加载中...
共找到 8,344 条相关资讯
Operator: Greetings, and welcome to the Milestone Scientific Third Quarter 2025 Financial Results and Business Update Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. David Waldman. Sir, the floor is yours. David Waldman: Thank you. Good morning, and I appreciate everyone joining Milestone Scientific's Third Quarter 2025 Financial Results Conference Call. On the call with us today are Eric Hines, Chief Executive Officer; and Keisha Harcum, Vice President of Finance of Milestone Scientific. The company issued a press release yesterday after market containing third quarter 2025 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the third quarter ended September 30, 2025. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenue and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone's control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and market requirements and standards and the risk factors detailed from time to time in Milestone's periodic filings with the Securities and Exchange Commission, including, without limitation, Milestone's report on Form 10-K for the year ended December 31, 2024, and Milestone's report on Form 10-Q for the third quarter ended September 30, 2025. The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, November 14, 2025. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, I'll now turn the call over to Eric Hines, CEO of Milestone Scientific. Please go ahead, Eric. Eric Hines: Thank you, David. So good morning, folks, and thank you for all joining our call. We're very fortunate to have so many people who believe in Milestone Scientific, and we are making progress. During the third quarter, we continued to execute our plan to build a leaner, more focused organization capable of sustainable growth and improved profitability. Through disciplined cost management and operational restructuring, we reduced operating expenses by over $0.5 million compared to the same period last year, while maintaining stable revenue performance. These results reflect the early benefits of our transformational strategy, which is centered around 3 priorities: streamlining operations and driving efficiency, strengthening commercial execution in both dental and medical and advancing our reimbursement and payer strategy to position CompuFlo for broad adoption in pain management. In our Dental segment, we made solid progress, expanding our direct sales programs in North America and advancing international registrations for our STA Single Tooth Anesthesia System. We have also enhanced our omnichannel marketing capabilities, and our maturing e-commerce platform continue to drive brand visibility and recurring customer engagement. International dental sales increased year-over-year, partially offsetting the decline in domestic revenue. On the Medical side, utilization of CompuFlo disposables rebounded slightly as we are starting to reenergize current customers, ensuring them that we are even more committed than ever as we continue to work on a structured and supported Medicare reimbursement strategy. We are particularly encouraged by feedback from leading pain centers domestically and internationally that are using CompuFlo to improve accuracy, safety and building confidence in epidural procedures. We also strengthened our organization through the addition of Dr. Dawood Sayed to our Board of Directors. Dr. Sayed is one of the country's foremost experts in interventional pain management and serves as Division Chief of Pain Medicine at the University of Kansas Medical Center. His appointment deepens our clinical and payer expertise and supports our strategy to accelerate adoption within hospital systems in integrated pain networks. In parallel, we continue to advance our reimbursement strategy for CompuFlo. And as we discussed last quarter, the system has secured Medicare payment rate assignments under CPT Code 0777T in 3 jurisdictions, supported by 2 MACs, Novitas and First Coast, that includes large population states like New Jersey, Texas and Florida. We are now building on that foundation, engaging with additional payers and expanding our commercial coverage footprint, essential steps for long-term medical growth. In summary, Q3 reflects disciplined execution and tangible progress toward our operational and commercial goals. We are in a more efficient organization. Our cost structure is leaner and our strategic priorities are sharply focused on growth and profitability. I'd also like to just point out that we'd like to invite you all to join our Instagram, Facebook and TikTok pages. Our Instagram page is @the.wan.sta. Our Facebook handle is just the Wan STA. And our TikTok handle is @the.wan.sta. We continue to put tremendous energy into our omnichannel digital marketing strategy, and we believe that will drive more people to understand who we are as an organization. With that, I would like to turn it over to Keisha Harcum. Keisha Harcum: Thank you, Eric. For the 3 months and the 9 months ended September 30, 2025, revenue was $2.4 million and $6.9 million, respectively, compared to $2.5 million and $6.6 million for the same period in 2024. Gross profit for the 9 months ended September 30, 2025, and 2024, was approximately $4.9 million for each period, reflecting no material year-over-year change. The stable growth performance primarily resulted from consistent product margins, favorable manufacturing cost management and a balanced sales mix between domestic and international markets. For the 3 months and 9 months ended September 30, 2025, SG&A expenses were $2.7 million and $9 million, respectively. Research and development expense for the same period was $16,000 and $437,000, respectively. Operating expenses were approximately $1.1 million and $4.6 million for the 3 and 9 months ended September 30, 2025, respectively. As of September 30, 2025, Milestone Scientific had cash and cash equivalents of approximately $1.3 million, and working capital of approximately $3.1 million. That concludes my financial review. I'll now turn the call back over to Eric. David Waldman: Thank you, Keisha. As we move forward, our focus remains clear: to execute efficiently, grow revenue and position Milestone for long-term profitability. We are strengthening our sales infrastructure, enhancing customer engagement and advancing the commercial rollout of CompuFlo through partnerships, payer engagement and medical education. In Dental, we continue to leverage our strong brand and product differentiation to drive international growth and expand the recurring revenue through our direct and e-commerce channels. I'm really proud of the progress we've made in such a short time, reducing expenses, stabilizing revenue and advancing the foundation for future growth. The path forward is about disciplined execution, operational excellence and ensuring that we continue to build value for our shareholders, customers and patients worldwide. I can't thank you all enough for joining this call today, and we will now open the lines for questions. Operator: [Operator Instructions] Our first question is coming from Anthony Vendetti with Maxim Group. Anthony Vendetti: So Eric, it sounds like you're very focused on stabilizing the business, which obviously is something that has to be done when you first come in. And in terms of the Dental business, which still obviously drives the vast majority of the revenue. In this particular environment that we're in economically and Dental offices, Dental clinics have always been, I think, and just in my experience, very concerned about investing new capital or buying new equipment. How do you convince them that this is a must-have product? And also if you could talk about the clinics that you're currently in, is there a target utilization rate or a way to ensure a certain level of utilization of your STA unit? Eric Hines: Thanks, Anthony. No, those are great questions. And the Dental business is the foundation for the company, right? At the end of the day, 80 or 90 or even maybe higher than that percentage of the revenues come from the Dental business. What we are learning is that there's really 3 tiers of customers who are sort of low users, mid and high users. And we really believe that a big challenge for us in the marketplace in general is that when we moved over to the direct sales, the e-commerce model, a lot of customers felt that we had really sort of gone more or less out of business and didn't know a whole lot about us. And so we are spending a lot of time really reconnecting with old customers who maybe thought that we didn't exist anymore. But more importantly, really sort of starting to expand our digital marketing to start to get to more dentists because a lot of times when we talk to dentists just in my hometown and what Jason speaks to them in Dallas, they don't even really know about the company or the Wand in general. So we think with 1.5% to 2% of the market share in the domestic market and more or less the same internationally, that it's mostly about getting the word out and really telling people about the benefits of the Wand. On the other side, education, right? So to move the low end users to the high-end users. Typically, we find that the high-end users are spending about $2,500 to $3,000 per year with us on disposables. We need to get the others moving in that direction. And just by the nature of the name of the unit, the STA, the single tooth anesthesia. What we've learned is many people are not using it for all the other injection types. And I think as most of the people know on this call, the Wand can do all of the injection types that a dentist needs during the course of operating their clinic. So we really need to do a better job of educating the low- and mid-tier users to make sure that they understand, and it's clear that the Wand can be used for many more procedures than just single tooth. I don't know if that covers what you asked me, Anthony, but let me know. Anthony Vendetti: Yes. No, that's great. So there's an active effort to try to increase the utilization of the Wand within the current installed base as well as getting the word out. And like you said, there's a huge opportunity because you don't have a lot of penetration at this time, even though it's the vast majority of your business. On the Medical side, maybe I know you decided to refocus on the current clinics that are using it and building that base for broader commercialization. Can you tell us where the company is with that refocused effort and then the plan for broader commercialization? Is that something that's occurring in this quarter? Or is that more of a 2026 goal? Eric Hines: No, another good question, Anthony. And let me just want to one more thing on the dental. So Jason brought to me 11 objectives that he has for the Dental business moving forward from a sales perspective. So along with the education and so forth, we've got objectives to go after some of the dental schools. We've got the DSOs that are part of that mix. We've got the digital marketing to existing customers. We've got lists from our own distributors that we're now starting to go through and have discussions with those folks. So it's a kind of a multitiered program on the dental side that attacks 10 or 11 different objectives, including DSOs. But to answer your question on CompuFlo, and as I stated in the last conference call, what I felt when I stepped into this role is that we had a lot of things going in a lot of different directions. And really, the plan now is to focus our energy on a handful of states, a handful of jurisdictions but more importantly, to put the right structure in place to support the physicians once they start using CompuFlo. And even more importantly, is to collect the data in a very meticulous way so that we can share that to the Medicare folks from a reimbursement perspective. We also plan to attack the commercial side of that equation as well. So in parallel to Medicare, we also plan to look at, at least one, if not a couple of the commercial payers to see if we can get some traction in those areas as well. And then while we're doing all of that, we will start to tackle maybe one other jurisdiction. But again, the plan is to try to stay as focused as possible. And I'm kind of holding the reins back until we do the proper review of the sort of the business case or the value proposition for pain management because if you recall, we sort of started down the path of labor and delivery and then pivoted over to pain management. And I want to make sure that we've got a clear message for the pain management clinics because it's a slightly different value proposition than it is for labor and delivery, where fluoroscopy is not used. Anthony Vendetti: Okay. Great. And just to be clear, right, so the focus is on the jurisdictions in Texas, Florida and New Jersey, correct? Eric Hines: Correct. Novitas and First Coast are the 2 MACs that are supporting those 3 jurisdictions. Anthony Vendetti: And just -- maybe it's too early to say, but just a little bit on the timing of -- you said you're going to collect that data and work with Medicare and make sure about reimbursement. But is that a 6- to 12-month process? Or what's at this point in terms of your vision of when broader commercialization will start? Do you have any clarity on that at this point? Eric Hines: Yes. I mean the broad adoption is challenging, but we plan on sort of restarting the program here in the next handful of weeks. We're doing a lot of due diligence behind the scenes with people who have a lot of experience in that world and we're gearing up to be ready to sort of reroll out CompuFlo -- the more data we collect early, the quicker we can get to a commercial -- larger commercial rollout. So again, we just need to be -- I don't have a problem of having people want to use it. The bigger problem is making sure that the people that do start using it get the proper information back to Medicare. Operator: Our next question is coming from Bruce Jackson with The Benchmark Company. Bruce Jackson: I wanted to touch on the tariffs just real quick. Last quarter, you said that from a supply chain perspective, you're pretty well set. You have inventory in the states and for the international accounts, could ship out of China. Has there been any change to that during this quarter? And then secondly, with the international customers, are they -- have they changed their purchase behavior because of the current situation? Eric Hines: It's a good question. Thanks, Bruce. So as far as the tariffs, we're really not seeing much of an impact at all. We, as you mentioned, have the ability to ship out of China internationally, so to avoid that and plenty of supply here in North America to handle our business here. So we're not really seeing a whole lot of impact. As far as changing behavior, we'd like to see more customers initiating sale -- orders coming out of China. It's been a little bit lighter than we wanted it to be. So we're considering potentially having a bonded warehouse in the U.S. if the tariffs continue to persist so that we don't -- so that we can ship out of the U.S. and/or China. But we're not really seeing a tremendous impact from the tariffs. Bruce Jackson: Okay. Okay. Great. And then in terms of the United States marketing effort, any thoughts on the sales force or the composition of the sales force? Do you have, for example, reimbursement specialists on staff? Tell us a little bit about how you're structuring the sales force, thinking about the sales force right now. Eric Hines: Another good question. The -- as far as reimbursement, we really -- we've tried in the past for reimbursement on the Dental side unsuccessfully. We've talked a little bit about trying to get a pediatric code based on the use case there in pediatrics. So we go back and forth as far as looking to attack the reimbursement market on the Dental side because there's obviously a lot of cost in doing that, and it could be difficult. As far as the sales organization, we plan on continuing to ramp that up. We've got a handful of people doing it here locally. So we're anxious to add horsepower to the Dental team, and we've got a handful of programs that could expand our sales footprint pretty dramatically in the North American market. And I think there'll be more to be said about that in the coming weeks. Bruce Jackson: Okay. And then last question for me. With your sales, is there a seasonality pattern where the fourth quarter is generally a strong quarter for you? And as we're looking at the model, should we be thinking about an uptick in revenue for the fourth quarter? Eric Hines: That's funny you asked about. I used to be in the software business, and we always had the hockey stick in Q4. It was always -- we shoved all the business into Q4 and then it was a light Q1, a heavy Q2, a light Q3 and then a massive Q4. Here, it seems to be quite a bit different. It's very steady. I think we were $2.4 million, $2.2 million, $2.4 million. And we expect a similar quarter in Q4. So no real huge inflection in Q4. It's a pretty steady business, which is wonderful. But we'd love to see it tick up, and we expect a similar quarter as we've had in the past or no big, huge hockey stick. Operator: Our next question is coming from John Corp, who is a private investor. Unknown Attendee: Nice to hear your presentation this morning. I am a long-term shareholder of Milestone Scientific, I would say, at least 15 years. Permit me, if you will, to give you the perspective of a long-term shareholder, and I might say a suffering shareholder because my hopes have been dashed repeatedly for the turn of events that might allow increasing revenues and positive cash flow and positive earnings for Milestone. I don't think you would have taken this job unless you believed as I do in the product. My dentist uses STA, has used it with me and it's a wonderful product. It was just terrific to get an injection like I received with the STA product. I try to attend every quarterly call. I started off by talking to Leonard Osser years ago, and he was enthused about your products as am I. But when Milestone received FDA approval and my hopes really got up, that was the beginning of a down slide that really took me by surprise. Since that time, the balance sheet has been ravaged. And I thought at one time, I really know where Milestone was going. And now I'm kind of at sea, I don't know where Milestone is going. I don't know what the challenges or pushback have been. You know, I don't know. I don't know how many pain clinics are using this. I don't know what their feedback is from the clinicians or the doctors. Could you help me with that perspective on where we are and where you -- what do you think the possibilities are for Milestone Scientific? And where those dramatic possibilities may be. The CompuFlo, obviously, but what is going on that we went from 10 salesmen to no salesmen to when your predecessor ended, we're inching along with trying to get 100 cases authorized for payment? It seems to me the cart may have been before the horse on this, but I don't know. Maybe you could help clarify what I don't know and give me some hope for the future of Milestone from your perspective. Eric Hines: Thanks, John. So welcome to the club, right? So I've been a shareholder since 2018, pretty significant investment in the company. And so I've been following it like you have, not quite so long as you have. So you've definitely got a lot more history than me. And I appreciate you continuing to support Milestone and for your patience and hopefully, for the future perseverance of the organization. But to answer your question, again, what I've observed in the few months that I've been here is, first and foremost, we have fantastic technology, right? So the STA, as you mentioned, the dynamic pressure sensing capabilities that also applied to the CompuFlo unit. Our technology is what it is, right? That hasn't changed. I think what has happened in the Milestone historically is that -- and I've seen this in other organizations that I've invested in is that it was probably a research-oriented company with a lot of inventions and a lot of patents and a lot of IP, but where it fell short, at least in the past from what I can see is it really didn't have true sales leadership that was driving the execution and the discipline required to scale and grow business in a proper way, right? And so when they rolled out CompuFlo and so forth, they had a little bit of a shotgun approach and got a lot of excitement going and a lot of use of the product, but they really didn't have a structure in place to maintain that business, and it's sort of all started to sort of fall apart, right? And so what we're doing is stepping back just a little bit, not a lot, and we're taking a much more focused approach with a very targeted group of customers and with support on the Medicare reimbursement front, so that we can do a proper rollout that can scale. And again, I think that's really it. The technology is great. The sales execution has been poor and the structure in place to support a scalable, sustainable business was just not put in place. And so your expression of the cart before the horse, I'm requiring that we build an ROI, a plan, a strategy before we jump into the market. And when you jump into the medical market, it is extremely sophisticated, it's extremely political. There's lots of moving parts. And if you're not prepared, you can get yourself into a tough unsustainable situation. So I'd just ask that you be patient. I know that you've been here 15 years, and again, we appreciate your support. But we're going to do this the right way this time. Operator: Our next question is coming from Elliot Sparrow, who is an investor. Unknown Attendee: Eric, congratulations on a great quarter, best one in a long time. And I hope the trend continues. My question is along the same lines as what you've just been answering to Anthony Vendetti and now John. I'm curious why we had many, many successful trials and demos over the years with fantastic feedback from those people. How come they never translate into sales? And then b, again, as you've been trying to explain what is going to be different this time around? Eric Hines: Yes. I think one of the big changes, and it's sort of -- I guess, a little bit surprised if the question doesn't get asked, right? So we've got Dr. Demesmin, who is an early adopter, right? So he's been wonderful. He continues to use the product and he's surrounded by a lot of customers in New Jersey that are still using the product. But we've also added some high-caliber talented people, Shanth Thiyagalingam and now Dr. Sayed who have been advising us at least a little bit here over the course of the past handful of weeks. But we expect that with them on Board, helping us navigate this complex environment is going to be done in a much more focused way. And so again, not to hit on the old team who is trying their best and working very hard, but again, it's a very complicated process to go from a category 3 to category 1 and it's a very difficult process and requires a lot of data to be generated in order to get the proper reimbursement code number. So the doctors want to use your solution so that they can make money. So again, I think to sort of reiterate, we are stepping back. We're taking advice from many doctors, engaging that community and the engaging companies who have tremendous experience in that community to do it the right way so that we can start off very focused, get the data we need, get the reimbursement where we need it and then seek a larger commercial rollout over a handful of weeks or months. But that's really just it. It's -- sometimes the thought is you just go out there and start selling like crazy, and you hope that it will latch on. But what I'm finding out is in this world, it doesn't work. You have to have data, you have to have structure, you have to have all those things in place. And I think with the Board that we now have in place, we plan on leaning on them to help us navigate that complex infrastructure, namely Medicare. Unknown Attendee: Okay. Great. Fantastic. My second question is totally different, and that is just about how are we set for capital and cash? And I know we've saved $0.5 million this year, but how much longer are we good for? Or are we going to need capital? That's it for me. Eric Hines: Thanks, Elliot, for your second question. So the initial focus for me stepping into the company was to get control of the cost, right? And so we've done a decent job of that. We still have more opportunities to work on that. As far as the front end of the equation, I'm sort of turning the jets a little bit to the sales focus. So like I said, I've been holding back a very strong horse by the name of Jason Papes, who's sitting here with us. And the plan is to turn the sales jets on full steam ahead here very, very shortly. But the company is -- from a cash perspective, has got plenty of cash to keep going for several quarters. And so we always are looking at opportunities to improve that if we need to. But right now, the company is in good shape. Unknown Attendee: Thank you very much, Eric, and I hope we have more good news from you in the short term. Operator: As we have no further questions in queue at this time, I'd like to turn it back over to management for any closing remarks. Eric Hines: No, I just appreciate folks joining the call. I appreciate the shareholders being part of this community and sticking with us. I share most of the sentiments that all of you do, part of the reason that I joined the company. And I can't say enough about how good I feel about having -- I hear from a lot of the different shareholders. And what I will leave you with is that everything I do every single day is about driving shareholder value. So for me, it's all about anything that I can do, and I tell everyone on the team, we need to turn into a sales-focused organization. So anything you do, whether it's product management, whether it's R&D, customer service and so forth, always be thinking about how that can benefit sales, how that can benefit our customers, and finally, how it can benefit our shareholders. So thank you very much, and thank you, David, for setting up the call. And we look forward to speaking with you all at the end of Q4. Good luck to all of us. