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Operator: Good morning. My name is Megan, and I will be your conference operator today. I would like to welcome everyone to the Third Quarter Slb N.V. Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a Q&A session. As a reminder, this call is being recorded. I will now turn the call over to James McDonald, Senior Vice President of Investor Relations and Industry Affairs. Please go ahead. James McDonald: Good morning, and welcome to the Slb N.V. third quarter 2025 Earnings Conference Call. Today's call is being hosted from Houston following our Board meeting held earlier this week. Joining us on the call are Olivier Le Peuch, Chief Executive Officer, and Stephane Biguet, Chief Financial Officer. Before we begin, I would like to remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. For more information, please refer to our latest 10-K filing and other SEC filings which can be found on our website. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our third quarter earnings press release which is on our website. With that, I will turn the call over to Olivier. Olivier Le Peuch: Thank you, James. Ladies and gentlemen, thank you for joining us on the call. I will begin today by discussing our third quarter performance, then I will describe the near-term outlook for Oil and Gas markets. Finally, I will share our guidance for the fourth quarter. Stephane will then provide more details on our financial results and the structure of our new digital division. After that, we will open the line for your questions. Let's begin. Our fourth quarter unfolded in line with expectations. We achieved sequential revenue growth driven by the addition of two months of activity from Champagnex, our digital business, and the resilient performance of our core. In the International Markets, revenue rose 1% sequentially, with notable increases in several countries across The Middle East and Asia. Across this region, sequential growth was seen in Iraq, United Arab Emirates, Oman, Egypt, China, East Asia, Indonesia, Australia, and India. Alongside broader improvements in offshore activity across Vienna, Sub-Saharan Africa, and Scandinavia. Meanwhile, revenue in North America grew 17% sequentially. This was driven mainly by the contribution of Champagnex, followed by higher offshore activity, which more than offset a decline in U.S. Land activity as U.S. Shale operators focused on further efficiency gains and cash preservation during the quarter. We also experienced strong growth in our Data Center Solution business, extending our reach with hyperscalers to a new market for Slb N.V. This quarter marks the first time we have disclosed our data center revenue, which has more than doubled year on year. Looking ahead, we foresee expansion beyond The U.S. along with the onboarding of new customers. Next, let me discuss the performance of our divisions. I will begin with Digital, as this is the first quarter we are reporting Digital as a standalone division. As you have seen in our release this morning, our digital business is comprised of four categories where Slb N.V. offers solutions that help unlock productivity for geoscientists and engineers, drive step change in efficiency and safety in operations, and help our customers in delivering better wells and higher producing assets. These solutions are embedded in platform and applications, digital operations, Digital Exploration, and Professional Services. Each of which Stephane will describe in more detail a little later in this morning's call. Specific to the third quarter, digital revenue increased 11% sequentially. This was driven by a 39% increase in digital operations, enabling digital services and automation capabilities augmenting our offering from our core divisions. Of note, automated drilling footage increased by more than 50% year on year. This was also supported by the addition of new connected assets from Champagnex. Following the integration, we now have a combined total of more than 20,000 connected assets deployed in the field, providing additional digital insights and optimization for our customers. One of the reasons digital operation is such an exciting area of growth is because it presents the opportunity to enhance every service and piece of equipment that we deliver. By embedding digital capabilities, we enhance performance and unlock the power of autonomous operations, creating an adjacent and fast-growing digital market that strengthens our core offering. In the earnings release published this morning, you would have seen a broad range of examples of platform and application being adopted by customers across all basins, customer types, and life cycles. These examples demonstrate the global reach of our digital brand, the impact of our platform strategy, and the emergence of AI as a transformative force in our industry. This quarter, for example, we secured key contracts awarded to our OptiSite production suite, which enables customers to process comprehensive data streams through cloud-based applications to drive productivity and efficiency across assets and facilities in the field. We also announced a collaboration with AIQ to deploy its Energi, AgenTeq AI solution for ADNOC, powered by Slb N.V. Lumi data and AI platform. These are meaningful milestones that speak to the momentum behind our digital business, and you can expect to hear more announcements in the weeks ahead that further demonstrate the impact and scale of these solutions. Turning to the financial performance of this business, we expect our digital revenue to continue growing at a rate that visibly outperforms global upstream spending and that exceeds the growth rate of our core business by double digits. At the same time, we expect Digital to continue delivering highly accretive margins to the company. In the core, I was very pleased with the resilient performance of this quarter, given the challenging macro environment. Excluding the impact of the Champagnex contribution, the core divisions of Reservoir Performance, Well Construction, and Production Systems were essentially flat sequentially. This demonstrates how our global footprint and broad portfolio help us to navigate regional uncertainties and offset localized headwinds. Specific to our Production Systems division, already benefiting from the addition of Champagnex, which delivered revenue growth and margin contribution ahead of expectations. We are very pleased with the integration so far, and in addition to the strong delivery of the team, we continue to receive positive feedback from our customers. For example, we recently delivered a combined ESP string using a Champagnex pump with an Slb N.V. induction motor for a main operator in the Panama Basin. By bringing together these two best-in-class technologies, we improved performance for unconventional wells and enabled faster installation, reducing downtime and strengthening project economics for our customer. And in The Middle East, we have received several contract awards for Artificial Lift, well testing, and production chemical technologies that leverage the combination of Slb N.V. and Champagnex solutions and engineering capabilities. Moving forward, in the context of tighter industry economics and mounting pressure from production declines, our customers are placing greater emphasis on production recovery solutions to unlock additional barrels at the lowest possible cost with maximum capital efficiency. This presents an exciting growth opportunity for companies who can offer solutions and technology to optimize production and maximize recovery from maturing assets. And technology will be the key. This is where Slb N.V. has a distinct advantage and why we have made production recovery a strategic focus for our business. By combining our deep subsurface expertise, the industry's broadest lift, intervention, and chemical technology portfolio with unique integration and digital capabilities, we offer a differentiated value proposition to our customers. This offering now includes Champagnex, which brings unique technical capabilities and a strong track record of customer success, from production chemicals to artificial lift, enhanced with digital capabilities. And we continue to develop our portfolio with strategic investments, including our recent acquisitions of Resman Energy Technology and Stimline Digital. Altogether, our production recovery offering adds another level of growth to our business, with combined exposure to CapEx and OpEx spend, complementing our leadership in upstream exploration and development. Now turning back to our quarterly results, and considering the market conditions we faced during the past few months, I am pleased with our performance. We achieved resilient results across the core divisions, delivering early success with Champagnex and continuing the momentum in digital. And there are several bright spots on the horizon. Thank you to the entire Slb N.V. team, including our new colleagues from Champagnex, for your excellent contribution this quarter. Next, I will discuss the ongoing macro environment and the near-term outlook for oil and gas markets. In an environment with increasingly challenging commodity prices and uncertainty on demand-supply balance, the industry has so far proven disciplined, and most long-cycle and international activity is demonstrating resilience. It is difficult to predict the exact outcome of further production increases and ongoing geopolitical developments, but the fundamentals for oil and gas remain constructive. Global inventories still reside at multi-year lows, and the need to offset natural production decline accounts for nearly 90% of annual upstream investment. These dynamics create a supportive environment for sustainable investment in the near to mid-term, barring a dramatic shift in commodity prices. Against this backdrop, with the exception of a few well-known markets where activity has recessed, global activity has stabilized with many locations still on the rise. To touch on international markets, many countries remain poised for investment growth tied to long-term capacity expansion plans and assurance of energy supply, particularly for gas. Notably, while OPEC+ production releases are currently being filled using capacity behind the pipes, additional releases will eventually require new infill drilling or new development to meet the higher supply output from these countries. This presents a positive catalyst for activity in member countries and reinforces the potential for higher activity in 2026. Specific to deepwater markets, the pipeline remains very healthy with favorable economics. We expect further investments in countries across the Atlantic, supported by oil, and in Asia driven by gas. And while short-term scheduling uncertainties have resulted in white space, partly in Sub-Saharan Africa, we expect this to progressively disappear as there are a number of FIDs planned for 2026 and early 2027. Meanwhile, in North America, operators continue to prioritize production maintenance as a result of commodity prices, underpinned by efficiency improvements leading to muted activity in the near to mid-term. In this context, considering the current industry dynamics and commodity price environment, we believe the conditions are set for when the supply-demand rebalances for the international markets to lead future activity rebound, and Slb N.V. is well-positioned to benefit from such an event. Now that we have discussed the market conditions, let me describe how we see the fourth quarter unfolding for our business. We expect that we will achieve a sequential step-up in results in the fourth quarter with high single-digit top-line growth. As we report a full quarter of Champagnex and generate seasonally higher year-end digital and product sales. With the third quarter results behind us, we are now in a position to confirm that second-half revenue will be within the midpoint of our previous guidance range of $18.2 billion to $18.8 billion. We also expect the fourth quarter adjusted EBITDA margin to expand 50 bps to 150 bps sequentially. This will be driven primarily by increased earnings contribution from both digital and Production Systems, including a full quarter of Champagnex results and fully restored operation on our IPS ECOLA assets. Specific to the digital business, we expect a significant increase in the fourth quarter on seasonally higher sales across the portfolio. As a result, we believe our digital division will be able to achieve double-digit growth year on year with EBITDA margin reaching 35% on a full-year basis. Overall, Slb N.V. continues to demonstrate resilience in navigating the challenging market environment. Our strength in digital, coupled with our growing presence in the production recovery space, will expand our leadership in the sector and help us drive positive outcomes for our customers. I will now turn the call over to Stephane to discuss our financial results in more detail. Stephane Biguet: Thank you, Olivier, and good morning, ladies and gentlemen. Third quarter earnings per share excluding charges and credits was $0.69. This represents a decrease of $0.05 sequentially and $0.20 when compared to the first quarter of last year. We recorded $0.19 of charges during the first quarter. This includes $0.12 of merger and integration charges largely related to the Champagnex acquisition that we closed during the quarter, as well as approximately $0.04 related to workforce reductions and $0.03 related to the impairment of an equity method investment. Overall, our third quarter revenue of $8.9 billion increased $382 million or 4% sequentially. I recognize that there are a lot of moving pieces this quarter, so let me bridge our Q3 revenue to Q2 at a high level. $579 million of the sequential revenue increase comes from the two months of activity we recorded this quarter from the acquired Champagnex businesses. This increase was partially offset by the loss of approximately $100 million of APS revenue due to production interruptions arising from a pipeline disruption in Ecuador and the absence of approximately another $100 million of revenue following the divestiture of our interest in the Palliser ATS Project in Canada at the end of the second quarter. In other words, after considering the revenue contribution from Champagnex and the impact of the lower APS revenue due to the two factors I just mentioned, revenue was essentially flat on a sequential basis. Our pretax segment operating margin declined 32 basis points sequentially to 18.2%. The impact of the two months of Champagnex was accretive to these margins as Champagnex contributed $579 million of revenue and $108 million of pretax income in the quarter. Company-wide adjusted EBITDA margin for the quarter was 23.1%, representing a sequential decrease of 92 basis points. The effect of the pipeline disruption in Ecuador negatively impacted our EBITDA margin by approximately 60 basis points. In addition, the divestiture of our interest in the Palliser project resulted in a further 30 basis points reduction. I will now go through the quarterly results for each division. Let me begin by sharing more detail about our new digital reporting structure. As Olivier described earlier, digital is a fast-growing business, and Slb N.V. is at the forefront of this industry transformation. We expect our digital business to grow faster than our core business for the foreseeable future with margins visibly accretive to the rest of the company. As such, our intent is to increase transparency around our digital business and better highlight its strategic value. To do this, we are now reporting digital as a standalone division. At the same time, our APS business is now being reported in the All Other category, together with our Data Center Solutions and Slb N.V. Capturing businesses. To provide you with better insight into these changes, as well as the impact of Champagnex, we have included supplemental pro forma financial information going back to 2024 as an exhibit to the Form 8-K we filed this morning for our earnings press release. Getting back to digital, revenue is captured and will be reported across four categories where Slb N.V. offers solutions for our customers: Platforms and Applications, Digital Operations, Digital Exploration, and Professional Services. Let me briefly describe each of these categories. Additional details can be found in question 11 to the FAQs at the back of our earnings release. The first category, Platforms and Applications, includes Slb N.V.'s cloud technologies, such as the Delphi and Lumi platforms, along with a suite of specialized domain-focused applications such as Petrel and Techlog, offered as SaaS subscriptions or perpetual licenses. These platforms and applications automate complex models, unlock data, and utilize AI and machine learning to reduce cycle time and improve the efficiency of workflows. This allows our clients to make better, faster decisions to improve their project economics and reservoir performance. With the exception of one-off license sales, revenue in this category is recurring in nature, underpinned by a globally installed software base built over four decades, and complemented by growing adoption of cloud-based capabilities and IoT-enabled solutions. As a result, Platforms and Applications has high retention rates and very limited churn. As illustrated by the fact that the net revenue retention rate was 103% at the end of the third quarter. This represents the percentage of recurring revenue retained from our existing customer base over the last trailing twelve months relative to the prior trailing twelve months. The second category is Digital Operations, which combines the unique strength of Slb N.V.'s core Oilfield Services and products with advanced digital technologies to deliver more reliable and more efficient field operations. By integrating connected solutions with performance live digital service delivery centers, customers gain real-time monitoring, remote decision-making, and automated execution across their workflows from autonomous drilling to automated well intervention. Revenue in this category is generated from the same client base as our core divisions and is therefore repeatable. Additionally, a portion of the revenue is recurring in nature. To incentivize the three core divisions, Well Construction, Reservoir Performance, and Production Systems, and digital to develop and promote this offering, the resulting revenue is recognized in both the respective core division as well as in the Digital division. This revenue is then eliminated in consolidation. The third category is Digital Exploration. Digital Exploration represents our Exploration Data business. Our differentiated library of site surveys and other subsurface data covers key exploration and producing basins worldwide. These licensed data sets are refreshed and reprocessed to benefit from the latest imaging algorithms and AI technologies enabled by high-performance cloud computing. Revenues are generated from one-time non-transferable license sales and are therefore non-recurring in nature. Professional Services makes up the fourth revenue category. This includes consulting and other services required to support our clients' digital transformations. These services include transition support from on-prem to cloud-based digital solutions, data cleanup and migration, and workflow automation, including deployment of solutions built using our global network of innovation factories. Professional services revenue is largely project-based, and repetitive engagements with the same customers are common. These services generate pull-through opportunities across the overall digital revenue streams. In addition to reporting revenue across each of these categories, we will also share annual recurring revenue or ARR on a quarterly basis. ARR represents the annual value of recurring subscription and maintenance revenue from platforms and applications along with the recurring portion of digital operations, providing a measure of predictable revenue over the next twelve months. Now that I have described our digital reporting structure in more detail, I will walk through our first quarter digital results. First quarter digital revenue of $658 million increased 11% sequentially, and adjusted EBITDA was $215 million, reflecting a margin of 32.7%, up 123 basis points sequentially. Third quarter sequential revenue growth was driven by robust sales of Digital Exploration, coupled with increased digital operations. It also reflects two months of activity from Champagnex, which contributed digital revenue of $20 million. Annual recurring revenue stood at $926 million at the end of Q3, representing year-on-year growth of 7%, highlighting our ability to continuously expand our offerings in platforms and applications and digital operations, as well as secure new customers. Turning to the core divisions, Reservoir Performance revenue of $1.7 billion declined 1% sequentially as higher activity in Europe and Africa was more than offset by lower revenue in The Middle East and Asia, primarily in Saudi Arabia. Pretax operating margin of 18.5% was essentially flat sequentially. Well Construction revenue of $3 billion was flat sequentially as higher revenue in offshore Vienna and North America were offset by lower drilling activity in Saudi Arabia and Argentina. Margins of 18.8% were essentially flat sequentially. Production Systems reported revenue of $3.5 billion increased $542 million or 18% sequentially. This reflects two months of activity from the acquired Champagnex Production Chemicals and Artificial Lift businesses, which contributed $575 million of revenue. Pretax operating margin of 16.1% declined 66 basis points sequentially, driven by an unfavorable geographic mix in completions and lower subsea margins. This decline was partially offset by the accretive margin contribution from Champagnex. On a pro forma basis, Production Systems revenue of $3.8 billion was flat sequentially, with lower completion sales offset by increased sales of valves and production chemicals. While it is still early days, we are quite pleased with the performance of Champagnex, which recorded another quarter of year-on-year revenue and margin growth, demonstrating the resilient nature of this production OpEx-based business. Going forward, these results will be further enhanced by the $400 million of annual pretax synergies that we expect to generate within the first three years after closing. We remain confident that we will be able to realize 70% to 80% of the synergies within the first twenty-four months of the transaction. As a result, we expect the transaction will be accretive to both margins and earnings per share on a full-year basis in 2026. Now turning to our liquidity. During the quarter, we generated $1.7 billion of cash flow from operations and $1.1 billion of free cash flow. These amounts include the payment of $153 million of acquisition-related items during the quarter. Capital investments, inclusive of CapEx and investments in APS projects and exploration data, were $581 million in the quarter. For the full year, we still expect capital investments, including the impact of Champagnex, to be approximately $2.4 billion. We expect that following our historical patterns, free cash flow will increase in the fourth quarter on the back of lower inventory as a result of year-end product sales as well as higher customer collections. The extent of the sequential step-up in free cash flow will largely depend on cash collections in certain countries. Finally, we repurchased $114 million of our stock during the quarter, which brings our total stock repurchases to $2.4 billion on a year-to-date basis. When combined with our $1.6 billion dividend commitment for the year, this will result in us returning a total of $4 billion to our shareholders for the full year. I will now turn the call back to Olivier. Olivier Le Peuch: Thank you, Stephane. Megan, I think we are ready to open the floor for questions. Operator: We will now begin the Q&A session. If you would like to ask a question, please press *1 on your telephone keypad. Your first question comes from the line of David Anderson with Barclays. David, your line is open. David Anderson: Hi, good morning. The IEA put out a report highlighting the increased global decline rates and the need to spend capital just to offset these barrels each year. Now that you have Champagnex in the fold, and you have created what looks to be the largest production-focused business and services, we think about chemicals, lifts, subsea, something like 40% to 45% of your revenue. Can you talk about how you see this part of your business growing? It's a little confusing when I think about your core business because this seems a little bit different. But how do you think about this part of your business growing, particularly with deepwater development ramping up? And I am just wondering, do you think the production should outpace the upstream-driven part of the portfolio through the end of the decade? Is that the right way to think about it in terms of the opportunity set? Olivier Le Peuch: I think the right way to think about it first is what the customer is looking for. And I think as you pointed out, it's clear that the natural decline that is weighing on the industry has to be offset not only by infill drilling and new developments, but there is increased recognition by the customer that production and recovery is a new theme that needs investment, technology, innovation, integration, and capability to lift and enhance production and hence recovery through technology and disruptive solutions that the industry needs. So we are positioning ourselves with this acquisition of Champagnex not only to address both the OpEx and the CapEx market as a larger market and hence as a larger share of the wallet of our customers, but also as a more resilient space as the OpEx has indeed been growing at a higher pace than CapEx lately and will continue to do so. But more importantly, I believe, is that we are able to unlock new solutions because we have the broadest portfolio with this addition. We have the broadest lift portfolio, the largest intervention portfolio in the market, and we have now science in chemistry and capability in the industry that not only touch the production from the wellhead to the process but also the reservoir. And I think when combining this with established integration capability of digital, I think we have something that the industry is looking for. And I think the customer feedback we are getting is actually extremely good because they are all increasingly focused on production recovery as a way to add to their production target. And it's an "and," not an "or." The end of upstream exploration development will be complemented by production recovery. It's a market that will expand long-term, and in this market, we believe we have a leadership position that we have established. David Anderson: And so shifting over to digital, thrilled to see all the breakout here. I have a million questions here. I am going to try to keep it to a handful of things just to focus on. Stephane, you talked about the four different segments here. I was wondering if you could kind of just talk a little bit about how we should be thinking about those four segments, how they should be trending, and what the drivers are for those four segments. I guess the exploration part, but kind of the rest of it. And then secondarily, you highlighted $900 million in recurring revenue year-to-date, up 7% from last year. I am just curious, are you expecting this to accelerate? Did you think it was going to grow more or less this year? And how should we think about that going forward? Stephane Biguet: Thanks for all the questions. Indeed, it's a lot of additional info. So the ARR above $900 million already, yes, it's growing, and we clearly anticipate this to continue growing as we not only offer more to our existing customers but also secure new customers. So probably going into Q4, we can be looking at probably high single-digit growth for ARR. And with the kind of number you see now, we are not too far, I believe, from getting into next year and getting to $1 billion of ARR, which really provides a very good baseline revenue. For the rest of your questions, I will pass it to Olivier. Olivier Le Peuch: Yes. No, thank you, Stephane. No, David, clearly, there are different dynamics for the four buckets. But I think if you have to look at the platform application, this is where customer adoption and expansion of our offering will give us the opportunity to continue on our journey to accompany our customers across the subsurface, across the production drilling, and across their data and AI capability. So the expansion of AI into that space, and you have seen several announcements during the earnings press release this morning showing that this will be a driving force for further growth. The deployment of clouds, both hybrid and public clouds, continuation of our platform transition that we have seen, and the continuing adoption of the capability we keep adding to our offering, the application we have seen. So this is all about customer adoption, technology transition from desktop to cloud to AI. So the digital portion is all driven by adoption for everywhere we