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Operator: Greetings. Welcome to the AirJoule Technologies Third Quarter 2025 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Tom Divine, Vice President of Investor Relations and Finance. Thank you. You may begin. Tom Divine: Thank you, and good morning. With me today for our third quarter earnings call are Matt Jore, Chief Executive Officer; Pat Eilers, Executive Chairman; Bryan Barton, Chief Commercialization Officer; and Stephen Pang, Chief Financial Officer. During this call, we'll be referring to a presentation, which is available on the webcast platform and on the Investors section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the Risk Factors and the forward-looking statements sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now I'll turn it over to Matt Jore. Matthew Jore: Thanks, Tom, and thanks, everyone, for dialing in this morning. Before I turn it over to Pat, who's going to review some of our recent milestones and Bryan, who will discuss our ongoing productization activities and customer engagements, I'd like to talk about some of the powerful macro trends that are fundamentally reshaping global water, and energy markets. These converging forces are creating significant demand for the exact solutions that our AirJoule platform technology is designed to deliver. And AirJoule is well positioned to play a meaningful role in this transformation. The explosive growth of artificial intelligence is driving massive data center development across North America and globally. What's becoming increasingly clear and creating urgent challenges for hyperscalers and data center operators is that AI infrastructure has an enormous water and energy footprint. Modern data centers require millions of gallons of water annually for their cooling systems. And as AI workloads intensify, these requirements are escalating dramatically, especially in air environments. Data centers are facing constraints relating to the availability of water in the quantity and quality that they require. This has some real operational impacts. Additionally, we're seeing mounting concern from some local communities over data center water consumption. In regions already experiencing water stress, data center developers often face having to truck in water at significantly higher expense in order to satisfy water requirements for data center operations and expansion. Some projects even face permitting delays and even outright opposition from local stakeholders. And there's growing recognition across the industry that water security isn't just an operational concern. It's becoming a fundamental constraint on AI infrastructure development. This was reinforced by AirJoule's selection as a winner of the Net Zero Innovation Hub for Data Centers technology competition, which validated AirJoule as a critical solution for sustainable data center operations. We also saw the recent launch of the Water-AI Nexus Center of Excellence led in part by Amazon and the Water Center at the University of Pennsylvania that explicitly acknowledges the intersection of AI infrastructure growth and water resource challenges. And beyond data centers, the CHIPS Act and other industrial policy initiatives are incentivizing billions of dollars in domestic manufacturing investment, batteries, semiconductors, advanced electronics. These facilities have 2 critical requirements, substantial high-purity water for manufacturing and precise humidity control for product quality and yield. Traditional approaches rely on municipal water infrastructure and energy-intensive dehumidification. AirJoule's platform addresses both requirements simultaneously, dehumidification with high-purity water generation, positioning us in a multibillion-dollar opportunity as domestic manufacturing scales. Underlying these trends is the fundamental challenge of water scarcity. Population growth and changing environmental conditions are exacerbating water stress across the United States and globally. The Western U.S., in particular, is facing severe and persistent drought conditions that are constraining development, agriculture and industrial activity. Water scarcity is not just an environmental issue. It's an economic development constraint. Communities wanting to attract data centers, manufacturing or residential development face constraints on water availability. Traditional approaches, deeper wells, pipelines, water transport are expensive, environmentally problematic and even politically contentious. And the military is increasingly focused on water resilience. Bases in water-stressed regions face operational constraints and forward deployed troops require reliable water supplies where traditional logistics are challenging. Our collaborations with the ERDC and across the defense sector for anticorrosion reflect recognition that AirJoule addresses critical national security challenges. At the same time, rising electricity costs are driving renewed focus on energy efficiency. Industrial facilities, commercial buildings and data centers face intense pressure to reduce energy consumption, both for economic reasons and to meet corporate sustainability commitments. Traditional HVAC and water management systems are energy-intensive, representing significant operational expenses and environmental footprints. AirJoule's platform technology is designed to deliver step change improvements in energy efficiency. By leveraging waste heat to produce water from air and utilizing advanced sorption materials for dehumidification, we can reduce energy consumption by up to 50% compared to traditional refrigerant-based systems. In an environment where every kilowatt hour matters for both cost and sustainability, this efficiency advantage is increasingly valuable to customers. And lastly, we're benefiting from significant regulatory tailwinds. Governments globally are mandating the phaseout of high global warming potential refrigerants as part of climate mitigation efforts. The American Innovation and Manufacturing Act and similar regulations worldwide are forcing HVAC and indoor air quality companies to fundamentally rethink their technologies. Traditional dehumidifiers, air conditioners and cooling systems rely heavily on these refrigerants, and these refrigerants are being phased out or face escalating costs and regulatory restrictions. This is creating urgent demand for alternative technologies that can deliver comparable or even superior performance. AirJoule's sorption-based platform can unlock a refrigerant-free system, positioning us as a solution to this regulatory transition. This is why we partnered with Carrier to integrate AirJoule technology into their next-generation HVAC systems. What makes this moment particularly compelling is that these trends are not isolated. They're converging and they're reinforcing each other. AirJoule's platform sits at the intersection of all these pressures, providing solutions that address multiple needs for industrial, commercial, defense and data center customers. This is why we're seeing accelerating interest from diverse industries why prestigious partners like GE Vernova and Carrier are collaborating with us and why defense organizations are engaging on multiple AirJoule applications. The market is recognizing that AirJoule is a transformational platform for a water and energy-constrained world. Now I'd like to turn it over to Pat Eilers to discuss some of our recent milestones towards our path to commercialization. Patrick C. Eilers: Thanks, Matt. During the third quarter, we achieved several milestones that represent critical validation of our technology, demonstrate strong market demand across multiple sectors and are advancing us toward multisystem deployments and commercialization in 2026. Our Hubbard, Texas deployment is operating 24 hours a day, 7 days a week across diverse environmental conditions, generating critical performance data. This isn't laboratory testing. It's real-world operation with full variability. The data we're collecting is helping us optimize system design, validate our performance and water quality expectations and demonstrate to customers that our technology works reliably in demanding environments. This track record is increasingly important as we advance commercial discussions with customers who need confidence in consistent and reliable operation. During the quarter, AirJoule was selected as a winner of technology competition sponsored by the Net Zero Innovation Hub for data centers, which is a consortium founded by Google, Microsoft, DATA4, Vertiv, Schneider Electric and Danfoss. These are some of the most influential companies in global data center infrastructure, and this prestigious recognition validates our technology as a critical solution for sustainable data center operations. We look forward to collaborating with these partners on sustainable data center design and showcasing our AirJoule system at the Innovation Hubs test bed facility in Europe this coming year. At the end of October, we delivered an AirJoule system to Arizona State University's Global Center for Water Technology led by Dr. Paul Westerhoff, this is one of the leading research institutions in the field of atmospheric water harvesting. This collaboration with ASU will generate rigorous independent research data on AirJoule's performance and potential applications. Dr. Westerhoff also plans to demonstrate our AirJoule system for industrial customers and operations in the Southwest United States. We also announced a cooperative research and development agreement known as ACRADA with the United States Army Engineer Research and Development Center to integrate AirJoule's waste heat to water capability for military applications. The military has rigorous requirements for reliability and performance in extreme environments. The fact that the ERDC has committed to AirJoule for this program demonstrates confidence that our platform can meet these exacting standards. Beyond the immediate research program, this partnership positions AirJoule for broader adoption across wider military applications. On our last earnings call, we mentioned a collaboration with the United States Defense contractor to evaluate AirJoule's technology for anticorrosion applications in high-value military storage environments. I'm pleased to say that those discussions have come to fruition, and we now have an agreement in place with that defense contractor. Under the agreement, we'll work together to establish a deployment project at a military storage facility and demonstrate how AirJoule provides dehumidification capabilities and substantial cost savings to the American taxpayer. This represents a significant expansion of our opportunities beyond water generation across military applications globally. These milestones provide the operational track record and customer validation needed to advance commercial deployments in 2026. Now I'll turn it over to Bryan to discuss our ongoing customer conversations and productization activities. Bryan Barton: Thanks, Pat. The milestones and partnerships that Pat and Matt discussed are translating directly into commercial opportunities as companies realize the value we can bring by delivering distilled water and compelling economics. Our water generation system is fundamentally unlike anything else on the market in that it produces clean distilled water with no contaminants. A critical differentiator driving these conversations is water quality. AirJoule delivers distilled quality water with 0 dissolved solids, meeting EPA and FDA bottled water standards. Our assortment-based process natively features 3 purification steps, and our hovered system is consistently demonstrating excellent water quality. This is important because our technology works best for customers lacking reliable sources of clean pure water, and that's exactly who we're targeting. For many industrial customers in water-stressed areas, municipal water sources may not be reliable or have the desired quality and trucking water, a $50 billion market is often the only viable option. We're actively engaged in discussions with customers to lock in additional deployments in 2026. And the breadth of this commercial pipeline demonstrates how the AirJoule platform can deliver across multiple industry verticals, including data centers, advanced manufacturing and the military. We look forward to providing more specific guidance on deployment time lines as we are able. Through these customer conversations, a compelling business model has emerged with the introduction of water purchase agreements or WPAs. Several of our customers are exploring this structure as an alternative to traditional capital equipment purchases. Under a WPA, customers purchase water on a volumetric basis, dollars per gallon rather than purchasing the capital equipment. AirJoule owns, operates and maintains the systems and customers pay for the water delivered. This is directly analogous to a power purchase agreement that has driven massive value in the power sector. For customers, WPAs eliminate upfront capital requirements and align economics with performance. They only pay for water actually delivered, and WPAs can improve project economics by converting capital expenditures to operating expenses. For AirJoule, WPAs create recurring revenue streams and can accelerate customer adoption. We're actively discussing WPA structures with several customers, and we believe this could become a significant component of our commercial strategy. Before I move to our productization efforts, I should mention that we're also making progress in adjacent markets beyond the industrial and commercial applications I've discussed, specifically in the residential dehumidifier market. This is an opportunity that would leverage our sorbent technology for high-volume consumer application in a multibillion-dollar market. We'll have more details to share on that soon. In preparation for these commercial deployments in 2026, we've been making significant progress on scaling our manufacturing readiness and productization of the AirJoule platform. During the third quarter, we celebrated the ribbon cutting of our manufacturing facility in Newark, Delaware, which is designed to support productization, assembly, quality assurance and performance validation as we transition from demonstrating systems to commercially viable products. We also expanded our testing infrastructure with an additional environmental test chamber, enabling us to validate system performance across a broader range of conditions and accelerate our product development cycles. Productization is absolutely critical to achieving our commercialization objectives. We have proven technology that works in the field. Our current deployments have demonstrated that. We have strong customer interest across multiple sectors. But to convert that interest into revenue, we must deliver systems that are economical and reliable with minimum maintenance costs. To this end, we are focused on 3 objectives: increasing our water output, reducing our overall system cost and ensuring reliability. First, maximizing water output from our chambers. We're focused on optimizing our solvent chambers to extract as much water as possible from each cycle. This isn't just about incremental gains, improving water output per chamber directly translates to better economics for our customers and a more competitive positioning for AirJoule. Currently, our sorbent chambers in Hubbard are each producing 100 liters per day at 60% relative humidity. We expect this to increase to 150 liters per day per chamber -- and with this 50% improvement, we can expect our 16 chamber A1000 product to deliver more than 2,000 liters of water per day or around 500 gallons. Second, reducing overall system costs. We have extensive design for manufacturing efforts and supply chain activities underway to identify cost-effective components, optimize our bill of material and establish relationships with suppliers who can support our volume production. Our goal is to ensure competitive economics for our customers while maintaining the performance and reliability standards they require. Third is our focus on ensuring reliability. Our customers, whether they're data centers, industrial facilities or military installations need systems that work consistently over extended periods with minimum maintenance costs. We're implementing rigorous quality assurance protocols, stress testing components and building redundancy into critical systems to ensure that when we deploy these units, they will perform as promised. The productization work we're doing now is directly enabling our 2026 commercialization goals. When we engage with customers about multiunit deployments, whether it's tens to hundreds of units we're discussing at individual data centers and industrial sites or defense deployments, they need confidence that we can deliver reliable, cost-effective systems. As we move through Q4 and into 2026, productization will remain a top priority. Every improvement in water output, every dollar we take out of our system and every enhancement to reliability directly strengthens our competitive position and accelerates our path to commercialization. Now I'll turn it over to Stephen for the financial update. Sze-Yin Pang: Thank you, Bryan. We can turn to Slide 11 of the presentation for a review of our financial results for the third quarter. As a reminder, AirJoule Technologies accounts for its 50% ownership in the JV using the equity method. These numbers in the table are only reflected for AirJoule Technologies. And the results from the joint venture reflected in the loss from investment in AirJoule JV line, which was $1.9 million for the third quarter. This is slightly lower than a $2.2 million loss in the first quarter and the $2.1 million loss reflected in the second. AirJoule's net operating expenses during the third quarter were $3-point million. This is inclusive of approximately $487,000 in administrative and engineering expenses reimbursed to us by the joint venture under our statement of work. Operating expenses were lower in the third quarter, primarily due to professional fees normalizing after our equity-related transactions in the second quarter, along with lower noncash share-based compensation expense. We also amended our licensing agreement with Pacific Northwest National Lab and as a result, reversed $475,000 worth of accrued royalty expenses, which resulted in a negative R&D expenses for the third quarter. Our net loss for the quarter was $4 million compared to net income of $2.5 million for the second quarter. And the main driver of this difference is primarily the noncash losses associated with an increase in the fair value of our earn-out liabilities and subject vesting shares, which are both noncash. During the third quarter, AirJoule Technologies contributed $2.75 million of capital to the JV with GE Vernova, which is being used to support the ongoing productization and commercialization activities that Matt and Bryan have touched on. AirJoule Technologies ended the third quarter with approximately $26 million of cash sitting on the balance sheet between the 2 entities. Subsequent to the quarter end, we also contributed an additional $5 million of capital into the JV. Looking ahead, I'll reaffirm that we have sufficient cash and liquidity to support both our operations and those of the JV. As you've heard on this call, we are focused on prioritizing our AirJoule system and preparing for multiple customer deployments in 2026. We expect the joint venture's full year 2025 spend to be at the higher end of the guidance I previously provided on our prior earnings call of around $17 million to $18 million. Today, as part of our ongoing capital market strategy and following our recent milestone being a timely filer for over 12 months as a public company, we have filed a shelf registration statement, which remains subject to SEC review. We view this as a prudent step that gives us flexibility and efficiency in accessing the capital markets when the timing is right. For clarity, the S-3 we filed today did not involve the issuance of any new shares. This filing simply ensures we're prepared to be opportunistic and reflects our disciplined approach to maintaining optionality and managing our access to capital. Now I'll pass it back for the Q&A portion of the call. Operator: [Operator Instructions]. Our first question is coming from Amit Dayal of H.C. Wainwright. Amit Dayal: I just want to go over a line from the press release that says data from Hubbard is accelerating commercial adoption. How should we sort of read this statement? Are you implying the potential pipeline? Or are there some pilots that are taking place like -- any clarity on this sentence would be very helpful. Bryan Barton: Thanks, Amit. I'll take the question. Yes, so the system in operation is generating immense amounts of data. And through that data and through our partnerships with customers, it's been a real catalyst to see systems operating in the field and performing very well, making clean water. At the same time, in Texas, right, there are a number of hyperscalers that are looking to build operations in Texas. And so when we talk about a lot of the data center interest and then overlaid with the fact that they're building those data centers in the broader Texas area, it's been great for us to have that system on the ground performing well. And to date, many hyperscalers have come through and have seen that system operating. Amit Dayal: Understood. Okay. And then in the last earnings call, you had sort of talked about exploring product integration opportunities with GE Vernova. How is that going? Any progress on that front? Any color on how we should see maybe that contributing to any commercialization efforts in 2026? Bryan Barton: Yes. So just as a reminder, our previous announced collaboration with GE Vernova is to really focus on the waste heat from gas turbines and integration of that waste heat into AirJoule's products and so that we can deploy at sites that have perhaps behind-the-meter power gen or just in general, the power generation capabilities of GE Vernova and then connecting to that waste heat. And so that project is in full swing. It's still in the, I would say, forming and paper exercise and really understanding how to integrate AirJoule, right? The next step would be actually integrating AirJoule's. So we can look forward to seeing the progress on like a demonstration type of system. But really, the first part is educating our customers that have these assets, these gas turbines that are generating immense amounts of heat, how to integrate those -- that waste heat directly into AirJoule. And so we can expect that this initiative with GE may first find life in the field through an actual project. Amit Dayal: Understood. Okay. And then the R&D spend was pretty low in 3Q. I mean, if I'm reading it correctly, it was around $8,000 and change. Any reason for such a low spend as you get closer to commercialization? Should we think about it in a way where most of that R&D stuff is now out of the way and you're focusing more on the commercialization part of it? Like just trying to understand why the R&D is at these levels. Sze-Yin Pang: Yes, I'll take that. As I mentioned, most of the R&D spend now is being borne at the joint venture level. So if you take a look at the earnings slide, which is a supplement to our results, you'll see that spend be pretty consistent with what we've incurred in prior quarters. And then the R&D spend directly as it relates to AirJoule Technologies corporate balance sheet, that's reflective of a reversal in the maintenance royalty expenses that we've been accruing that were previously being borne to Pacific Northwest National Labs and through a restructuring of that agreement, we were able to reverse the maintenance charges. So this quarter reflects that adjustment. But like I said, the R&D at the JV level remains pretty consistent with prior quarters, and we would expect that to continue going forward. Amit Dayal: Okay. I missed that. I appreciate it. Just last one, guys. What's the runway for the AirJoule JV? I know you put in sort of $2.5 million in 3Q. How long will that sustain? And what are your needs on that front going forward? Sze-Yin Pang: Yes. So as I also mentioned in our prepared remarks, we do expect the JV spend for the full year to come in at the higher end of the previously provided range of around $17 million to $18 million. This year, that spend also was inclusive of previously agreed upon statement of work we had with GE Vernova. We are evaluating kind of what that spend will look like for 2026. But I would expect that specific statement of work to likely come in lower from an aggregate spend standpoint for next year. From a -- on a go-forward basis, I'll also reiterate that our cash currently is sufficient to support both the corporate expenses as well as the JV spend through commercialization into 2026. Operator: The next question is coming from Jake Sekelsky of Alliance Global Partners. Jacob Sekelsky: So just starting with the water purchase agreement model, it looks like an interesting avenue for commercialization. Can you just comment on maybe the types of customers that are showing interest here? And would these be AirJoule owned and operated systems under this model? Bryan Barton: Thanks, Jake. Yes, that's accurate. We would -- AirJoule would own and operate these systems and the customer interest that we're getting is -- I'll comment on 2 respects. One, these are customers that need clean water at an operations site, and they don't have access to cheap and abundant municipal water or groundwater. So they're somehow limited on the access to water or the water that they can get is not of the right quality that they need for their operations. So that's really where we're seeing a fair bit of traction. And in those conversations, -- it typically goes like they really like what we're capable of delivering. They see the value and they want the AirJoule solution. But we're still early days in terms of deploying and demonstrating especially large amounts of water. And so to build the confidence that we can deliver the economics overall and have bankable projects, AirJoule will own and operate these assets and simply sell the water that's produced at a set dollar per gallon. Patrick C. Eilers: And I may just add, if you don't mind, Jake, this is Pat Eilers real quickly. I would just add that despite us putting up the CapEx for these projects, we're not raising capital at our cost of capital. It's a long-term offtake. We can look through to the investment-grade status of the offtake customers that are looking at these WPAs. So it's very accretive. Matthew Jore: Yes. And I was just going to add -- this is Matt, Jake. I was just going to add to what Pat and Bryan said is that I love the idea of an asset that you can make money on over a 15-year period. It just makes perfect sense to me. So that's another exciting proposition, especially, as Bryan said, as we're in total control of the operation and the data that comes out of these things. So that's another facet. Thanks for the question. Operator: The next question is coming from Ryan Pfingst of B. Riley Securities. Ryan Pfingst: Bryan, you talked about water quality in the prepared remarks. How important is that water purity advantage when you're having commercial discussions with data centers and industrial customers? And can you talk about AirJoule's differentiation a little bit compared to other atmospheric water generation approaches? Bryan Barton: Yes. Thanks, Ryan. So I'll take the first part first. And that is the water quality really depends on exactly who we're talking to, be it food and beverage customer or an industrial customer or a data center operator. Data centers actually have many different needs for water across their operation. We most often think about evaporative cooling. But if the data center puts a power generating asset on the site, they may also need what's called demineralized water, which is distilled water. So has 0 TDS water for use in, for example, a gas turbine. And so there are actually a variety of needs for clean water and distilled water depending on the industry or the use of the water. So we're really well positioned to address water for purpose and having clean water depending on who we're talking to. So that's the first part. And then -- I'm sorry, remind me the second part? Sze-Yin Pang: Just the differentiation of AirJoule compared to other approaches. Bryan Barton: Yes. Yes, thanks. So I think actually, this comes down to 2 main points. One is overall economics and reliability. Conventional atmospheric water generators work well in humid climates. But it's only humid for depending on location, half the day. But -- so we're really starting to think about this more in terms of like seasonal efficiencies. Like you could deploy a conventional system in Miami and it may work well. But even in Miami, it's not very humid in the peak midday sun. And so we -- it's really around seasonal efficiencies and operational costs for the entire duration of the year. So as we think about actual dollars per gallon, right, delivered from the asset, the asset is going to sit on the ground every month, 24/7 and operate. And so really, what we have to do to calculate levelized cost of water is think about the asset cost and how much water is generated for the entire length of the year. And so this is where AirJoule really shines because we can make water economically down to 30% relative humidity or so. And so now we have the full gamut of environmental conditions, mostly accessible to us. And the other point that I stressed on the call is really on our ability to generate clean water. When you condense water from the air, you often pick up other things, and there could be biological concerns. So you have to clean that water up quite a lot in order to get very good biological counts and very good contamination counts. And because AirJoule kind of selectively pulls water vapor out of the air and then we have a vacuum distillation process, the water that we make is natively very clean. Matthew Jore: Yes. Bryan, this is Matt. Ryan, I'm glad Bryan said that, he's a PhD in chemistry. So I'm glad that he mentioned that last part because this whole system is completely unique in that just as Bryan said, it pulls water vapor out selectively and only water vapor comes out and is condensed inside our condenser. If you think about what Bryan talked about with the DX systems that are out there, other atmospheric water generators, they do just what conventional air conditioning system. They condense on the outside of an evaporator. So all that stuff that's in the air goes right along with the water. So that's why we have this really unique advantage. So Bryan, thanks for adding that second part. Ryan Pfingst: Yes. I appreciate all that detail, guys. And then secondly, just curious, how much is the validation work you're doing with ASU and Dr. Westerhoff helped your commercial discussions? And does that project also help anything regarding regulatory approvals? Bryan Barton: Yes. I would say, first and foremost, the effort with Paul is independent validation, not just on how much water is generated per day or how much energy the system consumes, but also on the water quality side. So we'll have Paul's full academic and professional evaluation of those components. And at the same time, he is kind of the center spoke of a large network of folks interested and industries interested in atmospheric water harvesting and when it makes sense and how it makes sense, right? So there's really, I think, a mature perspective on when these types of deployments make sense. And Paul is involved in those conversations with interested industries. And so he also serves as kind of an industrial I think, a collaborator of sorts when people will come to him and ask how does the system work and he's a key voice in that conversation. So that -- those are the primary things. On the regulation side or certification side, not really involved. We're heavily pursuing this internally. We have to have certifications of the actual product from multiple perspectives and regulatory bodies. And then for individual deployments, like, for example, the one in Texas, the Texas TCEQ has to go through those validations at a particular location and then be vetted and approved as a public water -- portable water provider. So it's kind of location dependent in that respect. Matthew Jore: Ryan, one thing that you -- was stunning to me that Paul taught us is that in the greater Phoenix area, they get -- they consume about 1.2 billion gallons of water a day out of their aquifer and another 1 billion off of groundwater, surface water. And yet every day, 25 billion gallons influxes into the Greater Phoenix area in the air. That's how much water is in the atmosphere. That's something that I was stunned to hear Paul talk about. That's one of the reasons I suppose they're looking to the air for the water solution. Bryan Barton: It's actually quite obvious in the Phoenix area with the Palo Verde nuclear plant that's putting just an ungodly amount of water into the atmosphere. So you really see it. Operator: The next question is coming from Sean Milligan of Needham & Company. Sean Milligan: I just want to go back to the WPA model. I mean you gave some color earlier, but it seems like that would be a great model for you to pursue from a higher return perspective, but also from the customer in terms of like you're taking on the risk. So I mean can you frame up like how many discussions you're having there in terms of order of magnitude in your total pipeline, like percentages is it 25%, 50% -- like what are the rate of discussions you're having on the WPA model? Matthew Jore: It's an offer that we're making -- sorry, Bryan, it's an offer we're making out across the board, Sean. Bryan is going to be happy to talk about specifics here in the coming periods. But Bryan, go ahead. Bryan Barton: Yes, Sean, I would just say that in our conversations over many months, often goes to the risks of deployment and the assured guarantees. And so the WPA model kind of emerged and then we started outreach back to all interested customers. And it's in the many dozens that we've discussed with. And most of the conversations are going very well. There's a lot of positive reception on this business model for launching technology with us taking on the risk and just delivering against the water and needs. And we're in final conversations or I would say, approaching the final conversations with what we will take on in '26 and '27 and stay tuned for kind of that conversation. Matthew Jore: Yes. I will add to that Sean, I'll add to that. The thing that we learned in -- well, we're learning across the board, but in the New Orleans conference last year talking about data centers, where are we going to get all the power from. It's one of the reasons why power purchase agreements are so compelling. We realize now it's the same thing with water. Where are you going to get all the water to do all these new developments. And so these WPAs are really emulating the PPAs that you're familiar with. Sean Milligan: Yes. Like who are you -- I mean, what are you pricing against in the WPA model like other water suppliers and then just kind of like how your pricing maybe fits against that? Matthew Jore: Yes. Great. Go, Bryan. Bryan Barton: Yes. So it's really kind of unique in a situation where a customer needs distilled water and they don't have access, right? So municipal water is typically -- is quite affordable if it's available. And so we're specifically talking to folks that may have to truck in water and trucking in water can be pretty expensive. It can be $0.50 to $0.75 per gallon. And so that's really the main comparison if you want to deliver clean pure water and certainly cheaper than the cost of trucking in at those price points. Really, as we kind of like take these WPA conversations, forward, we're really in a position, I think, unique position that we can only take on so much, right? Like there's a real strategy and logic to, okay, what can we actually deliver against in 2026 for customers that really need this technology and are going to grow the pipeline and the demand signals out into the future. So while we have many conversations ongoing, we're going to be fortunate enough to be selective on who and where and how we deploy the initial WPAs. Sean Milligan: That's great color. And then one last question on the net zero innovation project. Congrats on that. But I was curious in terms of the timing of that and then just sort of -- is it a single unit? Or what's the scope of that project? And the timing in terms of like when that starts, how long that runs for and maybe what like expected outcomes for you all could be off of that project? Because it sounds like it's a chance to kind of highlight the benefit for Vista data centers. You're also doing that concurrently via other discussions. So just kind of curious about like how important that project could be in the future for you all. Bryan Barton: Yes. Thanks, Sean. It's actually, I think, a really exciting thing to be recognized as a winner for this net zero innovation hub. This kind of consortium or hub, right, founded from Google, Microsoft, DATA4, Vertiv, Schneider and Danfoss. And so there's amazing visibility to these key players in the industry to the AirJoule Technology. The project itself is a kind of a test bed center data center that will be in the Denmark area. And AirJoule will deploy into that data center and really showcase how does it take waste heat from data centers in a circular way, right, reuse that waste heat and create clean distilled water for the data center or other operations locally. And so we view it as just a great catalyst for the conversation around circularity with these key data center partners as well as a catalyst for real operational projects globally. Operator: [Operator Instructions]. The next question is coming from George Gianarikas of Canaccord Genuity. George Gianarikas: So first question is that looking at 2026, can you help us understand the sequencing? Will you see A250 dehumidification deployments first and then A1000? Or will they launch simultaneously? Bryan Barton: Yes. Thanks, George. You will likely see the A250 product launch before A1000 simply out of the simplicity of a 2-chamber system versus a 16-chamber system. Our engineering activities have started. So we're full swing in and the design and build of A1000, but A250 simply is ahead of the race because of it started earlier. So we'll see that one go into the marketplace. And as a reminder, it as a dehumidifier is the same machine as it as an atmospheric water generator. And really, it's the process of how it runs that distinguishes whether or not it's a dehumidifier or a water generator or both. In some cases, a few months. George Gianarikas: You've also talked about 2026 as an inflection point for commercialization. -- could you possibly define what success looks like by the end of next year? Bryan Barton: Yes. Thanks, George. For me, our key focus is firming the demand signals for where AirJoule will be successful and how it will be successful. So generating that and firming that pipeline for deployments in units either through the WPA or units sold. And then the product that can deliver the compelling economics is the second key milestone for those deployments. And so really, this is quite simple in that we are in those conversations to firm the demand, and then you will see and track the launch of the product and how it's capable of delivering the overall dollars per gallon or dollars per dehumidified air or the savings for those customer opportunities. So those are the key things to look for, we'll be referring against. Operator: Thank you. At this time, I'd like to turn the floor back over to Mr. Jore for closing comments. Matthew Jore: Thank you, everybody, for joining us today. The message I hope you take away from this call is straightforward. We're capitalizing on powerful converging macro trends that are creating significant demand for AirJoule solutions. We're systematically building the foundation for commercialization, validating our technology through real-world deployments, earning recognition from industry leaders, establishing critical defense partners, building a robust commercial pipeline and advancing productization to deliver cost-effective and reliable systems. The progress we've made this quarter moves us meaningfully closer to our 2026 deployment goals. We have the technology, the partnerships, the manufacturing capabilities and increasingly the customer demand to establish AirJoule as the leader in industrial scale water from air. We're executing our strategy with discipline and focus, and we look forward to updating you on our continued progress in the quarters ahead. Operator: Ladies and gentlemen, thank you for your participation and interest in AirJoule Technologies. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.
Operator: Good afternoon, everyone, and welcome to the AmRest Q3 2025 Results Call. My name is Brika, and I will be coordinating your call today [Operator Instructions] I would now like to hand you over to your host, Lukasz Wachelko to begin. So please go ahead, Lukasz. Lukasz Wachelko: Good afternoon, ladies and gentlemen. My name is Lukasz Wachelko, I'm representing WOOD & Company. And I have again a pleasure of moderating the call with management of AmRest to present to you the results of the third quarter of this year. The company is being represented by CFO, Mr. Eduardo Zamarripa; and IR and Strategic Director, Mr. Santiago Camarero Aguilera. Guys, the mic is yours. Eduardo Zamarripa: Thank you, Lukasz. Good afternoon, and thank you for joining us in today's third quarter 2025 AmRest results presentation. It is my pleasure to share with you an update of AmRest situation at the end of the quarter. During the third quarter of the year, despite ongoing trade tensions and geopolitical uncertainty, both global and European economies showed resilience though Europe's lagged the global average. Across Western Europe, activity stayed mute. Growth was modest, helped by public investment and easier financial conditions but weighted down by weak exports and cautious consumer spending. Inflation moved closer to the ECB 2% target, allowing monetary policy to stabilize after an earlier rate cut. However, disposable income growth remained limited due to past fiscal tightening and high living costs, keeping consumers confident fragile. In Eastern Europe, growth slowed sharply versus the previous quarter. Fiscal consolidation like VAT hikes and subsidy costs hit household consumption, while inflation stayed above target in many countries, eroding real incomes. In the case of China, its economy held steady about 4.5% year-on-year growth rate, supported by a manufacturing rebound and targeted fiscal stimulus. Household spending improved slightly, thanks to tax rebates and easier credit but confidence remained soft. With that context, we'll now review our third quarter results, financial performance and outlook before opening the floor for your questions. Please note that today's remarks may include forward-looking statements subject to risks and uncertainties. But let's start with today's presentation. If we go to Slide 2, please. As a reminder, AmRest is a leading multi-brand restaurant operator in Europe with 2,110 restaurants across 22 countries in Europe, the Middle East and China. We are proud to operate some of the world's most iconic and reputable restaurant brands. Our portfolio combines global franchise brands, KFC, Starbucks, Pizza Hut and Burger King with proprietary concepts such as La Tagliatella, Sushi Shop, Blue Frog and Bacoa, positioning our businesses across quick service, coffee, fast casual and casual dining. Every month, our restaurants welcome over 30 million guests, served by more than 44,000 AmRest colleagues, a scale that allow us to deliver consistent value and service across formats and geographies. If we move now to Slide 3, I'm going to try to summarize the most relevant financial KPIs and events for this quarter. First, we hit historic sales record of EUR 660.5 million for a third quarter with a 3.5% increase when excluding the impact of the asset disposed during the year. In this case, let me remind that we sold our equity stake in SEM business at the end of the first quarter. And as a consequence, we deconsolidated all the assets and liabilities associated to the business since then. The idea behind this transaction has been to internalize and optimize the value generated in the chain management and product quality assurance services. Second, EBITDA reached EUR 111.2 million, which a solid margin of 16.8%. The operating profit reached EUR 42.3 million with a 6.4% margin, while the net profit achieved at EUR 15.8 million. Leverage stood at 2.1x and the low end of our internal target range. Finally, during the quarter, we opened 16 new restaurants and renovated 46 units, continuing our commitment to growth and modernization. In the following slides, we will go into more depth and detail of these points. But let's start first with what we are doing in our different brands on Slide 4. The commercial position of our brands plays a crucial role in the value generation of AmRest. Let me start with the KFC, La Tagliatella and coffee brand in this Slide 4. At KFC, we continue to deliver both locally relevant experiences through dynamic campaigns and seasonal innovations. The California Summer campaign brought different offerings, complemented by a strong value proposition. We amplified engagement through the high-impact promotions. And for instance, our largest partnership of the year with the EuroBasket during the summer months. In addition, regional highlights included the Street Food Festival in Czechia and Hungary, introducing global flavors like [indiscernible] and Korean K Zinger. These initiatives strengthened brand image, boosted basket value and reinforce customer loyalty. At La Tagliatella, we continue to push culinary boundaries, partnering with Michelin-starred chef Carlos Maldonado to elevate brand perception and attract new audiences. This bold collaboration fuse Italian tradition with Maldonado's avant creativity, resulting in 4 exclusive dishes. The initiative delivered double-digit growth within our historical additions category, positioning La Tagliatella as an innovative leader in the restaurant sector. At Starbucks, we continue to strengthen our coffee leadership while embracing evolving consumer trends. Core coffee growth accelerated with espresso-based beverages reinforced by our back to Starbucks strategy centered on quality and tradition. Seasonal beverage launches continue to drive customer engagement, while growing interest in wellness and personalization is reflections in the strong appeal of matcha-based offerings. Now let's continue with our brand in Slide 5. At Sushi Shop, following the strong momentum for our Rubik's Cube collaboration during third quarter, we launched our annual summer receipts edition. The result resonated strongly with consumers prompting us to extend the offer into the September to maximize engagement. At Blue Frog, we strengthened our bar, identity and local relevance through 3 key initiatives: refresh drink menu, where we introduced higher quality creative options to elevate the all-day bar experience. Chinese Valentine's Day with a premium [indiscernible] and [ Thin ] cocktails created a festive romantic atmosphere. And third, our city-limited series locally inspired dishes and cocktails showcased authenticity and deepen the connection with regional audiences. At Pizza Hut, we strengthened innovation leadership through both consumer-focused initiatives. Globally, Pizza Hut introduced the Pizza Cheese Burger range, a mashup concept blending classic cheeseburger flavors with Pizza Hut signature pizza format. This range targeted Gen Z, and value-seeking consumers, supported by gaming and delivery partnership. These campaigns strengthened Pizza Hut reputation for both flavor innovation, resonating strongly with consumers. And finally, in third quarter, Burger King brought anime culture to life in Poland, Czechia and Romania with a special Naruto theme activation. Restaurants offer exclusive meals per with a collectible toys turning BK into a destination for anime fans and driving engagement, brand affinity and incremental sales. If we now move to Slide 6, please. Core revenues on a comparable basis grew by 3.5% year-on-year, underscoring the strength of our portfolio. In addition, we continue to see steady progress in the 12 months trailing average sales per equity store, driven by an optimized channel mix, disciplined pricing strategies and positive impact in recent renovations. These combinations of per store productivity and selective expansion reinforces our ability to consistently improve unit economics across the network. As a result, AmRest delivered resilient store level performance that supports sustainable growth despite the temporary challenges faced in several markets. Moving to Slide 7, please. In the third quarter of the year, digital orders reached 62% of total transactions, a clear testament of accelerating adoption and shifting consumer preferences. This transformation is powered by our omnichannel ecosystem which integrates proprietary kiosk, mobile apps, web ordering and third-party aggregators. By leveraging these platforms, we deliver personalized promotions, unmatched convenience and a seamless experience across every touch point. Digital remains a core pillar of our growing strategy, driving both customers' engagement and operational efficiency. In summary, our robust digital adoption underscores 2 things: challenging consumers' behaviors and our commitment