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the South Bow Third Quarter 2025 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Martha Wilmot, Director of Investor Relations. Please go ahead. Martha Wilmot: Thank you, Marvin, and welcome, everyone, to South Bow's Third Quarter 2025 Earnings Call. With me today are Bevin Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer; and Richard Prior, Senior Vice President and Chief Operating Officer. Before I turn it over to Bevin, I'd like to remind listeners that today's remarks will include forward-looking information and statements, which are subject to the risks and uncertainties addressed in our public disclosure documents, available under South Bow's SEDAR+ profile and in South Bow's filings with the SEC. Today's discussion will also include non-GAAP financial measures and ratios, which may not be comparable to measures presented by other entities. With that, I'll turn it over to Bevin. Bevin Wirzba: Thanks, Martha, and good morning, everyone. We appreciate you joining us today. South Bow's third quarter financial results once again demonstrated the resilience of our business with our stable earnings profile, allowing us to meaningfully deliver on our capital allocation priorities in our first year as an independent company. We have paid a sustainable dividend to our shareholders, funded our first growth project at Blackrod and strengthened our financial position. We are also nearing the exit of all transition services with TC Energy, which we expect to finalize by the end of 2025, almost a full year ahead of schedule. We have become more efficient in the process and are realizing cost savings that drive a more competitive tool for our customers and a stronger bottom line for our shareholders. The team has successfully managed several priorities while establishing South Bow as a stand-alone entity. And I'm pleased, maybe even a little relieved, if I'm honest, to say that we are now fully focused on our future strategic priorities of growing our business and enhancing our overall competitiveness while ensuring safe operations, financial strength and capital discipline. Regarding our growth initiatives, I visited our Blackrod site last week, and I am incredibly proud of the team's success in executing this important project, set to be delivered on schedule, within budget and with an exceptional safety record. I am confident that we will continue to demonstrate this type of project execution excellence as we mature our growth portfolio with organic and inorganic opportunities. By adding more revenue lines through growth, we will become more competitive across our existing systems. As we look to the future and the role of South Bow will play in serving our customers, we are encouraged by the dialogue taking place in Canada and the United States about advancing energy solutions. These conversations not only underscore the strength of the supply basin and the demand centers we serve, but also highlight the resilience of our customers' businesses. South Bow's assets are strategically positioned to serve their needs and we are focused on being the first choice for our customers. As we evaluate opportunities to leverage our pre-invested corridors, it will be important to establish appropriate risk and return frameworks, and carefully consider our investment requirements, which include minimizing shareholder capital exposure, adhering to our capital allocation priorities and seeking permitting durability. On safe operations and asset integrity, we have made significant progress in our remedial actions following the Milepost 171 incident. The work our team is completing increases our confidence in the integrity of our system. As we work towards returning Keystone to baseline operations and closing out the requirements of PHMSA's corrective action order. Richard will provide further details on this shortly. Finally, we have laid out a clear set of priorities for our team as we focus our attention on our second year. These priorities include maintaining safe operations, maturing and executing on our growth portfolio, continuing to enhance our competitiveness and the ongoing demonstration of discipline in our capital allocation and shareholder returns. I will now ask Van and Richard to touch on the financial and operational expectations that come with these priorities. Richard? Richard Prior: Thanks, Bevin, and good morning. I first want to speak to the progress we've made on our remedial actions at Milepost 171, while we await PHMSA's publication of the root cause analysis. The findings from the third-party metallurgical lab report determined that the pipe and welds conform to industry standards for design, materials and mechanical properties, and our own records confirm the pipeline was operating within its design pressure at the time of the incident. Through the remedial work we've completed to date, we do not see evidence of a systemic issue, and we're confident we will address the system's long-term safety through actions we've already taken or through planned enhancements to our integrity programs. To that end, since April, we've completed 6 in-line inspection runs that place a focus on the long-seam pipe integrity. Preliminary inspection results show no notable concerns, reinforcing our confidence in the integrity and reliability of our system. We have also completed 37 integrity digs with no injurious issues to report. Our investigative work will be ongoing through the end of this year and into 2026. In parallel, we are advancing important work with our in-line inspection technology providers to address and resolve tool limitations and apply the latest and advanced technologies across our system to increase our ability to prevent future incidents. This work is being incorporated into our remedial work plan, which we will submit to PHMSA for approval. I anticipate that the Keystone pressure restrictions will eventually be lifted in a phased manner. We're proactively sharing with PHMSA the results of all investigative work being performed with the goal to safely return Keystone to baseline operations in 2026 ahead of when market differentials are expected to widen and demand for uncapacity -- uncommitted capacity increases. Switching gears to the Blackrod project. In October, we achieved overall project mechanical completion and placed the 25-kilometer natural gas lateral into service. These are both significant milestones, and I want to extend a sincere thank you to the team for the tremendous effort in safely executing this project. Facility commissioning work is underway, and we remain on schedule and within budget to place the project into service early in 2026. Lastly, in October, all parties withdrew from the legal proceedings related to the variable toll disputes filed with the Canadian and U.S. courts and regulators. These proceedings had been active for nearly 6 years. And with the matter behind us, the team has now focused -- has turned its focus to new business opportunities to jointly create value for our customers at South Bow. And a reminder that as part of the separation agreement with TC Energy, South Bow was indemnified for this matter in addition to other matters that existed prior to the spin up to a liability cap of USD 22 million. I will now pass it over to Van to discuss South Bow's financial performance and outlook. P. Van Dafoe: Thanks, Richard. I'll start with our strong third quarter performance, which included delivering normalized EBITDA of $250 million. As expected, the marketing losses that we crystallized early in the year were largely offset by normalized EBITDA associated with higher maintenance capital expenditures in the period. Distributable cash flow of $236 million benefited from a current tax recovery of $71 million resulting from changes in U.S. tax legislation and successful optimization efforts from our tax team. To reflect these tax wins, we are revising our outlook for distributable cash flow to approximately $700 million for 2025 and our effective tax rate to range between 20% and 21%. We are reaffirming normalized EBITDA guidance for 2025 of $1.01 billion. Turning to 2026. Our outlook is supported by our highly contracted cash flows and the structural demand for our services. We are forecasting normalized EBITDA of $1.03 billion within a range of 2%. The key drivers of the increase from 2025 include; for marketing, we're expecting normalized EBITDA will be approximately $25 million higher, reflecting the recovery from losses recorded in 2025. For intra-Alberta and other, we expect normalized EBITDA will be approximately $10 million higher, reflecting Blackrod cash flows ramping up in the second half of 2026. And for Keystone, we expect normalized EBITDA to be approximately $15 million lower primarily due to reduced planned maintenance capital expenditures following an active integrity program in 2025. Distributable cash flow is forecast to be approximately $655 million within a range of 2%. As we consider the potential outcomes for the year, I'll note that normalized EBITDA and distributable cash flow will be influenced by pressure restrictions and price differentials. To exceed our baseline expectations, pressure restrictions will need to be lifted early in the year and price differentials would need to widen. On the other hand, the low end of our guidance range reflects a scenario in which pressure restrictions have remained in place throughout the year and pricing differentials have tightened beyond current levels. Our capital program next year includes approximately $25 million of maintenance capital, reflecting a less active plan and approximately $10 million of growth capital to complete the Blackrod Connection project. We plan to update our outlook for growth capital once we have sanctioned our next development project. Lastly, our Board of Directors has approved a quarterly dividend of $0.50 per share payable on January 15 to shareholders of record on December 31. The dividend remains an important component of our total return proposition. With that, I'll hand it back to Bevin for closing remarks. Bevin Wirzba: Thanks, Van. After another solid quarter of financial and operational results and through the hard work and effort of the team in establishing South Bow, we have strongly positioned our business for longer-term growth and success. Our priorities for South Bow's second year are clear. We will maintain safe operations and continue progressing towards returning Keystone to baseline operations, mature and execute our growth portfolio of organic and inorganic opportunities, continue to optimize our workflows and increase our competitiveness and maintain discipline with our capital allocation and shareholder returns. We look forward to sharing more on this next week at our first ever Investor Day. With that, I'll now ask the operator to open the line for questions. Operator: [Operator Instructions] And our first question comes from the line of Sam Burwell of Jefferies. George Burwell: So we got these latest list of major projects, I believe yesterday in the proposed crude pipeline that Alberta [indiscernible] was not on that, but I understand that you're providing some engineering and permitting support. So I'm just curious for an update on that. And then there were also some press reports, I mean, this is going back a little bit further about Keystone XL, a reboot of that being talked about in trade discussions between the U.S. and Canada. So with respect to that, just curious about what sort of existing infrastructure you guys might be able to leverage to expand crude egress capacity over kind of the medium and longer term? Bevin Wirzba: Yes. Thank you, Sam. It's Bevin here. I mean, first off, one of our key capital allocation priorities is to leverage our pre-invested corridors that we have both in Alberta, the pre-invested capital that we made for the former Keystone XL project and then pre-invested capital along our system in the United States. So we're always evaluating ways of leveraging that pre-spend for other solutions. Directly to your question on the West Coast project. Yes, we are providing some advisory support. Many members of our team have a long history in developing significant capital projects. And so we're lending some of that expertise to the provinces initiative there, but it goes no further than that. With respect to trade negotiations, to be honest, Sam, that's way above our pay grade. We're obviously watching and encouraged by the ongoing dialogue between Canada and the U.S., but I can't really speak any more detail to what's going on behind closed doors that we're not a part of. So thank you. George Burwell: Yes, of course, totally respect that. And then the commentary around marketing and tight crude spreads that certainly makes sense and squares with commentary from some of your peers. Just curious if you have a view looking out a little bit further when you think that spreads can widen out, inventories in Alberta can normalize and then we might start to see some contribution from spot volumes once presumably the egress has been lifted? Bevin Wirzba: Yes. Our views have remained very consistent on that front. We anticipated with our -- with the TMX pipeline coming on that, that would relieve some of the egress issues that we had over the last number of years. But we're very encouraged by the supply growth that has been occurring by our customers. If you just listen to the last week of quarters from our customers here up in Canada, you'll have noted that they are all very encouraged by potential growth in their organizations. And so our outlook has us seeing conditions being a lot more favorable in effectively late '26, early '27, where we see that, that supply growth will exceed what currently exists for egress, making our systems likely to see more walk-up and spot needs. Operator: Our next question comes from the line of Maurice Choy of RBC Capital Markets. Maurice Choy: Can I just double-click on the tax optimization and the U.S. legislation changes. Can you share a little bit more about what these were? And if these benefits reflect in the guidance for DCF for this and next year would actually translate to benefits also beyond 2026? Or do you envision returning back to, I guess, the prior cash tax run rate level? P. Van Dafoe: Yes, Maurice, it's Van here. Thanks for the question. The tax wins that we got were a couple of things. One is the one big beautiful bill in the U.S. that allows us to deduct additional interest. We have reached the cap on interest deduction. So that was extended. So that would be as long as that legislation stays, then we would continue to benefit from that. The second piece was around tax optimization, and we identified some tax pools that we were able to accelerate. And so those tax pools were on our balance sheet, and they were there. We just accelerated them. So we'll get that benefit in 2025 and 2026. And then in 2027, we'll go back to more of a regular cadence. So it's really just a flip between current tax and our deferred tax. Maurice Choy: Understood. And if I could finish with a question on the transition agreements. I think you previously mentioned that this transition will help improve your processes to be more efficient and realize cost savings for your customers through a more competitive toll, both of which I think you reconfirmed today in your prepared remarks. But you also mentioned that this could benefit the bottom line for shareholders. So are you able to quantify what that is and whether this is within the 2% to 3% EBITDA CAGR objective? Bevin Wirzba: Yes, Maurice, it's Bevin. So our objective of getting off of the TSAs as quick as possible in our first year is that it was -- you're not able to really optimize many of the processes within the company until you're legitimately on your new systems. And a simple example of that would be supply chain and procurement on how you issue and pay invoices. And we delivered Blackrod very successfully, but it came with a very kind of clunky procurement system that we needed to use. So we're now as one -- just one example, being able to optimize that and the delivery. I did point out in my remarks is that we believe that we can accrete those savings and those optimizations through to our variable toll. But there are some of those cost savings that do then flow through as well down to EBITDA. We have not included any optimization efforts into our 2% to 3% outlook with respect to EBITDA going forward. Those elements, we're still targeting to improve. We made good headway and at our year-end results. I hope to provide a good summary of what we found in our first year. But just for clarity, Maurice, we did not include that optimization into our EBITDA outlook guidance. Operator: Our next question comes from the line of Jeremy Tonet of JPMorgan Securities. Unknown Analyst: This is Ely on for Jeremy. I wanted to circle back to the organic growth opportunity set. I know opening remarks mentioned the upcoming development project. Just hoping to get some more color on what types of projects you guys are looking at, which side of the border and maybe just whether Blackrod kind of represents the template for growth projects as you see it? Bevin Wirzba: Thank you, Ely. I think we're obviously going to have that as a subject area for our Investor Day next week. But consistent to what we've said previously, we've been listening to our customers and trying to understand what kind of services they're looking for, for their businesses to be competitive. We were able to provide a great solution for IPC on Blackrod. And we're in a number of conversations, both in Canada and in the United States. And so we've seen probably the -- when we launched this business and made the announcement that the spin was occurring in mid-2023, I would say, since that time, the environment actually has become a little bit more constructive in both Canada and the United States. And so we're -- we've been maturing those growth opportunities. And that's one of our key priorities for 2026 is to mature and execute on the next organic and inorganic opportunities. Unknown Analyst: Looking forward to the Investor Day. And then just for the second question, I think you guys had a helpful slide showing 2026 guidance drivers. But just hoping to get some more context on how the kind of Milepost 171 remediation plan fits into potentially reducing that DRA and providing some upside next year. What does that process look like? And when might we expect a little bit of color there and maybe framing how that fits into the guide? Bevin Wirzba: So, Ely, I'll start and then pass it over to Richard on the plans for this year. When you looked -- when we provided the guidance around the range, I just want to remind everyone that 90% of our EBITDA comes in every year through our contracted period. So we have a great solid base to start from. And we've been working very diligently around getting our system capacity back up. But at a very high level, what has allowed us to deliver all our contracts and deliver our base business is our system operating performance, our SOF has really hit it out of the park. And our teams have done a great job allowing our systems to be available for the volumes that we're moving today. But I'll pass it to Richard to just talk about our mitigation plans and the work that's left to do here as part of the Milepost 171. Richard Prior: Sure, yes. And I touched on in my comments, some of the work that we've completed to date. So we're implementing a comprehensive remediation program that's system-wide. We've completed so far 6 in-line inspection runs and 37 integrity digs. We'll continue that work through this year and into next year. And then what we'll end up doing is filing a -- all of this work as it's ongoing, but we'll file a remedial work plan with PHMSA and eventually work with the regulator around lifting the pressure restrictions. Our goal is for that to happen sometime in 2026, it's hard to point to a precise timing for it. But as we work through the year, we'll -- I think we'll start to see pressure restrictions removed in increments, and that will allow us more access to uncommitted volumes, which we think will ramp up through the year. P. Van Dafoe: And Ely, it's Van here. I think that even if pressure restrictions are lifted, with those tighter differentials, you won't see a ton of EBITDA from those spot volumes. So that's just another thing to point out. Operator: Our next question comes from the line of Praneeth Satish of Wells Fargo. Praneeth Satish: So recognizing you're going to talk about your projects more at the Analyst Day. But as it stands today, do you think a placeholder assumption for CapEx in 2026 would be kind of in that $165 million range that you're spending in '25? Or do you think at this point based on the nature of the discussions that you're having in the pipeline that, that spend won't really hit in '26, and therefore, CapEx is likely to go down significantly in '26, even if you announce new projects. Just trying to get a better sense of what to assume for CapEx and what to assume for free cash flow next year? Bevin Wirzba: Thank you, Praneeth. So we -- in our capital table, we only put capital that we have sanctioned. And so you'll note that we don't have anything sanctioned at present, but we're working towards maturing those projects forward. With what Van commented on in our tax optimization, we've created a bit more capacity with respect to free cash flow and just to be able to put towards capital. I would say that right now, we've consistently said that we need to invest roughly on average $100 million plus or minus every year in order to deliver our 2% to 3% EBITDA growth CAGR. And I would use that as probably a good proxy over the next few years. If we do find something that's larger or more material, then we would love to finance that on a different basis. But I think for your modeling efforts, remaining kind of consistent to what we originally guided right out of the gate would be the best approach. Praneeth Satish: Got it. That's helpful. And maybe following up on one of those modeling assumptions. So I'm just trying to square the moving pieces here with the variable toll settlements and what the future P&L impact could look like at this point. I guess the way I read it is you've got maybe $33 million of remaining payments that SOBO would make over the next 6 years. But then you'd receive $19 million over the next 2 years and all of this, I think, is excluded from EBITDA. I just want to kind of double check that? P. Van Dafoe: Yes, it's Van here. All that would be normalized out of our EBITDA. So that wouldn't be included. If you're talking about GAAP and cash, then yes, yes, you're correct. Operator: I'm showing no further questions at this time. I'd now like to turn it back to Bevin for closing remarks. Bevin Wirzba: Well, thank you all for joining us today. We appreciate your continued interest in South Bow and look forward to connecting with you next week at our Investor Day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning. My name is Sylvie, and I would like to welcome everyone to the Bridgemarq Real Estate Services Inc. 2025 Third Quarter Results Conference Call. This call is being recorded. [Operator Instructions] I would now like to introduce Mr. Spencer Enright, Chief Executive Officer of Bridgemarq Real Estate Services Inc. Mr. Enright, you may begin the conference. Spencer Enright: Thank you, operator. Good morning, everyone, and thanks for joining us on the call today. I'm joined by our Chief Financial Officer, Wallace Wang. I will begin with a brief overview of our company's third quarter results. Wallace will then discuss our financial results in more detail, and I'll conclude by providing some remarks on organizational highlights, company updates and market developments. Following our remarks, Wallace and I will be happy to take your questions. I want to remind you that some of the remarks expressed during this call may contain forward-looking statements. You should not place reliance on these forward-looking statements because they involve known and unknown risks and uncertainties that may cause the actual results and performance of the company to differ materially from the anticipated future results expressed or implied by such forward-looking statements. I encourage everyone to review the cautionary language found in our news release and on all our regulatory filings. These can be found on our website and on SEDAR plus. So we continue to build on the strong momentum established in the first half of 2025, an encouraging sign given broader economic challenges and ongoing geopolitical certainty including U.S. trade tensions that continue to affect the Canadian economy. Despite ongoing uncertainty in both the housing market and the wider economic environment, we have continued to successfully attract and retain high-performing agents across our brands. Our comprehensive suite of tools, training services and technology offerings, which are all tailored specifically to the needs of Canadian REALTORS, have been a key differentiator over our competitors, helping us remain competitive and deliver exceptional value to our network. Revenue for the first 9 months of the year was $309 million compared to $249 million in 2024. As a reminder, last year's results reflect the addition of the brokerage businesses, which were acquired on March 31, 2024. At its meeting yesterday, our Board of Directors approved a dividend of $0.1125 per share, payable on December 31st to shareholders of record on November 28. This indicates an annualized dividend of $1.35 per share, which is consistent with 2024. And with that, I'll turn the call over to Wallace for a closer look at our third quarter