by subsequent business, political, environmental, regulatory, economic and other conditions and are subject to known and unknown risks and uncertainties and other factors, many of which are outside of Silicom's control, which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements. These include, but are not limited to, Silicom's increasing dependence for substantial revenue growth on a limited number of customers, the speed and extent to which Silicom solutions are adopted by the relevant markets, difficulties in the commercializing and marketing of Silicom's products and services, maintaining and protecting brand recognition, protection of intellectual property, competition, disruptions to manufacturing and sales and marketing; development and customer support activities, the impact of war, rising inflation, changing interest rates, volatile exchange rates as well as any continuing or new effects resulting from pandemic and global economic uncertainty, which may impact customer demand through customers exercising greater caution and selectivity with their short-term IT investment plans. The factors noted are not exhaustive. Further information about the company's business, including information about factors that could materially affect Silicom's results of operations and financial conditions are discussed in Silicom's annual report on Form 20-F and other documents filed by the company that may be subsequently filed by the company from time to time with the Securities and Exchange Commission, the SEC. Therefore, there can be no assurance that actual future results will not differ materially or significantly from anticipated results. Consequently, investors are reminded not to rely on those forward-looking statements. Silicom does not undertake to update any forward-looking statement as a result of new information or future events or developments, except as may be required by law. In addition, following the company's disclosure of certain non-GAAP financial measures in today's earnings release, such non-GAAP financial measures will be discussed during this call. Such non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes that the presentation of these non-GAAP financial measures are useful to investors' understanding and assessment of the company's ongoing cooperation and prospects for the future. Unless otherwise stated, it should be assumed that the financials discussed in this conference call will be on a non-GAAP basis. Non-GAAP financial measures disclosed by management are provided as additional information to investors to provide them with an alternative method for assessing the company's financial conditions and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non-GAAP to financial to GAAP financial measures are included in today's earnings release, which you can find on Silicom's website. And with us on the line today, we have Mr. Liron Eizenman, President and CEO; and Mr. Eran Gilad, CFO. Liron will begin with an overview of the results, followed by Eran, who will provide the analysis of the financial results. We'll then turn over the call to the question-and-answer session. And with that, I would now like to hand the call over to Liron, the CEO. Liron, please go ahead. Liron Eizenman: Thank you, Kenny. I would like to welcome everyone to our conference call to discuss the results of the third quarter of 2025. We are pleased with the ongoing progress that we have made in the third quarter, marked by another period of strong execution in line with our strategic plan and demonstrating solid design win momentum and success across various product lines. The design win momentum is tracking ahead of expectations. Since the beginning of the year, we have achieved 8 major new design wins with important new customers as well as existing ones, which builds out for us an impressive roster of design wins, the key for our expected growth from 2026 and beyond. I remind you that our goal was to reach between 7 and 9 design wins for the full year of 2025. As of October end, we have suppressed the lower end of our 2025 target range and with 2 months left to the end of the year, we are just 1 design-win short of the upper end of this ambitious target range. We see new design wins as the most tangible indicator of our progress in addition to the breadth and depth of our opportunities funnel. The focus on our core product lines, coupled with deep relationship with customers and potential new customers has created this solid funnel. We expect to continue to convert this funnel to further design wins in 2026 and have set for ourselves a new aggressive target of between 7 to 9 additional design wins in the coming year, spanning all product lines, including FPGAs, Edge solutions and SmartNICs. Our third quarter performance demonstrates that we are successfully advancing and meeting our milestones and our solid momentum underlies our optimism for returning to double-digit revenue growth in 2026 and beyond. In terms of financial results for the quarter, we reported revenues of $15.6 million in the upper half of the quarter's guidance range. Our balance sheet has remained very strong. At September end, our working capital and marketable securities totaled $114 million, including $76 million in cash, deposits and highly rated bonds with no debt, representing approximately $20 per share. The financial strength provide us with flexibility that we need to execute on our strategy and seize opportunities as they arise. I would like to focus on our design win momentum. In the third quarter, we secured 3 significant design wins. And earlier this week, we announced another important and fourth recent design win. Each win demonstrates the strength of our product portfolio, the trust of our customers base and most importantly, it is a solid indication of the successful implementation of our growth strategy. Those new design wins span all our product lines, FPGA, SmartNICs and Edge networking systems and are for a variety of applications, underscoring the continued relevance of our solutions across diverse customer needs and market segments and applications. One of those design wins was awarded by a long-term network optimization customer of ours. This customer selected our advanced Edge system as a platform for several of its next-generation appliances. With this expansion, our business with this customer is expected to increase dramatically to around $4 million annually at a full run rate. This win highlights the natural progression of our deep relationship with this customer from networking cards to FPGA smart cards and now to Edge systems. More broadly, it reflects our strong customer partnership drives, repeat and expanding engagement across all our product lines while also laying the groundwork for other opportunities, including additional innovative Edge platforms currently under discussion. We also achieved the first design win with a U.S.-based provider of multisite networking solutions, which selected our customized edge device to enhance scalability, security and efficiency across its customer base. Initial deployments are expected to begin by year-end 2025 with a projected run rate of approximately $1 million annually in 2026. Importantly, the customer is pursuing several additional sizable projects, each with multimillion-dollar revenue potential and is in discussion with us regarding another customized edge product for a separate use case, together representing a significant long-term growth opportunity. Earlier this week, we secured a design win from a leading SASE provider, which selected our edge networking system combined with a Silicom NIC to support wired 5G and WiFi connectivity. Initial orders amounted to approximately $0.5 million with full deployment run rate expected to reach around $3 million annually. We see strong further potential, and we are discussing with this customer the adoption of an additional Silicom platform. We were particularly excited to achieve our second post-quantum cryptography related win from a tech giant with a span of just a few months, providing strong validation of our leadership in this critical emerging space and serving as a reference point for further opportunities. The design win was from a global application delivery leader for our advanced FPGA smart card, incorporating SSL hardware acceleration and post-quantum cryptography offload. This solution will enable the customer to deliver high performance, enhanced scalability and simplified secure connections. Ramp-up is expected through 2026 with annual revenues anticipated to reach $2 million run rate. Although quantum computers are not likely to be widely available for several years, suppliers of communications equipment and services must plan now in order to defend effectively against harvest-now-decrypt-later attack strategies. We are seeing that regulators and enterprises are already preparing for the future security threats they pose to privacy since quantum attacks have the potential to break today's widely used encryption standards. Forward-looking companies are, therefore, moving early to integrate PQC into their architectures to ensure business continuity, with emerging privacy and compliance requirements and position themselves as leaders in secure infrastructure in a post-quantum world. Our PQC-ready smart cards put Silicom ahead of the adoption curve at the forefront of this future transition. The fact that we already offer a mature PQC-ready solution differentiates us clearly as an advanced technology partner, bringing us interest from both equipment suppliers and service providers. All those design wins demonstrate again the value of our broad portfolio and our sterling reputation as a trusted partner. Each of those wins represent a combination of extensive technical collaboration and customer trust, reinforcing our strategy of building enduring relationships that evolve into multiple high-value engagements. Together, the design wins achieved throughout 2025 establish a solid foundation for accelerated growth from 2026 onwards and strengthen our confidence in maintaining our momentum into 2026 and importantly, marking our return to long-term double-digit revenue growth. The opportunities funnel remains broad, spanning all our product lines, Edge systems, SmartNICs and FPGA solutions, addressing both new and existing customers across multiple industries and multiple applications. I urge you to review our investor presentation available on our website, which highlights many of those opportunities as well as has examples of those that have successfully passed through the opportunity funnel to become design wins and source of recurring revenues. As we move into 2026, we expect to see many more opportunities in our funnel transforming into design wins with numerous new opportunities for all of our product lines consistently entering the funnel. As I mentioned earlier, our newly announced target for 2026 is to achieve 7 to 9 new design wins, driving forward our growth strategy and providing the foundation for sustainable long-term value creation at Silicom. In terms of guidance, for the fourth quarter of 2025, we expect revenues in the range of $15 million to $16 million, and we continue to anticipate double-digit annual growth rate in 2026 and beyond. Our overall objective remains unchanged, to create significant long-term value for our shareholders by achieving EPS above $3, which we expect to reach as revenue scale to $150 million to $160 million range. Importantly, a faster ramp-up of certain high potential deals currently in the pipeline would accelerate this time line, enabling us to achieve our strategic goals ahead of schedule. In summary, we are very pleased with our continued progress in 2025. With 8 major new design wins already secured year-to-date, well within the target range for the full year, we are executing ahead of the plan and building strong momentum across all our product lines. We remain focused on continuing to build long-term customer relationships and expand our design win funnel providing a solid foundation for the accelerated double-digit growth we expect from 2026. With our unique technologies, a highly satisfied and growing customer base, a motivated team as well as strong balance sheet to support all our endeavors, we are ideally positioned for 2026 and beyond with the ultimate goal of delivering significant long-term value for our shareholders. We look forward to updating you on our progress as we close out 2025 and head into 2026, which we believe will be an inflection year for Silicom. With that, I will now hand over the call to Eran for a detailed review of the quarter results. Eran, please go ahead. Eran Gilad: Thank you, Liron, and good day to everyone. Revenues for the third quarter of 2025 were $15.6 million, 6% ahead of the $14.8 million reported in the third quarter of last year. The geographical revenue breakdown over the last 12 months was as follows: North America, 75%; Europe and Israel, 17%; Far East and rest of the world, 8%. During the last 12 months, we had one 10%-plus customer, which accounted for about 14% of our revenues. I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the noncash compensation expenses in respect of options and RSUs granted to directors, officers and employees, taxes on amortization of acquired intangible assets as well as lease liabilities, financial expenses. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today. Gross profit for the third quarter of 2025 was $5 million, representing a gross margin of 31.8% compared to a gross profit of $4.2 million or gross margin of 28.8% in the third quarter of 2024. While I note that our short to midterm expected gross margin range remains between 27% to 32%, we are very pleased with achieving a gross margin at the higher end of this range ahead of our strategic plan model. Operating expenses in the third quarter of 2025 were $7.4 million compared with $6.5 million reported in the third quarter of 2024. Our operating expenses in the quarter were higher than expected due to the relative weakness of the U.S. dollar, the currency in which we report versus the Israeli shekel and the Danish krone, the main currencies in which a large portion of our expenses are generated. Operating loss for the third quarter of 2025 was $2.4 million compared to an operating loss of $2.3 million as reported in the third quarter of 2024. Net loss for the quarter was $2.1 million compared to a net loss of $1.7 million in the third quarter of 2024. Loss per share in the quarter was $0.36. This is compared with loss per share of $0.28 as reported in the third quarter of last year. Now turning to the balance sheet. As of September 30, 2025, our working capital and marketable securities amounted to $114 million, including $46 million in high-quality inventory and $76 million in cash, cash equivalents, bank deposits and highly rated marketable securities with no debt. That ends my summary. I would like to hand back to the operator for the questions-and-answer session. Operator? Operator: [Operator Instructions] The first question is from Ryan Koontz from Needham. Ryan Koontz: Hi, this is Jeff Hopson on for Ryan Koontz from Needham. Just wanted to understand maybe more where Silicom could fit in with the ongoing AI narrative. Obviously, ASICs have a place in AI, but I would think there are also specialized situations where your guys' NICs could be utilized. So just maybe some more info on that. Liron Eizenman: Absolutely. So when we look at AI, we see opportunities in a few different product lines, maybe even all product lines to be more accurate. So on the one side, we see opportunities for our NICs, our high-speed NICs, 400-gig NICs. Those are just the right equipment you need for the inference systems as well as the training systems. So this is one area that we think this could be very good potential. Another area is with the FPGA because a lot of things are not really well defined still, I would say, in AI systems and there's a lot of proprietary communication and protocols that FPGA can bridge the gap there where ASICs are not available right now and probably will not be in the foreseeable future. And the third one is also on the edge systems where we are able to see opportunities for edge inference. We actually just had a webinar together with Intel about it yesterday, showing some use cases of AI at the edge, and we feel there's opportunities with all of them. Some of those are more advanced right now. Some of them are more early exploratory, but I think we definitely have opportunities in all of them. Ryan Koontz: And then looking at the presentation, you also have some large opportunities with service providers and some telco equipment. Just curious of the spending environment in those 2 in the telecom industry, if that's getting better or if there's certain things that are pushing spending or new types of hardware there? Liron Eizenman: Yes. I mean we have discussions with both service providers as well as OEMs and enterprises. Service providers, we have like Tier 1, also Tier 2, Tier 3 service providers. Some of them are the really big telcos and some of them are smaller. We definitely see for our products, for our type of products, we see the need. Customers see the need, they actually need our products for the next generation and to support their customers. So this is something that we feel will have good opportunities. We probably will also have design wins with service providers. So we feel good about it. Operator: [Operator Instructions] There are no further questions at this time. Before I ask Mr. Eizenman to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom's website, www.silicom-usa.com. Mr. Eizenman, would you like to make your concluding statement? Liron Eizenman: Thank you, operator. Thank you, everybody, for joining the call and for your interest in Silicom. We look forward to hosting you on our next call in 3 months. Good day. Operator: Thank you. This concludes Silicom's Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good morning. My name is Adam, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson Group Third Quarter 2025 Results Briefing. [Operator Instructions] In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements due to a number of factors, including, but not limited to, those described in the forward-looking statements and Risk Factors sections of the company's most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now, it is my pleasure to introduce Mr. Ali Dibadj, Chief Executive Officer of Janus Henderson. Mr. Dibadj, you may begin your conference. Ali Dibadj: Welcome, everyone, and thank you for joining us today on Janus Henderson's Third Quarter 2025 Earnings Call. I'm Ali Dibadj. I'm joined by our CFO, Roger Thompson. Before discussing the quarterly results, I wanted to comment briefly on the nonbinding proposal submitted by Trian, a 20.6% shareholder of Janus Henderson and General Catalyst, a growth venture capital firm earlier this week to acquire all outstanding ordinary shares of Janus Henderson that Trian does not already own or control. The Board of Directors has appointed a special committee, which will carefully consider the proposal. The company appreciates the history of constructive engagement with Trian since they first disclosed their investment in Janus Henderson in October 2020. We also appreciate the proposal desire for continuity for Janus Henderson's clients and other stakeholders. The offer will be evaluated by the special committee, and there is no assurance that any definitive agreement will result from the proposal without any transaction will be consummated. Janus Henderson does not intend to comment further about the proposal unless and until it deems further disclosure is appropriate. In the interim, and as always, our focus continues to be helping clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders. As you can understand, our remarks on this call must be focused on the quarterly results and progress across the business. And we ask that during Q&A, questions be limited to the business results. Now, turning to the quarterly results, where I'll start with some thoughts on the quarter before handing it over to Roger to run through the results in more detail. After Roger's comments, I'll provide an update on our progress in private markets and how we are meeting the evolving needs of our clients and their clients. We'll then take your questions on the quarterly results following our prepared remarks. Turning to Slide 2. Janus Henderson delivered another good set of quarterly results, building upon tangible momentum in the business. Results reflect the sixth consecutive quarter of positive net flows delivered by dedicated client groups, market gains, solid investment performance produced by world-class investment professionals and the efforts and productivity from all operating and support areas. Longer-term investment performance is consistently solid with over 60% of assets beating respective benchmarks on a 3-, 5- and 10-year basis. Against peers, long-term investment performance is even stronger with over 70% of AUM in the top 2 Morningstar quartiles across the 3-, 5-, 10-year time periods. Assets under management of $483.8 billion increased 6% over the prior quarter and compared to a year ago, AUM has increased 27%. September AUM is our highest quarterly figure ever at nearly $0.5 trillion in AUM. Switching to flows. The third quarter marked our sixth consecutive quarter of positive net flows and represented a 7% organic growth rate. Positive net flow results demonstrates our truly global distribution footprint and the broad range of strategies and vehicles we offer. Moving to our financial results, which remain solid. Adjusted diluted EPS of $1.09 is 20% higher compared to the same period a year ago. Our financial performance and strong balance sheet continue to provide us the flexibility to invest in the business, both organically and inorganically and return cash to shareholders. On Slide 3, I want to provide an update on progress being made in the business. We continue to be in the execution phase of our strategic vision, which consists of 3 pillars: protect and grow our core businesses, amplify our strengths not fully leveraged and diversify where clients give us the right to win. In Protect & Grow, we are actively upskilling and utilizing data, people and process best practices across the organization to drive market share improvement and diversification of organic growth across regions and strategies. For example, in the third quarter, there were 21 strategies that each had at least $100 million of net inflows. This compares to 11 strategies just a year ago. These 21 strategies reflect a broad range of capabilities and vehicles across Protect & Grow and Amplify strategic efforts, including 6 ETFs, 6 equity strategies, the fully tokenized Janus Henderson [indiscernible] AAA CLO fund, regional fixed income strategies, absolute return, Victory Park Capital's Asset Backed opportunistic credit fund and Privacore within our alternatives businesses and the adaptive capital preservation strategy within multi-asset. Under Amplify itself, we also announced a partnership with CNO Financial Group for providing long-term capital, which we believe will further accelerate the growth of Vicky Park Capital and expand and scale its investment capabilities for the benefits of our clients. With CNO and Guardian, we now have almost $50 billion in very long-term capital or roughly 10% of our overall AUM. We also continue to leverage our investment expertise through the launches of active ETFs that allow us to cater to client demands globally. During the third quarter in the U.S., we launched our Asset Backed securities ETF, JABS or JABS, and the global artificial intelligence ETF, JHAI. In Europe, we launched our transformational growth equity EUFIT ETF, JTXX, complementing our U.S. launch of transformational growth equity, JXX. Within the diversified pillar, we announced the successful first closing of a non-U.S. direct lending vehicle by our emerging markets private investment team. I'll talk more about the VPC partnership with CNO and our emerging markets private investment team later in the presentation. Along with executing our strategic vision, we are making progress in other areas of the business. As I mentioned, we delivered several consecutive quarters of positive net flows and delivered market share gains in key regions, which demonstrates that we are on the path to delivering consistent growth over the long term. In addition to the net flows this quarter, importantly, Janus Henderson also generated positive organic net new revenue growth in the third quarter. Fee pressures are persistent in this industry and not all AUMs created equally. We're pleased with that result. Elsewhere in the business, we've made the strategic decision to transition our investment management system to Aladdin. This multiyear transition is expected to deliver a more scalable operating model through consistent and integrated technology infrastructure and investment management platform. Transitions of this nature are not uncommon in our industry, and we expect this transition will deliver enhanced services to our funds and our clients and enable strategic growth. Our focus is on making this transition seamless for our clients, maintaining the consistent level of service they expect from us. While we anticipate an approximately 1% increase in adjusted operating costs for 2026 and 2027 from this transition, all else equal, in 2028 and beyond, we expect this transition to deliver ongoing operational improvements and efficiencies and an attractive ROI. We'll provide an update on 2026 expense expectations, including the net impact of this shift in ongoing costs on the next quarter's earnings call. Shifting to capital stewardship. Our solid financial results and cash flow generation, along with a strong and stable balance sheet has enabled us to return nearly $130 million this quarter through dividends and share buybacks. Our cumulative share count reduction is 23% since we started the accretive buyback program in the third quarter of 2018. Janus Henderson's strong liquidity profile continues to provide us the flexibility to invest in the business, both organically and inorganically as well as return cash to shareholders. I'll now turn the call over to Roger to run you through more of the financial results. Roger Thompson: Thanks, Ali, and thank you for joining us on today's call. Starting on Slide 4 and investment performance. As Ali mentioned, longer-term investment performance versus benchmark remains solid with at least 60% of AUM beating their respective benchmarks over the 3-, 5- and 10-year time periods. Looking at further detail, at least half of each capabilities AUM is ahead of benchmarks over medium and long-term periods, reflecting consistent longer-term investment performance across capabilities. Overall, investment performance compared to peers continues to be very competitive with over 70% of AUM in the top 2 Morningstar quartiles over the 3-, 5- and 10-year time periods. Slide 5 shows total company flows by quarter. Net inflows for the quarter were $7.8 billion, which improved significantly over the net inflows of $400 million a year ago. Excluding the onetime impact from the Guardian general account funding last quarter, our gross sales increased for the fourth consecutive quarter and improved by 86% compared to the third quarter of last year. All 3 channels and regions experienced an increase in gross sales compared to the prior year across a broad range of capabilities, including ETFs, U.S. buy and maintain credit, Australian fixed income, U.S. research, our tokenized AAA CLO fund and Asset Backed opportunistic credit from VPC. Turning to Slide 6 and flows by client type. Third quarter net flows for the intermediary channel were positive $5.1 billion, equating to a 9% organic growth rate. In the third quarter, net flows were positive in the U.S. and Asia Pacific with net outflows in EMEA. To set expectations, we do not expect to repeat this level of net flow in Q4. In the U.S., net flows were positive for the ninth consecutive quarter with inflows in several strategies, including most of the active ETFs, U.S. research, multi-sector income, U.S. Mid-Cap Growth and Privacore. U.S. intermediary is a key initiative under our Protect & Grow strategic pillar, and we're pleased that we gained market share on a year-over-year basis. Additionally, whilst negative, the third quarter net flows for U.S. mutual funds within the intermediary channel was the best result in several years. Under our Amplify strategic pillar, we've talked about amplifying our investment and client service strengths using various means, including vehicles through which we deliver to our clients. In addition to active ETFs, flows into CITs and hedge funds in this channel were positive in the third quarter. In EMEA, Continental Europe and the Middle East delivered net inflows, while the U.K. had net outflows, primarily driven by a single outflow in investment trusts. Institutional net inflows were $3.1 billion, marking the fourth consecutive quarter of positive flows. Gross sales were the best result in over 2 years and reflect fundings across all capabilities covering corporates, pensions, insurance and private credit clients. Net outflows for the self-directed channel, which includes direct and supermarket investors, were $400 million. The third quarter includes approximately $600 million of ETF net inflows from our supermarket clients. Excluding ETFs, self-directed net outflows were roughly flat to the prior year. Slide 7 shows our flows in the quarter by capability. Equity flows were negative $3.3 billion compared to $2.6 billion of net outflows in the prior quarter. The current quarter was impacted by the merger of the Henderson European Trust into another third-party trust, which resulted in $900 million of net outflows. The environment remains challenging for active equities across all regions. Whilst net flows for equities were negative in aggregate, CITs, active equity ETFs and Horizon SICAV funds all delivered positive net flows in the quarter. Elsewhere, while still negative, the U.S. equity mutual funds had their best flow results in over 2 years. Third quarter net inflows for fixed income were $9.7 billion compared to $49.7 billion of net inflows in the Guardian-boosted prior quarter. Several strategies contributed to positive fixed income flows. Active fixed income ETFs delivered over $5 billion in the quarter and included 5 active ETFs with at least $100 million of net inflows, including JAAA, JMBS, JSI, JBBB and VNLA or [indiscernible]. Other strategies contributing to positive flows were Australian fixed income, U.S. buy and maintain credit, the tokenized JAAA fund and multi-sector credit. Net flows for the multi-asset capability were breakeven, primarily due to net outflows in the balanced strategy, which were offset by an institutional win in our adaptive capital preservation strategy. And finally, net inflows in the alternative capability were $1.4 billion, driven primarily by absolute return, biotech hedge fund, VPC's Asset Backed opportunistic credit strategy and Privacore. Moving on to the financials. Slide 8 is our U.S. GAAP statement of income. Before moving on to the adjusted financial results, GAAP results this quarter include an approximately $28 million charge related to the strategic decision to transition our investment management platform to Aladdin. This