to innovation. That speed of service improved consistency and drives ticket growth. In short, digital continues to be a strategic lever for sustainable value creation. Now moving to Slide 8. As we have covered in previous calls, our underlying restaurant growth is complemented by strategic adjustments to nonperforming businesses made since 2022 which have led to the end of certain commercial agreements or disposable of some businesses during this period. These decisive moves are aimed to sharpening our capital allocation and focusing the portfolio on the most resilient and profitable formats, ensuring that our footprint is configured for sustainable long-term returns. Today, AmRest operates directly or via franchisees a portfolio of 2,110 restaurants across 22 countries and 8 brands, following the opening of 16 new restaurants and the closure of 14 during the quarter. With this, Santi, if you can cover the main financial highlights, please. Santiago Aguilera: Thank you, Eduardo. Thank you, everyone, for joining us. Our objective today is to try to be clear on what is working and transparent about what is -- what we are improving in our business. We continue to see healthy sales performance despite temporary macro headwind in several markets, and this is supported by a balanced brand and market mix as for a disciplined commercial execution. In this regard, pricing remains critical as we need to balance protecting traffic and brand health while offsetting cost inflation. Digital occasions are a structural tailwind. Guests are choosing our apps and aggregators for convenience, speed and value. And this trends across global QSR, where convenience led by omnichannel ordering continues to expand. We are progressing and refining offers through a better and wiser usage of data to increase attachment and order value. Second, our operating profitability is resilient, though shy of where we expected a few quarters ago. This reflects sector-wide wage and input cost dynamics and in some markets, a more value-sensitive consumer. We are staying agile, tightening cost control, prioritizing high-return initiatives and using target promotions that reinforce value without diluting the brand. This playbook is consistent with our strategic view of value discipline, operational efficiency and risk management to protect margins through the cycles. We have delivered an improvement in terms of the operating profit, underpinned by lower impairment charges and a sharper focus on the quality of earnings. That improvement is a function of many small structural gains product at a single lever. Finally, our balance sheet remains strong. We continue to generate solid cash flow and capital expenditure is not only well controlled but trending lower, while still leaving us ample flexibility to invest in digital initiatives, operational enhancements and the most attractive new unit opportunities. All of this is achieved while maintaining prudent leverage and preserving the capacity to navigate uncertainty. So with this in mind, let's turn to the Slide 10, please, for the quarter's financial and operating highlights. Most of this has already been covered by Eduardo but let me give you a quick recap. Quarterly sales came in just under EUR 661 million, which is a 3.5% increase year-on-year when we exclude changes in the consolidation perimeter. Same-store sales held steady with the index close to 100, showing a stable performance across comparable units. EBITDA for the period was a bit over EUR 111 million, giving us a margin of 16.8%. On a non-IFRS basis, this is excluding leases effect, EBITDA was EUR 64 million with a margin of 9.7%. And operating profit reached EUR 42.3 million, which represents a margin of 6.4%. During the quarter, as addressed by Eduardo, we opened 16 new units, and we kept the CapEx below EUR 34 million, reflecting our disciplined approach to capital allocation and focus on high return opportunities. And finally, as at the end of October, our same-store sales index remains around the 100 level. Moving to the Slide 11, please. Our group delivered a record third quarter revenues of EUR 661 million. That is likely from -- this is slightly up from last year, about 0.2%. And if you adjust for businesses with this consolidated earlier, growth came in at 3.5%. Now I think that it is important to recognize the context, the quarter wasn't without challenges. Consumer confidence stayed weak and cost of living pressures continue to squeeze disposable income. That means less discretionary spending in restaurant, especially towards the end of the summer. But here is the positive. We see these conditions as an opportunity to strengthen long-term loyalty. We are focused on giving customers what they want, great flavors at a attractive price points, smart bundles and value-driven offers. And we are using our digital platforms to personalized promotions and to make the experience as convenient as possible. One last note on comparisons last year, Q3 numbers included EUR 9.3 million of extraordinary income from refunds which boost revenues and profitability. Turning now into the Slide 12, please. We will focus on EBITDA performance for the third quarter. EBITDA came in at EUR 111 million, with margins holding around 17%. This demonstrates our ability to maintain healthy profitability in a dynamic market environment. The bridge of this slide shows how we have protected unit economics through effective labor management and productivity initiatives. These actions has helped us to offset inflationary pressures and competitive challenges, keeping operational efficiency strong. In the case of the operating profit for the quarter, we delivered EUR 42 million, representing a margin of 6.4%. This is a decline of 2.7 percentage points compared to last year. Looking at the first 9 months of the year, cumulative EBITDA reached over EUR 300 million with a margin of 15.6%. Operating profit for the same period totaled almost EUR 90 million. That corresponds to a margin of 4.7% which is an improvement of 0.3 percentage points versus last year. Moving now to Slide 13, please. I would like to highlight a few important developments in our restaurant portfolio and financial performance in this slide. First, over the past 12 months, our net equity restaurant count grew by 59 units. This reflects our commitment to selective growth in markets and formats with the highest potential. At the same time, the number of franchise restaurants declined mainly due to the transfer of the Pizza Hut France business. This move was part of our ongoing strategy to optimize the portfolio and concentrate resources where they can deliver the greatest returns. From a financial perspective, Net profit for the quarter was just under EUR 16 million. That's below last year's figure. But remember that last year included some one-off items that I mentioned earlier. And finally, also as I noted before, we continue to see a gradual reduction in terms of CapEx, reinforcing our disciplined approach to capital allocation and also I covered that point before. Let's move now please to the Slide 14, which provides a detailed view of our liquidity, our leverage position. Our overall risk profile remains broadly unchanged with our net financial debt now at 40 -- sorry, EUR 503 million. Importantly, leverage stands at 2.1x, right at the low end of our internal targets. And once more, this reflects our disciplined approach to financial management and our commitment to maintaining a strong balance sheet while continuing to invest selectively. At the end of the quarter, we held nearly EUR 145 million in cash, and we have access to an additional EUR 215 million via committed credit lines. All this ensures that our liquidity position remains prudent and efficient, fully aligned with the group's operational and strategic mix. On Slide 15, you can find an overview of our financial debt structure and also the maturity profile. As you can see, there has not been significant changes compared to the previous quarters. Our funding remains stable and well balanced with the vast majority of our debt denominated in euros. The maturity schedule is well levered with a clear long-term orientation. If we move now to Slide 16. We can find the breakdown of revenue, EBITDA and the number of restaurants that we have in each geography. This segment comprises businesses in 22 countries where once again, we have observed very different commercial dynamics. So as usual, let's start with Central and Eastern Europe, our most significant region, please, that you can find all this information in the Slide 17 and 18. In the third quarter, the region delivered sales of EUR 421 million, up 7.8% year-on-year and accounting for almost 64% of total group revenue. Looking at individual markets. Hungary posted double-digit growth of 10.3%, while Poland also performed strongly with almost a 9% increase. Regional EBITDA came at EUR 86 million with a margin of 20.4 percentage that represents a decline versus last year but keep in mind that Q3 '24 included more than EUR 8 million in refunds. So excluding this one-off, the EBITDA grew by 1.3%. Finally, the restaurant portfolio in the region is totaled 1,255 units at quarter end, following 8 openings and 2 closures. For the year so far, we have opened 35 restaurants in the region and closed 8. Let's move on to the Slide 19 and 20, please, to review Western Europe. Sales in this region for the third quarter totaled EUR 219 million, which is a 2.7% decline compared to the same period of last year and once more performance embody very drastically by different markets. In the case of Germany, we delivered a solid growth of 6%. In Spain, we held steady numbers, very similar to last year, while France continued to face big challenges with sales down almost by 14% due to weak consumer confidence. EBITDA for the quarter was EUR 32 million with a margin of 14.7%. This is broadly in line with last year. The restaurant portfolio closed the quarter were 770 units following 4 openings and 6 closures. And for the first 9 months of the year, we opened 10 restaurants and closed 24. If we go now to Slide 21 and 22, we have our performance in China, where sales for the quarter were EUR 20 million down 10% in nominal terms, but on a constant currency basis, so local figures, the decline was less than half of this figure, so this is below 5%. These numbers reflect the impact of a challenging macroeconomic environment and a global slowdown in consumer spending, which weighed on business generation. To address these headwinds, we are accelerating initiatives focused on value-driven menu innovation, strengthening digital engagement and optimizing operational efficiency. These actions are designed to protect margins and reinforce brand relevance in a more price-sensitive environment. In terms of profitability, EBITDA for the quarter was EUR 3.5 million with a margin of 17.4%. And finally, at quarter end, the Blue Frog portfolio comprise 85 restaurants following 4 openings and 1 closure. Year-to-date numbers, we opened 7 restaurants and closed 9. And with this, back to you, Eduardo. Eduardo Zamarripa: Thank you, Santi. To conclude, this quarter reflects both resilience and the reality of a tougher operating environment. While we achieve record revenues and maintained solid margins Growth was tempered by persistent macroeconomic headwinds, with consumer confidence, cost of living pressures and on even regional performance. We are not satisfied with these results and we are taking decisive steps to improve. Our priorities include accelerating digital engagement, sharpening value propositions, optimizing operational efficiency and maintaining a strict discipline and capital allocation. These actions are designed to protect profitability and strengthen branded relevance in a more price-sensitive environment. In light of these dynamics, we are revisiting our revenue and profitability guidance for this year to reflect current market conditions and the timing of our improvement initiatives. This adjustment is a prudent step to ensure transparency and set realistic expectations. In this regard, we expect to close 2025 with a low single-digit growth in sales and with an EBITDA margin slightly above current year-to-date that I remind you is 15.6%. Finally, the number of restaurants to be opened will be below last year numbers. Thank you for your continued trust and partnership. We remain committed to delivering sustainable value and will now open the floor for your questions. Many thanks to everyone. And with this, we are open to any questions that you may have. Operator: [Operator Instructions] The first question we have from the phone lines comes from Jakub Krawczyk with ODDO BHF. Jakub Krawczyk: Hopefully you can hear me. Here is Jakub Krawczyk from ODDO BHF. I have a couple of questions. Question number one, can you please elaborate on these refunds that were the one-off in Q3 '24? I just want to understand what the nature of these refunds are? And is this something which maybe can occur again. And question number two, France, okay, and Sushi Shop. Can you tell us -- give us a bit more color on what is the -- what's going on there? How is the restructuring going? What's the weakness? Why has -- the measures you have undertaken so far not really materialized in terms of -- or not translated to an improvement in the numbers? And what can be done? And what's the time frame? What are your expectations for this business for Sushi Shop specifically? And I guess a follow-on how does Sushi Shop perform outside of France? Is it equally weak or not? Eduardo Zamarripa: Okay. Thank you, Jakub for your questions. Now related to the first one that you make in terms of the refund, that's something that was a onetime effect. So we should not be having any refund like this in 2025. Then related to the question that you make on Sushi Shop, I would say that we have to split this in several topics. And first, we need to consider that the situation on the French market is quite challenging. Consumer confidence is going down and consumption is also challenging. That's why also we have some plans that we have been working on in the French market, talking about Sushi Shop but also the other brand that we operate there. Now topics that we have been working on. First, in terms of the stores, we have made the deep analysis of the stores that it makes sense to keep. And we have some stores that are big bleeders which do not make sense to continue working with. So we're restructuring that and closing the stores that do not make sense to have there. And we have 3 clusters in terms of stores, the ones that are profitable. And then the ones that we have a [indiscernible] stores, the one that they have a potential to increase the performance. Because of the operations, and the others that, as I said, they are heavy losers and makes sense to close. So that's part of what we are doing of what we are doing over there. Delivery strategy. As you know, Sushi Shop is fairly highly concentrated in delivery. So negotiation with the delivery companies in order to keep being relevant in the segment and be on the first pages of the applications. And at the same time, also strengthening our own delivery channel. The application is something very relevant, creating loyalty programs for our consumers also is quite relevant for us. We are working also in terms of the menus that we are offering reviewing that, which are the SKUs that have the highest consumption and keeping those and making the analysis of the one that do not move that much, so making menu efficiencies. And also innovations, new boxes that we are launching new roles that we are launching and innovation is something that plays a big role in a segment like in a segment like sushi. One of the facts that we also have in the past and right now in procurement, we are making a lot of advances in terms of the prices of the salmon. As you know, there was a big disruption in previous year in terms of the price of salmon. And right now, our procurement team is having very good negotiations in those fronts. Also renovations of our stores a design, which we have a warm, welcoming ambience, the colors that are there that invite you to spend a very nice time. And also working on the lightning of the places. So it's having a better environment overall in order to buy -- our consumers to be there given the reality that we have, a dine-in which is a small part of the business but working a lot on the value proposition for the consumer for the delivery. Santiago Aguilera: Yes. I mean, if I may to add over here. I mean, I understand the relevance of the question, given the performance that we have seen in the French market, the situation that we have in the past with the investment in Sushi Shop. But -- there are many small levers, as Eduardo was mentioning, many different things that are really turning the boat and the situation of the brand. It's very important the question that you ask Jakub, with respect to the performance in the different regions. And just to remind you, for the Sushi Shop the core business, the origin is France. But currently, we are running business in Belgium, Switzerland, Spain, the Gulf region, Luxembourg, and in most of these markets, what we are seeing is a quite positive performance with all these initiatives that we are putting on the table that invite us to think that the situation, the macro situation that we are living in the French market is preventing to unleash the value of all these initiatives that we are deploying at the moment. Thank you very much for the question. Jakub Krawczyk: That's very useful color. Can I just -- would it be farfetched to assume that for the moment, you're not considering more radical changes to this own brand such as exit or something like that at this point. I guess you're still in a mode to fix it, correct? Eduardo Zamarripa: We are focusing all our efforts in order to deliver results in this brand in France. Operator: [Operator Instructions] Lukasz Wachelko: Okay. So maybe I will use my previous moderator and ask a couple of questions from my end. First of all, as a follow-up to Jakub's question. In France, do you see any [ signs ] of the things getting better, are there any time lines and the milestones you have set? Do you have any visibility when the things can get better? That's the first one. Eduardo Zamarripa: Thank you for the question, Lukasz. And for us right now, the most important thing is to work on the improvements that we were mentioning. We have several initiatives across that. We have a plan put in place by the Brand President of the brand, and there are direct involvement of all the functional leaders. Now the CEO is involved on that execution plan, as you can imagine, also I'm quite involved on that. Also operations. So this is a priority. This is one of the priorities of the organization. Right now, I prefer to focus more on the things that we are doing more than to enter into which is the timing. But I want to assure that this is one of the priorities that we have in the organization in this 2025 and is still a priority for 2026. Lukasz Wachelko: Okay. And I also have a question about the Polish market when we see Zabka a leading convenience chain developing pretty fast. And this year, they started the rollout of a pretty nice offer of QSR products. Do you see any impact of that? Do you find them competitors -- should we expect any impact of those developments with offering a pizza on your numbers? How do you see it? Eduardo Zamarripa: Competition is something that is in the day-to-day operations of the restaurant industry, as you say, this is one of the emerging competitions with the products that they are offering. That's why also for us, it's very important to work on the -- on our consumers to work on the development of new products, on new occasions of consumptions, on improving the experience that the consumers that our clients have. And that's why we made particularly a section in this conference call in terms of the topics that we are putting on the table to attract consumers, Generation Z, but also and all our consumers to keep our brands relevant. That's what is relatively important for us. Now how we keep our brands relevant what makes us unique what makes us different. And the value proposition that we give and the development of new products is something that is quite relevant for us. But you raised an interesting point, Zabka, as you say, but it's also supermarket, the ready-to-eat segment in supermarket is increasing. That's a reality, and we need to adjust our strategy towards new realities that are happening there. But as always, we welcome competition, and that makes us be better every day. Lukasz Wachelko: Okay. And another question from my end before I let others is regarding the Czech market. When we were seeing recent negative news flow on the problems with quality or food safety in KFC. I understand the second restaurant was under the spotlight recently. So can you shed some light on that for us? What's happening there, how serious it is and one can take us? Eduardo Zamarripa: Thank you, Lukasz, for the questions. We take matters of health and safety very seriously and we have very strict food and safety protocols in place. Our restaurants regularly undergo multiple levels of quality and safety oversight, including external audits for independent third parties, internal foodservice controls and also inspections from national and local authorities. Across these hundreds of audits in Czech market, including 250 inspections conducted year-to-date by state authorities alone, we have not found any issue related to the systematic mishandling of food products. Santiago Aguilera: No, I mean, I think that, that's the point that we are really seeing many more audits that we have before, but all of them, they are coming up with positive outcome. I think that 1 of the points that is always important to remind that the level of checks, audits, protocols that we have in terms of health safety, I mean they are unparalleled in the industry. So if 1 thing we can be very proud, I think that is this specific point. Operator: [Operator Instructions] Lukasz Wachelko: Okay. So maybe in the meantime, we'll have another question Germany, there's the market when you were [indiscernible] for longer while but, in fact, I believe it was rather the previous quarter when the things stabilized and got better. And this time around also see a decent performance there. So -- what has changed why well Germany and also Hungary are performing above the other markets? Eduardo Zamarripa: Well, for Germany we have to take one consideration still is one of the challenging markets that we have. But as we were mentioning also with Sushi Shop in Germany is exactly the same. We are working in order to improve the experience that our consumers are having over there. The main brand that we have in Germany is Starbucks, and we have work a lot in order to improve that experience, as I was saying, through the development of new products, new beverages, also increasing the offering that we have in terms of food and going back to the roots of Starbucks is what is helping us to improve the results on that market. Lukasz Wachelko: Okay. And what about Hungary? Because this market is also standing out in the perspective. Eduardo Zamarripa: And you raised a very good one. If we make the comparisons versus the third quarter of last year, among the biggest markets that we have Hungary was outstanding in terms of -- it was outstanding in terms of results. And it's execution, execution and execution over there. Santiago Aguilera: We have received some writing question. I guess some of them, they have already been addressed. So thank you for it, but I'm going to try to read the ones that they have not been addressed yet. One of the question is, one, what are the main reasons for slowing sales dynamics in Spain despite the strong tourist and macro in the country. And here, one of the point that is important to bear in mind, I think it's always we have a very strong seasonality in terms of our business, depending on where your restaurants are placed, are situated, the seasonality is going to change. So that is why I always suggest that it's important to see from an aggregated perspective, really in 12 months average, I think that provides a better picture. And there, what you have is a strong momentum in our restaurants. The challenge in terms of the situation in Spain is very similar to other countries despite of the good macro figures that we have that is the cost of living pressure that many people are suffering and this is, of course, affecting consumption. But when you see the aggregated figures and the growth that we have, we have very positive dynamics, sales growth, pricing margins, and to be honest, we are quite positive about the future of our brands in the country. We have received also another question regarding Hungary that I think that we have already addressed about the very good performance that we are recording in the country. An additional question is asking, what are the main reasons for the like-for-like performance that we have in this quarter? And I think that this has also been addressed. We have some markets, and we are having a quite poor performance. We already addressed the situation that we have in France with a drop of 14% in terms of sales. This is one of the very big markets for us. So this is, of course, affecting the like-for-like figures of the whole group. And I don't know if we have any more questions on queue, operator? Operator: We currently have no questions in the queue, [Operator Instructions] And Santi, we have another question. So I'll hand back to Santi to read that. Santiago Aguilera: Sorry, I'm just trying to see the question. I'm not sure what is referring the question, apologies. Eduardo Zamarripa: I think it is related to G&A. I think under this quarter, we have -- as we have seen the performance of the market, we have been also very focused in terms of how we control and tightening our G&A in order to balance the results. Also, we have a question in terms of if we are seeing a more cautious consumer in Poland? And I think in a certain way, we also have are we have addressed this question in terms of consumption confidence across Europe is something that we look very, very closely, and we see how we can improve through the different products that we offer in our restaurants to deliver -- been able to deliver value to our consumer. Now one of the things that, yes, we are seeing the promotional activity has increased and the promotional -- the menus that we have are having an important way in our -- weight in our mix, so we are seeing these kind of effects in the consumer. But what is relevant is that through the value proposition, the products that we deliver and the menus that we have been able to offer to our consumers, the solution that they have in terms of full consumption in our restaurants. Santiago Aguilera: If I may here, I think that it is important to highlight also one topic. So we have addressed today in previous occasions, also know what is the complex context that we have from this macro perspective, our consumer confidence is weak in many different countries. And once more, we have to reverse the effect of the cost of living standards that the accumulated inflation that we have on the latest years is having on consumption. We are not immune to this. So this is a temporary effect. This is something that at 1 point in time, it will pass. But what we are trying to convey is here is 2 things. how we are addressing this. We are addressing this, taking an agile approach in terms of adapting to our consumer needs but also taking as an opportunity to enhance, improve our structural capabilities. And this is also something that we are trying to really to show you over here how we are building a better and a more profitable company, bear in mind that right now the temporary macro factors are not helping our business. We have one final question that is about CapEx expectations for next years. This is something that we will address on the next investor call presentation when we provide the full year guidance for 2026. But as we mentioned before. And also one of the things that we are trying to push as a structural -- and structural move in our strategy is to optimize the capital allocation to be efficient in terms of this CapEx, what we are seeing is that this is translating in a lower usage of CapEx. But once more, not preventing to be investing in to have a better company to continue to be open units, to continue to be invested in digitalization and to continue to be improving our operational capabilities. Thank you for all these questions. I now think that with this, if there are not any more questions. Operator: I can confirm, we have no further questions. Eduardo Zamarripa: Good. Thank you. Thank you, operator. Thank you to all the participants in the conference call. See each other in the next quarter results, please feel free to contact the IR team if you have any follow-up questions. And we are -- we will be happy to see you in one of our restaurants in the near future. Thank you very much. Santiago Aguilera: Thank you. Operator: This does conclude the AmRest Q3 2025 Results Call. Thank you all for attending. You may now disconnect, and please enjoy the rest of your day.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the CES Energy Solutions Corp. Third Quarter 2025 Results Conference Call. [Operator Instructions] I'd now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead. Anthony Aulicino: Good morning, everyone, and thank you for attending today's call. I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions. These risk factors and assumptions are summarized in our third quarter MD&A and press release dated November 13, 2025, and in our annual information form dated March 6, 2025. In addition, certain financial measures that we will refer to today are not recognized under current general accepted accounting policies. And for a description and definition of these, please see our third quarter MD&A. At this time, I'd like to turn the call over to Ken Zinger, our President and CEO. Kenneth Zinger: Thank you, Tony. Welcome, everyone, and thank you for joining us for our third quarter 2025 earnings call. On today's call, I will provide a brief summary of our financial results released yesterday, followed by an update on capital allocation and then our divisional updates for Canada and the U.S. as well as our outlook for the remainder of 2025. I will then pass the call over to Tony to provide a detailed financial update. We will take questions, and then we will wrap up the call. As always, I will start my comments today by highlighting some of the major financial accomplishments we achieved in Q3 of 2025. These highlights include our highest ever third quarter revenue and second highest quarterly revenue ever of $623 million; our highest-ever quarterly EBITDA of $103.3 million, which represented a 16.6% margin. Total debt to trailing 12 months EBITDA was at 1.29x at the end of Q3 2025, which is well within our targeted range of 1 to 1.5x. Cash conversion cycle days in Q3 of 110 days, right at the low end of our targeted range of 110 to 115 days. U.S. revenue of $409.4 million, which was our second straight all-time quarterly record. Canadian revenue of $213.8 million, which was our third highest quarterly revenue ever. With regard to our capital allocation plans, I'm pleased to report the following. Consistent with our prior messaging, we intend to address the dividend once per year while reporting Q4 or Q1 of each year. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes anticipated CapEx in 2026 of $85 million to $90 million. We will continue to research and execute on strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns. We intend to fully execute on our current NCIB allotment of 18.9 million shares prior to its expiry in July of 2026. We will continue to target a debt level in the 1 to 1.5x debt to trailing 12 months EBITDA range. I'll now move on to summarize Q3 performance overall and by division. Today, our rig count on North American land stands at 211 rigs out of the 716 listed as currently operating, representing an industry-leading and all-time record North American land market share of 29.5%. This market share surpasses our prior record from last quarter of 28.4%. In Q2, 66% of CES revenue was generated in the United States and 34% in Canada. As previously noted, this U.S. revenue result for Q3 2025 set a new all-time record as our highest U.S. revenue quarter ever. In conjunction with this, our Canadian divisions had their best ever revenue for a third quarter as well as their third best quarterly revenue ever. As noted during the Q2 call and messaged throughout the first half of the year, we expected margins to be under pressure in H1 2025 as tariff concerns, the negative macro outlook and our overstaffing in preparation for some large RFPs all took a toll on margins in Q1 and Q2. As shown with our Q3 performance and with the results of these new RFPs now known, we have been able to optimize metrics in order to begin to recover margins. There will also be a requirement for additional CapEx to support these business wins as indicated by our increased CapEx estimate for 2026 of $85 million to $90 million. Although we will not be identifying exactly who the recent RFP wins were rewarded by nor the exact amount of each of them, I will note the following. The new revenue will begin filtering into our Q4 2025 results, with the majority showing up in Q1 and Q2 of 2026. We previously indicated that we expected these awards to help enable EBITDA growth in the low single digits up to 10% in 2026 over 2025. We now estimate more confidently that, in a flat activity environment, the upper end of this range is the most likely outcome. In Canada, the Canadian drilling fluids division continues to lead the WCSB in market share. Today we are providing service to 73 of the 191 jobs listed as underway in Canada or a 38.2% market share. The overall active drilling rig count in Canada throughout Q3 and so far in Q4 has been trending consistently lower than 2024 by a little more than 10% year-over-year. In contrast to that, our current rig count is only down about 5% from 2024. Additionally, due to service intensity and the mix of well types being drilled, our overall revenue in Canada hit an all-time record for a Q3. We remain very optimistic about the prospects for 2025 due to the completion and full start-up of infrastructure projects and their associated takeaway capacity. We continue to view the WCSB as a basin which is in a great position to not only weather the macro pressure, but also to benefit significantly when those pressures subside. PureChem, our Canadian production chemical business, continued its run of very strong results in Q3. PureChem continued its impressive growth trajectory as well as all of the business lines continued to perform at extremely high levels. The revenue and earnings from our continued market penetration and market share growth continued to accelerate in Q3. Additionally, we have begun achieving access to the larger opportunities in the attractive heavy oil SAGD market. This is a market we have been focused on penetrating for the past 10 years. Although it is a long and complicated process to break into this market, we have persistently worked to find effective solutions. Over the past year or 2, we have finally been able to achieve some wins in treating SAGD production for a couple of the smaller operators and plants in the region. This has now given us the data to demonstrate to the larger operators that not only do we have the capability to service the production reliably, but we can also provide superior results than the status quo. This is high volume, high revenue and very sticky business due to its complexity and cost of change. We liken this business to the offshore business in the U.S.A. Different chemistry and problems but with large rewards, which we can penetrate and execute on them. In the United States, AES, our U.S. drilling fluids group, is providing chemistries and service to 138 of the 525 rigs listed as active in the U.S.A. land market today, for continually widening #1 market share of U.S. land rigs at 26.3%. At AES, we truly believe we have a unique structure within the drilling fluids space in North America. We believe we have superior technical capabilities, procurement teams as well as manufacturing and logistics people and facilities, all of which are focused on bringing value to our customers. The number of rigs drilling in the U.S.A. is flat since we last reported in August, but down by about 7.5% year-over-year. However, AES is actually up by 18 rigs year-over-year or 15%. Currently, we enjoy a basin leading 93 rigs out of the 251 listed as working in the Permian Basin or 37.1% of the market, very close to our highest market share ever in the Permian. I would also like to note that AES Completion Services, formerly Hydrolite, continues to make significant penetration into the clean-out, drill-out market in the Permian and South Texas regions. In partnership with AES, this business unit is delivering material revenue and EBITDA contributions significantly above pre-acquisition levels. As well, the Fossil Fluids Group that we acquired in Oklahoma during Q2 of 2025 is already running at much higher levels than prior to our purchase. Fossil is an impressive niche drilling fluids company that we knew very well. Their specialization in the increasingly attractive Cherokee shale, hybrid oil and gas play provides us with exposure to another growing basin and with alignment to the strong trends currently being experienced in the North American land gas market. Finally, I will note that our market share throughout the U.S.A. land market continued to grow as natural gas production continues to garner attention. Two years ago during our November 2023 earnings call, I noted that we intended to begin putting an emphasis on getting back into the Haynesville play as gas was starting to become relevant again. Currently, we are up to 7 of the 40 rigs working in the Haynesville, with 2 more moving in the next 3 weeks. This represents a market share of over 21%. Over the past year, we have constructed a blending plant and distribution facility strategically located within the basin, while also developing some niche products and systems specifically for the high-temperature, high-pressure challenges which Haynesville wells are notorious for. We anticipate further growth in this area as activity continues to ramp up in the coming months and years. One year ago, there were 33 rigs working in the Haynesville, today there are 40, which represents year-over-year activity growth of almost 20%. As well, today, we are currently servicing 14 of the 37 rigs in the Northeastern U.S.A. and we have recently been awarded 2 more, which will be moving in the next couple of weeks. This gives us close to a 40% market share in this gas-rich region, which includes the Marcellus and Utica shale plays. All of these results speak to the quality of the business we are operating throughout North America. Our focus on execution of strategy, service to customers, along with unmatched technical and logistical capabilities all explain while we now service almost 30% of all the rigs in North America. We have meaningful market shares in every basin which we are targeting. Finally, our U.S. production chemical division, Jacam Catalyst, continues its steady trend of growing market share and profitability. The division remains focused on further market penetration in all the areas in which they operate. As noted on the quarterly earnings call in August, Jacam Catalyst continued to invest in CapEx and personnel during the first half of 2025 in order to support not only its high activity levels, but also to support several potential upcoming business opportunities. It is important to note that Jacam's business, like PureChem's, is almost entirely leveraged to production-related spending by E&Ps and, therefore, the revenue and earnings are extremely durable through any cycle. As noted earlier in my comments, Jacam Catalyst has now been awarded some of the major RFP wins we were preparing for during the first half. In the coming months, we will transition into this new business as it is possible. This will be evidenced by the increased revenue, EBITDA and CapEx that we previously discussed and forecasted for 2026. Also as noted on the Q2 earnings call, Jacam Catalyst has been optimizing manufacturing, developing products and hiring some technical specialists in order to become a relevant supplier in the Gulf of America. Our initial targets in this region are the 54 deepwater platforms in the Gulf, meaning those are that are in over 1,000 feet of water. These types of platforms experience technically challenging conditions and require high-volume treatment. These conditions allow for specialized chemical solutions, which, although very different from land-based chemistries, presents opportunities for product development and solution differentiation. Although a long and steep learning curve, we are making progress as evidenced by the fact that we have recently been awarded our fourth platform, and in the coming months, we will be taking over providing the full suite of treatments for it. This now puts us on 4 of the 54 targeted deepwater platforms for a market share of approximately 7.5%. I want to reiterate the confidence I have in the resilience of our business model in the face of the current market uncertainty. Our business is countercyclical and requires minimal CapEx, especially during times of disruption in our industry. Noteworthy as well is that, in spite of the pullback in upstream activity, we have consistently experienced revenue and opportunity growth throughout 2025. Therefore, our strategy remains the same: anchored by a cautious focus on maintaining relationships with existing clients while continuing to develop products and solutions which benefit them, as well as opening doors with new clients and markets for us. And we believe our Q3 results are an early indicator of the tremendous work we have building in the business right now. We also believe that U.S. upstream activity will inevitably accelerate more than likely during the second half of 2026. In the meantime, we continue to expect 2025 to be a year of growth and positioning, with 2026 looking even stronger in North America as the oil market teams headed towards a more positive structure and natural gas demand continues to grow. With regard to U.S.A. tariffs and the suggested Canadian counter tariffs, these continue to have little to no direct effect on our business in the current state. However, we have made significant progress in restructuring our manufacturing and supply chains in order to minimize future exposures as much as possible. Where possible, we will manufacture products within the same country in which they are being sold. We will continue with this strategy until we have insulated the business as much as possible from future tariff risks. I will state again for clarity that, as noted clearly on our first -- Q1 call, the impact from tariffs announced to date continues to be immaterial to our overall business. As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business, culture and success of CES. Due to the growth we are still experiencing as well as anticipate experiencing, we have increased our total number of employees from 2,530 on January 1, 2025 to 2,675 at the end of Q3. With that, I'll pass the call to Tony for the financial update. Anthony Aulicino: Thank you, Ken. CES' third quarter delivered record Q3 revenue and record adjusted EBITDAC, demonstrating a continuation of strong revenue, margin expansion, funds flow from operations and high-quality earnings despite lower rig counts and WTI price related and market volatility. These results underpin the unique resilience of CES' consumable chemicals business model and sustained profitable growth as our customers continue to adopt chemical-related improved efficiencies and require higher treatment levels for increasingly prolific wells. CES continued to effectively deploy strong surplus cash flow to return capital to shareholders while investing in strategic CapEx and working capital levels to support our current revenue run rate and position the company for identified growth opportunities. In Q3, CES generated revenue of $623 million, representing an annualized run rate of approximately $2.5 billion and a 3% increase over the prior year's $607 million. Revenue generated in the U.S. set a new record of $409 million, representing 66% of total consolidated revenue. These results compared to revenue of $406 million in Q2 and $403 million in Q3 2024. Revenue generated in Canada set a third quarter record at $214 million, compared to $168 million in Q2, and was 5% ahead of the $204 million generated a year ago. Revenue levels benefited from recent acquisition contributions and elevated service intensity and production chemical volumes, driven by increasingly complex flowing programs. Customer emphasis on optimizing production through effective chemical treatments benefited both countries and countered declines in industry rig counts, illustrating the resilience and attractiveness of our business model. Adjusted EBITDAC in Q3 came in at $103.3 million, compared to $88.3 million in Q2 and $102.5 million in Q3 2024. Q3's adjusted EBITDAC margin of 16.6% came in at the high end of our target of 15.5% to 16.5% range, versus 15.4% in Q2 and 16.9% in Q3 2024. This improving margin trend reflects the onset of growing into a cost structure supporting higher revenue levels, strong contributions from accretive tuck-in acquisitions and an attractive product mix. CES generated $52 million in cash flow from operations in the quarter, compared to $66 million in Q2 and $73 million in Q3 2024. The decrease in cash flow from operations was driven by increases in working capital requirements to support record revenue levels, offset by strong funds flow from operations. Funds flow from operations, which isolates the effect of working capital fluctuations, was $86 million in Q3, compared to $77 million in Q2 and just below the record $89 million set in Q3 2024. Free cash flow was $27 million in Q3, compared to $35 million in Q2 and $40 million in Q3 2024. As measured by a free cash flow to adjusted EBITDAC conversion rate, this equates to approximately 26% in the current quarter and 30% year-to-date. Excluding investments in working capital, CES realized a conversion rate of 59% for the quarter and 52% year-to-date. CES maintained a prudent approach to capital spending through the quarter with CapEx spend net of disposal proceeds of $13 million, representing 2% of revenue. We will continue to adjust plans as required to support existing business and attractive growth throughout our divisions. For 2025, we still expect cash CapEx to be approximately $80 million, weighted towards expansion capital to support higher activity levels and business development opportunities. For 2026, we are currently expecting a range of $85 million to $90 million, and CES maintains the flexibility to alter spending levels commensurate with changes in end markets and required support levels. During the quarter, we continued to be active in our NCIB program, purchasing 4.4 million common shares at an average price of $8.09 per share for a total cash outlay of $35.4 million, representing 2% of outstanding shares as at July 1, 2025 -- representing 31% of the outstanding shares at that time at an average price of $4.21 per share. We ended the quarter with $510 million in total debt, representing an increase of $19 million from the prior quarter and $58 million from December 31, 2024. Total debt was primarily comprised of $200 million in senior notes, a net draw on the senior facility of $204 million and $98 million in lease obligations. Total debt to adjusted EBITDAC of 1.9x at the end of the quarter, compared to 1.25x at June 30, demonstrating our continued commitment to maintaining prudent leverage levels in the 1 to 1.5x range. Subsequent to the quarter, CES completed a private placement of an additional $75 million in senior notes due May 29, 2029 at a premium of $1,031.25, acknowledging the credit quality of the business model. This issuance in conjunction with last quarter's amendment and extension to our senior facility leaves us with significant financial flexibility and no near-term maturities. This additional liquidity allows us to comfortably support recent significant business awards that Ken outlined, in addition to identified growth opportunities as CES enters its next phase of potential growth. This prudent capital structure is further illustrated by our current net draw of $125 million, which has decreased by $79 million from the end of the quarter, reflective of the private placement of $75 million in additional senior notes. We are very comfortable with our current debt level, maturity schedule and leverage in the 1 to 1.5x range, thereby enabling strong return of capital to shareholders and prioritizing a sustainable dividend and share buybacks in addition to strategic tuck-in acquisition opportunities. Our continued focus on working capital optimization has led to improvements in cash conversion cycle, which ended the quarter at 110 days compared to 112 days in Q2. This translates to an operating working capital as a percentage of annualized quarterly revenue of 28.8% compared to our historical range of 30% to 35%. Each percentage improvement at these revenue levels represents approximately $25 million on our balance sheet. We continue to remain focused on profitable growth, acceptable margins, working capital optimization and prudent capital expenditures, which collectively drive our key metric of return on average capital employed. This approach