financial performance. Wallace Wang: Great. Thank you, Spencer, and good morning, everyone. Revenue in the third quarter was $123 million, slightly lower than the $127 million reported in the third quarter of 2024. Franchise fees increased for the quarter and the first 9 months of the year, driven by fee increases implemented at the beginning of 2025 as well as an increase in the number of REALTORS in our network. There are currently 21,617 REALTORS in our network, an increase of 3% since the end of last year. By contract, the total number of CREA REALTORS has decreased by 2% since the end of last year. In the third quarter, the company generated a net loss of $1.7 million compared to a net loss of $10.8 million in 2024. The reduced loss in the quarter is partially driven by the valuation of the exchangeable units remaining unchanged in the quarter compared to a loss of $10.8 million in the third quarter of 2024. Our adjusted net earnings, which considers our operating earnings before certain noncash, nonoperating adjustments and payments to holders of exchangeable units amounted to $1.0 million in the third quarter. Cash provided by operating activities amounted to $1.3 million in the third quarter of 2025 compared to $2.7 million last year. The company generated $1.5 million in free cash flow in Q3, down from the $5.3 million generated in the third quarter of 2024. This is primarily driven by increased capital expenditures during the quarter. The Canadian residential real estate market grew in the third quarter of 2025, closing at approximately $84 billion, an increase of 5% compared to the same period in 2024, driven by a modest 1% increase in the average selling price and a 4% increase in sales volume. This is largely driven by the province of Quebec, where the residential real estate market recorded a 20% increase in transactional dollar volume during the third quarter of 2025. Compared to the previous year, closing at $12 billion. This reflects a 10% increase in unit sales and a 9% increase in the average selling price. The greater Toronto market and the Greater Vancouver market recorded a decline in the average home prices compared to last year. The number of units sold during the quarter increased in both markets. As a reminder, market data is generally reported on a firm deal basis, whereas the company recognizes revenue when the transactions are closed. Spencer will now provide additional insights into the market and an update on our operations. Spencer Enright: Thanks, Wallace. So buyer activity throughout 2025 has remained below typical levels, particularly in Canada's two most expensive markets, Toronto and Vancouver. As has been the trend since spring, buyer demand in many areas of the country has been lower than historical norms, influenced by many factors, including housing affordability, employment, immigration and overall consumer confidence. For buyers in a position to transact at this time, however, improved affordability in the Greater Toronto and Greater Vancouver in market is presenting an opportunity. With inventory continuing to rise, prices edging lower and lending rates declining, affordability is gradually improving, creating more favorable conditions for those ready to make a move at this time. Quebec's real estate markets continued to demonstrate strength and resilience, joining major centers in the Prairies and Atlantic Canada in posting increases in prices amid tighter supply conditions this year. The Bank of Canada reduced its target for the overnight lending rate by 25 basis points in each in September and October. And the overnight rate now, it's at 2.25%. In September, Canada's consumer price index increased 2.4% year-over-year, up from the 1.9% recorded in August, which remains within the bank's inflation target range. On its own, the reduction to the Bank of Canada's key lending rate, along with indications of the rate remaining stable for some time, should drive a much needed measure of added stability for Canadians, who are contemplating a real estate purchase in the near term. Now I'll give you a few updates on the company's operations. A key competitive strength of our business is the ability to provide a broad range of real estate solutions for both agents and consumers. Our strong portfolio of brands, including Royal LePage, Via Capitale and Proprio Direct, sets the standard of service excellence across all of Canada. We continue to proactively innovate and improve our suite of services to our agents. We are currently embedding AI functionality throughout our service platforms with particular attention to tools that enhance lead generation and client engagement. At the same time, we have revamped our aid and training and coaching programs to equip our network of agents with AI knowledge and insights to improve their productivity and realize greater results in the marketplace. During the third quarter, we launched a new fall digital advertising campaign called Agents of a Different Stripe aimed at driving consumer brand awareness for Royal LePage. During its first 4 weeks, the campaign earned over 24 million impressions across Canada via video and static advertisements. Proprio Direct introduced a new CRM platform designed to enhance the client experience and streamlined business operations, helping our agents within that banner, deliver a higher level of service. And also in the third quarter, Via Capitale hosted its 2025 Via Capitale Congress to support skills development and training for real estate professionals. We remain focused on introducing new initiatives and training programs that enhance efficiency and help agents grow their businesses. During the quarter, agents operating under our corporately owned Royal LePage Real Estate Services and Johnson & Daniel Luxury brand benefited from the launch of a new Deal Hub, creating -- created to streamline compliance and deal processing across all of our brokerage operations. By continuing to invest in initiatives that enhance agent productivity through education and the strategic use of artificial intelligence, we are strengthening our leading brand, creating new opportunities for growth and delivering greater value to our shareholders. Overall, I am pleased with the market share growth we have achieved so far this year, and I'm excited to continue that momentum as we close out the year. With that, I will turn the call back to our operator and open up the call to any questions. Operator: [Operator Instructions] First, we will hear from Jeff Fenwick at Cormark Securities. Jeff Fenwick: I wanted to start off just talking about the REALTOR network. It looks like you've had some success sort of progressively growing it this year. The industry itself has seen some contraction. What are you seeing in terms of opportunities for recruiting right now, a bit of a better environment for you to maybe pick off some talented people that might want to come into your network, or how are you thinking about that? Spencer Enright: Yes, Jeff, this is an excellent year for us from a recruiting standpoint. We've had success both in securing new franchises as well as in recruiting individual agents with not just within our owned brokerage operations, but also within our franchise network of brokers. And that's been across both the Royal LePage brand, which operates nationally in all 10 provinces as well as our Via Capitale brand, which is exclusive to the Quebec province. What I found is, over the years, when -- and what we've seen sometimes as a trend is in years where the market is extremely difficult, and especially when you see Toronto and Vancouver with fewer home sale transactions, competition for listings is that much more fierce than it normally is, which is extremely fierce on a regular date. And agents want and need support for that. The ability to find and secure new business for them is even more difficult when there's less business to go around. And there's what we like to term a flight to quality, where there's a lot of new conversations with agents that maybe have been successful in the past with other brands, other competitors and are struggling now, and they're looking to partners like us for new solutions. And is there a way that they can regain that momentum for themselves or really build it in their career in a way that they're not getting today from others or that they've been getting before. And so we're having great conversations all across the country with ages as well as with broker owners. We've had really good success in growing our network this year. We've got a really robust pipeline that we continue to work on. And so I'm very excited for what we've got moving forward as well as what we've seen so far this year. Jeff Fenwick: That's helpful color. And then, I guess, another aspect business you've been investing in, it sounds like, is just operationally becoming a bit more efficient and using tools like AI. So are there opportunities here to sort of help boost the margins and, I guess, also make your REALTORS more productive at the end of the day? Like how is -- what's the current outlook there? Spencer Enright: Yes, there's lots of opportunity there, and we're doing everything we can in two key focus areas. One is with agents themselves, helping them take advantage of large language models and other tools that they have already available to themselves. We provide through our Google Suite partnership access to tools to all of our agents in our network. And so they need to be as productive as possible. There's opportunities to improve their productivity, their sales effectiveness. And so we're working on that through training programs as well as other educational forums for them to learn even from each other, not just from us. And then within our own operation, we're using it in many ways to build a more efficient model and a more effective model. One area that we're focused on right now across our brokerage business is making sure that we've got the highest standards of compliance and regulatory standpoint, which is always well for us, but across all of our brokerage durations, which they are in multiple cities, multiple provinces, there's an opportunity to use AI to our advantage in building the right way of ensuring that every transaction we do, every film sale and purchase is fully compliant with all of the regulations required. Jeff Fenwick: Okay. And then just wondering if within that, there was some spend in the quarter. I noticed the CapEx number, hopefully, it was $3 million, which is a bit higher than typical. So was there some investments going on in the business in the quarter? Wallace Wang: No. So that's primarily driven by the increase in the Asian count. So you can think of it as sometimes when we convert larger franchisees to our network, we pay a per agent fee upfront. And that's primarily to help the franchisees kind of offset the conversion cost, right? So they'll need to convert their signs and some of the other costs, and we obviously size these investments upfront based on the ROI of the capital that we're going to invest to make sure that over the lifetime of the contract, we generate attractive ROI. Jeff Fenwick: Okay. Great. And then just in terms of looking forward, I guess, you do have some capacity now with your balance sheet to look to continue to make those sorts of growth investments. At the same time, I know you're sort of juggling an environment that's a bit softer, and you've -- you're deferring some of your dividend payments to Brookfield. So what's the thinking in terms of feeling comfortable about continuing to make those growth investments right now? Spencer Enright: Yes. We feel really confident about it. I think when you take a look at the way we grow our business, in addition to the organic growth that you see with our franchisees growing or our brokerage growing, one agent at a time, there's franchising opportunities. We've got a strong pipeline. And as well as mentioned, sometimes there's a bit of a capital outlay for conversion. But like I said, we're having great conversations ongoing with new potential partners with us, whether they're in a franchise capacity or in the -- in part of our own brokerage capacity as agent teams, large teams. And so there might be a bit of CapEx investment to bring some of that in. As Wallace mentioned, we focus on the long-term and growing our agent count now under 10-year contracts with franchises is that long-term play where we build on top of the existing royalty streams that we have, the existing franchise fee stream. And so there's lots of opportunities to continue to do that. Exactly when those take place is not necessarily streamlined quarter-by-quarter because in terms of a franchisee moving from one brand to another, at the -- that happens at the end of a contract, whether that's with someone that's on a 5-year or some other time frame. So you can't necessarily predict that, that all happen in one quarter or another or that it will be consistent quarter-to-quarter or year-over-year. But that's been our bread and butter in terms of one of the small-scale M&A growth path that we've pursued in the past, and we expect to do more on that. Operator: At this time, I will turn it over to check on web questions. Wallace Wang: Right, there are currently no questions on the webcast. Spencer Enright: All right. Well, thanks, everybody. I'd like to thank everyone once again for joining us on today's call. We look forward to speaking with you again after we release our Q4 results in March. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.
Operator: Good morning, and welcome to the ImmuCell Corporation Reports Third Quarter ended September 30, 2025, Unaudited Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead. Joe Diaz: Thank you, Rocco. Good morning, and welcome to everyone. As Rocco indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I want to thank all of you for joining us today to discuss the unaudited financial results for the third quarter ended September 30, 2025. Listeners are cautioned that statements made by management during the course of this call include forward-looking statements, which include any statements that refers to the future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes or events to differ materially from those discussed today. Additional information regarding forward-looking statements and the risks and uncertainties that could impact future results, outcomes or events is available under the cautionary note regarding forward-looking statements better known as the safe harbor statement provided with the Form 10-Q and the press release that the company filed last night, along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Friday, November 14, 2025. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. The company included definitions of these terms as well as reconciliations of these figures to the most comparable GAAP financial measures in last night's press release in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, Special Adviser to the CEO of ImmuCell Corporation for opening remarks. Michael? Michael Brigham: Thanks, Joe, and good morning, everyone. This is an exciting time at ImmuCell. Lots of good change going on. Our financial performance over the first 9 months of 2025 has greatly improved compared to prior year, a turnaround, which was made possible in part by increasing our production output while improving gross margins. We are now in a great position as a company with a stock distribution channel and an energized commercial team. Our CEO and CFO will be commenting on the financial results in greater detail in just a moment. On another topic of change, we are amidst 2 very positive management transitions right now at ImmuCell. First, as most of you know by now, we added Timothy Fiori, our CFO, to the team back in April. Secondly, back in June, we announced the CEO succession plan. This effort was completed successfully effective November 1, 2025, with the hiring of Olivier Te Boekhorst as our new President and CEO. I'd like to welcome Olivier to the company. Olivier brings over 25 years of leadership and results-focused execution experience in animal health to ImmuCell. Before joining ImmuCell, he served as an operating partner of ARCHIMED, a global health care investment firm, where he focused on Animal Health Investments and served as Chairman and Chief Executive Officer of a portfolio company. Prior to that, Mr. Te Boekhorst was at IDEXX for 18 years, IDEXX is a main-based NASDAQ listed company with more than $4 billion in revenue, where Olivier lead strategy and M&A activities from 2004 to 2008 and then served as a Corporate Officer, Senior Vice President and General Manager of several business units from 2008 to 2021, including their livestock and dairy antibiotic residue testing businesses. He has a track record of driving growth and operational excellence in the livestock industry. And as I step away in January after 36 years with ImmuCell, I am very confident that we are in good hands with Olivier and Tim. At this point, I will turn the call over to Olivier for a few comments. Olivier? P. F. Te Boekhorst: Thanks, Michael. I am very excited to be here, and I want to thank you for your support during my onboarding. I appreciate the warm welcome and the investment from employees in my onboarding process over the last 2 weeks as I'm starting to learn the business. In conversations with the team, I've been asked why I joined ImmuCell. And one of the reasons for my excitement to join at this juncture is the importance of the work here. Fundamentally, ImmuCell keeps cats alive and healthy. We don't just make and sell doses of First Defense. We provide protection to newmored animals that cannot protect themselves. Farmers trust us because our technology works and they count on us to help them do their jobs better. And I tell the team that starts with the care and the effort we all put in every day. It is impressive to see the passion, dedication and pride of our staff in Maine and in the field as we support the larger mission of reducing the use of antibiotics in the food supply chain and ensuring the availability of safe, healthy and affordable dairy and beef products. I look forward to the next weeks of my onboarding process as I plan to spend a good deal of time in the field meeting customers, colostrum suppliers, distributor partners, key opinion leaders and the commercial team. I'm a customer-focused leader, and I intend to bring customer perspectives to everything we do at ImmuCell. ImmuCell is poised to do great things, and I'm very excited to be a part of that. The company aims to deliver a strong value proposition for farmers and our financial and operational performance so far in 2025 reflects that. Execution across our supply chain will be laser-focused on quality and product availability from vaccine production, colostrum sourcing, liquid processing, formulation, packaging and shipping of final products, our team is rebuilding confidence in the market and our ability to consistently meet customers' needs. I look forward to working, to regain customers, to capture share and to expand the use of scours preventatives. It's an exciting time to be at ImmuCell as we explore new market opportunities more aggressively. Now turning to our revenue for the quarter. We had an 8% decrease in total product sales during the third quarter of 2025 compared to the third quarter of the prior year. This is in line with previous comments we made about the effect of restocking our distribution channels earlier this year. I'm encouraged that domestic sales were up 2% during the third quarter compared to the third quarter of 2024, and domestic sales were up 9.5% during the third quarter compared to the second quarter of 2025. So we are seeing positive momentum in the U.S. market that represented about 86% of our sales during the trailing 12-month period ended in September 30, 2025. International sales, largely to Canada, were down during the third quarter of 2025 compared to the third quarter of 2024 due to timing of shipments and allocations of our short supply while we're managing our order backlog. This did create the 8% decrease in total sales during the third quarter that I just mentioned, but I do not believe this represents significant deterioration of underlying customer demand. It is worth noting that international sales during the 9-month period ended September 30, 2025, were 15% higher than the same period of the prior year. Longer-term growth trends are also meaningful. When we compare our trailing 12-month sales ending September 30, 2025, to the same period ending September 30, 2022, that is the period before we ran into significant supply issues, the 3-year compound annual growth rate is 11%. Okay. Turning to net income. We delivered net income of $1.8 million during the 9 months ended September 30, 2025, compared to a net loss of $2.7 million during the 9 months ended September 30, 2024, which is a $4.5 million swing in the right direction, driven by a significant improvement in gross margins that Tim will discuss in detail. We are focused on production capacity and quality, and one way to measure that is the approximate level of revenue we can now support. During the 9 months ended September 30, 2025, we demonstrated that we can produce at an annual rate that is very close to our capacity expansion goal of $30 million per year. Our priority now is on operational excellence and execution while we review our next capacity expansion opportunities. At this point, I'm going to turn the call over to Timothy Fiori, our Chief Financial Officer, for a deeper review of the third quarter financial highlights. Tim was my finance leader at IDEXX for 15 years, and it is a pleasure to team up with him again here at ImmuCell. Tim? Timothy Fiori: Thanks, Olivier. I'm happy to be working with you again. To start, I'd like to focus on improvements we've seen regarding the year-to-date net income and earnings per share as compared to prior year. Net income during the 9-month period ended September 30, 2025, increased by $4.5 million over the net loss during the 9-month period ended September 30, 2024. This significant improvement was driven by higher sales with increased gross margins and a 7.4% or $543,000 reduction in operating expenses. Basic net income per share during the 9-month period ended September 30, 2025, was approximately $0.20 per share in contrast to a net loss of $0.34 per share during the same period of the prior year. As Olivier mentioned in his comments, product sales during the third quarter of 2025 decreased by 8% or $505,000 compared to the third quarter of 2024. Product sales during the 9-month period ended September 30, 2025, increased by 7% or $1.3 million over the 9-month period ended September 30, 2024. Product sales during the trailing 12-month period ended September 30, 2025, increased by 16% or $3.9 million over the trailing 12-month period ended September 30, 2024. During the first half of the year, we effectively eliminated our backlog of orders and rebuilt inventory and distribution. Refilling the distribution pipeline after an extended backlog provided a temporary boost to sales. Overall, I'm pleased that we are out of the prior order backlog situation. As we can see in the Q3 results, backlog dynamics have created difficult conditions for year-over-year sales comparisons. During the Q2 call, we anticipated that we may experience a softening in sales during the second half of 2025, and that has happened as predicted in Q3. We believe that difficult comparisons may persist due to the backlog fulfillment in prior periods for the next several quarters. We should lap this backlog dynamic in the second half of 2026, given that we effectively exited the backlog situation as of June 30, 2025. You can see prior year backlog information by quarter in our most recent 10-K and in the 10-Q that we just filed. We have realized gross margin improvements in 2025 as compared to the prior year. Gross margin as a percentage of product sales increased to 43% during the third quarter of 2025 compared to just 26% during the third quarter of 2024. Gross margin increased to 43% during the 9-month period ended September 30, 2025, compared to just 27% during the 9-month period ended September 30, 2024. Gross margin increased to 41% during the 12-month period ended September 30, 2025, compared to just 27% during the trailing 12-month period ended September 30, 2024. Future success will require continued achievement of strong production yields, coupled with strong sales growth. We have several opportunities to drive growth from the existing products, including regaining customers that we may have lost during the short supply in years past. We also have several new product offerings in our functional feed product line. I'd like to talk for a moment about adjusted EBITDA because the impact of noncash depreciation expense on our bottom line is significant. To be clear, adjusted EBITDA includes an add-back of stock-based compensation expense, which is another noncash expense that's included in net income as calculated in accordance with GAAP. We created adjusted EBITDA of $751,000, $4.4 million and $5.8 million during the 3-month, 9-month and trailing 12-month periods ended September 30, 2025, respectively. These strong results compare favorably to adjusted EBITDA of $196,000, $35,000 and negative $175,000 during the 3-month, 9-month and trailing 12-month periods ended September 30, 2024, respectively. These strong results helped us increase cash to $3.9 million as of September 30, 2025, from $3.8 million as of December 31, 2024, while investing about $2.7 million in inventory build as we approach peak selling season. We will continue to closely monitor and manage cash as we balance long-term investment with near-term operational needs. With that, I will turn the call back to Olivier for some closing remarks. Olivier? P. F. Te Boekhorst: Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense suite of solutions, including the new products within the functional feed line