charge is removed from our adjusted results and the majority is noncash. Continuing to Slide 9 and our adjusted financial results. Adjusted financial results improved compared to the prior quarter and the prior year. The improvement was primarily due to higher average AUM and good investment performance generating higher performance fees. Adjusted operating income improved 22% and EPS improved 21% quarter-over-quarter. Improvements over prior year were similar with operating income and EPS both up 20%. Looking at the detail. Adjusted revenue increased 11% compared to the prior quarter and 14% compared to the prior year, primarily due to higher management fees on higher average AUM and improved performance fees. Net management fee margin was 42.7 basis points in the third quarter. The expected and communicated decline from the prior quarter was primarily a result of the successful integration of lower fee Guardian AUM. We are also very pleased with positive firm-wide organic net new revenue generation in the third quarter, which demonstrates our success across a broad range of strategies and regions. Third quarter performance fees were positive $16 million, primarily reflecting the SICAV absolute return strategy in U.S. mutual funds. The U.S. mutual fund performance fees were positive this quarter at over $3 million, which is the best result in over 10 years. This result compares favorably to negative $9 million of U.S. mutual fund performance fees over the same period a year ago. We currently expect Q4 2025 performance fees to be at or above the Q4 '24 total, reflecting very strong performance of our hedge funds, but final amounts will be dependent on performance over the remainder of the year. Continuing to expenses. Adjusted operating expenses in the third quarter increased 6% to $350 million, primarily reflecting higher profit-based compensation, LTI expense and investments supporting strategic initiatives. Adjusted LTI increased 20% compared to the prior quarter, largely due to mark-to-market on mutual fund share awards. In the appendix, we provided the usual table on the expected future amortization of existing grants due to use in your models. The third quarter adjusted comp to revenue ratio was 43.3%, which is flat to the prior year and in line with our guidance. Our 2025 expectation and an adjusted compensation range of 43% to 44% remains unchanged. Adjusted noncomp operating expenses decreased 5% compared to the prior quarter, primarily from seasonally lower marketing and G&A expenses. For non-compensation guidance, our expectation of high single-digit percentage growth in full year non-comp expenses compared to 2024 remains unchanged, reflecting investments supporting our ongoing strategic initiatives and operational efficiencies, inflation, the full year impact of the consolidation of VPC, NBK, Tabula and Guardian and the FX impact of a weaker U.S. dollar year-to-date in 2025. Our expectation of high single-digit percentage growth in non-comp expenses implies growth in the fourth quarter. We do expect to invest a little bit further in high ROI investments, supporting areas of momentum in our business, examples being marketing and advertising as well as client-related expenses such as T&E. We remain committed to strong cost discipline, ensuring that we manage our cost base while continuing to support the long-term growth objectives of the business. Our expectation of the firm's tax rate on adjusted net income attributable to JHG remains unchanged in the range of 23% to 25%. And finally, we'll give 2026 guidance on our full year call. But as Ali mentioned, our transition to Aladdin will result in higher costs in 2026 and 2027 before we deliver the improvements and efficiencies for the future in 2028 and beyond. Our third quarter adjusted operating margin was 36.9%, an increase of 200 basis points from a year ago. And finally, adjusted diluted EPS was $1.09, up 20% from the comparable third quarter 2024 period. The increase in adjusted diluted EPS primarily reflects higher operating income and operating leverage. Skipping over Slide 10 and moving to Slide 11 and a look at our liquidity profile. Our balance sheet remains strong and stable. Cash and cash equivalents were $1 billion as of the 30th of September compared to $395 million of outstanding debt. During the quarter, we funded our quarterly dividends and repurchased 1.5 million shares as part of our corporate buyback program for approximately $67 million. The Board has also declared a $0.40 per share dividend to be paid on the 26th of November to shareholders of record as at the 10th of November. Slide 12 looks in more detail at our consistent return of capital to shareholders. We've maintained a healthy quarterly dividend and have reduced shares outstanding by almost 23% since 2018. During the first 9 months of 2025, we've returned $331 million, including $143 million via share repurchases. The buyback program and dividends do not alter our ability to invest in the business organically and inorganically as well as return cash to shareholders. Currently, our liquidity profile allows us to do both. Our return of excess cash is consistent with our capital allocation framework. We'll continue to look to return capital to shareholders where there isn't an immediately more compelling investment in the business. With that, I'd like to turn it back over to Ali to give an update on our strategic progress in private markets. Ali Dibadj: Thanks, Roger. Turning to Slide 13 and an update on our progress in private markets. We've made progress in the private market space through Privacore, Victory Park Capital and our emerging markets private investment team. Starting with Privacore, which seeks to take advantage of and be the leader in the democratization of private alternatives in the private wealth channel. Year-to-date, Privacore has advised on $1.4 billion raised in the private wealth channel. Privacore is now selling on 5 wirehouses and platforms, and the team is expanding into RIAs and broker-dealers. In addition to advising on third-party products through its open architecture model, Privacore has also recently launched 2 proprietary funds, the Privacore VPC Asset Backed Credit Fund, AltsABF, which is sub-advised by our very own Victory Park Capital and the Privacore PCAM Alternative Growth Fund, Alts Grow, sub-advised by Partners Capital. In addition to these advised third-party and proprietary funds, Privacore expects to have more products coming online in the upcoming months and is working with Janus Henderson to expand its reach. In September, we announced that CNO Financial Group, a nationwide life and health insurer and financial services provider with $37 billion in total assets would acquire a minority interest in VPC. As part of the partnership, CNO will provide a minimum of $600 million in long-term capital commitments to new and existing VPC investment strategies. One of these strategies will be the Privacore Victory Park Capital Asset Backed Credit Fund I previously mentioned. This collaboration with CNO reinforces our shared belief in the long-term potential of asset backed private credit markets and further deepens Janus Henderson and VPC's insurance presence. CNO's investment of long-term capital speak to VPC's strong track record of providing private credit solutions across industries, their differentiated expertise in highly developed sourcing channels and the significant value VPC brings to its investors and portfolio companies. The transaction was completed on October 1, and Janus Henderson remains the happy majority owner of VPC. The transaction with CNO builds on Janus Henderson's recent momentum in the insurance space with our previously announced multifaceted strategic partnership with Guardian, which is working well. Lastly, in early October, our emerging markets private investment team, formerly NBK Capital Partners, marked a strategic milestone with the announcement of the successful first close of the $300 million Shariah-compliant fund, the Janus Henderson MENA Private Credit Fund IV with $125.5 million committed. The vehicle, which attracted strong demand from global and regional institutional clients and family offices, provides investors with access to emerging market private credit opportunities that deliver attractive cash yield and total risk-adjusted returns. The second close is planned for year-end 2025 with the final close in mid-2026. The successful first close of this direct lending vehicle underscores our commitment to investors in the Middle East and the growing number of companies in the region seeking access to flexible values-driven financing. It also highlights the important role of private credit plays in connecting capital with opportunities across dynamic growth markets. This business also strategically complements our emerging market public credit business, which is now at almost $2 billion of assets under management. Privacore, Victory Park Capital and Emerging Markets Private Investments underscores Janus Henderson's commitment to private capital as a key strategic growth area as we continue to diversify our capabilities and deliver differentiated solutions for our clients. Now wrapping up on Slide 14. We are making meaningful progress across the business, although we're not firing on all cylinders yet and have more improvement to go. We're executing against our strategic objectives, including capturing market share in key regions, diversifying our flows across regions and strategies, establishing new strategic partnerships and developing newly added pieces of our business. Investment performance is solid versus benchmark and peers. Net inflows were positive $7.8 billion, marking our sixth consecutive quarter of net inflows and the best quarterly results ever, excluding the Guardian net inflows of last quarter. While we are very pleased with the quarterly results, it's worth noting for modelers that these flows also reflect several fundings, which have depleted the near-term existing pipeline opportunities. Our financial performance and strong balance sheet allow us to continue returning cash to shareholders through dividends and share buybacks while reinvesting in the business for future growth. Our focus continues to be helping clients define and achieve superior financial outcomes and to deliver desired results for our clients, shareholders, employees and all our stakeholders. Finally, before I turn it over to the operator for questions, I want to acknowledge our CFO, Roger Thompson, who will start a well-deserved retirement beginning April 1 of next year. Roger joined the firm in 2013 as CFO and began leading the APAC Client Group in 2022. He is a valued member of our Executive Committee, a director on several of our Boards, has been a strong supporter of several of our employee resource groups, a friend and mentor to many people and a true culture carrier within our firm. He personifies all 5 of the Janus Henderson values. On a very personal note, the successes we've seen over the past few years with Janus Henderson could not have happened without Roger. He's been an incredible feedback giver, strategic thinker and all-around partner to me. I also want to thank him for the collaboration and fun on many of our client and investor meetings, earnings calls, town halls, travels even when we missed transcontinental flights and so much more. And I and the firm owe Roger an incredible debt of gratitude. While sad to see Roger go, we're very excited for his next phase in life. Pleasingly, and demonstrating the talent we have within Janus Henderson, I'm delighted that our Head of Corporate Development and Strategy, Sukh Grewal, will become our CFO and joins our Executive Committee. Sukh joined the firm in 2022 and through each of our recent acquisitions of Tabula, NBK Capital and Victory Park Capital and partnerships with Privacore, Guardian and CNO Financial Group, he's been instrumental in helping to define and deliver our strategy to protect and grow our core, amplify our strengths and diversify where we have the right. As a reminder, as we turn the call over to the operator for questions, we're unable to comment further on the nonbinding proposal and ask that you focus questions on the business results. With that, let me now turn the call back over to the operator to take your questions. Operator: [Operator Instructions] And our first question comes from Ken Wellington from JPMorgan. Kenneth Worthington: Roger, congrats to you. We'll see if farewells for later. But maybe first, in terms of net flows, clearly seeing a nice improvement in the intermediary and institutional channels. You highlighted the products that contributed. What I'm really after is like what is the story behind the numbers? Like what's the story behind the improved gross sales? Is it possible to help us better understand how and maybe which of the initiatives seems to be translating into what we can obviously see are the better results? Ali Dibadj: Ken, thanks for the question. Look, as you pointed out, we feel pretty good about what we delivered in the quarter on flows. You're right, it's a lot of thought process to get there. If you start with the intermediary side of things, the $5.1 billion of flows in the third quarter were certainly positive. We -- again, as we said in the prepared remarks, we want to make sure that people don't expect that to continue at that pace consistently. You've seen some of the public ETF data. But the whys are actually coming into play. The whys are actually certainly helping. And on the intermediary side, we've done many things, right? One is we've made sure that we have the right people in the right places. We've then made sure that we actually pay them the right way, incentivize them to grow and get new products on shelves and make sure they're the right products for the end client. We then are making sure that we have the right product. Now that comes in 2 flavors. One is ensuring that the performance is right. You'll see that our performance continues to be solid and versus several years ago, has certainly improved on average. And also make sure that the right wrappers, whether they be ETFs or CIPs or mutual funds, which we still are big believers in or SMAs or other wrappers as well, to make sure the product is right. And of course, then we want to make sure that we're calling the right people and are productive about it. So we're using a lot of data, including some newer technologies to make sure that folks are targeting the right people. So you put all that stuff together to your question, it's not just the outputs, but the inputs and wise. We feel pretty comfortable that we're on the right track. And obviously, in the U.S., that certainly started to show. This is our, I think, ninth consecutive quarter of positive flows, and it's starting to show outside of the U.S. as we transport that thought process on the intermediary side. On the institutional side, the $3.1 billion of flows this quarter marked the fourth consecutive quarter of positive flows. Gross sales were the best results we've had in something like 2 years. We're going to continue to build on that momentum. Again, there, too, I think we depleted some of our future pipeline and what happened this quarter. But still, the whys are a lot of the same, as I talked about on the intermediary side, around product, around vehicle, et cetera. But very importantly, it's also building relationships with our clients that are more than just transactional relationships. That's true in intermediary, but it's even more true in institutional, where we focus on building more nodes of connectivity between the firms. It might not just be delivering investment performance. It's also delivering ourselves, what we know about technology, what we know about AI, what we know about regulatory environments. And that's also part and parcel. You may have seen this to our brand campaign that's out there that is resonating. Again, both for intermediary and institutional, which is this Ampersand, right? This Ampersand is the symbolism of how we work with our clients. It's this together concept of Janus Henderson that our clients told us we were special about. So it's together, this Ampersand, it's their goals and our solutions. It's their problems and our hopes to deliver solutions for their problems. So it's all of those things together. It's not just one thing. It's never just one thing. As you know, there's no silver bullet, but we're certainly pulling all this together and hoping to continue to build over time, not overnight. I'm not sure we're there yet. We're not firing all cylinders, but over time, a very sustainable growth for us on a consistent basis. Kenneth Worthington: Okay. And I'm always looking for the silver bullet. So -- and just in terms of product performance, it generally looks very good, have seen some deterioration in equities. Can you talk about the themes you're seeing in the equity franchise that are impacting performance? Roger Thompson: Okay. Let me pick up on that first. I think you're right. The 1-year performance in equity is a little lower, but it's -- the longer-term time periods remain really solid, at least 50% ahead of benchmark. And against competition, the figures are even better with over 80% over 3 and 10 years ahead of competition or top 2 Morningstar quartiles. As you say, it's very concentrated. The move in Q3 over Q2 is really due to U.S. concentrated growth and U.S. research moving below benchmark over 1 year. I think really importantly, that is really to do with a poor Q4 last year. Our year-to-date performance is strong. Both of those are ahead of benchmark over year-to-date. Overall, equity is 63% ahead of benchmark year-to-date at the end of September. So it's a short-term number with, as you say, some really tricky markets that our excellent investors are working through, which again, I think, continues to be where active management is important. It is essential for client portfolios, 350 investment professionals and intensely focused on delivering between good and bad, as we always say, separating the week from the chat. That is a tough market at the moment, and you will get short-term blips, but it's that long-term performance, which is really critical to what clients look at. And then we're really proud of the reinvestment performance that we've got. Operator: The next question comes from Bill Katz at TD Cowen. William Katz: I apologize for my voice. So maybe first question is a 2-parter. I was wondering if you could comment about the ability to drive expenses and growth in the business and what hurdles you face as a public company? And then within that, I'm curious with the Aladdin opportunity, how do we think about the incremental leverage into '28 relative to the spend in '26 and '27? Ali Dibadj: Bill, thanks for the question. So first on the first one, look, we're clearly investing in the business to our guidance for this year of high single-digit growth, high single percentage growth in non-comp. We're seeing opportunities to invest. And as we see opportunities to invest, we constantly look at ROI. We look at where we invest, what's the return on that investment. I mentioned marketing spend and branding a second ago. I mentioned some of the investments we made in our people from a compensation and growth driving perspective. We constantly look at ROI. Roger is great at that. And so we look at where we get the benefit out of it. We think we can continue to do that and get good ROI, which is why we continue to spend more. Again, not peanut butter, not blanket, but in particular areas, we found that we can deliver value and value for our clients leads to growth. On your Aladdin question, as we mentioned, we'll give you more detail on the next quarterly call. We expect the short-term costs, as we said, to go up by about 1% of our overall expense base for 2026 and 2027. And then after that, we would tend to see some benefits. It's early days to know exactly what that is, but certainly, we'd like to see some benefits. And we're doing it, yes, for cost benefits, sure, but also really, really importantly because we think we can deliver better for our investors. We think we can deliver better for our funds, our mutual fund trustees and mutual fund shareholders, which are very important to us. We believe we can deliver better to our clients more broadly. And so we're doing it for all sorts of reasons. For us, this was the right match to work with Aladdin, may not be for everybody. For us, that was the right match. William Katz: Okay. And just as a follow-up, maybe on capital priorities from here. Balance sheet is in great shape. You bought back a lot of stock in the quarter. A, does the offer from Trian take you out of the market temporarily? And b, more broadly, how are you thinking about capital return from here? Maybe if you could comment on where you stand on the M&A pipeline. Roger Thompson: So let me pick up on that, Bill. Yes, so I guess the short answer is nothing changes. Our current expectation is we'll complete the full $200 million buyback by the Annual General Meeting of next year. In the third quarter, we bought another $67 million worth of stocks, 1.5 million shares. Cumulatively since we started the buyback in 2018, we've now bought back 23% of the stock, and that consistency is something we've talked about. We've got $83 million of the buyback outstanding. And we have an ongoing 10b5-1 plan that's in place, which is unaffected by Monday's nonbinding acquisition proposal. Ali, I'll pass back to you on M&A. But again, as we said, our capital philosophy remains completely unchanged and has been for a very long time that we will invest in the business but return cash to shareholders where we don't have an immediate need or near immediate need for that. Again, in terms of individual items, Ali? Ali Dibadj: Well, just we have the flexibility, obviously, to continue to do M&A and invest back in the business organically and return cash to shareholders. So we're in a privileged position. Operator: The next question comes from Craig Siegenthaler from Bank of America. Craig Siegenthaler: And Roger, best wishes for your retirement. Our question is on Victory Park. There's so many positive levers currently between Guardian Life, the CNO partnership and even capital raising at Private Core and probably a few that I'm actually missing. So how has Victory Park's AUM grown since the deal closed? And then how do you think about future growth of Victory Park over the next few years? Ali Dibadj: Craig, thanks for the question. We are very pleased with the Victory Park Capital acquisition. Just to take a step back, as you might remember, we targeted 3 areas from a private perspective that we wanted to go after. One of them was the democratization of alternatives into the wealth channel, and that's how we stood up. To your point, Privacore. We have a team that is doing extraordinarily well and driving flows appropriately from the wealth channel into the appropriate products from GPs. They're on 5 different platforms or wirehouses right now and with product in the marketplace. And so that's one piece of the puzzle for us to get wealth more exposed into the opportunities in the alternatives landscape. And that certainly includes some element of Victory Park Capital. As I mentioned, one of the proprietary products Privacore is delivering is with Victory Park Capital in that wealth channel. So that's one element. The second element is in private credit. But private credit in the U.S. from a direct lending perspective, we thought was rather oversaturated at this point. There may be opportunities in the future, but at this point, direct lending in the U.S. was not a place we wanted to go. So we certainly want to focus on outside the U.S. direct lending and in particular, the MENA private credit business that we brought on board, which has done extraordinarily well. I was just out in the Middle East a couple of weeks ago now, and the interest is very, very high for our product because they are a group of folks who've been doing this for basically 2 decades and have been able to show very, very good results. That's why we did our first close on this, probably $300 million total Fund IV for them and first one for Janus Henderson, but Fund IV for the team -- and the close, I think, certainly suggested that there's more to come in that piece of the business. So that's the non-U.S. private credit. And then to your point, not direct lending in the U.S., but we're certainly looking at asset-backed in the U.S. and globally, and that's where we come across Victory Park Capital. Victory Park Capital is a firm where the culture fits Janus Henderson, i.e., client-focused, i.e. growth-oriented, i.e. deep, deep research with deep diligence on the companies that they lend to and a lot of history with them. And we thought they were the best of the bunch. And so we did bring them on board. And to answer your question, if you note, out of the 21 products that delivered more than $100 million of flows this quarter, they have been one of them. And so they're mid-rise right now. I can't comment too much about the full raise. But if you think about that, which does not include CNO, right, which comes in, in likely Q4 here or has come in, in Q4. I do think that, to your point, we think there's enormous opportunity for Park Capital, not just in Privacore, but more broadly, especially with the insurance relationships. And the insurance relationship we have with Guardian is going fantastically well. And with CNO as well, we feel that it's another firm that we had really a culture match, really thoughtful, deep thinking, great management team, great people. And so partnering with them also makes a ton of sense. So I think you're right to suggest that there's a lot of opportunity here. We have to make the right moves and step by step, we'll get there. Again, this is one of those not overnight things, but over time, perhaps we'll get there. Craig Siegenthaler: Thanks, Ali. Just for our follow-up on investing. So year-to-date expenses have grown by 20% over the last 2 years, and that really doesn't account for CapEx either. So we're curious, do you feel your ability to invest has been constrained by being public balancing both growth objectives with the desire to show operating leverage. Ali Dibadj: Again, thanks for the question. We're investing where we see that there's ROIs. And so we'll continue to do that. You've clearly seen that in our numbers. You're right, we're investing in the business, and we're getting return off of it. When we stop getting a return, we'll stop. Don't forget that a lot of that operating cost growth is due to the M&A that we brought on board, again, a different type of investment, but investment nonetheless in growth and most importantly, delivering for our clients a broader suite of high-caliber investment products and client service. Operator: The next question comes from Patrick Davitt from Autonomous. Patrick Davitt: First question, we saw some big credit wobbles in the bank loan market in October. And clearly, you mentioned that had an immediate impact on bank loan and CLO fund flows. At a high level, I'm just curious how your bank loan and CLO teams are reacting to those specific issues, how they're scrubbing the portfolio and to what extent those issues are having any impact on your discussions with the distributors of those products for you? Ali Dibadj: Patrick, thanks for the question. So exactly as you described it, the wobbles are precisely why active asset management, particularly in fixed income is so critical across the board, particularly in fixed income. You mentioned there are a couple of companies that wobbles out there. I mean, Tricolor First Brands are the ones that hit everybody's radar screens. And without active asset management, perhaps one would have been index exposed to those names. And we, in fact, were significantly below index exposed, some areas not at all exposed to those businesses. So we very much espouse active asset management. We select based on criteria and understanding the companies underlying. And we certainly think that in any world, separating the wheat from the chat, which we do and 350 people at our firm do every day, including fixed income folks, is very important. Now remember also how we operate. We operate in the CLO world disproportionately. If you think about our securitized franchise and think about the 5 ETFs that we have that are over $1 billion, the largest one is the AAA CLOs. And just to remind folks about the construct of those, the CLO exposure generally, no matter what grade it is, the CLO exposure generally has better cash flow protections to it. And if you're in the AAA CLOs, if you're going to get hit, that basically means something like 70% or 75% of the loan portfolio in its entirety would have to default for you get impacted. So it's actually a relatively safe area. Now again, back in April, we saw some stresses in the market, obviously. And what we found also is JAAA, JBBB, given their size, given their competitive advantage in terms of the moat that they've built, sort of became the price discovery method for AAA and BBB CLOs overall. And at that time -- and again, at this time, nothing in our price action nothing in our spread moves suggests that there is any feeling of contagion or sense of contagion in the marketplace. So again, active asset management, Patrick, to your core answer to your question, active asset management is why we've been able to do well in this environment and an environment going forward, hopefully. Patrick Davitt: And any sense that the distributors are more or less concerned in distributing the product because of what's going on in the broader bank loan market? Ali Dibadj: We're not hearing anything to be fair. I mean you see the public ETF numbers, but I'm not hearing anything different at this point. Roger Thompson: I think Patrick, all volatility is different. Again, as Ali said, in March and April, we had a dip there with some outflows in the CLO ETFs. But from May all the way through the summer through September, we had obviously very, very strong inflows. So again, everything is different, but short-term volatility. And as Ali said, with the sort of -- we are the market in these things, so you'd expect to see some price discovery. Operator: Next question comes from Brennan Hawken from BMO. Brennan Hawken: Very much, Ali, I appreciate the comments about being limited in what you can say on the bid. But I had some questions that are more process, not really about opining on the offer. I was hoping you could maybe walk us through the special committee's process and time line. How will updates be communicated as you progress and whether or not there's been any interest expressed by strategic buyers now that Janus is formally in play? Ali Dibadj: Thanks for your question. I really appreciate it. From a process perspective, as best as I can tell, what I've been told is that the special committee will be going through a process over months, not weeks. But beyond that, we aren't commenting on the proposal at this time. Brennan Hawken: Okay. Had to give it a try. All right. So your ETF progress has been great. Look, obviously, JAAA is a spread-sensitive product, right? And so when you get concerns about spreads, the flows they will oscillate. But really encouraging to see how many products you've got now above $1 billion. And specifically, you've got your first equity product, I believe, JSMD, which is approaching that threshold. Can you