has led to a cultural adoption of these key factors allowing us to maintain a strong trailing 12-month ROCE of 21%. At current levels of activity, market share and service intensity, CES remains in a position of strength and flexibility supporting our capital allocation priorities, which are governed by adequate return metrics. We continue to prioritize capital allocation towards supporting existing and new business through investments in working capital as required and CapEx projects that deliver IRRs above our internal hurdle rates. We intend to purchase up to the maximum common shares permitted under our current NCIB. We remain very comfortable with our dividend, which represents a yield of approximately 1.7% at our current share price and is supported by a prudent 13% payout ratio, well within our target range of 10% to 20%. We will continue our annual practice of revisiting our dividend level when we report Q4 or Q1 in early 2026. And we will continue to explore prudent acquisitions with a continued focus on accretive tuck-ins, providing complementary products, markets, geographies and leadership that can benefit from our platform to realize attractive growth. At this time, I'd like to turn the call back to the operator to allow for questions. Operator: [Operator Instructions] We'll take our first question from the line of Aaron MacNeil with TD Cowen. Aaron MacNeil: Tony, maybe I'll start with you. I just heard you say in the prepared remarks that you prefer the buyback here. However, CES, its valuation multiple has increased, at least based on our estimates. So assuming you also agree with the premise of my question, how do you think about capital allocation in that context? And more specifically, do organic growth or opportunities or the potential for more tuck-in M&A start to look more attractive when compared against the buyback? Anthony Aulicino: Yes. That's a really good question. So just like stating the facts and weaving into the company's philosophy, we will always prioritize supporting the business. So supporting the business by investing in working capital and CapEx to maintain and support current as well as potential business opportunities. The guiding principle though that underpins that is maintaining a leverage level within that targeted 1x to 1.5x range. And after that, it's maximizing the free cash flow to allow us to pay a sustainable dividend, which we're very comfortable with right now in the low end of our 10% to 20% payout ratio level. And then after that, you're left with surplus free cash flow to allocate accordingly. We track the stock price, as everybody does. But what we really focus on is the implied valuation multiple. Given where The Street was most recently, and I'm sure some of the numbers were updated at that level of EBITDA estimate for 2026, the implied multiple was in the mid-6s. When we look at what we've talked about and what Ken mentioned is going to happen to EBITDA, absent any significant impacts, external impacts that are beyond our control, that multiple is much lower, lower -- probably in the low 6s range depending on what happens with FX. So from a relative valuation perspective, we're trading in the low, maybe mid-6s, depending on estimates. And that compares to our closest comp that had a multiple put out on it, which was ChampionX. And that was a 9x forward EV-to-EBITDA multiple. So we look at that. But fundamentally, what we do is we take a look at what the returns are on that dollar or those billions of dollars invested. If we could be earning a significantly higher return by executing on tuck-in M&A or by executing on some more significant CapEx projects by our divisions that are providing returns that are superior to buybacks, then we'll support that as well. But it will be governed by that 1 to 1.5x leverage. And based on where we're trading and where we believe the business is going, you're not going to see a significant slowdown in NCIB at this point. Aaron MacNeil: Fair enough and makes sense. Ken, maybe one for you. You mentioned in your prepared remarks EBITDA growing in that 10% range. I don't want to put words in your mouth. But if historically, capital spending levels largely correlated with revenue growth, you've got capital spending increasing by 9% at the midpoint. And so should we think about that growth in EBITDA as purely revenue driven, or is it a combination of revenue and margin? And again, if you agree with the premise, like is there a potential based on higher revenues for you to exceed what you've sort of outlined today? Kenneth Zinger: Good question. Thanks, Aaron. It's the latter. And we are -- that is our forecast, is sort of that 10% EBITDA growth if margins are better or, more importantly, if the operations of the business required, in order to be able to perform the work at a level that our customers expect, we will spend the money to make that happen. And I mean that will all back in the other way into the overall CapEx. Currently, we're looking at it in order to execute on the business we've achieved. We've got a few bigger projects that we were -- we knew were on the horizon that we were kind of waiting to do. But because of the recent awards and even the growth in the existing business, we're going to accelerate those. One of them, the Pecos barite facility, and we built that not that long ago, but we only built half of it. It was -- the building was built to house 2 grinding units. We only put 1 in it, because that was the sort of level we were running at. But due to the growth outside of this RFP stuff that we're talking about that we've achieved over the last couple of quarters here, we're maximizing our use of barite and we're almost to the capacity of that one as well. So we've started construction and move that spend project ahead. All kind of in anticipation of a stronger market towards the end of next year, as we talked about. The rigs that we're picking up and the business we're picking up, specifically in drilling fluids in the U.S., require more barite than the rigs we have because they're gas -- if they're coming in the Northeast or if they're coming in the Haynesville, the barite requirements for those ones can be like double to triple of what barite requirements are for a Permian rigs. So that's why we have to sort of update some of our infrastructure to accommodate them. Aaron MacNeil: Got you. And I can appreciate that my -- the premise of my question was oversimplified. So I appreciate the responses. Operator: Our next question comes from the line of Keith MacKey with RBC Capital Markets. Keith MacKey: I just wanted to start out on the contract wins that you announced for this quarter. Just to confirm, are the contracts that you were chasing, like the relatively large ones in the RFP process, have those all concluded and you won some and didn't win others? Or are there still more that could potentially be announced? Kenneth Zinger: So the ones that we were referring to that we were having to like over-hire for and get prepared for just to even be able to have a shot at them, there was 2 of those companies conducting that exercise, and they're done. We did really well at one of them. When they do those bids, they -- the RFPs, they do it by area that they operate in. So there's like 6 or 7 RFPs inside an RFP, 1 RFP. They're done. We did really well with one, not as well with the other, and the result of that is how we described it. But I will say that our RFP/tender list is longer than it normally is, and we've been doing really well at it. So when you're looking -- we keep -- we were at fault for pointing to those 2 large ones as being big drivers, but we've also got a whole bunch of other RFPs going on inside the business that we're faring really well on. Canadian production chem has been having some wins. U.S. production chem has -- have been having wins outside of the RFPs. And then as you can see by rig count, we're having some good success there as well. So there's a lot going on right now, it's pretty exciting. Keith MacKey: Yes. Got it. And just secondly, maybe turning to the financials. Pretty decent increase in accounts receivable year-over-year and quarter-over-quarter was actually larger than the revenue growth in terms of total dollars. Can you just comment on really why that happened and what we should expect for working capital going through 2026 as you continue to grow EBITDA? Anthony Aulicino: I think you'll see a much flatter year-over-year working capital level. If we do realize the increased revenue, you'll see a bit of an increase year-over-year, but not as much as you saw year-over-year Q3 2024 to Q3 2025. One thing that you should note that I probably should have included in my prepared remarks is, if you look at the year-over-year figures, our cash conversion cycle a year ago in Q3 2024 was 101. Our typical targeted range is 110 to 115. So that 101 was really an outlier. Hopefully, we'll work our way back down towards that, but that was a big factor. And the other big factor, the team provided this update that we looked at during the Board meetings, when you look at the FX delta going from 1 spot 3499 to 1 spot 3921 over that period, the FX effect alone on our AR was $10.7 million. So it's really those 2 things: having a very, very strong cash conversion cycle figure a year ago and also getting hit by FX a bit on the AR. But the FX part is unpredictable, and we'd like to get back down below 110, if possible, but we're pretty comfortable with what we've been doing with working capital. And to sum it all up, we should not see that significant an increase year-over-year going forward, unless there's a big boost in revenue. Operator: Our next question will come from the line of Tim Monachello with ATB Capital Markets. Tim Monachello: Just a quick follow-up. Did you say you're not expecting a big increase in working capital investment in '26? It sounds like you're expecting significant revenue growth alongside some of the wins that you've had. Anthony Aulicino: Yes. So you should use the same math we typically lead you guys towards. So you'll have your estimate on what's going to happen with revenue. Ken provided some narrative around the anticipated EBITDA dollar increase and also provided some color about expecting to be in the higher half of the 15.5% to 16.5% level. So you could back into what you think your revenue would be at the end of next year. And then just use the regular math, which is take that assumed quarterly revenue in a year from now and annualize that. And historically, you'd multiply it by 30% to 35%. But based on what we're doing, you should probably use something like 29%. Tim Monachello: Great. Okay. That's helpful. I guess most of my questions have been answered, but I want to think about how the year has gone so far. Like there's been some significant wins that you probably wouldn't have seen coming, and then some singles and doubles along the way that have got you to where you are today that significantly outperformed the market. And then you look at '26, and you talked these long tender list of opportunities that you're converting on and you add $85 million to $90 million of CapEx in '26 suggests that you probably see significant growth as well there. And then sort of pairing that with your margin expectations, which are already above that normalized range in this quarter, I'm just trying to figure out how do we balance that against increasing scale efficiencies to the fact that some of your new work is higher intensity and in higher-margin areas like the Gulf of America and you have a higher production chemicals mix going forward. Should we not be thinking about 16.5% being probably the lower end of the range as we go forward? Anthony Aulicino: At this point, just like last year, when we were putting up the 17s, those 17s were driven by excellent execution at all of the predictable levels. But what was unpredictable at that time was the contribution that we got from novel, new well-designed, well-accepted and adopted products, that got us through the high end. It's been similar where we've had a very attractive product mix that we experienced in Q3. And next year, you should see an increase in margins. But let's not forget, we were -- we reported around 15.5% for each of the last 2 quarters before this one. And I think it would be disingenuous for us to change that range at this point. We went as far as saying -- helping you guys a little bit by saying we're expecting to be in the high end of that range, i.e. high end of the 15.5% to 16.5% range. But to go beyond that at this point will be tough. We might be able to give more color after we have Q4 and December in particular behind us, when we see the real impact of the new business. But I think it's premature. Tim Monachello: Okay. Fair enough. I don't want you to put expectations that aren't achievable out there. It seems like we're trending in that direction. And then on -- on the CapEx for '26, understanding Pecos expansion. But can you talk about what -- how much of that is allocated in the growth portion and where else that might be going? Anthony Aulicino: Yes. It's still about 50-50, Tim. 50-50 growth and maintenance. Tim Monachello: So of the growth, you got Pecos in there. Is there anything other than else that's notable? Anthony Aulicino: So Pecos expansion is notable. There is some tweaking we're going to be doing at some of the manufacturing facility infrastructure to -- again, we don't have a broad-based utilization figure that we look at. If you look at broad-based, we're still like in the 60s. But occasionally, there are opportunities where there is significant demand for a specific type of reaction that is -- that requires the use of a specific reactor. And in cases like that, we'll be adding one or a few more. Kenneth Zinger: I can add to that too. There's -- like for specific projects, we're doing an upgrade to our scavenger plant in Edmonton. That's a couple of million dollars that was kind of on the books before and planned for '26, but something that we're -- that's a bigger project. We also recently have decided to do the blending plant in El Campo, that one, we recently had it inspected and decided that we better move ahead and get to an upgrade to that facility. That's a few million dollars. And then we also are putting in barite infrastructure in Canada in order to be able to self-support the market here as we continue to make market share gains and the work here gets tougher, using more barite. So there's a few million dollars that's recently been added in for that project as well. So there's a whole bunch of things that are a couple of $3 million, $4 million that are adding up that are, I'll call them, onetime expenses that, when we make them, we won't have to do them again for a long time. Tim Monachello: Are these sort of onesies and twosies margin enhancing or more necessary to meet the capacity of your -- of the growth expectations in terms of activity levels? Anthony Aulicino: It's the latter. Most of them are the latter. And sometimes you get the benefit of allowing -- or using that infrastructure to piggyback off of existing business. But it's mostly the latter. Tim Monachello: Great quarter, guys. Operator: Our next question comes from the line of John Gibson with BMO Capital Markets. John, your line might be on mute. Our next question will come from the line of Jonathan Goldman with Scotiabank. Jonathan Goldman: Congratulations on the quarter and congratulations on the RFIP wins. Just circling back to the margins -- yes, well done, well deserved. Maybe circling back to margins in the quarter. Nice recovery from earlier in the year, 16.6%. I guess it was in the 15s earlier. Previously, you did call out over-staffing levels, and it seems like that has persisted into Q3. Obviously, the new work hasn't started up. So what do you think drove the rebound in the margins on a sequential basis? Anthony Aulicino: Yes. When we look back at Q3, it's those things that we itemized. So number one was attractive product mix. Number two was significant contributions from the tuck-ins that we executed over the last year, both Hydrolite and Fossil Fluids, that are small, but because of their contribution margin profile, had a measurable impact on the consolidated results. And number three was some of the divisions doing a good job of containing head count additions and, in some cases, rightsizing some parts of the business to streamline SG&A and labor as it relates to COGS to improve margins. Kenneth Zinger: Yes. And we also, I've mentioned earlier, like we picked up some work that we weren't really anticipating through the quarters. Even though we were overstaffed a little bit in the U.S. production chem space, the other businesses picked it up, and that helped to offset some of that. Jonathan Goldman: Okay. That's good color. And I guess circling back to RFPs and the wins, I'm just wondering, were you able to bid on these sorts of projects in the past? And if not, what has enabled you structurally now to go after these sorts of larger projects or plays or certain customers in greater scale? Kenneth Zinger: Well, a couple of these we've mentioned before are that when we got into the offshore space, part of the justification for the acquisition of ProFlow back in '21 was getting -- being able to service some of these super-majors everywhere in order to service them anywhere. And everywhere in North America includes the Gulf of Mexico. So on a couple of these, until you can get into the Gulf of Mexico and prove that you can be competent and have some business servicing rigs there, you can't bid on the stuff on land. So it wasn't directly because of the ProFlow relationships or the ProFlow business that we got on to these bid lists, but it was because of the expertise we've acquired since acquiring ProFlow. Operator: [Operator Instructions] Our next question will come from the line of Michael Bunyaner with TLF Capital. Michael Bunyaner: Congratulations on outstanding results to you and your colleagues, especially in the environment when the rig count is down as much as it is. A couple of questions. Operationally, could you just expand on the opportunity in the SAGD and focus on both the value added that you're bringing to the clients and the length of the business that may be an opportunity for you there? Kenneth Zinger: Sure. Yes. So the SAGD market is very complicated and very sticky. When those projects with the majors in Canada sort of kicked off and they opened their plants, they worked with the bigger production chemical companies at the time to treat that production, which was uniquely different from anything that had been done before because of the temperatures involved, as well as the stickiness of the oil, call it. So back in the day, they developed that stuff. And they went with the suppliers they chose and the cost of change or the potential risk of a change is enormous because if you can't treat the production, you have to shut down the entire facility. And to shut that down requires shutting off the steam, allowing the reservoir to cool, correcting it. So it's been -- it's really difficult to break into those and get an opportunity to prove what you can do. You can recreate some in the lab, but what happens in the lab doesn't always happen in the field. So we've had to take the path as we've become a more relevant player and we've hired some more expertise in that space of going to some of the smaller operators who are new and starting up new facilities and trying to get into those just to prove that we can do it. And not only prove that we can do it, but in some cases, prove that we have better chemistry and better technology than our competitors in order to open the eyes and make it worthwhile for some of the bigger operators to take the chance on us. And that's kind of the phase we're in now. It's -- we talked about this back in 2012, '13, '14 when we were getting into production chems in Canada as being a target, and we've been working on it literally that long. It's been a much longer, harder path than we thought it would be. But the reason I pointed it out on the call is because we are actually starting to make some progress there. Michael Bunyaner: And you're starting to make progress in terms of being included in production or just being considered? Kenneth Zinger: Considered. Doing some trials at plants. Michael Bunyaner: Congratulations. That's excellent. And it's obviously a very large opportunity. And in terms of gas opportunity in the U.S., especially with what you are showing both in Haynesville and Marcellus and Utica. Are you seeing any of your customers outlining future demand for your services as it relates to the power generation to support data center expansions? Kenneth Zinger: I would say that that's not sort of the discussions we have with the level that we're talking to those companies, but you can draw the conclusion that, yes, it's related. Michael Bunyaner: Excellent. And one financial question. Tony, you were in, I believe, in the write-up, discussed the low cost or the cost of capital, the low cost of capital position that you're in. Can you just expand a little bit what that means to you? And if you're able to use that in winning more business? Anthony Aulicino: Yes, of course. So like one of the parts of the technical calculation of that cost of capital obviously is debt. And we have a leverage level that we're very comfortable with, that 1 to 1.5x range. And as we demonstrated publicly through third-party investors when we did that recent raise, our cost of debt is a lot lower than people thought, as demonstrated by our -- the implied yield of that raise, $75 million on top of the $200 million. So that's on the debt side. And then on the other side, absolutely, our cost of capital comes down, that opens up the doors to more projects, tuck-in acquisitions and uses of capital to expand the business or find new business that are able to provide incremental value because the delta between that return and the lower cost of capital or decreased WACC becomes bigger, and we're just creating more value by doing the same things that we're doing before because you're comparing them to a lower cost of capital. Michael Bunyaner: And are there any discussions among your customers to give you more business because the competitors are either focusing elsewhere too much or financially less stable than you are? Kenneth Zinger: I mean we don't -- I wouldn't say that we're having those discussions. I don't know what's happening inside boardrooms or inside management offices at operators. But I will say there's been a lot more -- with the pullback in activity, that's probably what's driving the active tender list that's going on currently and presenting some of the opportunities that maybe wouldn't have been open before. Guys are looking around a little bit and we're doing very well in that environment. Michael Bunyaner: Congratulations again to you and your colleagues, and thank you so much for excellent results. Operator: And that will conclude our question-and-answer session. I'll hand the call back over to Ken for closing comments. Kenneth Zinger: I just want to thank you to everyone for taking the time to join us here today. We appreciate your time and look forward to speaking with you all again during our Q4 update call on March 11. Operator: This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to AtlasClear Fiscal Q1 2026 Earnings Call. [Operator Instructions] Please note today's call is being recorded. Today's call will be led by John Schaible, Executive Chairman; and Craig Ridenhour, President of AtlasClear Holdings. Also joining us is Jeff Ramson, CEO of PCG Advisory, who will provide the safe harbor statement and manage the Q&A portion of today's call. Please go ahead, Jeff. Jeff Ramson: Thank you, operator. Before we begin, I'd like to remind everyone that today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. For more details, please refer to the company's Form 10-Q for the quarter ended September 30, 2025, and other filings with the SEC. AtlasClear undertakes no obligation to update forward-looking statements, except as required by law. With that, I'll now turn the call over to AtlasClear's Executive Chairman, John Schaible. John Schaible: Thank you, Jeff, and good morning, everyone. The September quarter marks a key inflection point for AtlasClear. For the first time since our de-SPAC, we achieved positive stockholders' equity of $6.9 million, eliminated the prior going concern qualification and further reduced de-SPAC liabilities by more than 80% from fiscal 2024. This achievement reflects our focus on disciplined execution and balance sheet optimization, which now positions AtlasClear as a more stable, growth-ready public company. Together, these efforts demonstrate that the foundational work we've done since our de-SPAC is delivering tangible results, establishing a platform for long-term scalability and value creation. We also secured $20 million in new institutional financing in October, half in convertible notes and half in equity units, strengthen our liquidity and providing a foundation for growth and acquisitions. Importantly, this funding allows us to execute on our strategic road map without requiring further near-term equity dilution. This progress comes amid a dynamic market for smaller financial institutions where access to efficient clearing, funding and technology infrastructure remains critical. We see this environment as an opportunity to demonstrate how AtlasClear's model delivers scalability and cost efficiency when it's needed most. Operationally, our subsidiary, Wilson-Davis and Company continued its track record of growing profitability, delivering strong commission, clearing and stock loan results. And strategically, we continued laying the groundwork for a vertically integrated technology-enabled platform for trading and clearing settlement and banking. With that foundation in place, I'll turn it over to our President, Craig Ridenhour, to review key operational highlights from the quarter. David Ridenhour: Thanks, John. Let's take a closer look at our performance this quarter and how our operational progress continues to translate into financial strength. Operationally, we saw meaningful growth in diversification. Revenue for the quarter was $4.25 million, up 52% year-over-year. Operating loss narrowed to $877,000, an improvement from $941,000 last year. Net loss was $440,000 compared to net income in the prior year period. That benefited from onetime fair value adjustments. Total assets grew to $73.6 million, up 21% from June 30 at the consolidated level. Net capital at Wilson-Davis increased to $12.28 million, exceeding regulatory requirements by about $2 million. On the business development front, our third corresponding clearing clients signed, and we anticipate we'll begin onboarding Q1 calendar year 2026, which we expect to contribute materially to the fiscal 2026 revenues. We also are in discussions to expand our LocBox partnership for the potential launch of new product platforms next year. On the leadership side, we welcome Sandip Patel as Chief Financial Officer and General Counsel and Steven Carlson rejoined our Board as an independent director, further strengthening our governance and financial oversight framework. The consistent growing profitability at Wilson-Davis underscores the strength of our recurring revenue model and serves as the foundation for scalable growth. We now have clear visibility into an expanding pipeline of new correspondence which should deliver sustained revenue momentum going into next year and beyond. With that, I'll hand it back over to John to walk through the financial results in more detail. John Schaible: Thank you, Craig. Let me walk through the financials in a bit more detail. Revenue of $4.25 million, up 52% was driven by commissions of $2.33 million, vetting fees of $0.37 million, clearing fees of $0.71 million and other revenues of $0.83 million. Operating expenses were $5.13 million, which were primarily compensation and technology costs as we are scaling our operations for growth. Our operating loss was $877,000 versus $941,000 in the prior year. Our net loss was $440,000 versus $10.7 million net income Q1 fiscal year 2025, but that included noncash gains from fair value adjustments. Cash and restricted cash, our cash is up to $32.2 million. up from $29.6 million at June 30, stockholders' equity, positive $6.86 million versus a negative $6.8 million deficit 3 months ago, a swing of over $13 million. These results validate the progress we've made in strengthening the balance sheet, simplifying our capital structure and positioning AtlasClear Clear for profitable growth. Overall, the quarter's results demonstrate steady execution across both our operating and financial objectives, supporting our transition from stabilization to sustain growth. We continue to maintain strong inventory capital at Wilson-Davis, exceeding minimum requirements by a comfortable margin and expect this buffer to expand as profitability scales. As we move through fiscal 2026, we will remain focused on driving operating leverage, maintaining disciplined expense control and strengthening capital efficiency across all business lines. We are equally committed to new product development such as digital assets, proven risk management, compliance and operational oversight as we grow to ensure our platform meets the highest standards expected of the regulated financial institution. With that, I'll turn it back over to Craig to discuss our strategic priorities and outlook for fiscal 2026. David Ridenhour: Looking ahead to fiscal 2026, our priorities are clear: One, capitalize on our strengthened balance sheet and new growth funding. The $20 million rates in October mitigated liquidity concerns and fully resolved the going concern qualification. We expect this capital to fund the integration of our technology stack, expand our stock loan and margin lending programs and support acquisition activity. Two, accelerate client onboarding and expansion. Our third correspondent clearing client is signed and we believe we've begun onboarding in Q1 calendar year 2026, while we continue to expand our pipeline. Each new relationship adds recurring revenue, scale and operating leverage. Three, Advance Commercial Bancorp acquisition. Once complete, it will provide low-cost funding and a regulated bank charter to support our clearing and custody ecosystem. Four, enhance and deploy technology. We plan continued rollouts of our OLA digital account opening system and LocBox infrastructure, including digital asset and credit capabilities for institutional clients. Five, pursue selective M&A opportunities. We will evaluate targets that enhance product capabilities, broaden client reach or offer complementary technology and strong financial returns. In parallel, we will continue deepening our relationships with FinTech partners to expand distribution channels and integrate complementary technologies that enhance our value proposition. Looking more broadly, the market opportunity for modern technology-driven clearing and banking infrastructure continues to expand. Smaller institutions are increasingly seeking flexible, cost-efficient platforms, a space where AtlasClear is uniquely positioned to lead. With these priorities in place, fiscal 2026 is shaping up to be a pivotal year, one focused on disciplined expansion, operational scale and sustained execution. With that, I'll turn the call back over to John for closing remarks. John Schaible: To summarize, AtlasClear entered this fiscal year in its strongest position yet. We eliminated the going concern uncertainty, achieved positive equity, secured new institutional capital and maintained profitability at our core operating subsidiary. These milestones reflect a year of disciplined execution and set the stage for the next phase of growth. With a stronger balance sheet, expanding client base and a clear path toward integrating our clearing technology and banking operations, we are well positioned to scale efficiently and deliver sustained shareholder value. We are executing now from a position of strength, focused on sustainable growth and long-term value creation. With a clear strategy, a strong capital foundation and the committed team, AtlasClear is well positioned to deliver measurable progress throughout 2026 and beyond. As we continue this momentum, our emphasis will remain on disciplined execution, transparency with our shareholders and building a durable platform that can scale with our clients' success. Our mission remains unchanged, to build a vertically integrated tech-driven financial platform that modernizes clearing and banking for emerging financial institutions and other fintechs. Thank you to our employees, clients, Board of Directors, and most of all, the shareholders for your continued trust and support. Your confidence drives our progress, and we look forward to keeping you updated as we execute our 2026 road map and build long-term value. We look forward to updating you on our progress throughout fiscal 2026. Thank you. Jeff Ramson: Thank you, John and Craig. Before the call, we collected questions from analysts and investors, which we will address now. First one is, "the $20 million in Funicular financing seems pivotal. Can you elaborate on its structure and how this capital strengthens your ability to execute on both near-term client wins and longer-term platform build-out. Some investors view alternative financings warily, what should give them confidence that the structure supports growth rather than just short-term liquidity?" John Schaible: I'll take that, Jeff. Thank you for the question. The $20 million Funicular financing is pivotal, and it's not just other parties that came in. We took 2 pieces in that financing. The first was a convertible note, which has a coupon of 11% to 5-year note striking at $0.75 a share, which obviously is far above the market price today. We also took in a unit offering that was comprised of equity and warrants striking at $0.75, and that was for another $10 million roughly, give or take. I totally appreciate, especially going through the de-SPAC process, how the convertible notes can be viewed with skepticism and concern because they can cause significant dilution where we stand today and the present strikes were far above the market. And so we believe this $20 million that we took in will put us in a position to grow the company in a way that will not be nearly as dilutive as what we suffered through the de-SPAC. So we're excited about the financing. Our partners, including Funicular, have been absolutely fantastic to us. They are strategic and we look forward to 2026. Jeff Ramson: So given that the share price is currently below $1, can you provide an update on the company's compliance with New York Stock Exchange listing requirements? David Ridenhour: Sure, Jeff, I'll jump in and answer this. We get this frequently. We certainly understand the concern from investors and shareholders regarding the dollar threshold because that's kind of imprinted in everyone's mind. We certainly don't like being under $1. We understand why we're here. We don't think our current price is reflective of the value that's in the company and the numbers we're putting out, and we think that this will hopefully be a distant memory. But all that being said, the question is if we're in compliance with NYSE listing standards. We are on NYSE American, and they have no dollar threshold as a listing standard right now. So we are fine. We actually -- because we don't have to worry about that dollar and making certain decisions, we are able to continue on our path to grow it properly, make the right decisions for our shareholder base and ultimately, the long-term prosperity of the company. So although it's uncomfortable to see it down there for some people, we are in compliance with NYSE AMEX standards at this point, and we're not concerned about the dollar because that is not one of the requirements. So I do appreciate the question. Jeff Ramson: Thanks Craig. Next question I have is, "can you speak to your digital asset strategy going forward? Given recent market volatility and evolving SEC guidance, how are you thinking about near-term revenue goals for this segment over the next year? And how does the Commercial Bancorp acquisition help support that growth?" John Schaible: I'll take that question, and that's a pretty in-depth question. Digital assets are a primary focus for us coming into 2026. And what we see out of the SEC with respect to additional guidance and what we see with now presently kind of a welcoming of the idea of financial services firms being in crypto, we want to be there in the best way we can correctly as fast as we can. We see crypto as one more product line with respect to the assets that are being traded, whether it's Bitcoin or Ethereum named crypto, that's really not much different other than from a regulatory perspective, of a security or a bond or a mutual fund. We want to be the platform that absorbs all of these products and holds them in custody and use that custody to create for our customers a better opportunity for portfolio margin. And we think crypto is a critical component of that. We are looking very strongly at certain acquisitions in this space that we think might make sense. We are looking very strongly at how we tie together the crypto, TradFi and DeFi in a way that is the most efficient possible way. And to get there, we do think the Commercial Bancorp acquisition will help us do that. As a Wyoming state chartered bank, that state has been for a long time, one of the most forward-thinking states with respect to crypto, the fact that the bank is also a federal reserve member bank, we think will allow us to cash -- settle things correctly in a way that perhaps our competitors can't do quite as efficiently. And so I do hold out hope that in the second quarter, maybe third quarter of next year, we'll be delivering crypto revenues to the platform. We see crypto as almost every other asset class from the trading perspective, but I kind of also want to caution that in that the crypto settlement functions, the idea of an on-chain immutable ledger that settles instantly, we think is ultimately the future for all financial products. And so several things to your question, Jeff. We're getting in front of it. We're looking at acquisitions. We have ideas and designs on crypto lending, crypto trading and we look forward to 2026 because we think it's going to be the year of crypto for us. Jeff Ramson: Very good, very good. Great. So the last question I have is, "with regard to Commercial Bancorp, the acquisition agreement was just extended through Q1 2026. Can you give us the latest on regulatory progress and integration planning, and how confident are you in closing within that window?" David Ridenhour: Sure, Jeff. I'll take this. It's a great question. And it's one that it gets lost sometimes, we found, and people that are in the industry look at that and realize the gem that we have there and that we're fortunate to have them under contract. When you look at Commercial Bancorp, Wyoming, it's a smaller Fed member bank, but it's profitable, it's clean. It's over a 110-year-old charter. We're very excited to go down the process with the Fed for potential approval. With that in mind, our goal right now is, and we believe we will need it is, we will formally file with the Fed. We anticipate no later than January 31. That's our goal internally. Now things can change, but that is our goal. And what that means is we will begin the Fed approval process where they'll begin recruit -- reviewing our applications, going through the entire -- it can be a lengthy process, although we understand with the new administration, it may have shortened a little bit, we're hopeful, but nonetheless, we'll begin that process by January 31. And again, the time it takes is the time it takes. The ultimate goal is an effective approval. We're confident we can get there, and we'll receive that based on management's experience and the experience also growing banks in the past. So we're optimistic on that front. So -- but then you look at the integration planning, there are a lot of things that we could do: One, we have to build out the tech somewhat there to do the longer-term plans. But as John just went through a litany of reasons, why digital assets are great given the jurisdiction of Wyoming. We see a long-term plan with the digital assets and custody of a number of other things. We also see the ability to go get a Fed master account, which is incredibly valuable. We see a number of different long-term goals, but the near-term goals on integration would be upon effective approval, would just be creating that internal ecosystem where we create deposit sweeps from Wilson-Davis of cash deposits over into Commercial Bancorp or as it operates as Farmers State Bank and the extension of credit from Farmers State Bank out to Wilson-Davis and clients of Wilson-Davis that want to trade on margin in various other functions. So that's an immediate thing that doesn't take a heavy tech lift that upon effective approval, we can immediately get into and begin providing these sweeps and extensions of credit without too much lifting. There are longer-term goals and also an expansion of the footprint, right? Currently, we're located -- Commercial Bancorp, Wyoming is located in Pine Bluffs, Wyoming. And we've been very open with them about the idea that over time, we would expand our footprint given what we're looking to do. But immediately, we will put additional capital in. We'll expand their balance sheet and their ability to take additional deposits on. So we're very excited about this potential opportunity. If you look across the landscape right now, it's been noted throughout the media how a lot of the crypto companies are going out there and they're looking for Fed member firms, and there's -- that's not by accident, but we're in a situation where we already have one under contract. We're going to begin the approval process. We believe we'll be successful in that approval process. And then ultimately, Jeff, when we get through that and if we do have a successful approval, when you combine the corresponding clearing licenses that we have with NSCC DTC through Wilson-Davis, combine that with the custody powers and the Fed member firm that we have within Farmers State Bank, Commercial Bancorp of Wyoming, that gives us a licensing footprint. Again, I say it often, it's not that we can say that it's impossible to replicate, but it's incredibly difficult for a host of reasons. So we're very excited about that. We're excited to begin the approval process, and we're optimistic about it, and we look forward to updating people along the way and our shareholders and investing public. So again, thank you very much for the question, great question. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good afternoon, everyone, and welcome to the AmRest Q3 2025 Results Call. My name is Brika, and I will be coordinating your call today [Operator Instructions] I would now like to hand you over to your host, Lukasz Wachelko to begin. So please go ahead, Lukasz. Lukasz Wachelko: Good afternoon, ladies and gentlemen. My name is Lukasz Wachelko, I'm representing WOOD & Company. And I have again a pleasure of moderating the call with management of AmRest to present to you the results of the third quarter of this year. The company is being represented by CFO, Mr. Eduardo Zamarripa; and IR and Strategic Director, Mr. Santiago Camarero Aguilera. Guys, the mic is yours. Eduardo Zamarripa: Thank you, Lukasz. Good afternoon, and thank you for joining us in today's third quarter 2025 AmRest results presentation. It is my pleasure to share with you an update of AmRest situation at the end of the quarter. During the third quarter of the year, despite ongoing trade tensions and geopolitical uncertainty, both global and European economies showed resilience though Europe's lagged the global average. Across Western Europe, activity stayed mute. Growth was modest, helped by public investment and easier financial conditions but weighted down by weak exports and cautious consumer spending. Inflation moved closer to the ECB 2% target, allowing monetary policy to stabilize after an earlier rate cut. However, disposable income growth remained limited due to past fiscal tightening and high living costs, keeping consumers confident fragile. In Eastern Europe, growth slowed sharply versus the previous quarter. Fiscal consolidation like VAT hikes and subsidy costs hit household consumption, while inflation stayed above target in many countries, eroding real incomes. In the case of China, its economy held steady about 4.5% year-on-year growth rate, supported by a manufacturing rebound and targeted fiscal stimulus. Household spending improved slightly, thanks to tax rebates and easier credit but confidence remained soft. With that context, we'll now review our third quarter results, financial performance and outlook before opening the floor for your questions. Please note that today's remarks may include forward-looking statements subject to risks and uncertainties. But let's start with today's presentation. If we go to Slide 2, please. As a reminder, AmRest is a leading multi-brand restaurant operator in Europe with 2,110 restaurants across 22 countries in Europe, the Middle East and China. We are proud to operate some of the world's most iconic and reputable restaurant brands. Our portfolio combines global franchise brands, KFC, Starbucks, Pizza Hut and Burger King with proprietary concepts such as La Tagliatella, Sushi Shop, Blue Frog and Bacoa, positioning our businesses across quick service, coffee, fast casual and casual dining. Every month, our restaurants welcome over 30 million guests, served by more than 44,000 AmRest colleagues, a scale that allow us to deliver consistent value and service across formats and geographies. If we move now to Slide 3, I'm going to try to summarize the most relevant financial KPIs and events for this quarter. First, we hit historic sales record of EUR 660.5 million for a third quarter with a 3.5% increase when excluding the impact of the asset disposed during the year. In this case, let me remind that we sold our equity stake in SEM business at the end of the first quarter. And as a consequence, we deconsolidated all the assets and liabilities associated to the business since then. The idea behind this transaction has been to internalize and optimize the value generated in the chain management and product quality assurance services. Second, EBITDA reached EUR 111.2 million, which a solid margin of 16.8%. The operating profit reached EUR 42.3 million with a 6.4% margin, while the net profit achieved at EUR 15.8 million. Leverage stood at 2.1x and the low end of our internal target range. Finally, during the quarter, we opened 16 new restaurants and renovated 46 units, continuing our commitment to growth and modernization. In the following slides, we will go into more depth and detail of these points. But let's start first with what we are doing in our different brands on Slide 4. The commercial position of our brands plays a crucial role in the value generation of AmRest. Let me start with the KFC, La Tagliatella and coffee brand in this Slide 4. At KFC, we continue to deliver both locally relevant experiences through dynamic campaigns and seasonal innovations. The California Summer campaign brought different offerings, complemented by a strong value proposition. We amplified engagement through the high-impact promotions. And for instance, our largest partnership of the year with the EuroBasket during the summer months. In addition, regional highlights included the Street Food Festival in Czechia and Hungary, introducing global flavors like [indiscernible] and Korean K Zinger. These initiatives strengthened brand image, boosted basket value and reinforce customer loyalty. At La Tagliatella, we continue to push culinary boundaries, partnering with Michelin-starred chef Carlos Maldonado to elevate brand perception and attract new audiences. This bold collaboration fuse Italian tradition with Maldonado's avant creativity, resulting in 4 exclusive dishes. The initiative delivered double-digit growth within our historical additions category, positioning La Tagliatella as an innovative leader in the restaurant sector. At Starbucks, we continue to strengthen our coffee leadership while embracing evolving consumer trends. Core coffee growth accelerated with espresso-based beverages reinforced by our back to Starbucks strategy centered on quality and tradition. Seasonal beverage launches continue to drive customer engagement, while growing interest in wellness and personalization is reflections in the strong appeal of matcha-based offerings. Now let's continue with our brand in Slide 5. At Sushi Shop, following the strong momentum for our Rubik's Cube collaboration during third quarter, we launched our annual summer receipts edition. The result resonated strongly with consumers prompting us to extend the offer into the September to maximize engagement. At Blue Frog, we strengthened our bar, identity and local relevance through 3 key initiatives: refresh drink menu, where we introduced higher quality creative options to elevate the all-day bar experience. Chinese Valentine's Day with a premium [indiscernible] and [ Thin ] cocktails created a festive romantic atmosphere. And third, our city-limited series locally inspired dishes and cocktails showcased authenticity and deepen the connection with regional audiences. At Pizza Hut, we strengthened innovation leadership through both consumer-focused initiatives. Globally, Pizza Hut introduced the Pizza Cheese Burger range, a mashup concept blending classic cheeseburger flavors with Pizza Hut signature pizza format. This range targeted Gen Z, and value-seeking consumers, supported by gaming and delivery partnership. These campaigns strengthened Pizza Hut reputation for both flavor innovation, resonating strongly with consumers. And finally, in third quarter, Burger King brought anime culture to life in Poland, Czechia and Romania with a special Naruto theme activation. Restaurants offer exclusive meals per with a collectible toys turning BK into a destination for anime fans and driving engagement, brand affinity and incremental sales. If we now move to Slide 6, please. Core revenues on a comparable basis grew by 3.5% year-on-year, underscoring the strength of our portfolio. In addition, we continue to see steady progress in the 12 months trailing average sales per equity store, driven by an optimized channel mix, disciplined pricing strategies and positive impact in recent renovations. These combinations of per store productivity and selective expansion reinforces our ability to consistently improve unit economics across the network. As a result, AmRest delivered resilient store level performance that supports sustainable growth despite the temporary challenges faced in several markets. Moving to Slide 7, please. In the third quarter of the year, digital orders reached 62% of total transactions, a clear testament of accelerating adoption and shifting consumer preferences. This transformation is powered by our omnichannel ecosystem which integrates proprietary kiosk, mobile apps, web ordering and third-party aggregators. By leveraging these platforms, we deliver personalized promotions, unmatched convenience and a seamless experience across every touch point. Digital remains a core pillar of our growing strategy, driving both customers' engagement and operational efficiency. In summary, our robust digital adoption underscores 2 things: challenging consumers' behaviors and our commitment to innovation. That speed of service improved consistency and drives ticket growth. In short, digital continues to be a strategic lever for sustainable value creation. Now moving to Slide 8. As we have covered in previous calls, our underlying restaurant growth is complemented by strategic adjustments to nonperforming businesses made since 2022 which have led to the end of certain commercial agreements or disposable of some businesses during this period. These decisive moves are aimed to sharpening our capital allocation and focusing the portfolio on the most resilient and profitable formats, ensuring that our footprint is configured for sustainable long-term returns. Today, AmRest operates directly or via franchisees a portfolio of 2,110 restaurants across 22 countries and 8 brands, following the opening of 16 new restaurants and the closure of 14 during the quarter. With this, Santi, if you can cover the main financial highlights, please. Santiago Aguilera: Thank you, Eduardo. Thank you, everyone, for joining us. Our objective today is to try to be clear on what is working and transparent about what is -- what we are improving in our business. We continue to see healthy sales performance despite temporary macro headwind in several markets, and this is supported by a balanced brand and market mix as for a disciplined commercial execution. In this regard, pricing remains critical as we need to balance protecting traffic and brand health while offsetting cost inflation. Digital occasions are a structural tailwind. Guests are choosing our apps and aggregators for convenience, speed and value. And this trends across global QSR, where convenience led by omnichannel ordering continues to expand. We are progressing and refining offers through a better and wiser usage of data to increase attachment and order value. Second, our operating profitability is resilient, though shy of where we expected a few quarters ago. This reflects sector-wide wage and input cost dynamics and in some markets, a more value-sensitive consumer. We are staying agile, tightening cost control, prioritizing high-return initiatives and using target promotions that reinforce value without diluting the brand. This playbook is consistent with our strategic view of value discipline, operational efficiency and risk management to protect margins through the cycles. We have delivered an improvement in terms of the operating profit, underpinned by lower impairment charges and a sharper focus on the quality of earnings. That improvement is a function of many small structural gains product at a single lever. Finally, our balance sheet remains strong. We continue to generate solid cash flow and capital expenditure is not only well controlled but trending lower, while still leaving us ample flexibility to invest in digital initiatives, operational enhancements and the most attractive new unit opportunities. All of this is achieved while maintaining prudent leverage and preserving the capacity to navigate uncertainty. So with this in mind, let's turn to the Slide 10, please, for the quarter's financial and operating highlights. Most of this has already been covered by Eduardo but let me give you a quick recap. Quarterly sales came in just under EUR 661 million, which is a 3.5% increase year-on-year when we exclude changes in the consolidation perimeter. Same-store sales held steady with the index close to 100, showing a stable performance across comparable units. EBITDA for the period was a bit over EUR 111 million, giving us a margin of 16.8%. On a non-IFRS basis, this is excluding leases effect, EBITDA was EUR 64 million with a margin of 9.7%. And operating profit reached EUR 42.3 million, which represents a margin of 6.4%. During the quarter, as addressed by Eduardo, we opened 16 new units, and we kept the CapEx below EUR 34 million, reflecting our disciplined approach to capital allocation and focus on high return opportunities. And finally, as at the end of October, our same-store sales index remains around the 100 level. Moving to the Slide 11, please. Our group delivered a record third quarter revenues of EUR 661 million. That is likely from -- this is slightly up from last year, about 0.2%. And if you adjust for businesses with this consolidated earlier, growth came in at 3.5%. Now I think that it is important to recognize the context, the quarter wasn't without challenges. Consumer confidence stayed weak and cost of living pressures continue to squeeze disposable income. That means less discretionary spending in restaurant, especially towards the end of the summer. But here is the positive. We see these conditions as an opportunity to strengthen long-term loyalty. We are focused on giving customers what they want, great flavors at a attractive price points, smart bundles and value-driven offers. And we are using our digital platforms to personalized promotions and to make the experience as convenient as possible. One last note on comparisons last year, Q3 numbers included EUR 9.3 million of extraordinary income from refunds which boost revenues and profitability. Turning now into the Slide 12, please. We will focus on EBITDA performance for the third quarter. EBITDA came in at EUR 111 million, with margins holding around 17%. This demonstrates our ability to maintain healthy profitability in a dynamic market environment. The bridge of this slide shows how we have protected unit economics through effective labor management and productivity initiatives. These actions has helped us to offset inflationary pressures and competitive challenges, keeping operational efficiency strong. In the case of the operating profit for the quarter, we delivered EUR 42 million, representing a margin of 6.4%. This is a decline of 2.7 percentage points compared to last year. Looking at the first 9 months of the year, cumulative EBITDA reached over EUR 300 million with a margin of 15.6%. Operating profit for the same period totaled almost EUR 90 million. That corresponds to a margin of 4.7% which is an improvement of 0.3 percentage points versus last year. Moving now to Slide 13, please. I would like to highlight a few important developments in our restaurant portfolio and financial performance in this slide. First, over the past 12 months, our net equity restaurant count grew by 59 units. This reflects our commitment to selective growth in markets and formats with the highest potential. At the same time, the number of franchise restaurants declined mainly due to the transfer of the Pizza Hut France business. This move was part of our ongoing strategy to optimize the portfolio and concentrate resources where they can deliver the greatest returns. From a financial perspective, Net profit for the quarter was just under EUR 16 million. That's below last year's figure. But remember that last year included some one-off items that I mentioned earlier. And finally, also as I noted before, we continue to see a gradual reduction in terms of CapEx, reinforcing our disciplined approach to capital allocation and also I covered that point before. Let's move now please to the Slide 14, which provides a detailed view of our liquidity, our leverage position. Our overall risk profile remains broadly unchanged with our net financial debt now at 40 -- sorry, EUR 503 million. Importantly, leverage stands at 2.1x, right at the low end of our internal targets. And once more, this reflects our disciplined approach to financial management and our commitment to maintaining a strong balance sheet while continuing to invest selectively. At the end of the quarter, we held nearly EUR 145 million in cash, and we have access to an additional EUR 215 million via committed credit lines. All this ensures that our liquidity position remains prudent and efficient, fully aligned with the group's operational and strategic mix. On Slide 15, you can find an overview of our financial debt structure and also the maturity profile. As you can see, there has not been significant changes compared to the previous quarters. Our funding remains stable and well balanced with the vast majority of our debt denominated in euros. The maturity schedule is well levered with a clear long-term orientation. If we move now to Slide 16. We can find the breakdown of revenue, EBITDA and the number of restaurants that we have in each geography. This segment comprises businesses in 22 countries where once again, we have observed very different commercial dynamics. So as usual, let's start with Central and Eastern Europe, our most significant region, please, that you can find all this information in the Slide 17 and 18. In the third quarter, the region delivered sales of EUR 421 million, up 7.8% year-on-year and accounting for almost 64% of total group revenue. Looking at individual markets. Hungary posted double-digit growth of 10.3%, while Poland also performed strongly with almost a 9% increase. Regional EBITDA came at EUR 86 million with a margin of 20.4 percentage that represents a decline versus last year but keep in mind that Q3 '24 included more than EUR 8 million in refunds. So excluding this one-off, the EBITDA grew by 1.3%. Finally, the restaurant portfolio in the region is totaled 1,255 units at quarter end, following 8 openings and 2 closures. For the year so far, we have opened 35 restaurants in the region and closed 8. Let's move on to the Slide 19 and 20, please, to review Western Europe. Sales in this region for the third quarter totaled EUR 219 million, which is a 2.7% decline compared to the same period of last year and once more performance embody very drastically by different markets. In the case of Germany, we delivered a solid growth of 6%. In Spain, we held steady numbers, very similar to last year, while France continued to face big challenges with sales down almost by 14% due to weak consumer confidence. EBITDA for the quarter was EUR 32 million with a margin of 14.7%. This is broadly in line with last year. The restaurant portfolio closed the quarter were 770 units following 4 openings and 6 closures. And for the first 9 months of the year, we opened 10 restaurants and closed 24. If we go now to Slide 21 and 22, we have our performance in China, where sales for the quarter were EUR 20 million down 10% in nominal terms, but on a constant currency basis, so local figures, the decline was less than half of this figure, so this is below 5%. These numbers reflect the impact of a challenging macroeconomic environment and a global slowdown in consumer spending, which weighed on business generation. To address these headwinds, we are accelerating initiatives focused on value-driven menu innovation, strengthening digital engagement and optimizing operational efficiency. These actions are designed to protect margins and reinforce brand relevance in a more price-sensitive environment. In terms of profitability, EBITDA for the quarter was EUR 3.5 million with a margin of 17.4%. And finally, at quarter end, the Blue Frog portfolio comprise 85 restaurants following 4 openings and 1 closure. Year-to-date numbers, we opened 7 restaurants and closed 9. And with this, back to you, Eduardo. Eduardo Zamarripa: Thank you, Santi. To conclude, this quarter reflects both resilience and the reality of a tougher operating environment. While we achieve record revenues and maintained solid margins Growth was tempered by persistent macroeconomic headwinds, with consumer confidence, cost of living pressures and on even regional performance. We are not satisfied with these results and we are taking decisive steps to improve. Our priorities include accelerating digital engagement, sharpening value propositions, optimizing operational efficiency and maintaining a strict discipline and capital allocation. These actions are designed to protect profitability and strengthen branded relevance in a more price-sensitive environment. In light of these dynamics, we are revisiting our revenue and profitability guidance for this year to reflect current market conditions and the timing of our improvement initiatives. This adjustment is a prudent step to ensure transparency and set realistic expectations. In this regard, we expect to close 2025 with a low single-digit growth in sales and with an EBITDA margin slightly above current year-to-date that I remind you is 15.6%. Finally, the number of restaurants to be opened will be below last year numbers. Thank you for your continued trust and partnership. We remain committed to delivering sustainable value and will now open the floor for your questions. Many thanks to everyone. And with this, we are open to any questions that you may have. Operator: [Operator Instructions] The first question we have from the phone lines comes from Jakub Krawczyk with ODDO BHF. Jakub Krawczyk: Hopefully you can hear me. Here is Jakub Krawczyk from ODDO BHF. I have a couple of questions. Question number one, can you please elaborate on these refunds that were the one-off in Q3 '24? I just want to understand what the nature of these refunds are? And is this something which maybe can occur again. And question number two, France, okay, and Sushi Shop. Can you tell us -- give us a bit more color on what is the -- what's going on there? How is the restructuring going? What's the weakness? Why has -- the measures you have undertaken so far not really materialized in terms of -- or not translated to an improvement in the numbers? And what can be done? And what's the time frame? What are your expectations for this business for Sushi Shop specifically? And I guess a follow-on how does Sushi Shop perform outside of France? Is it equally weak or not? Eduardo Zamarripa: Okay. Thank you, Jakub for your questions. Now related to the first one that you make in terms of the refund, that's something that was a onetime effect. So we should not be having any refund like this in 2025. Then related to the question that you make on Sushi Shop, I would say that we have to split this in several topics. And first, we need to consider that the situation on the French market is quite challenging. Consumer confidence is going down and consumption is also challenging. That's why also we have some plans that we have been working on in the French market, talking about Sushi Shop but also the other brand that we operate there. Now topics that we have been working on. First, in terms of the stores, we have made the deep analysis of the stores that it makes sense to keep. And we have some stores that are big bleeders which do not make sense to continue working with. So we're restructuring that and closing the stores that do not make sense to have there. And we have 3 clusters in terms of stores, the ones that are profitable. And then the ones that we have a [indiscernible] stores, the one that they have a potential to increase the performance. Because of the operations, and the others that, as I said, they are heavy losers and makes sense to close. So that's part of what we are doing of what we are doing over there. Delivery strategy. As you know, Sushi Shop is fairly highly concentrated in delivery. So negotiation with the delivery companies in order to keep being relevant in the segment and be on the first pages of the applications. And at the same time, also strengthening our own delivery channel. The application is something very relevant, creating loyalty programs for our consumers also is quite relevant for us. We are working also in terms of the menus that we are offering reviewing that, which are the SKUs that have the highest consumption and keeping those and making the analysis of the one that do not move that much, so making menu efficiencies. And also innovations, new boxes that we are launching new roles that we are launching and innovation is something that plays a big role in a segment like in a segment like sushi. One of the facts that we also have in the past and right now in procurement, we are making a lot of advances in terms of the prices of the salmon. As you know, there was a big disruption in previous year in terms of the price of salmon. And right now, our procurement team is having very good negotiations in those fronts. Also renovations of our stores a design, which we have a warm, welcoming ambience, the colors that are there that invite you to spend a very nice time. And also working on the lightning of the places. So it's having a better environment overall in order to buy -- our consumers to be there given the reality that we have, a dine-in which is a small part of the business but working a lot on the value proposition for the consumer for the delivery. Santiago Aguilera: Yes. I mean, if I may to add over here. I mean, I understand the relevance of the question, given the performance that we have seen in the French market, the situation that we have in the past with the investment in Sushi Shop. But -- there are many small levers, as Eduardo was mentioning, many different things that are really turning the boat and the situation of the brand. It's very important the question that you ask Jakub, with respect to the performance in the different regions. And just to remind you, for the Sushi Shop the core business, the origin is France. But currently, we are running business in Belgium, Switzerland, Spain, the Gulf region, Luxembourg, and in most of these markets, what we are seeing is a quite positive performance with all these initiatives that we are putting on the table that invite us to think that the situation, the macro situation that we are living in the French market is preventing to unleash the value of all these initiatives that we are deploying at the moment. Thank you very much for the question. Jakub Krawczyk: That's very useful color. Can I just -- would it be farfetched to assume that for the moment, you're not considering more radical changes to this own brand such as exit or something like that at this point. I guess you're still in a mode to fix it, correct? Eduardo Zamarripa: We are focusing all our efforts in order to deliver results in this brand in France. Operator: [Operator Instructions] Lukasz Wachelko: Okay. So maybe I will use my previous moderator and ask a couple of questions from my end. First of all, as a follow-up to Jakub's question. In France, do you see any [ signs ] of the things getting better, are there any time lines and the milestones you have set? Do you have any visibility when the things can get better? That's the first one. Eduardo Zamarripa: Thank you for the question, Lukasz. And for us right now, the most important thing is to work on the improvements that we were mentioning. We have several initiatives across that. We have a plan put in place by the Brand President of the brand, and there are direct involvement of all the functional leaders. Now the CEO is involved on that execution plan, as you can imagine, also I'm quite involved on that. Also operations. So this is a priority. This is one of the priorities of the organization. Right now, I prefer to focus more on the things that we are doing more than to enter into which is the timing. But I want to assure that this is one of the priorities that we have in the organization in this 2025 and is still a priority for 2026. Lukasz Wachelko: Okay. And I also have a question about the Polish market when we see Zabka a leading convenience chain developing pretty fast. And this year, they started the rollout of a pretty nice offer of QSR products. Do you see any impact of that? Do you find them competitors -- should we expect any impact of those developments with offering a pizza on your numbers? How do you see it? Eduardo Zamarripa: Competition is something that is in the day-to-day operations of the restaurant industry, as you say, this is one of the emerging competitions with the products that they are offering. That's why also for us, it's very important to work on the -- on our consumers to work on the development of new products, on new occasions of consumptions, on improving the experience that the consumers that our clients have. And that's why we made particularly a section in this conference call in terms of the topics that we are putting on the table to attract consumers, Generation Z, but also and all our consumers to keep our brands relevant. That's what is relatively important for us. Now how we keep our brands relevant what makes us unique what makes us different. And the value proposition that we give and the development of new products is something that is quite relevant for us. But you raised an interesting point, Zabka, as you say, but it's also supermarket, the ready-to-eat segment in supermarket is increasing. That's a reality, and we need to adjust our strategy towards new realities that are happening there. But as always, we welcome competition, and that makes us be better every day. Lukasz Wachelko: Okay. And another question from my end before I let others is regarding the Czech market. When we were seeing recent negative news flow on the problems with quality or food safety in KFC. I understand the second restaurant was under the spotlight recently. So can you shed some light on that for us? What's happening there, how serious it is and one can take us? Eduardo Zamarripa: Thank you, Lukasz, for the questions. We take matters of health and safety very seriously and we have very strict food and safety protocols in place. Our restaurants regularly undergo multiple levels of quality and safety oversight, including external audits for independent third parties, internal foodservice controls and also inspections from national and local authorities. Across these hundreds of audits in Czech market, including 250 inspections conducted year-to-date by state authorities alone, we have not found any issue related to the systematic mishandling of food products. Santiago Aguilera: No, I mean, I think that, that's the point that we are really seeing many more audits that we have before, but all of them, they are coming up with positive outcome. I think that 1 of the points that is always important to remind that the level of checks, audits, protocols that we have in terms of health safety, I mean they are unparalleled in the industry. So if 1 thing we can be very proud, I think that is this specific point. Operator: [Operator Instructions] Lukasz Wachelko: Okay. So maybe in the meantime, we'll have another question Germany, there's the market when you were [indiscernible] for longer while but, in fact, I believe it was rather the previous quarter when the things stabilized and got better. And this time around also see a decent performance there. So -- what has changed why well Germany and also Hungary are performing above the other markets? Eduardo Zamarripa: Well, for Germany we have to take one consideration still is one of the challenging markets that we have. But as we were mentioning also with Sushi Shop in Germany is exactly the same. We are working in order to improve the experience that our consumers are having over there. The main brand that we have in Germany is Starbucks, and we have work a lot in order to improve that experience, as I was saying, through the development of new products, new beverages, also increasing the offering that we have in terms of food and going back to the roots of Starbucks is what is helping us to improve the results on that market. Lukasz Wachelko: Okay. And what about Hungary? Because this market is also standing out in the perspective. Eduardo Zamarripa: And you raised a very good one. If we make the comparisons versus the third quarter of last year, among the biggest markets that we have Hungary was outstanding in terms of -- it was outstanding in terms of results. And it's execution, execution and execution over there. Santiago Aguilera: We have received some writing question. I guess some of them, they have already been addressed. So thank you for it, but I'm going to try to read the ones that they have not been addressed yet. One of the question is, one, what are the main reasons for slowing sales dynamics in Spain despite the strong tourist and macro in the country. And here, one of the point that is important to bear in mind, I think it's always we have a very strong seasonality in terms of our business, depending on where your restaurants are placed, are situated, the seasonality is going to change. So that is why I always suggest that it's important to see from an aggregated perspective, really in 12 months average, I think that provides a better picture. And there, what you have is a strong momentum in our restaurants. The challenge in terms of the situation in Spain is very similar to other countries despite of the good macro figures that we have that is the cost of living pressure that many people are suffering and this is, of course, affecting consumption. But when you see the aggregated figures and the growth that we have, we have very positive dynamics, sales growth, pricing margins, and to be honest, we are quite positive about the future of our brands in the country. We have received also another question regarding Hungary that I think that we have already addressed about the very good performance that we are recording in the country. An additional question is asking, what are the main reasons for the like-for-like performance that we have in this quarter? And I think that this has also been addressed. We have some markets, and we are having a quite poor performance. We already addressed the situation that we have in France with a drop of 14% in terms of sales. This is one of the very big markets for us. So this is, of course, affecting the like-for-like figures of the whole group. And I don't know if we have any more questions on queue, operator? Operator: We currently have no questions in the queue, [Operator Instructions] And Santi, we have another question. So I'll hand back to Santi to read that. Santiago Aguilera: Sorry, I'm just trying to see the question. I'm not sure what is referring the question, apologies. Eduardo Zamarripa: I think it is related to G&A. I think under this quarter, we have -- as we have seen the performance of the market, we have been also very focused in terms of how we control and tightening our G&A in order to balance the results. Also, we have a question in terms of if we are seeing a more cautious consumer in Poland? And I think in a certain way, we also have are we have addressed this question in terms of consumption confidence across Europe is something that we look very, very closely, and we see how we can improve through the different products that we offer in our restaurants to deliver -- been able to deliver value to our consumer. Now one of the things that, yes, we are seeing the promotional activity has increased and the promotional -- the menus that we have are having an important way in our -- weight in our mix, so we are seeing these kind of effects in the consumer. But what is relevant is that through the value proposition, the products that we deliver and the menus that we have been able to offer to our consumers, the solution that they have in terms of full consumption in our restaurants. Santiago Aguilera: If I may here, I think that it is important to highlight also one topic. So we have addressed today in previous occasions, also know what is the complex context that we have from this macro perspective, our consumer confidence is weak in many different countries. And once more, we have to reverse the effect of the cost of living standards that the accumulated inflation that we have on the latest years is having on consumption. We are not immune to this. So this is a temporary effect. This is something that at 1 point in time, it will pass. But what we are trying to convey is here is 2 things. how we are addressing this. We are addressing this, taking an agile approach in terms of adapting to our consumer needs but also taking as an opportunity to enhance, improve our structural capabilities. And this is also something that we are trying to really to show you over here how we are building a better and a more profitable company, bear in mind that right now the temporary macro factors are not helping our business. We have one final question that is about CapEx expectations for next years. This is something that we will address on the next investor call presentation when we provide the full year guidance for 2026. But as we mentioned before. And also one of the things that we are trying to push as a structural -- and structural move in our strategy is to optimize the capital allocation to be efficient in terms of this CapEx, what we are seeing is that this is translating in a lower usage of CapEx. But once more, not preventing to be investing in to have a better company to continue to be open units, to continue to be invested in digitalization and to continue to be improving our operational capabilities. Thank you for all these questions. I now think that with this, if there are not any more questions. Operator: I can confirm, we have no further questions. Eduardo Zamarripa: Good. Thank you. Thank you, operator. Thank you to all the participants in the conference call. See each other in the next quarter results, please feel free to contact the IR team if you have any follow-up questions. And we are -- we will be happy to see you in one of our restaurants in the near future. Thank you very much. Santiago Aguilera: Thank you. Operator: This does conclude the AmRest Q3 2025 Results Call. Thank you all for attending. You may now disconnect, and please enjoy the rest of your day.
Operator: Good afternoon, and welcome to the Beam Global Third Quarter 2025 Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lisa Potok, Chief Financial Officer. Please go ahead. Lisa Potok: Good afternoon and thank you for participating in Beam Global's Third Quarter 2025 Operating Results Conference Call this Friday afternoon. We appreciate you joining us today to hear an update on our business. Joining me is Desmond Wheatley, President, CEO and Chairman of Beam Global. Desmond will be providing an update on recent activities at Beam followed by a question-and-answer session. But first, I'd like to communicate to you that during this call, management will be making forward-looking statements, including statements that address Beam's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Beam's most recently filed Form 10-K and other periodic reports filed with the SEC. The content of this call contains time-sensitive information that is accurate only as of today, November 14, '25. Except as required by law, Beam disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. So next, I'd like to provide an overview of our financial results for Beam's Q3 of 2025. For the third quarter of '25, our revenues were $5.8 million, and our year-to-date as of September of '25 was $19.2 million compared to $40.9 million for year-to-date September of '24. The revenue decrease is largely unfavorable due to the order timing, which we believe will turn around in the future quarters. Desmond is going to discuss this in further detail momentarily. Revenues for the 9 months ending September 30, '25 were diverse across commercial entities and state and local governments with significant rebalancing towards our enterprise customers, whereas 67% of those revenues were derived from commercial customers compared to only 31% in the same period of '24. Additionally, for the same period, our international customers comprised 39% of all revenues in '25 versus 20% in '24. Our contracted backlog as of the end of Q3 of '25 was $8 million. Our gross profit for Q3 of '25 was a negative $28,000 or 0.5% gross margin loss. This was driven by the impact of fixed overhead allocations on reduced reported sales compared to an 11% gross margin for the same period in '24. The gross profit for '25 and '24 includes a noncash negative impact of $800,000 for depreciation and amortization. Without this noncash expense, which is non-GAAP, our gross margins for Q3 of '25 would be 13% with a gross profit of $700,000 and Q4 '24 would be a gross margin of 18% with a gross profit of $2 million. Our gross margin year-to-date September 30 of '25 was 10% compared to a gross margin of 12% for the same period ended in '24. Our year-to-date September 30 of '25, excluding the noncash items of depreciation and intangible amortization was 22% compared to 18% in '24, a 4 percentage point increase. The company has continued to recognize synergies and report positive gross margins from the company's acquisition. We expect the company's revenue to grow in the future and the company's fixed overhead absorption will improve. The total operating expenses were $4.8 million for Q3 of '25 compared to a credit of $50,000 in '24. Remember that our '24 operating expenses included a $6.1 million noncash change in the fair value of contingent consideration for the Amiga acquisition. Without the noncash items, which is non-GAAP, it does make the expenses more comparable, our operating expenses improved $1.5 million, which is a 30 percentage point increase. The decrease in expenses year-over-year is mostly attributable to efficiencies implemented, driving a decrease of $600,000 for salaries and benefits, $300,000 for sales and marketing and $300,000 in other G&A, which is mainly savings in our European operations. Our total operating expenses were $26.8 million for Q3 of '25, which included noncash totaling $15.4 million, which is mainly $10.8 million for the impairment of goodwill that we recorded in Q2 of '25. Without these noncash expenses, operating were $11.4 million, an improvement of $1.8 million and 14 percentage points over the same period in '24. The Q3 net loss was $4.9 million compared to $1.3 million net profit for the same period in '24. The third quarter '25 net loss, excluding noncash items, which is non-GAAP, was $2.8 million compared to $3 million for the same period in '24, an improvement of $0.2 million or 7%. The year-to-date net loss as of September 30, '25, excluding noncash items, was $7 million compared to $5.8 million for the same period in '24. Our cash balance at the end of September was $3.3 million compared to $3.4 million at June 30 of '25 and $4.6 million on December of '24. Our working capital balance at September 30 was $10.9 million compared to $9.8 million at June 30, an increase of $1.1 million. We have historically met our cash needs through a combination of debt and equity financing and more recently through our increasing gross profit contributions. I will now turn the call over to Desmond to provide our business update. Desmond Wheatley: Thank you, Lisa, and thank you all for joining us here today to go through this update on Beam Global's operating activities and third quarter results. I'm speaking to you today from Abu Dhabi in the United Emirates, where it's 1:30 on Saturday morning. It's been a busy and a kind of long day, and it's also been a busy week. Actually, it's been a couple of busy weeks on the road. So if I'm not the usual ball of fire that you get on these earnings calls, don't -- for 1 minute, put that down to any lack of enthusiasm for Beam Global or what we're doing. It's just that my batteries are running a bit low, and it's possible you may detect some of that on the way that I deliver my comments. The truth is actually anything but a lack of enthusiasm. I've been having an exciting and very fruitful week here in Abu Dhabi, and I'm absolutely thrilled about what we've done in creating Beam Middle East. We've literally just this week opened our new offices here. For those of you who are not aware of this, Beam Middle East is a new company, which we set up as a joint venture with the Platinum Group, chaired by his Royal Highness, Sheikh Mohammed Sultan Bin Khalifa Al-Nahyan, look him up please. The Platinum Group is a multibillion-dollar conglomerate, which is very active in technology, real estate, financial services, energy, gold, food stuffs and other industries across the Middle East and increasingly Africa. The joint venture is a 50-50 equity partnership between Beam Global and Platinum, each owning half of the equity in the entity. It's excellently structured for Beam Global because any and all costs which we incur supporting Beam Middle East in the pre-profit stages are returned from 100% of the first profits that come into the company. Said another way, we get paid back for any cost we incur before there's any profit share with the Platinum Group. I've been working with the Platinum Group now for several months, first, closing the joint venture agreement and then setting up the new entity in Abu Dhabi, which includes setting up and opening our new offices here. I've also just spent the last week with them, creating opportunities for growth for Beam Middle East, and I'm happy to report that I found them at all times to be very willing and capable partners whose knowledge of the way the United Arab Emirates work, combined with their excellent relationships at the highest levels seems very likely to create fantastic opportunities for us here. Monday through Wednesday of this week, Beam Middle East was prominently represented at DRIFTx, which is an autonomous vehicle, drone, electric vehicle and robotics trade show and exhibition. This was a fantastic show for us. We had a booth prominently positioned next to the main stage. And more importantly, we also had an EV ARC and BeamBike set up directly in front of the main entrance of the exhibition. We were the only EV charging infrastructure product at the event, which actually worked. We provided charges to the VIPs who drove electric vehicles to the event. We were certainly also the only company with fully autonomous off-grid rapidly deployed charging infrastructure solutions, and we were also the only company with a fully autonomous off-grid electric bicycle solution. It's interesting that although the show was full of fantastic new technology, drones delivering packages, autonomous air taxis, autonomous vehicles of every shape and size for law enforcement, the military, agriculture, food delivery and countless other applications, nobody there had a way to rapidly deploy highly scalable charging infrastructure for all these vehicles. Beyond that, all the vehicles that were there still require a human being to plug them in to charge, which is hardly very autonomous. It was a fantastic opportunity for Beam Middle East to demonstrate that we have solutions for both of these challenges. Nobody can deploy charging infrastructure more robustly, faster or less expensively than we can, and our patent-pending wireless charging infrastructure solution creates the perfect platform for autonomous vehicles. When not conducting their missions and when in need of a charging session, they can simply pull on to our engineered base pad and charge wirelessly without any human intervention. We had an unbelievable response to these capabilities and are already meaningfully engaged with several of the presenting companies. I was accompanied to this event by Ivan Tlacinac, who runs our Beam Europe operations, members of our Beam Europe team from Serbia and also members of our Beam Middle East team. All of us were extremely busy from early in the morning on the first day of the event to late in the evening on the last day. I was actually invited to speak on the main stage to a very well-attended room about the impact that Beam Middle East will have on this region's plans to electrify transportation and to invest $1 trillion on sustainable infrastructure in the coming decade. It gave me an excellent opportunity to speak to a room full of powerful decision-makers about the value that our products bring to the electrification of transportation, energy security and smart cities infrastructure. It was also an excellent opportunity for me to ensure that everybody there knew that Beam Middle East is the combination of a California-headquartered NASDAQ-traded company and the very powerful and influential Platinum Group. It cannot be overstated how important it is to have a local presence in this region and a well-respected partner when seeking success here. We now have both. I was impressed time and time again by the Platinum Group's ability to bring top leadership from government and the largest organizations in this region to meet with me. This allowed me and all the other members of our team to go straight to the benefits of our products and the value that they will bring without having to go through a lengthy and often risky process of creating credibility with a new audience. I'm very bullish about our opportunities here. After the event, I've just spent a day in Dubai, meeting with 2 other autonomous vehicle companies, both of whom have significant opportunities for our EV ARC with its wireless charging integration. I also met with several drone companies who can benefit from the use of our patented BeamFlight autonomous drone charging system. This is something we used to call UAV ARC, but we're now calling it BeamFlight. This fantastic product is one that I've had a patent on for a couple of years and originally developed for warfighting scenarios. BeamFlight can be deployed in contested environments and allow a drone operator to fly a drone out to a mission and crucially, when the drone requires charging, it can land on BeamFlight to recharge instead of returning to the operator, causing risk of being targeted if the enemy follows the drone back to them. BeamFlight removes that risk, and it can be deployed anywhere without construction or electrical work or any other type of activity. But it turns out there are a host of other commercial and military applications for this type of technology, and you're going to see us focusing heavily on that in the coming months. The great thing is that here in Abu Dhabi in the United Arab Emirates in general, the government and regulators are incredibly open to these new technologies and the rate of acceleration of the use of drones and autonomous vehicles here is breathtaking, especially viewed from the U.S. experience. We're actually able to work with drone developers and manufacturers and autonomous vehicle developers and manufacturers and move very quickly to creating solutions with them without being bogged down by time-consuming and often impossible regulatory barriers. Beyond that, the investment is here, and there's a vibrant market for these types of solutions. So we're not developing pie in the sky products that might be used sometime in the distant future. These are solutions that are needed today, and Beam Global has the patented technology to provide them. I'm really excited by the opportunities that I'm seeing here and by what I know that we're going to release to solve for many of the challenges faced by both drone and autonomous vehicle operators. Beam has the perfect technology to solve for these challenges. And now that we have Beam Middle East and our partnership with the Platinum Group, we are ideally positioned to put our technology innovations to work in this rapidly developing market where eye-watering investments are being made daily. Prior to coming to the Middle East, I was in London. And while there, I met with another drone company for whom we are currently developing batteries. I can't talk too much about this drone company or what they're doing, except to say that it's a submersible. But I can tell you that our fantastic battery scientists in Chicago have already developed a solution, which will provide this drone manufacturer with double the energy density and about twice the lifespan in a battery pack than the one they're currently using. This will allow the drone to stay on mission for much longer, and it means that they'll have to replace the battery much less frequently, which again allows them to stay on mission longer. We are confident that the battery we're developing for this drone, which we're fitting into incredibly tight real estate will also be much safer and reduce the risk of any type of thermal runaway event. That means that the drones will be less likely to experience any kind of malfunction, making them more reliable, safer and less expensive to operate. Now it turns out that our batteries are actually more expensive to buy than the ones that they're currently using, but their total cost of ownership for batteries will be reduced because of the tremendous expansion in utility that occur when you use ours. This is exactly the sort of application that our battery team are very good at attacking, and it's perfectly in line with the strategy that I've always had for our battery operations, which is that we should not try to compete at the commodity level, rather we should do the really difficult things for highly discerning customers and differentiate ourselves in ways that allow us to charge a margin, which is much higher than the commodity producer could charge, but which creates so much value for our customers that they're happy to pay it. And that's certainly the case in this instance. We've seen a 21% increase in our energy storage systems business this year. And what's exciting is that those revenues have come, yes, from some existing customers, but mostly from new customers, bringing extremely challenging requirements to us, which we're fulfilling in a unique and highly differentiated manner. We also continue to win new patents, further differentiating our batteries and other products from the competition. And these are not empty patents. They cover extremely important aspects of our differentiated technology and will provide real and meaningful value to our customers moving forward. This weekend, I'll be traveling to Jordan, continuing my Middle Eastern Odyssey, where I'll be visiting the deployment of our BeamWell product, which is currently in use with the Royal Jordanian Armed Forces Medical Services in a field hospital. This fantastic technology solution provides electricity for cooking and the refrigeration of medical supplies, highly ruggedized e-mobility and most importantly, a reliable source of drinking water from salt, brackish or foul water. It's our intention and the attention of the Royal Jordanian Armed Forces to move BeamWell into Gaza, where it will provide humanitarian relief for those in need in that war ravaged region. There's a lot of water in and around Gaza, but of course, it's all salty or brackish and we clean it up and make it drinkable. But we're already discovering that BeamWell can provide many other valuable services. For instance, when we first developed it, we only assumed that the water would be used for cooking and drinking. But we've learned from the Jordanian Medical Services that they also really need it for dialysis and other medical procedures as well. Of course, these applications are not only needed in Gaza, but BeamWell is also a fantastic solution for many parts of the world, which are ravaged either by war or natural disasters like hurricanes, floods, wildfires or earthquakes. The United Arab Emirates, where I am today is actually the largest donor of financial aid to that region, and I'll be working with the Platinum Group and other influential people here in an effort to fund many more of these systems. Further travels this year will take me to the Caribbean, where Jamaica has just experienced the most powerful hurricane in its history. Hurricanes are not more frequent than they used to be, but they certainly seem to be getting much more powerful and the people in the Caribbean are very sensitive to the fact that they lose electricity and fresh water every time these types of severe weather events take place. Beam's suite of off-grid energy generation, energy security and now desalinization products are a perfect fit for solving these risks and challenges. And I'll be working with U.S. government representatives and through other relationships to ensure that governments and commercial enterprises alike understand the tremendous capabilities which we can rapidly and scalably deploy in these island communities. We already have EV ARC deployments in Puerto Rico and in the U.S. Virgin Islands, so our product is well tested in these environments. During Hurricanes Irma and Maria, we were able to demonstrate our EV ARC product can withstand category 5 hurricane winds and continue to operate without incident. Also, notably this year during Hurricane Helene, our EV ARC products continue