that were launched in June. There is tremendous runway for First Defense, and we are excited to come out of a supply-constrained environment to execute growth initiatives. The energy in the commercial team is palpable. We are also very focused on operational excellence to ensure consistent supply of quality product. The year-over-year improvement in adjusted EBITDA that Tim just touched on are the results of this focus with increased sales at better gross margin and lower operating expenses. As we discussed before, we are awaiting FDA approval for our Re-Tain product, which addresses an important market need for effective treatment of subclinical mastitis. We believe that treating subclinically infected cows with Re-Tain could enhance best practices in the industry with an alternative to traditional antibiotics that are also used in human medicine. While we wait for FDA approval, we have started investigational product use studies to collect market feedback about product performance in the field in collaboration with Michigan State University. These studies are well underway, and the data we gather from this work will inform us of our best strategies for Re-Tain in 2026. This disciplined approach is intended to support a successful market entry. Our top priority at ImmuCell will be on solid execution across the organization. And I'm very pleased that we can leverage the foundation that Michael and the team have rebuilt and that we can now set our sights on defining and executing our strategy for long-term growth. With that said, we will be happy to take your questions. Let's have the operator open up the lines. Operator: [Operator Instructions] And our first question today comes from Frank Gasca, private investor. Frank Gasca: First of all, and I want to thank Mike for his service, for the years that he put in at ImmuCell, and we go back quite a way, it's about 25 years. So I wish him well in his upcoming retirement as I enjoy mine. As far as my questions, I'm going to take a somewhat more critical turn. I don't see the clean slate that you referred to. I see more -- in regards to First Defense, what has changed? It went from an expansion of capacity. We even committed capital, and now we're uncommitted to that expansion. I think you touch some of the causes of that. But what I'm looking for is what active and steps are you taking to increase that growth that was somewhat anticipated even years ago. P. F. Te Boekhorst: Thank you, Frank, for your question. And let me maybe just start with -- what we mentioned is we are now at a level of capacity that we set out for ourselves when we started the capacity expansion project a few years ago. And while we had a contamination event, we have now arrived at a place where we are actually in a better shape than we even were when we started that capacity expansion project because we have put all kinds of quality measures in place to ensure that we can manufacture at a predictable level. So that is an improvement in our capability. What I'm very excited to report after my first few calls with the commercial team is that after years of managing short supply, they are now able to go win new customers, talk to customers about increasing the use of First Defense if they're already using it. And this is a very different approach that the commercial team can now engage with, and they are very excited. I will be visiting the field next week with -- visiting with customers. And hopefully, we'll be able to report back to you firsthand what that excitement at both the customer and the sales team level is. So we're very pleased to be where we are. There is more to do but it does look quite positive from where I'm sitting. Thank you for your question. Operator: [Operator Instructions] Our next question comes from George Melas with MKH Management. George Melas: Thanks. First of all, I sort of want to reiterate what the previous caller said. Michael, thank you very much for your service and we appreciate it working with you. And I just want to say thank you very much. Olivier, welcome to the team. It's very exciting to have you. My question is a bit about the inventory. The WIP continues to grow. I mean a lot of it is the frozen colostrum, which is, I think we report is $3.3 million. But the finished good inventory right now stands at $2 million, which is the highest it's been, I think, in probably 6, 7 or maybe ever or at least from my model in at least 6 years. I'm trying to see and -- trying to see how you plan to balance sort of production with sort of cash generation or cash management. P. F. Te Boekhorst: Well, first, George, thank you very much for your welcome. I'm going to turn it over to Tim to address the inventory question. Timothy Fiori: George, good to talk with you. Yes, we definitely have seen inventory levels come up a lot. Of course, we started the year with really practically nothing, and now we have a more desirable level, frankly, of inventory and especially as we approach the peak selling season that's coming up in the -- around the first quarter. I meet with the team weekly with sales and the production team personally, and we have a good communication between the 2, and we do a planning process to seek those desired inventory levels. So we're paying a lot of attention to that. And I think we're in much better shape now than in the past couple of years for sure. On the colostrum side, we want to have a considerable amount of colostrum. And I think you're right that we need to carefully manage that and make sure that it doesn't become too much. And that is also on that regular review list of things that we're very focused on. But it is our key ingredient. And you're totally right that, when you look at WIP, that colostrum is a large component of that. P. F. Te Boekhorst: And George, if I could just add, I've worked with Tim for 15 years as my finance leader at IDEXX, as I mentioned earlier in the call, where we managed about $300 million business together. And Tim brings a very disciplined, rigorous process-focused approach to both operational and financial execution. And so I'm very excited to see that in place here and to continue working with him and also to partner with Bobbi Brockmann, our Vice President of Sales and Marketing, who has a very similar approach to commercial execution. And I'm bringing this up because I think that's the way forward for ImmuCell is to build on what Michael has built for us and now to really focus on disciplined day-to-day execution of our plans. Thank you for your question. Joe Diaz: Okay. This is Joe Diaz again, your moderator. I did want to have one question asked before we close the call out. The margin improvement in Q3 was very good. What do you attribute that to? Timothy Fiori: Thanks, Joe. Yes, the largest drivers of gross margin, as we see it, are the improved manufacturing performance as the primary one, but also the price increase. If you look around Page 37 of the recent 10-Q, we talked about our composite price increase in 2025 of around 6%. So those are both definitely important factors in gross margin improvement. And just the volume of sales, so you end up with that scale that's helping in manufacturing and with fixed cost spreading it out over a larger amount of volume is always a big part of that as well. Joe Diaz: Okay. That concludes our Q&A session. I want to thank everyone for participating in today's call. We look forward to talking with you again to review the results of the year ending December 31, 2025, during the week of February 23, 2026. Have a great day. Thank you for being with us today. Operator: Thank you. That concludes today's conference call. You may now disconnect your lines, and have a wonderful day.
Steve Wadey: Thank you, Stephen, and good morning, everybody, and welcome to our half year results for FY '26. Whilst we continue to operate in challenging market conditions, we have taken decisive action to improve our short-term performance and drive long-term growth, creating value for shareholders. And thanks to the dedication and hard work of our highly skilled employees, we've continued to support our customers' operational needs, delivering mission-critical technologies and services. Today, we'll take you through our half 1 results and the actions we've taken to address both near-term challenges and strengthen our market positioning for the long term. A great example is shown here, which illustrates the successful completion of the synthetic trials we undertook with BAE Systems to demonstrate how drones can operate alongside combat aircraft like Typhoon. This was a significant milestone in developing critical sovereign capabilities needed to defend the U.K.'s national interests. Let me start with our key messages for today. First, in tough near-term market conditions that have delayed orders in the U.K., we have delivered robust operational performance and our restructuring program in the U.S. is on track. Secondly, our mission-critical capabilities remain highly relevant to our customers' needs in a growing defense market and combined with our significant order book and substantial pipeline, provide very good visibility for long-term growth. Thirdly, despite near-term headwinds in our home markets, we have focus and visibility to maintain our full year guidance, and we continue to deploy capital with discipline. In summary, we are delivering the actions to improve business performance in the short term and are well positioned to capitalize on increasing defense spending so that we deliver compelling value creation for shareholders. Our agenda this morning expands on these messages. I'll start by giving you our half year in review. Martin will provide a commentary on our financial results. I'll then come back and give you an overview of our strategic outlook. Finally, we'll open up for questions. So to our review of the half year performance. In response to the market backdrop, we have taken proactive and disciplined portfolio actions, achieving good progress on our U.S. restructuring program as well as rightsizing other areas of the business. The improvement actions are delivering benefits and building resilience that will improve both short- and long-term performance. Overall, our first half financial performance was robust in tough near-term markets. We saw this particularly in the U.K., where we experienced delays to orders on our engineering services and R&D framework contracts, in part due to our customers prioritizing major equipment programs. This reduced our underlying book-to-bill to less than 1, excluding the LTPA contract award. We achieved 2 strategic milestones that strengthen our company for the long term. In May, we secured the GBP 1.5 billion extension to transform the LTPA for future warfare through to 2033. As a result, we closed the half with a significant order backlog and substantial pipeline, providing very good visibility for long-term growth. And in September, we announced the strengthening of the EDP contract to accelerate defense productivity by expanding the partnership and augmenting our high-value engineering skills with artificial intelligence. Together, these strategic milestones show how we are playing our part in delivering on the ambitions of the U.K. government's strategic defense review. As normal, we delivered a healthy cash conversion, enabling investment in the business and increased shareholder returns through our progressive dividend and multiyear share buyback program. Looking forward, we have approximately 90% of revenue under contract for this year, which is the same as last year. Whilst market headwinds continue, we're focused on execution and have visibility to deliver our full year forecast. Martin will take you through a bridge of this later in the presentation. I now want to address our half 1 performance and the progress we are making in each of our segments. Starting with EMEA Services. Due to market conditions in the U.K. and ongoing defense budget pressures in the Australian market, we delivered flat revenue with good margin. In the U.K., we grew 2% as a result of delayed orders on our framework contracts. And in Australia, our revenue was lower, predominantly due to the loss of the Land Systems work package under the MSP framework. In response to these dynamics, we took some resizing actions to build resilience whilst protecting core skills for the future. Our performance was underpinned by successful program execution across our long-term contracts. On the EDP contract, delivery performance was strong with 98% of all milestones delivered on or ahead of schedule. In September, we announced changes to the LTPA that will make it easier and cheaper for SMEs and new entrants to use our test and evaluation capabilities across the U.K. The launch of our T&E Innovation Gateway will help drive greater defense innovation and support wider economic growth across the U.K. Notable new contracts in the half include the strategic win GBP 25 million to deliver collective training for the Royal Navy to improve war fighting readiness at pace. This 5-year contract will see us deliver an immersive virtual training environment that realistically simulates the threats and missions that Navy personnel can expect to undertake in the future. Whilst near-term trading conditions remain tough, we have a clear pipeline of orders to win and deliver in the second half. Turning to Global Solutions. During the first half of the year, we've been focused on executing our plan to address the market challenges and operational issues that we highlighted in May. We've made good progress on the U.S. restructuring program. Key actions completed include the disposal of the U.S. Fed IT business, significant headcount resizing and cost base reduction as well as an improved control of labor rates and inventory. This progress puts us on a stronger foundation to move forward. As we forecast, revenue declined with lower margin compared to the prior year. Half of the decline was due to a lower volume of non-U.S. product sales versus a strong prior year comparator and the other half was in the U.S., principally due to the impact of DOGE on our Fed IT business that we have now disposed of and our planned resizing actions. As the U.S. market changed, we repositioned the business to build resilience and be better aligned to national security priorities. Our strategy is now focused on 4 capabilities where we have differentiated long-term incumbent positions and see good growth potential. These 4 areas are space & missile defense, maritime systems, advanced sensors and persistent surveillance. During the half, we secured $290 million of funded orders with a U.S. book-to-bill of 1.5x. Whilst we continue to focus on improving operational performance and winning longer-term programs, this strong book-to-bill underpins our second half forecast for Global Solutions. To summarize, we're making good progress. Whilst we finished the half with a smaller U.S. business, it is more aligned to national priorities and is well positioned to deliver long-term growth. I'll now hand over to Martin to take us through our financial results. Martin Cooper: Thanks, Steve, and good morning, everyone. As usual, I'll start with the financial highlights before moving on to the key financial metrics at a group level and details on our 2 reporting segments. I'll finish with capital allocation and guidance. And for reference, the U.S. dollar rate for the half averaged $1.34 compared to $1.29 last year, which has provided a headwind to the reported values. So turning to the results for the half. Order intake for the half was GBP 2.4 billion, which drove a closing order backlog of GBP 4.8 billion, both reported records for the group. Revenue was 3% down on an organic basis at GBP 900 million, resulting in a book-to-bill of 0.9x, reflecting the sale of our Fed IT business and trading conditions in H1, which impacted contract awards. Underlying profit was down GBP 10 million versus H1 last year at GBP 96 million, but margin at 10.7% was ahead of our half year expectations and underpins our full year target of around 11%. Underlying basic earnings per share of 14.2p were in line with last half as the lower profit was offset by the enduring benefit of the enhanced level of share buyback. Turning profit into cash remains strong at 85%, which again underpins our full year guide of around 90%. The strong operating cash performance, combined with the sale of our U.S. Fed IT business has enabled effective and value-accretive capital deployment. This has enabled us to not only reduce net debt half-on-half, but also to significantly enhance shareholder returns, which totaled GBP 101 million as we made excellent progress on our ongoing 2-year share buyback program and paid the final dividend. And return on capital employed remained strong at 21.1%. Moving to the key group financials and starting with orders. The book-to-bill of 0.9x, as Steve raised, resulted from delays in contract awards in the U.K. impacting EMEA Services. And within Global Solutions, the year-on-year impact on the federal IT market was particularly stark in the order flow in the business we have now disposed of. Whilst book-to-bill was down, total orders at GBP 2.4 billion was a record when incorporating the 5-year LTPA award. This meant we closed the half with an order backlog of GBP 4.8 billion, which does include GBP 0.4 billion of U.S. unfunded backlog, providing good visibility for future growth of core long-term business frameworks. Revenue at GBP 900 million is down 3% on a like-for-like basis when adjusting for FX and the sale of the Fed IT business. EMEA was lower on reduced volumes in Australia, where we lost a competitive land systems work package. And as Steve mentioned, despite being impacted by delays in orders, the U.K. business did grow 2% half-on-half. Global Solutions declined due to U.S. short-cycle revenues, of which a significant part was in the business now disposed of. In addition, our restructuring activities have resulted in us exiting some business lines as we focus on 4 major areas for long-term profitable growth. Within Global Solutions, our products business was lower against a high year-on-year comparative, but demand and outlook remains robust, and we expect a better second half. Recognizing the step-up required in H2 to deliver our revenue guidance, we have detailed on the chart the drivers that bridge us from half year to our year-end assumption of circa 3% organic growth -- like-for-like growth. So taking each in turn. Revenue cover at the half stood at 89%, in line with last year's assumed outturn at this stage, and that includes the core frameworks of EDP and LTPA, established positions on the likes of Naval Combat Systems and MSCA, Maritime training following the MCAST win and in the U.S., the TARS Persistence Surveillance contract and the work we do with the Space Development Agency. Secondly, our Period 7 order flow has added a further 2% to the cover and includes the mission-critical Typhoon support uplift. Thirdly, we have around 7% of orders, which are extensions of current positions or where we are close to finalizing the awards. Examples include the DragonFire laser weapons contract and target sales with predominantly repeat customers. Finally, we have a good visibility on a pipeline of further awards that we assume we shall win and deliver in year to cover the remaining around 2%. Whilst there are clearly market headwinds prevailing in the U.S., U.K. and Australia, we currently have good visibility and are hence maintaining our full year guidance. Moving to operating profit, which was down GBP 10.6 million against last year, reflecting lower revenue and the impact of the group's restructuring activities. Margin at 10.7% was ahead of expectations at the half with good consistent program execution against our backlog, especially in EMEA Services. In May, I talked about rebuilding margin from 9.6% to around 11%, and we are on track through driving strong program execution, cost base efficiency actions and the portfolio actions in the U.S. As usual, we have detailed the table reconciling underlying operating profit from segments to statutory profit. The income from RDEC and intangible amortization are standard reconciling items and predictable. The other 2 major reconciling items reflect the actions being taken to improve the long-term performance of the business. Firstly, our digital investment has increased in the half, driven by a major rollout to over 60% of the business. As a reminder, this is part of a wide -- of a program to enable growth strategy and wider business efficiency. Secondly, we have booked a further GBP 22.6 million of restructuring costs, driven by the portfolio work in the U.S., coupled with the rightsizing activity in Australia and ongoing efficiency activity in the U.K. To complete profit, the sale of the Fed IT business led to a GBP 0.5 million profit on disposal. Now turning to the segmental split of the group performance, starting with EMEA Services, which had a good operational half in difficult near-term market conditions. Orders increased to GBP 2.2 billion. Excluding LTPA, the book-to-bill was down to 0.8x with delays in contract awards in the U.K. and Australia driving the shortfall, albeit as mentioned in the revenue bridge, some of those orders have come through since period end. Revenue was broadly stable with the U.K. defense delivering growth, but this was offset by order delays and lower revenue in Australia with the loss of the land MSP work package. Program performance and cost control was good, ensuring consistent margins at 11.5% and funded backlog is now at a record high GBP 3.9 billion, which supports second half delivery and longer-term visibility. Next, Global Solutions, which posted orders of GBP 247 million at a book-to-bill of 1.3x, including annual funding on our core U.S. franchise contracts of Tethered Aerostat Radar System, Strategic Capabilities Office and Space Development Agency. These contracts also saw good on-contract growth. Securing these orders in the half helps to derisk second half revenue given the ongoing government shutdown. Orders were down half-on-half due to restructuring of the U.S. portfolio and timing of targets and product awards. These dynamics impacted revenue, which was 16% lower at GBP 192 million. And as covered in the bridge, the book-to-bill gives us a foundation to drive the required second half performance. Margin was down half-on-half at 7.4%, but up from last year as we work through the U.S. restructuring actions and was in line with our expectations at this stage. Moving to cash, where operating cash flow continued to be good at GBP 128 million and was in line with last year, delivering a high conversion ratio of 85%. Capital expenditure was GBP 36 million, of which GBP 21 million related to the LTPA. And in line with guidance, we would expect higher spend in the second half with a total for the year around GBP 100 million. To complete the cash analysis, the movement in net debt from year-end is shown here. We generated GBP 63 million of free cash flow. And with the proceeds from the Fed IT sale, that allowed us to deliver a significant step-up in shareholder returns at GBP 101 million as we accelerated the pace of the buyback program and grew the dividend 7%, in line with our progressive policy. Net debt, therefore, closed at GBP 180 million at a leverage ratio of 0.6x, up from year-end, but a GBP 10 million lower net debt than last half year. Turning to capital allocation, which is unchanged. The business is delivering good consistent cash flow and the focus and priority is driving sustainable organic growth at good margins whilst investing in the business. We maintain a rigorous approach to the deployment of our capital, scrutinizing organic investments against shareholder returns and ensuring we have a balanced and value-accretive deployment of capital. During H1, we've demonstrated our disciplined capital allocation policy by investing in our organic growth through CapEx, research and development, digital and major competitive bids. We provided a 7% progressive dividend, completed the sale of our noncore Fed IT business in the U.S. and used the funds from the sale to accelerate our share buyback program. We have a strong balance sheet, which gives us flexibility to drive organic growth and provides optionality for value-accretive capital deployment in excess of the GBP 200 million share buyback already announced. So pulling all that together and moving to guidance, which is unchanged. For the revenue bridge, we still expect to deliver a circa 3% organic growth on a like-for-like basis when adjusting for the sale of the Fed IT business and the higher exchange rate versus original guidance. Margin, we expect to be around 11% and with the buyback progressing at pace, EPS growth of 15% to 20%. Cash, we expect to be around the 90% conversion level and leverage around 0.5x at year-end. As usual, to help with your models, we've included additional technical guidance in the backup slides. This has been a robust half against a difficult market backdrop. And with the action taken and in train, have the visibility to deliver this full year guidance. I'd like to thank all our teams for delivering critical capabilities to our customers and for this half year result. With that, back to you, Steve. Steve Wadey: Great. Thank you, Martin. So to our strategic outlook. Let me start by explaining why we are a differentiated company, highly relevant to the increasing threat with strong fundamental growth drivers structurally aligned to the increasing defense spend. The threat environment has changed the market dynamics. We are in a new era of defense. Our customers have committed to long-term spending increases as we have seen across NATO and are driving major procurement reforms as they seek to rapidly scale existing capabilities and create new disruptive capabilities to overmatch the threat at wartime pace. We are not standing still. Our mission-critical capabilities shown here on the right are highly relevant and are directly