walk through your strategy for equity products within the active ETF construct? And what your launch plans are as you progress and widen out the suite? Roger Thompson: Sure. Let me just -- I was going to say, well, Ali, while you're thinking about the sort of strategic answer, let me just make sure that, again, everyone's got the grounded facts. Yes, you're right. We're now operating a pretty sizable ETF franchise. It's about $40 billion as of the end of September. That's 8%. That will be up from -- I don't have the number in front of me, but something like 2% or 3% a couple of years ago. Net flows into ETFs in the third quarter were $5.7 billion. And yes, the largest of those was JAAA in the high 3s. But JMBS, securitized income, JBBB, you're right, SMidCap growth, short duration were all in the hundreds of millions of dollars of flows. So we're seeing some real diversification of flow behind JAAA, which is now a $25-plus billion product. Ali Dibadj: And just to add to that, look, our philosophy is relatively simple and pretty consistent. We do things in a client-led way. What we believe our core competency is investing in the right companies, delivering investable -- good investment performance for folks with differentiated insights, disciplined investments and delivering world-class service. We're happy to put in different packaging if clients want that different packaging. For example, we put in ETFs. We put it in CITs, we put in SMAs to deliver on what our clients want. But to be very, very clear, we're not believers in cloning. We don't think that makes sense. The products that we currently have in mutual funds are in mutual funds for a reason. There are some real benefits of being in mutual funds in terms of the accessibility, for example, that people can get mutual funds in. So cloning it doesn't really make sense because it's not necessarily client-led needs. We haven't heard of our clients at least, maybe for others, but our clients at least saying, "Hey, let's turn these things into ETFs necessarily. But for some areas, exactly as Roger described it, some of those businesses like JSMD, JSML as well as some of the more exciting ones that we launched just very, very recently, JHAI, which is an AI ETF it's not just the kind of high flyer ETF. It's a really thoughtful longer-term place to take advantage of AI shifts more broadly, so picks and shovels and everything else that we think from a longer-term perspective will benefit JXX in the U.S. and JTXX in Europe, again, based on the UCIT platform there. Those are transformational businesses that we invest in, in a very concentrated manner in delivering ETF form. Again, we are client-led in the way we develop our products, and they can take many, many different forms. ETF certainly is one of them that seems to be for the right investment strategy for the right client, the packaging that people are preferential to at this point. Operator: [Operator Instructions] Final question. This will come from the line of Michael Cyprys from Morgan Stanley. Michael Cyprys: Just Ali, you're making investments across the business to drive growth. Curious how you would characterize the level of speed at which you're investing in the business versus, say, a year ago? And how do you see that evolving into '26? Does that stay at a similar pace? -- might that accelerate? How do you think about that? Ali Dibadj: Yes, Michael, thank you very much for the question. It's a really insightful question actually because what typically happens, and I think we're there now, is that at the start of a kind of new strategy, which we started, call it, 3 years ago, almost to your point, you invest a little bit and you wait for the reaction, right? It's kind of like a scientific method, right? You have a hypothesis, you try it, you see what happens and you get the response and then you kind of add more fuel to the fire or not, right? And when we started off the strategy, we had spread out a little bit, I guess, of where we're investing because we didn't really know what would hit, what would hit. We didn't know how the clients would respond, et cetera. And so now we're in the process effectively of culling and focusing, for lack of a better word. And so you look at your overall expenses, you look at where they're going, you look at what the returns are from a growth perspective or other elements, right? Risk mitigation could be an element, future cost savings is an element, et cetera, and you readjust. And so you can do that on a micro level on a day-to-day basis, but you certainly have to look at it from a broader basis as well. And that's the stage we're at right now, which is not so much from a quantum perspective, but from where we're going to invest a much more focused look. So it's a very good question, Michael. And I think you're right, we're at this point where we have now some experience. We have now some data. We know what's responding or not, and we can kind of focus in and hopefully get some ROI out of the business in particular areas and not kind of get lower ROIs in other areas. Hopefully, that helps. Michael Cyprys: Great. And then just as a follow-up question. When you're thinking about the investments you're making in the business, how long of the list of items that do not make the cut to get funded, don't get funded in maybe the manner that you'd like? What's the rationale for why those don't get funded? If you had more resources, might those be able to be funded? Or imagine at some point, organizational capacity bandwidth comes into play? I guess how close are you running into that organizational capacity constraint? Ali Dibadj: Roger can chime in on this. I think -- look, I think we are spending in the right areas and seeing the results come through. So to your earlier question, you're right. Some of the areas we just are unable to spend more, like we can't launch 100 products, right? Maybe we can, but we can't launch 1,000 products, right? We can only launch a few of them. So there's some organizational capacity there. By the way, some of that is why we're looking at Aladdin as an underlying tool to be able to allow us to get more capacity on things. That's why we're, as I've talked before, using technology more broadly to help us do things more efficiently. I mentioned the RFPs, for example, RFPs have gone up about 100% since a couple of years ago, and we haven't added more costs there because we're using technology to help us out. So we're trying to find ways and we are finding ways to do that. I couldn't tell you how long the list is. I mean, as you can imagine, an organization our size, everybody wants something, but we're always focused on the ROI of it. So I think we're being pretty disciplined and spending in the right ways. Roger Thompson: Yes, I think that's quite right, Ali. I'm not the most popular guy around here because we are pretty strict on ROIs. And there are -- pleasingly, there is more demand than supply. But as you -- exactly as you said, Mike, that is 2 things. It is both money and it is the ability to do things. So prioritizing things and prioritizing some things are independent, some things are interrelated. So you really need to understand those things in order to be able to say, yes, we can do this one or we have to go a bit slower with this one because we're doing something else. So that combination of capacity and cost is really critical to look at, but we are very disciplined in that. Operator: With this, I'll now hand back to Ali Dibadj for any concluding comments. Ali Dibadj: Okay. Thanks, Adam. Thank you all for joining the call today. I know it's a busy day. I think this quarter continues to show our momentum step by step, not overnight, but we are building towards sustainable growth. And that's thanks to our IT, ops, legal, finance, people, risk and compliance and other support functions. It's thanks to our world-class 500-plus client service teams. Thanks to our outstanding group of 350-plus investment managers. And to all of them, thank you, and let's continue to finish the year strongly on behalf of our clients, our shareholders and our other stakeholders. Thanks, everybody.
Operator: Good morning, ladies and gentlemen, and welcome to the Champion Iron Limited Second Quarter Results of the Financial Year 2026 Conference Call. [Operator Instructions] This call is being recorded on Thursday, October 30, 2025. I would now like to turn the conference over to Michael Marcotte, Senior Vice President, Corporate Development and Capital Markets. Please go ahead. Michael Marcotte: Thank you, operator, and thank you, everyone, for joining our call today. Before we get going, I'd like to point you to our website at championiron.com, where you'll find the presentation we'll be using throughout this call. On our website, you can also find our MD&A where we make references to forward-looking statements as we'll be making several forward-looking statements throughout this call. Joining me here today includes our CEO, David Cataford, who's going to be doing the formal presentation; and also Alexandre Belleau, our COO, in addition to other members of our executive team and some directors. With that, I'll pass it over to David, who will also do a Q&A portion on the back end of the call. David? David Cataford: Thanks, Michael. Thanks, everyone, for being on the call. We're very happy to be able to discuss our second quarter fiscal year 2026 results. We had a few challenging quarters last year, but very happy to be able to announce robust results this quarter. So despite a maintenance on the rail of about 12 days, we still managed to hit a record of concentrate sold. So a very good job that we've managed to achieve. We'll be able to discuss this a little bit more in detail. Also improved our production. I mean, despite the fact that we had semiannual shutdowns, I think the team did a fantastic job in being able to understand a little bit better the harder ore that we have and not only improve in terms of the plant's uptime, but also be able to work on the iron ore recovery to improve despite the generation of slightly more fines with this harder ore. When you combine all of these together, it allowed us to reduce our cash cost to about $76 per tonne. So as we've always said, we've got quite a lot of fixed cost at Bloom Lake. When we do improve our production, that allows us to reduce our operating costs. In terms of financial highlights, managed to achieve $175 million of EBITDA and just over $56 million of net income, which also allowed us to declare our ninth semiannual dividend of $0.10 per share. If we turn to community governance and sustainability, one of the important elements that we have achieved in the past few months is to be able to present the opportunity for Canada to be able to invest in the high-purity iron ore industry. So working with various groups on the federal level to be able to highlight the importance of investing in infrastructure to be able to help the Labrador Trough develop over the coming years. We've had quite a lot of traction on that side and been in Ottawa quite often to be able to meet with various groups, but I think the discussions are extremely positive. We also welcomed the new chief and his Council to site. So we had 2 productive days of being able to present everything we do and what are the next steps for Bloom Lake and other potential projects with the new chief and his Council, very positive development during the quarter. If we look at the sales highlights, as we mentioned, it was a quarter that we had the annual shutdown on the rail about 12 days downtime, but still managed to achieve quite a lot of sales. There's a few reasons for that. One, we are starting to benefit significantly from the increased rolling stock that is now in place and with all the various hires that IOC made also to be able to operate the new locos. When you combine everything on that front, that definitely helped on the actual logistics chain. What we've done internally as well is improve significantly everywhere that we can. So we've managed to increase the amount of ore per car, which allowed us to bring down more tonnes. So I think the team did a fantastic job to be able to maximize every railcar that we have and every opportunity we have to be able to bring down tonnes. And this allowed us to benefit from higher iron ore prices at the same time during the quarter. So in terms of our stockpile, what does that mean? Well, we managed to reduce our stockpile by about 477,000 tonnes during the quarter, down now to 1.7 million tonnes and continuing to bring that stockpile down. So very positive for cash flows. And also, hopefully, in a few quarters, we'll be able to have these stockpiling events behind us and not go back to that -- to those discussions. In terms of our operations, so yes, we managed to produce quite a lot of tonnes in the quarter that we had our semiannual shutdowns. But I think one important thing to highlight as well is that your mine is in very good standing. So we've invested quite a lot in terms of stripping to make sure that we keep the ore faces ready and make sure that we can operate this mine for the decades to come. So very happy with the results that we've managed to achieve, not only on the concentrate front, but also on the mining side. Turning over to the actual P65 and the industry overview. So you did see iron ore price increase by about 8.3% during the quarter. So that's been very positive for us. A little bit of headwind in terms of the sea freight, an increase of about 12%. But realistically, the improvement on the iron ore price was better for us compared to the slight increase on the shipping costs. What does that mean in terms of provisional price. Well, if you remember, at the end of last quarter, we had expected to settle our tonnes at around $100 per tonne. We managed to achieve $112 per tonne. So since we had 2.5 million tonnes on the water, that gave us a provisional price impact of about USD 30 million for the quarter. So very positive for us. When you look at next quarter, we do have a potential upside if iron ore prices stay where they're at because at the end of last quarter, we had 2.5 million tonnes on the water with an expected price of $114. But as you've seen, iron ore price is closer to about $120 at this time. What does that mean in terms of our average realized selling price. So if you look at the quarter, slightly lower than the average for the P65, one of the main impacts is definitely the fact that we had 2.5 million tonnes at the end of the quarter that was forecasted to settle at a lower price. So that definitely had an impact on our realized price for the quarter. And secondly, as you know, we are finalizing now our DRPF project. So this year, we have been selling more tonnes on the spot market because we are going to transition to this higher-grade material next year and did not want to lock up long-term contracts for our current material that will be converted to higher grade. In terms of cash costs, so as we mentioned, when you combine a very thorough shutdown, so we managed with the teams to be able to not only hit the proposed time for the shutdown, but also work very hard on managing our costs, improved our production and really worked with the teams to be able to see where can we improve in terms of cost without jeopardizing our long-term plan. And working all together, improving our production, we managed to hit $76 per tonne during semiannual shutdown quarter. So very proud of what the team has been able to achieve. What does that mean in terms of financial highlights. So quarterly revenue is just shy of $500 million, EBITDA of $175 million and an EPS of $0.11 per share. So very happy with the results that we managed to achieve in this quarter. What does that mean in terms of cash. So our cash did improve significantly during the quarter from $176 million to $325 million. Two main reasons for this. Well, obviously, the great quarter that we had, but also the closing of our senior secured -- unsecured notes, sorry. So that definitely helped in terms of our cash balance. So even if we continued investing in sustaining CapEx, continued investing in the actual DRPF project, paid our dividend, we managed to increase our cash from $176 million to $325 million. In terms of balance sheet, so we have over $1 billion of available liquidity. So very well positioned to be able to finalize our growth initiative to be able to convert half of our tonnes to 69% and very well positioned as well now that we end our 7-year CapEx run to be able to start deleveraging and potentially change our capital return structure. In terms of growth projects, so as we mentioned, our DRPF project still on time to be able to deliver at the end of this calendar year. So very happy with the progress of the actual construction. In terms of cost, we do expect to finalize the project at roughly around $500 million, so -- which is pretty much in line with the inflation-adjusted capital expenditure going back to January 2023. So when you look at the work that's been done in this inflation environment, very proud that we'll be able to deliver our third major project on time and on budget. In terms of Kami, you probably saw that during the quarter that we finalized the transaction with Nippon Steel and Sojitz. So securing the first payment of $68 million. When we discuss the cash of $325 million, this does not include the $68.6 million. This cash is in a restricted account controlled by us in the Kami partnership. So that is over and above the $325 million that we currently have as cash within the company. So very happy of having closed that transaction. So there's a bit of noise in the market when you look now in terms of what our premiums for high-grade, where is iron ore going -- but when you have 2 of the largest Japanese companies investing in a greenfield project in Canada to produce high-grade iron ore, it really shows that we do believe we're in the right commodity going forward to be able to maximize return for our shareholders. Why do I say this? Well, we have not seen projects of scale being able to come online to improve the quality of the actual iron ore that's traded on the seaborne market. What we're actually seeing is majors reducing the quality of the material. So we have the P62 that is now a P61, so 1% less in terms of quality. We have seen contaminants increase significantly over the past decade. And we do see quite a lot of companies that are announcing declining grades in terms of their material. So we're a bit counter that trend because we are improving the grade of our material. And I do think that over time, this is going to significantly increase the premiums for our material and trickle down as better returns for our shareholders. With that being said, I'd like to thank the team because I think we did an outstanding job during this quarter, and I would like to turn it over to questions that you might have. Operator: [Operator Instructions] First question is from Orest Wowkodaw at Scotiabank. Orest Wowkodaw: Congratulations on the operating performance. I'm curious if you can give us some color on the improvement in cash costs. I mean, last quarter, you warned about costs staying elevated because of harder ore in a different pit. I was just curious, are you out of that pit earlier than expected? Or what's driving the improvement? David Cataford: Yes. Thanks for the question, Orest. When you look at the last quarter, so we're still in that more difficult ore. I think what the team has managed to do, one, when we're in harder ore, it does create more fine material. So there was an impact in terms of recovery, if you look at the last quarters. The teams did a very good job in being able to improve on the recovery. We did quite a lot of work in the plants to make sure that we tweak our circuits to be able to maximize the recovery for that material. We also worked with the mining side to be able to switch a little bit the blending strategy. So definitely, as we've been a few months with this type of material, when we understand it a bit better, it's easier to be able to blend it and be able to minimize the impact. And if you look at this quarter, we also had the volume effect. So going from roughly about 3.2 million tonnes to 3.5 million tonnes was definitely an improvement for us. So if you combine all of those, that definitely helped in terms of our cash cost during the quarter. Orest Wowkodaw: And just as a follow-up, do you think these cash costs are now sustainable as your next quarter is not a scheduled maintenance quarter? Do you think you can maintain those costs? David Cataford: Well, we're surely going to work to be able to reduce as much as we can in the operating costs. I think as you know, it's really a volume portion at this stage. I think that the teams have done a very good job in terms of the maintenance side, the uptime of the plants. If we can hold this in this quarter, I do expect that we'll be able to continue on our cost journey. But realistically, it all depends on the actual volume we'll be able to produce during the quarter. Operator: Next question comes from Fedor Shabalin at B. Riley Securities. Fedor Shabalin: Dave and the team, congrats on a strong quarter, nice beat. And could you remind us, please, about seasonality that typical effects the destocking process? I know winter is [ not ] tough, but if you can quantify the -- and so going forward into the winter, should we expect kind of slowdown in this activity? David Cataford: Just to make sure was the question on the destocking, yes. So when we look at what we've managed to achieve now, obviously, we were in the best period of the year to be able to bring down material. There was no impact from forest fires. There was quite a lot of collaboration between ourselves and the rail operator. So I think we were in the sweet spot in terms of bringing down tonnes. If I look at the next quarter, we're going to start entering the winter months. And as you know, we have some mitigation measures to make sure that we don't freeze material in the ore cars. So that definitely usually reduces a little bit the performance per train. But realistically, I think we've improved significantly the rolling stock and the actual logistics cycle. So I think that's one positive. . And our team at site is definitely aligned to be able to find every opportunity that we have to not lose a single chance of putting tonnes on those trains. So I think we've done some improvements that allow us to think we'll be able to continue to destock, but we are entering in the periods where there's a little less productivity on that front. Fedor Shabalin: Helpful. And my follow-up is on DRPF. Is it fair to assume that the previous estimate of $20 per tonne premium is appropriate for the output of the DRPF. And what is the expected ramp-up profile in terms of volumes and timing. And specifically, what portion of total sales volume do you expect DRPF to present once fully ramped? Is it would be a hub. David Cataford: Yes, thanks for your question. So if you look at the DRPF, so as you know, we're delivering the plant basically at the end of this year. We're going to be in a ramp-up period for a few months. We do expect to have our first commercial vessel to be sold in the first half of 2026 calendar year. And then going forward, what we are going to do is to be able to place those tonnes, as we mentioned, closer to home, so to start benefiting not only from premiums for the high grade, but also from improved shipping costs. When we look at the expected premium, I mean, next year is going to be a transition year. So definitely, we're going to work with our clients to be able to prove that we can make 69% material, and they'll be able to test it in their plants. So as with all new products, there's usually a little bit of lag time before we get the full benefits of this material, but we do expect that these premiums will be significant once we've finalized the ramp-up, work with our various clients and be able to sign longer-term contracts for this type of material. Fedor Shabalin: Okay. I'll go back to queue, congrats one more time. Operator: Next question comes from Craig Hutchison at TD Cowen. Craig Hutchison: Pretty impressive sales volumes for the quarter. I just wanted to confirm, maybe a follow-up to the last question. Did you guys have the scheduled maintenance? Or was there a scheduled maintenance in September that you typically occur? Or is that something that's going to be pushed into Q4? David Cataford: Yes. So thanks for the question, Craig. So during the quarter, there was a 12-day shutdown. So that did happen in September. But despite that, we still managed to achieve the results that we did. So I think it was a very good combination of teamwork and the collaboration between us and IOC. Craig Hutchison: Okay. Great. And just on the DRPF, I mean, the spending in the quarter was a bit lighter than I expected, and you've talked about a slight increase on inflation. Is the balance of spending, is that mostly going to be pushed into the calendar fourth quarter? Or will some of that be spread out into early next year as well? David Cataford: Yes. It's always difficult to match that perfectly between the work that's actually being done and what's being paid. So there is a lag sometimes of work being done in the actual payment. So it's not because we reduced the cadence during the quarter. It's really due more to payment schedules that we have, but we have not reduced the cadence on that project. And when you look at the actual dollars out, it's probably going to be a few quarters after the completion of the plant that you'll see the final sort of investment for the DRPF. But the same thing is what happened with Phase 2 or with Phase 1. Craig Hutchison: Okay. Great. And then just on the DRPF project in general. I know the plan is to start shipping commercial volumes in sort of second half of next year. But is the plan to blend in the first half, will you guys be expensing that and booking that as revenue if you blend it with your other material? Or is the plan to sort of capitalize some of those costs and revenues through the first half until you're producing a product that sort of meets spec. David Cataford: Well, right now, what we're targeting to do initially is probably to blend the material. So we will be paid for the iron units. So as we ramp up the plant, I mean, obviously, if -- if it's a very smooth ride and we can deliver it quicker, well, then that strategy will change. But right now, the strategy is really to be able to -- one, that we'll be able to prove the quality of the material. But first, especially, I mean, we're starting this in the winter months, not the best months to be able to start 2 products at the port, 2 products with the trains. . So we want to demonstrate the actual robustness of the plant, make sure that we can achieve the different qualities. But at first, as you mentioned, we'll be blending that and that will trickle down in terms of revenue only in iron units. So there's usually formulas that we have already in place with our various clients to be able to account for that. And as we're comfortable with the delivery of the plant, well, then we'll be able to start really segregating 2 types of materials and having 69% concentrate or pellet feed and our typical 66% material. Craig Hutchison: Great. And maybe just one last question for me. Can you just maybe talk on what you're hearing in the DRI product in general. I think the last question was just on premiums. Just how robust is the market right now? I know there's some weakness in Europe and other places, but can you give us sort of broad overview of what you're hearing with regards to DRI in general. David Cataford: Yes. When we look at now, I think it's a bit of an abnormal situation. So obviously, you see the price for the DRI pellets. So it's not as its all-time high. It's very far from that. So it's pretty much at cyclical lows, which I actually think played in our favor because it doesn't incentivize a whole lot of people to be able to do what we're doing. When we look at what's potentially happening next year, so we have seen the first positive news out of Europe in the steel industry in quite a long time. So Europe is looking to implement tariffs to be able to protect against some Asian tonnes that are now coming into Europe. So as that happens and what we're seeing with the different steel mills that we're speaking to is that the first time in about 5 years that people seem a little bit positive. So if that happens and Europe does increase the amount of steel that they produce, that's definitely a positive for us and for premiums in terms of this type of material. We have seen projects also in North Africa and even in Europe that are continuing in terms of their DRI and EAF transitions. Some have been delivered, some will be delivered next year and the following year. We're seeing the same in the Middle East. So there might be a bit of a lag between when we see the actual crunch for demand for this type of material and when we deliver our plant. But we still think that this material is going to touch a pretty significant premium. Operator: [Operator Instructions] The next question comes from Stefan Ioannou at Cormark Securities. Stefan Ioannou: Most of my questions have been kind of answered in general. But just maybe just one more thing on the stockpile destocking. Is it still -- I know it's going to vary quarter-to-quarter based on maintenance and weather and whatnot. But is it a fair assumption that this is something that gets down to a "normal level", say, through the end of 2026. Is that a good way to think about it? Or... David Cataford: I mean I would love to do it quicker if I can. So definitely, we're going to put all the efforts to get there. I think it's a reasonable prediction. But again, as you know, we do not control the rails. So we're going to live with that partnership. I do see some improvements. I mean, 477,000 tonnes during the quarter, I think, was pretty good, hitting a record sales even if they had 12-day shutdown. So we'll capitalize on every opportunity we have to bring down that stockpile. We should not, in the future, have more than a few hundred thousand tonnes at site that is varying up and down depending on weather and things like that because our strategy, as you know, has never been to stockpile material. So hopefully, by the end of 2026, as you mentioned, that story can be behind us. Stefan Ioannou: Okay. Great. Great. And maybe just on the minutia sort of this idea of when you start creating the higher-grade product and then blending it at first. I'm just curious, like when you start producing it and you're showing the plant works, how long does it take a potential customer to take that material, test it, get comfortable with it and then come back to sign a contract? David Cataford: It depends on which client and how much they need the material. So I mean, once we've got the specs -- we've already sent quite a lot of test material to our various clients. So they have tested it at various levels in their labs. So I think it's more of a waiting pattern for certain to make sure that we can actually hit the quality. I think we've seen in the mining industry, a few people sometimes overpromise things and underdeliver. It's not really the way that we work, but still when you say that, it doesn't mean that people leave us on the actual material. So I expect that once we're able to produce the material, that doubt is going to be behind, and we'll be able to start signing the long-term contracts. Stefan Ioannou: Okay. And congrats again on the nice quarter. Operator: We have no further questions. I will turn the call back over to David Cataford for closing comments. David Cataford: Yes. So again, thanks, everyone, for your support. I mean when we look at your company, I mean, we've had quite a lot of support from all of you over the past 7, 8 years that we've done a significant CapEx run to be able to get the company where it's at. Now we've got a very strong foundation. We're going to deliver one of the best products in the world. We're going to be able to capitalize on increased premiums going forward, might be a little lag on that, but I still think it's the right strategy because we're really differentiating ourselves from what we're seeing in the rest of the world where quality is declining. So next year is an inflection point for us. It's really the moment where CapEx or significant CapEx are a bit behind us, and we can start benefiting from all the investments that we've made. So again, thanks for your support over the years and looking forward to be able to present the next quarter in a few months. Thanks, everyone. Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Welcome to the Merck & Co., Inc. Rahway, New Jersey, U.S.A. Third Quarter Sales and Earnings Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Peter Dannenbaum, Senior Vice President, Investor Relations. Sir, you may begin. Peter Dannenbaum: Thank you, Julie, and good morning, everyone. Welcome to the Third Quarter 2025 Conference Call for Merck & Co, Inc., Rahway, New Jersey, U.S.A. Speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer; Caroline Litchfield, Chief Financial Officer; and Dr. Dean Li, President of Research Labs. Before we get started, I'd like to point out that we have items in our GAAP results such as acquisition-related charges, restructuring costs and certain other items that we have excluded from our non-GAAP results. There is a reconciliation in our press release. I will also remind you that some of the statements that we make today may be considered forward-looking statements within the meaning of the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are made based on the current beliefs of our company's management and are subject to significant risks and uncertainties. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Our SEC filings, including Item 1A in the 2024 10-K, identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected in any of our forward-looking statements made this morning. Merck & Co, Inc., Rahway, New Jersey, U.S.A, undertakes no obligation to publicly update any forward-looking statements. During today's call, a slide presentation will accompany our speakers' prepared remarks. These slides, along with the earnings release, today's prepared remarks and our SEC filings are all posted to the Investor Relations section of our company's website. With that, I'd like to turn the call over to Rob. Robert Davis: Thank you, Peter. Good morning, and thank you for joining today's call. We continue to make meaningful progress in using the power of leading-edge science to save and improve lives around the world. We're delivering value to patients and customers today through our innovative portfolio of medicines and vaccines, and we're securing our future by making important investments in our pipeline, the strongest and deepest in recent memory. We now have approximately 80 Phase III trials underway across a diverse array of therapeutic areas, with important readouts coming over the next year in cardio-pulmonary, immunology, HIV, ophthalmology and, of course, oncology. We're investing behind more than 20 compelling launch opportunities, some already underway. These programs will transform our commercial portfolio and fuel future growth, with over $50 billion of revenue opportunity by the mid-2030s, and we remain committed to the pursuit of disciplined, science- and value-driven business development to further augment our expansive pipeline. In the third quarter, we continued to successfully execute on our strategy with important pipeline advancements, significant approvals, and successful new product launches. Additionally, in October, we completed the strategic acquisition of Verona Pharma. This provides us yet another important growth driver with multibillion-dollar commercial potential into the next decade. We're making strong progress across the business, and I remain confident in our ability to further broaden our impact to patients and deliver long-term growth and value for shareholders. With respect to U.S. health care policy, as I've said before, we share the administration's goal of decreasing patient out-of-pocket costs for our products in the U.S. while at the same time, realizing greater prices for our medicines and vaccines in countries that have not been paying fair value for the innovation we provide. We're actively engaged with the administration in an effort to find a path forward that achieves these objectives. We also want to preserve our ability to invest in the breakthrough innovations we intend to bring to patients in the future while ensuring the sustainability of our business long term, and we're optimistic about our ability to do so. We continue to make significant investments in manufacturing in the United States. Last week, we announced a groundbreaking event at our Elkton, Virginia site as part of a broader plan that will result in the investment of more than $70 billion in expanded domestic manufacturing and R&D. These investments will support our plans to drive long-term growth and will strengthen the U.S. as a global leader in biopharmaceutical innovation. Turning to our third quarter results. We're pleased to deliver solid performance, with continued strength across Oncology and Animal Health as well as increasing contributions from our new product launches, WINREVAIR, CAPVAXIVE, and most recently, ENFLONSIA. In research, several notable updates highlight our strong progress. In cardiovascular, we announced positive top line results from the CORALreef Lipids trial, the third and largest Phase III study evaluating enlicitide, our investigational oral PCSK9 inhibitor, in the treatment of hyperlipidemia. We look forward to sharing these results at the American Heart Association meeting next week and submitting these data to regulatory authorities. In pulmonary arterial hypertension, full results from the HYPERION study in recently diagnosed patients reinforce our confidence in the practice-changing potential of WINREVAIR. Additionally, we secured FDA approval for our supplemental BLA for WINREVAIR based on the strong results of the ZENITH trial. In oncology, we're pleased that the FDA approved subcutaneous pembrolizumab, or KEYTRUDA QLEX, and that the CHMP granted a positive opinion. KEYTRUDA QLEX will provide patients and providers an important new option that can be injected in as little as one minute. We're working relentlessly to continue to develop and deliver new treatment options for patients with cancer. At ESMO, we presented data across a broad range of oncology medicines and candidates, including important findings from breakthrough therapy-designated ADCs. Finally, we continue to expand our efforts in immunology, including for another of our important late-stage candidates, tulisokibart, where we initiated Phase IIb trials in three immune-mediated inflammatory diseases. These add to the Phase II study already underway in SSc-ILD and the ongoing Phase IIIs in ulcerative colitis and Crohn's disease. We're pleased to welcome our new colleagues from Verona Pharma and look forward to adding our commercial capabilities and scale to accelerate the launch of OHTUVAYRE, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease. Strategic business development remains a top priority. We're assessing potential targets with urgency given our desire to make additional compelling investments when both science and value align. In summary, we remain highly focused on building on the strong clinical and commercial progress we made in the quarter. The investments we're making to advance and expand our pipeline are increasingly translating into positive clinical results and successful new product launches. This is giving us improved line of sight towards the transformation of our portfolio to one with a far more diversified set of growth drivers. With each milestone we achieved, including compelling strategic business development, my conviction that we're well positioned to drive the next chapter of success for our company increases. I want to recognize the commitment and effort of our teams across the world. Together, I'm confident we'll achieve long-term growth and create sustainable value for both patients and shareholders. With that, I'll turn the call over to Caroline. Caroline Litchfield: Thank you, Rob. Good morning. As Rob noted, we delivered solid performance in the quarter, with growth driven by continued strength in Oncology and Animal Health as well as increasing contributions from our many new product launches. These results reinforce the conviction we have in our science-led strategy and in our outlook for continued growth. We remain confident in our ability to deliver strong results in the near term and are committed to making disciplined investments in compelling science to drive long-term value for patients, customers and shareholders. Now turning to our third quarter results. Total company revenues were $17.3 billion, an increase of 4% or 3% excluding the impact of foreign exchange. The following revenue comments will be on an ex-exchange basis. In oncology, sales of KEYTRUDA increased 8% to $8.1 billion, with global growth driven by strong demand from metastatic indications and robust uptake in earlier-stage cancers. Usage in tumors that primarily affects women, including cervical, breast, and endometrial cancers, was a key contributor to growth. In addition, we saw increased use of KEYTRUDA in combination with Padcev in first-line, locally advanced or metastatic urothelial cancer. In the U.S., growth benefited by approximately $100 million from an extra Tuesday of shipments, partially offset by other channel movements. We are also excited by the recent FDA approval and launch of KEYTRUDA QLEX, which occurred at the end of the quarter. Our broader oncology portfolio achieved another quarter of strong growth, driven by WELIREG with sales increasing 41% to $196 million, predominantly driven by increased use in certain patients with previously treated advanced renal cell carcinoma in the U.S. as well as continued uptake from ongoing launches in certain international markets. In vaccines, GARDASIL sales were $1.7 billion, a decrease of 25%. Excluding China, sales declined 3%, primarily due to lower sales in Japan, reflecting the expiration of reimbursement for the catch-up cohort, partially offset by sales growth of 13% in the U.S. which was attributable to price and CDC purchasing patterns. In pneumococcal, CAPVAXIVE sales were $244 million, driven by demand from both retail pharmacies and non-retail customers as well as the expected seasonal inventory build. We look forward to helping protect more adults from invasive pneumococcal disease and to driving continued growth of this important product. VAXNEUVANCE sales decreased 7% due to a competitive preferential recommendation in Japan, which more than offset growth in certain international markets. In the U.S., sales were roughly flat as competitive pressures were largely offset by favorable CDC stockpile activity. In RSV, ENFLONSIA sales of $79 million reflects initial stocking ahead of expected demand. We look forward to helping protect infants born during or entering their first RSV season. In cardiovascular, WINREVAIR continued its strong momentum with global sales of $360 million. In the U.S., approximately 1,500 new patients received the prescription and over 24,000 total prescriptions were dispensed in the quarter, a testament to the continued strong demand for this important treatment option. There was also an approximate $40 million negative impact from the timing of distributor purchases, which fully reversed in October. Compelling additional data from ongoing studies, which Dean will speak to in a moment, further support our outlook for steady new patient starts. Over time, we expect an increasing proportion of use in patients whose background therapies do not include a prostacyclin. Outside the U.S., we continue to make progress with securing approvals and reimbursement, including the recent launch in Japan, which is off to a good start. Overall, we look forward to positively impacting the lives of more patients with PAH. Our Animal Health business again delivered strong growth, with sales increasing 7%. Livestock sales grew 14%, driven by higher demand across all species as well as a benefit from timing of sales. Companion animal sales declined 3% due to a reduction in vet visits and competition in parasiticides, partially offset by price, improved supply and new product launches. I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis. Gross margin was 81.9%, an increase of 1.4 percentage points driven by favorable product mix. Operating expenses decreased to $6.6 billion. There were $300 million in business development charges in the quarter, compared with $2.2 billion in charges a year ago. Excluding these charges, operating expenses were flat, reflecting an increase in investments in support of our robust early- and late-phase pipeline as well as key growth drivers, offset by the timing of expenses. Other expense was $106 million. Our tax rate of 13.4% benefited from certain discrete items. Taken together, earnings per share were $2.58. Now turning to our 2025 non-GAAP guidance, which now includes the acquisition of Verona Pharma, as well as the restructured agreement for Koselugo. We expect full year revenue to be between $64.5 billion and $65 billion. This range represents growth of 1% to 2%, excluding a negative impact from foreign exchange of approximately 0.5% using mid-October rates. Our gross margin assumption remains approximately 82%, including an updated estimate of less than $100 million in costs related to the impact of tariffs. Operating expenses are now assumed to be between $25.9 billion and $26.4 billion. This guidance does not assume additional significant potential business development transactions. Other expense is now expected to be between $400 million and $500 million. We now assume a full year tax rate between 14% and 15%. We assume approximately 2.51 billion shares outstanding. Taken together, our EPS guidance is $8.93 to $8.98. Relative to 2024, this range includes a negative impact from foreign exchange of approximately $0.15, using mid-October rates. Recall, our prior guidance midpoint was $8.92. Our current guidance midpoint of $8.96 reflects a benefit from the restructured agreement for Koselugo of $0.09, partially offset by an estimated negative impact related to the acquisition of Verona of $0.04. As you consider your models, there are a few items to keep in mind. For KEYTRUDA, as previously communicated, year-over-year growth in the U.S. in the fourth quarter is expected to be negatively impacted by approximately $200 million due to the timing of wholesaler purchases. For ENFLONSIA, we are pleased with the initial purchases in the U.S. Keep in mind that most of this was stocking ahead of expected usage in this RSV season. Lastly, as Rob noted, we have one of the most robust pipelines in our recent history. Importantly, all of our major programs are advancing and we are excited about the additional opportunities in front of us. As we have said before, we intend to fully invest behind these opportunities, and as we look to 2026, we expect an acceleration in underlying operating expense growth driven by investments in both R&D and SG&A to fuel our pipeline and new launches, including more than $0.5 billion of investment to maximize the potential of OHTUVAYRE. This will enable us to continue to bring forward innovative medicines and vaccines to make a difference in the lives of patients and drive growth for our company. Now turning to capital allocation, where our strategy remains unchanged. We will prioritize investments in our business to drive near- and long-term growth. We will continue to invest in our key growth drivers and expansive pipeline of novel candidates, each of which has significant potential to address important unmet medical needs. We remain committed to our dividend with the goal of increasing it over time. Business development remains a high priority, and we are well positioned to pursue additional science-driven value-enhancing transactions. We are maintaining our increased pace of share repurchases and expect approximately $5 billion for the full year. To conclude, as we finish the year, we are confident in the outlook of our business driven by global demand for our innovative in-line portfolio, the exciting progress we are seeing with our many product launches and our exceptional pipeline. With continued investment in innovation and our ongoing focus on execution, we remain well positioned to deliver value to patients, customers and shareholders now and well into the future. With that, I'd now like to turn the call over to Dean. Dean Li: Thank you, Caroline. Good morning, everyone. The third quarter was marked by several notable clinical and regulatory milestones. I will start with updates in oncology, followed by vaccines and infectious disease, immunology, ophthalmology, and then cover advancements in our cardiovascular and pulmonary programs. I will close by highlighting key upcoming events through the first half of 2026. Progress continues across our diverse oncology portfolio. Last month, we received FDA approval for KEYTRUDA QLEX injection for subcutaneous administration of pembrolizumab. KEYTRUDA QLEX offers a substantially quicker administration time than intravenous infusion of KEYTRUDA, and can be administered subcutaneously by a health care provider in as little as one minute when given every 3 weeks. It has the potential to provide flexibility in the site of care while helping to increase efficiency in and access to health care systems. We also see opportunity for use in certain patients with earlier stage disease. To date, KEYTRUDA-based regimens have received FDA approval for 10 indications in the earlier setting. Last month, the European Medicines Agency's Committee for Medicinal Products for Human Use granted a positive opinion for subcutaneous administration of KEYTRUDA. The European Commission has approved KEYTRUDA as part of a perioperative regimen for the treatment of certain adult patients with resectable, locally advanced head and neck squamous cell carcinoma based on the Phase III KEYNOTE-689 trial. We continue to build upon the extensive body of evidence for KEYTRUDA in multiple indications spanning both earlier and metastatic stages of disease. At the European Society for Medical Oncology Congress, data from the KEYTRUDA program were showcased in two Presidential Symposium sessions. These include progression-free and overall survival results from KEYNOTE-B96 in certain patients with platinum-resistant recurrent ovarian cancer. The FDA has accepted our sBLA for priority review and set a PDUFA date of February 20. Also at ESMO, event-free and overall survival data from KEYNOTE-905 in patients with muscle-invasive bladder cancer who were ineligible for cisplatin-based chemotherapy, conducted in collaboration with Astellas and Pfizer, were presented. The FDA has also accepted this sBLA for priority review with a PDUFA date of April 7. The success of KEYTRUDA has enabled us to build a diversified oncology pipeline. At ESMO, data from our growing portfolio of antibody drug conjugate candidates were also presented, including: results for sac-TMT, our TROP2 targeting ADC, from the Phase III OptiTROP-Lung04 study in patients with EGFR-mutated non-small cell lung cancer conducted by our collaborator, Kelun. Findings from Kelun's Phase III OptiTROP-Breast02 study evaluating sac-TMT in locally advanced or metastatic HR-positive, HER2-negative breast cancer, as well as results from the Phase II/III REJOICE-Ovarian01 study evaluating R-DXd, our CDH6 targeting ADC, in certain patients with platinum-resistant ovarian, primary peritoneal or fallopian tube cancer in collaboration with Daiichi Sankyo. Also, earlier this week, we were pleased to announce positive results for WELIREG, our first-in-class oral HIF-2 alpha inhibitor, across adjuvant and advanced renal cell carcinoma based on 2 Phase III trials: LITESPARK-022 in combination with KEYTRUDA, and LITESPARK-011 in combination with Lenvima in collaboration with Eisai. Next, to vaccines and infectious disease. Starting with CAPVAXIVE, our 21 valent pneumococcal conjugate vaccine. Following the approval in the U.S. and EU, in August, the Japanese Ministry of Health, Labor and Welfare granted approval for CAPVAXIVE for the prevention of pneumococcal infections in the elderly and adults at high risk. We are also evaluating the potential of CAPVAXIVE in additional patient types. At the European Society of Clinical Microbiology and Infectious Diseases Conference on vaccines, results of the Phase III STRIDE-13 trial, examining the safety, tolerability and immunogenicity in children and adolescents aged 2 to 17 years who are at increased risk of pneumococcal disease were presented. The FDA has accepted for review the sBLA and set a PDUFA date of June 18. Regarding RSV, following approval in June, ENFLONSIA, our long-acting monoclonal antibody for the prevention of RSV disease in infants entering or during their first RSV season is now available. Earlier this month, we received a positive CHMP opinion from the European Medicines Agency. Turning to HIV. We have development programs spanning both treatment and PrEP settings anchored by our investigational NRTTIs islatravir and MK-8527. Earlier this month, new findings were presented at the European AIDS Conference including: 48-week Phase III data for doravirine and islatravir as a once-daily, oral 2-drug regimen for the treatment of adults with virologically suppressed HIV-1 infection on antiretroviral therapy; and 96-week Phase II outcomes data for the investigation of once-weekly oral combination of islatravir with lenacapavir for adults with virologically suppressed HIV-1 infection, in collaboration with Gilead. Moving to immunology, then ophthalmology. Tulisokibart is a humanized monoclonal antibody that targets tumor necrosis factor like cytokine 1A, that is associated with inflammation and fibrosis. The Phase III ATLAS trial in ulcerative colitis recently completed enrollment, and the Phase III ARES trial in Crohn's disease remains on track. Building on these studies, we recently announced an expansion of the development program evaluating tulisokibart in dermatology and rheumatology indications with the initiation of 3 Phase IIb trials. Since the acquisition of EyeBio last year, we have made significant progress advancing the Phase III clinical development program for MK-3000. Our novel candidate targeting the Wnt pathways for certain retinal diseases. Enrollment in the Phase III BRUNELLO study in patients with diabetic macular edema is complete and the study's primary completion date has been accelerated to September 2026. SUPER TUSCAN, a Phase II study evaluating MK-3000 in patients with neovascular age-related macular degeneration as well as retinal vein occlusion is currently enrolling. In addition, earlier this month, at the Eyecelerator event hosted by the American Academy of Ophthalmology, we presented promising first-time Phase I data from the RIOJA study evaluating MK-8748, our tetravalent bi-specific antibody targeting Tie2 and VEGF, in patients with macular edema secondary to branch retinal vein occlusion and neovascular age-related macular degeneration. Based on these data, we plan to initiate late-stage trials in 2026. Next, to our cardiovascular and pulmonary programs. WINREVAIR, the first and only activin signaling inhibitor for the treatment of adults with pulmonary arterial hypertension, continues to generate evidence for benefit across a broad spectrum of patients with PAH. Results from the Phase III HYPERION trial in recently diagnosed adults with PAH were presented at the European Respiratory Society meeting. Adding WINREVAIR on top of background therapy showed a significant 76% reduction in risk of clinical worsening events compared to background therapy alone, despite early termination of the study due to loss of clinical equipoise. The findings were also published in the New England Journal of Medicine. The FDA also recently approved an update to the WINREVAIR product label based on the results of the Phase III ZENITH trial. With the expanded indication, WINREVAIR is the first PAH therapy to have an indication that includes components of the clinical worsening event, hospitalization for PAH, lung transplantation and death. With the closing of the Verona Pharma acquisition, we welcomed new colleagues to the team. Together, we are well positioned to build upon the success of OHTUVAYRE, a first-in-class dual phosphodiesterase 3 and 4 inhibitor for the maintenance treatment of chronic obstructive pulmonary disease. We plan to advance the ongoing work in bronchiectasis and evaluate utility in additional indications, combination therapies and alternative formulations. Despite advances in the screening and treatment, there continues to be a cardiovascular disease epidemic with ASCVD as the leading cause of death globally. In September, we announced that enlicitide, our investigational oral PCSK9 inhibitor, met all primary and key secondary end points in the CORALreef Lipids study, demonstrating statistically significant and clinically meaningful reduction in LDL cholesterol for the treatment of adults with hypercholesterolemia on a moderate or high-intensity statin or with documented statin intolerance. This is the third positive Phase III trial for enlicitide. We look forward to presenting the detailed results of the CORALreef Lipid study as well as the CORALreef study focused on familial heterozygous hypercholesterolemia at the American Heart Association Scientific Sessions meeting next week in New Orleans. Please mark your calendars for an investor event at AHA on the evening of Sunday, November 9, where we will highlight these results and provide an overview of our cardiovascular and pulmonary program. We continue to see strong momentum across the pipeline. As Rob noted, there are approximately 80 Phase III trials underway across multiple therapeutic areas. We have initiated more than 15 Phase III trials this year and expect to have an increasing number in 2026. As we look through the first half of 2026, we anticipate a regular cadence of milestones across therapeutic areas, including: in oncology, the February 20 PDUFA date for certain patients with platinum-resistant recurrent ovarian cancer based on KEYNOTE-B96; the April 7 PDUFA date for certain patients with earlier-stage MIBC based on KEYNOTE-905. In HIV: the April 28 PDUFA date for the combination of doravirine and islatravir, an oral once-daily treatment regimen; and data from the Phase III ISLEND-1 and 2 trials evaluating islatravir in combination with lenacapavir, as a once-weekly oral treatment regimen. In immunology: Phase II data for tulisokibart from the ATHENA study in SSc-ILD; in cardiopulmonary: for WINREVAIR, data from the Phase II CADENCE study in pulmonary hypertension due to left heart disease; for enlicitide: presentation of detailed results from 3 Phase III trials from the CORALreef development program. We continue to make progress with a diversified pipeline across multiple therapeutic areas, and I look forward to providing further updates on our programs in 2026. And now I turn the call back to Peter. Peter Dannenbaum: Thank you, Dean. Julie, we're now ready for Q&A. [Operator Instructions] Thank you. Operator: [Operator Instructions] Our first question comes from Asad Haider with Goldman Sachs. Asad Haider: Maybe for Rob on BD. I was reassured to hear in the prepared remarks that you are assessing potential targets with urgency. And certainly, your Verona deal seems well received, and it seems that the market wants to see more of those types of transactions from you. So I guess any updated framing on what you're looking for would be helpful. And then related, there's also been an ongoing pickup in discussions about the potential reemergence of potentially transformative larger transactions in the industry, just given the external environment. So curious if you could share your updated views there. Robert Davis: Great. Asad, thanks for the question. As it relates to business development, as you point out, we were very excited about getting the closure of the deal with Verona. And as you know, we continue to see OHTUVAYRE as a multibillion-dollar opportunity. So excited about that. But as we've also said, we're not done, we do need to do more. We continue to look across all therapeutic areas. I would say, obviously, the areas of focus for us continue to be aligned with what is our key therapeutic areas from the business perspective. Oncology continues to see a lot of opportunities, immunology, cardiometabolic and the like are where we're continuing to focus. As is always the case, science will drive us. And when we see a scientific opportunity where there's an unmet need that we think strategically aligns with our approach, if we see value, we'll move. So no change in our approach. And as you think about deal size, we continue to be focused in that $1 billion to $15 billion range as the primary area. But as we've been clear to say in the past, we are willing to go larger than that, but always with the focus on science and always understanding that if we look and see an opportunity, we're going to do it based on that unmet need. As you think forward to your broader question on the reemergence of potential larger scale deals, our view of that has not changed. We do not think that a transformative acquisition, a synergy-driven deal is something that we need to do nor aligns with our future because as you know, we have one of the most robust pipelines we've ever had, and we see large synergy-driven deals as disruptive to that activity. And so our focus will be on bringing in pipeline assets not on those types of deals. But as you think about that, as we've said in the past, we're open to Phase I all the way through Phase III, and where we can find it, commercial opportunities. So we look across the full spectrum. Operator: Our next question comes from Geoff Meacham with Citibank. Geoffrey Meacham: I had a pipeline one for Dean. So on the expanding development of your TLL1 (sic) [ TL1A ] immunology, I'm assuming that a broad development program was already in place surrounding the Prometheus deal. But maybe talk about the selection of the indications that you just announced from a mechanism perspective and maybe what additional development opportunities do you like across the I&I space. Dean Li: Yes. Thank you very much for the question. I mean the focus initially was in the GI space, and we're -- our ambition is to be the first and best-in-class TL1A. We've always talked about that expansion. We've always thought about that expansion, and that expansion has been recently sort of outlined with recent Phase IIb studies in rheumatology and dermatology. The question is, could