to operate during 140-mile per hour winds and absolutely uniquely in the industry, while also submerged in up to 8 feet of storm surge. Our customer there, the U.S. Army informed us that our products were the only things that continue to operate and deliver electricity during Hurricane Helene. It's clear that we have a fantastic solution to solve for the significant risks and challenges being faced by communities that are prone to extreme weather events, particularly high winds, flooding and storm surge. All of these opportunities and many others are new to our company and provide a host of new avenues for us to generate revenues and profits with the technologies that we've developed and deployed over the last many years. At a time when EV charging infrastructure deployment is being focused on less in the United States, particularly by the federal government and the current administration, I'm really thrilled that we've created products and technologies, which have a vast array of potentials to solve real-world problems in places where there's actually funding to pay for those solutions. The expansion of our product portfolio and our geographic expansions into Europe and now the Middle East mean that we're decreasingly reliant upon the purchase of our products for EV charging in the United States. I'm still very confident that we'll have to deploy lots and lots of electric vehicle charging infrastructure in the U.S. in the future. But during this current lull, I'm also very confident that we're going to see tremendous success with EV charging infrastructure products in other parts of the world where the growth of electric vehicles is still staggering. I can tell you that here in the Middle East, there are so many electric vehicles. It's really mind-blowing. Sadly, almost all of them Chinese, but there's tremendous growth over here and also in Europe. Also through the deployment of our energy security, disaster preparedness and smart cities infrastructure products, we're going to see a lot more growth there, too. Not to mention the significant global appetite for the types of battery solutions that we're able to provide through our patented portfolio of energy storage products. Drones, submersibles, autonomous vehicles, electric vehicles, robots and countless other applications are seeking highly energy dense and safe battery solutions. And those are exactly the sort of energy storage systems that we create and manufacture in our Chicago facility. Our third quarter revenue of just under $6 million was not what we were expecting, largely because we've received an award from an existing customer from whom we would have received many -- from whom we have already received many prior purchase orders, and this was to deliver just over $3 million worth of EV ARCs, and we expect to deliver those EV ARC systems in the third quarter of this year. We went so far as to manufacture them in our San Diego facility. However, it turns out that this order was originally funded by the Federal Highways Administration with dollars which had been approved by Congress. Nevertheless, the current administration has seen fit to withhold those funds. And as a result, we've not deployed those systems as of yet. That's the bad news. The good news is that I've known this customer for a long time, and I've recently talked to them, and they told me that they're going to move ahead with the deployment anyway because they have separate funds with which to do it. It'll have to go through a new budgeting process, which is why we were not able to do it in the third quarter. But in the end, it will be just like everything else to do with the electrification of transportation. It's going to happen. It's merely being delayed by the current administration. I think it's unlikely that it will happen in the fourth quarter this year, but I do think it's very likely that it will happen in the first half of next year when the new budgets are finalized. Had we executed on that order, as we expected, we would be reporting closer to $10 million in revenues with significantly improved gross margins of around 20% gap. Our product gross margins are running at about 44% year-to-date. So you can see that the dip in growth for Q3 is driven by overheads and fixed allocations on a lower number of system sales recognized in the third quarter. So this reduction in revenue in Beam Global's Q3 of 2025 is actually just driven by order timing rather than by anything fundamental. Had we delivered those units as we expected to, we'd be reporting another quarter of growth with further improvement in gross margins. As it happens, we had a bit of a perfect storm of negative government activity, both in the United States and in Europe during the third quarter. Our European operations also saw a reduction in the delivery of their legacy products, which we anticipated for the third quarter because of political unrest in Serbia and the Balkans. Here again, we don't expect that these orders are lost. They simply move right, and we're confident that we'll deliver on them to some extent in the fourth quarter this year and certainly in 2026 early. Things are otherwise really picking up for us in Europe. Beam Europe actually contributed about 40% of our revenue in the third quarter. And what's really important is that we now have awards to tenders that we've been working on to deliver EV ARC systems to several cities across Europe. This is a perfect example of our strategy to expand both our product portfolio and the geographies into which we're reaching because what's happening is that while Europe is having some slowing on its traditional products caused by the political climate, which I've already mentioned, they're able to find ways to increase their revenues with the new product portfolio that they've inherited as a result of being acquired by Beam Global. At the same time, Beam Global, the parent is benefiting from increased revenue opportunities as a result of Beam Europe's activities. So you can see how these 2 strategies, geographic expansion and expanding product portfolios across both markets is coming together to defend us for some of the worst aspects of the current market and to create growth in spite of these conditions. I really don't believe we've seen anything like what Europe will do, and I'm looking forward to continuing improvements in the percentage contribution from Europe to our overall revenue picture. And now, of course, we have the Middle East, where we fully expect to make further sales and garner more revenues. So we're bringing lots of new opportunities for growth to the company even in trying times, and we're doing it without spending vast sums of capital or taking on debt. We currently have about $8 million of backlog, and that doesn't include the 3 million deployment that I just described to you a few minutes ago, and it also does not include any of the EVR deployments in European cities, which are coming about as a result of the recent awards we have won from the tender processes. The reason for this is because we don't include anything in backlog until we have a hard and fast purchase order for it. So when we actually hear of an award from a tender or receive a verbal award from a long-standing customer with whom we've done lots of business and always been paid, we don't actually include those in backlog until those customers issue purchase orders to us, which is sometimes the very last thing they do just before we ship. Takeaway is that this $8 million worth of backlog that we currently have, which again are confirmed purchase orders, doesn't really tell the full story about the commitments that we have to buy our products at this point. And of course, it also doesn't include anything at all from the Middle East yet. In some ways, you could see that we're operating in the worst time in our history from a political point of view, both in the United States and I'm afraid to say in the Balkans as well. And yet, we're finding ways to create new opportunities for growth, and we're still winning business and executing on it. The battery business growth with the new contracts, some of them so secret that I can't even talk about them, combined with other business activity, like the fact that we've already deployed BeamBike now for customers in the United States and in Abu Dhabi, shows that these expanded product portfolios are not only allowing us to make up for the shortfalls in the EV charging business, but in fact, creating whole new avenues of growth. In the case of BeamBike, much of the revenue that we received from that initiative will, I believe, be recurring in the future. And in fact, I think you're going to see us bringing in several new sources of recurring revenue in 2026 from both our product portfolio expansion and also geographic expansion. It just so happens that many of the new things that we're working on lend themselves very well to recurring revenue opportunities in the way that EV ARC sales previously did not. Now you might think that all of these initiatives that we're working on would mean that we'd significantly increase our operating expenses. But the fact is that we've actually reduced operating expenses in the third quarter through increased efficiencies and appropriate belt tightening consistent with the new reality of no federal sales in the United States. You'll note that we didn't make any federal sales at all in the quarter. I'll tell you this, to continue to hammer home that Beam Global is now and has always been incredibly disciplined with cash and equity. We haven't changed that philosophy, and we continue to figure out how to squeeze the maximum amount of value out of any investments that we make. This expansion into the Middle East, for example, has been done with very little capital because we're able to support all except our sales activities from our fantastic facilities in Belgrade and Kraljevo until such time as we reach sufficient volumes here to warrant assembly and then manufacturing facilities. But of course, those will largely be paid for and justified by cash flows generated by the business here in Abu Dhabi and the broader Middle East. We also view the Middle East, of course, as a gateway to Africa, and we'll be concentrating a lot on expanding into that market just as the Platinum Group does. So to sum up, it was a bit of a tough quarter from a revenue point of view because of the unfortunate delay caused to a significant order, which we should have delivered during the period. But at the same time, we've managed to significantly increase our opportunities for new streams of revenue, both onetime and recurring with fantastic and exciting product offerings and equally fantastic and exciting new markets. We haven't lost any of the orders that move right, so we'll be able to take advantage of those in future periods. And the Beam team has continued to find ways to make our business more efficient and improve our products without increasing our overhead costs in any material way. I'm grateful to them for their efforts, and I'm grateful to you for your support and for continuing to invest in and follow this fantastic company. I'll now return the call to the operator and take any questions which you may have. Operator? Operator: [Operator Instructions] Our first question is from Tate Sullivan with Maxim Group. Tate Sullivan: I think it's 2 or 3 calls in a row maybe that you're in the Middle East. On the wireless charging, I remember the patent, but had you gone through sales efforts with wireless charging before? Are you hinting at that based on your experience in the Middle East with interest in that product? Desmond Wheatley: I've known for a long time that the wireless charging solution was going to be very important for the autonomous vehicle market. I think it's also going to be very important for the general automotive market, but it won't be until the automotive OEMs start to integrate receivers into the underside of their vehicles. That's the -- the thing with wireless charging is it doesn't do any good for us to deploy the chargers and the transmitters if the car companies are not installing the receivers on the underside of the vehicles. And so far, they've been reluctant to do that for a couple of reasons. The first one is that for a long time, there was not a standard in the industry. Just like it took a long time to get to a standard for the plug-in connectors, there was not a standard for wireless charging in the industry. That problem has been solved, but also the car companies are reluctant to add cost to the vehicles through the addition of the wireless receivers so far. I think that's the wrong thinking, frankly, because I think consumers will be all over this. The idea that you could just drive your car up to a station like ours and walk away from it, not even plug it in and it fills up wirelessly, I think will be something that consumers will demand. But what's different now is that because we have so much exposure to both autonomous vehicles and frankly, also to drones, which will charge wirelessly in many instances of our BeamFlight product, we have companies with whom we can actually work. It's not like working with the Big 3 or the large automotive companies. These autonomous vehicle companies are generally a bit scrappier and a hell of a lot more entrepreneurial in their approach to this. And the regulations are also a lot less stringent, particularly where I am today. So what you're seeing now is because we've had this patent pending for some time, and we had the capability of doing this. We now have a market to provide it to, and that's why you're going to see an awful lot more activity on it in the coming weeks and months. Tate Sullivan: And then on the battery business or energy storage business, it sounds like you can't talk -- provide too many details, but is there a long trial period for the customers before they place orders? Or is that -- is this a special situation? Desmond Wheatley: Yes. I mean that's going to be customer by customer. In the instance that I'm talking about now, I think you're going to see a very quick move. I mean, I say very quickly. There's still some development things to do. But these guys are hot to trot. They're again, very entrepreneurial. They have an absolutely remarkable system that's in demand. And the good news is they're already using a battery. And as I said in my comments, what's different about what we're providing them is that we've doubled the energy density, which means that it can stay on mission for twice as long and also double the life expectancy of the battery in comparison to what they're using today with a much safer and more robust solution. And I think we're going to -- you'll see that a lot. A lot of drone operators are tending to go with kind of off-the-shelf battery solutions which is not helpful to them for 2 reasons. The first one is that typically, these highly commoditized solutions don't always have the level of quality that we produce. But also the drone manufacturers and operators are forced to design their devices around whatever square or rectangular box that are delivered off the shelf from these types of manufacturers. Beam can very unusually, in fact, I think, uniquely in the industry, make batteries in just about any shape. And because of that, we can fit into real estate that's not necessarily ideal for the existing battery vendors. So I think that's going to -- that has always been important to me. I don't like the idea of drone operators, whether those are submersible or in the air or on the ground having to design their products around a box. I want to make sure they design the product for the mission, and then we'll design the batteries that they need for their real estate and do a better job of it. And as I mentioned in my comments, the result of that is our batteries will probably always be a bit more expensive than the off-the-shelf ones to buy. But from a total cost of ownership point of view, be less expensive for energy delivered because of the longer life and the increase in energy density. So sorry, long answer to your question. The result is -- the short answer is some of the -- in some instances, we'll be able to move quite quickly to orders. In other instances, we'll have longer development periods, but we often get paid for that to do that -- the engineering required to do that. Operator: The next question is from Ryan Pfingst with B. Riley FBR. Ryan Pfingst: Well, the first one, a bit of a follow-up there. And earlier, you mentioned backlog is comprised of firm orders only as you've done historically. But for the larger pipeline of awards that could include maybe MOUs or earlier-stage agreements, can you share what the breakdown might look like there between battery opportunities and EV ARC opportunities, maybe at least at a high level, how to think about that? Desmond Wheatley: Yes. I mean it's -- the battery opportunities are increasing. And then the other contributions are coming from other products as well. I mean we now have the entire portfolio of products in our Beam Europe facilities, and they're contributing significantly to both backlog and to the sort of high probability pipeline. And then our new products coming out, too. I mean, as I mentioned, BeamBike, we already have BeamBike sold and deployed, and it's contributing to growth in our backlog as well. So what's really encouraging about this is while previously, backlog and pipeline was made up almost entirely of EV ARC sales and certainly in 2023 and '24, very predominantly EV ARC sales to federal customers. Now we're looking at a situation where none of our pipeline or backlog is made up of federal customers. I shouldn't say none. I think there are still a few instances or for EV ARC anyway. We are seeing interest from the federal government in our disaster preparedness and energy security products, which is I've often said, we have a lot more in common with the current administration than a lot of people think because we do make Made in America energy security and U.S. energy solutions. So that's contributing to the pipeline as well. But most importantly, what you're seeing much more diversified, a lot more of it coming from commercial customers, a lot more of it, not just EV ARC related, but related to the other new products that we brought out over the last year or so and certainly a significant and increasing contribution from our European operations as well. Ryan Pfingst: Understood. Appreciate that. And then second question, can you walk us through how you're thinking about the cadence of Beam's opportunity in the Middle East, maybe when we might start seeing Beam Middle East show up in backlog and results for Beam? Desmond Wheatley: Yes. Well, I've got to be careful about what I say here. As I said, I've had a very exciting week here. The event that we were at DRIFTx was just absolutely phenomenal, and we were very prominent in the way we were positioned at that event. In fact, we had some extremely important people come and spend time with me. They didn't spend time with anybody else at the event. And a big part of that is because I think there was a powerful realization that the thing that was missing there was the thing that was vital to all the other devices and vendors. And that was none of them can operate if they don't have the opportunity to fuel, to use a crudes term to recharge as it were because it's all electric. All of these vehicles are electric. There's nothing there that's not electric. And again, this goes back to the comments I made during my prepared comments, which is that electrification is happening with absolute certainty across the board. And we're only going to delay it a little bit in the U.S., but it's happening everywhere else at a clip. And so the requirement for charging infrastructure is really dramatic. And again, our ability to provide it wirelessly to autonomous vehicles so that they don't need to plug in just -- it's really been fantastic. So all of that leads me to feel very enthusiastic about this market. And I wasn't having theoretical down the road conversations with people. I'm talking to people who have real needs today. There's always a process, and we are new to the market. But of course, we're new to the market with Platinum Group, and that gives us just a phenomenal credibility right off the bat. I mean it really was impressive to see the Platinum Group executives who are there with me. They just -- they are connected at the very highest levels. And I was on a call earlier on today as a matter -- well, yesterday, it was now with the Platinum Group and the CEO of an autonomous vehicle company and his response to me was, I cannot say no to Dr. Hanai Atatreh, who's our representative of the Platinum Group. So just very well connected. All of that to say, I'm very bullish about the market. It would be foolish of me to try and put any kind of precise timing on things because there will be a process. But I think it will happen, and I think it's going to happen quickly. I think you'll -- I think we'll be announcing stuff in the not-too-distant future. Operator: The next question is from Noel Parks with Tuohy Brothers. Noel Parks: Just had a few things. Could you just maybe talk a little bit about where your total manufacturing capacity stands. And I guess I was thinking or just wondering if on a year-over-year basis, it was essentially flat or if there had been some growth? Desmond Wheatley: In terms of capacity? Noel Parks: Yes, manufacturing capacity. Desmond Wheatley: Yes, yes. Well, the truth is that our manufacturing capacity is underutilized at the moment because, of course, we've had this decline. Let's be frank. We had unbelievable growth between 2020 and at the end of 2023. And a great deal of it was driven by the fact that the U.S. was very heavily invested in and pushing very hard towards the electrification of transportation, and we were providing for that heavy focus. And so we built infrastructure in the U.S. to be able to cater to that. And we also built a sales machine to cater to that. It's quite specific selling to the federal government, to the Army, to Marine Corps to Pentagon, Navy, Space Force and all the others that we've deployed for. It's a specific type of selling discipline, team and process. Now all of that has completely evaporated, 100% because, of course, the new administration has different ideas about this stuff. We've had to pivot to do these other things. And fortunately, we do have the technology and we manage our business. We don't let things happen to us. We make things happen, and that's why we're doing all these different and wonderful things. Federal government will come back for us. There is no question about that. We will electrify. And when they do, frankly, they'll come back with more urgency. I can't say when that's going to happen because I don't know how long this thinking is going to continue. But there is no question that, that is going to happen. And urgency is good for us because we deploy faster and more scalably than anybody else does. But the answer to your question is we have excess capacity in the U.S. right now because of that slowing down very obviously. And then our acquisition in Europe got us 5x the factory space that we have in the U.S. under roof and several acres of land upon which we can build. Again, we own all of that. We don't lease it. We have no lease operating expenses or anything else there. We own all the land and buildings in that factory facility. So we have massive capacity on hand right now for expansion and for growth. And that is really good and really important, again, because of where I am today because our strategy in the Middle East is to invest in selling here. We've opened offices here, very attractive offices in Masdar City, which is the sustainability center pretty much of the Middle East actually. And we've opened offices here, but they are really focusing entirely on selling and some administrative things that we have to do in the region. We don't as of yet have any assembly or any manufacturing or even assembly facilities in the Middle East. And the reason for that is because we don't need them because we are a 4-week container ride away from our factory in Kraljevo. So what you're going to see us doing is selling in the Middle East and then fulfilling those orders from our factory in Kraljevo, which has a massive increase in capacity. And you asked me if we had an increase, yes, we have. We're more efficient in Kraljevo now and able to produce more EV ARCs than we were this time a year ago and more of the rest of our products. In fact, the BeamBike products that are deployed in Abu Dhabi today were manufactured in Kraljevo in Serbia and so is the EV ARC that are here manufactured in Kraljevo in Serbia by Beam Europe. So we're going to use that capacity to support this market in the Middle East until such time as we hit volumes that we anticipate. And when we do hit those volumes, we'll start to assemble here, not manufacture, but assemble components that are shipped here from -- mostly from Beam Europe, but to some extent from the U.S. as well from time to time, particularly batteries. And then we will move to full manufacturing facilities here when we hit those kind of volumes. And I anticipate growth in the sale of all of our products in Europe as well. So we will use up that capacity there. And then as I've said before, I anticipate a return to appetite for electric vehicles and charging infrastructure in the U.S. as well because, again, globally, EVs are growing rapidly. And that's -- we're a global company, and we're going to target those markets where there's good growth and good activity and then come back to the markets where there's taking the eye off the ball for a while at such time as that changes, which I'm certain that it will. Noel Parks: And I was wondering, with the EV ARC installed base, are there any trends that you're seeing with either sort of maintenance and repair expense. I was thinking about the very earliest units as they're aging, just assuming that must be increasingly something you're dealing with. Desmond Wheatley: Yes. So we have thousands of EV ARCs deployed now. And you're right. I mean, obviously, one of the -- it's good news, bad news, right? You have a product that lasts for a really long time. I mean for good to see we've got Unit 003 outside our offices. I mean that thing has been in operations now for 15 years. And so yes, that -- yes, you've got a fleet there that's got some aspects of it that are aging. And actually, we had a couple of instances where we had things which go wrong with devices, which we integrated into our product, which were made by other people in greater volume than we wanted or anticipated. And so we've had expenses associated with solving for those. And those are built into our financials right now. Those hit our gross margins. But the product is very well made. It's very robust. We don't cut corners in terms of the quality of the components that we use. We're still disappointed sometimes by external components. That's one of the reasons that I acquired a power electronics company last year in Serbia is because we use other people's power electronics and 99% of the failures we have on EV ARCs come from failures of other third-party products. So we're increasingly becoming vertically integrated because we can make the kind of components that are better suited for our products, make them work better, more efficient, but also, frankly, fail less often. But yes, we've seen costs associated with warranty expenditures. And again, those are all baked into our financials, but certainly not chronic, and it is a very robust and long-lived product as evidenced by the fact that we have so many of the -- in fact, the very few of the -- I think we have a better survivability rate than Rolls-Royce does in terms of product out in the field right now. Very few of them have ever completely failed. And so almost all of them are still out there in the field and operating. Noel Parks: Great. That was interesting sort of the rationale for the electronics acquisition was because of component reliability. And so yes, it does seem to make a compelling argument for vertical integration. Desmond Wheatley: It's reliability. There's no question about that. It's also that -- because we make very unique products, nobody makes anything that's exactly right for what we do. And we end up having to spend a lot of time kind of crow-baring and our engineering teams have to kind of fidget it with other people's products to make them work precisely as we need them to in the very -- don't forget in the U.S., we're deployed in the hottest and the coldest and the wettest and the windiest places. But there's also margin recapture. I just don't like buying other people's boxes and paying them margin and paying for a lot of packaging and air and stuff that we don't need. And so it will make us a hell of a lot more efficient as we continue to vertically integrate and make the products much better and cost us less money to make them. Operator: The next question is from Eddie Call, a private investor. Desmond Wheatley: Hello, Eddie. Thank you for being invested in our company. Eddie, you hear me? Operator: Mr. Call, you line is open on our end. Perhaps you have it muted on yours. Moving on, our next question... Desmond Wheatley: I'm not hearing... Operator: He's not transmitting. The next question is from [ Dick Grill ], a private investor. Unknown Shareholder: My question is on the stocks. Back in December of '20, the stock shares were at $73.78. And then in January, they dropped to $56 and March, they dropped to $40. And since then, it's been in the $2 range. Do you foresee any time that the price per share on the stock is going to rise? And second question would be, are you going to offer any dividends? Desmond Wheatley: Yes. So Eddie -- or Dick rather, thank you for bringing that voyage up. Yes, we have gone through that rotation out of growth stocks, particularly growth stocks related to electric vehicle infrastructure and anything to do with sustainability, frankly. I'm bound to -- we are not alone. I track probably 30 or 40 stocks in our space. Everybody's chart looks exactly the same, even though some of those companies are not very good and some of them are really very good. And I count us amongst the very good companies. The market -- what's happened to the market, there was a massive rotation out of growth stocks, about $6.3 trillion or $6.4 trillion moved into money markets. Almost all of that money came out of growth stocks when interest rates went up. That's one contributor. And frankly, I'm just not expert enough to explain to you all the things that are going on in the broader markets. But I can tell you this, we are 1,000x better company today than we were back in 2020 when we were trading at $73. In every way we've improved. We've improved our margins. We've improved our products. We've expanded our product portfolio. We've expanded the geographies into which we've gone. We've acquired a European market. I mean it's just -- there is no aspect of our business, which is not vastly improved over where we were back in 2020. And yet, we've seen this incredible decline in our share price. But again, so has everybody else. What our job is to do is to just continue making great products and selling them to great customers and doing them again because market rotations happen. And we see this -- we've seen this happen time and time again throughout the history of the stock market. I'm a believer in the market. I'm a believer that it will come back and that we will be rewarded because we've, through this time, shown great discipline, discipline with cash and discipline with our equity. And we've thrived while the company often from an operating point of view has thrived while the share price has gone in completely the opposite direction. So I believe that we will be rewarded for that. And I often say, I think we will see new highs again in the future. Next time, it won't be because of an EV bubble, it will be driven by just fundamentals because we're doing all the right things. We're blocking and tackling, and we're doing all the right things with discipline to grow a really fantastic company. So I do believe that we'll see the share price improve. It's be foolish of me to say when because I just -- I'm no good at forecasting the market. If I was, I'd probably be doing something else for a living. But I'm pretty good at doing what I do for living and so is everybody on my team, and they're all working very hard to create the fundamentals for a good company. Dividends, that's something that's in our -- that may or may not be in our future. But I mean, look, all companies aspire to dividends and shareholder returns and shareholder value is our job. It's job #1. It's the #1 thing that we think about every day, and we will not stop thinking about that as we move forward. And I appreciate you being involved. Unknown Shareholder: All right. Well, thank you because I've seen big improvements in the company, but the stock price stays in the $2 range, and I'm thinking, boy, they've had more orders than they've ever had in production and seem like the price would be going way up. Desmond Wheatley: It should be, and I believe it will. I believe it will. It's just -- again, the market -- I think it's safe to say the market is not always as rational as people sometimes think it is. But in the end, good companies that make good products and have discipline are rewarded and recognized by the market. And I believe that, that's coming for us. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Desmond Wheatley for any closing remarks. Desmond Wheatley: Yes. Well, I mean, I think that question from Dick was a hell of a way to end it here. As I said, we're 1,000x the company we were back in 2020, more so now. I've seen nothing but opportunity for us here. And we -- look, it's a struggle to re-steer the ship, right? We -- as I said earlier, we were very focused on the tremendous growth that was happening when the U.S. was heavily engaged in electrification of transportation. But we've got fantastic products that can do a whole lot of different things, and that growth is still very active across the world, and we're going to keep executing on it. So you can count on us to do that, continue with the discipline, continue with improving products and continue increasing our opportunities. And I'm looking forward to that. So thanks all for being involved. Thanks for your time on the call this morning or rather this afternoon. And Look forward to more great things in the near future. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone. I would like to welcome you to the Credicorp Ltd. Third Quarter 2025 Conference Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Credicorp's website. Today's conference call is being recorded. [Operator Instructions] Now it is my pleasure to turn the conference call over to Credicorp's IRO, Milagros Ciguenas. You may begin. Milagros Cigüeñas: Thank you, and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer; and Alejandro Perez-Reyes, our Chief Financial Officer. Participating in the Q&A session will also be Francesca Raffo, Chief Innovation Officer; Cesar Rios, Chief Risk Officer; Cesar Rivera, CFO of Insurance & Pensions; and Rocio Benavides, Mibanco's Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Gianfranco Ferrari will begin the call with remarks on key messages of our recent Investor Day, our recent political and macro environment and a brief overview of our quarterly results followed by Alejandro Perez-Reyes, who will provide a more detailed analysis of key macroeconomic indicators, our financial performance and our outlook for full year 2025. Gianfranco, please go ahead. Gianfranco Piero Ferrari de Las Casas: Thank you, Milagros. Good morning, everyone and thank you for joining us to review Credicorp's results for the third quarter of 2025. Just over a month ago, we had the pleasure of hosting our Investor Day in New York, where we marked 30 years since Credicorp's listing on the New York Stock Exchange and shared our road map for sustainable growth and impact. Our strategy is anchored in 3 key pillars. First, we are accelerating the scalability and monetization of our digital ecosystem by financially including more people and expanding the formal cashless economy. Platforms like Yape, Tenpo and Warda are playing a bigger role across payments, credit and savings and are already generating new revenue streams. Second, we're unlocking growth through business synergies across all our businesses by leveraging shared capabilities in data and AI talent and cross-business platforms to drive revenue diversification and efficiency. And third, we're executing with discipline with a focus on profitability thresholds, capital allocation and long-term value creation across both our core and disruptive initiatives. We also reaffirm our medium-term targets, an ROE of 19.5% and an efficiency ratio around 42% over a 3- to 4-year period. These goals underpinned by scalable platforms, improving asset quality and disciplined growth. Before turning to the quarter's results, let me take a moment to acknowledge the recent political developments in Peru and macro conditions across the markets where we operate. Late on October 9, Peru's Congress voted to impeach President Dina Boluarte, citing permanent moral incapacity. Shortly after, the Head of Congress, Jose Jeri, was sworn in as President. This follows a period of low approval ratings and growing public frustration with crime and governance. While broad leadership transitions have unfortunately become part of Peruvian landscape, the country has also demonstrated a long history of economic resilience and institutional continuity. At Credicorp, we've built our strategy and operating model for resilience. Our geographic and business diversification, strong capital and liquidity position and disciplined risk management allow us to stay focused on delivery even as the external environment shifts. Over the past 30 years as a listed company, we've generated an annual total shareholder return above 14%, consistently outperforming our regional peers. That track record reflects more than strong financials. It speaks to a business model built to navigate uncertainty decoupled from macro cycles and anchored in long-term value creation. That's why when events like recent political changes unfold, we remain rounded and focused on what we can control. As always, we are monitoring developments closely. The macroeconomic environment during the quarter was relatively stable with key indicators pointing to a global recovery across the region. In Peru, GDP growth for 2025 is now projected at 3.4%, up slightly above 3%. This revision is driven by higher-than-expected export prices and a boost to consumption following the eighth pension fund withdrawal. Domestic demand is forecast to grow nearly 6%, its fastest pace in over a decade outside the pandemic rebound. Driven by a more advanced economic cycle, record terms of trade control inflation, supporting real wages and rising trade demand. These trends point to improving business conditions with mining investments outlook strengthened by favorable export prices and new project ramp-ups. Despite the upcoming 2026 elections, we expect GDP growth to remain resilient, between 3% to 3.5%, largely supported by sustained gains in terms of trade. With inflation forecasted at 1.8% for 2025 and 2% for 2026, it remains comfortably within the Central Bank's 1% to 3% target range. In September, the Central Bank cut its policy rate for the third time this year to 4.25%, bringing it close to neutral level. This easing cycle is already supporting credit growth and private consumption. FX markets and external balances also remained stable, supported by high commodity prices. In Chile, GDP growth is driven by favorable terms of trade, mining investment and resilient consumption, with a more broad market outlook boosting medium-term expectations. Colombia's GDP is expected to grow 2.3% in 2025, up from just 1.6% in 2024, though fiscal pressures keep market sentiment cautious. In Bolivia, economic adjustment challenges remain, but Rodrigo Paz' elections ends 2 decades of mass rule, raising hopes for a more pragmatic reform-oriented economic agenda. All in all, we continue to navigate a dynamic external environment with prudence, agility and a focused approach to the areas where we can drive long-term value. With that context, let me now walk you through the key results of the third quarter. We had another strong quarter with robust performance across our core businesses and consistent delivery on our strategic priorities. These results drove an ROE of 19.6% anchored in healthy operations and a proven risk posture. Universal Banking and Insurance & Pensions delivered very strong results, while Microfinance continued progressing steadily towards its medium-term profitability target. Fee-based and transactional income also grew, underscoring the strength and diversity of our platform. Our innovation portfolio contributed 7.4% of our risk-adjusted revenue, keeping us firmly on track to our 10% target for 2026. Turning to [ credit ] activity. Dynamics improved and FX-neutral loan growth accelerated to 7% year-over-year. Origination pipelines remain healthy, particularly in Retail Banking and Microfinance, positioning us for further momentum in the fourth quarter. The positive credit momentum also supported margins. Risk-adjusted NIM stood at 5.5% in year-to-date figures, supported by better asset quality and our structurally efficient low-cost funding base. On the deposit side, we raised the share of demand and saving accounts to 39.5%, a direct reflection of our digital engagement strategy and the trust we've earned from our clients. Asset quality also continued to trend favorably, benefiting from enhanced origination standards, refined risk-based pricing and stronger collection execution. Lastly, from an operational standpoint, our efficiency ratio came in at 46.4%, well within our expected range, reflecting the leverage in our digital capabilities and our disciplined cost management. Capital levels remain strong across all businesses. With that, I'll turn it over to Alejandro to discuss our results and provide more insight into our operational and financial performance. Alejandro, please go ahead. Alejandro Perez-Reyes: Thank you, Gianfranco, and good morning, everyone. This quarter's 19.6% ROE reflects sustained momentum in our core businesses and the increasing contribution of our innovation portfolio. We revalued Bolivia's balance sheet using a more market-reflective exchange rate, which generated an accounting year-over-year contraction of 2.1% in Credicorp's total assets this quarter. As I discuss the quarter's highlights, I will focus on the year-over-year operating trends. Loans measured in quarter end balances increased 1.5%, negatively impacted by the revaluation of Bolivia's balance sheet and the depreciation in BCP's dollar portfolio. Excluding these effects, FX-neutral loan growth for the quarter was 7%. This increase was driven primarily by BCP mainly through mortgages and consumer loans in Retail Banking and by Mibanco. Asset quality has improved materially year-over-year. NPLs contracted across the board, and Credicorp's NPL ratio stood at 4.8% this quarter. The cost of risk fell to 1.7% on the back of fortified risk management and supported by improvements in payment performance and in the Peruvian economy. Net interest income increased 2.7%, spurred by a contraction in interest expenses after interest rates fell and low-cost deposits expanded and accounted for 58.1% of the funding base. In this context, NIM increased to stand at 6.6%. Other core income grew 11.9%. Fee income increased 8.2%, boosted by transactional activity at Yape and BCP. Gains on FX transactions rose 23.4% through higher volumes at BCP. Lastly, the insurance underwriting result grew 33.1%, reflecting a stronger insurance service results in the Life business. On the efficiency front, our cost-to-income ratio stood within guidance at 46.4%. Next slide, please. Peru's economic outlook remains positive despite former President Boluarte's impeachment. So far, there have been no significant impacts on key financial variables such as interest rates and the exchange rate. The pace of GDP growth accelerated in the third quarter to stand around 3.5% year-over-year. Domestic demand continued to outpace overall GDP growth as it has since mid-2024, expanding at a robust 6% for the fourth consecutive quarter. This sustained momentum is attributable to the mid-cycle phase of the economy and to the fact that the terms of trade are at the most favorable level seen in the past 75 years. High-frequency indicators continue to point to robust economic activity, driven by a steady recovery in employment and real wages. In terms of private investment, business expectations, one of its key drivers, remain in optimistic territory. Meanwhile, core proxies such as heavy-duty vehicle sales, capital goods, imports and terms of trade continue to grow at a double-digit pace. We revised our year-end GDP growth forecast upward from slightly above 3% to 3.4% based on 2 main factors. First, export prices for gold, copper and silver, which together account for half of Peru's local exports, have risen significantly faster than expected, driving terms of trade to record highs. Second, the eighth pension fund withdrawal is expected to boost private spending and support household consumption. We expect economic activity to remain strong throughout the coming year with GDP growth projected in the 3% to 3.5% range despite pending elections in 2026. Next slide, please. The Federal Reserve lowered its policy rate for the second consecutive meeting in response to signs of a cooling labor market. Fed futures have moved, another probability of one additional rate cut in December is evenly split. In Peru, annual inflation has remained below 2% for 11 consecutive months, which constitutes 1 of the lowest prints for both advanced and emerging economies. Following the 25 basis points rate cut in September, which brought the policy rate down up to 4.25%, the Central Bank is close to what it considers the neutral rate. In Colombia, inflation recently accelerated to 5.2% year-over-year in September, which remains above the upper bound of the target range of 4%. Inflation concerns coupled with fiscal challenges have led the Central Bank to keep its policy rate stable at 9.25% during the last 3 meetings. In Chile, the Central Bank held its policy rate steady at 4.75% during its most recent meeting. Inflation slowed to 3.4% year-over-year in October, the lowest rate in more than a year, boosting expectations for a December rate cut. This Sunday, Chile will hold its general election and expectations for a more pro-market administration are seen as supportive for future growth. Next slide, please. BCP maintained a solid ROE of 25.6%, which reflects resilient margins, diversified revenue streams and low cost of risk. On a quarter-over-quarter basis, total loans measured in quarter end balances rose 1.7%. In FX-neutral terms, growth reached 2.4%, mainly driven by Retail Banking segment, which grew 3%, while the Wholesale Banking portfolio increased 1.8%. NIM stood at 6.1%, increasing 10 basis points on the tail of a shift in the asset mix. Other core income grew 1.6% fueled by fee income from Yape. NPL volumes fell 0.9%. In Retail Banking, NPL volumes declined led by individuals and as a close second, by SMEs. Provisions rose 9.6%, reflecting both the recurring dynamics of Retail Banking and specific impacts within Wholesale Banking. In Retail Banking, provisions for individuals remained stable, while provisions for SMEs rose slightly due to a base effect stemming from higher reversals last quarter linked to increased debt repayments in SME business. In Wholesale Banking, there was a relevant increase in the credit risk of one corporate client, which is currently paying up to date. The cost of risk edged up to 1.3%, driven by the dynamics of provisions and loan growth, which were supported by favorable macroeconomic conditions in Peru. In this context, BCP's risk-adjusted NIM stood at 5.2%. From a year-over-year perspective, I would like to highlight the following dynamics. Loan balances grew 4.6%. However, loan growth in FX-neutral terms reached 7%, led primarily by retail segments and closely followed by wholesale loans. Retail segments and consumer loans, in particular, were favored by positive economic conditions, while lower interest rates boosted growth in mortgages. In Wholesale Banking, middle market loans were up this quarter, bolstered by short-term lending to agri businesses. NPLs contracted across all BCP segments, primarily in SMEs and individuals. In individuals, the reduction in NPLs was attributable to repayments, which were fueled by higher liquidity and through improvements in loan origination and debt collections management. NIM decreased 6 basis points, riding a downward trend in the yield on interest-earning assets and partially offset by a lower funding cost, both in line with market rate trends. The cost of risk fell across Retail Banking segments, driven by improvements in payment performance after low-risk vintages increased their share of total loans, supported by a strengthening economic backlog. Other core income rose 10.8%, fueled primarily by fee income, which reflected solid results in Yape and BCP. Gains on FX transactions, which grew alongside an uptick in transactional activity in retail segments, were a secondary driver of growth in other core income. The ratio for other core income to assets maintained its upward trend, which is the result of our initiatives to diversify BCP's income streams. It is worth noting that this evolution reflects our investments in technological capabilities to bolster our