aligned to our customers' priorities. We are a horizontal integrator, developing new technologies, testing new platforms and delivering frontline mission support. We play an essential and vital role in helping our customers accelerate capabilities into service and increase war fighting readiness to counter the threat. As the market is changing, we have adjusted our strategy to increase focus in 3 areas: firstly, partnering more closely with our customers to help them build greater resilience, rapidly modernize and deliver innovation at pace; secondly, continuing to pursue focused growth in each of our key domestic markets; and thirdly, leveraging our capabilities to expand and grow into European NATO markets. Let me take each of those in turn. We are increasing our competitive advantage through greater partnering and innovation with our customers and industry to deliver operational advantage and drive growth. We are a strategic partner to the U.K. government and the fourth largest defense supplier to the U.K. MOD. Our capabilities are aligned to the ambitions of the Strategic Defense Review, and we have increasing opportunities to leverage our expertise in partnership with the government into major export programs, such as our engineering services and mission data capabilities into the recent win of Typhoon into Türkiye. On Monday this week, Luke Pollard, the Minister for Defense, Readiness and Industry, visited us in Farnborough and has welcomed our commitment to proactively transform the way that mission-critical engineering services are provided to the U.K.'s armed forces that I mentioned earlier. This includes our investment in new digital and AI technologies to augment our high-value engineering skills, significantly increasing U.K. productivity and innovation. To stay ahead for the long term, we remain focused on investing capital into our people, technology and capabilities. We achieved a major milestone in the half with the successful transition of U.K. and Australian employees onto our new digital workplace to improve our ways of working and business efficiency. And investing in cutting-edge defense technology continues to be a key driver for our future growth. Our long-term R&D created the laser technology that is critical to the growing DragonFire laser weapon program. Investing in the business is core to our strategy to ensure we have a differentiated portfolio and are well positioned to capitalize on increasing defense spending and drive organic growth. The longer-term opportunity in our domestic markets remains significant, and our mission-critical capabilities are focused on areas of priority for our customers, which are robust and set to grow. In EMEA Services, we have deep expertise that we are leveraging on next-generation technologies, capabilities and programs. This includes the launch of our DroneWorks initiative to help SMEs access our expertise and facilities to accelerate drone development for rapid deployment. And we are delighted with a recent significant competitive win to further develop our disruptive laser technology for next-generation laser weapons beyond DragonFire. In Global Solutions, we now have a U.S. business with much greater focus on the 4 differentiated capabilities that I described earlier. As a result, we have delivered significant on-contract growth across our large multiyear contracts that Martin described, SCO, TARS and SDA. And we see significant growth potential for space and missile defense, where our capabilities are highly aligned to multiple U.S. space programs. From a wider product perspective, we are continuing to invest in our maritime, targets, sensors and secure navigation capabilities where we have differentiated offerings to drive organic growth. Our portfolio is now focused and structurally aligned to national security priorities of our domestic customers, underpinning our long-term perspective. We're also increasing our focus to position the business and drive organic growth in adjacent markets by leveraging our core capabilities across the AUKUS nations and into European NATO and allies. We are collaborating with our customers across the AUKUS nations to develop new opportunities. Examples include sharing laser technology from the U.K. into Australia, leveraging our R&D expertise. We're also sharing our engineering services experience to help shape the future of the EDP and MSP contracts, and we are applying our world-leading maritime T&E capabilities in the U.K. to support the T&E opportunity for the AUKUS submarine program in Australia. Over recent years, we have made good progress with European NATO and allies, where we have differentiated capabilities. We've grown the use of our unique U.K. test and training capabilities from nations such as Germany, Italy, Spain and most recently, Japan. We're also increasing our export focus and a key opportunity progressing well is the export of our electronic warfare and mission data expertise into Belgium. And whilst Poland remains an upside opportunity, we're actively shaping further persistent surveillance opportunities in Eastern Europe and the Middle East beyond our U.S. program. We're also well positioned to capitalize on NATO's increasing defense spending, and we see our addressable market growing. With a focused approach to our international expansion, we are creating value across the company to drive further organic growth. Having secured the LTPA extension, we have a significant order backlog of GBP 4.8 billion, providing a firm foundation for the company. This backlog, combined with our qualified pipeline of GBP 11 billion, provides good long-term visibility at 8x our FY '25 revenue. We have built this visibility by focusing on our customers' needs, partnering with industry and winning larger, longer-term programs. On the left, I'm showing our major domestic programs where we have strong incumbent positions that build up to approximately 70% of our annual revenue. This solid base in our domestic markets gives us a platform to deliver on-contract growth and win new programs in our pipeline. This solid base also gives the platform to leverage our capabilities to expand internationally, shown here on the right, including opportunities to leverage both our services and product capabilities into European NATO markets. Whilst we may not win all of these, our pipeline is robust and prudent with many additional growth opportunities beyond the GBP 11 billion shown here. Overall, our significant backlog, combined with our healthy pipeline, gives us very good long-term revenue visibility and underpins our confidence in creating long-term value for shareholders. So in summary, we've taken the necessary actions in tough near-term market conditions, strengthening our portfolio to improve our performance. The fundamentals of the business remain strong, and our mission-critical capabilities continue to be highly aligned to our customers' needs in a growing defense market. Combined with our backlog and pipeline, this gives us very good visibility for long-term growth. Whilst near-term headwinds continue, we're focused on execution and have visibility to maintain our full year guidance. 10 years ago, we launched our growth strategy. As you can see from the chart on the right, this year is a transition year. Having taken decisive action and significantly grown our backlog, we have a strong platform to capitalize on increasing defense spending. This gives us confidence to drive sustained long-term growth and deliver compelling value creation for shareholders. Martin and I'd be happy to take your questions. Steve Wadey: Okay. Rich, first question. Richard Paige: It's Richard Paige from Deutsche Numis. Could you just give a bit more detail about what's going on in Australia, please, and circumstances there? And on -- second one on U.K. Intelligence, again, sort of dig between there because it feels as though you're reasonably confident that there hasn't been a significant deterioration in trading in that business. And then thirdly, just on exceptionals and digital innovation. If you could just outline thoughts for the full year on both of those numbers and particularly digital innovation, how long they -- how long that persists as an exceptional charge, please? Steve Wadey: Okay. Maybe, Martin, I'll start on Australia. Maybe we do exceptionals, and I'll finish off with U.K. Intel. Okay. So I mean, I think on Australia, I think it's a tough market. In some ways, the Australian market has been very similar to some of the dynamics that we've seen here in the U.K. It's absolutely not unique to us. As you heard in my presentation, right at the start of the year, we had a loss of a competitive work package. Whilst we're not the prime through the team that we're on under the MSP program, that has resulted in lower revenue for us. But I think we need to put that in perspective, Rich, Australia now about 6% of the group. And I think what's been important is that in understanding that market dynamic, whilst we've taken the resizing actions, we've also taken actions to strengthen the portfolio and focus on the programs that are going to give us long-term underpinning growth looking forward. Those key areas, if you are interested in those, there are really 4 big drivers that we're focused on for the future in Australia. The customer is going through an exercise in the coming calendar year, so 2026, looking at what program will replace MSP. It's called future MSP. We expect there to be an RFI and RFP for that, and we're in a market shaping phase. I mentioned sharing experience between the U.K. and Australia customers to secure a prime role and position ourselves for the next phase of engineering services. Secondly, we're continuing and we're delivering really well on our threat representation business through the acquired Air Affairs business. That's under our JATTS contract. We expect a renewal of that contract imminently, and that provides long-term underpinning growth. Thirdly, you have heard me talk about lasers. We have quite a lot of progress on lasers. I'm sure we might get some questions on this in the U.K. in a moment. It's really a strong long-term growth driver, but there's a lot of collaboration between our customers and our teams looking at next-generation lasers in Australia, where we're very, very well positioned. And the final driver that I mentioned in my presentation is related to the AUKUS submarine program, again, where we expect over the next 1 to 2 years, a significant program opportunity on providing the range capability or the test and evaluation capability for both the AUKUS submarine program as well as surface fleet. So yes, it's been a tough year. It's not unique to us. There are plenty of businesses, as you know, having to take resizing actions and improve business efficiency we have. But we need to put it in perspective, and we've got some really good solid positions to grow going forward. Do you want to do exceptionals? Martin Cooper: Yes. Thanks, Rich. I mean I think on -- as I covered in my script, then we've had a pretty significant rollout in the first half across a lot of our workforce on one major work stream within that package. So it was GBP 12 million -- just over GBP 12 million in the half. I'd expect the second half to be a little bit less, but a few models, I'd model about GBP 22 million for the year, and then we'd expect it to start to step down next year and then finally complete in FY '28 for us. Richard Paige: [indiscernible] Martin Cooper: Clearly not by the nature of exceptionals, but I mean, you'll notice just to cover the restructuring point, I mean, I think you -- that could be split into 2 major halves, one around sort of roughly 50-50 around headcount impact and headcount reductions. And then as I mentioned, again, as a reflection of some of the work streams we've either exited or really rationalized down in the U.S., then there were around GBP 10 million plus of further write-downs in the U.S. that went through that line. So you should think a bit of headcount reduction and then sort of final balance sheet cleanups. But obviously, we wouldn't expect anything else material in the second half on either line. Steve Wadey: And I think on U.K. Intelligence, I mean, you'll know U.K. Intelligence had a tough year last year. So this year has very much been a transition year for U.K. Intelligence. And I describe the wider context of the U.K. market has been tough, and we've seen a delay to orders, particularly around the R&D, DSTL areas and engineering services. But I think that UKI is positioned well for this year. It actually did relatively well on its orders in the first half and has got a very good pipeline to deliver a much stronger second half performance that we are planning on. And included in that, the business is also well positioned. You would have seen me mention a couple of export-related orders, particularly in the EW emission data area where certainly in the next, let's call it, 1 year, we would expect some of those export-related orders to positively contribute to the rebuild and next phase of growth for U.K. Intelligence. George Mcwhirter: George Mcwhirter from Berenberg. Maybe coming back to Australia again. Just in terms of the competitive land systems package that you mentioned that you lost, can you just talk about the size of that contract, please? And what lessons you can take from that loss? And the second question is on the U.S. What proportion of the business would you say is shorter cycle now that you've disposed of the federal IT services business? And have you seen any impact from the government shutdown? Steve Wadey: You need to start on the Australia side. I'm happy to talk about lessons. Martin Cooper: Right, George. So certainly, the value of package of work was about AUD 50 million. Most of that was reflected in our guidance at the start of the year. We had hoped to perhaps pick up a little bit of subcontract work, but that's not really materialized. So around $50 million impact, but it was baked into the guidance in essence at the start of the year. Steve Wadey: And I think lessons, George, I think, is similar to what we've discussed before and certainly, I'm seeing that is our focus in the U.K., which is really understanding the pressures and the drivers on our customers, all of our markets, our customers, whilst defense is a high priority, they're all trying to get more for less out of their budgets. So therefore, really thinking through innovative proposals and being focused on areas where we can differentiate and be more competitive is absolutely key. There are many examples I could talk about in the U.K. where we're doing that. And the 4 areas that I mentioned in answer to Rich's question is really about how we become more competitive and more innovative to differentiate and then build those longer, larger sustainable positions going forward. Start on the U.S. of short cycle? Martin Cooper: Yes, I mean I think, George, to sort of turned it around a little bit, the 4 major sort of work streams we're focusing on now that Steve outlined reflects more than 80% of the revenue work that we now do in the U.S. And I think as you remember, as we went into this year, we didn't include really any material values on the likes of robots and sort of short-cycle book-to-bill work. And so the coverage that we've got through the half year book-to-bill relies very little on short-cycle impact at all, and that's where it is. Now you'll all know that in the U.S., you do also have annual contracting. So you could describe that as short cycle in some instances as to where it is. But a lot of that real sort of what you would have traditionally called as short-cycle volatility was stripped out at the start of the year and is not in our bridge for full year as we look forward. And I think in respect of the government shutdown, the reflection that we had a very strong book-to-bill in the first half in most of those big contract awards on the likes of TARS, SCO, SDA, the forward-funded contracts came in, in September, which drove the strong book-to-bill, which has given us that cover now like all defense contractors and all contractors. If there's another government shutdown in January again and/or these things get protracted, then obviously, there could be impacts further down the line or for further orders. But in the short run, then we're fine. Steve Wadey: And I think more broadly, I think, as I said in the presentation, we're really pleased with the progress that we're making. I mean the U.S. restructuring program is on track. The disposal of the Fed IT business was a key milestone. As you heard, we've taken some significant cost out and headcount out to resize the business in line with the market that we see. Hence, my comment about we have now got a smaller business. But as Martin has just said, that smaller business is really well positioned because we've now focused on these 4 revenue streams where we have long-term positions, and we can see that growth potential, which reduces the exposure to that short-cycle volatility that you are pointing out. And as Martin says, the book-to-bill of 1.5x gives us the ability this year to drive through that performance then really focus on these growth drivers for the long term. Hopefully -- does that answer your question, George? Great. Joel Spungin: It's Joel Spungin from Investec. Steve, one for you, sort of a big picture question, and I've got a couple for Martin as well. But I was wondering if you could talk maybe just sort of thinking out beyond FY '26 as we look into fiscal '27, '28. You go back and QinetiQ used to grow roughly double nominal sort of defense budget growth for a long time in terms of organic growth. Is that still something you think is achievable even in a world where nominal defense budgets in the West are rising at an unprecedented rate, i.e., could this business get back to being a high single, even low double-digit organic growth business? Steve Wadey: Yes. I think this is a good question. And I think there are a number of things to say. I think, first of all, we're very confident we've taken the right actions. We've taken the right actions to deal with the dynamics as we came into this year. And that ultimately, hence, your question, puts us on the right trajectory to return to higher rates of growth. And we have an exceptionally strong backlog and exceptionally strong pipeline. You've seen that there with 8x FY '25 revenue cover. And therefore, I think your question is a question of timing. And actually, how do we really make sure that we control the things that we can control. And what we've shared with you today is that we are in control of everything that we can. But there are some market dynamics that will determine partly the answer to your question about how quickly we will return to that from a timing perspective. But we're absolutely doing all the things that we can. And then if you go further into that question and say, well, what are the drivers though? But what are the drivers that could -- that become the bridge from this year into that multiyear phase of returning to that higher level of growth. And it is worth just mentioning them because I think that it will help everybody understand how the company returns to those higher growth rates. So the first one absolutely is in our core strength of test and evaluation. The long-term partnering agreement on a multiyear basis is absolutely going to be a contributor to our growth. The modernization work of bringing in hypersonics directed energy, autonomous systems, the increasing in tasking that we expect to see through our test and evaluation Innovation Gateway, the DroneWorks initiative that I mentioned. And I didn't mention it in the presentation, but we've just won a contract to expand quite considerably the capacity of the ETPS training school, which is going to be considerable increasing capacity both for our domestic and international customers. So that's a really important growth driver. The second is actually, and we've talked about this as our strategy for several years, how do we leverage our test capability into training. Note the strategic win of the MCAST contract. It's GBP 25 million. You might say, well, that's not big, but it's a strategic win as we move into training, and that training is absolutely complementing our test capabilities, and there are quite a considerable number of incremental opportunities above MCAST in a short-term period that will add to growth. The thirdly is U.S. I've mentioned this a few times actually in answers. I think we're really well positioned around space and missile defense. Our capabilities with the SDA. We have SATCOM capabilities, and we also have broader sensors capabilities. Space is a very large growing opportunity in the U.S., and we're well positioned in that and alignment with programs that you all know such as Golden Dome, we're positioning to win a role on that. And separate to that, I think it's in our unfunded order bridge. We did actually win an option, a ceiling option with the Space Development Agency worth up to $95 million to provide additional support to them in this coming year. So that's the third growth driver. Fourth one is around advanced weapons. You go back a year, we talked about -- in fact, it was May, wasn't it? We talked about the 2-year renewal on the weapons sector research framework. That is really starting over this next multiyear period to bring benefit, particularly in the directed energy area, both radar frequency as well as lasers. Martin mentioned the importance of DragonFire. And I just mentioned, we've had another win in next-generation laser technology. And then finally, the focus on Europe and 2 particular areas I would highlight. The framework contract that we signed now 2 years ago with NATO to allow access to our T&E ranges continues to bring and be attractive to nations like Germany, Italy, Spain, Netherlands. And the second area I mentioned in response to Rich's question is our greater focus on export. And we're in a really mature partnering position with HMG and looking at exports together. I mentioned 2 examples around our EW emission data capability with Belgium and with Türkiye opportunity on Typhoon, and those will contribute. So those 5 areas, I think, answer your question is the bridge from this year to those higher rates of growth. Clearly, not everything there is under our control. So it's a matter of timing. But certainly, over that few year period that you've mentioned, I would expect us to really get back into much higher growth rate. So hopefully, that answers your question. Joel Spungin: Can I -- sorry, just a couple of quick ones, Martin, I'm a bit more dull. The -- sorry, I lost you a bit on the guidance, the GBP 22 million. Is that the digital investment that you expect for the full year? Or is that the... Martin Cooper: Yes. So the total cost of digital investment, I expect to be around the GBP 22 million. Joel Spungin: Right. And you're not at the moment, expecting any more restructuring charges? Martin Cooper: Correct. Joel Spungin: Right. Okay. And then sorry, very final one. Fed IT, I was just wondering if you could say how much did Fed IT contribute to revenue and profit in the half? Martin Cooper: Yes. So in revenue in the half, it was about -- you should have modeled around GBP 10 million to GBP 11 million, so around $13 million to $14 million. And it does have a second half weighting, which is why when you're adjusting your models, you'd expect more like $20-plus million in the second half, which is why we want obviously the adjustment in the full year guide. It is fairly low margin. We will get to you, sir. Sash Tusa: Sash Tusa from Agency Partners. Just a very quick one first. I think that you slightly implied that there have been some delays to target orders in the first half. If I understood that right, is that something that has subsequently occurred or that you sort of expect to occur in the second half? Steve Wadey: So do that one first. Yes. So you are right, there has been a slight slowdown. Nothing particular in the market other than a general slowdown. But as Martin showed in our bridge, targets are part of a pickup that we expect in the second half. It is worth saying that we did achieve some initial target sales in the U.S., relatively small in the half, but we did. And we expect to be focused on additional task orders through the ATS-3 contract that we signed 12 months ago in that second half bridge. Sash Tusa: And then just a sort of broader question about U.S. space and Golden Dome and so forth. I mean clearly, you've seen an awful lot of hopes for procurement reform over your careers. And it's possibly quite jaundiced about sort of claims that politicians make for that. But Secretary Hegseth does seem to want to go faster and break a lot of things. And he doesn't seem to be particularly in favor of what he calls legacy contractors, which might be a category that you fall into. How do you make yourself relevant to new defense technology companies whose business model seems to be extravagant claims on PowerPoint, build stuff, it blows up, moves on as opposed to a rather more measured approach in terms of test and evaluation. Steve Wadey: How long have you got? You make a number of points. I mean, first of all, you touched on space and SDA. We have an excellent relationship with the SDA. We're the largest contractor working in with them. And therefore, we partner very closely with them, and we help them deliver their programs at pace. So by being relevant, by deeply partnering and helping them achieve, to your point, their programs faster, that's how you position well. And I think SDA contract was an example of significant on-contract growth in the half. That comes down to good performance and good partnering. And please note what I mentioned about the option that we've had added to that contract for the next few years, which could build even greater on [indiscernible]. So I think the core in that is being close to your customers, understanding the drivers. I think more generally, I think all