we see more? I will always leave that open. I do think that the Phase III for ulcerative colitis and especially for Crohn's disease is very important to me, not just because it's in GI, but in Crohn's, there's an element of fibrosis. And the other one is the Phase II in SSc-ILD. I will need to see that because if I see that in Crohn's disease, then you all of a sudden start talking about not just similar to other anti-cytokines, dampening down inflammation, you then have a leverage in terms of fibrosis. And that would steer us in relationship to what we would do next. Operator: Our next question comes from Akash Tewari with Jefferies. Akash Tewari: So your team has talked about a 1.0 and 2.0 solid tumor strategy, with 1.0 being sac-TM3 -- sorry, sac-TMT and then 2.0 is combining the ADCs with the PD-1 VEGF. At ESMO, it looked like your TROP2 is showing a 6- to 12-month benefit on overall survival, at least it's trending that way in second line. And that's triple what we're seeing with the PD-1 VEGF. So what gets you more excited? The signal you're seeing with your TROP2 or the PD-1 VEGF class? And how does that impact your appetite to potentially run another round of Phase III combo trials with the LaNova asset? Dean Li: Yes. So I should probably reset. I don't believe that we've said anything in relationship to how you've talked about it in terms of the different phases. We are extremely excited about the TROP2, the sac-TMT, and we've had a productive relationship with Kelun. One of the things I would just emphasize is it's very easy to sit there and say, "Oh, this is a TROP2 ADC, and we throw all the TROP2 ADCs in a bucket as if they're not different." I think the recent data suggests that there may be differences, and we're really interested as we move 15 Phase III studies, but 10 of them are actually in places where the other TROP2s haven't gone. So we're very interested in pushing the sac-TMT with and in the appropriate place with IO or with other precision targeted. In relationship to the PD-1 VEGF, we're also interested in advancing that and seeing that data just evolve not just with us, but from the outside world. And that will define to us where we would put the PD-1 VEGF in relationship to PD-1. But I just want to just make sure that we're very excited about the sac-TMT. We've shown data, Kelun has shown data. You've highlighted how it's different. We believe that we're eager to see the trials that can drive that in -- not just in the Chinese patient populations, but in the U.S. and globally. Operator: Our next question comes from Evan Seigerman with BMO Capital Markets. Evan Seigerman: I wanted to just touch on the ENFLONSIA launch in the United States. Heading into RSV season, can you just talk about the initial feedback, say, versus the competition and kind of what you're seeing in terms of potential uptake as we head into RSV season. Robert Davis: Yes. Maybe I'll start, and then if Caroline wants to jump in, she can as well. Overall, we feel good about where we are with ENFLONSIA. If you look at how that launch has progressed, I would point out that while we did receive, obviously, all the full approvals we were a couple of weeks later than initially expected. So that did play into this because it put us a little bit later into the season. We did highlight, as Caroline pointed out in the prepared remarks, there was $75 million -- or $79 million of initial stocking, and that really was the seeding order from the VFC as well as other wholesaler distributor stocking. So as we sit here right now looking at the season and into next year, we really continue to see an opportunity. I would point out, if you think about the benefits ENFLONSIA brings, there's no weight-based dosing, our ability to look at our total contracted portfolio of vaccines. All of the things we've talked about continue to make us believe this will be a very important vaccine. And as we look forward into '26 and beyond, we continue to see that. We'll see where the rest of '25 plays out, but it's -- all in all, given the timing of when we started, we feel good. Caroline Litchfield: And just to add to Rob's comments, we had the seeding order in the third quarter. We expect that to be utilized during the fourth quarter. Feedback from customers has been very good, and we look forward to having an impact this season and much more of an impact as we go into 2026. Operator: Our next question comes from Daina Graybosch with Leerink Partners. Daina Graybosch: I wonder if you could give us an update on KEYTRUDA and the proportion of the sales that you have from early-stage settings and a breakdown of which of those tumor types of the 10 approved is driving that revenue? Robert Davis: Yes. I'll start, Daina, and then Caroline can jump in as well. So if you recall, if you look at where we are in the earlier-stage setting, we have currently 10 approved indications, now 5 with overall survival, which is important. And if you look at where we are going forward, the drivers of that in that cervical continues to be important, RCC, we continue to see TNBC and non-small cell lung cancer, all are important drivers. We're obviously excited. We don't have approval yet, but you heard that we have yet another potential OS benefit coming, 905, I believe it is, that Dean spoke about earlier. So yet more coming, and that's in muscle invasive bladder cancer. So a lot out there, we're excited about where it goes. It's driving over half of our growth. Right now, it's coming from earlier-stage indications. And we achieved -- if you look back to -- we indicated we would be at 25% in 2024, and '25, we're now -- we're exceeding 25%. We have not given specific targets, but we see it growing as a percent overall of total sales, and it's over half of our growth. So it is an important driver, especially as we think about the QLEX launch that is just starting to get underway. Operator: Our next question comes from Chris Schott with JPMorgan. Christopher Schott: Just Rob, a question on MFN. I appreciate the color in the prepared remarks. But just following some of the recent deals with the administration, both with Pfizer and Astra, should we be thinking about this type of structure as a reasonable framework for the industry? And just any updates in terms of where Merck is in terms of its discussion with the administration on MFN. Robert Davis: Yes, Chris, thanks for the question. As I said in the prepared remarks, overall, we're aligned with what the administration is trying to achieve, which is to lower the out-of-pocket cost for patients at the pharmacy counter and at the same time, to get foreign prices up to ensure that foreign governments are paying their fair share. So those broad-based principles, we're aligned with. We are in continuing discussions with the administration. I'm not going to give any specific updates other than to say, I am very optimistic that we're going to have a constructive outcome to those discussions. And the framework, we'll wait until we actually have something to talk about there to be more specific to how we see ours coming out. Operator: Our next question comes from Carter Gould with Cantor. Carter Gould: You had a pair of good WELIREG data recently. So Dean, I wanted to ask you around your confidence in ultimately hitting on OS in the 022 study and the importance of that in moving the needle on adoption in that setting. Dean Li: Yes. So we are equally excited about the WELIREG. It's a first-in-class treatment. We've announced the top line Phase III for the second line as well as the adjuvant. And I also think it's important that in one of the trials, the ability of a HIF-2 alpha to do something on top of the VEGF blocking agent is important. In relationship to OS, I think OS is always really important. It's important for the FDA, but most importantly, it's important for patients. So we are really eagerly awaiting to see if and when we cross that boundary. And so yes, we are excited, and we have a broad portfolio program in WELIREG. And so we'll be anxious to share those results when we get them. Operator: Our next question comes from Terence Flynn with Morgan Stanley. Terence Flynn: Caroline, I know you commented somewhat on expenses for 2026. I was just wondering if you can give us any comments on the top line in terms of some of the pushes and pulls as we think about that, recognizing you probably don't want to give guidance yet at this point, but just maybe help us think through some of the levers there. Caroline Litchfield: Yes. Of course, Terence. So as we go into 2026, we are expecting solid top line growth for our company, and that growth will increasingly be fueled by the number of new launches that we have. So we're expecting continued patient impact and revenue growth from WINREVAIR. OHTUVAYRE now is also part of the Merck portfolio. We have CAPVAXIVE, which is off to a very strong start, and ENFLONSIA. And on top of that, we have our Animal Health business, where growth will also be driven by new launches, including BRAVECTO QUANTUM, the 12-month injection, as well as NUMELVI, our new dermatology product. We also have the expectation of continued growth in oncology. To the last question, WELIREG, has strong growth with greater potential ahead of it as we get into other successful studies and treat a broader range of patients. And we do expect continued growth in KEYTRUDA, albeit at a slightly slower pace than we've seen as we are getting to peak penetration in some of the indications, and we do expect some headwind from price in our ex-U.S. markets. The other headwinds that we will face will be related to loss of exclusivity and generic entrants. And that really is DIFICID that's seen generic entrant halfway through 2025 in the U.S., BRIDION, which will have its LOE partway through 2026. And we also expect the headwind of IRA price setting on the JANUVIA family and the generic entrant for JANUVIA midway through next year. But overall, confident in our ability to continue to positively impact patients and drive solid growth. Operator: Our next question comes from Umer Raffat with Evercore. Umer Raffat: I was wondering if I should ask about Organon situation, but I realize it's multiple years removed, stand-alone company. So maybe there's not a whole lot you could say anyways. So let me focus instead on CADENCE trial instead. And Dean, my question is, it finished late September. You're indicating first half '26. It sounds to me like that's a little longer than I would have expected to get the readout out there on 150-patient trial. So could you just catch us up on your thought process there? Dean Li: Yes. So just as everyone knows, we have ZENITH, HYPERION earlier in disease, those data have come through. We have a primary completion date of CADENCE this year, and we said that we would be presenting it to the data in a meeting. I believe that we will be putting out a top line once we know it as well. So when we talked about the first half of -- or the first quarter or first half of 2026, we were talking about the full data at a medical meeting. We are eager to see that result because that result will suggest to us how much we can use WINREVAIR outside of the patient population that's formally PAH. And so we're eager to see those results as well. Operator: Our next question comes from Courtney Breen with Bernstein. Courtney Breen: Just coming back to some of the White House price policy pressures and comments you've made already. I wanted to ask this in a slightly different way. If we look at kind of Merck's ratio of revenue today, it's about 50-50 inside the U.S. versus outside the U.S. How different do you expect that to be in 5 years' time? And how much of that could be attributed to product mix? And how much down to kind of equalization of price? Robert Davis: Yes, Courtney, thanks for the question. I'm not going to get into specific guidance. Obviously, if you look at where our business is driving, we're excited about the diversity of the pipeline we're bringing. A lot of those opportunities disproportionately will be U.S. based, primarily just because of the nature of the drugs and the uptakes and the value you can assert to the U.S. market. So mix will affect how we look forward. How MFN or other pricing dynamics change, it's too early to say because we need to see what it is. And so I would leave it at that for right now. Operator: Our next question comes from Vamil Divan with Guggenheim Securities. Vamil Divan: So I appreciate the comments around 2026 and how to think about some of the driver there. I had a question just more on GARDASIL. Maybe it's a good thing that we haven't talked much about GARDASIL on this call, but just obviously a challenging year for that product. I'm curious how you think about that product sort of in 2026 and beyond, both in the U.S., where obviously, there's been sort of evolving sentiment around vaccinations and maybe some -- could be an adjustment to the guidelines around the U.S. recommendations, but also then ex-U.S., given you'll be annualizing out of the China and Japan impact. So just any sense of -- I think consensus is expecting a sort of robust return to growth for that product over the next several years. Just curious how you're thinking about that. Caroline Litchfield: Thank you for the question, Vamil. So GARDASIL still remains a very important product, and we're really proud of the impact that we're having in helping protect people from certain HPV-related cancers. As we look forward, in the United States indeed today, we are seeing growth in our vaccinations in the 9, 10 age group as well as the mid-adult segment. And that's being offset by a lower level in the adolescent segment, and that's really driven by a reduction in the eligible population, and there are some macro factors there. As we look forward for the United States, we are hopeful for growth. But clearly, as you mentioned, the ACIP recommendation around that dosing schedule will very much impact whether we do or don't grow in the United States. And as we've said before, we will always look at having the appropriate price point in the United States based on the value that we are providing society. Outside of the United States, you rightly note that we will lap the impact of China as well as the reduction in the cohort for the catch-up in Japan as we go through 2026. So we look forward to protecting more people around the world. What we're seeing in countries outside of the United States, some of the public programs have really reached maturity. So we expect a routine cohort to be vaccinated each and every year. The private market is a great opportunity for growth for us. And that's really in the mid-adult segment, age 27 through 45, where we're creating the system to enable people to get vaccinated in many countries around the world. And it's also in some countries in the broad age cohort. So we will be working to activate that cohort. It does take time, but we'll be activating that cohort to drive growth in the private segment as we go forward. Overall, we expect modest growth for GARDASIL in the near term. Operator: Our next question comes from Luisa Hector with Berenberg. Luisa Hector: Just back to KEYTRUDA. Could you just update us on your latest expectations for conversion from IV to subcutaneous and the kind of pace that we could expect? And with that in mind, Caroline, you made a comment on KEYTRUDA growth at a slower pace for '26. So just to check whether that is the overall franchise or IV only? And will you report the sales separately? Robert Davis: Yes. Luisa, this is Rob. I'll maybe start and then Caroline can address the last part of your question. So if you look at expectations for QLEX, as we've said, it's early in the launch, but everything appears to be on track. And there's no changes to what we previously communicated. We continue to expect that we're going to achieve 30% to 40% patient adoption and that, that will take us out to 18 to 24 months to achieve that. So nothing has changed there. I would highlight, as we've pointed out in the past, that we will have a permanent J-code, but we won't get that probably for 6 months. And during that first 6-month window, you can anticipate a slower uptick just because with people using temporary J-codes, there can be longer reimbursement windows. And so some people will hesitate to order until they have the permanent J-code. We've done everything we can to learn from the other subcutaneous products that have launched ahead of us. I can tell you that we've put in place, I believe, a commercial contracting strategy that really will make it frictionless to convert patients over, or in the cases of new patients, to adopt the therapy, and that's important to make sure that we are driving this because access and conversion are what is our goal or adoption is the goal we have moving forward. I'll let Caroline speak to her comments about the overall growth next year. Caroline Litchfield: Yes. So Luisa, the comments I gave were with regards to KEYTRUDA in its entirety, where we expect KEYTRUDA to slow although it'd be an important contributor to growth for our company. Within that, to Rob's point, we are really excited about the contributions that QLEX can bring as we do provide treatment options for more and more patients as next year unfolds. Peter Dannenbaum: And we will anticipate reporting separately in 2026. Operator: Our last question comes from Alex Hammond with Wolfe Research. Alexandria Hammond: On EyeBio, can you help with the Phase III BRUNELLO result in context? What's the bar to deem the trial a success? And I guess given the competitive nature of this indication, how do you plan to execute commercially? Dean Li: Well, let me just say that we're really excited about pushing this first-in-class MK-3000 novel candidate targeting the Wnt pathway. I would just remind, I believe this is the first time a novel mechanism has been pushed through in relationship to having clear human genetic evidence for it, and we plan to evaluate that MK-3000, not just in diabetic macular edema, but also neovascular age-related macular degeneration as well. In terms of commercial sort of execution, I would hold off until we see the data from these trials, but we're pushing very fast and very forward in relationship to this because this could be one of the first new mechanisms, kind of like the WINREVAIR story, where it's the first generally new mechanism that can make a profound effect on such a broad disease. Robert Davis: Yes. And maybe just to add a little bit on the commercial opportunity. And if you look at where we are today in the United States, there's about 1.6 million patients with diabetic macular edema. So this is the leading cause of vision loss in people with diabetes. And so as you look at that population, still, there's a very large opportunity because 30% to 40% of patients on therapy are not responsive to the current anti-VEGF. So the ability potentially to see conversions is significant. If you look, it's about a $13 billion market today, and we believe that our ability to drive that kind of conversion with this new molecular entity is important. As far as the commercial infrastructure, we're really combining the EyeBio's leadership strengths and our expertise in ophthalmology and pushing these forward, and I'm quite confident that we will have the global infrastructure to be able to drive this. We're investing pretty heavily behind this. And when you look at this and combined with the Tiespectus, this is a multibillion-dollar opportunity for the company. We're very excited. I think this is one of the underappreciated areas of what we have, and I credit Dean and the team, they've advanced these by a couple of years from what we originally anticipated when we did the deal. So this is a win in my book. Peter Dannenbaum: Great. Thank you Alex. Thank you all for your great questions, and we'll end the call there. Please reach out to the IR team if you have any follow-ups. Operator: Thank you for your participation. Participants, you may disconnect at this time.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lincoln Financial Third Quarter 2025 Earnings Webcast. [Operator Instructions] I would now like to turn the call over to Tina Madon, Head of Investor Relations. Tina, please go ahead. Tina Madon: Thank you. Good morning, everyone, and welcome to our third quarter earnings call. We appreciate your interest in Lincoln. Our quarterly earnings press release, earnings supplement and statistical supplement can all be found on the Investor Relations page of our website, www.lincolnfinancial.com. These documents include reconciliations of the non-GAAP measures used on today's call, including adjusted income from operations and adjusted income from operations available to common stockholders or adjusted operating income to the most comparable GAAP measures. Before we begin, I want to remind you that any statements made during today's call regarding expectations, future actions, trends in our businesses, prospective services or products, future performance or financial results, including those relating to deposits, expenses, income from operations, free cash flow or free cash flow conversion ratios, share repurchases, liquidity and capital resources are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning as well as those detailed in our 2024 annual report on Form 10-K, most recent quarterly reports on Form 10-Q and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after today. Presenting this morning are Ellen Cooper, Chairman, President and CEO; and Chris Neczypor, Chief Financial Officer. After their prepared remarks, we'll address your questions. Let me now turn the call over to Ellen. Ellen? Ellen Cooper: Thank you, Tina, and good morning, everyone. We appreciate you joining us. We delivered strong financial results in the third quarter, marking our fifth consecutive quarter of year-over-year growth in adjusted operating income and underscoring the broad-based momentum and disciplined execution as we accelerate our strategic priorities. We have remained focused and consistent in advancing our vision for Lincoln, and this quarter is another proof point. Each of our 4 businesses continued to make measurable progress against our transformation road map, translating strategy into results and contributing to the strong fundamentals that are reshaping the company into a more agile, scalable and growth-focused enterprise with durable earnings power and a clear path to building long-term shareholder value. The core tenets of foundational capital, enhanced operational efficiency and a strategy for profitable growth are increasingly evident in our results. We're evolving the direction of the organization with a clear focus on increasing our risk-adjusted return on capital, reducing the volatility of our results and growing our franchise. And we're starting to see the benefits of those actions. Our capital position remains well in excess of our 20 percentage point RBC buffer, and we have made significant enhancements to optimize our operating model, creating a more efficient and nimble organization. Our businesses have made notable progress on strategies to shift to products and segments with higher margins, more stable cash flow profiles and greater capital efficiency. We see meaningful opportunity ahead and are continuing to invest for future growth. Our businesses operate in attractive, expanding markets where we compete from a position of strength grounded in our trusted brand, leading franchise and clear competitive advantages in distribution, product manufacturing and customer service. Our trajectory continues to accelerate, our track record is increasingly clear, and while our progress won't always be linear, we're confident in the direction we're heading and excited about the path forward. I'd like to briefly comment on our annual assumption review, which continues to be a rigorous and comprehensive process, encompassing all key assumptions. The outcome this year reflected some puts and takes, resulting in a small favorable impact to adjusted operating income in the quarter, highlighting the continued alignment between our underlying experience and our go-forward expectations. The process provides a strong foundation for disciplined evaluation and well-structured governance of assumptions. Now turning to our third quarter performance, excluding the impact of our annual assumption review. Each of our businesses generated robust year-over-year results, reflecting continued momentum and execution against our strategic priorities. Key highlights included Annuities recording earnings growth driven by higher account balances and strong and diversified sales. Life Insurance posted improved earnings, supported by stable mortality and operational efficiencies while achieving higher sales driven by executive benefits. Group Protection delivered earnings that were in line with its prior year record third quarter, healthy premium growth and broad-based sales growth across market segments and products. Retirement Plan Services delivered higher earnings attributable to increased account balances and produced positive net flows in the quarter. Now turning to our business results, starting with Annuities. Our Annuities business continued to deliver excellent year-over-year and sequential sales growth, reflecting sustained progress in our strategy to diversify our new business mix. Reported sales reached $4.5 billion, our fourth consecutive quarter of increased sales with our spread-based products, including fixed annuities and RILA, representing 63% of the new business total. Each of our 3 core product categories, fixed, RILA and variable annuities exceeded $1 billion in sales, supporting our focus on building and sustaining a more balanced product mix, supporting our strategic and financial goals with strong profitability and capital efficiency and underscoring our differentiated ability to capture customer demand. Our go-to-market strategy, combined with our breadth of products, deep long-standing distribution relationships and consultative wholesaler model enables us to broaden our addressable markets and reach more customers seeking to retire with confidence and financial security. Our distribution partners value our customer-centric approach, which equips producers with the insights, tools and capabilities to deliver the right solutions while enhancing their productivity and ease of doing business. As a holistic solutions provider with a product suite that continues to expand, we are positioning our Annuities business for further growth. As a leading product manufacturer, we are delivering innovative new features that are meeting evolving customer needs across various environments, further distinguishing us in the marketplace. Our fixed annuity sales increased by 36% year-over-year as we leveraged the foundational product and distribution capabilities we built to sustain a consistent and growing presence in the fixed segment. We also continue to invest in our service model to deliver more seamless value-add capabilities to support our customers. Additionally, during the quarter, we transitioned to fully retaining the flows from our fixed sales, which will enhance the growth of our spread-based earnings over time. Our RILA sales increased 21% year-over-year, a sixth consecutive quarter of sequential growth that reflects our ability to differentiate through distinctive and expanded product features and crediting strategies that resonate with customers. Sales volumes of our traditional variable annuities were also up year-over-year. Our variable product suite offers a broad array of features and benefits that meet customer needs and remain integral to our overall offering. VAs remain a valuable contributor to our overall product mix, generating strong free cash flow and attractive risk-adjusted returns. In summary, these results demonstrate the success we are achieving in delivering a diversified product mix that meets customers where they are across different life stages, risk tolerances and economic environments. The strategy to increase the proportion of our spread-based earnings through profitable new business generation translates into more resilient and predictable cash flows over time while meeting our risk-adjusted return targets and balancing the financial contribution across products. We remain confident in the strategic trajectory within our Annuities business and our ability to leverage our competitive strengths to achieve our profitability objectives. Now turning to Life Insurance. As I've mentioned on prior calls, we have taken decisive steps to reposition this business for long-term value creation. We have strategically shifted our new business mix to emphasize products that support our strategic objectives, those with growing addressable markets that offer compelling value propositions for our customers, enable efficient capital deployment and position us for durable profitable growth. This quarter's results reflect the progress we are making as our strategic realignment continues to gain traction. Excluding the impact of our annual assumption review, Life earnings reached $54 million, marking a significant year-over-year improvement. Sales totaled nearly $300 million with executive benefits accounting for 2/3 of that volume, driven by a couple of large cases. In this product category, we have enhanced our competitiveness through targeted product additions and by strengthening our distribution relationships and expanding our service model, enabling us to deliver a strong quarter for executive benefit sales. While we don't expect this level of sales to repeat in the fourth quarter, given the natural variability in large case activity, we have built the foundational capabilities to support a growing presence in this segment. We are continuing to invest to ensure a long-term growth path and are encouraged by the results we're seeing. Our other Life sales were a well-balanced product mix aligned to our targeted strategy. The momentum this quarter reflects the effect of the deliberate actions we've taken over the past several years, optimizing our wholesaler footprint, emphasizing products with more stable cash flows and enhancing the customer experience. We are continuing to invest in modernizing our service model and advancing our digital offerings to deliver a more integrated customer experience. Through expanded technology, we are differentiating our capabilities to provide real-time insights to support faster data-driven decisions and position us for sustained growth. In the Life business, we are seeing the early impact of our repositioning efforts and remain steadfast in our commitment to enhance and grow this business and realize its full long-term potential. Next, turning to our Group Protection business. As mentioned earlier, Group's earnings were in line with its prior year record third quarter, although modestly below our expectations. Importantly, the core fundamentals of this business remain strong. We continue to execute on our targeted strategy of delivering value across 3 unique market segments: local, regional and national with an ongoing strategic focus on repositioning this business for sustainable profitable growth, transforming how we operate and delivering reliable quality customer service. We're seeing tangible results from our actions as reflected in our year-over-year 5% premium growth, driven by robust sales, strong persistency and pricing discipline across both new and renewal business. Our premium expansion was broad-based