touch, for every product and equipment we deliver, we will continue to add digital services, automation, and autonomous capability to complement this offering. So this would be added to the core. It's jointly to the core, but it's an exciting adjacent space to the core that we grow and fast faster-paced growth ahead of the core. You have seen this quarter, you have seen the year on year, and we are talking about 50% year on year growth. This is remarkable. The digital exploration is linked to the exploration market, but it's increasingly becoming digital because the customer recognizes they need to use more digital insights before they drill the first well. Hence, it will be linked, and it will be up and down, highly variable from quarter to quarter. But yet trending, in our opinion, positively. And Professional Services, I think, have to support the three buckets. And have the capability we put inside the customer office ahead of the on large engagements with consulting engagements or during the transition of that data space into our offering. This is what drives this. So it's different drivers, but altogether, we believe over time, this will all be positive, leading to each other to create sustainable growth going forward as we say outpacing CapEx spend. David Anderson: Appreciate the insight. Thank you. Olivier Le Peuch: Thank you. Thank you. Operator: Your next question goes to the line of James West with Moelis Research. James, your line is open. James West: Thanks. Morning, Olivier and Stephane. Olivier Le Peuch: Good morning, James. James West: So curious on two key markets here for you guys where you have a nice dominant position that I would love to get your thoughts on. First is deepwater. As we look out into 2026, obviously, it's been very resilient although some white space, but it looks like we are going to kick off a lot of campaigns next year. Just love to hear your thoughts on how we should think about that unfolding and Slb N.V.'s position? Olivier Le Peuch: No. First and foremost, I think deepwater remains here to stay and is here to grow as a market. It has several economics. And it is seen as a place to invest to unlock new resources. You see it's not only development FID, but it's also exploration. The border is going on and is steady and is growing. So now if we look at activity and the schedule of the rigs that we foresee going forward, actually, we are foreseeing that white space that developed in the last eighteen months is starting to dissipate. And we believe from a rig activity drilling activity, we may say that we are at the bottom this quarter in 2025. And we expect, although very gradual, we expect strengthening of the rig activity to support this both exploration and development FID coming in the pipeline. With a gradual strengthening and an uptick in the later part of the year that is currently scheduled and strengthening further in 2027. And we see it from the call from our customers to prepare the subsea pipeline that corresponds. We are happy with our Subsea position. We will be closing the year with growing both booking and backlog to be ahead of last year both and to place us to a position where Subsea should grow not in 2026, materially in 2027 as a consequence of this pipeline. So we are confident that it's on the horizon. And I think we will start to see the strengthening happening step by step. James West: Got it. Okay. That's great. Thanks for that Olivier. And then the other market, the Kingdom Of Saudi Arabia, has gone through some gyrations here in recent quarters, but it seems to me like at least that we may have found somewhat of a bottom and maybe looking to add activity next year. Is that consistent with what you are seeing in that market? I know it's a sizable market for yourself. Olivier Le Peuch: No, I would comment on the activity. I think it is our assessment indeed that we have reached a stabilized activity, if not bottom, in the current level of activity we see. And we are anticipating a likely rebound in the near to mid-term. And directionally, we are anticipating that we should expect increased activity in 2026 for both gas and oil for different drivers. Gas continues to support the expanded capacity commitment to 2030 and then commercial Jafurah and other assets in the country. And for oil, in relation to supporting the extra supply that is delivered to the market and assurance of supply through intervention and possibly to some additional oil drilling as well. James West: Great. Thanks, Olivier. Olivier Le Peuch: Thank you, James. Operator: Thank you, James. Your next question comes from the line of Scott Gruber with Citi Research. Scott, your line is open. Scott Gruber: Yes. Good morning. I want to ask about the data solutions business. Morning. The data center solutions business, it's growing pretty quickly here. Actually becoming really sizable. Can you talk about the strategy for the business? Is the aim here to develop a skill set and take it global, you know, as data center construction goes global? And overall, how do we think about the growth for the data center business in '26 and beyond? Olivier Le Peuch: Yes. I think it's early days, and we are very pleased with the market position we gained at a very fast pace. I think based on our first relationship and partnership with that hyperscaler gave us the opportunity to step into that market, building on our manufacturing and generating process technology and global supply and logistics that I think we have put to make it a reality. Now going forward, yes, the ambition is to expand beyond The U.S. footprint we have established. And we already have a pipeline of expansion here in Asia that has been agreed. And to also expand to more customers and diversify hyperscalers and collocators as we call them. To complement our offering. But yes, we will add technology. We will add the critical technology that makes it unique to go beyond the first step we have. So yes, we have an ambition to grow it. To expand customers, to expand geography. To broaden our offering. And remember, this is clearly not driven by oil and gas customers, it is driven by hyperscalers partners. That reach out to us to help them respond to this AI boom and data center growth that I think will last beyond this decade. Clearly. Scott Gruber: Got it. No, very interesting. It's a bit of a different business. Is it fair to assume that there's little CapEx and balance sheet commitment with the business? Or is there an investment needed to grow this business? Olivier Le Peuch: Absolutely. The investment is competencies that I think we have at scale in the organization. It's technology, creating a reputable scalable modular solution that differentiates us for fast deployment. But it's not CapEx, no. I think we are not this is a very very low CapEx intensity business. That we have set up here. Scott Gruber: Excellent. We will continue to watch. Thank you. Olivier Le Peuch: Thank you. Operator: Thank you, Scott. Your next question comes from the line of Josh Silverstein with UBS. Josh, your line is open. Josh Silverstein: Yes. Hi, everyone. Thanks for the new digital details here. Like the 7% growth in the annual recurring revenue. Is this growth predominantly coming from new customers or growing the new customer base, the existing customer base? Obviously, the 103% net retention rate shows how sticky the revenue is, but I am curious about if you need to keep adding customers to drive that growth going forward? Olivier Le Peuch: I think we already have 1,500 customers, and I think we have a lot to grow with each customer we have. But yes, we are adding new customers in every new space where we develop technology. I think the digital operation, I think, is a discovery for many customers, and we are doing it every day. The platform application, I think the new offering Lumi and Lumi Data and AI platform, I think, is being delivered fresh from launch last Q4 to new customers, and as adoption has been already more than 50 customers in less than a year. I think it's remarkable. So I think we are very proud of this. So it's a combination of enhancing the adoption within customers, developing enterprise solutions, and enhancing the consumption and delivering more to an existing customer set. And also expanding and broadening our customer access for part of the offering that we were more confined to a few customers in the past. So I think we are broadening our offering with more access across all our customers, and we are strengthening for existing large customers, and you have seen announcements in the last, and you will see more announcements coming soon on customer adoption, large customer adoption. That reflects our success with those customers. Josh Silverstein: Great. And then just as a follow-up, I wanted to go back on the EBITDA margin comments that you guys have made. You highlighted it was around 32% for the first nine months, but I think you said you expected to reach 35% for the full year, which implies a very large jump towards 45% in the fourth quarter. So I wanted to just make sure that was right and then where you think margins can kind of go to if we look at 2026 versus 2025? Olivier Le Peuch: Yes, yes. We I confirm we did say that we think we can reach 35% EBITDA margin for the full year. And yes, it's a step up for the fourth quarter. If you look at actually at the pro forma statements we provided for the we include the digital division by quarter, back to 2024. This variability and seasonality is quite common. Actually, we always start very low in the first quarter, and margins as well as revenue, by the way, grow quarter after quarter. So Q4 is always the best revenue quarter and is always the best EBITDA quarter as well. So we are pretty confident we can get there. If you look into the future, 35% EBITDA margin is a good baseline to start from basically. By the way, if I if I can add something we've not discussed before on the mass EBITDA margin, except for the digital exploration part of it, is a very good proxy for free cash flow. There's obviously no CapEx in the digital business, again, except for exploration data. Josh Silverstein: Great. Thanks, guys. Olivier Le Peuch: Thank you. Operator: Thank you, Josh. Your next question comes from the line of Arun Jayaram with JPMorgan. Arun, your line is open. Arun Jayaram: Yes, that was my question on kind of digital capital intensity of that segment. So I was just wondering about as you think about, you know, longer-term growth from that segment, I mean, you mentioned that you think that it could help outstrip the core business by double digits. Was wondering if you could maybe elaborate on that commentary on growth from digital. Olivier Le Peuch: I think there are two comments to it. One, as I said, is the adoption of our customers. Existing and new customers we developed in the last question. I think that the market expansion itself, digital is being seen as a critical mission-critical for many customers to transform the way they operate. To add productivity, to add efficiency to their geoscientist engineer and asset team. And I think this trend is here to stay. And we are leveraging our market leadership to leverage and to continue to grow our market position into that supporting our trend. But secondly, and I think more importantly or equally importantly, is our ability to continue to add digital operation capability digital growth, and hence this one will outperform the core because the principle we are setting here is essentially for every service we provide, for every well site we touch, for every equipment we deliver, we will progressively add building on our platform and connecting to our life performance center will add a set of digital services and enhance this offering that enhances the operation, the performance, and gets the customer to create more value. So this will ultimately and mechanically be going at a higher rate than the core because it will be the market penetration of digital into our core business. So you add this to the underlying trends of digital transformation with the earnings that we have witnessed in AI, I think you get the combination that gives us the confidence that we will clearly outperform the market growth of CapEx and outperform the core as a combination. Arun Jayaram: Great. One follow-up, Olivier. I wanted to see if you could elaborate on your commentary on what would happen in the recovery. Your commentary suggests that you expect that international would lead in a recovery. Historically, it's been North America. So I was wondering if you could maybe just elaborate on that thought. Behind that commentary. Olivier Le Peuch: Yes. I think we believe that tightened economics that we are under, and we believe we don't see them necessarily changing very much. We see them improving slightly as soon as the demand-supply rebalance. But under those conditions, I think we believe that the situation in North America is such that we don't anticipate significant gain of activity based on the efficiency. Practical based on, I would say, the challenging economics of some basins and also of the continuing consolidation happening in this market. By contrast, internationally, you have several trends that are here to stay. I think that deepwater has a very solid pipeline that drives international growth. You have gas and as a security of supply, that has led to capacity deployment, exploration capacity expansion, and non-commercial development internationally. And you still have the commitment to oil capacity expansion, if not the necessity to offset the decline in many international locations and aging basins that combine to make international, I would say, getting a better outlook and the first leg for the rebound as activity strengthens. Arun Jayaram: Great. Thank you.
Operator: Greetings, ladies and gentlemen, and welcome to the Truist Financial Corporation Third Quarter 2025 Earnings Conference Call. Currently, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this event is being recorded. It is now my pleasure to introduce your host, Mr. Brad Milsaps. Brad Milsaps: Thank you, Betsy, and good morning, everyone. Welcome to Truist Financial Corporation's Third Quarter 2025 Earnings Call. With us today are our Chairman and CEO, William Rogers Jr., our CFO, Mike Maguire, our Chief Risk Officer, Brad Bender, as well as other members of Truist's Senior Management Team. During this morning's call, they will discuss Truist Financial Corporation's third quarter results, share their perspectives on current business conditions, and provide an updated outlook for the remainder of 2025. The accompanying presentation, as well as our earnings release and supplemental financial information, are available on the Truist Investor Relations website, ir.truist.com. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slides two and three of the presentation regarding these statements and measures, as well as the appendix for appropriate reconciliations to GAAP. With that, I'll turn it over to William. William Rogers Jr.: Thanks, Brad, and good morning, everybody, and thank you for joining our call today. Before we discuss our third quarter results, let's begin, as we always do at Truist, with purpose on slide four. At Truist, our purpose to inspire and build better lives in communities guides every decision. It's the foundation of our strategy and the reason our fantastic teammates show up every day with conviction and care. We believe purpose drives performance, which is why during the third quarter, we announced a strategic investment designed to accelerate our performance by building better lives, deepening relationships with existing clients, and attracting new clients in some of the strongest markets in the country. We're investing in our communities by building 100 new insight-driven branches in high-growth markets, renovating more than 300 locations, enhancing digital capabilities, elevating marketing, and hiring premier advisors to serve clients with more complex financial needs. These new branches are designed for smarter client engagement with advanced AI-driven technology and dedicated premier advisor spaces, all aimed at helping clients achieve financial success and further strengthening our presence in these dynamic communities. These investments are part of our overall strategy to improve our profitability, accelerate growth by deepening relationships, and delivering a more personalized, technology-enabled experience to new and existing clients, which I'll discuss throughout today's call. Now let's turn to our results on slide five. For the third quarter, we reported net income available to common shareholders of $1.3 billion, or $1.04 a share, which included $0.02 a share of restructuring charges primarily related to severance. At a high level, our strong performance in the third quarter reflects the diversity of our business model and the execution of many of our strategic growth and profitability initiatives that we've been discussing for the last several quarters. These initiatives include accelerating growth through the addition of new clients and deepening existing relationships in areas like payments, wealth, and premier banking. We're executing our plan while maintaining our expense and credit discipline and returning capital to shareholders. During the third quarter, average loan balances increased 2.5%, as we saw broad-based growth across our wholesale and consumer segments, driven by increased loan production and new client acquisition. Average deposit balances did decline late quarter due to two large M&A-related client deposits that were withdrawn in mid-July that we've discussed previously. Excluding the impact of these deposits, average client deposits increased during the quarter. Adjusted non-interest income increased 9.9% late quarter to more than $1.5 billion due to strong investment banking and trading income and strong wealth management income. The third quarter represented our best non-interest income quarter since the divestiture of TIH. Adjusted expenses remain well controlled and were up just 1% late quarter, which, along with a strong revenue performance, helped drive 270 basis points of late quarter positive operating leverage. We also maintained strong asset quality metrics as net charge-offs declined both on a late quarter and a year-over-year basis. Finally, we remain in a strong capital position, which allowed us to support our balance sheet growth and return capital to shareholders. During the quarter, we returned $1.2 billion of capital to shareholders through our common stock dividend and the repurchase of $500 million of our common stock. We plan to target approximately $750 million of share repurchases during the fourth quarter. In summary, our third quarter results were strong as the combination of improved revenue, discipline expense and credit management, and robust capital return drove 130 basis points sequential improvement in our ROTCE to 13.6%. We do still have a lot of work to do. Our recent performance and the momentum I see across the company every day give me confidence in our ability to reach a 15% ROTCE in 2027. I'll share more on how we plan to get there later in the call. Before I hand the call over to Mike to discuss our quarterly results, I want to spend some time discussing the progress we're making on our strategic priorities and the positive momentum we're seeing within our business segments and with our digital strategy on slide six. Let me first start with consumer and small business banking. I'm encouraged by another solid quarter of consumer loan and deposit growth, net new checking account growth, and progress with our premier banking clients as we deepened relationships and acquired key new clients and households through digital and traditional channels. Net new checking account growth remained positive in the third quarter, with over 20,000 new consumer and small business accounts added, a key metric that reflects both the strength of our brand and the long-term growth potential of our company. We're attracting younger clients with greater median incomes and higher average balances, which aligns directly with our strategy to build enduring, profitable relationships early in the client lifecycle. Average consumer and small business deposit balances increased modestly late quarter and 1.9% versus the third quarter of 2024. Average loan balances increased 2% late quarter and 7% versus the third quarter of 2024, driven by a significant increase in production. Premier banking continues to be a strategic growth engine. We saw significant increases in loan and deposit production per banker, reflecting deeper client engagement and improved productivity. Our digital strategies also deliver results. We continue to accelerate our performance with enhancements, increased production, and accelerated client engagement, positioning us to scale efficiently and meet evolving client expectations, as seen with the success of our AI-enabled chat function, Truist Assist. Digital transactions rose 7% year over year, and digital channels accounted for 40% of new to bank clients. Notably, Gen Z and Millennials represented 63% of this growth, a strong signal that our digital-first approach is resonating with the next generation of Truist clients. In wholesale, I'm encouraged by this quarter's loan growth, improvement in investment banking and trade revenue, and progress in key focus areas like payments and wealth. Average wholesale loans increased 2.8% late quarter and 4.8% year over year, driven by growth from new and existing clients and increased production. Seeing that growth was broad-based across industry banking verticals, as this strategy continues to gain traction. We've seen consistent quarterly growth in balances, fueled by new client acquisition across diverse sectors, supported by strategic talent investments. Year to date, we've onboarded twice as many new corporate and commercial clients compared to the same period last year, and we're seeing higher revenue per client, a clear sign of deepening relationships. In wealth, net asset flows remain positive, and year-to-date AUM from wholesale and premier clients is up 27% versus the prior year, reflecting strong advisor productivity and overall client trust. Our payments business continues to scale, launching new solutions that deliver speed, simplicity, and security to our clients. These enhancements, along with targeted talent investments, drove an 11% year-over-year increase in treasury management revenue. Now, let me turn it over to Mike to discuss our financial results in a little more detail. Mike. Mike Maguire: Thank you, Bill, and good morning, everyone. I'm going to start with our performance highlights on slide seven. We reported third quarter 2025 GAAP net income available to common shareholders of $1.3 billion, or $1.04 per share. Included in our results are $0.02 per share of restructuring charges, which are primarily related to severance. Now, moving to third quarter results, adjusted revenue increased 3.7% late quarter due to 9.9% growth in non-interest income and 1.2% growth in net interest income. Adjusted expenses increased 1% late quarter, primarily due to higher personnel expenses related to incentives and strategic hiring efforts. Our asset quality metrics remain solid as net charge-offs declined on a late quarter basis and on a year-over-year basis. Our CET1 capital ratio remains stable at 11%, and our CET1 ratio, including AOCI, improved by 10 basis points to 9.4%. I'll now cover loans and leases on slide eight. Average loans held for investment increased by 2.5% on a late quarter basis to $320 billion due to growth in both commercial and consumer loans. Average commercial loans increased by $4.8 billion, or 2.6%, due to $3.7 billion of growth in CNI loans and $1.5 billion of growth in CRE loans, partially offset by lower commercial construction loan balances. In our consumer portfolio, average loans increased $3 billion, or 2.5% late quarter, due to growth in other consumer, residential mortgage, and indirect auto. The average loan yield remained relatively stable on a late quarter basis. Moving now to deposit trends on slide nine. Average deposits decreased $3.9 billion sequentially, or 1%, due to the mid-July withdrawal of $10.9 billion of short-term M&A-related client deposits that we've discussed previously. These deposits impacted the second quarter average balance by $10.9 billion and the third quarter average balance by $1.7 billion. As Bill mentioned, many of our top business and growth initiatives are aimed at driving core client deposit growth. As a result, we're seeing accelerating momentum with clients in consumer and wholesale that will drive improved client deposit growth in the fourth quarter and in 2026. As shown in the chart on the bottom right-hand side of the slide, our cumulative interest-bearing deposit beta improved from 37% to 38% on a late quarter basis. Based on our outlook for stronger client deposit growth in the fourth quarter and our expectation for two additional 25 basis point reductions in the Fed funds rate in October and December, we remain on track and confident in our ability to drive our interest-bearing deposit beta to the mid-40% area in the fourth quarter. Moving to net interest income and net interest margin on slide ten, taxable equivalent net interest income increased 1.2% late quarter, or $45 million, primarily due to one additional day in the third quarter, loan growth, and fixed-rate asset repricing. Our net interest margin declined one basis point late quarter to 3.01%. We expect net interest income to grow approximately 2% on a late quarter basis in the fourth quarter due to continued loan growth, growth in client deposits, and a reduction in deposit costs following the September reduction in the Fed funds rate and our expectation for the additional two cuts during the fourth quarter. These positive factors should result in net interest margin expansion in the fourth quarter as well. As you can see on the top right-hand side of the slide, we updated our outlook for the fixed-rate asset repricing. We expect to reprice approximately $11 billion of fixed-rate loans and approximately $3 billion of investment securities during the fourth quarter. Based on our view of interest rates for the remainder of 2025, we anticipate that new fixed-rate loans will have a run-on rate of around 7% compared with a run-off rate of closer to 6.4%. We may allocate a portion of the cash flows from the investment portfolio to support loan growth in the fourth quarter versus securities. We also updated our swap portfolio disclosure on the bottom right-hand side of the slide. As of September 30, we had $105 billion of notional received fixed swaps and $28 billion of notional paid fixed swaps compared with $90 billion and $29 billion, respectively, at June 30. During the quarter, we increased our notional received fixed swap position by adding additional forward starting received fixed swaps as part of our overall strategy to maintain a relatively neutral position to changes in rates relative to our baseline view. Turning now to non-interest income on slide 11, adjusted non-interest income increased $140 million, or 9.9% versus the second quarter of 2025, due to strong growth in investment banking and trading income and wealth management income, partially offset by lower other income. Investment banking and trading income increased $118 million, or 58% late quarter, to $323 million. We saw improved performance across our platform with strength in debt capital markets and trading revenue. Based on our current pipeline and overall strong market activity, we remain optimistic about investment banking and trading income in the fourth quarter as well. Wealth management income also experienced a strong quarter, with fees up 7.5% late quarter due to higher market values, positive net asset flows, and new client acquisitions. On a like quarter basis, adjusted non-interest income increased $75 million, or 5.1% compared to the third quarter of 2024, primarily due to higher wealth management income and higher service charges on deposits due to greater treasury management revenue. Next, I'll cover non-interest expense on slide 12. Adjusted non-interest expense, which excludes the impact of restructuring charges, increased 1% late quarter, due primarily to higher personnel expenses related to higher incentives and strategic hiring efforts. On a year-over-year basis, adjusted expenses remained well controlled and were up 2.4% due primarily to higher personnel expense. Moving now to asset quality on slide 13. Our asset quality metrics remain strong on both a late and like quarter basis, reflecting our strong credit risk culture and the proactive approach we've taken to quickly resolve problem loans. Net charge-offs decreased three basis points late quarter to 48 basis points, and were down seven basis points versus the third quarter of 2024, as we benefit from lower CRE losses on both a late and like quarter basis. Our loan loss provision exceeded net charge-offs by $51 million, and our ALL ratio held steady at 1.54% of total loans. Non-performing loans held for investment increased nine basis points late quarter to 48 basis points of total loans. Second quarter non-performing loans of 39 basis points benefited from the resolution of several problem loans, resulting in