of our markets are looking for reform. I don't think that's specific in the U.S. And I think that is a nature of what is being driven by the threat. And therefore, all of our governments, whilst they want to spend more money, that money is going to take time to come. And therefore, they want to get more from their money quickly, and that means doing things differently. And I come back to how well positioned we are. And if you look at our 4 capabilities, creating new technologies that create disruptive military capabilities to overmatch the threat quickly. Lasers, the case in point is really good. Focused on engineering services. I mentioned, I think, twice the importance of proactively investing in how do we augment our high-value skills with artificial intelligence. That's not about replacing our people. That's about doing what we do faster and at greater scale to help them drive efficiencies and scale their capabilities. So I think these are the dynamics, Sash, and I could go on further that by being really relevant and partnering, but coming up with different ways of working to support them on their reform, that's how you grow in difficult markets and position yourself well for the long term. I think that's the fundamental ethos. We have 2 more questions behind you. Benjamin Pfannes-Varrow: Ben Varrow, RBC. On the -- maybe kicking off with the second half growth, I think you've addressed it in the slides there, but just maybe on EMEA Services, looking at the second half, I think you need to grow around high single digit. Is the message from the slide there that those prospective orders coming in are pretty much derisked, so you're not concerned there of meeting those numbers. Is that the general takeaway? Steve Wadey: I'll do that one. Maybe I can start generally. I mean we've sort of talked about the market being difficult. And clearly, we've had delays, Ben. But we've got really good focus on execution and what the bridge that Martin showed is the visibility. If you're referring to the 7%, there are really 3 main drivers for that. The first is around EDP-related task orders. Secondly is around laser-related programs. That's not just DragonFire. It also includes the win that I've just mentioned on next-generation lasers because that was post AP7. In fact, it was last night. And then thirdly, targets. They are the 3 biggest drivers in there. And what really we're showing is in that 7%, they're really specific and identified, and therefore, they are high confidence. And we also have a pipeline of further awards that go beyond that and hence, the way that Martin presented it. Benjamin Pfannes-Varrow: Two more. In terms of maybe asking Joel's question slightly differently, over the next couple of years, you've spoken you can get back to that sort of high single digit, low double digit. Is there anything to be mindful of that's working against you or prevents you from getting there over the next couple of years to keep in mind? Steve Wadey: Well, I guess the most straightforward is the things that aren't in our control. So the market dynamics are partly the timing that I mentioned to the answer to Joel's question, but are we doing all the proactive thinking of investing, changing what we're offering, engaging with our customers. We're absolutely all over that. So we're doing everything in terms of the actions on short-term performance and positioning us to shape and win these proposals. So I think it's the things that aren't in our control, which is actually just the flow of orders really. But no, I think we're very well positioned, hence, the answer to Joel's question. Benjamin Pfannes-Varrow: Last one on the sort of upcoming U.K. defense investment plan, thoughts or expectations what could come out there? Steve Wadey: Yes. I mean we've been through a lot in the U.K. market this year. We had a strategic defense review in June, defense industrial strategy in September, defense reform initiative, July, was it? And then we've got the defense investment plan let's say, before Christmas, wherever it's going to be. So we've been through a lot. And I think that getting through, in some ways, the last big block of this reset and renewal of defense in the U.K. will be good. I think it will bring clarity. It will bring confidence. And I think what we expect from it is with that clarity, I think there will be a lot of focus on innovation and R&D and building different capabilities. Clearly, we're well positioned for that. And then more fundamentally, I think it will be calling even more so for initiatives of innovative capabilities to do more for less. And hence, some of the proactive changes that we've been making around the future of EDP and the AI-related investments. So I think clarity and confidence is going to be good. We'll welcome that. And then we really expect innovation and bringing proactive proposals to be part of the implementation and then sort of build that position as support to our government going forward. David Richard Farrell: David Farrell from Jefferies. Two questions for me. Just going back to the exceptionals and the digital platform. Could you just remind us what capabilities that will give you as an organization? What exactly are you doing? What efficiencies does it drive? Steve Wadey: So if we go back a couple of years maybe to when this whole project was launched, I think we talked very openly that the company infrastructure had been built really on the back of a legacy IT infrastructure from the U.K. government. And it went back 20 years. Hence, why this was a fundamental discrete investment project to fundamentally build a digital platform and set of applications for the company globally. And really, that project has been in 3 phases. The first phase was to put a fundamentally different secure network in place across the company using state-of-the-art digital technologies. That is done and complete. Secondly, the next phase was then effectively migrating our people onto the new devices. As both Martin and I have said in our presentations, that is largely complete. And now we're on the sort of the final phase, which is really now all about migration of apps and then new tools, whether that's engineering tools or a project that's very close to Martin's heart, which is around the business system finance tools. So hence, this was that multiyear discrete project to really bring the company digital infrastructure into state-of-the-art capability. And I think it's going very well. And I think both of us use slightly different language. This will change the way that we work. It will allow us to share information, share technology, drive collaboration and also build greater business efficiency into the way that we operate. Feel free to add. Martin Cooper: Yes. I mean I think, David, I think -- I mean, this actually enables us to bid into some contracts as well and be prime lead in some areas Steve mentioned Australia and other areas by having these advanced and better systems that will enable us to actually bid and hopefully win more work going forward as well. I would also make the point that we meant there, and you might be about to touch on margin anyway. But I mean, I think anyone who's been through these digital rollout programs, it is quite disruptive to organizations. And you'll remember at the start of the year, we were a little bit cautious, more cautious on margin just around that operational impact, and there has been some impact and that continue there will be for the rest of the year whilst we're going through that. But as Steve says, we're getting on with it and it will have long-term efficiency benefits as well. David Richard Farrell: I see my second question was about growth. I've really touched on the Polish TARS opportunity. But can you just kind of detail how that works? Who selects the winner? Is it the U.S. government? Is it the Polish government? Has the U.S. government shutdown in any way delayed the award of that project? Steve Wadey: Yes. I mean the first thing is a reminder to ground us all, Poland is not in our base plan, and it is not in our forecast. So just to be really clear on that. In terms of the process, it's an FMS sale from the U.S. government to Poland. Therefore, the decision-making is with the U.S. government. But clearly, they will have dialogue and exchange with the Polish government. And to your point, partly related to shutdown, I mean, there is no public announcement so that remains, as I would think about it more as an upside opportunity. But I think more important to that, you mentioned the phrase TARS, is really thinking about our TARS capability, which if everybody is not familiar, this is where we are running a really significant national program along the Southern U.S. border, providing persistent surveillance between U.S. and Mexico. That is another contract. There are 2, in fact, one called TARS, one called [ TAS ]. And both of those also have delivered good on-contract growth over recent years. And from our perspective, we're really positioning to grow that capability as one of our 4 priority streams, and we're positioning to grow that both domestically in the U.S. We expect further on-contract growth to come this year, and we also expect to grow it internationally, and we're actively shaping a number of opportunities in different countries around the world, both in Eastern Europe and Middle East. Unknown Analyst: It's [ Francois ] from Barclays. Just coming back to the digital investments you've been doing. You mentioned the fact that you can increase your win rates because of that investment on the line. So -- which is obviously good for growth. But just in terms of margin, is this investment going to generate any margin benefits down the line? Or is it just a function of making your business better positioned to win new contracts and fund growth? And then secondly, going back to the U.S. business with those 4 key areas you outlined before. Can you discuss the medium-term growth profile for the business there, compare that with the rest of the group? And then how should we think about the margin in the U.S. in the medium to long term? That would be very helpful. Martin Cooper: I'll start with the digital. I mean, just to be clear, I mean, this is -- as Steve says, this is around also building good long-term business resilience, and you'll all be very aware of, obviously, heightened cyber threats and other things. So this is predominantly around, obviously, having the right systems to be effective for our employees and other things. It does give us the opportunity in some parts of the world where we don't have the current capabilities to be able to bid into things, but this is predominantly an efficiency thing, but also we do need to clearly continue to invest in the business. So I wouldn't want you to think this is going to make a huge step-up in margin going forward as we work through this program, but it should definitely help efficiency drive as we go there. Perhaps in the U.S., just on margins, and then I'll hand over to Steve around growth. I mean, clearly, all the actions we're taking are about designed to drive margin up in the long term. I referenced a couple of areas where we actually also actively took ourselves out of some contracts in the first half because they were lower margin and were noncore to us and things. But I think you should think about this business in the long run as more of the sort of high single-digit margin business in line with sort of peers, so sort of in the 7% to 9% would be the margin, and that would then, therefore, push Global Solutions more up into around the 10% level, as I think we've outlined in the past, but that's the kind of benchmark that we're pushing that business through these actions. Steve Wadey: Yes. And rather -- on the U.S., I mean, rather than giving growth rates and comparisons because as we know, we'll be giving an update on our growth in May. Maybe what I can talk about is the growth drivers. I've sort of talked about a few of them. So just to go back over. So space and missile defense is an absolute growth driver where we are positioned. And I use the phrase multiple space programs. It's worth just touching on. So clearly, we have the SDA program. We also have a SATCOM related engineering services program. And I've just briefly touched on Golden Dome, where we can see some of our engineering services and our sensors capability relevant for that. So we have a series of capabilities, and we're well positioned in our customer relationships to see good growth coming from that program. Second one, Maritime Systems. We know if we look back in time, the company has been very well positioned in its relationship with General Atomics and the U.S. Navy as part of the electromagnetic launch and recovery system on the Ford-class carriers. The Ford-class carrier is a long-term franchise program for us, and we see good opportunity, particularly coming in the next year and bringing further growth on the carrier program. Many of you will remember about 3 years ago, we said we would take those capabilities and position into the submarine program. We initially won some business on to the Virginia-class carriers. That has expanded on to 2 or 3 subsystems. And in the last 12 months, we're very pleased that our track record of performance in Maritime Systems has led to us winning business on the Columbia-class submarine. So we have strong performance with the carriers moving on to Virginia. We've now moved on to Colombia, and we see that -- we see steady but good long-term growth coming on a multiyear basis and then moving into surface fleet programs as well. So that's the second driver. Third one is around Advanced Sensors. This is from our prior MTEQ capability where we have some really good advanced R&D and next-generation sensors. What might be a small win in the half was winning a Phase 0 contract on a program called FALCONS. This is the next generation of really long-range IR sensor for the U.S. Army. It's potentially a very large program of record in the U.S. We've got a very novel and clever design, and we're delivering that Phase 0 program and looking at key strategic partnerships of how we will position ourselves to win. That's a multiyear opportunity. And the last really is the broader franchise opportunity that I discussed around persistent surveillance, which is TARS, [ TAS ] and the domestic growth that we expect on that and then our focus on the wider international expansion. Those really are a bit more color in the growth of those 4 areas. Any more questions? Any questions online from anyone? Operator: There are no questions coming through from our conference call. I'd like to turn the conference back to Steve Wadey for any additional or closing remarks. Please go ahead. Steve Wadey: There's one more opportunity in the room. Okay. Well, thank you very much for your time. We'll both be hanging around if anybody in the room would like to follow up with any additional questions. Thank you.
Operator: Good morning, and welcome to the Neo Performance Materials Third Quarter 2025 Earnings Conference Call. For opening remarks and introduction, let me turn the call over to Karen Murray, General Counsel for Neo. Please go ahead. Karen Murray: Thank you, operator, and good day, everyone. Today's call is being recorded, and a replay will be available starting tomorrow in the Investor Center on our website at neomaterials.com. Our call will be accompanied by a live webcast presentation. If you are joining us online, the slides will advance automatically as we progress through the discussion. You can also download a copy of the presentation from our website. On today's call are Rahim Suleman, Neo's President and Chief Executive Officer; and Jonathan Baksh, Neo's Chief Financial Officer. Please note that some of the information you will hear during today's presentation and discussion will consist of forward-looking statements, including, without limitation, those regarding revenue, EBITDA, adjusted EBITDA, product volumes, product pricing, income and expense measures, cash returns, operational changes and future business outlook, including potential expansion plans and agreements. Actual results or trends could differ materially from those discussed today. For more information, please refer to the risk factors discussed in Neo's most recent financial filings, which are available on SEDAR+ and on our website. Neo assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. Financial amounts presented today will be in U.S. dollars. Non-IFRS financial measures will be used during this conference call and the information regarding reconciliation to the IFRS measures is set out in the financial statements and MD&A. I will now turn the call over to Rahim. Rahim Suleman: Good morning, everyone, and thank you for joining us today. Let's move to Slide 4. The third quarter was another strong period for Neo, marked by continuing to execute our growth strategy in global rare earth magnetics, momentum across the business and end markets and solid financial results. We are advancing our strategic growth plans as an integrated rare earth magnetics and critical materials company. Our product platforms and technologies continue to benefit from megatrends in electrification, robotics, AI and clean energy. And the industry is accelerating its need for critical materials from both robust and localized supply chains. It's important to note that for Neo, we are well prepared to grow into this generational opportunity in rare earth magnetics. Neo, of course, has been in the rare earth magnetic space for 30 years and already has an integrated supply chain with rare earth separation in Europe for decades. Thanks to our operational history, we are extremely well positioned to capture more opportunities with the focus in critical materials to serve our long-standing customers as they need to be served. Moving to Slide 5. Our new European Permanent Magnet facility held its grand opening in September, a major milestone for Neo and indeed, all of the critical materials space in Europe. The event drew senior government officials from the European Commission and customers from major automotive and technology OEMs from across Europe and North America. Our successful grand opening of this European magnet plant is a tangible demonstration of how industrial policy, customer commitment and private investment can converge to create a resilient and regionalized supply chain. Our partnerships with government and industry stakeholders in Europe underscore the strategic value of this project. It's not just a plant. It's the cornerstone of a European magnet ecosystem designed to support the transition to electrification, clean energy and digital technologies. The early feedback from customers has been exceptional, with OEMs recognizing that Neo's European presence provides the reliability, transparency and ESG assurances, all increasingly required in critical material supply chains. This facility is designed as a scalable platform. Phase 1a establishes 2,000 metric tons of annual capacity, supporting both pilot production and initial customer programs for traction motors and eDrive systems. The next step, Phase 1b is already being planned and will expand the site to approximately 5,000 tonnes. Given overwhelming customer demand, Neo will also expand its product offerings and magnetic solutions toward additional applications, including accessory drive systems, wind turbines, robotics, drones and automation. This endeavor will be one of the new largest integrated magnet facilities in the Western Hemisphere. Importantly, this growth can be achieved within the existing site footprint, providing an efficient pathway to scale as customer commitments, responsible launch time lines and policy incentives align. At the grand opening, Neo also showcased our European rare earth separation business, highlighting the integrated nature of Neo's existing business. We are in the process of installing a heavy rare earth separation line in Europe as well, building on the vast infrastructure, skills, technology and operational history that we already have. We expect to start separating heavy rare earth at small scale later in 2016 -- 2026. Moving to Slide 6. Equally important this quarter was the signing of our expanded strategic partnership with Bosch, one of the world's most respected automotive technology leaders. This memorandum of understanding extends a long-standing relationship and formalizes collaboration on the supply of advanced rare earth magnetics for Bosch's next-generation e-motor platforms and other applications. The agreement provides a multiyear framework for magnet supply from our new European facility and underscores Bosch's confidence in Neo's technical capabilities, execution record and alignment with their commitment to resilient localized supply chains. This MOU represents a pivotal commercial milestone and a clear validation of our strategy of investing in Europe. It directly connects Neo's new magnet capacity with another leading Tier 1 supplier. The multiyear nature of this agreement shows Bosch's desire to secure long-term capacity while reflecting one of the key mantras at Neo, it is about working together and managing responsible launch curves. In addition to Bosch and our first awarded customer Schaeffler, Neo continues to advance qualification programs and contract discussions with additional automotive, industrial and renewable energy customers. These engagements are translating into providing long-term demand visibility and supporting our path to scale. I think what should be of particular interest to our shareholders and partners is the nature of Neo's awards and Neo's customers. These are firm awards for real multiyear programs with difficult technical specifications and for which we have already delivered samples. These programs are with some of the most advanced and largest motor manufacturers in the world. After all, to a magnet maker, the motor manufacturer, which is sometimes an OEM and sometimes a Tier 1 is the customer and Neo and Magnequench has served motor manufacturers for decades. These are our customers. They know us well, and we will continue to grow with them. Shifting gears to Slide 7. We are making meaningful progress in simplifying our portfolio and focusing our capital allocation on the highest value segments. In 2025, we have continued to deliver steady EBITDA expansion driven by operational efficiencies, improved product mix and a disciplined approach to cost management. In our 2 largest manufacturing facilities, including the environmental catalyst facility we opened in 2024, we are seeing significant conversion cost savings with the introduction of new automation and advanced data analytic techniques applied to our established manufacturing processes. We have also made advances in sustainability. Neo's rare metals business continues to expand its recovery and recycling capabilities, including gallium and hafnium supporting both environmental and economic goals. These capabilities not only reduce waste but also strengthen our supply chain security. From a liquidity standpoint, our balance sheet gives us the flexibility to advance Phase Ib of the European magnet expansion, invest in next-generation processing technologies and pursue additional opportunities that enhance our downstream value-add capabilities. And as this Slide 8 illustrates Neo continues to be a pure-play beneficiary of the global shifts reshaping supply chains for critical materials. This is the convergence of 3 powerful forces. The macro demand for electrification, robotics, AI and clean energy technologies, public policy tailwinds and customers driving regionalization and our own unique asset base, technical experience and years of operational excellence. Neo is positioned at the center of these 3 key success factors. Our differentiated platform enables us to meet customers' needs across geographies and technologies from magnetics to catalysts to rare metal recycling. These markets are supported by enduring macro trends rather than short-term cycles, which gives us the confidence in the durability of our growth plans. Our teams have done a remarkable job executing on complex projects across multiple geographies, maintaining safety, cost discipline and a long-term focus on profitability. I would like to thank them for their hard work and dedication. And with that, I will now turn the call over to Jonathan for the financial review. Jonathan Baksh: Thank you, Rahim, and good morning, everyone. Moving to Slide 10. For the third quarter, Neo generated $122 million in revenue and $19 million in adjusted EBITDA, reflecting a resilient demand and strong execution across all 3 business segments. Year-to-date adjusted EBITDA stands at $55 million, up 27% compared to the same period last year. Given the solid results so far this year, we have raised our full year 2025 guidance to a range of $67 million to $71 million up from $64 million to $68 million when we last reported in August. Growth this quarter was driven primarily by increased magnet volumes up about 20% year-over-year, combined with solid contribution from emission catalyst and rare metals recycled. Our margin profile remains resilient despite market volatility, reflecting the benefits of operational efficiency, pass-through pricing and previous portfolio actions to divest highly volatile assets. With that said, during the quarter, we experienced some benefit from customers pulling demand forward, along with favorable movements in rare earth prices. While we continue to use pass-through pricing mechanisms in our customer contracts, short-term margin impacts from price fluctuations may still occur. These dynamics underscore the importance of our disciplined approach to managing volatility and maintaining predictable performance. Moving to Slide 11. I'll touch briefly on performance by segment. Magnequench delivered strong profitability and volume growth in the third quarter with volumes up 21% year-over-year and adjusted EBITDA rising 27% to $8.1 million. Year-to-date adjusted