with increasing results across all market segments and product categories with supplemental health, a strategic area of focus, increasing 33% year-over-year. This growth underscores the execution of our strategy to diversify across market segments, expand and deepen the product portfolio and invest in the people, process and technology to create differentiated capabilities that deliver a simpler, faster and more connected customer experience. While the third quarter is typically a seasonally lighter sales period, Group delivered year-over-year sales growth of nearly 40%, broadly diversified across market segments and products. In this business, servicing our customers with excellence is a strategic differentiator. As we look ahead, we will continue to drive our segment strategy in a profitable and sustainable way by broadening our distribution relationships, expanding our product suite and continuing to expand our digital tools and technology to drive more productivity, efficiency and effectiveness. Grounded in a strong foundation and disciplined execution from pricing to expansion in growing addressable markets, our Group business is well positioned to drive sustainable growth and profitability. While we expect some variability in results from quarter-to-quarter, the fundamentals are strong, and the long-term trajectory is positive. Now turning to Retirement Plan Services or RPS. RPS delivered a strong quarter, achieving 5% year-over-year earnings growth and first year sales of $2.4 billion as the robust new business pipeline we previously communicated materialized this quarter. Additionally, total deposits increased 20% year-over-year and net flows were positive, driven by the strong sales momentum in the quarter. Our offerings and our core recordkeeping and institutional markets continue to drive meaningful customer engagement, reinforcing our long-term growth potential. Looking ahead, we will continue to focus on initiatives that will enhance our operational and service capabilities, broaden our product offerings and drive greater efficiency as we pursue sustainable and profitable growth. In closing, we are moving forward with conviction, intention and collective determination. The progress we have made is evident not only in our financial results, but in the precision of our execution and operating model we are continuing to refine and fortify and the durability of our capital position. We are expanding our strategic advantage by pivoting toward higher-margin, capital-efficient growth, investing in the foundational core that sharpens our competitive edge and evolving into a more agile, scalable and forward-looking enterprise. Through disciplined transformation, we are building a market-leading franchise equipped to thrive in a dynamic environment, align capital with strategic priorities and capture value where we have built scale and momentum. In summary, we are delivering today while advancing the capabilities that will drive tomorrow. With that, I will turn the call over to Chris. Christopher Neczypor: Thank you, Ellen, and good morning, everyone. Our third quarter results represent another quarter of strong execution and meaningful progress on our strategic initiatives, delivering year-over-year adjusted operating income growth for the fifth consecutive quarter. This continued broadening momentum underscores the effectiveness of our strategy, and a disciplined approach consistently demonstrated across our businesses. Importantly, each of our businesses delivered stable or improved year-over-year earnings. Alongside this, we maintain a strong emphasis on free cash flow generation and capital efficiency, reinforcing Lincoln's ability to deliver attractive risk-adjusted returns and positioning the enterprise for durable long-term success. This morning, I'll focus on 3 primary areas. First, I'll discuss our consolidated results for the third quarter, including the outcome of our annual review of reserve assumptions. Second, I'll provide insights into our segment level performance. And third, I'll offer a brief update on our capital position and investment portfolio. Let's begin with a recap of the quarter. This morning, we reported third quarter adjusted operating income available to common stockholders of $397 million or $2.04 per share. This includes the impact of this year's assumption review, which increased adjusted operating income by $2 million or $0.01 per share. Additionally, our alternative investment returns were largely in line with expectations, delivering an annualized return of just under 10% or $101 million. After tax, this was $2 million below our target or $0.01 per diluted share. Turning to net income. We reported net income available to common stockholders of $411 million or $2.12 per diluted share. The difference between the net income and adjusted operating income was predominantly driven by 2 main factors. First, there was a negative after-tax change of $151 million in the fair value of the GAAP embedded derivatives related to the Fortitude Re reinsurance transaction. This change was primarily driven by the impact of lower interest rates on available-for-sale securities in the funds withheld portfolio backing the agreement with the corresponding offset flowing through accumulated other comprehensive income or AOCI. Second, more than offsetting this negative was a favorable after-tax impact of $324 million within nonoperating income, driven primarily by the positive movement in market risk benefits amid a stable interest rate environment and higher equity markets. Of note, our hedge program continues to perform well, in line with expectations. As in prior years, the effectiveness of our hedging strategy allowed us to take a $50 million distribution from LNBAR this quarter. Before turning to our segment results, I want to briefly touch on the impacts of our annual review of reserve assumptions on adjusted operating income. As I noted earlier, the overall impact from the assumption review this quarter was minimal, resulting in a $2 million net benefit to adjusted operating income. While there were some positive and some negative adjustments, none were material relative to the scope of our reserves. Group Protection earnings benefited from a positive adjustment of $39 million this quarter, driven mainly by updated assumptions in our [ LTD and life lines ], reflecting favorable trends we've seen over the past few years. This was offset by modest negative impacts in both our Life and Annuities operating income of $29 million and $8 million, respectively. As it relates to our life assumptions, the impact this quarter stems from slightly elevated mortality experience within our universal life block, which was primarily offset by more favorable mortality experience in our term block, consistent with the drivers of our recent results. Importantly, policyholder behavior remains broadly in line with our expectations. The impacts of our annual assumption review on our segment results for this period and the prior year period are detailed in our earnings release issued this morning. Now turning to our segment results. Excluding the impact of the assumption review, Group Protection operating earnings were $110 million, consistent with the prior year record third quarter, and the margin for the quarter was 8.1%, reflecting a modest decline of 40 basis points year-over-year. The main driver of our result was a moderation in our disability loss ratio, which increased to 76.7% compared to 70.5% in the third quarter of 2024, excluding the impacts of the assumption review. This increase reflected both volatility, specifically 1 month of unfavorable severity in our LTD experience as well as lower LTD recoveries. While we've seen the volatility in severity normalize, the lower LTD recovery rate will likely continue. Over recent years, enhancements in our claims management practices have significantly improved early-stage resolutions. But as these practices mature, incremental benefits naturally moderate. Offsetting this unfavorability during the quarter was continued favorability in LTD incidence and continued favorability in Life results. Group life results, in particular, remained strong year-over-year, delivering the second lowest loss ratio post the pandemic, supported by lower incidence and favorable severity outcomes. Excluding the impact of the assumption review, our life loss ratio improved relative to the favorable prior year quarter, declining to 65.3% compared with 71.8% in the third quarter of 2024. Although quarterly fluctuations in mortality outcomes are expected, this continued strength underscores the effectiveness of our disciplined pricing. As a reminder, we typically experience seasonal pressure from the third to fourth quarter. Looking ahead and incorporating the third quarter trends and these seasonal factors, we expect to end the full year with a margin in the range of mid- to upper 8%, representing a roughly 50 basis point improvement year-over-year. We remain confident in our strategy, disciplined execution and ability to deliver attractive and resilient long-term performance. Now turning to Annuities. Excluding the impact of the assumption review, Annuities delivered operating earnings of $318 million, up $18 million year-over-year, driven by higher average account balances, net of reinsurance and continued growth in spread income. Additionally, this quarter's earnings included a benefit of approximately $10 million from favorable expense dynamics, primarily related to expense timing and certain tax items that were partially offset within Other Operations. Turning to spreads. Spread income continued to grow with spread-based products representing 29% of total annuity account balances, net of reinsurance, reflecting our commitment to diversifying our annuity business. RILA account balances increased 16% over the prior year quarter, representing 22% of total balances, net of reinsurance. Fixed annuity account balances were 11% higher year-over-year as we began retaining all of the fixed business we sold during the quarter. From a net flows perspective, VA net outflows continued at a similar pace as in recent quarters, reflecting the maturity of the block, while net flows into spread-based products exceeded $1 billion, further underscoring the success of our strategic diversification efforts. Overall, our Annuities business delivered strong earnings growth, reflecting our ongoing efforts to diversify and strengthen the stability of our earnings base in this business. We remain confident that our disciplined approach positions us well to deliver stable, attractive returns over the long term. Retirement Plan Services reported operating income of $46 million, up slightly from $44 million in the prior year quarter, driven by higher account balances amid a favorable equity market backdrop and spread expansion. This was partially offset by pressure from stable value outflows over the past 12 months, although the level of stable value outflows has stabilized in recent quarters. Sequentially, earnings improved by $9 million, the result of favorable equity markets and improved spreads. It's worth noting that this quarter benefited from approximately $2 million of nonrecurring items, primarily driven by net investment income favorability, which had an offset in Other Operations. Base spreads were 107 basis points, up from the prior quarter and prior year. The sequential increase reflects normalization following last quarter's onetime administrative adjustment as well as about 2 basis points of benefit from the nonrecurring net investment income dynamic just discussed. On a normalized basis, spreads are broadly consistent with last year's third quarter. Net inflows totaled $755 million, reflecting strong sales momentum and a robust pipeline noted last quarter. As we look ahead to the fourth quarter, we expect flows to be pressured by a few known plan terminations, the majority of which were not meeting our profitability targets. Account balances benefited from equity market performance with average balances increasing nearly 8% year-over-year. End-of-period balances reached $123 billion, up 5% sequentially. Overall, our third quarter results highlight steady improvement and positive momentum within Retirement Plan Services. While we remain focused on disciplined expense management and continue to target efficiencies aligned with our long-term earnings objectives, it's important to remember that the fourth quarter typically brings a seasonal increase in expenses, which we expect to be a modest sequential headwind. Beyond expense discipline, we remain focused on initiatives aimed at delivering underlying growth and enhancing the long-term profitability of Retirement Plan Services. Now turning to Life. Excluding the impact of the assumption review, Life delivered operating earnings of $54 million for the third quarter compared to $14 million in the prior year quarter. The increase was driven by stabilization of our mortality experience, increased investment income and continued expense discipline. Mortality results for the quarter improved compared to the prior year quarter, driven by lower incidence. While severity was slightly higher, overall experience was consistent with our expectations. Turning to expenses. We continue to see year-over-year improvement driven by disciplined expense management. Net G&A expenses declined 4% compared to the prior year quarter, reflecting continued underlying efficiency. Annualized alternative investment returns for the quarter were roughly 10%, essentially in line with our target, but below the 11% return we achieved in the prior year quarter. More broadly, we are beginning to realize the benefits of increased investment income, driven in part by continued growth in alternative investments, which remain well aligned with our life liabilities as well as ongoing enhancements to our overall investment profile, all of which should continue to support earnings going forward. Overall, the strong results this quarter highlight the ongoing progress that we have made in our Life business, further validating the strategic initiatives we've implemented to position this business for sustained profitability. Turning now to expenses. As we've discussed, expense management remains a strategic priority across the organization, and we've made meaningful progress year-to-date. Through the first 3 quarters, we achieved significant improvements in operational efficiency with expenses tracking favorably compared to the prior year. This disciplined approach has been driven both from a total company perspective and through targeted actions such as within our Life business. However, as is typical, we anticipate that expenses will rise sequentially in the fourth quarter in certain areas, largely attributable to higher variable compensation, including the impact of anticipated growth in sales volumes during the quarter. Additionally, certain strategic investments intended to enhance the long-term profitability of our businesses will have a slightly greater impact in the fourth quarter compared to earlier quarters. Despite this expected sequential increase, our full year expenses will reflect the disciplined actions we've executed this year, which we expect will result in relatively flat expenses compared to the prior year despite higher sales and increased volumes. We remain committed to disciplined expense management, ensuring we maintain and build upon our progress in managing the expense base effectively. Now for an update on capital. We again ended the quarter with an estimated RBC ratio well above our 420% buffer, continuing to maintain a strong excess capital position above our target due to the Bain proceeds and growth in retained free cash flow during the year. As we've indicated previously, we expect to deploy this excess capital over the next year as we execute against our strategic objectives. This quarter, we made meaningful progress on 3 specific initiatives. First, we fully transitioned to retaining all of the fixed annuity business we originate with the exiting of our external flow reinsurance agreement. The strategic objective of achieving a more balanced mix of variable and spread annuity earnings will come through various actions with the full retention of existing sales, the important first step. Leveraging our Bermuda-based affiliate and a more fully optimized asset allocation framework will allow us to expand profitability while a portion of the proceeds from the Bain transaction currently sitting in excess capital will be deployed to support this retention. It's worth noting from a GAAP perspective, you'll see slightly higher retained acquisition expenses in the near term, which should translate to higher spread income and profitability over time. Second, we continue to scale our institutional funding agreement program with $1.9 billion in issuance completed year-to-date. As we've discussed previously, FABN and other similar programs are an important growth engine for our spread earnings and will utilize some of our excess capital over the next year or 2. Over the next year, we plan to begin disclosing the specific earnings metrics as we scale the program. Lastly, optimizing our legacy life block has been a critical objective that we've been working on for the last 3 years. And as we discussed, post the Bain transaction, we are evaluating a number of actions that should enhance the long-term free cash flow from this block. We'll have more to say on this in our outlook discussion next quarter. Looking ahead, we remain committed to a disciplined and balanced approach to deploying our excess capital aimed at enhancing our risk-adjusted returns and positioning Lincoln for sustainable long-term success. Turning to investments. Our investment portfolio delivered solid results in the third quarter, reflecting disciplined management, effective diversification and ongoing execution. Portfolio credit quality remained strong with 97% of investments rated investment grade and below investment grade exposure near historic lows. Our partnership with Bain Capital continues to enhance our investment capabilities, and we are already benefiting from increased sourcing flexibility and execution efficiency. Within private credit, we remain comfortable and confident in our long-standing disciplined approach and continue to lean into investment-grade private and structured strategies as we further optimize our investment portfolio while supporting objectives around sales growth, earnings potential and capital generation. Lastly, alternative investments generated roughly a 2.5% return for the quarter, generally consistent with our long-term expectations and reflecting continued strength across strategies. In closing, our third quarter results reflect another period of consistent execution and meaningful progress on our strategic priorities. We delivered strong earnings across all businesses, advanced initiatives to diversify and enhance our earnings base and maintained a healthy capital position. These outcomes underscore the effectiveness of our strategy and a disciplined approach we've taken to enhance capital efficiency, free cash flow generation and long-term profitability. While our results will not always be linear, the broader momentum across the enterprise remains clear. The actions we've taken this year position Lincoln for a strong 2025, and we remain focused and on track to achieve the objectives outlined in our 2026 outlook. Our commitment to disciplined execution and balanced capital deployment continues to reinforce our ability to deliver durable, attractive risk-adjusted returns and long-term shareholder value. With that, let me turn the call back over to Tina. Tina Madon: Thank you, Chris. Let me turn the call over to the operator to begin Q&A. Operator? Operator: [Operator Instructions] Your first question comes from the line of Joel Hurwitz with Dowling & Partners. Joel Hurwitz: I wanted to start on Life. So good to see another quarter of improved earnings. Can you unpack the drivers there? Anything unusual in the quarter? And then there's been volatility over the past several quarters with Life earnings. I believe your '26 guide that you provided a couple of quarters ago suggested earnings may even be above the level we saw in Q3. Any way you could help us understand the earnings power of this business in the near to intermediate term? Christopher Neczypor: Sure, Joel. It's Chris. What I would say is that this quarter was really a reflection of a stable quarter for the life insurance block. If you think about it, there's drivers of volatility that are probably more outsized for that business. As you're well aware, mortality and alternative investment returns as the 2 big ones. And as I said in my prepared remarks, both mortality and alt returns came in basically as expected for this quarter. And so it's actually a really nice quarter because you can see in a stable environment for the big drivers of volatility, what the third quarter earnings power would look like. The reason I emphasize third quarter is because, as I'm sure you know, there is seasonality in that business. And so third quarter and fourth quarter tend to be, call it, $20 million higher than the average second quarter tends to -- would represent a flat quarter and then first quarter, the $40 million worse, just given the drivers of mortality. So you could look at the third quarter as a good run rate once you normalize for seasonality. What I would say as it relates to the drivers because when you do that for this year and last year, you are seeing growth year-over-year, which is positive. It's in line with the expectations that we had set out. And it's driven by the things that we said it would be driven by. Its increased net investment income, part of that is the growth in the alternative investment income portfolio, not necessarily the rate which has stabilized, but the growth in the balances. We've discussed how they are a good long-term fit for the long-duration nature of the liabilities. And most importantly, you continue to see the expense discipline that we've talked about and that's starting to come through in a more fulsome way. So at the end of the day, a number of those drivers should continue as we look out over the next couple of years. We're excited about the growth potential as it relates to the earnings power of that business. And it's just nice to have a really clean quarter so you can see what the underlying earnings power looks like for a third quarter. Joel Hurwitz: Got it. That's helpful. And then just on capital, with leverage essentially back to your 25% target and a much improved capital position, where do you guys stand on resuming a share repurchase program? Christopher Neczypor: Yes, Joel, thanks for the question. I think, as you know, we tend to talk in more detail about our capital plans and free cash flow outlook and so forth as part of our fourth quarter earnings call when we give the outlook. What I would say is that relative to the guidance that we put out 2 years ago and then reiterated at the beginning of this year, we are tracking at expectations, if not better, across almost all the metrics. So we feel really good about the direction of the company, both from a GAAP earnings perspective, sales, free cash flow, RBC. We're obviously working through the deployment of the Bain proceeds over the next year. And at the end of the day, as we've talked about before, when we get the fourth quarter and give a more detailed look as it relates to how we're thinking about capital and deployment, both internally and for return to shareholders, we'll go through that in more detail. Operator: Your next question comes from the line of Ryan Krueger with KBW. Ryan Krueger: I had a question to start on Group. So with this year's margin expected to come in at the mid- to upper 8% range, is that a good starting point when thinking about going forward? Or I mean, because I think you probably still had pretty favorable mortality this year, and it sounds like disability maybe is reverting more to a bit of a lower level. So just trying to think through if that's a good starting point or if we should actually normalize a bit lower going forward, at least in the near term. Christopher Neczypor: Sure. I'll answer your question, and I'll give you more detail maybe than you had asked. But if you step back, let's just start by saying that we're -- we feel really good about the trajectory of Group, right? I mean the business there was a 1% to 3% margin business a couple of years ago. We've improved to over 8% last year. We're going to see another 50 basis points improvement this year. You're seeing premium growth 4% to 5% on average. So the outlook for Group hasn't changed. What's happening this quarter is that some of the normalization that we had expected maybe more in 2026 is just happening a little bit earlier. And I'll unpack all of that. But I just want to reiterate by saying we feel really strong about the trajectory for Group. And at the end of the day, our outlook has not changed. So if you step back and sort of unpack this quarter, and I'll hit on both disability and life to your question. Disability loss ratio, it's up, call it, 6 points. As you know, disability loss ratios are driven by 2 primary things: the incidence, so the new claims being filed and then the resolutions, obviously, the reserves released as claimants return to work. Incidence continues to be very positive. The trend there has been good for a number of years, and we haven't seen any signs of that reverting. It's a positive trend that will revert at some point to a more normalized level. But the incidence trends remain very strong. We would expect that trend to continue into fourth quarter. Resolutions is where we saw less favorability this quarter, and it's really just -- it's driven by 2 things. So if you think about the 6-point change in the disability loss ratio, half of that, we would say, was driven by severity volatility. And so all that means is that during the month of August, the average size of the claim as it relates to resolutions was lower than we would expect. That's volatility that happens. We've already seen that revert in September and October. The other half, though, is a normalization of the resolution rate. And it's still really good compared to historical levels, but it is normalizing off of what was an extremely strong 2024 number. And we would expect that trend to continue. As I mentioned, part of the dynamic that's occurred over the past couple of years is we've invested in our systems and our processes. You were seeing resolutions trend lower than we would expect over the long term, the rate being higher. And so what's -- when we think about our outlook, 2026, 2027 and beyond, we'd always expected that normalization. So at the end of the day, what I would say is third quarter results had a little bit less favorability as it relates to the resolution rate. That was to be expected at some point. We're seeing it start a little bit earlier. But then as you look into next year, our expectation hasn't really changed. On the Life side, I would say 2 things. One, the results have been pretty good over the past 2 years. Part of that, as we emerge further and further away from the pandemic, you're just seeing mortality improvement, and that's reaching a decent steady state. But the other thing that's happened, and we've talked a lot about this is that a good portion of our rate increases or the rate actions in general that we've taken over the past 2 or 3 years have really been executed through the life block. So in 2025, we've seen mortality improvement, and we've seen the impact of the rate actions come through. That's contributing to improved loss ratios. Year-to-date, I think our life loss ratio has improved around 5%. And so that's going to have the favorable mortality in there, the pricing actions. And keep in mind, we also include supp health in the life loss ratio. We'll look to think about incremental disclosures there over time. But at the end of the day, going forward, while we know there will be some volatility quarter-to-quarter, the results this year have been relatively within our expected range. I would say third quarter was probably at the low end of that range. And as we think about fourth quarter, we are continuing to see some of those positive trends. Ellen Cooper: And Ryan, I'll also add that as we think about future growth, we also -- as Chris alluded to and also as you heard in our remarks, we continue to also see premium growth. Now we will always continue to prioritize profitable growth over pure top line growth. But if you look at our overall premium growth, and we talked about the fact that we grew 5% year-over-year. And importantly, we are continuing to lean in, and we see more opportunity in local markets, which is a higher-margin part of this overall business. We've done an awful lot in the last couple of years to invest in the capabilities there to be able to strengthen our overall relationships with brokers that are also leaning in there. And then we see this broadening, expanding opportunity as it relates to supplemental health. And just to give you a sense, when we look at the overall premium growth year-over-year of 5%, 33% growth year-over-year in supplemental health. And in all cases, we see opportunity to just continue to expand lines of coverage in our regional and in national in that space. So we see that there continues to just be future opportunity to grow as it relates to the Group business. Christopher Neczypor: So when you put all that together, Ryan, to answer your question specifically, yes, there will be some normalization of some of the LTD trends that we've talked about. But offsetting that will be the positive impact from the dynamics Ellen just walked through, the growth in supplemental health, continued repricing. So I wouldn't say that we're expecting deterioration in our margin. I think that this quarter, we just saw a little bit of that normalization happen earlier. Ryan Krueger: Great. And I appreciate all those details. One just quick follow-up on disability resolutions. Do you think that -- I mean, do you think that/it has anything to do with the economy? Or do you think it's more just company specific, given how favorable it had been and just normalizing to a more sustainable level? Christopher Neczypor: So I don't know that it really is anything to do with the economy, but I would also say it's more than just company specific, right, Ryan, because there's really 2 dynamics. One has been the increased processes and overall investments in our claims management process. That's certainly -- I can't speak for our peers. That is a very much Lincoln-specific strategic initiative we've talked about. But also as you just think about the fact that incidence rates have been very low over the past 2 years, the composition of your claim inventory has been shifting. And so as you know, late-stage duration -- late duration claims have a lower probability as it relates to being resolved and you work that down. So as the mix of your inventory changes, just to keep it simple, your rate -- the rate itself will normalize over time. And that's not a Lincoln specific thing, that's an industry thing. Operator: Your next question comes from the line of Suneet Kamath with Jefferies. Suneet Kamath: I wanted to start with the assumption review, acknowledging that it was fairly minor. Are there any statutory impacts that we should think about? And is there any kind of