transactional platform. The efficiency ratio stood at 38.7% at the end of the third quarter. Growth in operating expenses was spurred by provisions for variable compensation and hiring of digital talent for strategic projects. Next slide, please. Yape continues to generate value across the Credicorp ecosystem with 15.5 million monthly active users, which is the equivalent of 82% of the economically active population. We aim to expand this user base to 18 million by 2028. Current users conduct an average of 58.5 transactions per month. Only 12% of these transactions generated revenue, indicating considerable room for further monetization. From a financial standpoint, revenue per monthly active user reached PEN 7.4, while expenses per mile stood at PEN 5, reflecting continued improvement in profitability and operational scalability. Although marketing campaigns aimed at driving feature adoption led to higher expenses in the quarter, no material shift in cost structure were observed. In the last quarter, revenue grew almost 2x year-over-year. Looking ahead, we expect revenues to triple by 2028, primarily driven by higher revenue per mile as users adopt more monetizable features. Payments remain the dominant contributor, accounting for 53% of Yape's revenue, fueled by strong growth in QR, bill payments and checkout functionalities. Lending continues to gain momentum, now accounting for 20% of Yape's revenue. To date, over 3 million clients have received disbursements, 1 million of which constituted first-ever formal loans. Looking ahead, we aim to expand our disbursed client base to 8 million by 2028 as we deepen our understanding of user payment behavior and refine our risk management capabilities. In e-commerce, GMV continues to grow, driven by Yape promos and gaming, establishing a third monetization pillar. In aggregate, Yape contributed 6.6% of Credicorp's risk-adjusted revenue this quarter, advancing its mission to deepen financial inclusion, scale monetization and strengthen its strategic growth as the growth engine of Credicorp's digital ecosystem. Next slide, please. Ongoing economic recovery continued to exert a positive impact on Peru's microfinance sector with Mibanco outperforming sector peers. In this context, Mibanco's profitability kept rising and stood at 18.8% this quarter, supported by a rebound in loan disbursements in recent quarters and strengthened credit risk management. I would like to highlight key quarter-over-quarter dynamics. Loans grew 2.4% in quarter end balances, riding an upswing in loan disbursements, which hit an all-time high in September. The NPL ratio fell for the fifth consecutive quarter to stand at 5.7%. NIM picked up 15%, boosted by a shift in the mix towards small ticket higher yield loans. In parallel, the cost of risk fell 17 basis points to stand at 5.2%, while risk-adjusted NIM reached a 4-year high of 11%. From a year-over-year perspective, loans measured in quarter end balances grew 8%. Our active pricing management, coupled with the decrease in cost of funding, helped NIM increase. The cost of risk fell 101 basis points as lower risk vintages continue to gain traction and now account for 78% of total loans. Operating expenses remained under control and efficiency stood at 51.4%. In this context, Mibanco's year-to-date contribution to ROE was 16%, transitioning towards our target for medium-term ROE in the low 20s. Mibanco Colombia's results continue to tick up, reflecting double-digit year-over-year loan growth, controlled risk management and optimized efficiency, supported by a more favorable economic environment for the microfinance sector. As a result, profitability stood at 12.3% at quarter end. Next slide, please. At Grupo Pacifico, insurance underwriting results remained strong this quarter, supported by solid operational dynamics in both the P&C and Life businesses with ROE standing at 20.9%. On a quarterly basis, net income remained relatively stable. Insurance underwriting results rose 7% on the back of Life business, which reported a decrease in insurance service expenses that was primarily driven by a drop in claims. The [ FASA ] business also posted an improvement in its underwriting results, albeit to a lesser extent. These gains were partially offset by a decline in P&C underwriting performance impacted by higher claims. Growth in underwriting results was offset by a drop in net interest income associated with life insurance contracts. On a year-over-year basis, net income rose 23%, primarily on the back of Pacifico's full consolidation of the corporate health insurance and medical services operations. Excluding the consolidation effect, net income rose 10%. Insurance underwriting results rose for the Life business, driven mainly by a decrease in claims on disability and survivorship and credit life lines, and for the P&C business, which reported growth in direct premiums in the cars and medical assistance lines. These impacts were partially offset by higher operating expenses and by an increase in the net loss on securities, which was impacted by credit downgrades on a couple of assets in the investment portfolio. Next slide, please. Profitability of our Investment Management and Advisory business increased this quarter with ROE standing at 17.4%. On a quarter-over-quarter basis, core income-generating businesses delivered strong results this quarter, reflecting improved capital markets activity, particularly in the trading unit and continued growth in Wealth Management and Asset Management with AUMs in U.S. dollars up 6% and 14%, respectively. These dynamics were partially offset by higher operating expenses. As a result, net income increased 10%. On a year-over-year basis, net income increased by 5%, mainly due to favorable performance of the trading unit in our Capital Markets business and stronger treasury performance. These dynamics were partially offset by higher operating expenses. Next slide, please.. Now I would like to review Credicorp's consolidated evolution regarding quarter-over-quarter dynamics. Loan growth was fueled by retail segments, leading to a higher yield interest earning asset mix. As a result, the yield on interest earning assets rose 13 basis points. On the liability side, low-cost deposits registered an increase in their share of total funding, and bond maturities triggered a decrease in interest expenses. These favorable dynamics were partially offset by an increase in the balance of time deposits at BCP. As a result, funding cost decreased 1 basis point. On a year-over-year basis, the positive impact of a higher yield interest earning asset mix was offset by the negative impact of lower market rates. As such, the yield on interest-earning assets fell 9 basis points. On the liability side, interest rate dynamics complemented by our competitive advantage in local funding led the funding cost to decline 25 basis points. In this context, NIM stood at 6.6%, up 9 basis points. Going forward, growth in retail lending, powered by our strengthened risk management capabilities should sustain NIM's growth. Next slide, please. Moving on to loan portfolio quality. Asset quality showed slight further improvement this quarter as NPL volumes continue to contract across segments, falling to levels below those reported prior to the 2023 recession. Amidst ongoing economic recovery, provisions have dropped over the past 12 months due to an improvement in payment performance and successful risk management measures at both BCP and Mibanco. The positive impact of this improvement exceeded expectations, which kept provisioning levels low once again this quarter. In this context, the NPL coverage ratio rose and stood at 110.1%. Going forward, we will continue to accelerate retail origination while managing risks. In coming quarters, asset quality may improve from the back of a rising liquidity after the eighth pension fund withdrawal is rolled out from November 2025 to February 2026. Following that, we expect loan growth to recover its pace and the cost of risk to rise but remain within our appetite. Next slide, please. Core income expanded 5.1% year-over-year, underscoring our ability to deliver consistent growth. Net interest income rose 2.7%, supported by a stronger funding mix and a higher yield loan portfolio. This helped lift NIM to 6.6%, reinforcing the resilience of our margin. Other core income grew 11.9% driven by key momentum from Yape and BCP and a 23.4% increase in FX gains on the back of higher volumes. As highlighted during our Investor Day, other core income is expected to play a growing role in Credicorp's strategy to diversify revenue sources. This includes scaling digital monetization to Yape, expanding bancassurance, accelerating growth through remittances and deepening transactional engagements across traditional platforms. Risk-adjusted NIM rose 50 basis points year-over-year to stand at a record high of 5.5%. This evolution reflects our risk management is becoming a competitive edge that enables expansion into new market segments. The efficiency ratio for the first 9 months of the year stood within guidance at 45.7%. Operating expenses grew 12.8%, fueled primarily by core businesses at BCP and by investments in our innovation portfolio. Growth in core expenses at BCP was driven mainly by provisions for variable compensation and higher IT expenses. Expenses for our innovation portfolio rose 16.1% led by Yape, Tenpo and Culqi, which represented 83% of disruptive expenses in the first 9 months of this year. Next slide, please. ROE for the first 9 months was 20.1%, supported by solid business performance and bolstered by the extraordinary gain from the Banmedica transaction in the first quarter of the year. If we adjust for this transaction, ROE is 19.3% for the first nine months. On an accumulated basis, net income reached a record high, even when excluding the gains from the Banmedica transaction in the first quarter of the year. If we adjust for each transaction, ROE is 19.3% for the first 9 months. On an accumulated basis, net income reached a record high even when excluding the gains from Banmedica's transaction. We achieved this by leveraging low cost of funding, a reduction in the cost of risk and an increase in lending. We are committed to generating diversified and robust revenue stream as we ramp up revenues from other core income and transition toward a stronger, more resilient business model. Now I'll move on to our guidance. Next slide, please. As previously stated, we maintained our GDP guidance as we expect GDP to grow 3.4% this year. We expect our loan book to grow around 6.5% year-over-year measured in end-of-period balances. These figures do not consider the impact of the asset revaluation at BCP Bolivia but do include the revaluation of the U.S. dollar against the Peruvian sol. Amid a more dynamic economic backdrop and strengthened origination levels in the first 9 months of the year, we expect balanced growth to continue accelerating in the last quarter, driven primarily by Retail Banking at BCP and by Mibanco. The acceleration anticipated for loan growth in the shift in the mix -- and the shift in the mix towards retail should support NIM as interest rates trend downward. Accordingly, we expect NIM to stand within our guidance range. While an increase in the cost of risk is anticipated in the final quarter, driven by a stronger focus on lending to higher-yielding segments, we expect it to close at the lower end of the guidance range. Accordingly, we expect the risk-adjusted NIM to move closer to the upper end of the guidance. On the efficiency front, we expect to be within our guidance range. Regarding fee income and insurance underwriting results, we expect growth to stand at low double digits this year, supported by an acceleration in economic activity and ongoing diversification of our income sources. As a result, we maintain our full year ROE guidance at around 19%. This figure reflects both solid core performance and sustained discipline on the risk front. While local political uncertainties remain, we believe the fundamentals are in place to support this level of profitability. With these comments, I would like to open the Q&A session. Operator: [Operator Instructions] Our first question comes from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: My question will be related to asset quality. So NPLs and cost of risk are behaving much better than expected this year, is well below your guidance provided. You mentioned you're expecting cost of risk to be at the low end of the guidance. It should be around 2%. So my question is if it's not too conservative, this guidance, because cost of risk will have to be above 2% in the last quarter, so I just wanted to hear your thoughts on that. Looking to 2026 that probably you will accelerate the growth into high-yield segment, how should we think about the cost of risk? Should we start about 2% or similar guidance that you have provided this year? Gianfranco Piero Ferrari de Las Casas: Ernesto, this is Gianfranco. Allow Cesar to get into the details. César Ríos: Thank you for the question. I would say that, in fact, the results are better than we initially expected at the beginning of the year, is a combination of better results in the measures taking in the risk management front but also a more dynamic economic backdrop. As we were mentioned and Alejandro has been highlighted, the economy is growing faster, particularly if you consider consumer spending, and this is positive for the quality of the portfolio. And at the end of the year, another factor is that we are going to have liquidity events, the AFP withdraws that are going to impact negatively, we'll say, loan growth but positive credit quality. So this is going to contribute to the numbers that we are laying out. And actually, Alejandro mentioned in the guideline that the cost of risk is going to be around the lower end, and the lower end is 1.8%. That's the first part of the question. In the second part, what we expect for the next year is to increase gradually, as we have mentioned previously, the shift in the composition of the portfolio. But I will again emphasize that the positive thing is that we expect to do that, increasing the NIM. And so the risk-adjusted NIM should also increase in absolute terms in relation to the current levels. Ernesto María Gabilondo Márquez: Excellent. And just for a second question is on OpEx growth. So we noticed this quarter came at a double digit. As you mentioned, the idea is to have revenue growth outpacing OpEx growth over the next years. But how should we think about OpEx growth next year? I don't know if you can break it down, your expectation of OpEx growth. How much will be related to the disruptive initiatives like Yape, Tenpo and how much to the ongoing business? Gianfranco Piero Ferrari de Las Casas: Alejandro? Alejandro Perez-Reyes: Sure. Yes. So we have seen important operating expenses growth this quarter, but it's inside of our guidance, as we've mentioned. So it's been planned as we are revamping capabilities, both in the core business and the innovation part. We expect to continue to invest in the future but in the core business, probably at a lower speed than what we've seen in this year because, again, we've done some particular projects during this year. So it should come a little bit lower. And on the innovation side, we'll probably remain in similar numbers that will allow us to generate more income and hence, go to our mid-term target that Gianfranco mentioned of 42% in the next 3 years -- around 3 years. So you should see a little bit of a lower growth of expenses in the core business and similar growth in the innovation part. Operator: Our next question comes from Brian Flores from Citi. Brian Flores: I have a question related to growth, right, because your long-term guidance of ROE is 19.5%, and as you mentioned, you were ramping up. The economy is going well. Just wanted to see what should we think about the first quarter of the year given the political uncertainty. We have elections in April. So just wondering if we might see some deceleration in the first quarter as mostly corporates tend to be a bit more cautious, and as you mentioned, there are some impacts from withdrawals probably carrying into January, February. So if you think maybe we could see ROE levels similar to this year, which obviously are very positive or do you think we are, I would say, converging into this 19.5% long term in a sooner way? And then I'll ask my second question. Gianfranco Piero Ferrari de Las Casas: Sure. Brian, this is Gianfranco. I'll answer the uncertainty question regarding elections next year. And maybe based on data, if you do a back testing on what has happened in the last 4 or 5 elections, whatever, there's always -- so the previous year, there's basically no reduction in terms of growth, long-term growth or investment and so on. However, there is a slowdown over the last 4 elections, and there's a slowdown in the first quarter of the year of the election. So that's in line to what you're implying in your question. Having said that, it's a tricky question because of what Cesar and Alejandro mentioned before. The pace of growth in terms of GDP, consumer -- consumption in general, trade balances and so on, some of those indicators are at record levels for the last, I don't know, 10 years -- actually, trade balances is at record levels over the last 70-plus years. So it's tricky. So if you force me to give you an answer, my personal opinion is that next year -- the first quarter of next year is not going to be as low as what has happened in previous elections. Regarding ROE for the upcoming years, we will provide guidance next year -- next call actually rather than nowadays -- than 2 days, sorry. Alejandro Perez-Reyes: I also want to complement in a couple of comments. Again, Gianfranco has mentioned the economy is finishing the year very strongly. Just a couple of points. Private investment in the last quarter the third quarter of the year grew 10.4%. That's the highest since 2013. We already mentioned private consumption. So we are entering the year with a very positive situation. So that's -- basically, there's going to be some election-related effects, but again, it's interesting to see which one is weighting more. So we're not expecting a big change in the first quarter. Having said that, there is also the aid withdrawal from the pension plan, and what we expect is for it to have an effect of around 0.5% in growth -- in less growth but more related to the extra cash in the hands of our consumers and the prepayments in loans based on that. But again, in this economic backdrop, we expect next year to -- I mean, we'll give guidance in the next call, but we expect next year to be a strong year in growth for Credicorp. Brian Flores: No, perfect. Just to clarify, that 0.5% impact is full year or is it year-over-year in the first quarter? Alejandro Perez-Reyes: It is full year, but it's going to be probably very much in the first quarter because the withdrawal starts in November and finished in February. So it is -- the full year effect is 0.5 percentage point but again, probably very concentrated in the first part of the year. Brian Flores: No. Okay. Perfect. And then just to confirm, the -- I mean, the base line that we should think about in terms of growth is, based on what I understand, similar to this level of 2025, right, that it's in the guidance? Alejandro Perez-Reyes: Well, we'll give guidance again in the next call, but the way I would put it is if you think about 2025, the beginning -- the first half of 2025 growth wasn't very strong. It's accelerated in the last quarter. So I would say that there's probably an opportunity to even better grow when you consider a full year in 2026. Brian Flores: No, perfect. I really appreciate the clarification because, as Gianfranco was saying, this is indeed a tricky question, and it has a lot of moving parts. So I really appreciate -- if I can just very quickly on my second question, Yape's contribution nearly close to 7%. Just wondering if we can envision double-digit contribution by 2026. Gianfranco Piero Ferrari de Las Casas: Definitely. Yes, very probably. Operator: Our next question comes from Renato Meloni from Anonymous Research. Renato Meloni: Congrats on the results. It's Renato from Autonomous Research here. So just a -- first, a quick follow-up on loan growth. Just like picking up on your earlier comments, just wanted to know if you should expect to reach the loan growth guidance for this year and if that's FX adjusted or just the nominal value. And then my second question is on the NIM expansion. I just wanted to reconcile your comments because, I mean, we can see the mix shift here driving yields higher, but at the same time, you're commenting on these like lower risk vintages. They're positively impacting cost of risk. So I just wanted to put these 2 together and see what really happened here. Gianfranco Piero Ferrari de Las Casas: Yes, Alejandro, would you take that, the first one? The first one was the loan growth. Alejandro Perez-Reyes: Sure. So loan growth, I would say that it's -- the number we've given in guidance is nominal, but it does consider the adjustment of Bolivia's restatement, okay, which is just an accounting standard because we're using a different exchange rate. So it's not considering any impact of the sol-dollar exchange rate. And we do expect to reach it. I mean if we consider the retail growth we've seen in the third quarter, just by continuing with that retail growth and having some wholesale growth, we should be able to be around that area. And again, with the economic backdrop, we believe it's very achievable in this year. Gianfranco Piero Ferrari de Las Casas: Yes. Go ahead, Cesar, the second question. César Ríos: Yes. The second question. I understand your question because you say it's a combination of better quality but after the better quality, higher cost of risk. The issue is that we are talking about fundamentally of 2 different portfolios. We have been improving the quality of originations, so the traditional portfolios are having less cost of risk gradually. As Alejandro mentioned, as the year goes, we have more of newly originated part of the portfolio in relation to the originated portfolio in year 2023 that came with higher cost of risk. So this is a trend that goes the cost of risk down. As the year passes, we are starting to originate in new segments with purposely higher cost of risk, higher margin, and this percentage is growing gradually. So the combination of these factors explains the initial draw, diminishing the cost of risk and the gradual improve as the year ends and the next year began. I don't know if it's clarified the points. Renato Meloni: No, that's pretty clear. Congrats on the results. Operator: Our next question comes from Yuri Fernandes from JPMorgan. Yuri Fernandes: I have one regarding Bolivia. I know this year has been volatile on FX, the impairments, like the readjustments, right, on the portfolio deposits, but now there was an important political shift in Bolivia. I know this is small for your entire operation, but this quarter, it was already better. So if you can comment on what you expect for Bolivia if the elections -- like the new President should have any tailwind for you going forward, like any security gains you may have. Just trying to understand if Bolivia from headwind in the past years may become a tailwind for you here. Gianfranco Piero Ferrari de Las Casas: Yuri, let me take that question because I believe you know that I ran that bank for 3 years, so I'm quite knowledgeable about Bolivia. So even though it's very early stages for the new government, the initial definitions or decisions they've made are -- they're giving very positive signaling. The executive cabinet is very pro market and professional. They just appointed I believe yesterday or the day before the new Central Bank President. He's a very well-seasoned technical guy. So the initial indicators are quite positive. As you mentioned, Bolivia has -- the Central -- BCP Bolivia, sorry, has been small for us. I've been seeing it as an option value for us. And that option may become quite relevant going forward. We're positive on what Bolivia can -- what can happen in Bolivia as a country. Having said that, there's a lot to be done on the political and economical and social matters for the government. But we're quite positive with the potential outcomes going forward. Yuri Fernandes: So we'll keep asking about the updates, but good to know that you have the optionality there. If I may, just a quick second one, payout and dividends. Your capital accumulation has been pretty strong. I know you have the cash payment of the legal debate you have on the taxes. But what should we expect here? Like guide us through capital returns for shareholders. Gianfranco Piero Ferrari de Las Casas: Yes, can you take it, Alejandro? Alejandro Perez-Reyes: Yes. So basically, this year, the payout has been 58%. And as you alluded, we did that in just the regular dividend. We didn't pay an extraordinary dividend. Going forward, I mean there's growth in our business that, of course, consumes capital, but we do expect to maintain our increasing ordinary dividend and potentially with also extraordinary dividends. And I would say probably payout ratios should be higher than this year in the high 60s. But again, it's going to depend on whether there's any particular transactions. There's always the possibility of something that changes that. But in ordinary business, we should see an increase from this year not necessarily to the 2024 level, where we had a payout of 75%. But we were generating a lot of income without loan growth, so that, of course, doesn't consume capital. But again, higher than this year and with increasing ordinary dividends is what I would think we're going to see in the coming years. Yuri Fernandes: Right. In the case of inorganic acquisition, like which areas do you see value for? Like insurance, you just had Banmedica. But anything that is important for Credicorp nowadays? Gianfranco Piero Ferrari de Las Casas: So nothing relevant, Yuri, as we speak. As we mentioned -- actually, Alejandro just mentioned it. We will retain whatever is needed for financing growth, including potential inorganic operations. Everything else will be paid as dividend, and the idea is to keep increasing the regular dividend. But as we speak, there's nothing relevant in terms of M&A. Operator: Next question comes from Lindsey Shema from Goldman Sachs. Lindsey Marie Shema: Just a follow-up on the impacts of the eighth pension fund withdrawal. I was wondering if you could kind of weigh the impacts against each other. I mean, it sounds like there's going to be better asset quality but slower loan growth. And then are you seeing any impacts to Prima? And then net-net, how are you seeing the impacts on the business? And then I'll ask a second follow-up afterwards. Gianfranco Piero Ferrari de Las Casas: Yes, Alejandro? Alejandro Perez-Reyes: Yes, sure. So the withdrawal is going to be -- we expect it to be around PEN 25 billion. If we think about the usual share we've retained inside Credicorp, that could be around PEN 10 billion. So there's a positive impact in local funding. We expected that to be around 1% more than we already expected in local funding both this year and next year. So that's a positive. As I mentioned, in loan growth as Credicorp, we are expecting around 0.5 percentage point less of loan growth next year, so that is a negative impact for the coming year. As for Prima, the impact this year are very, very small. If you consider that, this actually impacts basically fee income and it's happening very late in the year. Next year, there's certainly going to be an impact in fee income of around 10% of fee income if the numbers that we're assuming of withdrawal remains in place. Gianfranco Piero Ferrari de Las Casas: Yes. Maybe just a quick comment that goes beyond your question actually, and we've been saying it for a couple of years already, is unfortunately, we believe that the pension fund -- the pension system in Peru has been destroyed by the politicians. We've been quite active in the past in trying to come up -- we have reasonable proposal that hasn't been taken into consideration. So hopefully, in the upcoming years, that pension fund system, both a public one and the private one, can be fixed, and we come up with a value proposition and structuring that is reasonable for Peruvians. Otherwise, there's going to be a major issue, I don't know, 10, 15 years down the road. Lindsey Marie Shema: And then for my second question, you continue to see strong loan growth at Yape. Could you provide an update on the unit economics, especially as you've started to increase the multi-installment loans? Alejandro Perez-Reyes: Yes. I mean, as I mentioned, we are scaling the multi -- as you mentioned, the multi-installment loans in Yape. Today, that -- I mean the cost of risk in that versus the rate that we're charging, it's a very positive business. It's still small, so we expect to scale it going forward. I don't have the unit economics to share at this time. But again, it is a growing business that should -- today, it represents around 20% of Yape's income, the whole lending business, and we expect it to continue growing and become an even more important contributor to Yape. Gianfranco Piero Ferrari de Las Casas: Maybe to complement Alejandro's answer for you to understand how we're managing the loan book at Yape, we start lending -- so bear in mind that this is mostly unbanked or underbanked. So we start lending mono -- installment, mono quotas, very small ticket loans. And as we gain info and data from the customers, we shift them or increase the value prop in terms of tenor and size of the ticket. Both the mono quota overall and the multi-installment are profitable businesses. So again, we don't have the unit economics of each single loan, but we manage them by -- actually by vintages, and overall, the results are positive. Alejandro Perez-Reyes: Yes, and it has a very positive in the population because it's for more than 1 million clients, it's the first loan that they have gained access to. Operator: Our next question comes from Daniel Vaz from Safra. Daniel Vaz: Congrats on the strong performance. Very good results. I'm particularly interested on Mibanco here. It continues to surprise us, right? So I think ROE expansion, maybe improving asset quality also with good NIMs, and you're coming from years, I guess, since maybe 2023, that your loan growth has been decreasing, right? So now -- right now, we see a loan growth on the positive side coming from like 1% last quarter to 8% right now. So also very strong numbers in Colombia. I noticed like 20% year-over-year growth. So looking at the whole picture, correct me if I'm wrong, but this outperformance and also controlled asset quality should give you even more confidence to accelerate growth in Mibanco, right? So I guess, looking at -- ahead like 2026, I would expect this loan growth to migrate like from, I don't know, maybe single digit to low teens, maybe mid-teens level portfolio growth, right? So you're seeing very, very good asset quality, ROE expanding. Is this the case? I mean, should we think Mibanco like this to the upcoming quarters? Gianfranco Piero Ferrari de Las Casas: Thank you, Daniel, for your question, but let me get a couple of steps back to -- for you to have a more holistic vision. The whole microfinance sector in Peru has been hit very harshly over the last 4, 5 years. This is the worst combination because rates went up, so the funding -- and most of the microfinance institutions, funding is not retail funding or transactional funding, is time deposits or capital market -- local capital markets. So rates went up that were -- they weren't able -- I'm talking as a system. They weren't able to pass through that increase in rate. Cost of risk went up, therefore, margins were really squeezed. On top of that, and I've always been very critical about it, the microfinance institutions, at least in Peru, the whole transactional business, fee income and so on, and this is the case of Mibanco, is very weak. So you see that they have the perfect storm over the last 3, 4 years. Going forward, and I totally agree with what you just said regarding lending because -- at Mibanco because we expect the quality of the portfolio has already improved dramatically. The new vintages are performing better than the old vintages. So we are quite positive on the lending business going forward. On top of that, Mibanco -- and this is a more long-term strategy. On top of that, Mibanco is currently working in complementing that business. So in the next few years, you'll see that the fee income business, transactional business is going to grow at a faster pace than the lending business or the lending of that margin because we are focusing in bringing more transactionality to Mibanco, and the collateral effect is that the cost of funding should go down also. Operator: Our next question comes from Carlos Gomez from HSBC. Carlos Gomez-Lopez: Congratulations, particularly on Yape and particularly on Bolivia. You really took my question because I know that is close to your heart. But in that regard, you have the changes in Bolivia. You have the elections in Chile, the elections in Colombia as well as Peru. So it seems to me that you might have a target-rich environment for investment around the region. Does that make you more inclined to perhaps invest more and distribute less? And if so, do you have a particular geographical difference right now? That will be the question, yes. Gianfranco Piero Ferrari de Las Casas: Yes. Carlos, our region -- so again, Credicorp has been here for 30 years. BCP has been here for over 130 years. So actually, the vision we have goes beyond the political environment. Obviously, political environment impacts the performance of our countries and our appetite. Having said all of that, we are quite positive to what could happen, especially in Bolivia, Chile and Peru. Let me provide you more detail. It's not only because -- it's not because of the change in government and government -- the upcoming government being more pro market or whatever. That's definitely relevant, but more relevant than that is what's going on with commodity prices, specifically copper and lithium and gold in the case of Peru. So copper prices -- and you guys or your banks know more than we do. Copper prices should stay at high levels for a long period because of the investments that are being done in data centers and that data centers consume a lot of energy. And lithium, it's a matter of the transition, sorry, to electric vehicles and so on. And gold is like a hedge to the dollar basically. So we are positive on that. And well, both Chile and Bolivia are very relevant in lithium reserves. Both Chile and Peru are really relevant in copper reserves. So the whole -- there are a lot of moving pieces, but the whole environment, we see a very much -- a much more positive environment for the upcoming years when you compare that environment to what we have had in the last, I don't know, 4, 5 years in these 3 countries. Carlos Gomez-Lopez: We're happy to hear. And if I can sneak in one more question on the rates, could you give us an update on your sensitivity to rates, both U.S. dollars and soles? Gianfranco Piero Ferrari de Las Casas: Alejandro? Alejandro Perez-Reyes: Sure. Carlos, the -- again, we've talked about this before. So we have a theoretical number of 100 basis points decrease in rate, both in soles and dollars, parallel shift. That number today is at 17 basis points. 15 of those come from the dollar part of the book and just 2 on the soles part. Again, this is a very theoretical example. And as I mentioned -- and I mentioned in the Investor Day, actually, what we've seen in practice is our NIM growing, while the rates in Peru has come down more than 300 basis points. So the theoretical sensitivity, they are those 17 basis points. We are expecting actually NIM to continue very strong and risk-adjusted NIM to grow in the coming years. Operator: Our next question comes from Marcelo Mizrahi from Bradesco BBI. And we'll move on to our next question. We have Andres Soto from Santander. Andres Soto: My question is regarding Yape and some of the numbers that you mentioned during the call. You said you expect revenue in Yape to triple by 2028. And the revenue in Yape already represents 6.5% of Credicorp total revenue, so it will be fair to assume that, by 2028, that number should increase to 15%, the revenue contribution from Yape? And if so and making assumptions also regarding the efficiency, the contribution to the bottom line should be in excess of 20%. Is this the way that you guys look at this? Alejandro Perez-Reyes: Yes. Well, to your point, Yape is going to be a mere contributor year-over-year for Credicorp. We are expecting it to be around the 15% mark of not necessarily revenue but net result for Credicorp in the next 3 years or so. Andres Soto: Okay. But even in that conservative assumption, Alejandro, if it represents 15% of income of earnings in 2028, currently, when you look at the fourth quarter, it represented less than 5%, for the full year, I would say, 2.5%, something like that. You will see an earnings accretion in excess of 10% of the level that you have now, and the ROE of Credicorp is already at 19%, even higher than that. So the ROE by 2028 should be 21%. My point here is the 19.5% that you present as a medium-term target sounds conservative considering the potential for earnings accretion coming from Yape. Alejandro Perez-Reyes: Sure. No, I think your numbers are -- make a lot of sense. We mentioned around 19.5%. And again, we have elections in all the countries in this coming year, so we certainly -- I would say we are usually conservative in that kind of use. We're certain we'll come back and revise that at a later time when there's more certainty on the political outlook for other countries. But again, if everything works as planned, probably around 19.5% will be on the higher end of that concept for sure. But again, we'll come and revise that later. Gianfranco Piero Ferrari de Las Casas: No worries. No worries. Alejandro Perez-Reyes: No. I mean we're going to be around 19.5%. We're going to be on the ramp to the upside more than to the downside. That's what I'm trying to say. Gianfranco Piero Ferrari de Las Casas: Andres, your pushback is -- this is Gianfranco. Your pushback is correct. But again, even though we're positive on the outlook of what could happen in the region, we're still in Latin America, so volatility is part of the game. And that growth in terms of income at Yape, there are a lot of assumptions, a lot -- there's execution risk and so on. So you know us for a long time. Yes, our outlook or our guidance is on the positive side, and Yape may have a relevant -- positive impact on the upside of that. César Ríos: Not today, but in 3 years can be also a little bit of cannibalization between several vehicles. That is not relevant at all now. Andres Soto: Yes, that's a fair assumption, Cesar, but the cannibalization will come against Mibanco and this will be with a much higher potential for ROE. So it will be even accretive if that comes to happen. Gianfranco Piero Ferrari de Las Casas: You're totally right, Andres. The cannibalization should generate value rather than destroy value. Operator: Our next question comes from Alonso Aramburu from BTG. Alonso Aramburú: Yes. Just following up on your recent comments. You mentioned that Yape is doing a pilot for the SME segment. So I'm just wondering if you can give us some color on that. How different is that to the strategy you're following compared to Mibanco? Is this targeting the same Mibanco clients or are these different clients? Are you using reps to visit some of these clients? Just give us some color into how you're approaching this via Yape. Gianfranco Piero Ferrari de Las Casas: Alonso, this is Gianfranco. We're approaching Yape in a very different way than -- a different model than the Mibanco model. It's basically based on transactions we gather through the app. So there's basically no human contact. That said, that model is much cheaper, much more efficient than the Mibanco model, but it's an untested model. So we're at the very initial stages, even though the vintages, which are not relevant yet, are performing quite well. But you see that the Mibanco model is a more expensive model, but it's a very proven model with high ROEs, high NPS and so on, whereas Yape is an untested model. We still see that there's a lot of space. The larger one is the unbanked or underbanked. But still, Mibanco only has 20-plus percent of -- low 20s market shares in the microfinance business. So there's a lot of space for gaining share overall. As Cesar mentioned before, as of today, we are not worried whatsoever in terms of cannibalization between Mibanco and Yape. Maybe, I don't know, 2, 3 years down the road, we may rethink the whole approach to the microfinance SME businesses here in Peru. Operator: [Operator Instructions] Our next question comes from Marcelo Mizrahi from Bradesco BBI. Marcelo Mizrahi: My first time here. Very good to be here with you. So my question is regarding the insurance business. So in the last couple of quarters, the loss ratios are going down on Life and also in Crediseguro. My question is to look forward if it is recurring. So look forward, these loss ratios will return to the levels of 50% on Life or not. This is a new level of loss ratios to this line and looking to the Crediseguro, the same question. Alejandro Perez-Reyes: Sure. Marcelo, there's been a particular effect on the survival business related to a restatement done from some pension plans on the number of people registered. So the thing is it's been an unusual positive result, and it should go back to more normalized levels going forward. Marcelo Mizrahi: Okay. But those levels are around 20%, 30% loss ratios or they will come back to 50% as they was in the last years. Gianfranco Piero Ferrari de Las Casas: Let me -- so the short answer is what Alejandro mentioned. There are some exceptional impact on the loss ratios this quarter. Going forward to your question that is, is it going to be back at 50%, if I were to provide a short answer, it would be, yes. A more structural answer is that the further we go into the bancassurance and life insurance business on a more retail and lower-end segment, that the ratio should improve. Margins there are better. So it's not that we're going to have the ratios we have this quarter, but in the medium to long run, that the ratios we have in the past should be better going forward. Marcelo Mizrahi: And the last one about insurance. So do you guys believe that this line will maintain this pace of growing more than the other lines, so it will generate value, add value comparing to the other lines of the bank? Gianfranco Piero Ferrari de Las Casas: So yes, a great question. We always talk about the financial system in Peru is underpenetrated and so on. When you see the level of penetration in insurance, is -- that's even -- I don't know if the word is worse or better, worse in terms of receiving -- the Peruvian population coverage but better in terms of business opportunity. So going to your question, we are quite positive that, that business should grow at really high rates for the upcoming years. And we're working very heavily on deploying new products, new channels, improving value propositions and so on so as to reach the underinsured in Peru. Operator: And ladies and gentlemen, there appear to be no further questions at this time. I would like to turn the floor back over to Mr. Gianfranco Ferrari, Chief Executive Officer, for closing remarks. Gianfranco Piero Ferrari de Las Casas: Thank you. We're entering the final months of the year with strong operating foundations and a clear sense of strategic direction. I want to reiterate the core message we shared at our Investor Day. Our strategy is built not just to perform in favorable conditions but to endure and thrive across cycles. Over the past 4 years, we have grown net income 3x faster than Peru's nominal GDP, driven by the strength of our diversified business model, scalable platforms and disciplined execution. In that context, we've raised our medium-term ROE target from around 18% to approximately 19.5%, reflecting the benefits of a more inclusive digitally enabled business as we expand into new segments and broaden our addressable market. To get there, our strategy is focused on unlocking operating leverage and driving sustainable profitability. We will deliver higher risk-adjusted NIM through a more retail-oriented loan portfolio while increasing transactional and noninterest income from our disruptive initiatives. Together, these drivers will accelerate income growth, enhance efficiency toward the 42% level and strengthen our ability to generate superior long-term returns. At the same time, we remain mindful of the broader context. While Peru continues to face political uncertainty, including its seventh presidential transition in under a decade, its macroeconomic institutions remain intact. This is a familiar pattern, political volatility coexisting with economic resilience. That said, political uncertainty does carry an opportunity cost, and we hope that in time, greater political stability will allow the country to fully unlock its growth potential. Early signs from the new administration point to a more pragmatic tone and renewed efforts to engage the private sector. Business sentiment is gradually improving, with more companies planning to invest, hire and expand activity in the upcoming quarters. In this environment, our focus is clear: execute with discipline, expand financial inclusion and deliver long-term value for our shareholders and the societies we serve. Thank you for your continued trust and partnership. Operator: Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect your lines.