EBITDA reached $22.4 million, up 20% from last year, supported by higher volumes, operational efficiency and disciplined cost management. Growth reflected solid underlying demand and customer restocking activity amid evolving supply chain and geopolitical conditions. Bonded magnet shipments reached a record quarterly high up 38% year-over-year, driven by demand in automotive, AI data centers and energy-efficient applications while bonded powder volumes increased 18%, reflecting continued market share gains and healthy downstream demand. Moving to Slide 12, the Chemicals & Oxides segment delivered another strong quarter with adjusted EBITDA up 213% year-over-year and 358% year-to-date, reaching $4.1 million and $16.4 million, respectively. These results are reflective of higher rare earth prices, portfolio transformation and continued operational discipline. Following the sale of the Chinese separation assets and the relocation of the emission control catalyst operation, the business is now focused on higher-margin growth areas, including emission catalyst and wastewater treatment solutions. Demand remains robust with emission catalyst volumes up 20% in the quarter and wastewater treatment volumes up 42%, driven by global sustainability and environmental regulations. The segment also continues to strengthen its European capabilities, operating one of the region's few noncaptive separation facilities and advancing a new heavy rare earth separation pilot line, which remains on track and on budget as construction nears completion. Products continue to benefit from tighter environmental standards globally, particularly in Asia and Europe. Moving to Slide 13. The Rare Metals segment delivered resilient financial performance with adjusted EBITDA of $11.5 million for the quarter and $30.9 million year-to-date, down 30% and 10%, respectively, from last year reflecting the anticipated normalization of hafnium prices after record highs in 2024. Despite this, end market demand remained strong across aerospace, industrial gas turbine and semiconductor applications supported by continued global investment in advanced manufacturing and clean energy technologies. While hafnium margins declined 41% year-over-year as pricing stabilized, the gallium business performed well, benefiting from solid performance and regulatory tailwinds. Neo also remains one of the only gallium recyclers in North America, a key competitive advantage that supports long-term growth and market resilience. Across all 3 businesses, our teams have executed extremely well in balancing near-term profitability with long-term growth priorities. Moving to Slide 14 and turning to the balance sheet. Neo's financial position remains very strong. We ended the quarter with a net debt position of approximately $28 million and total liquidity exceeding $110 million, including credit facilities and government grants. Importantly, this includes a healthy gross cash balance of $61 million, reinforcing our strong financial position. Our disciplined approach to working capital and low leverage gives us the financial flexibility to fund ongoing growth projects and weather any near-term macro volatility. We also continue to prioritize shareholder returns. During the quarter, we maintained our regular dividend and NCIB while continuing to invest in growth capital projects. As we move into the final quarter of the year, we expect to maintain steady momentum across our core platforms. Reflecting this confidence, we have raised our 2025 adjusted EBITDA guidance to a range of $67 million to $71 million underscoring our ability to deliver strong financial performance. And as we move into 2026, our priorities continue to center on operational efficiency and capital discipline. With that, I'll turn the call back to Rahim for closing remarks. Rahim Suleman: Thank you, Jonathan. And moving to Slide 16. As we approach the end of 2025, Neo is in a strong position, strategically, operationally and financially. We are executing on a long-term strategy to grow our industry-leading permanent magnet business, enabling supply chain diversity and robustness and supporting the global energy transition and technology advancements in multiple arenas. Our focus remains on operational excellence, delivering reliable, high-quality critical material solutions to our customers, investing in innovation and maintaining financial discipline. With our strong balance sheet, solid customer demand and a pipeline of long-term strategic growth projects, Neo is well positioned to deliver profitable growth and long-term value for our shareholders. Thank you for joining us today, and we will now open the call for questions. Operator: [Operator Instructions] Our first question comes from Daniel Harriman with Sidoti. Daniel Harriman: Congratulations on the great quarter. I'll start off with 2, and then I'll get back into the queue. But starting off with Narva now online after the grand opening and export controls continuing to tighten, I'm wondering if you're hearing from interest from customers if they are explicitly requiring localized magnet supply? And if so, how do you think that's going to change the volume or quality of the programs you've been invited into. And then secondly, just with Magnequench and magnet volumes seemed exceptional in the quarter. Once again, I'm curious if you could kind of break down how much of that strength feels structural from traction motors, data center cooling and industrial automation versus maybe just short-term restocking from your customers. But I really appreciate it, guys. Rahim Suleman: Sure, thanks for both questions. So in terms of the first question with respect to the grand opening and the continued export controls, I think you're right in terms of we are seeing increased customer interest. Although I kind of break it into 2 pieces. I think there was already significant customer interest when we began the planning for this facility, and we did the groundbreaking of this facility, call that 2, 3 years ago, I think the customers already knew that they had a concentration risk issue that was important to them. I think with the restrictions that were put in place in early April, it absolutely ramped up that level of tension, that level of urgency and those requirements. Those requirements remain today. The grand opening facilitated more customers, more potential customers coming and asking for more agreements and more opportunities. So the MOU that we have with Bosch raised more customers to come to the door to ask for similar type of contracts for alternative type of opportunities. But for us, the issue is never actually about customer demand. There is absolutely plenty of customer demand and our customers know our capabilities, and they trust us and they work with us. It's really just about time to launch. I think we're pretty darn confident in the sales funnel. We're pretty darn confident in our operational and technology capabilities, but we are also darn confident in understanding how a plant of this size gets launched and what a responsible way to do that is. So from a demand perspective, there's really no issue. It is figuring out what the right launch curves is and how you bring each customer on board with all of the related PPAP documentation and kind of control mechanisms that we have. When you are an automotive supplier or another supplier on mass production levels. You put a lot of controls in place around your production process for every part. And every part that we win, remember, every platform, at least the traction motor platforms that we're winning, these are $50 million to $100 million cumulative revenue programs. When you launch them, you better be good, you better be right, you better have your costs in place, and that's the way that we approach that. With respect to the Magnequench volumes, your second question extremely high quarter for Magnequench volumes, extremely impressive for us. And I think you pointed it out correctly. It's actually both. It is demand across virtually all of the applications, but we do think some of that is a response to geopolitical environments. The question that is in front of everyone will really be, is this resetting people's inventories pipelines so that people feel more comfortable on how much inventory they're holding? Or was this a temporary -- like is this a pull forward that will get reversed in a future quarter? I think it's more likely that the pipelines are being filled and that customers want to hold more inventory through the system. So -- but I think we'll see if that means that some of these volumes unwind or volumes just return to normal or if there's kind of continued pipeline growth, but I think that the volume number of Magnequench was kind of above our forecast and expectations of what the normal business looks like. But the normal business continues to grow, traction motor business continues to grow even in the existing Magnequench segment, AI data centers continue to grow. So I think all of those elements of the business are performing extremely well. And I think that they'll continue to perform extremely well. Operator: And the next question comes from Nick Boychuk with Cormark Securities. Nicholas Boychuk: Coming back to the Bosch partnership, and you mentioned that other partners are coming to you looking for similar deals. Can you give any update on how those negotiations are going? Expectations with Bosch to convert that into a formal order and your appetite to sign similar type contracts with other partners? Rahim Suleman: Yes. So when you say negotiations per se, really not negotiations in the traditional form. They're more -- everybody talks about what partnership means and the supply chain all needs to be partners, this, that and everything else. I'd say it's one of the first times in my career that I feel that this is a partnership-based conversation that we're having dialogues with our customers and for others that are coming to the door, and we're talking about, look, these are the reasonable launch windows we have available at this point. And this is what the development time line for any particular product would be and people are really understanding in terms of how do they fit into that development type pipeline and how do they fit into the launch curves. I would say the factor here at play is not negotiating over price or negotiating over specifications or this, that or anything else. The factor here is saying, okay, in order for us all to be successful on this path, they require both a level of urgency, better level of reliability. And we require a level of cost certainty. So margin confidence as well as not putting other customers in jeopardy. And I think both sides appreciate the openness of our dialogue. So the opportunities are there, and we'll pivot our pace depending on how launches go and depending on what types of programs. We're having conversations with customers on look, certain types of programs that have certain compositions are probably faster for us to also go through a development cycle for than compositions that are different. So we just kind of make choices with the customer, but we do it in a fairly transparent and open environment because everybody wants everyone to be successful here. Nicholas Boychuk: So just to clarify then, that in these development partnership conversations you're having, you're able to directly express the margin or the pricing that you need in order to justify investments and they're comfortable with that type of a negotiation or? Rahim Suleman: Yes. Look, we're not talking about specific prices at this point. Like when we talk about specific pricing those things, we have a sample developed, the composition established, the product flow established and all of those types of things. They understand that there is a difference between the Chinese cost and cost and manufacturing elsewhere in the world. I think we're fortunate and our manufacturing location is actually quite cost effective. I think our customers appreciate that, that cost effectiveness matters. But it doesn't mean that it's the same price or the same cost is producing it in Southeast Asia. So Therefore, there is an open dialogue on the costs are not the same. It's not hostage pricing. It's dialogue around costs are not the same, margin expectations are not the same, new capital in place and return on capital expectations are not the same but let's work together to figure out how we solve the ultimate challenge, which is a diversified supply base. So they're very good conversations. There -- it's less about price negotiation more than it is about understanding what the requirements are and what that path to success looks like. Nicholas Boychuk: And what impact if any is that having on your thoughts around developing out Phase 1b? Is this potentially pulling that forward, giving you a little bit more certainty to make that investment maybe sooner? Rahim Suleman: Yes. I think it's about certainty and comfort on making the investment. I think that the investment will proceed on a time line that makes sense for the operation to -- it's not just about winning the programs, but each program has its own launch curve, too, right? So it's about finding the right time that matches all the various launch curves that we have of the programs that we have of those that we're onboarding and when that capacity will be required. Again, the factor is managing the launch curves and then just planning so that we're not spending capital unnecessarily and that we're just finding the right time line for it. So certainly, huge visibility into demand. I guess if you were to -- I'd say it this way, when we started this project 3 years ago, and we evaluated financial risk, customer risk, technical risk, operationally, we evaluated a whole series of criteria for us to move forward on these. And then we had levels of confidence on each of those that ultimately led to the business decision to move forward with this. If you look at one of those criterias, which was customer acceptance, it's more than 100% now. If we were to look at what our criteria was our score on customer acceptance would be greater than 100%, but we still have to get through the time to launch. Operator: [Operator Instructions] The next question comes from Ian Gillies with Stifel. Ian Gillies: Could you talk a little bit more about the heavy rare separation expansion plans in Estonia, maybe a bit around ultimately how large you would like that to be, if possible, what you intend to produce? Do you expect it to be a material financial contributor and the like? Rahim Suleman: Sure. So what I'd say is on heavy rare earth separation, we also follow the same methodology of step by step. So what we are producing here is a mini production line. It's not a lab. We've done lab stuff all through our career. We have our Singapore lab that's been doing heavy rare earth related stuff for 30 years. We have one of the most advanced earth magnetic labs in Estonia already, obviously, and all the infrastructure attached to it. So this line is not lab line. It is -- but it is a mini production line. And the purpose of building the mini production line at first is to roll it out and see some of the dynamics to be able to separate for a while and get real-life experience on some of the time lines and some of the chemistry and some of the purity levels that we're going to get. It will then lead to subsequent decisions on how do we integrate that with the existing light rare earth line and there's various points in time that one can make choices around how one would integrate it or whether one would build an expansion into the light rare earth line as well and whether one would do that on a parallel basis or an integrated basis. So there's lots of decisions and planning and engineering that we would still do again, and I would say that because we have the history, the knowledge and the technical expertise to make what I say is the best decisions, right, to make the right decisions, not to just run forward with whatever one thinks is the right thing to do. We have the ability to play out different options and model different options and see how all of that comes together. So to get it back to your question, the scale remains small. We haven't said specifically what the scale of the product will be. It depends largely on the feed that we're receiving. So we have some heavy rare earths in our existing sets of feed, but not enough. So we'll be working through stockpiles while we're also receiving material from our feed for our existing feedstocks. We need more feedstocks of heavy rare earth generally in the world. In terms of the availability of NDPR, like separate it into the 2 pieces, do we need more feedstock to support separation? Or do we need more feedstock to support magnets. Magnets can buy feedstock from other people like raw material as well and they do. So there isn't -- this isn't an issue that is tied to our ability to make magnets. This is just an opportunity that tie to our rare separation business of scaling that business to be larger. So we'll scale the heavy rare earth line in due course when we have better visibility to more rare earth feed, but we wanted to get this mini production line in place. A, it does provide some rare earth to Magnequench, not enough, but more particularly -- and it's never intended to be enough. We always want Magnequench to be multi-sourced. So we'll always partner with Lynas and MP and others in the industry for sourcing for Magnequench. We've been partnering with them and Lynas in particular for a decade. So we'll continue to do that, but like there's no dialogue on us not continuing to partner with others in the rare earth industry and wanting supply. It really doesn't matter how much we build in our Silmet separation business, our philosophy will always be to be dual sourced or multisourced in those environments. In terms of the actual economics, I think you have to wait to answer that question until we actually have a better view on what the largest and most likely form of next feedstock will be, what the exact heavy composition will be. In terms of what we will separate, I appreciate this getting to be a long answer now. In terms of what we will separate this is always to start by separating Dy and Tb because of the imminent need in magnetics for more Dy and Tb, but the reality is because we've been doing heavy rare separation for 30 years, we have customers around the world for all of the various different heavy rare earth elements. We have one of the largest global technical sales forces in rare earths. So we'll have opportunity to separate other materials as well, working with our customers to satisfy their demands. But we haven't made those decisions as yet. So as I said, we approach it on a step-by-step basis. Sorry for the long answer. Ian Gillies: Understood. No, thoroughness is always appreciated. Similarly, around capital projects, one of the things that came up during the Estonia tour and the investor presentation, was a potential expansion of Korat in Thailand? Is that a formal project yet? Or is it a thought on the back of a napkin, like where would you define that potential opportunity at this point in time? Because it also seems like some promising. Rahim Suleman: Yes. It's certainly not a thought on a napkin, but it's also not yet and I think it's -- times are going to be measured in weeks here, not months or quarters where it will become an official project, which is to say I extensively believe it's already official project within the Magnequench planning team, but it still has to be reviewed and go through the appropriate approval process. So I'm very confident in the growth rate of magnets in general, very confident in having more capacity. So probably what's really the focus of the review process that are coming are things around capital efficiency more than opportunity. So it's likely going to happen, but it has to go to the right proof of processes and have the right metrics attached to it before we say yes or no. Ian Gillies: Are you willing to disclose how much you think that debottlenecking could improve production by that facility? Rahim Suleman: Probably not yet. And I think what we would be doing in Thailand would be partially debottlenecking, but frankly, it would actually be adding gross capacity because there's just more business. And it would be the types of capacity and the types of programs that we would be focused on within the review process. But it would be like primarily volume and product related style capacity more than trying to solve an existing problem. Conversion costs and everything else are separate projects. There is capital that goes into conversion cost improvements, and it has its on return on capital metrics that we measure. Those things kind of continue in everyday life. Expansion capital goes through a different review process. Ian Gillies: Understood. Listening to your remarks on Phase 1b of the Estonia expansion or Phase 2, however we choose to frame that. It sounded certainly a bit more optimistic even than a few months ago. A question I get often is why isn't the decision being accelerated from early '27? Like are you putting any thought to pulling that decision forward given what you're seeing? Rahim Suleman: Yes, I think so. But I mean, like I said, I think that there's a number of different decision criteria that go into whether we would pull that forward. The decision -- the limiting factor, as I said, is not customer interest, it's not demand. That is crystal clear that, that is not the limiting factor in our decision-making process. Our decision-making process, it's so much -- frankly, it's not even about an if, it's merely about when. And the when is merely tied to capital efficiency and ensuring the greatest returns on shareholder capital. It's like it's -- we haven't committed to it, so it's odd for me to say it's not an if decision. It obviously isn't if decision. It still need to see proper economics. We still need to go to the board. We still need to do a number of things. But from a customer demand perspective and from what we know about our ability to make the magnets and ability to understand pricing and have customers like all of those things are well established for us by now. So again, the decision on -- I'll say, the decision is primarily one related to timing, and that's really just about capital efficiency and the greatest return on capital to shareholders. Ian Gillies: Last one I'll ask. At this juncture, given your conversations with whether it be the EU or specific European governments, like do you get any sense yet as to whether any sort of similar pricing arrangements could happen in Europe similar to what's happened with the DoD in the United States? Rahim Suleman: So I'll break the question into 2, which is to say, unfortunately, we're not going to comment on specific conversations that we're having with various governments around the world. So we won't provide any specifics on those dialogues. But in terms of the general concept around price floors or price supports or this, that or everything else, let's bear in mind that for Magnequench, which is the magnet-making portion of this kind of supply chain and probably the most important element of the dialogue for us, the raw material is on pass-through. So it's less of an economic consideration for Neo in terms of Magnequench. It just affects the viability to the customers' side of things and provide certainty to a customer in terms of pricing, and I think those things are valid and -- but there's pros and cons to both. In terms of the separation side of the business, I think it does have a bigger impact to the separation side of the business, but we're not a mining company, so it doesn't have that level of impact. So a couple of different dynamics to put into the mix. But as I said, we won't comment specifically on government conversations. Ian Gillies: Fair enough. I had to try. Rahim Suleman: Absolutely. But we are everybody's favorite phone call these days. Operator: Thank you. And I'm showing no further questions at this time. Ladies and gentlemen, thank you all for joining us. This now concludes today's conference call. You may now disconnect.