ongoing earnings GAAP impacts that we should think about as well? Christopher Neczypor: No, nothing material. We would spike it out if there was anything to note there. Suneet Kamath: Got it. And then I guess on the retention of the fixed annuity business, is that something that we're going to actually see in the earnings in the near term here? Or is that going to take some time to sort of develop? Just curious about the cadence of that. Christopher Neczypor: Yes. Good question. So -- and the answer is both, but for different reasons. So what happens is you'll see the account -- the net retained account balances grow, and you will see increase in investment income and increase in interest credited grow. I will say that one of the things we're looking at is as spread-based account values become a bigger part of the annuities block. We're going to look to get better disclosure next year to more explicitly spike out some of the individual drivers there. But that aside, what you will see is growth in spread income, but that comes in as the assets and liabilities are emerging over the life of the policy. In the near term, what happens is you actually have slightly higher retained acquisition expenses. So this is one of the things that I spiked out in my commentary where because we don't have the flow deal anymore, you don't see the offset as it relates to some of the acquisition expenses. And so that's a slight near-term headwind to Annuities. But then over time, you'll see growth in spread income. Suneet Kamath: Got it. Is there any way to size that drag? Christopher Neczypor: We'll look to give you more color there as it relates to the fourth quarter outlook. I think we've said before that we were ceding 60% to 70% depending on what time period you're looking at as it relates to fixed annuity flow. If you have an estimate for what acquisition expenses are, you could see that. I think in this quarter, we had 1 month of retained -- or actually, I think it was 2 months of retained fixed annuity flow on a 100% basis. So you can look at some of the expense line items there. But we'll get you something more detailed as it relates to the 2026 outlook. Operator: Your next question comes from the line of Alex Scott with Barclays. Taylor Scott: First one I've got for you is just on the topic of private credit. I'd be interested in what your take is on some of the, I guess, one-offs that have kind of popped up recently. And maybe just to add on to that, just your views of potentially growing into private credit as we're looking at the growth in your business, retaining more. I assume that comes with a little more private credit allocation to the Bain partnership. What is your comfort with the stability of that business and the quality of the assets that you're putting on? Christopher Neczypor: Yes. So as it relates to the one-offs, I don't -- we don't have a view. We don't really have exposure or an impact from some of the names in the headlines. What I would say is big picture, I think when you look at our portfolio relative to others, especially relative to others in the annuity space, we've been somewhat underallocated to different parts of the private credit and structured securities asset classes. We certainly have a good healthy allocation over the past 10 years, but it hasn't been a focus of growth the way that it has for others, just given the fact that we haven't been as big in some of the retained spread business historically. So my point is we feel really comfortable with our portfolio. You can look at the investment details that we give each quarter. The credit quality is very stable. Our credit losses this quarter, you can see in the [ investor supp were ], I think one of the lowest quarters of the past quarter -- I mean they're very, very de minimis and in line with the past 2 years, let's say. So we don't see any issues as it relates to the existing portfolio as it relates to growing. Look, we're going to be thoughtful about it, right? We're going to apply the same discipline around portfolio construction and risk management that we've done before. And it's something that we think will be a driver, but it doesn't necessarily mean that we're going to be taking outsized risk. Taylor Scott: Got it. Helpful. Second one I had for you is on the SGUL. You mentioned optimizing that block further. And I just wanted to see if you could provide any extra color around some of the things you're considering. Are we talking about things that are more internal or external reinsurance? Any way you can help dimension that for us? Christopher Neczypor: Sure. And again, I think we'll have more to say next quarter when we give our outlook as we do every year. But Alex, what I would do is probably reiterate what we've said in the past. We think there's a number of ways to continue to optimize that block, some external, some internal. We think that the options as it relates to repositioning the asset portfolio would be a driver to free cash flow and NII over time. We've talked a lot about looking at our historical captive framework and looking for efficiencies there. We've talked about the potential to explore another external deal. So I think we went through this when we announced the Bain transaction, but all of those projects are in the works from an exploration perspective, some we think will have real meaningful impact, some we're still studying. But at the end of the day, part of the capital as it relates to the Bain equity will be deployed to execute on a number of the things that we've discussed. Operator: Your next question comes from the line of Wes Carmichael with Autonomous Research. Wesley Carmichael: I had a question on, Ellen, your comments, just thinking about increasing the risk-adjusted ROE of the company and reducing volatility. Just wondering if there's any kind of new developments in terms of products that you want to lean into there. And I understand you've been growing Group Protection, but are there other kind of product areas you'd point to where ROE and cash flow are more attractive now? Ellen Cooper: So we really -- when we think about overall product, first of all, and expansion of product, everything that we're doing inside of each of our businesses is really to support our overall strategic and financial objectives. So the idea of continuing to really lean into places where we see, first of all, growing expandable markets and also additionally stable cash flow and higher risk-adjusted returns. So we really can take it case by case. So for example, we talked about really strong sales in the quarter in Life Insurance. And one of the places there was related to executive benefits. So I want to call out just a couple of things there. We had historically had a presence in executive benefits. But in the last year or so, as we really have been focusing on pivoting the entire Life franchise, we really strengthened our overall offering. We broadened our capabilities there. We continue to deepen our relationships on the distribution side. And we also built some necessary capabilities, dedicated resources, and you see that we put up a couple of large cases in the quarter. And at the same time, all of the sales that you see in the life portfolio as we continue to build momentum there are all products that we've leaned into that are really emphasizing more accumulation and more limited guarantees that also will produce stable cash flows. So we have repriced and put up completely new products in the IUL space as an example. Accumulation VUL is another example. And we also have a risk-sharing product in our MoneyGuard space. And at the same time, we're building tools that differentiate us from presale and post-sale. We've completely optimized the distribution footprint. In our annuity business, one of the places where we believe that we're winning and one of the reasons why we continue to see strong sales, 32% year-over-year sales growth is that in each of our product categories, we're continuing to expand. And there, we've got unique crediting strategies. We have unique index features. We commented already on Group Protection and really leaning into, as an example, supplemental health. And then I'll just call out in Retirement Plan Services, one of the things that is driving our strong sales in the quarter, our small market sales were up 24%. And there, we're leaning into pooled employer plans, and that has also -- that's some of the higher-margin parts of the Retirement business. And our stable value investment only was up more than 2x. And there, we developed a new product as well that was shorter duration. So -- and we will continue because it's part of our competitive advantage to really lean into new product, product expansion, very much listening to the voice of our customer and what the compelling value propositions are and then testing that alongside what meets our strategic and financial objectives. Wesley Carmichael: Got it. And maybe a more detailed question. But I think, Chris, you mentioned a $50 million dividend out of LNBAR. I think it's been a little while since you executed on taking money from that subsidiary, and I appreciate you may want to share more next quarter with the outlook. But is there an annual expected level of dividends out of that sub? Or -- and how much, I guess, do you think it might fluctuate if we get a little more volatility with the macro? Christopher Neczypor: So Wes, what I would say is the $50 million dividend is consistent with what we took last year. And frankly, to your specific question, we saw a lot of volatility in April and May. And so it's actually a good testament to the effectiveness of the hedge strategy. And the overall dynamics as it relates to the way that we operate our variable annuity risk that we were able to take another $50 million dividend this year. I think longer term, as we build excess capital in different parts of the organization, you would expect to see some growth in dividends. As a reminder, we also have our Bermuda affiliate, which is now over a year in the operational phase. So I would say, over time, I would expect growth in dividends from all of our entities, but the fact is that this year was very in line with last year as it relates to the LNBAR dividend. Operator: Your next question comes from the line of Tom Gallagher with Evercore. Thomas Gallagher: Just a few questions on Group Protection. Chris, if I follow what you were saying, it sounds like you think the higher severity trends in disability should improve, but the lower claim recoveries is probably going to continue. And I think you said it was 50-50 in terms of the impact on the loss ratio between those 2 things. So having said all that, is it reasonable to assume the trend into Q4 that's embedded in your guidance should be improvement in the Group disability loss ratio by -- if we had to pick a number, something like 3 points, but then partly offset by higher group life loss ratio just because that was so favorable. Christopher Neczypor: Yes. So Tom, what I would say is first point, this is just a nit, but I wouldn't really call the severity impact the trend. It was 1 month, and that can happen from time to time. So for what it's worth, I mean, it was more volatility than the trend. But that's right. I mean you have the math right. It was about half of the disability loss ratio growth due to that dynamic and the other half due to trend. So if you move from third quarter to fourth quarter, as I mentioned in the prepared remarks, we would normalize for that volatility, but then you also have seasonality that happens in the fourth quarter relative to third quarter for disability. So just keep that in mind. I would say that a loss ratio that's slightly in line with third quarter to maybe up a little bit depending on the degree of seasonality would be a decent expectation for the disability loss ratio, consistent with what we've seen in the past. Thomas Gallagher: Got you. That's a good point on the seasonality. The -- and then I guess just a follow-up. What are you guys seeing in pricing now? You've clearly had pretty good growth in Group Protection. What are you seeing on '26 renewals for rate? Are things softening a bit? Are they stable, firming? Ellen Cooper: So Tom, we will continue to message what we've said in the past, which is it is very competitive out there. It always has been, and it's also rational at the same time. We are continuing to see a strong cycle as it relates to going into the fourth quarter. We are going to continue to lean into prioritizing profitable growth over top line growth. And so you'll see us really focusing on leaning into the places in particular, where we see further opportunity in local markets, as an example, supplemental health, as we called out earlier. And just in general, we would expect that -- you may recall that last year's annual cycle was particularly strong and active across the entire industry. So I think it's fair to expect that you will likely see less activity as we move into the fourth quarter. Thomas Gallagher: Got you. And Ellen, sorry, one quick follow-up on that. So you would expect maybe not as strong as sales, but then better retention. Is that way to think -- is that a way to think about the trade-off of that? Ellen Cooper: So we have seen much improved persistency while putting rate increases through at the same time. And I think a lot of this really speaks to all of the infrastructure, technology and customer service capabilities that we have invested in along the way. Just to give you an example, if -- when we create the infrastructure so that we are -- we have technology that is now connecting directly into our customers. And we build an infrastructure with them, and we're supporting them in terms of ease and access. We just become much more of a long-term partner. And so we've invested in that. It's supporting us in terms of really being able to have more persistent client base and continuing to build on additional digital tools to enable us to just have longer relationships with our customers. Operator: That concludes our question-and-answer session. I will now turn the call back over to Tina for closing remarks. Tina Madon: Thank you, everyone, for joining our call today. If you have any follow-up questions, please don't hesitate to reach out at investorrelations@lfg.com. Thank you for your time. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Medical Properties Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead. Charles Lambert: Good morning. Welcome to the Medical Properties Trust conference call to discuss our third quarter 2025 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Williams, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting. Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section. During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only, and except as required by the federal securities laws, the company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at medicalpropertiestrust.com for the most directly comparable financial measures and related reconciliations. I will now turn the call over to our Chief Executive Officer, Ed Aldag. Edward Aldag: Thank you, Charles, and thanks to all of you for joining us this morning on our third quarter 2025 earnings call. Before you hear from the rest of the team, I'll spend a few minutes discussing recent strategic updates, including a few notable developments during the quarter in the Prospect bankruptcy process. First, across all asset types, our tenants are delivering exceptional performance. General acute care operators reported a more than $200 million increase in EBITDARM year-over-year with tenants such as LifePoint Health and ScionHealth delivering double-digit percentage revenue increases during the quarter. Post-acute operators reported a $50 million EBITDARM increase versus the same quarter last year. That includes Ernest Health, up 17%, Vibra up 33% and MEDIAN up 7%. Finally, in our behavioral health portfolio, EBITDARM increased $10 million year-over-year. Rosa will share more details on this performance trends across our portfolio shortly. In August, NOR Healthcare Systems in California was named the successful bidder for Prospect's 6 California facilities. We promptly agreed to a new lease agreement with NOR, the terms of which are broadly similar to those agreed to with other operators in our transitional portfolio. All rent will be deferred for the first 6 months, ramping to 50% for an additional 6 months and then reaching total stabilized annual rent of $45 million per year thereafter. More recently, we reached a settlement agreement with Yale New Haven and Prospect, whereby Prospect will receive $45 million from Yale. This payment from Yale will be additive to the ultimate proceeds that Prospect receives for these properties. Prospect has already entered into an agreement to sell 2 of its Connecticut facilities to another operator and is actively engaged in negotiation with buyers around the third hospital. Finally, our portfolio of new tenants continues to ramp monthly rent on schedule. With a few exceptions that are mentioned in our press release. We have collected all rent due from these operators through October, including 100% of rent from HSA. In August, we sold 2 facilities from this portfolio in Phoenix, Arizona to a tenant for approximately $50 million pursuant to a purchase option in the lease. We continue to own approximately 15 acres of land in the area. We are increasingly confident in our ability to generate total annualized cash rent of more than $1 billion by year-end 2026. Notably, this $1 billion target does not reflect any rent contributions from any of the California Prospect properties. Reflecting this confidence as well as our strong belief that our share price remains significantly undervalued, our Board of Directors has authorized a new $150 million share repurchase program that we intend to deploy opportunistically. Furthermore, I want to call your attention to a comprehensive reaffirmation of our business model presentation posted to our website earlier this week. In this presentation, we directly address a range of false narratives that critics have been spreading about our business model. We believe it is important that shareholders, operators, journalists and lawmakers all have a complete understanding of the truth around MPT. There remains a dynamic macro policy environment, making the permanent and flexible capital solutions that MPT offers more important now than ever. Rosa? Rosa Hooper: Thank you, Ed. As always, I will cover some highlights from the quarter across our diverse global portfolio beginning with Europe. As a reminder, international operators comprise approximately 50% of our total portfolio, and we continue to be pleased with the consistency of coverages exceeding 2x across this portfolio. This performance reflects these operators' strategic focus on high-quality patient care as well as continuous expansion of access to care within their communities. In the U.K., Circle repeatedly ranks among the highest of all health care operators in patient satisfaction, maintaining a reputation score well above its next closest competitor. Circle continues to make significant investments in advanced technologies, including AI and robotics, strengthening its competitive advantages and reinforcing its position as one of the leading health care providers in the U.K. market. Our Sulis Bath Hospital (sic) [ Sulis Hospital Bath ] in the U.K. is the first independent hospital to receive accreditation as an elective surgical hub deemed by the NHS and the Royal College of Surgeons of England. This recognition highlights the hospital's high standards in clinical performance, operational efficiency and patient care. With coverages consistently above 2x, Priory has demonstrated its ability to adapt its service lines to the needs of each market, allowing for flexibility as the NHS' mental health model evolves. Priory continues to explore technological opportunities such as its partnership with Psyomics to launch an innovative digital pathway that aims to revolutionize access to personalized mental health care. In Germany, MEDIAN continues to report strong negotiated reimbursement rates and occupancy trends, enabling them to meaningfully outperform prior year revenue and earnings. In Switzerland, Swiss Medical has launched integrated care models in each of the French, German and Italian-speaking regions. With these new platforms successfully supplementing Swiss Medical's strong organic growth, EBITDAR grew more than 10% trailing 12 months year-over-year. In Spain, IMED continues to progress construction on new hospitals in Alicante and Barcelona with scheduled openings during 2026 with over 70% of construction completed. Turning to our U.S. portfolio. Ernest Health has continued increasing consolidated coverage every quarter over the past year with legacy IRFs reporting strong results and new developments rapidly ramping. As such, consolidated EBITDARM coverage is now approaching 2.4x. LifePoint Health continues to deliver high-margin growth at a steady, stable rate versus the rapid acceleration observed in 2024. Conemaugh Memorial continues to be the most significant growth driver within LifePoint -- MPT's LifePoint portfolio with trailing 12-month admissions increasing 15% year-over-year. Surgery Partners 3 facilities delivered another quarter of strong performance with consolidated EBITDARM coverage above 6x. Our hospital in Wisconsin recently completed a much anticipated expansion to their operating suite to accommodate additional surgeons wanting to bring cases to this respective facility. HSA continues to improve operations and staffing across markets with Q2 and Q3 EBITDARM coverage approaching 1x on fully ramped rent, which, as a reminder, does not fully ramp until September of 2026. Summer seasonality drove softer volumes in the third quarter, but revenue remained strong due to a higher patient acuity mix. MPT has committed to funding approximately $40 million over the next 2 years for necessary infrastructure and other capital improvement projects, including HVAC and elevator replacements. The vast majority of this amount is for a newly constructed 7-story parking deck. These costs will be added to the lease space upon which the tenants will owe rent. HonorHealth launched its rebranding in Arizona by renaming Mountain Vista to Four Peaks Medical Center. In addition, Honor remains focused on physician recruitment, executing its self-funded CapEx strategy and upgrading facilities ahead of anticipated volume recovery. Quorum Health's Odessa facility continues to improve performance with stronger-than-expected admissions and surgical volumes. In August, Odessa Regional announced that it achieved Silver certification as a Cribs for Kids National Safe Sleep Hospital, demonstrating adherence to rigorous guidelines established by the Cribs for Kids National Safe Sleep Hospital Certification program. Insight Health reopened ER services at Trumbull, Ohio earlier this month with plans to slowly open more services as volumes come back along with physicians and staff. Prime Healthcare's MPT facilities continue to show improved performance with EBITDARM coverage over 2x as volumes and ER conversion rates have increased across the portfolio. Prime received credit rating upgrades from Fitch, Moody's and S&P during the third quarter. Pipeline Health continues to demonstrate growth with EBITDARM coverage over 2x. Additionally, they are opening new service lines for patients at all 4 hospitals. In summary, we are very encouraged by performance trends across our portfolio. Our portfolio of new tenants continues to ramp monthly rent payments, and we remain well positioned to generate significant cash flow from our 388 properties and approximately 39,000 licensed beds around the world, enabling us to create value for shareholders moving forward. Kevin? James Hanna: Thank you, Rosa. Today, we reported normalized FFO of $0.13 per share for the third quarter of 2025. The normalized FFO result would have been $0.01 higher if not for the payment of September rent by cash basis HSA on October 1. These results fully reflect the full quarter dilutive impact of not only our first quarter secured bonds, the second quarter MEDIAN joint venture refinancing. Higher G&A expense versus the second quarter also impacted GAAP results, primarily driven by higher stock compensation expense resulting from the change in the fair market value of 2024 and 2025 performance-based equity compensation, of which no shares have been earned or vested as of September 30, 2025. Our earnings from equity interest were higher in the quarter as changes in German tax policy resulted in a net deferred tax benefit to our German JV and as the value of the underlying real estate in the CommonSpirit joint venture continues to adjust upwards. Neither of these items are included in our normalized FFO results. We recorded approximately $82 million in net impairments, the majority of which related to Prospect and the decline in expected proceeds of certain Pennsylvania and Rhode Island assets. We continue to expect that cash proceeds from both the settlement with Yale and Connecticut and the sale of the Connecticut facilities will be more than sufficient to repay MPT's outstanding DIP loan balances. Despite this expectation, accounting rules require that we record impairments to our Prospect carrying values. There are other immaterial adjustments to carrying values during the quarter, including routine adjustments to marketable securities that were disclosed as noncash fair value adjustments in our reporting. I will now hand the call over to Steve to discuss our liquidity and capital strategy moving forward. Steve? R. Hamner: Thank you, Kevin. I'll wrap up quickly with just a few points, none of which will be surprising, and then we can take any questions. First, a quick summary of the strategies we have been executing for repaying and otherwise addressing future maturities. We've sold at significant gains and financed at above book values many billions of dollars in highly attractive hospital assets. Almost without exception, these transactions have provided clear validation of our underwriting rigor and the resulting asset values. Access to these values has given us the assurance and flexibility to repay and refinance several billion dollars of debt in 2025 alone. The secured notes we issued in February are now trading at significant premiums. And our most recent transaction financed more than $2 billion of German rehabilitation hospitals at a 5.1% coupon. This access to capital has also given us the ability to re-tenant and begin collecting what is now scheduled to be an incremental $200 million plus in annual cash rent from new operators, resolve the issues around Prospect bankruptcies and address debt maturing in 2027 and beyond, all of which we are doing successfully. Along with our clear visibility into rent ramping to a scheduled incremental $200-plus million, the upcoming 2026 annual escalations, cash payment of our roughly $100 million DIP loan and periodic asset sales similar to what we have reported in the last few quarters, we also have reason to expect even more liquidity. Specifically, and while there is no certainty, Prospect is expected to generate proceeds in excess of the $100 million balance of our DIP loan. A substantial majority of any such proceeds will flow to MPT. We are evaluating the sale or lease of several assets, which are not currently yielding meaningful returns. And we also continue to evaluate sales of earning assets and portfolios for attractive gains. For example, Aevis Victoria, our co-owner of Infracore and the parent of Infracore's Swiss Medical Network lessee, is currently exploring various strategic options for its affiliates, including Infracore, to support their long-term development. Infracore is considering various opportunities to open up its capital or even list on a stock market in order to meet the growing demand for sale and leaseback solutions in the public and private hospital market in Switzerland. As this and other market indicators demonstrate, demand for hospital real estate is strong across virtually all geographies. Our cost of capital is still higher than we expect it will be. But as we have previously said, we may make modest acquisitions when strategically important. But as Ed pointed out, repurchasing our own common stock is among our very best and most accretive uses of capital. And for that reason, we announced this morning that we have implemented a $150 million strategic stock repurchase plan that will make available some of this expected growing liquidity to capture that permanent value. This announcement demonstrates our conviction that recent prices of our common stock do not reflect our assets' underlying value, and we have, therefore, not issued any shares under our recently implemented at-the-market offering program. We reestablished that program and the long-term opportunistic flexibility it provides us in August, shortly after the effectiveness of our new 3-year shelf registration statement. Importantly, some of our unsecured notes outstanding still trade at discounts in today's markets. And nothing we may consider with respect to share repurchase or ATM programs rules out continuation of possible debt refinancing or redemption strategies. We've conclusively demonstrated that we have the asset values to accomplish these strategies. Moreover, as you would expect, we carefully monitor and plan for the maintenance of all debt covenants as we look into possible future capital transactions. We consciously designed and negotiated these covenants to provide us the opportunistic flexibility to execute these strategies, and we are confident that we will do so. And with that, I will turn the call back to the operator to queue any questions. Kayla? Operator: [Operator Instructions] Your first question comes from the line of Mike Mueller with JPMorgan. Michael Mueller: I guess on the buyback, the question here. I mean, how do you weigh looking at a buyback versus using the capital to either pay down debt, buy back other debt, just given where the leverage level is today and even on a pro forma basis, where it will be? And I guess the follow-up to that is in terms of funding a buyback, would you only use asset sales? Or would you use cash on hand or tap the credit line? Can you just put that whole buyback into perspective for us? R. Hamner: Sure, Mike. We, first of all, have a number of opportunities, and we've been talking about these for several quarters, and that's reinvest in the business with, as I mentioned, and as we've done on a very limited basis, strategically buying new assets. We certainly recognize the trading volumes and levels of some of the unsecured bonds that could provide attractive opportunities for tendering or repurchasing on either small or large scale. And we recognize, as we've just conceded that we think our shares are significantly undervalued. So we have all of those options. We have resources available. We will continue to evaluate the opportunities and the timing of those opportunities and the sources of that capital. I can't say I doubt we're going to borrow money -- incremental money in order to fund the buyback. And we've mentioned a few of the increasing -- possibly increasing cash resources that we'll have, including some assets that are currently not earning much, if anything, and possibly some of the well-received earning assets that we've demonstrated just