NPLs declining to multi-quarter lows. As you can see on the slide, the third quarter of 2025 level remains stable compared with the third quarter of 2024, which reflects a return to a more recent level. The late quarter increase was driven by higher non-performing CNI and construction loans, partially offset by a decline in CRE non-performing loans. Over the last week, there have been a number of questions about exposures to certain borrowers, including Tricolor and First Brands. Just to address it, Truist does not have any exposure to Tricolor. However, we do have exposure to First Brands, but this exposure is fully reflected in our loan loss reserve and our updated and improved 2025 net charge-off guidance. Now, I'll provide additional color on our guidance for the fourth quarter of 2025 and for the full year on slide 14. Looking into the fourth quarter of 2025, we expect revenue to increase by approximately 1% to 2% relative to third quarter revenue of $5.2 billion. We expect net interest income to increase approximately 2% in the fourth quarter, primarily driven by loan growth and lower deposit costs. We expect non-interest income to remain relatively stable late quarter. Adjusted expenses of $3 billion in the third quarter are expected to remain relatively stable on a late quarter basis. As it relates to buybacks, as Bill mentioned, we plan to target $750 million for the fourth quarter. For full year 2025, our outlook for revenue and expense growth is unchanged. Based on our current outlook for net interest income and non-interest income in the fourth quarter, we would expect annual revenue to come in around the midpoint of our 1.5% to 2.5% range. In terms of our outlook for adjusted expenses, we continue to expect full year 2025 adjusted expenses to increase by approximately 1% in 2025 versus 2024. On asset quality, we expect net charge-offs of 55 basis points in 2025, compared with our previous guide of 55 to 60 basis points. Finally, we expect our effective tax rate to approximate 17.5% or 20% on a taxable equivalent basis in 2025. I'll now hand it back to Bill for some final remarks. William Rogers Jr.: Thanks, Mike. As I mentioned earlier in the call, our recent performance, coupled with the strong momentum I see every day inside our company, reinforces my confidence in our ability to accelerate growth and profitability over the near term. As you can see on slide 15, we expect to grow revenue in 2026 at a higher rate than we will grow revenue in 2025. Although it's a little too early to provide specifics on the 2026 outlook, I'll say at this point we expect the rate of revenue growth in 2026 to more than double versus our growth rate this year. We also expect to generate more operating leverage in 2026 than we will generate this year. In addition, we plan to increase our share repurchase program in 2026 to $3 billion to $4 billion, which is above the 2025 level, as we'll now target a 10% CET1 ratio by the end of 2027. Finally, these drivers and others should also accelerate our EPS growth rate beyond what we'll achieve in 2025. As I've discussed today, we're seeing solid progress in many of our key strategic focus areas, all of which I expect to accelerate over the near term and help us achieve our previously stated goal of a mid-teens ROTCE, which I'll discuss in more detail on slide 16. As shown on slide 16, we're targeting a 15% ROTCE in 2027, a goal that reflects our confidence in Truist Financial Corporation's long-term earnings power and strategic direction. We see multiple paths to stronger revenue and profitability. With focused execution, we believe these initiatives will deliver meaningful improvement over the next two years. The key drivers outlined on the right side of the slide include continuing to execute against our top business growth and profitability initiatives that I discussed on slide six, continuing to drive positive operating leverage, realizing the ongoing benefit from fixed-rate asset repricing and accelerating share buybacks. Much of our profitability improvement and growth potential is rooted in deepening relationships with existing clients, particularly in wealth management, payments, premier banking, investment banking and trading, and corporate and commercial banking, where we're already experiencing strong momentum. In summary, I'm as optimistic as ever about Truist Financial Corporation's future. I'm encouraged by the momentum we're seeing across the businesses and remain focused on executing with discipline, delivering for our clients, and creating value for our shareholders. I want to pause and thank all of our teammates for their incredible focus, their productivity, and their purpose-driven commitment to move Truist Financial Corporation forward. As always, we appreciate your continued interest and support, and we look forward to updating you on progress in the quarters ahead. With that, Brad, let me hand it back over to you for Q&A. Brad Milsaps: Thank you, Bill. Betsy, at this time, will you please explain how our listeners can participate in the Q&A session? As you do that, I'd like to ask the participants to please limit yourselves to one primary question and one brief follow-up in order to accommodate as many of you as possible today. Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. In the interest of time, we ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from John Pancari with Evercore. Please go ahead. John Pancari: Good morning. William Rogers Jr.: Morning, John. Just on your color that you gave around 2026, I appreciate all the detail there, particularly around the revenue expectations and the ROE. On the revenue front, for revenue growth to more than double, can you possibly help us break that out a little bit? How are you thinking about the spread revenue component versus the fee revenue side? Maybe within the spread revenue side, how you would think about the pace of balance sheet growth as you look at 2026 that would underlie that? William Rogers Jr.: Yeah, John, I'll start with that. Clearly it's a component of all of the cylinders hitting, you know, so NII growth is a key part of our revenue. We have continued loan growth. We've got really good momentum on that side. I think we'll continue that at a pace that's not too far off from where we are today. As it relates to the deposit side, I think we're in a different part of the J curve there. That's accelerating. You saw some of the activity on the client side and some of the momentum we see headed into the fourth quarter. There's some seasonality in that. We'll have both loan and deposit growth. Deposit growth better than this year and loan growth probably a little more consistent. On the fee income side, I think also just continuing the fee income momentum that we've established in the last couple of quarters. John Pancari: Okay, great. How do you think about the breakout of that revenue growth when you look at overall spread revenue versus the pace of revenue growth you would see on the fee side? How are you thinking about that? Brad Milsaps: You know, John, we're trying to avoid being, we're shaping more than guiding. I think for 2026 at this point, obviously still in the planning sort of cycle, I would say we wouldn't expect a remix, you know, spread versus fee income next year. I think, with that in mind, it's likely that fees are going to grow at a faster rate than NII will, but both have strong momentum going into next year. John Pancari: Okay, great. Thank you. Lastly, I know you had talked about the degree of positive operating leverage accelerating over this year. Any way to help us frame that as well? I know you don't want to be too specific, but just trying to gauge how much of efficiency improvement is baked in in terms of thinking about the momentum that you could see as you head into 2026. Brad Milsaps: I'm afraid I'm going to let you down again. We don't want to be too specific, John, but I think the intention of the slide that Bill referenced was that we feel great about at least twice the revenue growth operating leverage this year. We expect to be around 100 basis points. It should be higher than that next year based on what we see right now. Those factors combined should drive EPS growth higher as well, and the buybacks obviously helping with the ROTCE journey. I think that was the intent there. Sorry not to be more specific at this point. John Pancari: No, that's fine. We can go off the graphic, I guess, on page 15 and make an estimate based on that. Thank you. I appreciate the color. Brad Milsaps: Yeah, you got it. Operator: The next question comes from Scott Siefers with Piper Sandler. Please go ahead. Scott Siefers: Morning, guys. Thank you for taking my question. Mike, I was glad to see the interest-bearing deposit costs come down a couple basis points. That was a nice sort of inflection. You sound optimistic on the outlook into the fourth quarter. Bill, your comments were all very constructive on overall growth into next year. I'm just curious if you can expand upon the options you see with deposit pricing now that the Fed is lowering rates again and what gives you confidence on that growth momentum into next year as well. William Rogers Jr.: Mike, I'm sure you do the pricing and I'll do the growth. How about that? Brad Milsaps: Yeah, that's fine. Good morning, Scott. On the pricing side, we feel pretty good about, you mentioned, we saw a touch of momentum in the third quarter. We actually, as you'll recall, back in the second quarter, we were actually hoping and maybe expected to be closer to 40% on the beta in the third quarter versus the 38% we got. The good news is we're off to a pretty good start in the fourth quarter as well. I mentioned we thought we could get to sort of the mid-40%, and that takes into consideration some of the momentum that we are seeing now based on the September cut as well as the October cut, which is going to be more important, of course, for the year than December. That should drive some nice benefit for us in terms of both NII and our margin in the fourth quarter. We would expect that to continue into 2026. It's not just, some of that's taking advantage of some of the psyche and getting some help on rates, but there's also some mix that we're focused on. Maybe that's a good segue to talk to Bill about some of the momentum we're seeing on the balances with core client deposits. William Rogers Jr.: Yeah. Mike, you talked a little bit about the pricing side and increasing betas. On the momentum side, we saw some end-of-period growth in client deposits. We see existing momentum in some key markets. Think about Miami, DC, and some others from us. Really accelerated growth in markets like Pennsylvania and Texas, where we're growing at disproportionately faster rates. I look at sort of all the leading indicators of deposit growth. If you think about for us, the leading indicators are things like net news. We're bringing in a lot of new clients that we have a chance to deepen relationships with. Those balances are higher than they've historically been. We look at the premier production. We talked about that. Premier production's up almost 30%. They're in, got the engine running there. Then look at treasury management pipelines. Their pipelines are up really significantly. Treasury management up double digits. New clients and wholesale, 60% of our new clients have awarded us a payments product. Some of those haven't funded yet. I look at all these as the leading indicators of deposits, enhanced marketing, onboarding. I talked about the branch commitment long term. We're also building not only for the short term within this cycle, but ensuring that we've got really good market presence and capacity to grow over the long term in the deposit cycle. Hopefully, that's helpful. Brad Milsaps: Yeah, no, that's great. I appreciate all that. Maybe separately, Bill and Mike, I think you both have been pretty clear that you all are focused organically. Just curious for any updated thoughts or if your thoughts on them may change at all now that the ground is sort of shifting a bit in the large regional space, given some of the transactions we've seen over the last 90 days or so. William Rogers Jr.: Yeah, I mean, we think the best place for us to focus is Truist. If we think about the opportunity to increase shareholder value and provide really great return, it is for us to really stay focused and highlighted on Truist. That being said, we're just like ultra competitive right now. I mean, we've never been more competitive. We've got, you know, great teammates on the field. We've got product and capability. We've outlined this growth pattern, you know, where we are today to the return. I am all Truist all the time. Brad Milsaps: Perfect. Okay, good. Thank you guys very much. I appreciate it. Operator: The next question comes from Erika Najarian with UBS. Please go ahead. Erika Najarian: Hi, good morning. In terms of the walk, Bill, to 15% ROTCE, what do you think is the, you know, appropriate efficiency ratio underneath the surface? I'm sure we could all do the math, but just wanted to hear from you in terms of where you want this efficiency ratio to go from the 55.7% as you think about the medium term. You mentioned that you're being ultra competitive. There could be, you know, deal making if you're super focused on Truist could also lead to opportunities for you. How do you balance optimizing efficiency with potentially being more aggressive at taking advantage of some of the consequences and fallout from the deal making in your footprint? William Rogers Jr.: Yeah, Erica, on the efficiency ratio side, that's not going to be the biggest driver of the walk. The biggest driver, we'll have some marginal improvement in the efficiency ratio, but quite frankly, we're not going to guide to that or manage to that because to your point, we have a lot of opportunity for growth. That's where you're going to see us continuing to invest. We outlined those opportunities in CSBB and wholesale, and I think they're significant. We're not investing in response to, we're investing relative to opportunity. We've got a lot of opportunity. We want to be the most competitive player in our markets. That's, and we're going to continue to invest in that regard. We're going to be driven by growth. We're going to be driven by operating leverage, and we're going to be driven by return. Erika Najarian: Got it. Just a follow-up question for Mike. As we think about more than doubling your revenue growth in 2026, that's clearly better than 3% to 5%, which is the double of what the 2025 revenue growth is. How should we think about the trajectory of the net interest margin in that context relative to the cuts in the curve? Brad Milsaps: Yeah, Erika, just to clean it up a little, if you look at our outlook, you know, we mentioned in our prepared remarks that we expect revenue to grow in the fourth quarter, you know, 1% to 2%, which puts us at the midpoint of our range, which is 2%. As it relates to the net interest margin, you know, we would expect progress in the fourth quarter with the cuts in October and December that I mentioned to Scott a moment ago. We would expect to see continued progress in 2026 and in 2027. Again, there's a lot of assumptions around the backdrop there, but with the operating environment that we see today and with the curve as we see it today, we'll make progress in 2026 towards that kind of three-teens number that I've talked about a little bit. I think we're there in 2027. That'll be an important driver, you know, as Bill mentioned, in terms of the business initiatives and the ROA profile that should continue to evolve and improve that net interest margin, which again, it's going to be driven by a number of things. You know, Erika, it's going to be the sort of structural under-earning on the balance sheet around fixed-rate asset repricing. We expect, you know, a profitable loan and core client deposit growth to help, you know, improve and drive the margin. We're hiring bankers, expanding businesses. I think we've got a lot going for us as we think about NII and NIM trajectory over the next couple of years. That's going to be a really important part of the ROA improvement story, which coupled with a touch of improvement on efficiency, as Bill mentioned, plus, you know, the fee business momentum we have, plus a little bit of buyback, we think is what gives us the confidence that 15% is going to be achievable in 2027. Erika Najarian: To clean up the message, just because it's a very crowded earnings day, I want to make sure we're taking away the right thing. When Bill said the rate of revenue growth to more than double in 2026 versus 2025, are we looking at the full year 2025 outlook on slide 14? It's more than double 1.5% to 2.5%, not more than double 1% to 2%. I know it sounds like teeny tiny, but it's important for investors to clarify. Brad Milsaps: Yeah, I think Erika, what and maybe take us directionally versus literally. I think Bill's looking at 2% for 2025 and saying that literally it'll be more than twice that. Erika Najarian: Got it. Brad Milsaps: Call it 4% plus. Yes, sir. Yep. Erika Najarian: Thank you. Operator: The next question comes from Ken Usdin with Autonomous Research. Please go ahead. Ken Usdin: Hey, good morning, guys. I wanted to ask, you mentioned that you've got some fixed-rate benefits into the medium term. I'm just wondering if you could kind of flesh that out a little bit. We can see that the loans are getting about 60 basis points in the fourth quarter, but what's the benefit you have as you look further out in terms of the magnitude that you see rolling over the next couple of years that'll help that NIM trajectory? Thanks. Brad Milsaps: Yeah, good morning, Ken. No, you've got it right. In the fourth quarter, we gave you sort of the 7% run-on versus the 6.40%. The bonds may be a little bit better than that in the fourth quarter. On the loan side especially, we would expect for that to begin to diminish. That is going to be, I think, a nice tailwind for us in 2026, but a diminishing tailwind with perhaps a long tail, though the overall magnitude of the improvement will diminish over time. That is really driven by two factors. One, a lot of the loans that are repricing for us are in that sort of consumer lending platform. Those are generally pretty short assets, with lives in the two and a half to three-ish years range. You have got some churn that has been happening already over the last couple of years, and to some extent, that is playing itself out. On the other hand, most of our term exposure is in sort of the two to three-year part of the curve, the shorter end of the belly of the curve. With that part lower, you are starting to see, and we will begin to see, at least we assume, lower run-on rates. Will it continue to be a benefit? It will. If you think about it more in terms of the yield on that portfolio, let's call it $135 billion ballpark of fixed-rate loans that we think about. You are going to get a few, a couple, maybe basis points a quarter of improvement on the yield, and then that will diminish. Same thing on the bonds. We have got some different vintages based on different maturities and speeds there, but we would expect that benefit to diminish a touch as well throughout the course of next year as you see the belly of the curve and maybe the longer end of the belly lower as well. The other thing to note just on the bonds as you are looking at our yields on the securities, we do also have the phenomena that our payers, which receive SOFR, are going to feel some pressure as the funds rate gets lower. You might see the gross yield, which is what we show you on that NII disclosure page. The gross yield should continue to march up, but the yield, including the hedge, will actually show some pressure as those payers are less in the money. Ken Usdin: Great. That's great color. Just one quick one. It's great to see the IB and trading kind of get back to that level where it had been previously. Just wondering if you could flesh out where the drivers were and obviously market dependent, what kind of trajectory could we think about going forward? Thanks. William Rogers Jr.: Yeah, and I think the way you characterize it is right. I mean, we're sort of back to that kind of level that we think is sustainable. The good news, it was on a lot of cylinders. We hit on a lot of the cylinders of our business. Pipelines, to your other comment, are actually quite strong. We have a lot of awarded business in the M&A side for the fourth quarter. We're overall confident that this trend can continue. This has been a business that has historically grown at low double-digit kind of CAGR over time. I think over time that continues to be that opportunity. We have a lot of new teammates that know how to leverage this capability, and that's what's fun to see. What gives me more optimism for the future is you can just see how we're becoming more relevant to clients. In the early part of that, you see that in FX and derivatives. In the longer term, you see it in more of our advisory business and M&A and equity capital markets and other components, debt capital markets or the other components. Good quarter, all cylinders, good pipelines, and really good leading indicators in terms of how our team is utilizing these resources that we have. Brad Milsaps: Okay, thanks, Bill. Operator: The next question comes from Ebrahim Poonawala with BofA Securities. Please go ahead. Ebrahim Poonawala: Hey, good morning. William Rogers Jr.: Morning. Ebrahim Poonawala: I just had maybe Bill, and I think we have Brad on the call as well. We'd love to get sort of your views on, from a credit quality perspective, where things stand, both given kind of your businesses in terms of direct consumer lending, even on the subprime side. Just give us a health check on where you see credit quality on the consumer side. When we look at non-accrual C&I loans, NDFI or non-NDFI, do you see credit at the precipice of material deterioration? That's how the market's been trading these stocks over the last couple of days. We'd love your perspective on both those. Thank you. William Rogers Jr.: Yeah, let me go sort of really high level. I'm staring at Brad. I'll bring it down a little lower level with Brad and try to go around the horn because you asked a lot in your question. I can say overall credit quality is strong. Let me start with that as a premise. We have seen in the market some, I would say today, idiosyncratic and uncorrelated events. That being said, just remember, the number one risk for a bank is credit risk. Just like we're vigilant about that, we have been in the past, we're hyper-vigilant today and we'll be hyper-vigilant tomorrow. These are important components. You talked a little bit about NDFI and said maybe it's probably worth diving in there just a little bit. Our largest exposure on the NDFI side is REITs and asset securitization. That's 50% of our NDFI portfolio. We know that they're different by institution. Everything else that's in those categories, capital calls, leasing, BDCs, mortgage warehousing, they're all single-digit part of the overall portfolio. Highly, highly diversified, 20-plus asset classes, low interconnectedness, which has been the spirit of that portfolio and Truist Financial Corporation overall. Maybe with that, let me turn to you, Brad. If there's anything else you want to clean up, we can do that. Brad Bender: Yeah, thanks, Bill. Good morning, Ibrahim. I'd say, you know, I'll build on the NDFI really quickly. For us, we take a very client-centric approach. It is, to Bill's point, highly high-quality diversified collateral with strong structural protections. We take a dogmatic risk-adjusted return approach across the differentiation of those asset classes. I think in your consumer questions, particularly around the subprime, as a reminder, the majority of our subprime sits only in our auto portfolio. On the rest of the consumer portfolios, it's a very marginal amount. The majority of our consumer portfolios are high-quality superprime borrowers. We de-risked in 2023 and 2024 on the lower end of the consumer spectrum. That was an intentional decision that we made. It's also reflective in the results that you see this quarter. That's really where we're going to continue to focus, is how do we drive high-quality assets both in the wholesale and the consumer space. Ebrahim Poonawala: Got it. I'll just leave it at that. Thank you both. William Rogers Jr.: Thanks. Brad Bender: Thanks. Operator: The next question comes from Matt O'Connor with Deutsche Bank. Please go ahead. Matt O'Connor: Good morning. I just wanted to come back to the capital levels and buyback commentary and get a sense of if there's flexibility to kind of lean in the buybacks. We're obviously seeing some sell-off in the market here. Two days might not be enough to make you want to lean in, but if there's more pressure, broadly speaking, it seems like you've got the capital that you could do more if you wanted to. William Rogers Jr.: Yeah, I mean, I think, Matt, you know, we want to be on a steady pattern. We don't sort of want to, I think, to your point, react to two days' worth of market volatility. That being said, we think this is a great time. We've got ample capital. I think we've got a really good flight path. You know, we do have the flexibility. I think about, you know, $750 million, sort of think about that as a floor, so to speak, and then we've got capacity to increase that as we go along, all while keeping, we think, an appropriate and conservative capital structure. We wanted just to define the speed and the slope to get to that 10% CET1. Matt O'Connor: Okay, that's helpful. Just a little question here, just the loan growth. You had a lot in commercial real estate. We've heard about some refinancing away from the banks there. Just wondering what drove that. Again, not huge, but $2 billion increase off of a $20 billion in the quarter. Thanks. William Rogers Jr.: Yeah, a lot of that is sort of we had a decrease to have an increase. Some of that was just an inflection point. In that CRA, think a lot of what we talked about earlier, REITs, think about a lot of the shorter duration, long-term relationships with a lot of capital markets business associated with them. It's a little more of an inflection than an actual relative long-term increase. Brad Milsaps: Prepayments load. William Rogers Jr.: I'm sorry, yeah, prepayments load, yeah. Matt O'Connor: Okay, thank you. Operator: The next question comes from Chris McGratty with KBW. Please go ahead. Chris McGratty: Oh, great. Good morning. Brad Milsaps: Morning. William Rogers Jr.: Good morning. Brad Bender: Just a quick clarifying question on the non-accrual loans and CNI, which went from $520 million to $800 million. In your prepared remarks, you talked about the First Brands exposure. Is that contributing to that? I know you said you had reserved against it. I'm trying to see where this lies and if it's been charged off. Thank you. Yeah, Chris, good morning. It's Brad. I'll hit that really quickly. As a reminder, we had outsized resolutions in the second quarter, and what you're seeing is a return to recent levels. Yes, First Brands is captured within that. It was an appreciable amount of it. It wasn't the whole of the increase, but that $48 million sort of matches what you saw in 4Q, 1Q, and previous periods. Chris McGratty: Okay. The message is that that increase has been reserved for. Brad Bender: Yeah, we've got it accounted for in the forward guide. Chris McGratty: Perfect. Just clarifying slide 16, which is again the ROE target. I think it's great to see the formalization of 15%. Is the message you're sending on 2027, we're going to get there on the full year or at some point? I know it's a little bit of a nuance. Brad Bender: Yeah, I think we're going to get there on a full year basis. That's the message. William Rogers Jr.: Yeah, in any one quarter, you're going to have some fluctuation, but yeah, for the full year. Chris McGratty: Okay, thank you. Operator: The next question comes from Betsy Graseck with Morgan Stanley. Please go ahead. Betsy Graseck: Hi, good morning. Can you hear me okay? Brad Milsaps: Good morning, Betsy. Betsy Graseck: Yeah, okay. I just want to make sure I understand what we just said, which is that First Brands' estimated credit impact is in the forward guide, meaning it's not embedded in this quarter that just reported. Brad Bender: Yes, so Betsy, it's Brad. It is accounted for in the quarter just reported, and then the forward guide from an NCO, if there are implications there that play out. We're early in that process. Betsy Graseck: Okay, we're. Brad Bender: Yeah, so accounted for in non-performing loans and then forward guide on net charge-offs. Betsy Graseck: Okay, got it. I just also wanted to understand how you're thinking about the underwriting in this environment. Does it change at all? I'm asking with context to C&I's been doing better, obviously accelerating a little bit. Can we expect to have that kind of acceleration continue here, or is there a change in underwriting style, path, due diligence that would, you know, perhaps slow it down a bit as we move into 2026? William Rogers Jr.: Yeah, I mean, I'll start with that. We're vigilant and diligent in our underwriting. As I said earlier, we have been, are, and will be. Maybe