Operator: Hello, and welcome to the Bit Digital third quarter 2025 earnings call. Depending on where you are joining us from, we will begin shortly. During the call, all participants' lines will be open in listen-only mode. If you would like to ask a question at that time, please press star 1 on your telephone keypad. As a reminder, today's call is being recorded. I will now turn the call over to your host, Cameron Schnier of Investor Relations at Bit Digital. Please go ahead. Cameron Schnier: Thank you, and welcome to the Bit Digital third quarter 2025 earnings call. Joining me on the call today are Sam Tabar, our Chief Executive, and Eric Wong, our Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements made during today's call may be considered forward-looking. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For a discussion of those risks, please refer to our filings with the SEC, including our Form 10-Q filed today. Our remarks today may also include non-GAAP financial measures. Reconciliations of those measures to the most directly comparable GAAP figures can be found in our Form 10-Q, which is available on our website. After our prepared remarks, we will open the call for Q&A. With that, I will hand the phone over to Sam to discuss our performance. Sam Tabar: Thank you, Cameron. And thank you to everyone for joining us today. The third quarter was our first full period as a focused Ethereum treasury and staking company. Our execution has been consistent with the plan we laid out last year. Since completing the White Fiber IPO in August, Bit Digital has become a more streamlined business. Our strategy is simple: grow our Ethereum holdings and staking activity in a prudent, responsible way that creates long-term value for shareholders. We are not chasing size for its own sake. We are not trying to accumulate as much ETH as possible in the shortest time. Our goal is to compound value per share through disciplined capital allocation, careful risk management, and consistent yield generation. During the quarter, we continued to expand our ETH position. At quarter-end, we held about 122,000 ETH. By October, that number had risen to more than 153,000 ETH, with roughly 132,000 actively staked. That is a fivefold increase since June. It shows that our transition to an Ethereum-centric platform is well underway. After quarter-end, we completed a $150 million convertible notes offering. We used the proceeds to purchase about 31,000 ETH. The structure of the offering was designed to be accretive to net asset value per share. The initial conversion price was set at a premium to our estimated MNAV at the time. The transaction attracted participation from leading digital asset investors and institutional funds. This financing reflects our disciplined approach to growth. We are not pursuing rapid expansion for its own sake. Instead, we raise long-term low-cost capital on attractive terms, then we deployed it directly into Ethereum at what we believe is a compelling long-term entry point. Our staking operations are now beginning to contribute meaningfully to revenue. Staking revenue grew to about $2.9 million in the third quarter, up from $400,000 in the prior quarter. This was driven by a larger staked balance and a higher realized yield price. As our ETH position grows, staking income will become the main engine of our results. We see it developing into a strong recurring source of cash flow. And, of course, the real power of this model shows itself when ETH moves meaningfully higher, something we believe is a matter of when, not if. Turning briefly to mining, we produced 65 Bitcoin in the third quarter, down from 83 in the prior quarter, as we continue to wind down the business in a measured way. Mining gross margin was about 32%, our highest since the recent halving. This reflects improved fleet efficiency as we phased out older hardware and optimized hosting. As of September, our active hash rate was about 1.9 exahash, with an average efficiency of roughly 22 joules per terahash. We expect fleet efficiency to improve to around 19 joules per terahash over the next few quarters as less efficient units are retired. We anticipate active hash rate trending towards 1.2 exahash by mid-2026. Mining remains a small non-core contributor, but it continues to help offset corporate overhead while we complete the transition to a fully Ethereum-based model. As I like to say, mining can be a pretty good business if you never have to spend money on replacing ASICs. Ethereum's fundamentals remain solid. Institutional participation is rising, validated accounts continue to grow, and on-chain activity is strong. We believe ETH's role as the foundation for digital assets, decentralized finance, and tokenized real-world assets becomes clearer with time. For investors, Bit Digital offers an actively managed, yield-generating way to gain Ethereum exposure. We combine the characteristics of a treasury vehicle with the benefits of active capital allocation and staking income. Our experience and scale allow us to manage risk and capture opportunities that passive ETH holders cannot. Finally, discipline is more than a strategy; it is who we are. This quarter reaffirmed that discipline is our competitive edge. We have operated and evolved through multiple crypto cycles as a public company. Drawdowns are nothing new to us. That experience helps us stay focused on durability, not momentum. The third quarter was about execution. We streamlined the business, strengthened our capital base, and delivered strong results while positioning Bit Digital for the next phase of growth. With that, I will hand it over to Eric to walk through the financials. Eric Wong: Thank you, Sam. As a reminder, our financial results continue to consolidate White Fiber under US GAAP due to our majority ownership. Segment breakouts are available in our Form 10-Q. Also note that a portion of our consolidated cash is held at the White Fiber level. Total revenue for the third quarter was $30.5 million compared to $25.7 million in the prior quarter and $22.8 million in the same period last year. Ethereum staking revenue totaled $2.9 million, up over 542% from last year. We earned 644 ETH from native staking and 53 ETH from delegated staking during the quarter. The year-over-year increase in staking revenue reflects both higher Ethereum earned and a higher average Ethereum price. As of September 30, we held approximately 122,000 ETH, of which about 100,000 ETH were staked, representing roughly 82% of total holdings. That balance has continued to grow meaningfully since quarter-end, with 153,500 ETH held and 132,000 ETH staked as of October 31. While new validators take time to enter the activation queue before generating yield, we expect the full effect of this increase to be reflected in fourth-quarter results. Digital asset mining revenue was $7.4 million compared to $6.6 million in the prior quarter and $10 million in the same period last year. We produced 65 Bitcoin during the quarter. Mining margins remained positive despite higher network difficulty and the ongoing wind-down of the fleet. Cost of revenue, excluding depreciation, was $2.1 million compared to $13.8 million in the prior quarter and $15.5 million a year ago. Gross profit was $18.3 million, representing a 60% gross margin compared to 32% in Q3 2024. General and administrative expenses were $33.1 million compared to $19.7 million in the second quarter and $13.7 million a year earlier. The increase primarily reflects higher share-based compensation and consulting costs related to the White Fiber IPO and transition. Standalone Bit Digital G&A is expected to normalize as nonrecurring costs fall off and once White Fiber-related costs are fully separated. The standalone cost structure for Bit Digital has the flexibility to become very lean. Net income for the third quarter was $146.7 million or 47 cents per share, compared to a net loss of $38.8 million in the year-ago period. Results were driven by higher revenue, improved margins, and a $168 million gain on digital assets, reflecting appreciation in our Ethereum holdings. Adjusted EBITDA was $166.8 million compared to $27.8 million in Q2 and negative $19.7 million a year ago. On the balance sheet, we ended the quarter with approximately $179 million in cash and cash equivalents and approximately $424 million in digital assets, consisting almost entirely of Ethereum. Including USDC, total liquidity was approximately $620 million, of which roughly $166 million was held at the White Fiber level. We had no debt outstanding as of September 30. After quarter-end, we closed a $150 million offering of 4% convertible notes due 2030, providing long-term low-cost capital to support continued ETH accumulation. Our plan is to keep total leverage below 20% of ETH holdings. Right now, the figure is above the threshold, meaning we would not increase leverage until the ETH price rises to comfortable levels relative to our notes. That concludes my financial review. I will now hand the line back to Sam. Sam Tabar: The third quarter was an important step in Bit Digital's evolution. We completed our transformation into an Ethereum-focused company. At the same time, we continue to deliver strong financial performance. Our balance sheet is solid, our capital base has expanded, and our ETH position continues to grow. Looking ahead, our priorities remain the same. We will allocate capital responsibly, continue scaling our staking operations, and maintain a strong financial position. We believe that discipline, patience, and thoughtful execution will create the most long-term value for our shareholders. We are also in a unique position amongst digital asset companies. Bit Digital gives investors exposure to two powerful secular trends: first, the growth of Ethereum as the backbone of decentralized finance, and second, the rise of AI infrastructure through our ownership of White Fiber. Our competitive edge is clear. We built infrastructure that earns in all conditions, anchored by the two most powerful story arcs of our time: ETH and AI. White Fiber is establishing itself as a credible operator in the high-performance computing market. We continue to see substantial value in that business. Our retained stake represents a meaningful asset for Bit Digital shareholders. We view our ownership as both strategic and long-term. The lockup on those shares expires in February 2026, but let me state firmly, we will not sell any of our White Fiber shares during 2026. We are confident that the value of this asset will materially appreciate over time. The recent sector-wide drawdown does not affect our conviction. Clarity accelerates adoption. For the first time, we are seeing regulation begin to finally catch up with technology, and Ethereum is winning where it matters most. Every part of modern financial infrastructure now touches ETH in some way. It has become the foundation for stablecoins, decentralized finance, and the next wave of on-chain financial innovation. We believe Ethereum and AI will define the future of digital infrastructure. This is where credibility and capital meet. Bit Digital positions itself early where the puck is going, not where it has been. We are building for participation, not extraction. We own the compute, the capital, and the credibility to help secure the next generation of networks. As we move forward, we will stay focused on what we can control: disciplined capital deployment, prudent risk management, and steady growth in our staking operations. We believe this approach will allow us to compound value per share over time and remain one of the most durable platforms in the digital asset space. Thank you for joining us today, and thank you for your continued support. Operator, please open the line for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. Please state your name and company before posing your question. Again, press star 1 to ask a question. If you are in the event via the web interface and would like to ask a question, simply type your question in the ask a question box and click send. We will take our first phone question. We will go to George Sutton with Greg Hallum. Please go ahead. George Sutton: Thanks. Hey, Sam. So one thing that I think would be helpful, the market has gotten a little confused of late with a number of different blockchain alternatives. I would call them Solana, SWE, Ganson, etcetera. Can you just talk about your ultimate belief in Ethereum relative to the rest of the blockchain options? Sam Tabar: Sure. I mean, to begin with, Ethereum has no downtime. And Wall Street is going to back a blockchain that has zero downtime. So when it comes to security and downtime, there is no second best. Ethereum is certainly the very best blockchain for that use case. Of course, Bitcoin is not possible because it does not have smart contracts. And, of course, there is smart contract technology with Solana and the others, but they have downtime. There are also centralization issues. It is pretty clear that Wall Street has already made its decision about which blockchain it is going to back given those reasons that I mentioned. It also helps that from a regulatory perspective, there has been some clarity, and there is emerging clarity about stablecoins. You are seeing regulatory acts like the Clarity Act and the Genius Act making their way up. And a lot of these regulations provide a lot of clarity about the rules on stablecoins. And last I looked, I think a little bit more than half of stablecoins are built on Ethereum. And stablecoins are certainly where the puck will be going, and that is built on Ethereum. So for all those reasons and much more, not to mention there are tens and tens of thousands of developers in Ethereum, that is way more than any other blockchain by orders of magnitude. So, I mean, I can go on, but those are a few reasons why we believe Ethereum is going to be the winner. And, frankly, we think the race has already been largely determined, but perhaps I am biased. George Sutton: So I appreciate the increase in the staking revenue. Do you have a limit on the percentage that you will ultimately stake? Sam Tabar: I mean, for us, the more the merrier. I will let Eric talk about that a little bit. Eric Wong: In terms of the ETH balance sheet, we can stake 100%. And right now, the reason we are about, like, you know, 85% is below 90% is because a portion that we are working with external managers is also being staked via different staking strategies that would generate alpha for the company as well. So that is our target to generate a small yield and just, you know, not just native staking. But beyond native staking, you know, above 3% of the yield. But to answer your question, we can stake 100%. George Sutton: Are you using multiple custodians? Eric Wong: Yes. We primarily are using two custodians. One is Fireblock, and another one is Cactus Custodian by Measures Board. And we have been using them for the past, like, you know, four or five years. It has been working great. Operator: We will go to our next question. Our next question comes from Brian Dobson with Clear Street. Please go ahead. Brian Dobson: Hey. Thanks very much. As you look out into the broader market, thinking about your competition, what do you think sets Bit Digital apart over the next two years? Sam Tabar: I mean, we have just taken a step back. There is SPAT and there is DMNR. These two companies, I have a lot of respect for Joe and for Tom. I was just on a panel with them in Singapore at 2049. We had a very healthy debate with each other. Highly recommend checking out that debate because that question came up. And the short version of my answer was that, first of all, you know, Bit Digital was a successful business. We had Bitcoin mining, which was profitable. We sold all our Bitcoin. We bought into Ethereum at that. We also had a very successful HPC business, so successful that we IPO'd that business, and we now own 71.5% of a real business. So Bit Digital was not some sort of failed business that was a shell that was just picked up and then, you know, did a pipe and shoved a bunch of Ethereum on it. That is not what happened. This was a real company, and this company currently still has a very profitable business, including staking Ethereum on the balance sheet. Also, I mean, except for Joe Lubin, who is the co-founder of Ethereum, I have been involved with Ethereum since 2017. I remember people asking me if I thought Ethereum was basically topping at $300. I kept telling people no. I do not think it is topped. And if you ask me today, I will continue to put the same answer. It has not topped even at $3,000. So I have been involved in those. I also built technology on Ethereum. As a co-founder to Fluid and Navy, the team built something called AirSwap. It was a decentralized exchange. We actually sold that company to Joe Lubin, who is the co-founder of Ethereum, is involved with us. So, you know, we are intimately involved with Ethereum, not just from a price action perspective, but also from a technological perspective, which is why it reinforces our belief and our conviction why this technology over other technologies. And, lastly, I mean, there are many reasons. But, lastly, we are able to do things like unsecured converts. We have been able to financially engineer the purchases of Ethereum unlike any other DAX. There is not any DApp out there that has done unsecured convert. We are the only ones, and we just have that ability and talent, and we are structured in a way where we could do that. And that is really important because if it is a secured convert, well, when the third goes down, creditors can grab your Ethereum, and that is not going to end well for you. But in our case, that cannot happen because it was an unsecured debt. It is not secured by the underlying assets that we have in our balance sheet. So because of our creative ability with financial engineering, which we were inspired by Michael Sandler's playbook, and this was a successful company, continues to be a successful company. It owns a controlling ownership stake in White Fiber, which is an AI infrastructure company. And because we understand the underlying technology very, very well, and the only person who would know that better than me is Joe Lubin, we think that we are very differentiated in many different ways. So we do not think, frankly, being the largest is the marker of success. It is how you do it. And we have done it with unsecured converts. We are structured in a way that positions us to have exposure to digital assets and artificial intelligence in a successful company. And so those for those reasons and more, that is how we are differentiated versus SPAT and BMNR. Brian Dobson: Great. Thanks. And then just as a quick follow-up, the converts and preferreds market are rather demand converts and preferreds has been pretty robust over the past few months. Looking forward, do you have a preferred way of raising capital? I mean, because I will be using secured converts, but I will let Eric, our CFO, talk more about that. Eric Wong: Yeah. I mean, convertible is always on the table, but we do monitor our leverage very closely. And we do not want to overleverage the company. And we had to set up an ATM program for $2.5 billion, but we only use it when we see in the market makes sense or the MNAV makes sense. We are very conservative. And combined, I think that is our way of adding additional Ethereum accumulation. Treasury. Brian Dobson: Excellent. Thank you very much. We will next go to Kevin Dede with H. C. Wainwright. Kevin Dede: Hi, Kevin. Hi, Eric. Hi. Guess first question is, I know you mentioned 1.2 exahash midyear next year, Sam. But I am looking at the hash price at 4 cents now, and I am wondering if that may have reset your calculus a little bit. And maybe you could give us an idea where you think you would be at the end of the year next year. Sam Tabar: I will give that to you, Kim and Eric. I mean, likely in that range. I think it is just a function of sort of a hosting portfolio pruning over time as contracts roll off and then optimizing the newer machines. I mean, there might be space to increase it marginally. Just based on what is available, maybe on shorter-term, you know, one-month extensions here or there if those machines make sense. But, I mean, it is a business generally that is sunsetting, and like, we have never had a lot of conviction historically in being able to model mining economics a year out. So I think we will just evaluate that as it comes. But as it stands, it is going to be a business that methodically winds down. And as older machines are retired, efficiency should improve and should enhance the overall margin profile of that business. All else equal with the Actress. I know that you are working with Fireblocks, obviously, another custodian, but I was wondering if you might offer your thinking on running your own validator nodes and I guess more broadly, how you expect to squeeze more yield out of the Ethereum network? Eric Wong: We work with Figment for our native staking, and we have been very happy with the service, you know, and security as well. I would take this very, very seriously. I, you know, I would throw digital assets based, you know, in the hundreds, million dollars range and, you know, not too far from, you know, billion dollars of digital assets on the management. Another strategy we have is we have been engaging with external, you know, fund managers for strategies that would, you know, generate additional yield beyond native staking. But, again, we are very, you know, cautious about, you know, the risk associated with external partners as well. So we take a very measured way. But, yeah, we are trying to, you know, generate additional yield alpha from the market as well on top of the 3% native staking that is bringing us. Kevin Dede: Eric, is there, I mean, is there any thinking on, you know, internally about perhaps running your own validator nodes? And, you know, taking Figment out of the equation. Eric Wong: I think as of now, we are, you know, pretty happy with working with Figment. But I would say when the operation becomes, you know, meaningful enough, we might consider by this point we are happy with working with the external service provider. Kevin Dede: Could you just sort of walk me through your $2.9 million staking revenue number? How do you get that? I mean, I saw how much Ethereum you generated. Is that just sort of the end of the quarter number multiplied by the Ethereum price, or is it done on some sort of average basis? Eric Wong: It is based on, I think, daily basis for revenue. Kevin Dede: Oh, okay. Sort of a higher-level question. Given on the Ethereum network because, you know, I am still trying to get used to it, the, you know, the complexion of the business has changed a lot. The network has changed a lot, right, with some very large companies acquiring large amounts of Ethereum. And you named a Bitmine, and SharpLink and EtherZilla, the ether machine, and I am wondering, you know, how you might think about what happens to inflation of 1% at most recently. But I am wondering if you think these treasury companies change that inflation pattern. Eric Wong: I am not sure if it is treasury companies would, you know, change the inflation. Because the inflation is more driven by, you know, the issuance of Ethereum from the blockchain itself. And, you know, the activity is on-chain. So the treasury companies would, you know, help, you know, help accumulate and stake the ETH. That would, I think, that would average a lower staking yield. But at this point, you know, the staking yield is pretty stable. So it is not making a very material impact for the overall, like, inflation discussion of Ethereum. Kevin Dede: Okay. Thanks, Eric. I appreciate your color on that. I guess I was sort of thinking that, you know, huge amounts of Ethereum were coming out of the network. And there is not more available to handle, you know, the daily transaction volume. Eric Wong: No. They are all being fixed. And, you know, all the, you know, that were, like, you know, running the evaluators. So that is still in the ecosystem. Money is not being taken out in that regard. Kevin Dede: Okay. Thank you, gentlemen. Thanks for having me on the call. Appreciate it. Operator: Thank you, Kim. Next, we will go to Nick Giles with B. Riley Securities. Please go ahead. Nick Giles: Thank you, operator, and good morning, everyone. This is Henry Hurl on for Nick Giles. For my first question, what are your guys' expectations for consolidation in the digital asset space? And how do you guys think about opportunistic M&A? Thanks. Sam Tabar: It is a good question. We have come across some opportunities ourselves. But we are currently focused on our unique position. And we are very uniquely positioned. We are not just some ordinary, you know, playing the middle of that. We are, you know, we have Ethereum on our balance sheet, which we stake the vast majority of. And we own 71.5% of White Fiber, which is in, you know, the hottest sector, and that will continue. We see absolutely no drop in demand for the building of the data centers regardless of the drawdown in the sector today, regardless of what Jim Cramer has to say. We actually know that there is incredible demand, and we own 71.5% of that. A company that is exposed to that particular demand. So we are uniquely positioned, and there is just no space I would rather be in than digital assets and artificial intelligence. And I do not know of any other publicly listed company that has direct exposure to that. So very uniquely positioned. If we were to buy another DApp, I am unsure how they would add value, really. I think we will just continue to stay the course and buy and buy. And then just as I mentioned today, and it is very important for everybody to note, we will, even though our lockup ends in about three months for White Fiber, we are announcing today that we will not sell that stake throughout next year because our conviction in that company is extremely rock solid high. Nick Giles: Great. Thank you. That is well noted. And then as a follow-up to a previous question, could you guys provide any more guidance on staking yields going forward? Like, how should we think about opportunities beyond the 3% annually that we are seeing today? Thanks. Sam Tabar: I will let Eric answer that question, but I hope that one day, people will dig a little deeper on how people are doing their staking amongst the DApps. You know? It would be interesting to see if fees that, you know, should not be, you know, you guys should look at the fees that are being charged in the various service providers that other DApps are using just to make sure that, you know, it is in line with the interest of shareholders. I could certainly say that with respect to ours, very much aligned with the interest of shareholders. From there on, I will just leave it to Eric to answer your question more directly. Eric Wong: Yeah. I am happy to. Yeah. The native staking right now provides about 3%. I think it will continue to provide 3% for, you know, medium-term, period of time. And the, you know, managers who are working with, we like to see at least, you know, 4% of the yield. Yeah. That is a goal. But we are, you know, evaluating those strategies, you know, and justify the risks return and do, but combined, you know, we like to add this new boost, you know, 10%, new 20% of the, you know, compared to the benchmark of a native state. Nick Giles: Great. Thanks for the time, guys. Operator: Thank you. Mike Grondahl, Northland Securities. Mike Grondahl: Hey, Sam. I wanted to ask you about White Fiber and what would you say have been the two biggest challenges in ramping revenue there? Sam Tabar: Well, look, you know, we are trying to close this deal, this lease, and I wish it was as easy as signing a lease for an apartment. But it is not. There are a lot of moving parts when it comes to a contract that is generationally long and that has this kind of quantum amount to it. So things take a little longer than anticipated. But time is our friend because as time went on, we were able to upgrade the deal on the White Fiber side. So we look very much forward to announcing that deal when it is finally signed. I will not give, I will not discuss, like, a timeline, except to say it is very soon, but I cannot, I do not want to quantify it because I do not want to be crucified afterwards if I get it wrong. So I am glad that everybody is patient. But to answer your question, the challenge with respect to White Fiber is basically how long it takes and how complicated things are in negotiating deals of a certain size. It takes a while, but, you know, for those who are patient, people would be likely rewarded. Mike Grondahl: Got it. And no operational challenges or anything of that nature? Just basically lease complications and signing, it sounds like. Sam Tabar: That is right. That is right. And, you know, we are so blessed with the Enovum acquisition. On the White Fiber side, we did what I think was a gem of an acquisition of a team called Enovum last year. And one of their strengths is they have a retrofit approach to data centers. So they, or their entire careers, they have been doing this for high before they did it for us. They would identify facilities and turn them into tier-three data centers. In fact, the latest what they did for White Fiber was they identified what was a mattress factory last February. They took control of it, I think, early April or late March. And now, they turned it into a tier-three data center, and it is going to start generating revenue now for a very well-known counterparty called Cerebras. And they did that on time within budget, six months. And they used a retrofit model approach to that, you cannot do that with a greenfield build. Greenfield builds take about eighteen months, sometimes two years, and a lot of variables that you do not control in building a greenfield. But because this team that we acquired has this ability to retrofit existing facilities and turn them into tier-three data centers, that is a very special ability that not many people have. We have that team. And so because, you know, now we are looking at North Carolina, which is our flagship facility that used to be one of the largest manufacturing facilities on the Eastern Seaboard, and we are turning that into a tier-three data center. The construction has already begun. And now we are just working on finalizing the business development aspect of it. But, operationally, we are extremely well-seasoned, thanks to the talent, the very deep talent, and the seasoned experience of our team that we were able to acquire and hire across the past year and a half. Mike Grondahl: Got it. Hey. Thanks for that color. Operator: Thank you. And next, we will go to Pat McCann with Noble Capital Markets. Please go ahead. Pat McCann: Hey, thanks for taking my questions. On for Joe Gomes today. First question is, with the goal of becoming the largest public ETH treasury, where do you believe you rank today? Sam Tabar: The goal is to be the best. Size is not really the metric. The goal is how you do it. So we were able to financially engineer the purchase of Ethereum in ways that others have not. That is extremely important. Imagine you become the best or sort of the biggest to your base a secured convert. I would much rather be number two purchasing Ethereum with an unsecured convert than being number one in doing that through a secured convert. I am not saying that is what the number one guy did. But there are sloppy ways to buy Ethereum, and to be number one through a sloppy way is not the way to go. And so we have been very, very careful not to do it that way. And I think that to us is really our north star. How you do it, how you are purchasing Ethereum, how are you positioned, being positioned with owning a successful company like White Fiber, being positioned by buying Ethereum through unsecured converts, being positioned that way to do it responsibly to us is our goal and not to just buy Ethereum hell or high water and, you know, and be number one and then, you know, you can get in trouble after a while. So that is not something that is our goal necessarily. Having said that, we do intend to buy material amounts of Ethereum. We will do it in a responsible way. We have levers that others do not have. And we look forward to reporting in the medium-term future about these Ethereum purchases that we will be doing. And, you know, it is nice to see that Ethereum is down today. You know? People may be selling Ethereum today, but, you know, it is those who have diamond hands that get rich. And we have a very long-term vision of what Ethereum was. I have been saying the same thing since 2017. The same thing in 2018. Same thing in 2019, and I am saying the same thing in 2025. I will be saying the same thing next year in 2026. Ethereum will continue to structurally go up. There will be a lot of cyclical gyrations. But the way that Bit Digital is going to purchase Ethereum will be responsibly and prudently because we do not want to blow up. Pat McCann: Got it. Appreciate that. And then the other question, just if you could comment on the G&A expense this quarter, what went into that? And do you see that going, moving forward? Sam Tabar: Yeah. There is a lot of one-off G&A expenses because of a maybe I should leave that to Cameron and Eric. Go ahead, guys. Eric Wong: I mean, the G&A does consolidate White Fiber, and I mean, like, from the perspective of consolidation, I would generally refer to comments made on the White Fiber earnings call, which would provide a lot of nuance on that side of the business. For Bit Digital, like, there were similarly some nonrecurring items, some elevated marketing spends, some that we would view as discretionary that we could pull back. Like, generally, Bit Digital is pretty flexible from a cost structure perspective, and it can be very lean. And it will become significantly leaner. So, like, on a forward basis, G&A should be materially lower. Cameron Schnier: Yeah. Basically, just a lot of one-offs that happened at the G&A level. On a normalized basis, you will see how the Bit Digital cost structure is actually very light and flexible. Pat McCann: Great. Appreciate it, guys. Operator: And we have no more questions over the phone. Sam Tabar: No more questions? Okay. Well, thank you for joining us today. We appreciate your continued interest and support. We look forward to speaking with you again next quarter. And remember about my comments on Diamond Hands. Thank you, everybody. Operator: This concludes today's call. We thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to Biotricity's Second Quarter Fiscal 2026 Financial Results and Business Update Conference Call. Today's conference is being recorded. As a reminder, this is Biotricity's Second Quarter Fiscal 2026 ended on September 30, 2025. So all figures presented for this period will reflect that end date. Earlier, Biotricity issued its earnings press release for the period, which highlighted financial and operational results. A copy of the press release is available on the Investor Relations section of Biotricity's website and full financials have been filed with the SEC on Form 10-Q and posted on EDGAR at www.sec.gov. Before beginning the company's formal remarks, I'd like to remind the listeners that today's discussions may contain forward-looking statements that reflect management's current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements except as required. At this point, I'm pleased to turn the call over to Biotricity's founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead. Waqaas Al-Siddiq: Hi, everybody. I would like to first thank everybody for joining us today. Fiscal 2026 has been a pivotal year for Biotricity, defined by significant advancements and strategic initiatives that have brought us to the threshold of profitability. Our relentless focus on innovation, strategic partnerships and operational excellence have positioned the company for continued growth and scalability across multiple fronts. This is a milestone as it sets the foundation for continued growth. With our approach to operational efficiency and automation, we can continue to scale and grow the business while maintaining margins and costs. We believe we have achieved economies of scale where new revenue will have incremental operational costs but with declining ratios, driving us to a healthy net margin business similar to other SaaS-like businesses. Technologically, we are continuing to hone our AI clinical model while developing next-generation diagnostic technologies. Our focus is to have a suite of diagnostic tools that are available to clinicians for more comprehensive screenings. To that end, we are now in the process of developing a multiparameter cardiac monitor. In preparation of this ultimate goal, we are finalizing Biocore Pro 2, our next-generation cardiac monitor with an expanded set of capabilities, which we expect to file for FDA by end of Q1 next year. During the latest quarter, we continued to expand sales of Biocore Pro, our next-generation cardiac monitoring device, strengthening our industry presence and underscoring our dedication to delivering cutting-edge health care technology. This includes recent initiatives that continue to build momentum, including the launch of major cardiac monitoring pilot programs with several hospital networks and clinics, accelerating our path to breakeven. These efforts are anticipated to fuel the rapid adoption of our Biocore Pro, expanding use across existing and new customer bases. Alongside sales expansion, we are focused on expanding our strategic partnerships to build complementary distribution channels where we are inactive. Recently, this has culminated in market expansion with contracts in the VA and leading home care groups. Additionally, we continue to expand our pulmonary and neurology partnerships with leading home-based diagnostic companies, diversifying our market reach. In summary, our innovation, strategic execution and operational efficiency have positioned Biotricity for sustained growth and profitability. In the coming year, our focus is to expand our commercial team, investing profits into commercial expansion to increase market share and drive top line growth. We expect our growth rate to improve as we invest profits into commercial expansion. We remain focused on delivering innovative high-quality cardiac care solutions and are confident in our ability to continue driving value for our shareholders while improving patient outcomes worldwide. With that, I will turn the call over to our CFO, John Ayanoglou, to provide more detailed financial insights. S. Ayanoglou: Thank you, Waqaas. Let's review the highlights of our second quarter fiscal 2026. Our recurring revenue generated as a result of strong market adoption of our Technology-as-a-Service subscription model as well as our usage-based subscriptions remain robust, driven by the popularity of our FDA-cleared cardiac monitoring devices, especially the next-gen Biocore Pro, which features cellular connectivity. Atrial fibrillation, a primary contributor to strokes, remains a significant focus for our business. Biotricity has already monitored and recorded well over 2 trillion heartbeats, improving patient outcomes for patients with atrial fibrillation, increasing their chances of earlier medical intervention. This is not only an improvement in patient outcomes, it also has the propensity to deliver significant health care cost savings for both patients and the broader health care system. For the second quarter of fiscal '26 ended September 30, 2025, revenue increased by 19% compared to the corresponding prior year period to $3.9 million from $3.3 million in the prior quarter. This growth is reflective of our strategic initiatives and directly impacted by our focus on continual technological advancement. We see further revenue growth in our sales pipeline in coming quarters and are optimistic about delivering those future results, which reflect the fact that our latest flagship device is a best-in-class device geared towards use in hospitals and large clinics where we continue to penetrate effectively. Technology fees accounted for 89% of the quarter's total revenue, reflecting strong customer satisfaction and retention and quality support services. Gross profit for the quarter totaled $3.2 million, up 29.4% from $2.5 million of the prior year period. Our gross profit percentage improved 660 basis points to 81.9% for this quarter, up from 75.3% in the corresponding prior year quarter. This increase is attributable to the expansion of our recurring technology fee revenue base, efficiencies gained through our proprietary AI and improvements in our monitoring and cloud cost structure. As part of our sales initiatives, we continue to search for opportunities to expand our geographic footprint. We serve thousands of cardiologists across hundreds of centers. Our in-sourcing business model allows these cardiac medical professionals to have direct control over our services, enhancing efficiency and enabling broader market penetration. Our business development initiatives include expansion into other verticals that are ancillary but fit naturally with our core business. We continue to investigate those types of opportunities for the future. Operating expenses for the second quarter were $2.9 million compared to $2.8 million in the same period last year, which is a 5.1% increase. Our SG&A expenses increased by 2.5%, a comparative additional spending of over $56,000 for this quarter, though we added to our R&D expenses, increasing those by $84,000. As previously discussed, we have strategically transformed our sales force to increase efficiency. Our external sales team is focused on longer sales cycles in larger accounts, including independent hospitals and GPO networks. We are contracted under 3 of the largest GPO networks, which gives us coveted access to sell into more than 90% of hospitals in the U.S. All of these positive improvements in revenue growth and operating efficiencies through the use of AI and other automation as well as proactive cost management have allowed us to continue to achieve positive free cash flows, defined as the cash from operations that is available to pay interest and dividends. And we've done this for the last 5 consecutive quarters and has been set on a path to achieve profitability in the next few quarters. In fact, we're pleased that this quarter, the second quarter of fiscal 2026 is the second consecutive quarter of Biotricity in which it has achieved a positive EBITDA. This is an important milestone and indicator that we are nearing full profitability. The company achieved EBITDA of $373,000 this quarter, which corresponds to $0.14 on a per share basis. A reconciliation of our EBITDA and adjusted EBITDA numbers is available in our 10-Q. We are pleased with the progress made in building our technology, obtaining FDA registrations, developing effective sales strategies and implementing cost-cutting measures. The result has been an improvement in operating results of nearly $0.6 million to achieve our second consecutive profitable quarter from operations, which was $274,000 for this quarter. Net loss attributable to common shareholders for the fiscal 3-month period was $772,000 compared to $1.6 million during the corresponding prior year period. On a per share basis, we reported a loss per share of $0.29 compared to $0.73 for the corresponding prior year period. Looking ahead, we remain committed to advancing our business through commercialization of our Biocore, Bioflux and Biocare products. Our tech is truly useful globally, and cardiac is the #1 chronic care condition in the entire world. The growing market interest and demand for our suite of products dedicated to chronic cardiac disease prevention and management reinforce our confidence in our market position. Importantly, our focus on innovation and development continues to yield significant advancements in our remote monitoring solutions for both diagnostic and post-diagnostic products, bringing us ever closer again to profitability. We are excited about the future and confident in our ability to deliver sustained growth and profitability for Biotricity. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Okay. Gentlemen, it looks like there are no further questions at this time. I'd like to turn the conference back to management for any closing remarks. Waqaas Al-Siddiq: Thank you, and thank you all for attending. This has been a fantastic quarter for us as we believe it is the moment we achieved economies of scale. We are confident that we are on the cusp of profitability and expect increasing revenues while maintaining margin. Our focus now is to scale the business, investing in the expansion of our commercial team to drive growth and market share. If I had to distill our message into key takeaways for the next 12 months, they would be as follows: one, our revenue will continue to increase; two, our margins will be maintained; three, we will be profitable and we will invest our profits into commercial expansion to increase revenue and market share; and four, we will continue to innovate. Thank you, and have a great day. Operator: And with that, everyone, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your evening.
Operator: Good day, everyone, and welcome to today's QuoteMedia Third Quarter Results Conference call. [Operator Instructions] Please note, this call is being recorded, and I will be standing by. It is now my pleasure to turn the conference over to Dave Shworan. Please go ahead, sir. David Shworan: Thank you, and welcome, everyone. We appreciate you joining us today. Before we begin, I have a brief safe harbor statement. Except for historical information contained herein, the statements made in this call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. And now we're happy to go through our 2025 third quarter results. 2025 continues to be a very successful year for QuoteMedia. We're growing, and this quarter clearly reflects that momentum. We've delivered a 10% year-over-year revenue increase and revenue rose 5% sequentially from Q2. This is a solid growth. And importantly, it is supported by several new contracts that will be starting next quarter. Looking ahead, we expect this momentum to continue, and we're forecasting even higher growth numbers for Q4. Our pipeline is strong, and we're in advanced stages on several new large proposals. We are busier than ever, both onboarding new clients and expanding our footprint with existing clients. We're also continuing to expand our products and our data across almost every category, and the response from clients has been overwhelmingly positive. I'd like to touch briefly on profitability trends. Our gross margin improved from 46% to 48%, and we expect our gross margin to continue improving as revenue grows and as amortization expenses trend downward over time. The same is true for EBITDA and overall profitability, which we expect to strengthen in coming quarters as the impact of previously capitalized development costs continue to diminish. In addition, our deferred revenue finished the quarter at $2.2 million, which reflects strong contracted business that will be recognized in future periods. We're extremely proud of the progress we're making. The products are state-of-the-art. Our data is comprehensive and proprietary, and we continue to differentiate ourselves in a competitive industry. We're succeeding -- successfully winning business from large incumbents and our market position is strengthening quarter after quarter. It's all very exciting, and we believe that we're extremely well positioned for continued growth -- strong growth heading into 2026. With that, I'll now pass the mic over to Keith Randall to walk us through the financial details for the quarter. And after that, we'll be happy to take any questions. Go ahead, Keith. Keith Randall: Thank you, Dave, and welcome, everyone. I'll start with the income statement. Note that all comparisons are on a year-over-year basis, unless otherwise noted. We had a 10% increase in total revenue compared to Q3 2024 and a 5% increase compared to Q2 2025. Corporate Quotestream revenue increased 18% and interactive content revenue increased 5%. These increases were driven by an increase in average revenue per customer as we continue to attract larger customers and cross-sell additional products to existing customers. Individual Quotestream revenue was relatively flat, increasing 1%. Our cost of revenue consists of fixed and variable stock exchange fees and other data costs and amortization of capitalized development costs. Our cost of revenue increased 6%, mainly due to increased variable stock exchange fees related to our increase in revenue as well as price increases for fixed stock exchange fees. Our gross margin percentage increased from 46% to 48% as the cost of revenue decreased as a percentage of sales. This was due to an increase in revenue as well as a decrease in amortization expense related to capitalized development costs. We expect the gross margin percentage to continue to improve going forward as our revenue grows and the amortization expense continues to decrease as we capitalize less development costs. Our total operating expenses increased 11% for the quarter. Sales and marketing expenses decreased 5% due to a decrease in salary payroll. G&A expenses decreased 25%, mainly due to a decrease in bad debt expense. The decrease was also due to a decrease in office rent expense as we downsized our office space in Vancouver, Canada when our previous lease ended in June. Since COVID, the majority of our development staff work remotely, therefore, we require less office space. Software development expenses increased by 74%. This was due to the decrease in the percentage of development costs capitalized versus expensed as we capitalized 4% this quarter compared to 26% in Q3 2024. The increase in development expenses was offset by the decrease in payroll expense resulting from the reduction in development personnel in December 2024. Our net loss for the quarter was $367,000 compared to a net loss of $441,000, an improvement of $74,000. Our adjusted EBITDA was $378,000 compared to $367,000, an increase of $11,000. While the accounting for development costs has no impact on cash flow, it continues to negatively impact our reported earnings. As previously mentioned, a smaller proportion of development costs was capitalized compared to prior quarters, resulting in a greater amount being expensed immediately. As development costs are amortized over a 3-year period, amortization expense remains elevated due to higher levels of development costs capitalized in previous periods, temporarily reducing our net income. But despite the negative impact of the accounting for development costs, our profitability improved versus Q3 2024. We expect gross margin, EBITDA and overall profitability to continue to improve in future quarters as our revenue grows and the impact of higher amortization expenses related to prior periods diminishes. Please refer to the reconciliation included in our press release for the calculation of adjusted EBITDA. Turning now to our balance sheet and cash flow statement. Our cash totaled $281,000 at quarter end, which was a $304,000 decrease from our 2024 year-end cash balance of $585,000. Our deferred revenue totaled $2.2 million at quarter end. The future costs associated with realizing that revenue is minimal as most of our deferred revenue relates to setup and development work already completed. Those setup and development fees have been deferred and will be recognized in future periods over the service contract to which they relate. Our year-to-date net cash flow from operations was $832,000, while net cash used in investing activities was $1.1 million, primarily due to spending on infrastructure and product development. Going forward, we expect our double-digit revenue growth to continue for the remainder of this year and into 2026. Also, as mentioned earlier, we expect our bottom line to improve as our revenue grows and the amortization expense associated with capitalized development cost decreases. Thank you, and I'll now pass it back to Dave. David Shworan: Thanks, Keith. Okay. We'll now open up the call for any questions. So please let us know if you have any questions. Operator: [Operator Instructions] And our first question will come from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Yes, a couple of questions. You mentioned that you believe that there will be an acceleration in the rate of growth in the Q4. And I was wondering if you were referring just to the year-over-year growth or were you referring to sequential growth? You mentioned that you saw 5% sequential growth in Q3. I was just wondering -- just to clarify what you were referring to there. Keith Randall: That was year-over-year in terms of the double-digit growth. Michael Kupinski: Yes. Okay. And then... Keith Randall: We also expect quarter-over-quarter growth as well. Michael Kupinski: Right. But not at the 5% level sequential... Keith Randall: Well, it will be comparable to that -- quarter-over-quarter growth will be comparable -- I'm not sure if it will be exactly 5%, but Q4 will definitely be revenue growth -- the revenue for Q4 will definitely be higher than Q3. Michael Kupinski: Got you. Okay. And in terms of that, can you just kind of give us a little color if that -- if you believe that growth is coming from increased number of customers? Or is that coming from increased average revenue per customer? Keith Randall: Well, it's mostly increased average revenue per customer, but that's new -- that's a little bit deceiving because it's new business coming in the door for existing customers. So