as in the last several billion dollars of asset sales, we expect any additional asset sale, earning asset sales would also be at very attractive profitable gains. So all of that is available. And as we've been doing for a couple of years now, we evaluate periodically, constantly, in fact, what's the best use of the available capital that we have. Operator: And your next question comes from the line of Michael Carroll with RBC Capital Markets. Michael Carroll: I just want to follow up on Mike's questions related to the buyback. I mean is this -- can you kind of highlight the timing of this of when some of these purchases could occur? I mean I know you have a big debt maturity in 2027. You still are pulling money on the line of credit for -- to meet some of the debt covenants. You're still kind of cash flow negative, at least in terms of some of the investments you made, I guess, post that. I mean, do we need to have all that kind of resolved before you start to buy back stock? Or are you willing to do that in the near term? Edward Aldag: Yes, Mike, I think you should assume it will start immediately. Michael Carroll: Okay. And then, Ed, can you give us an update on HSA? I know you were -- you had some positive commentaries on their progress and the ramp-up that they've been doing. Maybe provide some details on what drove the late September rent payment? And is that a concern that -- like does that cause you any concerns of their ability to pay the ramped up rent over time? Can you provide some color on that? Edward Aldag: Sure. They continue to perform very well. The biggest improvements in Florida come from recruiting the doctors back to the facilities that left during the Steward debacle. They also have been extremely successful, probably exceeding even our expectations in Texas. From the standpoint of their cash delay in October -- in September -- excuse me, it was the -- we believe, the final steps of getting the TSA in order, getting the money repaid to the lender that they had for the DIP money in Florida, and we do not expect any additional issues. R. Hamner: And I'll just point out one last thing. And you remember, September, the rent actually doubled. And so they paid twice in September, actually on October 1 and what they had been paying. And again, I think we made clear in the press release, they've already paid October rent. Operator: And your next question comes from the line of Farrell Granath with Bank of America. Farrell Granath: I was just wondering if you could add a little commentary around the Yale New Haven hospitals. I saw the update with having at least 2 with greater line of sight of a potential close. Is there anything else that you can share and also the potential third if there's any further interest? Edward Aldag: So Farrell, I think you're going to need to repeat that. No one around the table heard the first part of your question. Farrell Granath: So sorry about that. I was just asking about the Yale New Haven hospitals and the progress on having those either re-leased or sold under the binding agreements? Or is that involved as well as the third property? Edward Aldag: Yes, sure. So the 2 facilities are under binding agreement. We expect those to close hopefully before year-end, if not shortly thereafter. The other one, we hope to have a binding agreement imminently with another buyer. Farrell Granath: Okay. And also, I saw a little bit of commentary on the NHS restructuring and impacting of the referral on the behavioral providers. Does that grant you any concern on the future health of that sector for Priory for their EBITDARM coverage? Or does that maybe add a little target if that could be something to dispose of and use for capital funding? Rosa Hooper: So we've talked about this in the last quarter, I know, perhaps the one before, too. So NHS, as they have did with acute care a few years back, they want to try to keep as much of their mix of patients in their own hospitals, and now they're doing the same thing with behavioral. It's our belief that they ultimately will realize the benefit of having independent hospitals to treat some of those patients because they're just -- the resources are needed in the independent sector to assist with getting the volume of patients treated. So no, we think it's short term and will come back around. And in the meantime, Priory has, as evidenced by their 2x coverage, been able to put operational items in place to continue to perform very well. Edward Aldag: The operator there does not expect to see a significant decrease in their coverage. Operator: And your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: In terms of the rent collections in the quarter, I think in the press release, you did mention that there was maybe not as much of collection as you expected in Pennsylvania and Ohio. Curious if that relates to Insight in particular? And if you could just kind of give us an update on that asset transition. Edward Aldag: Yes. Tayo, it's almost exclusively the Ohio facility, as you probably know, probably read, they were delayed in reopening the facility that's up and -- has gotten open. Senator Moreno has been very helpful in that. So we expect that to change. We have delayed when we expect their actual full rent to begin, and I believe that's in -- moved to January. And then the -- in Pennsylvania, that's a very, very small amount of money. The facility continues to improve and not exactly sure when that one will start paying rent. R. Hamner: That's a $30,000 a month rent payment, Tayo. Omotayo Okusanya: Got you. Okay. That's helpful. And then just kind of looking through the sub, it looks like there was some additional about $20 million of new loans in the quarter. Just kind of curious if you could kind of talk us through who that was to, if it's to any of the kind of operators of the assets in transition? Edward Aldag: There were 2 loans to operators, one being insight, and that was for CapEx and for reopening cost. And then there was a loan to the facility in Pennsylvania, Tenor, and that too was for CapEx. Omotayo Okusanya: Got you. That's helpful. And then another one for me. The 8 assets, I mean, you took about 23 assets, 15 were leased, 8 were kind of out there and you kind of were kind of looking at what to ultimately do with those 8 assets, including some other developments. Could you just walk us through kind of the status of those 8 and kind of what's happening? Edward Aldag: Tayo, I'm not sure exactly the 8. I guess the 2 big ones would be the one in Massachusetts in Norwood and then the other one in Texas in Texarkana. Both of those facilities remain under construction. And other than about all I can say at this particular point because of various NDAs, we are in negotiations with people about those facilities. Operator: I will now turn the call back over to Ed Aldag for closing remarks. Edward Aldag: Thank you very much, and thank you all for joining us. As always, if you have any questions, please don't hesitate to reach out to Drew, and we'll get back with you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Welcome to the Aris Mining Third Quarter 2025 Results Call. We will begin with an overview from management followed by a question-and-answer period. [Operator Instructions] The conference is being recorded. [Operator Instructions] Please note that the accompanying presentation that management will refer to during today's call can be found in the Events and Presentations section of Aris Mining's website at aris-mining.com. Also, Aris Mining's Third Quarter 2025 financials can be -- have been filed on SEDAR+ and EDGAR and can also be found on their website. I would now like to turn the conference over to Mr. Neil Woodyer, Chief Executive Officer. Please go ahead. Neil Woodyer: Thank you, operator, and welcome, everyone. Thank you for joining us for our third quarter 2025 earnings call. I'm joined today by members of the management team, including Richard Thomas, Cam Paterson, Oliver Dachsel, Alejandro Jimenez, and we'll be able to answer your questions at the end of the call. Before we begin, please take note of the disclaimers on Slide 2 as we will be making forward-looking statements throughout today's presentation. Now starting on Slide 3. Following the strong first half year's performance, I'm delighted to report that we have delivered an excellent third quarter. Gold production in Q3 totaled 73,236 ounces, a 25% increase over Q2. Segovia has been ramping up production in line with the expectations following the commission of the second ball mill in June, while Marmato has maintained its solid production levels. This brings our total production for the 9 months of '25 to 187,000 ounces. So we're tracking about the midpoint of our full year production guidance of 230,000 to 270,000 ounces. Against the backdrop of rising gold prices, our strong operational performance has driven record financial performance in the third quarter, putting us in a strong position to fund our growth plans. Gold revenue totaled $253 million in Q3, up 27% over Q2. Adjusted EBITDA was $131 million for Q3 and more than $350 million on a trailing 12-month basis. And we ended the third quarter with a cash balance of $418 million. Meanwhile, the construction of the Marmato Bulk Mining Zone continues to advance with first gold pour expected in the second half of 2026. Lastly, we published 2 major technical studies. First, a pre-feasibility study for Soto Norte in September, confirming it as one of the most attractive gold projects in the Americas. And second, a preliminary economic assessment for Toroparu, which outlines a long-life, low-cost open pit gold project with strong financial returns. Our strategy from here is therefore straightforward. We'll advance Toroparu to a pre-feasibility study over the next 10 months or so. And then we will plan to start construction. In parallel, we're advancing the permitting process for Soto Norte. Together, these projects demonstrate the depth of our growth pipeline beyond Segovia and Marmato and position Aris Mining to become a very significant gold producer. Before I hand over, I'd like to share a quick update from our meetings in Guyana last week, where I presented the results of the Toroparu PEA study to Guyana's Minister of Natural Resources and the Minister of Finance. The meeting gave the project strong support and have confidence that Toroparu can become one of the next major gold mines in Guyana. We're focused on making this happen. With that, I'll pass over to Cam for an update on our financial performance. Cameron Paterson: Thank you, Neil. Turning to Slide 4. Aris Mining reported strong financial results in the third quarter, driven by increased production volumes and a strong gold price environment. As Neil mentioned, this quarter, we generated record revenue of $253 million and record adjusted EBITDA of $131 million, which drove record adjusted net earnings of $72 million or $0.36 per share. We closed the quarter with cash of $418 million, up from the $310 million held at Q2. This increase reflects $91 million of cash flow after sustaining capital and income taxes, $60 million of proceeds from the exercise of warrants, 99% of which got exercised before they expired in July and $13 million of proceeds from closing the sale of the Juby Gold Project on September 29, partially offset by $48 million we invested in growth capital. Moving on to Slide 5. Our AISC margin increased by 36% compared to Q2, reflecting increased production with the successful commissioning of the second mill at Segovia, higher realized gold prices and continued cost controls. Taxes paid totaled $13 million in the quarter compared to $42 million in Q2. Taxes paid in Q2 were substantially higher as a result of the settlement of our 2024 Colombia income tax liability. In Q3, we generated $43 million in free cash flow from operations after expansion capital. That's after investing $48 million in our growth projects, including $31 million at Marmato, which includes $23 million related to the construction of the bulk mining zone, $10 million at Segovia spent on underground exploration and development, completion activities for the mill installation that followed its June commissioning as well as ongoing work on the tailings storage facility and $7 million invested at Toroparu and Soto Norte, which included the technical studies mentioned by Neil earlier. Financing activities driven mainly by the warrant exercises, as I alluded to earlier, resulted in cash inflows of $65 million in the quarter, which together with free cash flow from operations resulted in a net increase to our cash position of $108 million in Q3. With a continued strong gold price environment and solid operational performance, Aris Mining remains well positioned to deliver robust cash flows to organically fund growth initiatives. I'd like to now hand the call over to Richard to discuss our operational results and growth projects. Richard Thomas: Thank you, Cam. Moving to Slide 6, please. As mentioned by Neil earlier, we delivered total gold production of 73,236 ounces across our operations in the third quarter, an increase of 25% from quarter 2, resulting in total gold production of 187,000 ounces for the first 9 months of 2025. Segovia accounted for 65,500 ounces of gold produced, driven by the following 3 things: an increase in gold throughput following the commissioning of the second mill in June, an average gold grade of 9.9 grams per tonne and finally, splendid recoveries of 96.1%. In monetary terms, Segovia's strong performance in the third quarter can be summarized as follows: Segovia's all-in sustaining cost margin totaled $121.5 million, an increase of 39% compared to quarter 2. On a trailing 12-month basis, its all-in sustaining cost margin has reached $328 million. Owner mining all-in sustaining cost was $1,452 per ounce in quarter 3, resulting in an average of $1,482 per ounce for the first 9 months of 2025, trending towards the lower end of the company's full year 2025 guidance of $1,450 to $1,600 per ounce. Gold produced from Contract Mining Partners, mill feed generated an all-in sustaining cost sales margin of 44% in Q3, bringing the average for the first 9 months of the year to 43%, above the top end of the company's full year 2025 guidance range of 35% to 40%. Turning your attention to the bottom right. Rising realized gold prices and continued cost discipline continue to drive the all-in sustaining cost margin expansion at Segovia. In quarter 3, Segovia generated an all-in sustaining cost margin of $1,853 per ounce. Moving on to Slide #7. I'm pleased to report that Segovia's production ramp-up following the installation of the second ball mill in June continues to progress as planned. The new ball mill has increased the plant's throughput capacity from 2,000 tonnes a day to 3,000 tonnes per day, and we're making good progress with our gradual production ramp-up as evidenced by the increase in tonnes milled per month since July, as shown in the chart in the bottom right-hand corner. Comparing tonnes milled per month in September of 79,471 to the average monthly of quarter 2 of 55,987 tonnes milled implies an increase of 42%. Importantly, as highlighted in the chart on the top right-hand corner, we didn't sacrifice grade to increase throughput. The grade of our mill feed in quarter 3 was even marginally higher than in quarter 2. Lastly, our recovery rate has remained at an excellent 96.1%. These 3 factors together have allowed us to meaningfully increase gold production in quarter 3 to 65,549 ounces. Based on gold production year-to-date and expectations of a continued gradual ramp-up, Segovia is tracking about the midpoint of our 2025 production guidance of 210,000 to 250,000 ounces. With increased processing capacity and underground development advancing, Segovia is targeting gold production of around 300,000 ounces in 2026. Moving on to Slide #8. At Marmato, construction of the Bulk Mining Zone continues progressing, and I'd like to use this opportunity to give you an update on the different work streams of the project. We have to date completed 580 meters of the main decline, which equates to 34% of the full length of the 1.7 kilometer decline. Current development rates are at 72 meters per month and are expected to increase to approximately 150 meters per month once we have transitioned through the fault zone. Completion of the decline is targeted for August 2026. Los Indios crosscut is advancing towards the connection with the main decline, which is now approximately 320 meters away. As you will see in the project design on the left of the slide. This horizontal development will provide additional access and ventilation pathway, enabling ore and waste haulage between existing workings and the new infrastructure. Importantly, completion of the crosscut will enhance operational flexibility and derisk the project's ramp-up phase by allowing multiple access points for early development and production sequencing. On surface, bulk earthworks for the process plant platform have reached 95% completion and the retaining wall is over 75% complete. Final shaping of the carbon-in-pulp plant platform is expected during the first week of November. Construction activities continue to advance safely with over 2 million man work hours completed to date. Major equipment, including the primary crusher, the SAG mill, the ball mill and filter press has arrived in Cartagena. Approximately 95% of long lead items have been ordered. The contract for the main civil, mechanical and electrical works is in place with the contractor mobilized and construction activities having commenced in October. Preparations for the new power line continue to advance well. Land acquisition is complete and the environmental impact study has been submitted for approval, enabling construction to commence in March 2026 following the issuance of the permit. To ensure continuity of commissioning and early operations, backup generators are included in the site power plan to mitigate any potential delay in the grid power connection. At the end of quarter 3, the estimated cost to complete the project was $250 million, of which $82 million will be funded by the remaining installments under the Wheaton streaming agreement and bringing the total, which Aris Mining has to fund to $168 million. The project remains on schedule with first gold expected in the second half of 2026, followed by a ramp-up period to steady-state operations. Moving on to Slide #9. As Neil mentioned at the beginning of the call, we completed a feasibility study for Soto Norte, which we believe is one of the most attractive gold projects in the Americas. With the PFS complete, we are advancing the required studies to apply for an environmental license in the first half of 2026. The PFS outlines a long-life underground gold mine with robust economics, low operating costs and industry-leading environmental and social design features. We went to great lengths to strike the right balance between scale, profitability and responsible development considerations, which I will discuss in greater detail in the following 2 slides. Before moving on, I would like to draw your attention to the charts at the bottom left and bottom right-hand side of the slides. Starting on the left, Soto Norte has 7 million ounces of measured and indicated resources at a grade of 5.6 grams per tonne, of which 4.6 million ounces at a grade of 7 grams per tonne have been converted to proven and probable reserves, confirming that the Soto Norte is a high-grade, long-life project. As a reminder, Aris owns 51% of Soto Norte and hence, our attributable share of measured and indicated resources and proven and probable reserves are 3.6 million ounces and 2.3 million ounces, respectively. Turning to the right-hand side, we can see that the production and process grade profile over the first 10 years of the project. The mine plan has been calibrated such that we will be mining higher grade ore of the ore body first, resulting in process grade in those years being above the reserve grade. This, in turn, drives higher annual gold production in the first 10 years compared to the life of mine average, which enhances Soto Norte's net present value and payback period. Turning to Slide 10. The new study has reduced Soto Norte's processing capacity from about half from more than 7,000 tonnes per day previously to 3,500 tonnes. Of that, more than 20% of Soto Norte's plant capacity will be made available to process mill feed from local community miners, mirroring our successful partnership model with Contract Mining Partners at Segovia and Marmato. The 3,500 tonne per day design requires $625 million of initial capital expenditure. All other metrics on this slide are based on operating Soto Norte at the owner mining rate of 2,750 tonnes per day. Said differently, we chose not to incorporate the upside associated with the contract mining partner component of the study. The results based on owner mining alone are highly attractive and deliver the following results: a 22-year life of mine based on mineral reserves, annual gold production of 263,000 ounces over years 2 to 10 and 203,000 ounces over years 1 to 21. all-in sustaining costs of $534 per ounce over the life of mine. Annual EBITDA averaging from $547 million over years 2 to 10 and $410 million over years 1 to '21 at an assumed gold price of $2,600 per ounce. At that base case gold price, the project delivers an after-tax net present value of $2.7 billion and an internal rate of return of 35.4% with a payback period of 2.3 years. At a gold price of $3,000, the NPV increases to $3.3 billion and the IRR to 40%. As a reminder, all those metrics have been quoted on a 100% basis and Aris share is 51%. Let us move now to Slide #11. It is important to highlight that we have listened to Soto Norte's constituents very carefully and have gone to great length to design a project that addresses their concerns. We believe our PFS design adheres to the highest standards of safety, water protection and environmental management while delivering significant long-term value for our shareholders and for our community and government partners. As I've mentioned, 750 tonnes per day, which is more than 20% of the plant capacity will be dedicated to processing material purchased from the local community miners, replacing the informal mills that pollute water courses with safe license processing. Development of Soto Norte will generate significant employment. During peak project construction, about 2,300 jobs will be created with long-term operations requiring about 675 employees. Colombia will also benefit from $3 billion in taxes and royalties over the life of mine, assuming a gold price of $2,600. Clearly, if the current gold prices are here to stay for the long term, the project's fiscal contribution would be even more significant. Equally important, the project is designed to protect the local water, including a recycling system, allowing for 96.5% of water reuse. Other important features include a flow sheet requiring no cyanide or mercury reuse, a paste backfill plant to reduce tailing storage requirements on surface and a filtered tailings storage facility designed following international best practice. We're confident that this project strikes an appropriate balance between scale, profitability, responsible development considerations, and we're proud of Soto Norte's industry-leading environmental and social design features. We look forward to progressing studies that will enable us to submit our environmental license application for Soto Norte in the first half of next year and continue advancing what we believe is one of the most attractive gold projects in the Americas. Now turning to Slide 12. As Neil mentioned, we published the preliminary economic assessment for Toroparu, our 100% owned gold development project in Guyana, the second major technical study within 2 months. And like with Soto Norte, this PEA for Toroparu represents the first time that Aris Mining management team has articulated its vision for how this project should be designed, built and operated. After the merger of Gran Colombia and Aris Gold and the arrival of our management team in September 2022, the company paused the project's previous construction plans to reassess the project on a first principles basis, which included completing a new geological interpretation, updating the mineral resource estimate and undertaking optimization studies. As a result, this is a robust PEA that outlines a major new growth and diversification opportunity for Aris Mining. Toroparu has measured and indicated resources of 5.3 million ounces of gold at a grade of 1.3 grams a tonne and an inferred resource of 1.2 million ounces of gold at a grade of 1.6. The chart on the right-hand side of the slide illustrates Toroparu's planned gold production and process grade profile over the 21-year life of mine outlined in the PEA. The average gold production projected is 235,000 ounces per year, supported by a consistent mill grade ranging from 1 to 1.3 grams per tonne. The long steady production profile demonstrates the grade continuity of the project. Turning to Slide 13. I'd like to go over some of the key project parameters and the economics. Mill capacity of 7 million tonnes per annum, a scale that supports an attractive investment return and results in a life of mine of over 20 years, an annual life of mine gold production of 235,000 ounces with significant byproduct credits from silver and copper. Average all-in sustaining costs of $1,289 per ounce and annual EBITDA averaging from $443 million over the life of mine, assuming a gold price of $3,000 per ounce. Initial construction capital is estimated at $820 million, including preproduction costs and $96 million of contingency. After-tax net present value at 5% of $1.8 billion, an internal rate of return of 25.2% and a payback period of 3 years, assuming a gold price of $3,000. The PEA results confirm Toroparu as a large-scale, long-life open pit project with robust economics. Based on these results, we've initiated a PFS for Toroparu, targeting a completion in 2026 with the goal of advancing towards construction. With that, I'd like to pass over to Oliver for an update on our capital structure. Oliver Dachsel: Thank you, Richard. Moving to our cap table on Slide 14. Our strong operational and financial performance in Q3 has increased our adjusted trailing 12-month EBITDA to $352 million and further strengthened our balance sheet. Our liquidity position has increased to $418 million, and our net debt has decreased to $64 million as of September 30. Total leverage has decreased to 1.4x, which is 1.6 turns lower compared to Q4 2024. Net leverage has decreased to 0.2x, which is 1.3 turns lower compared to Q4 2024. With low and decreasing financial leverage, no meaningful debt maturities until October 2029, stable credit ratings at B1/B+/B+. Our balance sheet is in even stronger shape to support our growth strategy. With that, I'd like to hand over the call to Neil for closing remarks. Neil Woodyer: I'd like to conclude our prepared remarks on Slide 15. And our message is straightforward as it's exciting. Aris Mining is in a strong position to deliver exceptional growth in the near term to more than 500,000 ounces of annual gold production while advancing Toroparu and Soto Norte, which could potentially unlock 370,000 ounces of additional annual gold production on an attributable basis. We have the building blocks in place to create a leading gold mining company in South America. And importantly, we also have the team and the balance sheet to do it. Looking ahead, we are committed to building on our solid operational and financial momentum, finishing the year strongly and positioning Aris Mining for a successful 2026 and beyond. With that, I'd like to thank you for your time today and look forward to your questions. I'll now turn the call back to the operator to open the line for questions. Operator: [Operator Instructions] Our first question is from Carey MacRury with Canaccord Genuity. Carey MacRury: On the great quarter. Just wondering if you could give us a bit more color on how the Segovia mill expansion is going now that we're through October, just sort of what the run rate is sitting at? And should we still expect 3,000 tonnes a day by the end of the year? Richard Thomas: Absolutely. It's going very well. At the moment, we're taking very nicely at about 2,500 to 2,600. As we -- as our development improves and increases to the end of the year, we get to 2,800 to 2,900 and then early next year, we'll be at 3,000 tonnes per day. Carey MacRury: Okay. Great. And do you have all the Contract Mining Partners lined up to deliver the tonnes that you're expecting? Richard Thomas: Yes, we do. We're adding additional 6 contracts in early in next year. The quotas and all the contracts are in place, so we're ready for that. But the bulk of that increase will come from our own operations, and we are well on track for that. Carey MacRury: Okay. Great. And then maybe one final one. In terms of Toroparu or Soto Norte, I'm assuming you would sequence those, you wouldn't do them at the same time. Is that fair? Neil Woodyer: Toroparu pre-feasibility, feasibility should be complete within about 10 months. We will be putting in the license on Soto Norte about midyear. That's going to take 18 months to go through. So Toroparu is a little bit ahead of Soto Norte. So we will see where we are as to which to build, probably Toroparu straight into it. Operator: [Operator Instructions] The next question is from Don DeMarco with National Bank Financial. Don DeMarco: Congratulations on the quarter and also on the Toroparu PEA. I'll just continue with the questions on Toroparu from the last caller. Do you see this asset as a -- I mean, what your bias appears to be in favor of developing it? But is it also potentially a divestment candidate? And what are your thinking on those 2 or potentially other options? Neil Woodyer: It is not a diversification. It's an ideal mine for us to build. It's the right size. We have the cash. We have the team. It fits in very nicely after Marmato. It's totally within our financial capability building. It's another 200,000 ounces, and it is geographic diversification. Very clear in my mind, this is a mine for us to build. Don DeMarco: Okay. And then for my next question, just looking at the development of the Marmato Bulk Mining Zone. What level of CapEx should we be modeling in the home stretch? I see that first pour is still on track for late next year, maybe $30 million was spent in Q3. So should we model an increase in CapEx going forward? Will it be more heavy lifting as we get into 2026 and get closer to first pour? Richard Thomas: Definitely, Don. So at the moment, we've completed the pad. So we are now ready for the construction of the mill. So you can expect a sharp increase in the capital spend rate going forward. We have signed a contract with our main contractor. They have mobilized on site and they are starting the foundations as early as next week on the 4th of November. So once that starts, the amount of money we'll be spending on a monthly basis will increase. Operator: This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Woodyer for any closing remarks. Neil Woodyer: Well, thank you, everybody, for joining us today. We appreciate your interest, and please don't hesitate to reach out to Oliver if you have any questions. And again, thank you very much. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.