that doesn't change from that perspective. Brad highlighted on the consumer side, we made some adjustments, quite frankly, in the last 18 months as it relates to that portfolio, just ensuring that our portfolio on the unsecured side particularly stays superprime and allowing for that. You see that in some of our results. That was a marginal change on that point as it relates to the wholesale side. The key for us is just to have a really diversified portfolio. We have a lot of discipline around the diversity. I don't think that changes, but it does accentuate the fact that we just want to have a really diversified portfolio in sort of every way that you can measure and define a diverse portfolio. We think that's inherently the strength of Truist. If you look at sort of any category, Betsy, that you might say, "Gosh, this is something I'm worried about or thinking about." We index low on all of those. That was the advantage of creating Truist, creating this highly diversified portfolio. If we have anything, it's going to be continued discipline around that diversity. I don't think that lowers our growth opportunity and actually increases the opportunity because we have so much diversity. Betsy Graseck: Okay, thank you. Operator: The next question comes from Steven Alexopoulos with TD Cowen. Please go ahead. Steven Alexopoulos: Morning, everyone. William Rogers Jr.: Good morning. Brad Milsaps: Morning, Steve. I wanted to start, I want to go back to Ibrahim's question on NDFI. I know this has become the topic du jour on these banks' earnings calls. Generalists listening to this conversation are dumping out of regional banks on fears that their portfolio is loaded with cockroaches. When you guys look at the totality of your loan exposures, where do you rank the risk of the NDFI portfolio? Below average, average, or above average? Do you think the market is right at this point in time to be scrutinizing that portfolio? Yeah. Maybe I'll hit it really quickly for you. Today we sit at about 11% of our total lending portfolio. That ranks us as of 6/30. On the published data, that puts us ninth out of 11. I think back to Bill's point, well-diversified, granular, and then underweight relative. On how we think about this from a long-term standpoint, I think these are long-tenured relationships with global financial institutions across 20 asset classes for us. We have sub-limits and top-of-the-house limits in place to ensure we maintain credit discipline. We will continue that on a forward basis. William Rogers Jr.: Yeah, and relative to where it fits, I mean, this is, you know, if you think about the high percentage of ours being REITs and asset securitization, this is an investment-grade looking portfolio, which we have really good returns against and really good risk-adjusted returns. We have the capacity and capability, you know, with our tools and things that we can do from a capital markets perspective that these are just long-tenured clients. We don't think about this as an NDFI strategy. Maybe that's the best framework to start. This is a client strategy that gets counted in an NDFI category. These are businesses that we've been in for a long time and, you know, have a lot of confidence in going forward. Brad Milsaps: Okay, it sounds like because you're pointing out that you have lower exposure versus peers, you do think this is a problematic portfolio for the industry, right? Otherwise, you wouldn't be pointing out it's well below peers in terms of your exposure. William Rogers Jr.: No, I think we're pointing out it's well below peers, back to my diversity comment. If you have a lot of diversity, you have diversity from risk, but you also have diversity from opportunity. We have an opportunity to grow things that have smaller %, and it also mitigates our risk. Diversity is a two-edged sword that I think we use wisely. Brad Milsaps: Got it. Finally, if we go back to where we were three months ago, we've now had Tricolor, First Brands, and this Cantor loan called out by Zions. I'm curious, the way you look at your loan portfolio, do these represent an inflection point in the credit outlook for the industry compared to where we were three months ago? I think it's early to call it at that level. I would say this is certainly an opportunity. We'll go back and look at all, as we do with any external events, what occurred, what are the implications. It would be early to call it an inflection point. Our performance to date isn't demonstrating that across our portfolios, and we're not seeing that on a broad base. Okay, perfect. Thanks for taking my questions. Operator: The next question comes from Gerard Cassidy with RBC. Please go ahead. Gerard Cassidy: Hi, Bill. Hi, Mike. William Rogers Jr.: Morning. Gerard Cassidy: Bill, I'd like to go back to your comments when you opened up about the new branches being AI, you know, integrating AI into these branches. Can you share with us how we are going to be able to measure the success that, you know, this AI infiltration into the banking industry and you guys in particular as you tap the potential of these investments? How do you think it's going to manifest itself to us outsiders where we could say, wow, Truist is way ahead of the curve compared to their peers? William Rogers Jr.: Yeah, you know, it's a great question. I think today we talk about AI like it's something separate, like we used to talk about the internet as something separate. I think AI is just going to be the fuel. We're not going to talk about it being separate. The way you're going to see the successful companies implementing AI is, does it reflect in their business? Does it reflect in the more efficient? Does it reflect in that we're growing at a higher level? I look at all the use cases that we have across the company, and they're all in those categories. There are places that are going to make us incredibly more efficient. There are places that are going to make us really, really more client-centric. You noted that as it relates to the branch police. There are places that are going to help our overall revenue growth and sales productivity. It's all in those categories. I think we're not going to say this AI contributed this amount to the efficiency ratio or this amount to revenue growth. I think that's actually sort of hard to do. If you're getting disproportional growth and disproportional efficiency as a result of AI, I think that's where we're going to end up talking about this. I'm really optimistic about what AI can do to help us accelerate everything that we talked about. Our ROTCE walk, I'd say, is fueled by AI. It's maybe a good way to think about it. Gerard Cassidy: Very good. Just as a follow-up, I apologize for beating up on credit, but you guys have demonstrated that you're one of the better underwriters out there. Coming back to the First Brands, I'm curious, Brad, you know, the size of that exposure, you know, how big was it? Second, just how'd you guys get involved? If you could just give us some color on your thinking of that relationship. Yeah, Gerard, happy to hit it. Look, it's early. As you know, we don't normally talk specifically about clients. We are in it with a broader base. Overall, the exposure is less than $200 million for us. It would be early for us to get into the details of that. Understood. No, I appreciate that. Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Brad Milsaps for any closing remarks. Brad Milsaps: Okay, thank you. That completes our earnings call. If you have any additional questions, please feel free to reach out to the investor relations team. Thank you for your interest in Truist, and we hope you have a great day. Betsy, you may now disconnect the call. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American Express, Q3 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, please press star, then one on your touch-tone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from the queue at any time by pressing star, then two. If you are using a speakerphone, please pick up the handset before pressing the numbers. Should you require assistance during the call, please press star then zero. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramachandran. Please go ahead. Kartik Ramachandran: Thank you, Daryl, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods. We discuss. All of these are posted on our website at npr.org. Com. We'll begin today with Stephen Squeri, chairman and CEO, who will start with some remarks about the company's progress and results, and then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Stephen and Christophe. With that, let me turn it over to Stephen. Stephen Squeri: Thank you. Good morning, and thank you for joining us. We had a very strong quarter with revenues up 11% year over year to a record $18.4 billion and earnings per share up 19% to $4.14. Cardmember spending in the quarter accelerated to 9%, or 8%, on an FX adjusted basis, with particularly strong retail spending and a bounce back in travel and our credit performance continued to be excellent. Based on our strong performance through the first three quarters, we're raising the guidance we provided in January. We now expect full year revenue growth of 9 to 10% and EPS between $15.20 and $15.50. The big news in the quarter was the launch of our refreshed US Consumer and Business Platinum cards, which reinforces our leadership in the premium space. I'm very pleased to say that the initial customer demand and engagement are exceeding our expectations. In fact, while it's still early, this is the strongest start we've seen for a US platinum Card refresh. Before I get into more details on platinum, I want to provide some context. We are fortunate to have a global premium customer base that is unmatched in the industry, and our goal is to provide our customers with the best experience in the industry. By continually investing in innovating our value propositions, the recent platinum launch is yet another example of our proven strategy of refreshing our products on a regular basis to drive customer engagement and growth. In fact, we've done over 200 refreshes across our portfolio globally since 2019, and this is the third US platinum refresh we've done in the past decade. Our refresh strategy leverages and strengthens the competitive advantages of our membership model. It starts with understanding what our customers and our prospective customers want, and then enhancing our value propositions with access to compelling benefits, services, and experiences at a price point that delivers outstanding value. The scale of our premium customer base gives us a distinct advantage. Our consumer and Business Platinum card franchise alone accounts for approximately $530 billion of annual spend globally. This scale gives us deep insights into customer spending patterns and emerging trends, which informs our product enhancements and where we invest in. Another key advantage is the relationships we have with 160 million merchants around the world who accept our cards. We've grown the number of Amex accepting merchants by nearly five times since 2017, giving our card members more places to use their cards and giving more merchants access to our high spending customers who spend, on average, nearly three times more annually on American Express cards than the average spend per card on other networks. Ultimately, product refreshes fuel a virtuous cycle of growth for the company. By continually enhancing our offerings, we drive the engagement and scale of our premium customer base, our high spending card attract a growing number of world-class merchant partners who add more value to membership, which drives more engagement. And this enables us to generate more dollars that we can reinvest in enhancing our products. The result of all this is a loyal and growing premium customer base, mutually beneficial relationships with our merchants, and strong returns for our shareholders, including higher revenue growth, excellent credit quality, expense leverage, and increased profit across our product portfolios. There's no better example of how we execute this strategy than our platinum cards. We launched our first platinum card over 40 years ago. It was the first premium card of its kind in the industry and remains the category leader. Platinum was initially designed for well-established, affluent, frequent travelers. Several years ago, we made a conscious decision to widen our aperture for our premium products so that we could also attract new generations to the franchise and grow with them as their needs change. With the value enhancements we've made over the past decade, the Platinum Card has evolved into the leading premium lifestyle card that it is today, with a wider range of benefits and experiences that appeal broadly across generations, including Millennial and Gen Z consumers who are very comfortable paying for its exceptional value and are highly engaged in the product. A good example of these value enhancements is the previous US Platinum refresh we did in 2021. Coming out of the Covid pandemic, we learned that our card members, particularly the younger cohorts, love the benefits we've added in categories like digital entertainment, wellness delivery services, in addition to our travel offerings, which we also continue to enrich with investments in New Centurion lounges and expansion of our hotel programs. That brings me to our most recent platinum launch. Here again, we continued our strategy of enhancing the card's benefits and services with more world-class partners across the areas we know our customers love to deliver industry-leading value that far exceeds the card's annual fee. In addition, we continue to enhance our award-winning digital capabilities, introducing a new app experience for our US platinum members that makes it even easier to engage with the card's benefits. As I mentioned earlier, the initial results are very strong, exceeding our expectations. For example, new platinum account acquisitions are running at twice the level before the refresh in the first three weeks. We saw very strong engagement in the new benefits, and over 500,000 requests for the new mirror card. And while the annual fee increase won't go into effect for a few months, retention rates have been stable post-refresh. In addition to these results, we saw record bookings through Amex Travel following the platinum refresh and the launch of our new all-in-one travel app, which we introduced earlier in September in the US. Looking ahead, I'm confident about our ability to sustain our growth by continuing to build on our powerful membership platform with a growing set of high-value products, benefits, services, and experiences. We'll also continue expanding our digital capabilities for consumers and businesses, including the upcoming integration of centers, expense management, solution for commercial customers, and will focus on continuing to grow merchant coverage outside the US to give card members more places to use their Amex cards. With that, I'll hand it over to Christophe to walk through more detail on third quarter results. Christophe Le Caillec: Thanks, Steve, and good morning everyone. Let me start with a few highlights for the quarter. Our business model is performing really well. Revenue growth accelerated to 11% this quarter with broad-based growth across revenue lines. Annual card fees are now approaching $10 billion annually and have grown at double digits for 29 consecutive quarters. Credit performance remains excellent, with both US consumer and small business delinquency rates still below 2019 levels. And we've driven leverage from expenses and provision even as we have invested in our premium value propositions, marketing, and technology. As a result, we continue to deliver very strong returns. EPS growth was 19% this quarter with an ROE of 36%. Turning to build business trends for the quarter. Total spend was up 8.5%, FX adjusted, about two percentage points higher than Q2. The step-up in growth was driven by strong retail spending, up 12%, as well as a rebound in T&E. Airline spending picked up this quarter, and restaurants, our largest T&E category, continued to be very strong, up 9%. Premium T&E bookings saw good momentum, with spending on front of cabin airline tickets up 14%. The momentum we've seen from younger customers also continued. Millennials and Gen Z now account for 36% of total spend, making up the same share as Gen X. International had another strong quarter. We spent up 13% FX adjusted. Momentum remains broad-based across markets, with three of our five top countries growing by 18% or more this quarter. In addition to the strong early performance, we are seeing in the US following the refresh spent on platinum cards issued outside the US is up 24% this quarter, consistent with what we have seen over the last two years. Overall, spend growth continues to be driven by transaction growth, up 10% in Q3. A good indicator of engagement from our customer base. I will note that we see strong engagement from Millennial and Gen Z card members, with the average number of transactions per US customer, about 25% higher than older cohorts. We acquired 3.2 million new cards in the quarter, and even more important than the overall number of cards, demand for our premium products remain very strong, with over 70% of new accounts acquired on fee-paying products. Turning to balance, growth and credit loan and card member receivables were up 7% year over year. Broadly in line with bill business. There was about a one percentage point impact on balance growth from our health facility portfolios. Again this quarter, credit performance remains very strong and stable. Q3 delinquency and write-off rates were low, with delinquency rates flat to last quarter, while write-off rates declined. This performance is supported by our focus on premium products, which tend to attract high-income, highly creditworthy customers. We're seeing the outcome of this strategy in the latest platinum refresh, where the credit profiles of consumer applicants following the refresh are even better than what we were seeing before, with an average FICO score of 15 points contributing to two times the number of acquisitions. Overall provision expense of $1.3 billion this quarter included a reserve build of $125 million, reflecting balanced growth. Returning to revenue on slide 14. Revenue was very strong this quarter, up 11% with momentum across revenue lines. Net card fees were up 17%, FX adjusted, a pace that we have now maintained since 2019. Card fee growth moderated as we expected and will continue to moderate before we see an inflection upward in 2026. As a result of our product refreshes. As a reminder, card members who held platinum cards prior to the refresh get to experience the new benefits for a few months before the increase in the annual fee goes into effect. The new card fee will then be applied at renewal anniversaries over the next 12 months. Additionally, card fees are amortized over a 12-month period, putting those factors together, it takes roughly two years to fully lap the impact of the refresh on card fees. With the contribution to growth peaking 12 months following the effective date of the new annual fee. The overall trajectory of card fees is also dependent on many other factors, such as volume and mix of acquisitions, retention, and the full suite and cadence of product refreshes globally. Net interest income was up 12% again this quarter. We continue to grow balances largely in line with spending while driving higher NII growth by expanding the margin earned on balances and at the same time, we've maintained best-in-class credit results. This quarter, the service fees and other revenue line includes the impact of a transaction at the Global Business Travel Group, which contributed about five percentage points to year-over-year growth in this line. In addition, this is the first quarter that we have fully lapped the sale of the acidified business last May. The main takeaway here is that growth in service fees and other revenue is running higher than the low single digits that we saw in the second half of last year. And earlier this year. Overall, we feel good about the momentum we have at this point in the year, and we're on track for full-year revenue growth of 9 to 10%. Turning to expense performance, VCE was up 14% in the quarter with the VCE to revenue ratio coming in at 42%. Card member service growth stepped up from the first half of the year to revive by strong early engagement with the refreshed US platinum benefits, especially some of the quarterly credits that were available to customers. This is a good early sign of interest in the product, and the new benefits. And as we noted previously, the cost of benefits occurs immediately. While the realization of fee revenue is lagged given the timing and accounting of those fees. Our model also benefits from partners that offer value to our customers. Over the last 12 months, our partners have offered over $3 billion of value across embedded benefits. Amex Travel and Amex offers. We also manage our VCE expenses through constant innovation of our rewards and benefits. The latest one being the introduction of amount-based redemptions. As we've noted previously, we expect the VCE ratio to increase over time as a result of our investments in the value proposition and the mix shift to a more premium portfolio. We also feel good about the ability of these investments, together with expense leverage, to drive sustainable mid-teens EPS growth under our long-term aspiration. Moving on to capital, we returned $2.9 billion of capital to our shareholders, including $0.6 billion of dividends and $2.3 billion of share repurchases. Our business continues to generate very strong returns with an ROE of 36% this quarter. Our strong ROE enables us to return a high level of earnings to our shareholders around 70% over the past three years. Over the same time period, our dividend is up 58%. That brings me to the outlook for the year where there continues to be uncertainty in the environment. Given the strength of our performance, we are raising our full-year guidance. We now expect revenue growth of 9 to 10% and earnings per share between $15.20 and $15.50. These assume a stable macroeconomic outlook as we get to the end of the year. Stepping back, we feel really good about our momentum year to date, and we are very pleased with the initial demand and engagement following the platinum refresh. With that, I'll turn the call back over to Kartik and we'll take your questions. Kartik Ramachandran: Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator. Operator: Ladies and gentlemen, if you wish to ask a question, please press star, then one on your touch-tone phone. You'll hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing star, then two. If you are using a speakerphone, please pick up the handset before pressing the numbers. One moment please. For the first question. Our first question comes from the line of Sanjay Sakhrani with KBW. Please proceed with your question. Sanjay Sakhrani: Thank you. Good morning. First of all, I appreciate all the disclosures on the platinum card and the refresh. And it seems like things are going really well there. Steve, I guess there's been just a lot of resiliency, if not strength, across your customer base. Even corporate and small business to accelerate sequentially. So maybe you could just talk about how you're feeling about the path forward? Can things actually improve here? Because we've bottomed some because you had this acceleration. Maybe just in a stable macro backdrop, specifically, and then just one Christophe modeling thing, the gain that you had this quarter, I mean, should we think about it as an explicit benefit? I'm sorry if I missed it. Missed that commentary. If you had any. Thanks. Stephen Squeri: Look, I think you saw a little bit of an accelerant this quarter from a Billings perspective. But if you look back over the last 6 or 7 quarters, it's been relatively stable. Is this a sign of things to come? I don't know if we're going to keep this billings up the way we are, but I don't see anything in the horizon here that would indicate that billings are going to slow down or decline. So, you know, I think the second quarter, you saw a deceleration in airline spending. I think the pickup in T&E was really good. I mean, restaurants continue to be strong, but airlines really did pick up. And I think what was really encouraging for us as well was the premium part from an airline perspective. I mean, that was up 14%. When you think about front of the cabin. So that coupled with quarterly billing, quarterly bookings in our US travel consumer travel business, which we're at an all-time high. So I think, you know, look, we're still in a relatively stable, stable environment. I would also point out, as I always point out, our card base is not representative of what's going on across the United States. It truly is a bifurcated economy. We have a small percentage of the cards, but our cardholders are much more premium, and we're lucky to have a much more premium card base. So, you know, we're seeing a little bit of a pickup in spend. We hope that that continues into the fourth quarter. I think what was encouraging for us is also the pickup in small business. You know, we saw 4% growth pick up in large and global as well, which was up at about 6%. And international continues to, you know, just continues to really be really strong. And the last thing I'll say is I think retail spending, especially in the US consumer business, you know, hopefully is a good harbinger for what will come during the holiday season because US consumer business was very strong as well at 9%. So, you know, are we going to see a big accelerant from here? It's not what we're expecting, but we're not also expecting a deceleration as well. Christophe Le Caillec: And on your question about the gain, so it's not a large gain. It's in the range of about $80 million. We called it out because it has an impact on the growth rate of that line. Service fees and other revenue there. You know, if you want to color, as you know, we own about 30% of the Global Business Travel Group. And I'm sure you've heard or seen that they just merged with their Carlson Wagonlit. And that translated into a small gain for us, which we recognized this quarter. And that is moving the line a little bit. It's about five percentage points of that 17% growth that you see here. FX adjusted, even if you control for that, we would still be in double-digit revenue growth. So it's really not changing that much there. The picture in terms of the momentum that we've reported this quarter. Operator: Thank you. Our next question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question. Ryan Nash: Hey, good morning Steve. Good morning Christophe and I echo Sanjay's comments on the disclosures. Maybe Steve can maybe just talk or Christophe, broad strokes on the financial impact of the platinum refresh, particularly on card fees and VCEs. And, Christophe, you broadly comment on this, but does this in any way impact your ability to generate mid-teens EPS growth? Not over time, but during the refresh period? Thank you. Stephen Squeri: I'll let Christophe go through some of the numbers here. Christophe Le Caillec: Yeah, the short answer is no. We try to provide some color in terms of the dynamic. And you understand I know there the card fee dynamic is delayed. And then it's summarized over 12 months. While the benefit is immediate and is available to everybody. That clearly puts a little bit of pressure. And we signal at the beginning of the year that you should expect a little bit of step up in Cochems at the back end of the year, on the back of this platinum refresh. But the year is really playing out as we were expecting it to play out. You know, of course, we have those insights. It was not all that visible to all of you, but we were expecting that kind of like step up in Cochems in Q4 and we are expecting it as well for 2026 going forward. So we did all of this with our eyes wide open. It's a material investment, a significant investment, but it's our biggest product. And we give you a little bit of, you know, some global numbers as well. On the size of their product. It's very large. So it is a sizable investment for us. But we are, you know, we are still, you know, doing all of this with the, you know, ambition to deliver 15 or mid-teens EPS in terms of, in terms of the coming years. Stephen Squeri: Right. And the only thing I would say is that, you know, look, we plan and we run the company medium to long term here. So as Christophe pointed out, we do all this stuff with our eyes wide open and with our aspirations in mind. And so when we think about our planning horizon, as Christophe said, it will take, you know, two years for everything to fully play out and expenses play out a little bit earlier. But, you know, our aspirations are still our aspirations. Ten, 10% plus revenue growth and mid-teens EPS growth. Operator: Thank you. Our next question comes from the line of Mark DeVries with Deutsche Bank. Please proceed with your question. Mark DeVries: Yeah, thanks. I was hoping to get a better sense of how much you think the platinum refresh contributed to the acceleration in build business growth during the