basically cross-selling new products to existing customers will account for most of that. Michael Kupinski: Got you. And then in terms of just kind of like the tone of the market and your -- and the competitive nature of the market, I was just wondering if you can just talk a little bit about that. And then if you can talk a little bit about, we went through a period of product development for the company to be a little bit more competitive with the products, and it seems like you're kind of gaining a little traction there. How do you feel about the product suites that you have right now in terms of your competitive position? Are there products that you feel that you may need to invest in to offer in the future to be a little bit more competitive? Or do you feel like your product suites are pretty much very competitive where you are? David Shworan: So the product suites that we have, I think, are very, very competitive. There isn't a lot of investment that we have to make to expand on that. It's more internal. So it's more just doing more with the data. We're doing a lot of work with AI so that it can automate a lot of services that people are looking for because we own all of the data, that's making it perfect. It's making us very, very strong in the industry. But as far as product lines against our top competitors, we are definitely either neck and neck or better than them in many areas. And that's why we're taking away some of their business, which is great. Yes. So I think we're always developing and we're always adding. We're expanding on all kinds of different features and services and product lines and data sets that we're doing. But it's not like it's heavy investment anymore. It's just continuation of expansion. Michael Kupinski: And you touched on my next question. I was just wondering in terms of AI, what are -- how are you using AI? Obviously, you have a lot of opportunities, especially as you look at utilizing some of your data reports and things like that. I was just wondering if you can just kind of give us some thoughts on how you're utilizing AI. David Shworan: Yes. We've been -- well, QuoteMedia has been using AI for probably since the inception of it in some shape or form. So because we're doing a lot of the data collection, data normalization, all kinds of things like that, the AI has always kind of been there behind the scenes doing things for us. But as it gets stronger and stronger now, now we're having it do a lot more. And we actually have an AI department that's building out all kinds of advanced AI tools on top of all of our data for our clients. So it's things like taking our Quotestream platform and having a complete chatbot that you can talk to and you can have it do anything you want, tell you about trades, execute trades, analyze portfolios, all of those things. So we're basically training AI, but having AI use our data for everything. So it's not about where you have ChatGPT where it goes out on the web and it starts hitting websites and grabs information and puts it together for you. This is actually using actual complete fundamental data from us, our corporate action data, our quote data, everything, all of the data from the user. So you should -- the users are going to be able to do everything that they want with AI in all of our products and that's where we're going with it. And in addition, we're doing a lot of data collection with AI, data cleansing with AI, normalization, scoring, sentiment, all kinds of things with AI taking news, turning it into smaller tidbits that are easily ingestible by people, flagging what's going on in their portfolios with their watch list, things like that. So we're working with all of our -- obviously, our higher-level clients. All of our high-level clients have a wish list, and we're working with them kind of across the board to take all of this to market. And we're moving very quickly with it because we've already been working with AI. So it's probably going to be coming out very, very quickly. Michael Kupinski: And if I could squeeze in just one more question. In terms of the churn in the third quarter, was churn very similar to second quarter? Or can you just kind of give us some thoughts about customer churn and how it was relative to maybe the first and second quarter? Keith Randall: Yes, we had very little churn this quarter and last quarter for that matter. Michael Kupinski: And it's very similar. Keith Randall: Yes. I mean I don't have an exact percentage to give you, but I can tell you it's very low. Operator: And our next question will come from Jonathan Jetmundsen. Unknown Attendee: Two quick questions. One is on the cash balance. You guys are cutting it pretty close. So just wondering kind of now that we're a month into Q4, how cash is looking? And is there any risk of needing outside financing this year or early next year until cash starts to build? Keith Randall: Yes, I can answer that. Unfortunately, the way the timing of our funds work is we receive -- we have some quarterly clients that we get in right after the end of each quarter. So the quarter ends are the lowest of our cash balances. And then I think on October 3, we had got in $700,000. So it's just the timing of our cash flow. The end of the quarter is always the lowest. Unknown Attendee: Okay. And then turning to bookings, if you look at end of Q3, taking recognized revenue for the quarter as well as any kind of new bookings on top of that, do you guys have an estimate of what ARR looks like at the end of Q3? Keith Randall: Sorry, repeat that last part, please? Unknown Attendee: Yes, asking if you have an idea of what kind of total booked ARR was at the end of Q3, which should be taking just your recognized revenue plus any new bookings that just haven't started recognized yet? Keith Randall: I don't have that exact figure. But as you know, that like most of our revenue is almost exclusively -- all our revenues are recurring. The only part of the revenue that's not recurring is just the development work that we do, like the setup and development. So that's something we'll look to, I think, maybe to publish in future quarters. But I don't have a -- if you're asking for an exact amount, I don't have it handy right now. Unknown Attendee: Okay. Final question, just really on the sales and marketing and go-to-market. Like how are -- how do you rate the effectiveness of that team in strategy right now? Because just looking at the financials, you guys spend a decent amount on sales and marketing and generate kind of net new bookings each year well below that spend. I'm just trying to understand how you guys think about it and how we can get more efficiency and effectiveness out of the sales. David Shworan: Yes, that's always the game plan. But this -- I think this year has proven that we've done a pretty good job. There's a lot of activity with sales and marketing going on. There's a lot of conferences. I don't know if you follow our LinkedIn, but they're always attending every event in every city that we can go to and meeting with every different firm. So we're doing everything we can as far as sales and marketing. But I mean, they've done well. I mean we've got, what, a 10% increase. And in fact, it's -- if I know the math and what we lost in the previous year, which was probably about 5%, so that's probably 15% increase. In reality of how well the salespeople have done, they're doing very well. And I think we've got a good team. I'd like to expand on that team. I'd like to get into some more cities. But yes, we're monitoring it all and working -- it's a big team approach, and they're closing some pretty big deals now. So things are going well. Operator: And our next question will come from Ankur Sagar. Unknown Attendee: Congratulations to you, Dave and Keith, I think, at least getting back on that growth trajectory after your last year's efforts. I just have a couple of questions. On the press release, I think it was mentioned about some large or major new contracts that will start contributing in Q4. On those -- if you could just shed some light on these larger contracts on what sizes and products these are? And have they contributed anything in these new contracts in this Q3? Are they just net new? Keith Randall: I can address that. So -- we had some larger ones. I'm not going to get into the exact dollar amounts from some of our larger -- and this is like new statement of works for existing larger customers. So some of that revenue has started in Q3. And then the remainder of that will start in Q4 or possibly even Q1 of next year. Unknown Attendee: In terms of the size, are they just -- if you were to look at the annual contribution, both the development cost and the ARR, are these like 7 figures? Keith Randall: Combined, they approach it, but individually, no. So -- but we have other deals that are in the pipeline as well. Unknown Attendee: So based on these and the pipeline that you have, you expect to continue on this growth trajectory. Would that be fair to say? Keith Randall: Yes. We think... David Shworan: That's what we predict. Yes, that's what we're predicting. But I mean, it's also because we have a lot of new ones like actually brand-new clients on the go right now. I mean, Keith is referring to we closed a whole pile of new deals. But as far as the largest ones, we're -- new statement of works or new purchase orders from our -- some of our largest clients where they expanded with us and they went into other divisions and powered other services and platforms and things like that. So obviously, the bigger the firm -- when you're working with a multibillion-dollar firm, they have lots of different places that we can do business with them. So we've been expanding in all those areas. But we also have some more of those in the works right now. Unknown Attendee: Okay. Okay. And how much of that growth, Dave, is within the existing clients? As you mentioned, you work with these large clients where you get a deal in one area and then you're able to sell into and work with them on other areas? Or are they're just net new customers? What portion of growth is net new customers and the other way with existing customers? David Shworan: Well, as far as this last quarter, I mean, it all depends on what the quarter holds, right? Sometimes there's -- you're closing more new deals and sometimes all of a sudden, one of your largest customers comes along and says, I want to spend another $1 million with you. And then all of a sudden, you jump that way. But I mean, we're always working on both. So what percentage, it's hard to say. It's -- I don't even know the numbers of percentages because it fluctuates, right? Like we might sign a big deal with an existing customer right now and then next week, we might sign a big deal with a brand-new customer, and they kind of even out. Unknown Attendee: Okay. And then one for you, Keith. In terms of this development cost capitalization, I mean, when do you expect this to be done with this or at least get to a normal level, you think where it should just be reflect the true profitability on the income. Keith Randall: Yes, sorry to cut you off. Yes. I mean every -- you can already see that the impact is diminishing. I would imagine that the impact will be -- I haven't really worked out the exact numbers. But by the end of next year, the impact will be negligible by the end of 2026. But each quarter, the impact goes down and down. And if you remove the impact of capitalization of costs, whether it's development or fixed assets, for the quarter. We actually have a positive net income if you remove the impact of those effect -- for the accounting of those capitalized costs. So they really do distort our earnings. But that impact is, like I say, every quarter... David Shworan: And I think the message there is also that we're going to be banking cash because even though the books show these numbers that are financially reported, it's not the reality of the cash flow, right? So as we start banking cash, then we can start to figure out what we're going to do with that cash, whether it's share buyback or acquire companies or different things like that. So we're on the right trajectory now for 2026. Unknown Attendee: Got it. And then on that cash flow, Keith, I know you were mentioning but to the prior caller that with -- how it works, I mean, quarter end, your cash flow is all -- shows down on the cash on the balance sheet. But with this double-digit growth that you're expecting, despite that the way it works quarter end, you expect to be -- generate -- be free cash flow positive in Q4 and then going forward? Keith Randall: Cash flow positive, I think that's fair to say. Yes, we're always subject to timing of when we receive funds. But yes, no, it's just -- it's unfortunate that the timing of our funds, we have a lot of large clients that pay quarterly and it's at the beginning of the quarter. So by the end of the quarter, like I say, like I previously mentioned, our cash balances are at their lowest at the end of each quarter. Unknown Attendee: But there is also the dynamics where you generate the cash and there's also you invest into the development of it. I mean the cost -- I mean you expect probably next year those development costs to be less. Any expectation or comment you could share on that? David Shworan: I don't -- lots of people ask me that if I'm going to decrease development costs. I think I don't really want to decrease development. I want to keep development as kind of a flat, like so where we keep our developers and they're working. We have lots and lots of things that I want to do and where we want to go. But it's not growing the development cost. I think that's the main thing is we want to use all of those people. They're very well versed in our systems. We've got good teams. Everybody is creating what's needed. And when a company comes along, and you have to realize when these big companies come along, they've got lots of money and they want it done a certain way, and I want to have the people to do it that way. And that's how you do it. But then you lock them in for many, many years. And once they're in, they're in, and you just keep growing it. Unknown Attendee: Okay. One last one for you, Dave, not putting you -- I'm not trying to put you on spot, but still we're showing top line growth. Based on your commentary, the outlook looks pretty good. I mean you will have double-digit year-over-year growth going forward. But the company's valuation just doesn't reflect that improvement. Any thoughts you could share on what things you could probably do, as you mentioned about share repurchase or anything -- any other instruments you could use? David Shworan: Yes. I mean I think it's mostly just doing more IR activities and next year going to more conferences and getting the word out, just doing the best we can that way. We needed to pull out of that bad year, and we did. So I'm glad I didn't spend a lot of time last year doing those events because I would have been talking to a wall. But now I think we've got the story again. Everything is looking great. We're projecting really good growth. We've got bigger clients we can announce next year. So it's perfect timing to get the ball rolling and get investors to know about QuoteMedia. I think we're so thinly traded. And our stock bumps up and down. I mean it dropped today, but somebody just [ trades ] some shares out there and the next thing you know it's down, but it could be up tomorrow. I mean it's just we're so thinly traded. We need to get more investors. So that's the target for next year. Keith Randall: And I also think we're negatively impacted by our accounting bottom line, which -- because I don't think a lot of people can wrap their head around that. It's the reason for it, that it's the capitalization of development costs. So that's going to work itself out as well. I think that's taking our stock price down. Operator: [Operator Instructions] And it appears we have no further questions. Mr. Shworan, I'll turn the conference back to you. David Shworan: Okay. Well, thank you, everyone, for joining us today. We appreciate your continued support and interest in QuoteMedia, of course. And as always, if you have any follow-up questions, please feel free to reach out to us, reach out to me. And investors@quotemedia.com is an e-mail address we use. And thanks again. We wish you have a great rest of your day. Bye-bye. Operator: And this does conclude today's QuoteMedia Third Quarter Results conference call. Thank you for your participation. You may now disconnect.
John Dolan: The call today includes our Chief Executive Officer, John Lai, Chief Financial Officer, Garry Lowenthal, our Commercial Operations Adviser, Michael Eldred, and myself, John Dolan, PetVivo's Chief Business Development Officer and General Counsel. Following our remarks, we will open the call for your questions. Before we conclude today's call, I will provide some important cautions regarding the forward-looking statements made during the call. Before we begin, I would like to remind everyone that the call is being recorded to make it available for replay. The replay instructions can be found in today's press release available in the Investor Relations section of our website. Now turning to our results for the quarter. Our growth in product momentum continued into the second quarter as we further expanded the use of our flagship animal osteoarthritis veterinary medical device, Spring with OsteoCushion technology. We have also advanced the commercialization of PRECISE PRP, our new breakthrough regenerative health product that can be administered alongside Spring. Precise PRP for dogs generated increased revenue during the quarter as its adoption continues to spread in the canine market. We expect the PRECISE PRP revenue to further increase at an accelerated pace with the recent reintroduction to the equine market of PRECISE PRP for horses. We have also continued to advance the research, development, and use of other technologies we have gained from new major partnerships formed over the last several months. These innovative technologies, which include PRECISE PRP, involve diagnostics and medical treatments that are transformative for our platform and particularly for the veterinarians and pet owners we serve. Since the market introduction of Spring in late 2021, it has now been used by more than 1,200 veterinary clinics across all 50 states. Now with the recent addition of our first distributor in Europe, which soon followed from our first international distributor we signed in Mexico, we can include several additional international clinics now using Spring. Mexico is a very attractive market for our animal health solutions, especially since the country's veterinary healthcare market is projected to grow at a compounded annual growth rate, or CAGR, of 11% and is anticipated to reach approximately $2.4 billion within the next six years. Personal horse ownership is deeply intertwined with Mexican culture and tradition, which makes the Mexican marketplace exceptionally ideal. The market is much larger, estimated at more than $16.56 billion today and is projected to more than double to $34.8 billion by 2033, growing at a CAGR of 8.6%. In just the UK, where our new European distributor, Nupsila Group, operates, the market currently exceeds $2.6 billion and is growing at a 7.8% CAGR. For each of these markets, their high growth rates are particularly noteworthy given their already very large size. As sales continue to ramp up in Mexico and kick off in the UK, our US distributor network increased their sales by 35% over the same year-ago quarter, reaching $237,000 and representing 75% of our total revenues for the quarter. The growth in distributor sales, combined with the expansion of our in-house sales force and product offerings, drove a 1% increase in total revenue for the quarter, totaling $303,000 and making it one of our best quarters yet. In fact, it was our highest revenue-generating fiscal second quarter on record. On a first-half comparative basis, revenues were up 85% to more than $600,000, marking our best first half ever. This performance reflects the success of our sales and marketing efforts. These efforts remain strongly focused on the large equine market as we continue to expand our larger and fast-growing companion animal market. Our growth has also been driven by a strong performance of our sales and marketing leadership, including April Boyce, our VP of Sales and Marketing, and Michael Eldred, our Commercial and Operations Adviser, as well as several new highly experienced territory managers we have deployed nationwide over the past year and our new team of professional sales representatives and technical service veterinarians who support them. Together, they have been developing deep relationships with the nation's leading veterinary clinics, veterinary corporate entities, consolidators, and distributors, setting the stage for continued strong growth. During the quarter, we were excited to announce the appointment of Josh Rubin to our Board of Directors. He brings to us a wealth of experience in healthcare and life sciences finance, capital markets, and corporate strategy. He currently serves as Managing Director of Life Sciences at Uniti Capital, where he is focused on venture lending to healthcare companies. He previously served in financial director roles with RBC Capital Markets and Wells Fargo Securities. Josh boasts a tremendous track record in the successful execution of multibillion-dollar M&A and capital transactions. His deep understanding of the life sciences industry and strategic insights into growth-stage companies like PetVivo will be invaluable as we continue to grow and expand our market presence in the veterinary markets and begin to explore the introduction of products to the human markets. Now before we get into more of the other exciting recent developments and our outlook for the second half of the fiscal year, I would like to turn the call over to our CFO, Garry Lowenthal, who will take us through the financial details for the quarter. Garry? Garry Lowenthal: Thank you, John, and good afternoon, everyone, on our call. Thank you for joining us today to discuss the results of our second quarter of fiscal 2026 ending September 30. As John mentioned, we had another great quarter with revenues of $303,000. This was an increase of 51% over the first quarter of last year. Our results were up 85% to more than $600,000. Despite the second fiscal quarter being traditionally our slowest quarter of the year, we generated an increase from the previous first quarter. This growth was largely driven by a number of key factors, including our expanded North American distributor network, with their contribution increasing 35% compared to the year-ago quarter, reaching $237,000 or 75% of our revenues. Our expanded in-house sales force also helped drive sales, which include the sales of our new product offerings such as PRECISE PRP. Gross profit totaled $220,000 or 72.6% of revenues, which was an increase of 23% from $180,000 or 89.5% of revenues in the same quarter a year ago. The decreased gross margin was due primarily to the new PRECISE PRP product, which carries a smaller margin as we increase sales mix with this new product offering. Total operating expenses decreased 3% to $2.3 million from $2.4 million a year ago. The reduction in operating expenses was due to reduced research and development costs as well as the strategic cost reduction and restructuring program we implemented last fiscal year. Combined with the increase in sales, the lower operating expenses helped decrease our operating loss by 5% compared to the same year-ago quarter, bringing it down to approximately $2 million. Net loss totaled $3 million or $0.11 per basic and diluted share compared to a net loss of $2.2 million or $0.11 per basic and diluted share in the same year-ago quarter. The increased loss was due to an increase in interest expense from debt discount as all of our convertible notes converted on September 30. Excluding the $942,000 of debt discount recorded as interest expense, the net loss actually improved 5% to $2.1 million. Net cash used in operating activities increased to $3.8 million from $3.1 million in the same year-ago quarter. The increase was primarily due to the increase in inventory purchases of the company's new PRECISE PRP product line to meet growing demand and trade vendor settlement payments as our accounts payables decreased substantially during the fiscal quarter. Now turning to our balance sheet. Our available cash totaled $768,000 on September 30, 2025, up from $220,000 at the end of our fiscal year ending March 31. The increase was primarily due to finance activities that we conducted during the quarter. Also notably, our total liabilities decreased to $1.1 million from $5.1 million just last March 31, 2025, at the end of our fiscal year. This 79% decrease was primarily due to the extinguishment of derivative liabilities related to our convertible notes as well as a massive reduction in accounts payables due to settlement payments with trade vendors and the conversion of all of our convertible notes to common stock on September 30. Finally, I would like to mention that during the quarter, we qualified to begin trading on the OTCQX Best Market. To qualify for the OTCQX, public companies must meet higher financial standards, follow best practices in corporate governance, and demonstrate compliance with applicable securities laws. Furthermore, trading on the OTCQX, we are now penny stock exempt. We believe our uplift from the OTCQB to the OTCQX demonstrates our commitment to transparency, strong corporate governance, and delivering long-term value to our shareholders. We also believe that trading on the OTCQX enhances our visibility within the investment community and provides greater liquidity and accessibility for investors as we continue to execute on our strategic growth initiatives. Now this completes our financial summary for the quarter. John? John Dolan: Thank you, Garry. The growth for the quarter demonstrated the success of our overall strategy for driving greater adoption of Spring, as well as increasing the awareness and acceptance of PRECISE PRP for the treatment of osteoarthritis in animals. PRECISE PRP is a proprietary and revolutionary allogeneic platelet-rich plasma product, or PRP, designed for horses and dogs that was developed by VetStem. PetVivo has been granted the exclusive license to commercialize PRECISE PRP for canine and equine in the United States. PRECISE PRP is a first-in-class off-the-shelf PRP product for use by veterinarians. It is a Leuko Reduce allogeneic pooled freeze-dried PRP that provides a species-specific source of concentrated platelets and plasma for intra-articular administration. Unlike other PRP mechanical kits currently in the market, PRECISE PRP does not require a blood draw or centrifugation, thereby making it a truly off-the-shelf product that is easy and convenient to administer. We have begun to sell this great breakthrough regenerative product under an exclusive licensing supply agreement with VetStem that we signed in February 2025. The combination of Spring and PRECISE PRP has received very favorable reports from veterinarians regarding the ease of use of these products and their effectiveness in the management of osteoarthritis in horses and companion animals. We have continued to work on expanding the awareness of the benefits of both of these innovative products among key decision-makers. In July, we exhibited at the Texas Equine Veterinary Association 2025 Summer CE Symposium held in Marble Falls, Texas. We also attended other smaller industry events during the quarter. At these events, we demonstrated the research-backed benefits of Spring to veterinarians, including leading sports medicine and rehabilitation experts in the veterinary industry. We also had the opportunity to exhibit jointly with VetStem at the 2025 Fetch Kansas City Veterinary Conference held in August at the Kansas City Convention Center. Together with VetStem, we exhibited the PRECISE PRP technology at this conference. These conferences are very important to our marketing efforts as they allow us to discuss firsthand with decision-makers the benefits of administering Spring and/or PRECISE PRP to companion animals. We can discuss with them the anecdotal reports as well as present the positive results from several clinical studies that have been conducted by leading independent investigators. From these events, we usually gain a better understanding of our target market and the types of veterinarians we should be more focused on. This includes vets who specialize in sports medicine, rehabilitation, and/or pain management, as well as surgery. Regarding additional studies, we have completed the accumulation of data from a canine elbow pilot study conducted by Orthobiologic Innovations, a leader in R&D for regenerative and sports medicine. The study was led by two prominent veterinarians, Sherman and Deborah Knapp, and we expect the data to be ready for presentation by the end of the calendar year. Studies like this canine elbow study, as well as our other completed studies related to the management of stifle, cranial cruciate ligament disease, and hip osteoarthritis, continue to play a crucial role in our sales and distribution strategy. Veterinarians, as well as large national and international distributors, generally want to review university or independent entity-conducted research before adding new products like ours to their treatment regimens or distribution catalog. Our internal sales team and outside distributors also use these studies in their commercialization efforts, including related veterinarian training. The studies also help our engagement of new industry partners, such as Veterinary Growth Partners, VGP, with whom we recently joined forces. VGP is a management services organization, or MSO, that supports veterinary practices by offering practice management and marketing tools, consulting, and vendor relationships. VGP is committed to actively promoting Spring and PRECISE PRP through their expansive member network of more than 7,300 veterinary hospital clinics across the United States. As I mentioned earlier, during the quarter, we entered into the European marketplace for the first time with the engagement of UK-based Nupsila Group. Nupsila Group is a leading UK-based veterinary group that operates as both a veterinary wholesaler and referral provider, with a specialization in musculoskeletal health, orthobiologics, and regenerative medicine for companion animals and horses. Nupsila has committed to inventory, market, and promote throughout the United Kingdom our Spring with OsteoCushion technology. An initial order was shipped, and the official education and training of Nupsila's sales force is scheduled to begin in mid-January. During the quarter, we also advanced our new strategic collaboration with Commonwealth Markets, the syndicated ownership group behind the 2023 Kentucky Derby winner, Meij, and the 2022 Dubai World Cup champion named Country Grammar. Our partnership with Commonwealth has been centered on the clinical use promotion of Spring and PRECISE PRP. As part of our collaboration, Commonwealth has integrated Spring and PRECISE PRP into the care protocols of a number of their top-tier thoroughbred stables. In this environment, they are using these technologies as both a preventative measure and/or a management solution to promote joint health and extend performance longevity. It is also being used to support recovery after high-impact training and racing. In addition to this clinical implementation, we are also exploring co-branded content, educational initiatives, and industry outreach to elevate awareness around joint wellness to support the broader adoption of Spring and PRECISE PRP across the equine health community. Our unique partnership with Commonwealth, a recognized leader at the highest level of sport, represents a tremendous affirmation of our Spring and PRECISE PRP technologies. Their championship-caliber horses and progressive approach to wellness make them the ideal partner to showcase the benefits of these revolutionary restorative technologies. By combining our clinical expertise and commercial capabilities with Commonwealth's vast network, we can provide more veterinarians with cutting-edge, effective solutions that enhance recovery and long-term soundness in competitive horses. Also during the quarter, we made great progress with our strategic alliance and collaboration with another key partner, Digital Landia, who is a leading pioneer in agentic AI solutions. Following the end of the quarter, we signed an exclusive ten-year white-label licensing agreement with Digital Landia for its patented breakthrough next-generation agentic pet AI technology. Our efforts are now focused on integrating this amazing technology into our platform as a first-of-its-kind global pet care ecosystem. In support of the diagnostic process, it can decipher animal behavior and communication through real-time analysis of vocalizations, body language, and physiological signals captured via a vet's or a pet parent's smartphone camera. Furthermore, the AI system has the capabilities to receive animal medical data such as physicians' medical records, medical imaging, and lab results to assist the veterinarian in diagnosing afflictions and diseases as well as suggesting treatment options. Given how it accomplishes this with an amazing 97% accuracy, Digital Landia's agentic AI presents a paradigm shift in how we understand pets and their physical health. The underlying technology features five patent-pending innovations with nine specialized diagnostic agents accessible to veterinarians for all patients. By aligning our clinically proven therapies with such powerful AI technology, we believe PetVivo is uniquely positioned at the intersection of AI innovation and veterinary care. This agentic pet AI technology also addresses two critical challenges facing the veterinary industry: skyrocketing client acquisition costs and the difficulties in capturing the exploding Gen Z pet parent demographic. We believe the implementation of this agentic pet AI technology has the potential to deliver a 90% to 98% reduction in client acquisition costs, lowering it from $50 to $150 per patient to just $1.50 to $5 per targeted client outreach. It can also simultaneously provide veterinary practices with unprecedented access to the fast-growing market segment of Gen Z pet parents. Also, earlier this week, Digital Landia announced the publication of a comprehensive technical white paper documenting the agentic pet AI framework that will power our new PetVivo B2B veterinary practice platform, which we will market through our wholly-owned subsidiary, PetVivo AI Inc. The white paper validates the technical foundation underlying the platform. It provides veterinary professionals, investors, and industry stakeholders with detailed visibility into the multi-agent artificial intelligence architecture, which will enable transformative clinical and economic benefits for veterinary practices. Given the strength of this report, we expect our PetVivo AI solution to rival mainstream AI applications in terms of adoption rates, and thereby create tremendous visibility for our brands, particularly Spring with OsteoCushion technology and PRECISE PRP. Beta testing continues and has been advancing well, and we anticipate the official commercial launch to take place in the near future. The launch will introduce both Digital Landia's agentic pet B2B and B2C app and PetVivo's new B2B platform. Now for an introduction to a functional Spring-like product, in the first fiscal quarter of this year, we established a strategic partnership with Piezo Biomembrane, a spin-off from the University of Connecticut that is pioneering biodegradable piezoelectric materials designed for implantable and regenerative applications. Through this collaboration, we have been advancing the research and development of revolutionary functional biomaterials that can promote regeneration, restoration, and/or remodeling of damaged or injured tissue and bone in both animals and humans. The combination of these two technologies, Spring and Piezo Biomembrane's piezoelectric material, is creating an exciting new future for PetVivo. One that we believe will be transformative for not only our growth outlook but also for veterinarians and their many precious patients. We have now completed Stage A of our three-phase joint research and development project that successfully demonstrated that materials from our mutual products can be combined into a single offering, which can generate piezoelectric activity that provides therapeutic benefits to animals and humans. Stage B, which is now underway, will determine if combined products can be mass-produced at scale and demonstrate a preliminary indication of safety for administration in animals. This stage is progressing very well to date. The final stage, Stage C, which is expected to begin in the second calendar quarter of next year, will determine the definitive safety and efficacy of the product. Altogether, our latest new technologies have created an exciting future for PetVivo that is transformative to not only veterinarians and the patients they serve but potentially for humans as well. Looking ahead, we expect to see continued strong sales momentum and market penetration for the duration of fiscal 2026 and beyond. In fact, we have never been in a better position to accelerate our growth and expand across high-growth markets. The U.S. animal health market is expected to double to $11.3 billion by 2030. Such massive growth is rare for such an already large industry, and it provides us with amazing tailwinds. For the full fiscal year ending March 31, 2026, we continue to see another year of record growth and improving bottom line as we continue to expand the use of Spring and PRECISE PRP as well as advance our other new products on our expanding medical therapeutics platform. The third and fourth quarters of the fiscal year have been traditionally the strongest, particularly given the increase in annual industry events during the third fiscal quarter, which typically drive greater product awareness and new orders. In fact, given our current growth momentum, we see the fiscal third quarter having the potential to produce another very robust revenue outcome. As we continue to grow and expand over the coming quarters, we will remain committed to advancing the best in pet health solutions, ensuring our products reach more veterinary professionals and pet owners, with our success in these efforts driving greater value for our stakeholders. Now I would like to turn the call over to our Commercial and Operations Adviser, Michael Eldred, to provide us with an update on the company's sales, marketing, and operations efforts as well as some other exciting events occurring in the company. Mike? Michael Eldred: Thank you, John. I hope everyone on the call had a wonderful week. Overall, I am extremely pleased with the sales performance, and our Vice President of Sales and Marketing, April Boyce, is doing a wonderful job enhancing our digital marketing initiatives. We are now expanding our sales team and adding a few more inside sales reps so we can have a stronger team out there communicating to the veterinarians and bringing awareness and selling the product. Additionally, we are implementing a new CRM system called HubSpot, which will be critical so we can keep track of all of our call notes and follow-ups and all the veterinarians that need additional details on the product and sales follow-up calls. Having our new PRECISE PRP equine, as John mentioned, is a wonderful thing to strengthen our portfolio. Previously, we just had the canine PRP, but now having both products in our portfolio gives us a better opportunity to train distributors and train them on both products so they can help us out there in the marketplace sell the product. We will be excited to have a bigger launch at AAP coming up here in December in Denver. Overall, I am just extremely excited with the performance, and we are taking all steps we can to make sure that we continue to drive forward and become known as the leader in regenerative medicine. If anybody has any specific questions on any of the sales and marketing initiatives, I would be more than happy to answer afterward. But I think John Dolan has done a pretty good job summing up the great progress that we have made. So overall, nothing out of the norm that's selling these products. It just takes time, and we are making great progress. So now I will turn it over to our CEO, John Lai, and he can take it from here. John Lai: Thank you, Mike. Now I would like to open up the call to the Q&A session. Operator, could you please instruct our listeners on how they can ask questions? Operator: Sure. So now we are starting the Q&A section. For anyone that joined over the phone, please dial 9. Or if you joined over your computer, please click the react button on the toolbox and select raise hand. Okay. We have one raised hand. You are now allowed to talk. Please, unmute yourself. Peter Sullivan: Can you hear me? John Lai: Yes, I can. Thank you. Peter Sullivan: Okay. Thank you. Hi. My name is Peter Sullivan. So a couple of questions. You quoted the number somewhere around 1,200 clinics that have used your product. How many of your clinics are really heavy users? And you can define that however you want, but something more than a few cases here or there. John Lai: The learning curve or the time that it takes for a vet to really bring on the product ranges anywhere from six months to a year. They use it because one of the major selling points of Spring with OsteoCushion is the longevity of the product. The only way to establish longevity is the actual time. So like with the VGP, I believe they tried the product probably close to two years ago or even more before they felt comfortable to come on board in a big way. So it is a time-consuming process. I do not have those numbers in front of me on how many of those are active users. But as you can see from the anecdotal evidence, we are continuing to grow the clinic numbers that are potentially coming on board. Peter Sullivan: Sure. Can I ask a follow-up question? John Lai: Absolutely. Peter Sullivan: Can you break down the revenue between Spring and PRP? John Lai: I am going to leave that to the CFO because I have it, but I do not know if we can disclose because that is more of a—I do not think we break that down right now in our financial reporting. Garry, do you want to answer that? Garry Lowenthal: Absolutely. It is actually a really good question. We had roughly about 42% that was the PRP for this last quarter, and 58% was Spring. Keep in mind that it is just the canine. It was just the canine. It was not the equine. It was not the horse. Peter Sullivan: The PRP was just the canine version. Garry Lowenthal: Just the canine. We just started shipping the equine in this quarter literally about a month ago. Michael Eldred: I think it is important to note that small animal veterinarians, joint injections are not something they do every day. It is something that they are getting more familiar with, starting to do it as a means to increase revenue in their clinics as they start to lose the pharmacies. The equine veterinarians, on the other hand, Spring and this PRECISE PRP equine, equine veterinarians know how to inject joints. They do it every day. So I think we will see a good ramp-up with the equine PRP, and we are starting to take more efforts on Spring. But the companion animal market is a slow growth, but it is long-term. It is going to be a much more significant market for us. Peter Sullivan: Yeah. I mean, that is kind of why I asked about your heavy user clinics because even though I am not a veterinarian, I know a few, and they were like, I would not even try to do this thing. So it is not surprising to hear that it is sort of slow to get into those clinics. Michael Eldred: We are focusing more on the progressive clinics. There are a lot of corporate accounts like the VCAs, the MARS, all the NVAs. Any veterinary clinic that is emergency or has three to five doctors is a relatively good-sized clinic. Obviously, those are our targets. Then we start to focus on the single veterinarians when we run out of things to do. Peter Sullivan: Do you have any corporate—I do not know what the right word is—but these big corporate clinics, have any of them adopted your product corporate-wide yet? Michael Eldred: No. Because every corporate is different. Sometimes a lot of the corporate clinics now, they still allow the veterinarians to have their own decision-making process. We do have some veterinarians that are probably part of a corporate group. But, like, for instance, Mars, who has a formulary, no. That is a significant process to get a corporate mandate to use the product. Peter Sullivan: I am not super knowledgeable. Are there some products that would, like, not yours, but some product that would have a corporate blessing to use? Michael Eldred: Yeah. Any of the normal drugs that are used maybe for NSAIDs or anti-inflammatories, flea and tick, those kinds of things. Anything that is prescribed daily or monthly by veterinarians is something for sure. But a specialized product that is a specialized area is a learning curve. They all have to get comfortable with it. Peter Sullivan: Okay. I have one more question. I am hoping I am not monopolizing somebody else's time. Do you do a breakdown, or can you do a breakdown between companion versus equine, regardless of the product, but just how that revenue breaks down? Michael Eldred: Gary could do that at some point in time. The other thing too is those are two very separate markets. Equine veterinarians buy differently than canine veterinarians. So, yeah, we track those separately, but once again, we just got the equine PRP. That is going to be a good upscale and a big launch for us. But once again, it takes time, and you have to realize a lot of these veterinarians already have centrifuges. They have things. They have product on the shelf, so they have to work through that. But we hope it is somewhat like a hockey stick. Garry Lowenthal: Peter, this is Garry, the CFO. Since we are now shipping the equine, in the future, we are going to do some reporting, but we are also going to break out equine and canine in the future just because the PRECISE PRP is going to be really big for us. We are going to break it out by the companion animals, small animals versus the horses. Peter Sullivan: Sure. Okay. So, Peter, I should follow up also. John Lai: You have quite a bit of adoption from VCA clinics out in California, Nevada, and Arizona. It is not on their official formulary, but, like Mike said, they allow the vets to choose the product outside if they want to use it. So we are starting to get good traction into those areas, and that should eventually lead to the approval process as a formulary. Peter Sullivan: Sure. Okay. Yeah. I think it is helpful to track both the Spring PRP breakdown and companion versus equine to see the underlying growth in the individual products. So I appreciate you breaking that stuff down. That is all I have for questions. Thank you. Operator: Okay. Thank you. Yes. Anyone would like to raise your hand, please. If you dial in, dial 9 or if you are on your computer, please click on the react button and select raise hand. John Lai: Okay. So let us just give one last warning or one last chance for anybody to ask a question. If not, then I will be giving closing notes and having John Dolan, our General Counsel, give the disclosures. If there are no more questions, then I would like to thank everyone for joining us today. We look forward to talking with you again soon and presenting our second fiscal quarter results when we report again. As always, take care, and thank you for joining us today. John, please go ahead and wrap up the call. John Dolan: Thank you, John. Now before we conclude today's call, I would like to provide the company's safe harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's future revenue, future plans, objectives, expectations, events, assumptions, and estimates. Forward-looking statements can be identified by the use of words or phrases usually containing the words believe, estimate, project, intend, expect, should, will, or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts, and projections for its business, the industry, and markets related to its business. Any forward-looking statement made during this conference call is not a guarantee of future performance and involves certain risks, uncertainties, and assumptions which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, various risks as detailed in the company's periodic report filings with the U.S. Securities and Exchange Commission. For more information about risks and uncertainties associated with the company's business, please refer to the management's discussion and analysis of financial conditions or results of operations and risk factors sections of the company's SEC filings, including but not limited to, our annual report on Form 10-Ks and quarterly reports on Form 10-Q. Any forward-looking statements made during the conference call speak as of today's date. The company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regards thereto or any changes to its events, conditions, or circumstances on which any forward-looking statement is based except as required by law. I would like to remind everyone that this call will be available for replay starting later this evening or by tomorrow morning. Please refer to today's earnings release for dial-in replay instructions available via the company's website at www.petvivo.com. Thank you again for attending today's presentation. This concludes the conference call. Operator, you may disconnect.