quarter. I was kind of surprised at how quickly you made some of those credits, like the Resi and Lululemon available, probably stimulated some spend and also any color on kind of the strength of demand on the consumer product versus the business. Christophe Le Caillec: Good morning, Mark. So on the spend, if you look at the spend in aggregate total build business for the quarter, the impact is small. You know, we've seen strength as we said in travel and entertainment, airline went from being flat last quarter to being at 5% this quarter. So either those macro changes are what's driving the billing strength that you see in the quarter. If you were to look at some specific partners, though, you would see like an impact. And we are sharing, I think some of those numbers on that platinum. Charge on platinum card, where, you know, we're calling out that, you know, for those partners listed on the bottom right here, there was like a 2X increase in terms of the number of customers. But the total impact, billing wise for the quarter is, is not really material. Operator: Thank you. Our next question comes from the line of Donald Fandetti with Wells Fargo. Please proceed with your question. Donald Fandetti: Hi. Good morning. Steve, can you dig in a bit on what you're seeing in SM? You know, obviously it's good to see the uptick, you know, is that organic growth or is this just sort of bouncing around. And do you see any scenarios where that could normalize as you look out to 2026? There's also, you know, some fintech competition. Stephen Squeri: Yeah. Look, I think what we're seeing is we're seeing still good acquisition. Which is good. And you're seeing organic start to turn around. A little bit, especially at the small end and at the, in the, in the medium in, in the middle market as well. So I think it'll, it'll stabilize. You know, one of the things that we've talked about quite a bit is, you know, our larger transactions moving off, you know, some of the cards that came on during, during the Covid piece. And I think we're, we're over, we're growing over that right now. So we feel good about acquisitions. We feel good about the early indications as it relates to the business. Platinum. Platinum launch. And yeah, it's look, it's a, it's a competitive, it's a competitive marketplace out there. No doubt about it. Which is why we've done the center where we did the center acquisition and why we'll be looking, you know, early next year to, to relaunch, to launch our, our version of center integrated in with our cards. So you know, we think there's still a lot of opportunity in this space. And we think, you know, hopefully the, the downturn that we saw from an organic perspective is, is going to be behind us. Operator: Thank you. Our next question comes from the line of Craig Maurer with FT Partners. Please proceed with your question. Craig Maurer: Yeah. Hi. Good morning. Thanks for taking the questions. Wanted to ask first. When you look at the platinum card refresh, I was curious how much of that you think has been. With consumers or businesses that have high-end cards with other issuers already, or upgrades within your own portfolio, trying to ascertain, you know, the degree to which this, this investment is creating a competitive takeaway from others. And second, if you could just talk about the international strength and where you saw that most outside the US. And where you might still be lacking in terms of coverage, thanks. Stephen Squeri: Yeah. So look, I think the it's a little bit too early to tell in terms of, you know, what the takeaways are at this point. I think the upgrades were very happy with the upgrades and we were happy with, you know, the new card acquisition that we saw, what we what we don't know. And we'll figure this, this out. But we're, you know, sort of three weeks in here. With these people that had premium cards before. Is this their first foray into the premium card segment? But we'll look at all that. We will look at all that data and figure that out as far as international goes international pretty much across the board was, was very, very strong for us. I think, you know, we focus on really the big five markets. I think three of those markets, we had at almost 18% growth. And, you know, coverage continues, you know, as I said, we're, we talked about the city strategy of getting to 75% live coverage. And we talked about the various country strategies. And we continue to march, march in that direction. You know, we'll continue to focus on Europe. And that's been a big focus. There's still some cities that, that we're working on. And will share more color with that. As, as that, as that occurs. But we're really pleased with just how much coverage has increased. Over the last, over the last few years. Operator: Thank you. Our next question comes from the line of Erika Najarian with UBS. Please proceed with your question. Erika Najarian: Hi. Good morning Christophe. If I could just. Dig in to Ryan's question a little bit. You know thank you so much for taking us through. You know, the sort of lifespan of the increase in card fees two years after the refresh. It's fully baked in 12 months after the new car will peak. I'm wondering if you could walk us through in terms of the same pacing, in terms of the step up and related expenses, is it would it be the heaviest over the next like 3 to 4 quarters and then it would subside in, in the next in the back half of, let's say 27. That walk would be helpful. Christophe Le Caillec: Hey. Good morning Erika. Either predicting what's going to happen in 27 is going to be like really hard, but you. From her engagement standpoint, we are certainly going to keep engaging with card members. And our goal is to increase the engagement. But from a modeling standpoint, I think you can assume that the entire benefits are available to our card members from book back book from day one, and there are very strong engagement that we've seen in a right on the day of, you know, announcing the new product on September 18th. Was very high from day one. And has remained, you know, elevated and strong since then. So I don't think we there is like a bit of a curve that is playing out for those benefits. The way the way it's playing out. If you want for card fees. Right. The accounting is also a lot more straightforward. Many of the benefits are quarterly benefits. So you kind of like expense them as soon as the card member earns them. So there is not that kind of complexity for those benefit as there is for card fees. So it's going to be like much more linear. But over time, as I said, the goal is actually to get more and more of these card members to engage with those benefits. So you should expect that kind of like, you know, modest trend up. By design. Operator: Thank you. Our next question comes from the line of Brian Foran with Truist Securities. Please proceed with your question. Brian Foran: Hey, maybe piggybacking a little on Craig's question. If I think about the tearing of gold, platinum and black. You know, now that there's more dining on platinum. Are you seeing any interactions with gold? That you would call out? And then on the other side, you know, is there white space available for some, you know, enhanced or new, even new card between platinum and black? Now that you know, it's clear that a lot of consumers will jump at a pretty high annual fee. Stephen Squeri: So, you know, look, gold continues to be, you know, a very strong product for us. And we continue to acquire new cardholders there. So we haven't seen Gold Card acquisition go down. And we have seen upgrades. But it's still early. I mean, you know, we're only three weeks in here. So we'll see how that plays out. And, you know, part of part of our strategy is to provide card members with a path to, to higher end products that potentially meet their needs, you know. Look, is there a is there a product between Platinum and Centurion? Maybe if you have any ideas, we're open to those to those ideas. But you know, it's something that we talk about from time to time. But we'll see. But we're really happy with Centurion is and we're happy with where with where platinum is. And I think this refresh will continue to cement our position as the leading premium product. Operator: Thank you. Our next question comes from the line of Rick Shane with JP Morgan. Please proceed with your question. Rick Shane: Hey guys. Thanks. I'd kind of like to follow up related to Erica's question, particularly related to retention offers as you as the new higher fees roll out, I assume that that really sort of cascades over 12 months. And I'm curious how we should think about perhaps what percentage of customers take retention offers or request retention offers. And if you expect that that response rate is going to be higher or lower this time based on the initial responses you've seen. Stephen Squeri: Yeah. So I think in general, that's a low that's a very low percentage of how we retain our base. Most of the retaining of the base is actually just explaining the product to them. And I think when you look at this product and you look at what you pay for, the value that you get, it's pretty easy to come to the conclusion that this is a product that I really want to keep. And so I think what we one of the things that we've really tried to do with this refresh is really make it easy to understand what the benefits are. And easy to engage in those benefits. And I think that's critical because what that will do will lead to more retention. More engagement, will drive more business to our merchants. And we'll have more loyalty all the way around. So I don't see retention offers playing a. In fact, I would argue that they may play even a smaller role than they have in the past. And they already had a small role, because I think this product. Really works really hard for itself. Operator: Thank you. Our next question comes from the line of Jeff Adelson with Morgan Stanley. Please proceed with your question. Jeffrey Adelson: Hey, good morning. Steven Christophe. I just wanted to maybe dig in a little bit more on consumer health. I know, you know, I think your results really speak for themselves. And you've been pretty clear that you're seeing a stable spend environment in the last 6 or 7 quarters. Delinquencies remain low. I guess, just maybe in light of all these seemingly one-off headlines we've seen recently, which the market is maybe hearing are not so one-off, you know, there's been a lot of focus on the health of the consumer. So obviously your consumer base is very different than most. But maybe you could just give us a little bit more color and commentary into the health of your consumer base. Maybe what you're seeing at the lower end of that spectrum and relatedly, just anything you're noticing from the government shutdown so far, if at all. Thanks. Stephen Squeri: All right. Let me make a couple comments and I'll whatever. I miss. Christophe can fill in I. You know, I think that there's been a little bit of noise out there in the last couple of days about, you know, defaults and. Especially from a commercial perspective. But if you look at what the banks reported from a card write-off perspective and a card delinquency perspective. It all got better. Write-offs are down from the bank, from the from the major issues that we follow. Delinquency is down. And for ourselves. Delinquencies are exactly what they've been for the last number of quarters. You know, around at 1.3 and our write-offs sequentially are, you know, are down a little bit. They're 1.9. But, you know, we've been hovering around two and 1.9 and our gap, you know, we still have a huge gap between us and and our competitors. So I think, you know, the health of our consumer is really, really good. And they're spending they're engaging with the product. And they're paying their bills. And I would argue that it looks like the health of, of our bank competitors, consumers are getting are getting a little bit better. As far as the government shutdown goes. You know, this is not our first rodeo with a government shutdown. And we haven't really seen any impact at this particular point in time. And if I go back historically, I think the last, not the last one, but maybe the one before was like 35 days or something like that. It. It didn't really have an impact. And so and for card members that are impacted, we do have our programs, our short-term relief programs, which will get them over the hump, enable them to continue to use the product and then come back and engage with us as they normally would. So that's that's pretty much what we're seeing. Christophe Le Caillec: I don't have a lot to add. You know, I will say, you know, some indicators that reflect the strength of our portfolio, like retail spend up 12%, restaurant spend up 9%. So very strong acquisition as well with 70% of the card members joining the franchise choosing to join American Express on a fee-paying product. So the first thing they do is just like to pay a fee that shows, you know, confidence in their in the future. And of course, you know, on the credit metric, part of our job is also to kind of, you know, look at every single, you know, customer in that just to see whether there are areas of weakness and, you know, like it's very stable across the board, very strong. And. Reflected in the metrics in the reserve rate. We go, you know, there's a lot of scrutiny that goes into this modeling. And and you know, we see a lot of strength and stability across the board. Operator: Thank you. Our next question comes from the line of Mihir Bhatia with Bank of America. Please proceed with your question. Mihir Bhatia: Good morning, and thank you for taking my question. I was wondering if you could spend a couple of minutes on marketing spend and how you're thinking about that, not just into for Q, but also just longer term or into 2026. I guess, I suspect you want to continue to support the platinum refresh, but any details you can provide on where that $6 billion-ish of annualized spend is going? Maybe just give us a peek under the hood. How much is broad-based sponsorships, brand building versus like more micro like, the card member bonuses, retention type stuff? Thank you. Yeah. Christophe Le Caillec: Hey. Good morning Mihir there. Are the biggest share. And the one that is moving from one quarter to another when it comes to marketing is there a size of the welcome incentives? Right. That's the biggest share of this marketing line. And there is tension here in that number. Between we want to spend more marketing dollars, but we also want that marketing dollar to be more efficient. So if you work here in the marketing organization, you constantly battling between. Let's do more, let's spend more. And yet at the same time, let's make sure the dollars were really, really hard for us. And the, you know, the number that we end up spending each quarter and each year is the outcome of those two. Kind of like pressure points. And we are very strict and disciplined about those two. We really do not want a great opportunity to go. And so we're going to keep investing and we're going to keep investing at elevated levels. And at the same time, we're going to subject every single of this dollar to the level of rigor that we have spoken in the past, making sure that the return on that investment, we treat that as an investment meets our profitability criteria. Right. And we are very clear in terms of stopping those investments where they are not meeting these criteria. And we are getting more and more sophisticated. You know, and measuring those, tracking those and, and, you know, and that's that's how we make that decision. It's not like, let's spend this year like $6 billion. We kind of like go in very much in the detail. And it is the sum of all this kind of like analysis that leaders do. That number. That's what we've done in the past and that's what we're going to keep doing going forward. Operator: Thank you. Our next question comes from the line of Moshe Orenbuch with TD Cowan. Please proceed with your question. Moshe Orenbuch: Great, Thanks. You've kind of answered both the question about card fees and spending in terms of the refreshed. Is there, you know, some sort of a like a vintage like performance in terms of spend volumes and, you know, and therefore the key revenue driver that you could share with us, like as you kind of bring on both, you know, both from new accounts and from, you know, higher spend from existing accounts. Any ways to think about that over the next several quarters? Yeah. Christophe Le Caillec: So we're not. We're not disclosing those kinds of like numbers around spend by vintage or revenue by vintage. But what I can tell you is that intentionally, we have been, you know, back to the conversation with me here about investments and marketing dollars. We've been spending more of our dollars against fee-paying products and premium products. So the customers that are, you know, the more recent customers or indexed on these fee payment products, they also overindex on being younger customers. And we've made that point many, many times. And either this quarter we shared with our with you that everything else equal, when you look at the engagement we're getting from these younger customer, they actually tend to transact 25% more than the older cohorts. So either I'm not going to share vintages and detail numbers with you, but you know, those are the kind of like forces that are at work here. More premium younger card members, more engaged. And that's what's kind of like the dynamic in the portfolio. Stephen Squeri: Right? The only thing I'll add is that. We're getting from a younger cohort, we get a higher share of their wallet and they stay with us longer. And they grow as their lives grow. And so what we don't disclose vintage numbers. You can just philosophically look at this and say, well, if you're getting somebody younger and they're going to stay with you longer and you have a premium base that you're going after. Maybe you can conclude that they will spend more over time. And so those vintages, as you get these cardholders now tend to add more value down the road. And that's the strategy without without going through sort of this, this is who we acquired when. But if you just think about this from a strategic perspective. Younger premium cardholders, we're going to grow with them as their careers grow as their families grow as their as their life changes. And we're what we're doing here is we're really creating that loyalty and engagement so that we become that card of choice. And when you put a lot of benefits on a product. People want to engage with that product. More on an ongoing basis, whether that product, whether they're using a benefit associated with the product or not. And so that's a dynamic that's at work. Operator: Thank you. Our final question will come from the line of Rob Wildhack with Autonomous Research. Please proceed with your question. Robert Wildhack: Hey guys. One more on platinum. The $3 billion figure in partner offered value was an interesting one. As you've gone through this refresh cycle and maybe looking back over the last few cycles, refresh cycles. Now to I mean, how has that partner receptivity changed with respect to co-funding credits and rewards? And then is there anything unique or different between the products, like to call out on the same theme as you compare the gold refresh to the platinum refresh. Stephen Squeri: Well, I think you know, the nice part about sort of this product and our customer base is. People want to work with us and people that have been working with us want to work more with us. And I think there's no better example than that. Than our relationship with Uber. You know, we always we've had an Uber benefit for a long time. And now you have an Uber one benefit on there. And so they clearly see the value of working together. And it's a great partnership of working together to drive to drive results. You know, for both of us. And so, you know, it's we're very discerning about who we're going to work with. We work we try and work with, you know, as many world-class brands as we can. And you. Know what you want to do is make sure that you're putting together a value proposition that speaks across the generations. And so, as I said in my opening remarks, we've been expanding these value propositions from pure travel to much more lifestyle wellness, and, you know, retail. And so forth. And digital, you know, people live their lives that way. And so I think that, you know, as we continue to think about this and as we continue to have success here. It gets back to what we what we talk about, which is our virtuous cycle, that the more the more value we bring to our merchant partners, the more they want to engage with our cardholders, and then the more that we drive. As you think about the various products you look to target, the various value propositions to the target audience that you're going for. And if you just take if you look at sort of differential between platinum and gold. Well, gold has, you know, certain travel benefits associated with the, the, the hotel collection. It really is targeted. It has a heavy emphasis on dining. And, you know, we've talked about the success that we had with Dunkin and the engagement that our card base has, and that's worked out very well for our cardholders, very well for us and very well for Duncan as well. And so the challenge of our marketing teams is to make sure that we're not only know what our card members want, but anticipate what our card members want. And then build those into the value propositions by working with those partners that will, that will, in fact, do that. And I think, I think we've done a good job in that respect. And I think the team has really stepped up and created a platinum card value proposition. That is the best value proposition that we have ever that we ever had. And I think our customers are really appreciating it and will continue to appreciate it. Kartik Ramachandran: With that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator. Back to you. Operator: Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at IR.americanexpress.com. Shortly after the call. You can also access a digital replay of the call at (877) 660-6853, or (201) 612-7415. Access code. 13756151. After 1 p.m. eastern time on October 17th through October 24th, that will conclude our conference call for today. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Autoliv, Inc. Third Quarter 2025 Financial Results Conference Call and Webcast. Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Anders Trapp, Vice President of Investor Relations. Please go ahead. Anders Trapp: Thank you, Lars. Welcome, everyone, to our third quarter 2025 earnings call. On this call, we have our President and Chief Executive Officer, Mikael Bratt; our Chief Financial Officer, Fredrik Westin; and me Anders Trapp, VP, Investor Relations. During today's earnings call, we will highlight several key areas, including our record-breaking third quarter sales and earnings, as well as our continued strategic investments to drive long-term success with Chinese OEMs. We also provide an update on market developments and the evolving tariff landscape impacting the automotive industry. Finally, our robust balance sheet and strong asset returns reinforce our financial resilience and support sustained high levels of shareholder returns. Following the presentation, we will be available to answer your questions. And as usual, the slides are available at autoliv.com. Turning to the next slide. We have the safe harbor statement, which is an integrated part of this presentation and includes the Q&A that follows. During the presentation, we will reference some non-news GAAP measures. The reconciliations of historical use GAAP non-use GAAP measures are disclosed in our quarterly earnings release available on autoliv.com and in the 10-Q that will be filed with the SEC or at the end of this presentation. Lastly, I should mention that this call is intended to conclude at 3:00 pm CET. So please follow a limit of two questions per person. I now hand it over to our CEO, Mikael Bratt. Mikael Bratt: Thank you, Anders. Looking on the next slide. I am pleased to share yet another record-breaking quarter, underscoring our strong market position. This success is a testament to the strength of our customer relationships and our commitment to continuous improvement as we navigate the complexities of tariffs and other challenging economic factors. We saw a significant sales growth, driven by higher than expected light vehicle production across multiple regions, especially in China and North America. Our high growth in India continues, accounting for 1/3 of our global organic growth. I am pleased to highlight that our sales growth with Chinese OEMs has returned to outperformance driven by recent product launches and encouraging development. Looking ahead, we anticipate to significantly outperform light vehicle production in China during the fourth quarter. We improved our operating profit and operating margin compared to a year ago. This strong performance was primarily driven by well-executed activities to improve efficiency higher sales and the supplier compensation for an earlier recall. We successfully recovered approximately 75% of the tariff cost occurred -- incurred during the third quarter and expect to recover most of the remaining portion of existing tariffs later this year. The combination of not yet recovered tariffs and the dilutive effects of the recovered portion resulted in a negative impact of approximately 20 basis points on our operating margin in the quarter. We also achieved record earnings per share for the third quarter. Over the past 5 years, we have more than tripled our earnings per share mainly driven by strong net profit growth, but also supported by a reduced share count. Our cash flow remained robust despite higher receivables driven by higher sales and tariff compensations later in the quarter. Our solid performance, combined with a healthy debt level ratio supports continuous strong shareholder return. We remain committed to our ambition of achieving 300 million to 500 million annual in stock repurchases as outlined during our Capital Markets Day in June. Additionally, we have increased our quarter dividend to $ 0.85 per share, reflecting our confidence in our continued financial strength and long-term value creation. Expanding in China is key to strengthening Autoliv's innovation, global competitiveness and long-term growth. To support our growing support our growing partnerships with Chinese OEMs, we are investing in a second R&D center in China. In October, we announced a new important collaboration in China as illustrated on the next slide. We have signed a strategic agreement with Qatar the leading research institution setting standards in Chinese automotive sector. This partnership marks a new chapter in our commitment to shaping the future of automotive safety. Together with Qatar, we aim to define the next generation of safety standards and enhance the safety on the roads in China and globally. We're also broadening our reach in automotive safety electronics as shown on the next slide. We recently announced our plan to form a joint venture with HSAE, a leading Chinese automotive electronics developer to develop and manufacture advanced safety electronics. The joint venture will concentrate on high growth areas in advanced safe electronics, including ECUs for active spa, hands-on detection systems for steering wind and the development and production of steering wheel switches. Through this new joint venture, we intend to capture more value from steering wheels and active diesel while minimizing CapEx and competence expansion enabling faster market entry with lower technology and execution risks. Looking now on financials in more detail on the next slide. Third quarter sales increased by 6% year-over-year, driven by strong outperformance relative to light vehicle production in Asia and South America. Along with favorable currency effects and tariff-related compensation. This growth was partly offset by an unfavorable regional and customer mix. The adjusted operating income for Q3 increased by 14% to USD 271 million from USD 237 million last year. The adjusted operating margin was 10%, 70 basis points better than in the same quarter last year. Operating cash flow was solid USD 258 million, an increase of USD 81 million or 46% compared to last year. Looking now on the next slide. We continue to deliver broad-based improvement with particularly strong progress in direct costs and SG&A expenses. Our positive direct labor productivity trend continues as we reduced our direct production personnel by 1,900 year-over-year. This is supported by the implementing our strategic initiatives, including automation and digitalization. Our gross margin was 19.3%, and an increase of 130 basis points year-over-year. The improvement was mainly the result of direct labor efficiency, head count reductions and compensation from a supplier. RD&E net cost costs rose both sequentially and year-over-year, primarily due to lower engineering income due to timing of specific customer development projects. Thanks to our cost saving initiatives, SG&A expenses decreased from the first half year level combined with the increased gross margin, this led to 70 basis points improvement in adjusted operating margin. Looking now on the market development in the third quarter on the next slide. According to S&P Global data from October, global light vehicle production for the third quarter increased 4.6%. The exceeding the expectations from the beginning of the quarter by 4 percentage points. Supported by the scrapping and replacement subsidy policy we continue to see strong growth for domestic OEMs in China. Light vehicle demand and production in North America has proven significantly more resilient than previously anticipated. In contrast, light vehicle production in other high content per vehicle market, namely Western Europe and Japan, declined by approximately 2% to 3%, respectively. The global regional light vehicle production mix was approximately 1 percentage point unfavorable during the quarter. Despite the important North American market showing a positive trend. In the quarter, we did see call-off volatility continue to improve year-over-year and sequentially from the first half year. The industry may experience increased volatility in the fourth quarter, stemming from a recent fire incident at an aluminum production plant in North America. And production adjustments by key European customers in response to shifting demand. We will talk about the market development more in detail later in the presentation. Looking now on sales growth in more detail on the next slide. Our consolidated net sales were over USD 2.7 billion the highest for the third quarter so far. This was around USD 150 million higher than last year, driven by price, volume, positive currency translation effects and USD 14 million from tariff-related compensations. Excluding currencies, our organic growth sales -- organic sales grew by 4%, including tariff costs and compensation. China accounted for 90% of our group sales. Asia, including China, accounted for 20% and Americas was 33% and Europe for around 28%. We outlined our organic sales growth compared to light vehicle production on the next slide. Our quarterly sales were robust and exceeded our expectations, driven by strong performance across most regions, particularly in Americas, West of Asia and China. Based on light vehicle production data from October, we underperformed slightly production by 0.7 percentage points globally as a result of a negative regional mix of 1.3 percentage points. We underperformed slightly in Europe, primarily due to an unfavorable model and customer. In the rest of Asia, we outperformed the market with 8 percentage points, driven primarily by strong sales growth in India and to a lesser extent, in South Korea. While the organic light vehicle production mix should continue to impact our overall performance in China, our sales to domestic OEMs grew by almost 23%. ,8 percentage points more than their light vehicle production growth. Our sales development with the global customers in China was 5 percentage points lower tender light vehicle production development as our sales declined to some key customers, such as Volkswagen, Toyota and [indiscernible]. On the next slide, we show some key model launches. The third quarter of 25% or a high number of new launches, primarily in including China. Although some of these new launches in China remain undisclosed here, confidentiality, the new launches reflecting a strong momentum for Autoliv this important market. The models displayed here feature Autoliv content per vehicle from USD 150 to close to USD 400. We're also pleased to have launched airbags and seatbelts on another small Japanese cars, this is the main [indiscernible] Autoliv has historically had limited exposure to these segments in Iran. In terms of Autoliv's sales potential, the [ Onvo ] L9 is the most significant. Higher content per vehicle is driven by front center airbags on five of these vehicles. Now looking at the next slide. I will now hand it over to Fredrik Westin. Fredrik Westin: Thank you, Mikael. I will talk about the financials more in detail now on the line. So turning to the next slide. This slide highlights our key figures for the third quarter of 2025 compared to the third quarter of 2024. The net sales were approximately $ 2.7 billion, representing a 6% increase. The gross profit increased by $ 63 million and the gross margin increased by 130 basis points. The drivers behind the gross profit improvement were mainly lower material costs positive effects from the higher sales and improved operational efficiency. This was partly offset by negative effects from recalls and warranty, depreciation and unrecovered tariff costs. The adjusted operating income increased from $ 237 million to $ 271 million, and the adjusted operating margin increased by 70 basis points to 10.3%. The reported operating income of $ 267 million was $ 4 million lower than the adjusted operating income. Adjusted earnings per share diluted increased 26% or by $0.48, where the main drivers were $0.29 from higher operating income from taxes and $0.08 from lower number of shares. This marks our ninth consecutive quarter of growth in adjusted earnings per share, underscoring the strength of our ongoing operational improvements and further bolstered by a reduced share count from our share buyback program. Our adjusted return on capital employed was a solid 25.5%, and our adjusted return on equity was 28.3%. We paid a dividend of $0.85 per share in the quarter, and we repurchased shares for USD 100 million and retired 0.8 million shares. Looking now on the adjusted operating income bridge on the next slide. In the third quarter of 2025, our adjusted operating income increased by $ 34 million. portion attributed with $ 43 million, mainly from higher organic sales and from the execution of operational improvement plans, supported by better call-off volatility. The out-of-period cost compensation was $ 8 million lower than last year. Costs for RD&E net and SG&A increased by $ 30 million, mainly due to lower engineering income. The net currency effect was $ 6 million positive, mainly from translation effects. Last year's supplier settlement and this year's supplier compensation combined had a $ 29 million positive impact. The combination of unrecovered tariffs and the dilutive effect of the recovered portion resulted in a negative impact of approximately 20 basis points on our operating margin in the quarter. Looking now at the cash flow on the next slide. The operating cash flow for the third quarter of 2025 totaled $ 258 million, an increase of $ 81 million compared to the same period last year, mainly as a result of higher net income, partly offset by $ 53 million negative working capital effects. The negative working capital was primarily driven by higher receivables, reflecting strong sales and delayed tariff compensation towards the end of the quarter. Capital expenditures net decreased by $ 40 million. Capital expenditures net in relation to sales was 3.9% versus 5.7% a year earlier. The lower level of capital expenditures net is mainly related to lower footprint CapEx in Europe and Americas and less capacity expansion in Asia. The free operating cash flow was $ 153 million, compared to $ 32 million in the same period the prior year from higher operating cash flow and the lower CapEx net. The cash conversion in the quarter, defined as free operating cash flow in relation to the net income was around 87%, in line with our target of at least 80%. Now looking at our trade working capital development on the next slide. The trade working capital increased by $ 197 million compared to the prior year, were the main drivers for $165 million in higher accounts receivables, $ 8 million in higher accounts payables and $40 million in higher inventories. The increase in trade working capital is mainly due to increased sales and temporarily higher inventories. In relation to sales, the trade working capital increased from 12.8% to 13.9%. We view the increase in trade working capital is temporary as our multiyear improvement program continues to deliver results. Additionally, enhanced customer call of accuracy should enable a more efficient inventory management. Now looking at our debt leverage ratio development on the next slide. Autoliv's balanced leverage strategy reflects our prudent financial management, enabling resilience, innovation and sustained stakeholder value over time. The leverage ratio remains low at 1.3x, below our target limit of 1.5x and has remained stable compared to both the end of the second quarter and the same period last year. This comes despite returning $ 530 million to shareholders over the past 12 months. Our net debt increased by $ 20 million and the 12 months trailing adjusted EBITDA was $ 41 million higher in the quarter. With that, I hand it back to you, Mikael. Mikael Bratt: Thank you, Fredrik. On to the next slide. The outlook for the global auto industry has improved call for North America and China. While the industry continues to navigate the trade volatility and other regional dynamics, S&P now forecast global light vehicle production to grow by 2% in 2025, following growth over -- of over 4% in the first 9 months of the year. The outlook for the fourth quarter has significantly improved. Nevertheless, they still anticipate a decline in light vehicle production of approximately 2.7% in the quarter. In North America, the outlook for light vehicle production has been significantly upgraded driven by resilient demand and low new vehicle inventories. However, a recent fire incident at an aluminum production plant in North America may impact our customers. For Europe, S&P forecast of 1.8% decline in light vehicle production for the fourth quarter despite some easing of U.S. import tariffs. We continue to see downside risks for Europe, like the European light vehicle production, driven by announced production stoppage at several key customers. In China, light vehicle production is expected to decline by 5%, primarily due to an exceptionally strong Q4 in 2024. Nevertheless, S&P anticipate sustained growth in Chinese LVP over the medium term, supported by favorable government policies for new energy vehicles. more relaxed out the loan regulations and increasing export volumes. The outlook for Japan Light vehicle production has improved as carmakers are increasingly shifting exports to markets outside the U.S., aiming to mitigate reduced export volumes to the U.S. In South Korea, domestic demand has been steadily recovering, while exports have also risen driven by increased shipments to other regions compensating for the decline in exports to the U.S. Now looking on our way forward on the next slide. We expect the fourth quarter of 2025 to be challenging for the automotive industry with lower light vehicle production and geopolitical challenges. However, our continued focus on efficiency should help offset some of these headwinds. Consistent with typical seasonal patterns, the fourth quarter is expected to be the strongest of the year. Despite the expected decline in global light vehicle production year-over-year, we foresee higher sales and continued outperformance, particularly in China. Unfortunately, we are also facing some year-over-year headwind. Unlike the past 3 years, we do not expect out-of-period inflation compensation in the fourth quarter given the shift in the inflationary environment. We expect higher depreciation costs due to new manufacturing capacity to meet demand in the key regions and that the temporary decline in engineering income will persist, driven by the timing of specific customer development projects. These factors combined in the reason for why we currently expect the full year adjusted operating margin to come in at the midpoint of the guided range. However, our solid cash conversion and balance sheet provides mentions and a robust foundation for maintaining high shareholder returns. Turning to the next slide. This slide shows our full year 2025 guidance which excludes effects from capacity alignment and antitrust-related matters. It is based on no material changes to tariffs or trade restrictions that are in effect [indiscernible] 2025. As well as no significant changes in the macroeconomic environment or changes in customer call of volatility or significant supply chain disruptions. Our organic sales is expected to increase by around 3%. The guidance for adjusted operating margin is around 10% to 10.5%. With only 1 quarter remaining of the year, we expect to be in the middle of the range. Operating cash flow is expected to be around USD 1.2 billion. We now expect CapEx to be around 4.5% of sales. revised from the previous guidance of around 5%. Our positive cash flow and strong balance sheet supports our continued commitment to a high level of shareholder return. Our full year guidance is based on a global light vehicle production growth of around 1.5% and a tax rate of around 28%. The net currency translation effects on sales will be around 1% positive. Looking on the next slide. This concludes our formal comments for today's earnings call, and we would like to open the line for questions from analysts and investors. I now hand it back to [indiscernible]. Operator: [Operator Instructions] And the questions come from the line of Colin Langan from Wells Fargo. Colin Langan: You raised your light vehicle production forecast from down 1.5% to up 1.5%, but organic sales didn't change why aren't you seeing any benefit from the stronger production environment on your organic? Fredrik Westin: Yes. Thanks for your question. So the -- there are a couple of components here. I mean, first one is that some of these adjustments that we also don't take into account are for past quarters. So some of the volumes have been raised in -- also in the first half, whereas we had already recorded our sales for that. So that doesn't -- so then we had a different outdoor underperformance in the first half of the year. So that's one part of the explanation. And then we also see a larger negative mix now after 9 months and also expect that for the full year. That is close to 2 percentage points. This negative market mix, which is also one of the reasons. And that's even less unfavorable now than we saw at the quarter ago. So those are some explanations. And then on top of that, we see that some of the launches in China have been a bit delayed and that they are not coming through fully in line with our expectations that we had here about a quarter ago. So those are the main reasons why you don't see that LVP estimate increase comes through on our organic sales guidance. Colin Langan: Got it. And then the margin in the quarter was very strong. I thought Q3 is typically your -- one of your weaker margins. Anything unusual in the quarter? I noticed you flagged supplier settlements. I kind of get the nonrepeated bad news last year. Is the $15 million of supplier compensation additional good news, is that onetime in nature? How should we think of that or anything else that's maybe possibly onetime in nature in the quarter that drove the strong margin? Mikael Bratt: Yes. The $ 50 million there is a one time. It is compensation from a supplier for historical cost that we have versus our customers there. So it's onetime in the quarter here for previous costs that we have had. So I would say here also that I think what you saw in the quarter here was that we had slightly higher sales than expected. So that was an important component, of course. But I think most importantly here is that we continue to see a very strong delivery of the internal improvement work that we are so focused on and that we have been focused on for a while leading to our targets here. So good work done by the whole poly team here across the whole value chain. Operator: And the questions come from the line of Björn Enarson from Danske Bank. Björn Enarson: On your implied guidance for Q4 and also on your -- a little bit cautious comments on Q4, it looks like there are a little bit of temporary negative effects that you are talking about or should we extrapolate the Q4 trends looking into 2026? Or are you quite happy with the productivity work and also that call-offs looks again a little bit better. So should we have as a base assumption that you should progress again towards the midterm target of 12%? Or how should we look upon that? Mikael Bratt: I think, I mean, first of all, that we feel confident when it comes to our ability to eventually get to our 12% target. No doubt about that. And I mean what you see here in the Q3, Q4 movement here is nothing if you read into that. I think, as I said before here, I mean, we see very good progress in terms of the activities that we control ourselves here, and we see really good traction when it comes to the strategic initiatives that we have outdone some time back. So good progress there. I think -- when you look at Q4 -- over Q4 here, it's, I would say, more of, first of all, a normalization of the quarters here. I mean, is still the strongest quarter in the year. But of course, in the previous last 2, 3 years here, it has been more pronounced since we had this out-of-period compensation that we referred to earlier here. Which you will not see in the same way now in this quarter in Q4 2025. So that there is a difference there. And I would say also here, I mean, you have seen a little bit stronger Q3 when it comes to sales and there is a timing effect between Q3 and Q4 compared to when we looked into the second half year. So there is also a part of the explanation. But the bottom line here, we feel comfortable with our own progress here towards the target that we have. Fredrik Westin: And then maybe just to build on that, just one more detail on the fourth quarter. we do expect that we will have a slightly lower engineering income also in the fourth quarter, as you saw on the third quarter. This is temporary, and it's very dependent on how the engineering activities are with certain customers. And this should then also recover in 2026. Björn Enarson: Okay. I saw that comment. And did you say it's likely to be recovered then in early next year then? Fredrik Westin: Or next year, overall, yes, should be a recovery ratio that is more in line with -- or a bit higher now than what you see in the second half of this year. And that's, again, very dependent on engineering activities with certain customers and how they reimburse us. Mikael Bratt: Yes. Because in some cases, it's built in, in the Peace pricing. In some cases, it's paid like engineering income specifically. Depending on how that mix looks over time, of course, you have some smaller fluctuation and that is really what we refer to [indiscernible]. Operator: And the questions come from the line of Tom Narayan from RBC. Gautam Narayan: Maybe a follow-up to that last one. The Q4 guidance. You called out three headwinds, the less compensation on inflation I guess, the higher depreciation and then this engineering income. Just wondering if you could dimensionalize those three in terms of order of magnitude for Q4. I mean, we know the engineering income is temporary. The other two, I guess, depends on certain factors. Just trying to dimensionalize those three in terms of what is temporary and what continues. And then I have a follow-up. Fredrik Westin: Yes. So I think the income, you can look at the Q3 on a year-over-year basis and how that -- as a percent of sales. And that, I think, is a pretty good indication also for how that could be in the fourth quarter. And that's the largest headwind we will have. The next one is the fact that we had this out of period, the compensation from our customers related to inflation compensation last year that falls away this -- the second largest and the third largest is the depreciation expense increase. Gautam Narayan: Okay. And then on the China commentary, we did see -- I think the ID is losing share in China due to some just government initiatives and whatnot. I would have thought that alone would maybe benefit you guys more? I know macro in China, the domestics are doing better than the global. So I see that. I understand that. But just wondering if the share loss at BYD's seen. I know you're under-indexed to them is benefiting you guys? Mikael Bratt: Yes. I mean in the overall mix, of course, since we are selling components to them, and you see them -- their portion of the total market flattening out. Of course, it's supportive in the sense of measuring our outperformance relative to COEMs, LVP as such. So mathematically, yes, that effect that. Operator: And our next questions come from the line of Mike Aspinall from Jefferies. Michael Aspinall: One first on India. It was 1/3 of the organic growth. Can you just remind us where we are in the shift in content per vehicle in India and how large India is in terms of sales now? Mikael Bratt: Yes. I think we are see the strong development in India there and as I said, 1/3 of the growth in the quarter it's today around 5% of our turnover is coming from India. It's not long ago, it was around 2%. So a significant increase of importance there. And we have a very strong market share in India, 60%. So of course, we are benefiting well from the volume growth you see there. And we're expecting India to continue to grow, and we have also invested in our industrial footprint there to be able to defend our market share and to capture the growth here. And content-wise, we expect it to go from it went from $120 in 2024 to roughly USD 140 this year. So you have both content and LVP growth in India to look forward. Fredrik Westin: And then we are to around $160 to $170 in the next couple of years. Michael Aspinall: Great. Excellent. And one more. Just on the JV with [ Hancheng ] chain, who are you purchasing these items from before? Were you purchasing from [ Hancheng ] and now to JV or have you formed a JV with them and we're purchasing from someone else previously? Mikael Bratt: I mean they have been an important supplier to us in the past as well. And of course, we have worked with them and established a very good relationship there. I could say it hasn't been exclusively with them. We have a global supplier base here, but we see a great opportunity here to not only produce but also develop components for our future models and programs here, we work together here, both on development and manufacturing. Michael Aspinall: Okay. So they're moving, I guess, from a supplier and now you guys are going to be working together. Operator: And the questions come from the line of Vijay Rakesh from Mizuho. Vijay Rakesh: Mike, just quickly on the China side. I know you mentioned subsidies. When you look at the NAV and the scrapping subsea, fleet is down 50% this year. Do you expect that to be extended to '26? Or is there going to be another step down? And I have a follow-up. Mikael Bratt: Yes. We I will say we are not speculating in that. So I guess it's anybody is yes here. But I think, overall, we definitely look very positively on China. And as we have mentioned here before, we are growing our share with the Chinese OEMs here and good development in the quarter here. And we're also investing in China as well here. So as I mentioned in the presentation here earlier, I mean, we are investing in a second R&D center in Wuhan to make sure that we also continue to work closer with the broader base of customers there to adding capacity. We talked about the JV of now here. And then also the partnership with Qatar care here is important steps here. So all in all, looking positively on China going forward here for sure. So subsidies or not, we will see. But overall, it's pointing in the right direction here. Vijay Rakesh: Got it. And then I think on the -- as you look at the European market, a lot of talk about price competition and imports coming in from Asia and tariffs, et cetera. How do you see the European market play out European auto market play out for 2026? Mikael Bratt: Yes. I think we wait to comment on '26 for the next quarterly earnings here when it's can for it. But as we have said here for the remainder of the year, we are cautious about the European market more from a demand point of view than anything else. I think -- that's really the main question mark around the market and anything else in terms of OEM reoffering or anything like that. I mean it's really the end consumer question. it comes to you. Operator: And the questions come from the line of Emmanuel Rosner from Wolfe Research. Emmanuel Rosner: My first question is actually a follow-up, I think, on Colin's question around the organic growth outlook, which is unchanged despite the better LDP. I'm not sure that I understood all the factors, but if we wanted to frame it as like growth above market, initially, you were going to grow 3% despite a shrinking market, now growing 3% in a market that would be growing 1.5%. Can you maybe just go back over the factors that are driving this different expectation for outperformance? Fredrik Westin: Yes. In that sense, I mean the largest change over yes, a couple of quarters here since we started the year is the negative market mix. So as I said, we now see a negative market mix for the full year of around 2 percentage points. and that has deteriorated over the course of the year. But that's the largest part. Then we also have seen here in the third quarter, also the negative customer mix for us in mostly North America and Europe. So that's also a deviation to what we expected going into the year. And then the last one that I already mentioned before is that we see some delays on the new launches, in particular in China. So they're not coming through at the same pace that we had expected originally. Emmanuel Rosner: Understood. And if I go back to your framework and your midterm margin targets. Can you just maybe remind us the drivers that will get you from the 10% to 10.5% this year towards the where are we tracking on some of those? And I did notice that you mentioned improved cold pull-offs accuracy, both sequentially and year-over-year. Is that something that you expect to continue and that will be helpful for that. Fredrik Westin: The framework has not changed, as you would probably expect. So it's still -- if we take 2024 as the base point adjusted operating margin, we still expect 80 basis points improvement from the indirect head count reduction. In the reported numbers here now, you don't see a movement in that, but we had about employees from a labor law change in Tunisia that we now have to account for head count that distorts that number. You adjust for that, we would also have shown further progress on the indirect head count reduction. So that is well on track. There was a 60 basis points from normalization of call-offs. That is developing well. We saw 94% call of accuracy here and also in the third quarter, which is an improvement on a year-over-year basis. We also talked about that we have decreased our direct head count by 1,900 people despite that organic growth was up 4% on a year-over-year basis. So that's tracking very well. And then the remaining 90 basis points would be from growth component, where we are a little bit behind now this year as we laid or as you talked about before, and then from automation digitalization. And there again, you can see, I think, on the gross margin, even if you exclude the settlement here with the supplier, you can also see there that we are progressing well on that component. Operator: And the questions come from the line of Jairam Nathan from Daiwa Capital Markets. Jairam Nathan: I just wanted to kind of go back to the announcement in out of China. Just wanted to understand the timing, it seems it kind of coincided with also the -- with the announcement of Adient, the 0 gravity product. So just wonder is there -- is this the timing related to some -- a new business win or more opportunities there? Mikael Bratt: You're talking about JV or? Jairam Nathan: The JV, the Qatar partnership as well as the kind of announced you kind of finalize the Adient gravity product. Mikael Bratt: I was going to say they're not connected at all as such because, I mean, the JV here is really to vertically integrate in an effective way together with the partner to gain a broader product offering here to say that we also yes, more to our end customer, basically. Qatar is, of course, a development collaboration to make safer vehicles safer roads for everyone. So it's including light vehicles, commercial vehicles and valuable radiuses, meaning 2-wheelers, et cetera. So the broad-based research collaboration there. And then the AGM, of course, is connected to the 0 gravities. So I mean, yes, to some extent, of course, they are all about safety products as such, but they are not connected in any way. Jairam Nathan: Okay. And just a follow-up, I wanted to understand the lower CapEx. Is that something that can be maintained in as a percentage of sales into the future? Mikael Bratt: Yes. I think, I mean, we have been talking about this in the past also that our ambition is to bring down the CapEx levels in relation to sales compared to where we have been -- and we've been through a cycle here where we have investing a lot in our facilities around the world here, Europe, where we have consolidated and upgraded a number of plants in BI investments we talked about before. expanding capacity in China. We also upgraded in Japan, et cetera. So last couple of years here, we have invested heavily in upgrading our industrial footprint, and we are coming out now into a more normalized phase here, and that's why we can bring it down here. So we are not expecting to see CapEx jump up back in the near term here. Operator: The questions come from the line of Hampus Engellau from Handelsbanken. Hampus Engellau: Two questions from my side. Maybe [indiscernible] question, but if I remember correctly, you covered about 80% of the tariff costs in the second quarter, and the remaining 20% came in Q3, and now you're moving around 20% for Q3, you would get in Q4. Is the net effect like 100% compensation, if you account for the things you that came from second quarter to Q3? Or you still a net negative there on the margins? Mikael Bratt: Let's take the first that one. We are still net negative here, as we said, we have received some of the outstanding 20 in the second quarter. But most of it remains still. And then in the third quarter here, we got 75. So we have accumulated more outstandings from Q2 to Q3. But as we have indicated here, we still expect to get full compensation and catch up on this in the fourth quarter fully compensated. That's our expectations here. Of course, the work is ongoing here as we speak with debt, but that's the net result right now. Hampus Engellau: Fair enough. And the last question was more related to from what you see today in terms of launches for 2026, maybe compared to 2025 if you have -- could share some light on that? Mikael Bratt: I have no figure yet for '26 to share with you here. But I think in general terms, I mean, we have good order intake here to support our overall market position here. We see, however, some especially on the EV side, planned programs or launches being delayed or canceled here. So there are some reshuffling there. But what kind of impact that we have in '26 compared to '25, we are not ready to communicate that yet. But we, as I said, we have good order intake to support our market position. Operator: And the questions come from the line of Edison Yu from Deutsche Bank. Yan Dong: This is Winnie Yan for Edison. My first question is on the supplier contract that came out of GM, indicating maybe like a more -- a less favorable contract terms of suppliers on a go-forward basis. Just curious if this is something that's more isolated and more depends on like the OEM. Or do you see like heading into [indiscernible] maybe a broader trend that can close potentially as a headwind heading to next year and [indiscernible]. Mikael Bratt: Yes. No, I don't want to comment specific customer contracts or conditions here. But of course, I mean, it's constantly ongoing development here in terms of what the OEMs wants to put into the contract. But I would say that I see good ability to manage those clauses and contracts that are put in front of us here. And I must say I don't feel any major concerns around more difficult situation. I think we are quite successful in negotiating and settling contracts with our customers here. So nothing exceptional there from our point of view, I would say. Yan Dong: Got it. And then on the Ford fire impact, you did mention some potential impacts into 4Q. So I was just curious if you can help us delineate that? Is that something to be concerned about? Or is it more of a negligible impact for you guys? Mikael Bratt: Yes. I think I mean every car that is not produced is not a good thing, of course, and especially the customer in question here. But I mean you have seen the announcement made by the OEMs here. And just as a reference here, I mean, the Ford 150 is around 1% of our global sales. And so we're so good about this manageable level from our point of view. Operator: And the next question come from the line of Dan Levy from Barclays. Dan Levy: Great. I just wanted to just follow up on that prior question. The headlines on Experia yesterday causing some potential supply issues. Just how much of that of a potential risk have you seen or heard on that in the fourth quarter for European production? Mikael Bratt: For the European production. No, I think it's too early to comment on that. I mean it's just a few days hours or most into the situation here. I think, first of all, I think we have a very good supply chain team that are a lot here and are managing through the situation here. We have been here before with supply chain cost gains. And I would say, the last couple of years, there has been many topics here. So I mean, the team is well prepared to maneuver through it. And we'll see and come back on that, but I would say it's too early to be too granular or to detailed around. And as I said solid [indiscernible] we don't see so much yet on the customers. Dan Levy: Just as a follow-up, I wanted to double-click on the China performance. So you did very well outperformance with the domestic OEMs. But in spite of that, the total China performance was negative 3 points even though the domestics are the clear majority, I think we were all a bit sure, I know you sort of unpacked this a bit before in one of the prior questions. But can you maybe just explain the dynamics of why even though you outperformed the domestic, the overall China performance was negative. And what -- can you explain what flips going forward that is leading you to say that your China growth going forward should outperform. Mikael Bratt: Yes. I mean we still guide for us, as we said before here, I mean, we believe that we will see improvements here in the quarter to come. And I think it's a really important milestone here what we reported on the COEM outperformance, which was really strong here in the quarter. But still, the global OEMs is the biggest majority of our total sales. And some of our customers here that are significant had a negative mix impact on us this quarter, unfortunately. So what was on the negative side here. But we don't see this as major trend shift here it's mix effect that we see from quarter-to-quarter. But I think the important takeaway here is that we see this strong growth development to the Chinese OEMs that is also growing their share of the total market. So that sets us up for our development in China over time. Operator: Given the time constraints, this concludes the question-and-answer session. I will now hand back to Mr. Mikael Bratt for closing remarks. Mikael Bratt: Thank you very much, [indiscernible]. Before we conclude today's call, I want to reaffirm our commitment to meeting our financial targets. We remain focused on cost efficiency, innovation, quality, sustainability and mitigating tariffs. As of this ongoing market headwinds, we anticipate strong fourth quarter performance. Our fourth quarter call is scheduled for Friday, January 30, 2026. Thank you for your attention on to the next time. Stay safe. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Bank OZK Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jay Staley, Managing Director of Investor Relations and Corporate Development at Bank OZK. Please go ahead. Jay Staley: Good morning. I'm Jay Staley, Managing Director of Investor Relations and Corporate Development for Bank OZK. Thank you for joining our call this morning and participating in our question-and-answer session. In today's Q&A session, we may make forward-looking statements about our expectations, estimates and outlook for the future. Please refer to our earnings release, management comments, financial supplement and other public filings for more information on the various factors and risks that may cause actual results or outcomes to vary from those projected in or implied by such forward-looking statements. Joining me on the call to take your questions are George Gleason, Chairman and CEO; Brannon Hamblen, President; Tim Hicks, Chief Financial Officer; and Jake Munn, President, Corporate and Institutional Banking. We will now open up the lines for your questions. Let me now ask our operator, Gigi, to remind our listeners how to queue in for questions. Operator: [Operator Instructions] Our first question comes from the line of Stephen Scouten from Piper Sandler. Stephen Scouten: So George, you and Brannon and your whole team, obviously know these real estate markets better than any of us. I'm wondering from the heightened fear peak of like 2023 to today, if you could give some commentary on how absorption is trending in some of these various classes, whether it's office, industrial, land, kind of how you view those in the landscape today, the attractiveness of each of those, how they're trending? And additionally, maybe on these 2 new loans that moved to substandard, how we can think about when the ACL would tend to get recognized? Because obviously, the Chicago loan doesn't appear to have an ACL and the Boston one appears to have a massively significant ACL already associated with it. So just kind of understanding some of the puts and takes as those loans migrate. George Gleason: Yes. Let me take that last part of your question, and then I'll turn it over to Brannon for some more general commentary on what we're seeing. In regard to the -- we did have 3 loans migrate one from substandard to substandard nonaccrual, that loan had a significant charge-off on it that recognized our exposure on that. We had a significant reserve for it last quarter, but that did manifest itself in a charge-off. And that's a good example to answer your question, when do you -- when does a reserve on a loan become a charge-off, and that is when it becomes evident that we're moving forward with a liquidation or other resolution of that, that's not as an ongoing loan. The second project, you mentioned the Chicago project. We took -- when we moved that, that move from special mention to substandard nonaccrual, we took the charge-off on that, reducing that to what we consider a liquidation value on that asset. The third asset you mentioned moved from special mention to substandard. And we put a sizable reserve on that, representing what we think is a wide range of potential outcomes on that. Those sponsors are continuing to actively work a really good lease prospect and maybe others, I'm not aware of, but I know they've got one really good lease prospect that they're far along with. And hopefully, there'll be the winning proponent on that. They're also evaluating how to recapitalize that project and go forward. I think by the end of this next quarter or into Q1, we'll have more clarity on that. Now with that said, I've read some of the analyst reports that have already been written on our release last night, and it seems that the universal characterization is it was a mixed bag on asset quality. And I would certainly agree that, that's an accurate picture. We did have those 3 migrations and a couple of charge-offs on that. None of those were surprises. They were all either substandard or special mention assets. But the flip side of that is we -- on the positive side, we had our largest foreclosed asset, which constituted more than half of our foreclosed assets that Lincoln Yards land in Chicago sell during the quarter at the book value we had it on the books for. So that was a big win. And the second and third largest OREO assets that we had at June 30, which are now our first and second largest OREO assets are both under contract as of October 2, with expected closings this quarter, and those will have neutral to positive gains on sale, breakeven to gain on sale on those if they close and assuming they do close, we never know they're going to close until they do. But if they do close, we'll have a positive outcome on that. So I think we're doing a really good job of resolving credits that do come into the foreclosed asset category in a very effective way and feel good about that. I think that's a positive. The other thing that I think is a positive, if you look at our combined special mention substandard and foreclosed assets, that aggregate number was actually down modestly during the quarter. So reflected a pretty stable asset quality from that front. The third or fourth point, I guess, I would make is on Page 29 of our management comments, we've talked for years now since the beginning of the COVID-19 pandemic about the importance of sponsor support. And we had an outstanding quarter in sponsor support. We had 41 loans that reached a maturity that were extended and modified. We had almost $70 million of additional reserve deposits posted in connection with those modifications, extensions. We collected $13.5 million of fees. We had over $80 million of unscheduled paydowns on those loans and $14 million of unfunded balances that were curtailed as a result of those. So some of those numbers are among the highest over the 13 quarters that we've been tracking and reporting that data. So while you did have 3 loans migrate risk rating-wise, which you'd always prefer to not see, but they were identified credits, we had just a number of really strong sponsor support examples in our modifications and extensions. And then the final point I'd make before I turn it over to Brannon in that regard is you've seen an infusion of liquidity into the CRE space as evidenced by the record level of RESG paydowns in the quarter just ended. And we've been communicating for some time that we expected a high level elevated RESG paydowns for a number of quarters. That reached a new height in the quarter just ended. That should not have been a surprise to anybody because we've been talking about it for a number of quarters now. But it does reflect the fact that there is a growing degree of liquidity for refinance options and that sponsors are reaching the point that they're willing to grab on to some of those refinance options. So all that is kind of my view on the credit quality front. I'll let Brannon address what he's seeing in the -- at the ground level project, project CRE trend. Paschall Hamblen: Yes. Thanks, George. Thanks, Stephen, for the question. I think broadly, a lot of the things that George just described are evidence of continued improvement in real estate markets. Our largest concentration in real estate on the residential side, multifamily and then through condos in there as well. And that's -- that particular part of the world has been performing very well across the portfolio. But then as you work down, you mentioned office and industrial, and we were pleased in both cases with the continued absorption leases that are being signed up in various projects across the country. There are markets that are hotter, that are -- they've filled up, they've used up all the really strong Class A office space. And that trend of flight to quality just continues. We see it everywhere we go. And as leases roll, it takes a little bit longer for an office contract to work its life than it does an apartment. And so it takes time to see the ultimate degree and magnitude of the migration from lower quality projects to higher quality projects, but we're encouraged at how we're seeing that take place in a number of markets across the country. I mentioned industrial. We continue to see good lease-up there. And I know that we had -- saw a question around industrial appraisals. We're -- all our appraisals on these projects are reflecting the current state of markets, whether it's strong leasing or lesser leasing. And we're really pleased, as always, at our basis in these deals that may be not moving quite as quickly as the others that are really leasing up well. So good activity there. And the office space strength has been strong enough that you're starting to get a bleed over in the life science sector. Those markets where there's just not enough really high-class office for tenants to move to our sponsors in the life science world where demand has been slower, are -- we're seeing them being open and courting tenants that are more of a traditional office use in those projects. And of course, as we've noted several times over the past, our basis in those projects makes an office lease a very executable proposition. So while life science has not attained the level of the magnitude velocity of leasing that office has, you are starting to see office be considered and impactful to projects that are otherwise labeled life science. So you've got all the things George mentioned as evidence of the recovery in the commercial real estate markets. You've got perhaps a reignition of the easing cycle that will take some pressure, slow some headwinds with respect to both sponsors and real estate projects with respect to tenants and operating businesses and all the impact that, that has. And obviously, the capital markets are giving a nod to those market dynamics in the origination of a lot of loans, many of which are coming to take our projects away. And as has been mentioned, our payoffs this quarter are a pretty significant indicator of that. Stephen Scouten: Yes. Fantastic level of detail. Really appreciate that. And maybe flipping the script a little bit, reading through the management commentary, management comments and I went back and read, gosh, a bunch of them last night, all the way back to like 2017, it feels like you guys are about as bullish as I remember reading as it pertains to 2027 loan growth and kind of how you're positioned to be opportunistic there. And it seems like a lot of that is getting past the wall of these older vintage repayments in RESG. But just kind of if you could comment further on that, it sounds like mid-single-digit growth expected in '26, meaningfully more expected in '27. So I don't know if you can frame that up at all, but it feels like loan growth and fee income growth, you're both pretty bullish on as we get into '27. And just any additional commentary there would be great. George Gleason: Yes. Yes, Stephen, I think you correctly understand how we view the future here. Obviously, 2022 was RESG's record origination year. We originated $13.8 billion. We give that in that year. We give that cadence chart in our management comments document and have for years that -- Tim, what page is that on? Tim Hicks: Page 13, figure 13. George Gleason: Page 13, figure 13, in the management comments document that shows that cadence. And we have told people for years that most of these loans have a 3- to 4-year life cycle. So it's no surprise to anyone that's been following our stock that we would have an exceptionally high level of RESG payoffs in 2025, probably late 2025. You certainly saw that in the quarter just ended. And in 2026 as those loans kind of reach that 3-, 4-year time frame. So we've known since we were celebrating the extraordinary level of originations in 2022 that, gosh, we were going to be having to pedal hard to keep up in '25 and '26. And that realization was a strong impetus behind our effort to really ramp up our CIB group and diversify and build its origination capabilities so that we could achieve a handoff of the growth baton from RESG as it was absorbing that payoff wave to another business unit that could match the quality that we've traditionally had in RESG, that 12 or 13 basis point life of portfolio sort of net charge-off number, that high asset quality and also originate in significant volume. So our timing there I think, was very good. If I were criticizing my leadership as CEO, I would have said, gosh, we should have started CIB a year sooner, and the timing would have been perfect. But we started it when we had the human resources lined up and felt like it was time to go on it. And we're pretty close to spot on there. So what I think happens is that RESG repayment wave just continues through '26 as we grind through the natural payoff cycle from all those '22 originations. And of course, there'll be a few older and a few newer originations that will pay off next year and some of the '22 will slide to '27. But next year is going to be the big payoff wave if the normal expected cadence holds true. And CIB is growing. We've really ramped up the staff there. So I think those guys are going to carry the growth ball for us next year. And of course, we would expect our high-quality indirect marine and RV business to continue to grow kind of at a similar rate of growth to what it has grown this year. We would expect our commercial banking business to grow. And with that big RESG payoff wave, we think that gets us to a mid-single-digit loan growth rate next year. But once that payoff wave is behind us and RESG is beginning to contribute positively to future growth, and we're not absorbing all those payoffs, we think we've got all of those growth engines really contributing in a meaningful way, and that really is going to lead us to some nice, very diversified growth in the portfolio in '27 and years thereafter. And at that point, I think you're 40%, 30%, or 38%, 32%, whatever, it's a much more balanced almost 3 parts of the portfolio that are more or less equal with RESG, of course, being the legacy dominant part of that, CIB being almost equal, if not equal to RESG and the commercial banking indirect piece really filling in the final kind of third part of that equation. So I think that diversification is good for asset quality. I think it's good for eliminating some of this concentration risk that's weighed on our valuation, and I think it's good for growth. So we're really excited. I think we've positioned ourselves well to be in a really good place at that point from a growth perspective. And I think we grind through with mid-single-digit growth next year, and a lot of banks out there would be happy with mid-single-digit loan growth. So we're feeling good about it. Stephen Scouten: Great. That's fantastic, George. And maybe just one accounting question to follow up on what you just said. As you migrate towards that maybe 40-40 percentage over time with CIB and RESG, if that reduces the unfunded book further, which I would think it would, that would just simply unlock more potential capital for share repurchases. Is that right on how that accounting would generally work at a high level? George Gleason: Yes. And the CIB guys are very cognizant of that. And they're focused on opportunities that not only meet our high asset quality and returns, but also have high utilization rates because we're very sensitive from our history with RESG where we've got almost as many unfunded as funded that, that capital burden of all those unfunded loans really impairs our ability to be as efficient with capital allocations as we would like to. And we've had those conversations. Of course, Jake and his team are a bunch of really smart guys. They didn't need to have that explained to them. So they are actually working to weed out some of our older legacy business in those books that has a very low utilization rate in preference to new business that's very high-quality new business, but it's going to have a higher utilization rate and less unfunded. So we're focused on that as part of the strategy. Paschall Hamblen: Yes. And George, to piggyback off of that, you can look in our management comments specifically in the CIB section. You'll notice quarter-over-quarter, we had a little bit of shrinkage in our fund finance group, for instance. That is exactly what George is explaining. We're actively, as we grow, rebalancing these legacy books to ensure that we're optimizing utilization and the deployment of capital, but also ensuring that we're getting the best return possible for our shareholders. And so you saw a little bit of a dip there in fund finance. That was primarily by design as we've shed some legacy borrowers who, in some cases, weren't even utilizing their facilities. We weren't getting the fees that we wanted out of those opportunities. Opportunity came around to exit those relationships on good terms, and so we did that. And so you'll see that continued rebalancing to George's point, of the CIB book actively as we grow to ensure that we're improving our utilization quarter over quarter over quarter. Operator: Our next question comes from the line of Manan Gosalia from Morgan Stanley. Manan Gosalia: So I appreciate all the comments on the credit for the RESG side. Can you talk a little bit about the CIB side, maybe what you're hearing, what you're seeing in the portfolio, especially given the recent headlines in the asset-backed lending, corporate banking, sponsor finance, fund finance portfolios. Can you just talk a little bit about what you're seeing there? George Gleason: Jake, do you want to take that? Jake Munn: Sure. That sounds great. Good morning, Manan. It's great to hear from you. You know, quarter-over-quarter, we actually had record origination growth for CIB. We originated nearly 2 dozen new relationships, upsized nearly a half dozen relationships, which is very exciting to see. Now what you'll see within the management comments on a net basis due to both -- some of the strategic realignment that we mentioned earlier as well as the capital markets being really active this quarter, we had a record number of bond issuance and high-yield issuances, which are blessing and a curse that took a little bit of a nick out of our outstandings growth quarter-over-quarter, but the upside is now that we have our loan syndications and Corporate Services group, we're able to reap the benefit of additional fee income from our capital markets program, which is exciting. But quarter-over-quarter, I do want to point out that it was very successful for CIB overall. Our ABLG group really led the way along with CBSF and then our new Natural Resources Group. To a lesser degree, we had great contributions from our fund finance and lender finance groups as well. And so we're excited about the continued diversification we're seeing there, the consistent growth we're seeing there and candidly, the additional fee income that we're producing in partnership with CIB's LSCS with that growth. You had touched on something that's really made the headlines lately, the NDFI space, the lender finance group. The beauty of what we're building here is we're building a wholesale banking infrastructure based on that diversification play. And so with the launch of these new business lines that we've brought into the fold, with the launch of some business lines that we're looking into on the horizon here for the next couple of quarters that we feel like will be very complementary. As a whole, our exposure to that lender finance space will continue to dilute as a percentage of the bank's overall portfolio. And so I do want to point that out as we kind of get into the nitty-gritty here on the NDFI side and some of the headline risk that you all have heard of there. The bulk of our NDFIs here at Bank OZK are really found in that lender finance group led by Jim Lyons, very experienced team. That is our former EFCS group, just to make it clear for everybody as we've renamed them and really honed in a focus on what they've been doing. But an experienced group that's locked in arms with our portfolio management and operations team to ensure deep underwriting, compliance, oversight and really a credit-focused and a credit-first mindset specifically in that space. We're a little bit different in that space than most and most that you've seen in the market that have stubbed their toes there lately. We really focus on single lender opportunities and to a degree, 2 bank club deals within that niche more than the broader syndications. We think that's important in that space because that allows us to have tighter control, allows us to have a deeper look at the underlying portfolio companies within those, the attachment points that the bank has at the loan level as well. And it also ensures that we can put in place a structure that we find to be palatable and conservative in nature, too. And so we take a little bit of a different approach there. We do a bottoms-up risking, which is very different than other institutions. We take the time to look at each portfolio company investment. We actually rate that against the bank's risk rating methodology to ensure that it meets the standards of our institution. We also dive into their policy and their procedures to ensure that they're properly monitoring these loans. And then in addition to that, we also engage third parties for field examinations, appraisals, you name it, to ensure that what we're lending to is, a, actually there; but b, is valued at the valuation that plugs into our assumptions for our overall loans. And so that's a space we've been in since 2019. That loan book has continued to grow, but grow at a much smaller pace than our other business lines. And while we remain focused and committed to that space, I do want to point out over time, it will be -- continue to be a bit diluted just with the introduction of some of these other more diversified C&I business lines. George, anything there you'd like to add? George Gleason: Yes. I'm -- you were talking about the NDFI loans, Jake, from your CIB group. But a chunk of our NDIF loans that show up on our call report are actually RESG loans. And this goes back to our long-standing relationships with a lot of the debt funds that do commercial real estate lending. And we compete with those guys, a lot of times, if they win a unitranche deal, they'll bifurcate it into a senior mezz and we're the senior lender and they're the mezz, sometimes they want to hold that whole loan on their books, but leverage it with a loan from us. And we do a loan to lenders or an NDFI loan to those guys. And we underwrite our loan to them exactly and service it and manage it exactly as if we were the senior lender on that and if we were making the senior loan. So in our view, there is no difference in the way we rate or evaluate those loans or the risk profile of those loans versus us being senior and them being mezz in the transaction. So that's a big chunk of our NDFI loans. We feel really good about that. It's business we've been doing for many years with an exemplary track record. And in CIB, we are looking at the portfolios of the lenders that we're leveraging. As Jake said, our attachment points are very low in those. It gives us a lot of comfort, insulates us from a lot of risk. I was appalled when I was listening to one of the news programs the other day and one of the executives from one of the lenders that has been called in one of these situations was on there and he said, frankly, we just need to do better underwriting. And I thought, my gosh, you're making loans to complex entities out there and you just now figured out you need to do better underwriting. I mean we are thoroughly vetting and doing very diligent underwriting on these things. And Jake really emphasized that talking about a lot of our deals we're single lender or small group lenders so that we're able to really influence that and dig in there and look at the underlying portfolios in great detail. And of course, we got locked boxes and third-party servicers and other protections there that ensure that we're doing those things the right way. Paschall Hamblen: Yes. And George, just to piggyback off that again, I think it's important to point out that the NDFI opportunities and when we're looking at our lender finance book, for instance, it's going to be -- think of BDCs, Business Development Corps, for instance, we look at how they're looking at their investments, right, concentration risking, ensuring that the bulk of their loans are senior secured loans are properly perfected. And then we also look at what industries are they focused in. We've mentioned on prior earnings calls that CIB recognizes there are certain industries out there that are currently a little bit higher risk or very competitive, but we're seeing people stretch on structures, and it makes us candidly uncomfortable. And we see that in the consumer space, the auto space, we see that in the degree in health care, venture capital and tech. And so there's a lot of BDCs and other what we classify as NDFIs that are focused in those niches and good on them, if that's their prerogative. But just like a direct loan that we would do here at Bank OZK, when we're lending to an NDFI, we look at the industries they're investing in to ensure that it is aligning with our overall credit philosophy as well. George Gleason: Yes. And that conservatism and thorough underwriting is evident in our pull-through rates. Jake, what are we running now kind of pull-through rate. Jake Munn: Great point, George. We're still sub-15%, yes. So when we look at that quarter-over-quarter, we're still being very selective on the opportunities that we're pursuing. 85% of the deals that come across our desk we're passing on primarily from a credit structuring standpoint, from a yield standpoint, the market has gotten very competitive, and we've said that quarter-over-quarter. And we're choosing to pick the spaces, pick the markets that make sense to us, and we're sticking to our guns on credit quality. We'd rather have high credit quality names here and let our products and services speak for themselves versus chasing just yield and as a result, doing a bunch of highly levered deals or deals in kind of adverse industries and asset classes. George Gleason: Yes. We're -- as we've said earlier, we're looking for CIB to become 30% to 40% of our loan book over the next several years. And obviously, even if we're 3% or 4%, we would be paying close attention to. But realizing that it's going to become an element of our loan book, we expect to rival our RESG book as far as volume. We're certainly intent on doing this right. Operator: Our next question comes from the line of Matt Olney from Stephens. Matt Olney: I wanted to switch gears a little bit, and I appreciate the commentary around the margin and the guidance for the NII in the fourth quarter. Very helpful, and that all makes sense. Just want to understand your expectations of when that margin could stabilize. If we go back a year ago, the Fed cut aggressively in the fourth quarter and the margin was down in the fourth quarter and then down a little bit more in 1Q and then stabilized in 2Q of this year. So call it a quarter or two lag after the Fed paused, we saw the NIM stabilize. So just looking for any color on when you expect the margin to stabilize as it relates to Fed cuts. George Gleason: Yes. Happy to address that. If Cindy were here today and she's off and not with us today, but if she were here, she would tell you that our predominant interest-bearing deposit product is a 7-month CD special. We have other maturities, but probably 80% or more of our CD issuance is in that 7-month time frame right now. So our variable rate loans typically tend to reprice around the time of a Fed cut. Those CDs are going to reprice 7 months later more or less. So that's a good example, Matt, of why there's a 2-quarter lag more or less. You see spread getting compressed a little bit for a couple of quarters after a Fed cut until that deposit pricing catches up. And certainly, we'll see that this quarter, I would expect with the September Fed cut and likely 1 or 2 more this quarter. So we're going to be chasing those loan yields for a couple of quarters with our deposit cost until the Fed stops and a couple of quarters after that, we should catch up. Now the other side of that equation, though, is important, and we've included in our management comments on Page 19, figure 20 that is the floor rates in our variable rate loans. So at September 30, 22% of those loans were at -- of our variable rate loans were at their floor. If the Fed cuts a quarter more, 36% will be at their floor and 50 basis points, 41%. So as we get to that 36% and then into the 40% numbers, those floor rates significantly slow down the repricing or stop the repricing of some portion of our variable rate loans. And that gives us the ability to catch up that margin differential much more quickly. So I would tell you, given where the floors are now, it's probably a couple of quarters of compressed margin following Fed cuts to catch up. But as we go through more Fed cuts, if we end up with 3 or 4 or 5 Fed cuts, we're going to begin to derive some meaningful benefit and shorten that catch-up period because we'll have a lot of those loans that will no longer adjust downward. Matt Olney: Okay. That all makes sense. Appreciate the color there. And just to also go back and clarify a comment from a few minutes ago around 2026 and 2027. I think we all appreciate the RESG paydowns are going to be elevated in '26 and continued expense build-out next year as well. It sounds like we should assume that the net income growth and the EPS growth year-over-year in '26 may not be significant. But as the loan growth accelerates in '27, it sounds like this is the year where we could see a lot more operating leverage and the EPS growth and the income growth could be more material. Is that a fair interpretation of your commentary? George Gleason: Yes, I think that's an accurate interpretation. We think that we can achieve record net interest income and record EPS next year. It's going to require a lot of work to do that and probably the year-over-year gains will be relatively small as they've been this year, while we've been building out a lot of this infrastructure for the future and absorbing -- beginning to absorb a lot of these payoffs. But we're putting up positive numbers year-over-year, we would expect to do that next year and then to really see the benefits of all that investment kick in significantly in '27 and future years. Operator: Our next question comes from the line of Catherine Mealor from KBW. Catherine Mealor: One follow-up to the margin question was just on the -- I totally appreciate the floor impact, right, and how that will limit kind of the betas as we get further cuts. And then how do we then layer on just the mix change with pricing at CIB being lower yields than the RESG book and how that can impact loan yields over the next couple of years? George Gleason: That's a good question. And obviously, on our CIB book, we typically have a little lower spread than we do on our RESG book. We do get some fees and more treasury management opportunities, other miscellaneous fees on that book. And then Jake mentioned that as our customers go to capital markets, whether it's for bond issuance or equity issuance, we have now got through our CIB team, a unit that shares in those fees and lets us participate in that. So net-net, I think CIB's revenue-generating capability is not far off RESG's on a pound per pound basis. And where we really, I think, will equalize or actually benefit from CIB is as CIB becomes a bigger part of our book and particularly if they can achieve the higher utilization rates on their credit lines that we are going to strive to achieve there. We will not have as much unfunded loan commitments on that portfolio and the diversification and elimination of our CRE concentration will let us be a little more judicious in our allocations of capital. So I think on an ROE basis, CIB will help us be actually improve our return on equity, even if on an ROA basis, there's a slight deterioration in ROA because I think it will allow us to be much more judicious in the use of our capital. Jake Munn: And Catherine, just to help there. As a reminder, as George mentioned, through LSCS and the introduction and build-out of that business line last year, and it's really ramping up now, we have capabilities to collect bond tips and other capital markets fees. We have the capabilities to collect and serve our clients from an interest rate hedging standpoint, and FX standpoint. We have the opportunity to produce income from a permanent placement standpoint, too. And so we're starting to see a real nice uptick and build there of additional fee income from LSCS, which is serving the broader bank as a whole. And then as a reminder, too, in how we do these deals, over 96.9% of our deals this last quarter or for our book, I should say, as a whole, we're either single lender, they're 2-bank club or if they're syndications, we're the admin agent, we're leading deals now or we're the JLA, and so because of that, not only can we positively impact the overall structuring of those deals, but it's allowing us to unlock substantially more fee income as we serve in more impactful roles for our clients and both a cross-sell standpoint and then also just an upfront fee and arranger fee, et cetera, standpoint. And so to George's point there, we're really starting to see a nice uptick in fees driven by that business unit, and we feel very optimistic about the future. George Gleason: Yes. And the one item that Jake and I both neglected to mention that's really super important is our deposit opportunities for noninterest deposits, noninterest-bearing deposits or low interest-bearing deposits, low-cost deposits through CIB is really an important part of the return on equity equation on that book of business. And obviously, we strive to get deposits with our RESG loans, but commercial real estate loans just don't have anywhere near the same level of deposit opportunities for low-cost deposits that you get with a CIB type of book. So that's a big part of the equation as well. Catherine Mealor: Okay. That's great. And then my follow-up is it was -- there's a lot of movement in credit, and I agree with your conversation that it was kind of a mixed quarter on credit. But it was good to see the overall level of credits basically unchanged, right? Some came in, some came out, but the overall level was unchanged. So I guess the big question is, what's kind of left to maybe come into special mention in your book? And maybe is there a way to give us some color around maybe some kind of migrations within the rest of your past credits? Like are you seeing kind of stabilization there? Or is there anything there that you're keeping an eye on? And then secondly, how do we think about how lower rates could potentially impact the health of your RESG book and perhaps limit the new inflows into special mention just because lower rates kind of help the credit of some of those projects? George Gleason: Yes. That's a great question. Obviously, all that RESG book is variable rate loans. There are a lot of floors in there, but we're not at the floors, unfortunately, on a lot of those loans. So our sponsors will, in large number, benefit from additional Fed rate cuts. That also -- a lower rate environment also creates additional opportunities for them to go to a permanent loan or go to a bridge lender that may be loaning them higher leverage money or cheaper money that will be attractive. So Fed cuts will tend to magnify to a small extent, the rate of RESG loan repayment. So it's a good thing on the quality side and good for our customers. It's a bad thing on the repayment side. But all these loans are going to pay off sooner or later one way or the other. So we're happy for our customers to get a good exit if market conditions allow that. Your other question about what else is out there and what are we watching? I would tell you, we got guys that watch every loan in our portfolio every day. So we're looking at everything all the time, and that's part of the secret of the success we've had over our history as a company and certainly our 28 years since we went public where we beat the industry's charge-off ratio every year, we're paying attention and servicing our loans in a very effective manner. As for how do you know when something is going to become -- going to migrate to those problems? Well, deteriorations in value, deteriorations in market conditions, failure to lease, all really are kind of summarized on Page 29 of our management comments where we talk about sponsor support. And that really is the key. Are our sponsors going to continue to support their projects until they get them leased or get them sold, and our track record on that. And we've said this. We said -- when the COVID pandemic started that we expected most of our sponsors would continue to support their projects until conditions normalized. We've reemphasized every quarter since the Fed started raising interest rates 13 quarters ago that we expected most of our sponsors would continue to support their projects until conditions normalize. Now there are obviously a handful of exceptions and sponsor fatigue and energy and resources to support projects gets exhausted over a prolonged period of time. So we've seen some examples of that, but they've been limited number of examples. And when we've seen those examples, that's when loans become special mention. That's when loans become substandard, that's when loans move into the OREO book and then get liquidated out. So I would say the same thing I said at month one of the COVID-19 pandemic and after the first Fed increase, we expect the majority of our sponsors -- the vast majority of our sponsors will continue to support their projects until they get a successful conclusion. They'll do it because they're high-quality sponsors. They have high-quality assets, and they have a ton of money invested in them. And that keeps them engaged in the projects. We will have some along the way where they're just become exhausted in their ability and energy and resources to support a project, and we'll deal with those when we do. And I think we're very well reserved for what we think is a plausible set of scenarios in that regard. Catherine Mealor: And any changes you're seeing to the trends in life science loans? I think that's the one asset class we're all watching and worried about. George Gleason: Brannon, do you want to talk about life science? Paschall Hamblen: Yes, Catherine, good to talk to you. I alluded to it in my comments earlier, that's been an industry that's had a lot of product delivered and less demand for its space. And I would say there's still headwinds. There's still time to have some of those projects get where they want to go. But what we are seeing is a shift in the intention -- the intended use of that space. It's -- and we've said this quarter after quarter after quarter, it absolutely has the flexibility to serve a more typical office user. And because of demand improvement that we're seeing in the office space, there's starting to be a lot more indication and real lease interest around life science space by the typical office user. So I think that's one of the green shoots that we're seeing in that space. You don't always execute exactly the way you want to. But at the end of the day, getting a user in the space to pay a rent is what it's all about. And again, as I said earlier, our basis in these life science deals is such that executing on a different use on an office use in particular, is absolutely an executable transaction. So -- and as you guys are aware, as we've said so many times about the significant good news funding that we have in these loans and the cost of building out an office tenant space is typically a good deal lower than it is for a life science tenant. So the dynamics that exist there, again, you'd love for them to all be full with life science tenants, but we're encouraged at the office markets that are pushing prospective tenants to really high-quality assets that we've financed the construction of. Operator: Our next question comes from the line of Janet Lee from TD Cowen. Sun Young Lee: On -- just given -- I know, I appreciate that we'll get more clarity in the fourth quarter and January, but on that Boston office loan that moved to a substandard accrual, is that baseline expectation that they will win that 1/3 of the building for that potential tenant? And is that how your reserve tied to this loan is baked in? Just given the size, I would appreciate if you could give a little more color on what the likely path of this loan is in your current seat. George Gleason: Yes. We certainly don't want to get ahead of our sponsor here in their negotiations. They are working hard on leasing. They're also evaluating how to recapitalize that project for a longer runway. Our reserve on it, as I said in my preliminary comments to the initial question, reflects a wide range of scenarios here. So I think we're very well reserved on this, and we're going to let our sponsor continue to work this and endeavor to execute on it, and we'll see how that plays out over the next couple of quarters. Sun Young Lee: Got it. And just switching gears to loan origination. So if I look at the third quarter, it was one of the lowest levels. And in your management commentary, you talked about the expectations for higher origination volumes for 4Q, and I would believe beyond 4Q. Can you explain to us how the third quarter is sort of an outlier quarter and then it will likely look better in that fourth quarter and beyond, just given that you also commented on RESG commitments are likely to decline, but I guess that's more of the -- more driven by the payoffs activities. I would appreciate any color. George Gleason: Yes. You are correct in surmising that our expectation for continued decline in RESG commitments is really driven by the payoffs. I think it is very likely that our very low volume of originations in the quarter just ended was an anomaly. You can never say that for sure. We'll be glad to put up another quarter of results and prove that. Hopefully, we will. What I can tell you is we've already originated in the first 2 weeks or so of the current quarter, about half the origination volume or a little more that we originated in the whole quarter last quarter. So those transactions, I think there are 3 of them that we've already closed this quarter would have been transactions we actually expected to close last quarter. But for one reason or another, they got pushed into this quarter. So we hope we'll return to a much more typical and normal level of originations in Q4 and future quarters. As I mentioned and as we mentioned in the management comments document, there are not as many new CRE projects being originated just reflective of all the various market conditions out there. There are a lot of lenders chasing those projects. So you've got a situation where you've got too many lenders chasing too few projects. That's leading to some structures and pricing and leverage points that we would not go to, that is having an impact on our origination volume. But even with that, I do think we will return more likely than not to a better, more typical origination volume in Q4 and future quarters. Operator: Our next question comes from the line of Brian Martin from Janney. Brian Martin: Most of mine have been answered here. But George, just I've been kind of bouncing back and forth between calls. But just your -- the further build-out of the CIB group, George, can you just talk about if there's a lot more stuff -- a lot more teams or people or verticals that maybe you're contemplating adding, I guess, and just kind of spell out kind of where you're thinking given the growth outlook in that unit and just give a little bit of color on that. And then just -- I know you've talked about in the past the fee income opportunity given it's such a small piece of revenue today. Just kind of over time, where you think that fee income to revenue kind of percentage can get to as you go forward? George Gleason: Yes. Let me tell you that we have a wonderful leadership team in our CIB group. And it's not just Jake, but it's the leadership team under him. And they are -- thank you, operator. They are doing a great job of recruiting just top-tier veteran talent to the team, and they're being very careful about it, but they're also being very active out there in the market. So Jake, I'm going to come to you and let you unmute and talk about that and give a little additional color. Jake Munn: No, I appreciate that, Brian. You asked my favorite question of the morning talking about the fun stuff here. So I appreciate the question. It's a good one at that. I want to emphasize here in third quarter, we're looking at the management comments. You can see quarter-over-quarter, we're up $575 million in outstandings. If we were to look on a commitment basis, so that would be your outstandings plus your unfunded, we're up $1.19 billion. That's our net number. And I wanted to point that out again, from an origination standpoint, these teams are really starting to hit their stride across the board. Our natural resources group, led by George McKean, and Moni and Arth, that team has really taken off and putting together some nice opportunities for us. CBSF continues to grow. We have identified our leader out in Atlanta, John, and he's joined us, and he's building up our presence in that part of the country for us and our footprint. We've identified our leader and brought on [indiscernible] within CBSF out in Nashville. He's got great experience and comes from a very large institution. We're excited to have him here, and we'll continue to build the team there as well. And so the CBSF and the diversification and the great yield that comes from that book is really, again, still at its infancy, and we're going to see that continue to grow and build and really be impactful leaders here for the institution. In addition to that, Mike Sheff's ABLG group has continued to expand. We just hired a gentleman up in New York, and we'll continue to focus on when we find the right people in the right spot that fit the OZK credit culture and overall culture. We're going to find those people. We're going to source them. We're going to bring them in and give them all the support they need to be successful, and we're seeing that in our ABLG group. Our lender finance group, as previously mentioned, led by Jim Lyons, is doing a fantastic job. We're seeing some nice opportunities come that way. We're being highly selective in that space, as I previously mentioned, because we are seeing a lot of pressure on the pricing and structure that we refused to give on. Our fund finance group, Parul and team is really doing a nice job and is going through that legacy book of business, as mentioned, and optimizing it. So we're proud of her and what she's doing and our portfolio management and operations group, which is really the backbone and more than 50% of our CIB staff continues to do a really good job in the underwriting, the compliance, the oversight space and partnering with our second line, our loan review, credit risk management partners, our enterprise analytic partners as well as our third line to ensure that all the lending that we're doing is safe and sound and is what's best for both our institution and our shareholders and the communities we serve. If we look at the overall gross of what we did in the third quarter, we actually originated about $1.6 billion in net new opportunities and material upsizes, which would have equated to about $850 million in outstandings. And so again, some of that delta between the net and the gross there is optimization of the book, which we mentioned. But also, as mentioned previously, capital markets were very ripe, and I'm sure you all saw it as well, but we had a lot of clients, our public clients access the markets, bond issuances, high-yield issuances. And as a result, we're reaping the benefits of the fee income now that we have a great capital markets partnership and program, but that resulted in a little bit of a chip off of our overall growth for third quarter. As we look into fourth quarter, we're very cautiously optimistic. We feel nice about what we're doing. We have teams in place and executing at a high level. We had over a dozen names that were originated in third quarter that will be booked here really in October and then going into November, too. So we anticipate fourth quarter being strong as well. And we continue to look at opportunities for additional business lines, as you asked. That makes sense for what we do that are natural complementary kind of bolt-ons that have nice returns for us, but also have positive kind of credit profiles that really fit the bill of OZK. So we're just getting started on the CIB side. I think you're going to see continued growth and momentum there, and we're very excited about it. George Gleason: Yes. And let me add, Jake, and Jake is operating this addition and expansion of his staff under a gating metric that Brannon and I are monitoring. And that metric is really volume and revenue generation. And as his volume grows and revenue from his business line grows, he can add the next guy or the next 3 guys. And there's a gating metric on that. We're adding -- these are very high-level team members. They're very well paid. They're veteran people. So you're paying for the experience and the knowledge and the relationships that they've built over decades in most cases. And it's not inexpensive to build this team. It's, in fact, expensive to build this team. But we're being very disciplined about the way we do it, and we're getting revenue in place to generate positive leverage before we add the next person or the next group of people. We get positive leverage on that group. We get the next group. So Jake is growing it in a very responsible manner. and we're building it with high-class people in a very professional manner. And that's why I think we talked about '27 being, these guys are really hitting full stride in '27. We will have added a lot of additional people to their world between now and '27 that will generate a lot of additional growth opportunities across a very diverse book of business. CIB, we're talking a lot about our desire to diversify our portfolio more. CIB is inherently internally diverse in what they're building, and that's another big plus out of that. Jake Munn: Yes. And George, to that point, if we look at CIB as a whole, it represents over 40, 45 unique industries. And so there's a lot of diversification within that book, within the structures and the business lines they're under. And again, I just want to emphasize for everybody -- you know, everybody's -- to George's point there that as we hire, we take a very different approach than what our competitor banks do. You see a lot of other banks will enter in a market and they'll hire 10, 20 people, and they'll give them years and years to build up a book and repay the institution for that initial hiring slug. But here, we're really doing it in a methodical way to George's point, before we hire the next person, the existing team pays for them. And so as a result, we ensure that as we grow, we're keeping a very close watch on expenses and a close watch on that efficiency ratio to ensure that we don't get over our skis. Operator: At this time, I would now like to turn the conference back over to George Gleason, Chairman and CEO, for closing remarks. George Gleason: Thank you guys all for being on the call today. We greatly appreciate it. We look forward to talking with you in about 3 months. Thank you. Have a great day. That concludes our call. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.