Operator: Good morning, and welcome to the Third Quarter 2025 Lifeward Ltd. Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Almog Adar, CFO of Lifeward Ltd. Please go ahead. Almog Adar: Thank you, Operator, and thanks to everyone who has joined us on the call today. My name is Almog Adar. I am Lifeward Ltd.'s Chief Financial Officer, and with me on today's call is our President and Chief Executive Officer, William Mark Grant. Earlier this morning, Lifeward Ltd. issued a press release detailing the financial results for the third quarter, which ended September 30, 2025. I would like to ask you to review the full text of our forward-looking statements from the press release. We anticipate making projections during this call, and actual results could differ materially due to several factors, including those outlined in our latest filing with the SEC. And with that, I will turn the call over to William Mark Grant. William Mark Grant: Thank you, Almog. Good morning, everyone, and thank you for your time today. Since joining Lifeward Ltd. in June, I have completed a sober and comprehensive assessment of the business, starting with our strategic direction down to our commercial model and operations. What I found is a company with innovative, powerful technology, deep clinical knowledge, and a mission that matters. Also, a company that needs sharper focus, stronger discipline, and a rebuilt foundation to unlock its potential. Over the past few months, we have taken meaningful steps to rebuild those fundamentals. We have simplified how we operate, strengthened the processes that matter most to patients, payers, and providers, and begun reshaping our go-to-market approach around global access, distribution scalability, and a data-driven commercial model. The progress we have demonstrated this quarter is encouraging, an early sign that this work is taking hold. We delivered another record quarter for ReWalk placements for Medicare beneficiaries. This is our second consecutive record since CMS established their fee schedule in April 2024. We implemented meaningful operational efficiencies, manifesting in a 16% reduction in quarterly cash burn and a 27% reduction in non-GAAP operating loss compared with last year. We also expanded patient access, including receiving our first Medicare Advantage commercial revenue for our ReWalk 7 personal exoskeleton. Now with our CE Mark approval, we have expanded our access to the European market, which represents roughly about 40% of our global addressable exoskeleton opportunity. These results are demonstrating that Lifeward Ltd. is becoming a more focused, more efficient, and more patient-centered company. Earlier today, alongside our earnings release, we also announced the completion of a $3 million loan with Oramed. This capital enhances our near-term liquidity and supports ongoing execution of our transformation plan. We are still early in a multi-quarter rebuild. I understand there is more work ahead, and I have confidence in the commitment and dedication of our teams across our company to complete this transformation. We are highly encouraged that soon after implementing these measures, we are already seeing real momentum and a clear direction. We are rebuilding the fundamentals and positioning Lifeward Ltd. to serve more people, scale more efficiently, and create durable long-term value. With that, I will turn the call over to our CFO, Almog Adar, to review the financial results from this quarter. Almog Adar: Thank you, Mark. As we review our results, I will discuss both GAAP and non-GAAP figures. The non-GAAP results exclude the items detailed in the reconciliation table in today's earnings release and, in our view, provide a clear picture of the company's underlying operating performance. I encourage you to refer to the GAAP results in the reconciliation table as we go through the third quarter 2025 financials. And now, let's discuss revenue. Lifeward Ltd. reported revenue of $6.2 million in 2025 compared to $6.1 million in 2024, an increase of $100,000 or approximately 1.1%. On a quarter-over-quarter basis, Q3 revenue increased approximately 8% from $5.7 million in Q2 2025, driven primarily by higher Medicare unit sales in the U.S. Now let's break it down by product line on a year-over-year basis. Revenue from our traditional product and services, which include the ReWalk personal exoskeleton, the MyoCycle FES bike, and the ReStore exosuit, totaled $3.1 million in Q3 2025 compared to $2.5 million in Q3 2024, an increase of about $600,000 or 24%. This increase is driven by a year-over-year increase in Medicare-related sales. During 2025, we delivered 15 ReWalk units compared to four ReWalk units delivered in Q3 2024. Revenue from the ATLAS G product and services was $3.1 million in Q3 2025, down from $3.6 million in Q3 2024, primarily driven by timing factors and quarterly revenue mix. Across both product lines, our commercial pipeline remains healthy. For the ReWalk product line, we closed the quarter with a pipeline of more than 117 qualified leads in process in the United States. In Germany, with 49 leads in process at quarter-end, 33 active rentals, which historically convert to sales within three to six months. So, altogether, we closed the quarter with 2023 systems in backlog. Moving to gross profit, in 2025, our GAAP gross profit was $2.7 million or 43.7% of revenue, compared to $2.2 million or 36.2% of revenue in 2024. On a non-GAAP basis, the 2025 gross profit was $2.7 million or 43.7% of revenue compared to $2.6 million or 42.5% of revenue in 2024. The year-over-year increase was primarily driven by lower production costs following the December 2024 closure of our Fremont, California manufacturing facility. Now pivoting to operating expenses, GAAP operating expenses were $5.9 million in 2025 compared to $5.4 million in 2024. The increase was largely driven by a $2 million earn-out write-down that we recognized in the prior year quarter. On a non-GAAP basis, adjusted operating expenses were $5.7 million in 2025 compared to $6.7 million in 2024. The decrease primarily reflects greater efficiency in reimbursement activities, improved efficiencies in marketing and sales operations, and lower R&D spending after the completion of major development programs. We expect this positive trend to continue into 2025, supported by the ongoing impact of our efficiency measures. Our GAAP operating loss for 2025 was $3.1 million compared to $3.2 million in 2024. On a non-GAAP basis, operating loss was $3 million compared to $4.1 million in the same period last year. We expect our quarterly operating loss to further reduce in 2025 as sales volumes continue to grow and efficiency measures continue to take hold. Net of balance sheet and cash flow, we ended 2025 with $2 million in cash and cash equivalents and no debt. This amount includes the full gross proceeds raised through our ATM facility, which totaled approximately $1.2 million. Our operating cash usage in 2025 was $3.8 million, compared to $4.5 million in 2024. The improvement reflects the benefits of operational efficiencies and the consolidation of our manufacturing facilities. Following the end of the quarter, we entered into a $3 million loan agreement with Oramed, providing additional capital support to further strengthen our liquidity position. Based on our current plan, we remain a growing concern with sufficient cash to fund operations into 2026. We continue to evaluate all opportunities to support our operations and growth plan while continuing to implement cost management initiatives to preserve resources and maintain focus on our core businesses. Lastly, financial guidance. Lifeward Ltd. is reaffirming full-year 2025 guidance, including expected revenue in the range of $24 million to $26 million and a projected non-GAAP net loss in the range of $12 million to $14 million. With that, I will turn the call back to Mark. William Mark Grant: Thank you, Almog. Since June, we have been focused on rebuilding the fundamentals of Lifeward Ltd., defining our strategic direction, sharpening our commercial model, improving operational discipline, and aligning the organization around a more scalable and data-driven approach. The progress we delivered this quarter shows that the foundation we are putting in place is working. We are executing with more consistency, more focus, and greater alignment across the company. As you heard from Almog, part of this transformation is that we are consistently assessing opportunities to enhance our financial position. We have had a number of productive conversations across the landscape, and we will continue evaluating all options that could support our long-term strategy. We are also not dependent on any single path. Our focus remains on making decisions that position Lifeward Ltd. for durable value creation. We have meaningful opportunities in front of us across our existing markets, in global expansion, and through the strategic avenues we are exploring. We are committed to building a stronger, more efficient, and more impactful Lifeward Ltd. for the future. Thank you for joining us for the call today and your continued support. Operator, let's open it up for questions. Operator: We will now begin the question and answer session. On your telephone keypad, 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 2. Again, it is star then 1 to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Yale Jen with Laidlaw and Company. Please go ahead. Yale Jen: Good morning, and thanks for taking the questions. And I just have a little bit of detailed things here. First of all, I just want to confirm that you mentioned that the 33 systems in rental. Is that correct? If so, what's the breakdown between the United States and Germany? William Mark Grant: Can you repeat the question, Yale? Breakdown for the rental. How many rental systems are for the ReWalk of the quarter, and what's the breakdown between the United States and Germany? Yale Jen: So we may, as I mentioned in the call, we have 33 active rentals, all of them in Germany. Yale Jen: All in Germany. Okay. Great. That'd be great. Okay. And my second question is that in the previous quarter, you have a collaboration with CoreLife. Just curious what kind of impact you may have felt in the third quarter or even going forward? William Mark Grant: Yale, thank you for the question, and good to hear your voice today. So the partnership with CoreLife has been going well, and so we have both been diligently working into this partnership and building the pipeline over time. It has grown each quarter, and we are learning the training processes and what it takes to reach those patients for marketing efforts. So we are excited about that partnership and looking for it to expand in the future. Yale Jen: Okay. Maybe the last question here is that you mentioned that you have the highest percentage of ReWalk from Medicare, which is a great development. Just curious, do you have any colors in terms of what percentage of, I guess, from the dollar sense, that were from Medicare versus others? And thank you. William Mark Grant: So it is reflecting that this page is approximately 50% of our total revenue for ReWalk products only, not taking into account the other G product. Yale Jen: Understood. Understood. And maybe just to tag one more. What's the actual rough revenue in the two of ReWalk within the $3.1 million of the traditional product sales? William Mark Grant: $2.9 million is related to the ReWalk product, and the other is mainly the MyoCycle. Yale Jen: Okay. Great. Thanks, and I really appreciate it, and the best of luck for you guys. William Mark Grant: Yeah. Thanks for the questions. Operator: The next question comes from Swayampakula Ramakanth with H.C. Wainwright. Please go ahead. Swayampakula Ramakanth: Thank you. And this is RK from H.C. Wainwright. Good morning, Mark. And Almog. Morning, RK. A few questions from me. So starting off from the top, Mark, as you said, you looked down through the different aspects of the company and did a review. What have you learned in that compared to when you did the due diligence coming into the company? And what sort of what aspects of the operations do you think require changes so that we get to not only the inflection point but also the growth stage of the company? William Mark Grant: Okay. Thank you for the question. So quickly, I think first and foremost, the fundamentals of the business really have to be established from the ground up. You know, good visibility into KPIs, understanding data, and deploying resources where data supports it. And that's number one, kind of the first thing. I saw a little bit of that coming into the role, but not as much as I got into it a little deeper. Secondarily, we have the opportunity to form some great strategic partnerships and channel management, and that comes in two flavors. One is it allows us to gain broader access to patients through all the payers across the U.S., and secondarily, it's a population of patients that are really targeted in our environment. So I'm excited because I've got roughly twenty years or twenty-five years of experience in that channel management and also across payer access. And so the channel partnerships coupled with payer access and payer policy development are key for our success going forward. And then the last piece around operations is frankly just scale. We've got a good growth plan in front of us, so we have to make sure we can keep up with it and be reproducible with high quality. So I think if I boiled it down to four different pieces, one of which is establishing true and solid fundamentals. The second is making sure we are leveraging channel partners as strongly as we can and ensuring access for everybody. The third is access across all payers across the globe, so no patient is left behind. And the fourth is ensuring we scale for the future with good COGS. Swayampakula Ramakanth: Thank you for that, Mark. And then, when you talk about channel management, what triggered the increased sales into Medicare this quarter, the third quarter, and how much of that could be sustained into future quarters? William Mark Grant: The good news is the channel management is starting. So as we go into Q1 of next year, you will see the reflection of that. So right now, we are just cleaning up the fundamentals. The channel partnerships take a bit to develop, and so you are not seeing a reflection of it at all. What you are seeing right now is a focused Salesforce where we divide the Salesforce into two pieces. We have one that's focused on capital sales and one that's focused on the patient, payer, and access. Okay. But more to come on that one. That's the good news. Right? That is true. Swayampakula Ramakanth: So Almog, you reaffirmed the guidance to $24 to $26 million for 2025, which means you are asking for a 21% growth from the Q3 number, I think, if my calculations are correct. And you grew based on your own press release, you grew 8% between Q2 and Q3. So what gives you the confidence that you can get that 21% growth? Almog Adar: First, hi, RK, and thanks for the question. As you know, Q4 is usually the strongest quarter for us at ReWalk for both products, AlterG and ReWalk, and what gives me the confidence that we will achieve our guidance is the existing backlog for both products and the strong pipeline that we are managing. Swayampakula Ramakanth: Okay. Thank you for that. And then on the AlterG, what happened there? Because it looks like there was a 15% decline. What needs to be done so that we can kind of just stabilize the ship and let it sail again? William Mark Grant: Yeah. RK, this is really about the core focus of the sales teams. We have a neuro rehab team that has been selling capital and selling into the neuro rehab space. And, frankly, what that does is that loses some of the focus that you really need. So we have started a couple of beta programs, which will expand out to the broader community as we go into the next year. But where we have a dedicated capital team that will be selling AlterG, and we will have a highly focused neuro rehab team that will be selling ReWalk. And this is in particular to the U.S. Just as a comment, Germany continues to be very successful in both efforts. We are really refocusing the strategy here in the U.S. Swayampakula Ramakanth: Okay. And talking about Germany, you were commenting a little bit on ReWalk 7, and Europe could be an opportunity as much as 40% of your total sales. So to that end, how is ReWalk 7 being introduced? And is it still the workers' comp insurance that you are looking into, or is it outside of that insurance segment, you have any visibility or actually could gain some adoption in other segments of the market? William Mark Grant: Yeah. When you look at Germany, I think the one thing, the key indicator, and I'm going to reinforce where we started, is there are 33 active patients that are in their rental period now. There's a high percentage of those that actually convert, and a high percentage of those convert in three to six months. And so for me, that's really the health of their pipeline and looking at how that business is growing, so it's a solid pipeline. Secondarily, we do have good coverage. About 40%, we have coverage directly, but we have 100% access to all patients. So the good news is when you look at Germany in particular, not the total European nation, but you look at Germany, we've got exceptional access. We have opportunities to expand outside of Germany as the MDD listings and other things come together. So we still have to actually get ReWalk 7 across all the payer entities and countries, but it gives us great access because of the CE mark. So more work to do on access, but trust me, we're doing really well. Swayampakula Ramakanth: Okay. The last question from me. I have been watching Lifeward Ltd. for a long time. And you know, the company did have a few situations where the financial overhang became quite a bit to bear. But, again, we are in that position now. And from your experience and from how you see it, how comfortable are you to get over this hump? And hopefully, is this the last time we do that? William Mark Grant: Yeah. RK, look. I'm not naive. Right? So, you know, this is a tough place for any company to be, but as you can tell from my voice and the plan that we put together and also my experience, I'm actually excited to be standing where I'm standing. And so it may feel and look like the bottom, but the reality of it is, you know, those in business actually feel like this is a great place. What I'm excited about is we have a good turnaround story. The fundamentals of the business are repairable in short order. There wasn't really anything broken. And so I'm excited about that. Secondarily, the innovation is exceptional. And so if you look at the products in the portfolio with the ReWalk 7, how strong the hardware is, how easy it is to iterate against for the software, same thing with AlterG, first in class name, first in class brand. Something you can also get after on innovation. And there are other products in this space that are available for aggregation at good value discounts. I'm excited about where we are. But, again, I want to start off. I'm not naive. This is not going to be an easy path. Hence, why we've been having so many conversations across the landscape. To make sure we can find the best partner to suit with. You know? And I'm optimistic that we're going to find the right one. Swayampakula Ramakanth: I am very optimistic too because I have seen this company go through a lot of things and they've always come out, you know, better than the previous, you know, better than the situation that they were at. So good luck, and thank you for taking all my questions. William Mark Grant: Yeah. Thank you. We'll talk to you soon. Operator: Once again, if you have a question, press 1. And we have a follow-up from Yale Jen with Laidlaw and Company. Please go ahead. Yale Jen: Thanks for taking my follow-up questions. And in terms of the AlterG, I remember last quarter, you guys were talking about expanding to the sports arena versus just in the medical space. Just like to get some updates on that effort, and thanks. William Mark Grant: Yale, you got a great memory, and I'm glad you brought that up. That is part of the broader strategy. So we have two beta regions right now within the U.S. where we've actually switched to having a capital sales team and to having a neuro rehab specialist. So the capital sales team focused on AlterG, rehab specialist, and the other focused on ReWalk 7. And so those efforts have just started. So I would expect that you're going to see some stronger results as we turn into the new year. But we've already made those fundamental changes. We do know from our customers and from our pipeline that we're seeing good growth. But we also haven't rolled it out across the entire U.S. So more to come on that as we actually execute against the transformation. But we were opportunistic. As we had changes in the space, we went ahead and put it into play. So we are going to have a team that's focused on high school sports, elites, and up. They're also going to be focused on rehab facilities, but they're going to get the support of the neuro rehab specialist that call on ReWalk. So you kind of get the double dip. So we're going to cover the rehab centers explicitly with two different people, and then you're going to have a dedication of a capital goods sale and then also someone who could work with patients, payer, and providers in the neuro rehab space. So bifurcating the space, we know from outside the U.S. Also, I know from my history is really important for the end user, for the customer and the buyer. So bifurcating the Salesforce will give us the focus needed to deliver against better fundamentals and also the growth you expect. Yale Jen: Maybe just to add on here is which is that in terms of the sports arena, would that be practically all self-pay instead of any other venue of reimbursement? William Mark Grant: You know, for sports, yes. But we do get a tremendous amount of the business from government and grants outside the U.S. So there is a good blend. Right? So it's all not just self-pay. So the DOD and others support us very well with all of our products. And then it's likewise outside the U.S. You know, we get tenders for these products on a daily basis. Yale Jen: Okay. Great. That's very, very helpful, and thanks a lot, and best of luck going forward. William Mark Grant: Thank you. Appreciate it, Yale. Operator: This concludes our question and answer session. I would like to turn the conference back over to William Mark Grant for any closing remarks. William Mark Grant: Hey, again, I want to thank everybody for joining the call today and just let everybody know that we're at a unique inflection point here at Lifeward Ltd., we're excited to be here and appreciate the support that we get from you. We're looking forward to meeting the expectations that you guys set in the market. With that, I'll close the call, and appreciate everybody's time. Talk to you soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome everyone to the Iterum Therapeutics Third Quarter 2025 Financial Results. My name is Becky, and I will be your operator today. All lines will be muted throughout the presentation portion of the call. I will now hand over to your host, Kevin Dalton, Senior Director of Legal Affairs. Please go ahead. Kevin Dalton: Thank you, Becky. Good morning, and welcome to Iterum Therapeutics' Third Quarter 2025 Financial Results. The press release with our third quarter results was issued earlier this morning and can be found on our website. We are joined this morning by our Chief Executive Officer, Corey N. Fishman, our Chief Financial Officer, Judith M. Matthews, and our Chief Commercial Officer, Christine Coyne. Corey and Christine will provide an update on the commercial launch of Orlynda in the U.S. Corey will also give an update on the business generally, and Judith will provide details on our financial results. We will then open the lines for Q&A. Before we begin, I would like to remind you that some of the information presented on this conference call will contain forward-looking statements concerning our plans, strategies, and prospects for our business, our ability to continue the commercialization of Orlynda in the U.S., our ability to expand into new territories and put additional resources in high-prescribing geographies, and to expand the payer coverage of Orlynda in the U.S. Our ability to raise funds either through capital raise and/or revenue generated from sales of Orlynda, the development, therapeutic, and market potential of Orlynda, and the protection provided by our patents. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors outside our control. These include our ability to build and maintain a sales force and continue the commercialization of Orlynda in the U.S., the market opportunity for our potential market acceptance of Orlynda, the actions of third-party suppliers, manufacturers, and contract sales organizations, our ability to continue as a going concern, the accuracy of our expectations regarding how far into the future our cash on hand will fund our ongoing operations, and finally, other factors discussed under the caption "Risk Factors" in our annual report on Form 10-K and 10-Q filed with the SEC this morning. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements. We will also be referencing non-GAAP financial measures during the call. We have provided reconciliations of GAAP reported to non-GAAP adjusted information in the press release issued this morning. With that all said, I'll turn it over now to you, Corey, for your opening remarks. Corey N. Fishman: Thank you, Kevin. Welcome to everyone, and thank you for joining us today. We are excited to be talking with you today and especially looking forward to sharing information about the early stages of the Orlynda commercialization. Just to remind you, we launched Orlynda into the market on August 20. Now I'd like to turn the call over to our Chief Commercial Officer, Christine Coyne. Christine Coyne: Thank you, Corey, and good morning to everyone. As with nearly every new product launch, changing behaviors and old habits is paramount, particularly in a category where prescribing habits have been ingrained for decades due to lack of innovation and limited new branded options. Changing healthcare provider behavior involves frequent office visits and getting time with those prescribers and their office staff. Our field team has been calling on our providers and ensuring they remember that there is now a better way to help treat their uncomplicated urinary tract infection patients with Orlynda. As with any promotion, message retention and behavior change increases over time and with frequency. That is our current focus with our customers. Each week, this improves. Having said that, we made steady progress in educating providers about Orlynda and driving early Orlynda use among patients suffering from uncomplicated urinary tract infections, especially in the most recent weeks. Our momentum with customers has been growing consistently. Through November 12, we generated more than 280 prescriptions, which were driven by more than 100 unique prescribers. Nearly half of those prescribers have broadened their experience by prescribing Orlynda to more than one patient. This is an important signal of both physician and patient experience with Orlynda. As physician comfort with Orlynda continues to grow, we have seen a number of these physicians broadening out their use, especially in the most recent weeks. Another important indicator which we follow closely is the fill rate of Orlynda prescriptions through our specialty pharmacy partner. This step in the process has a few parts to it. With new product introductions, in many instances, payers have yet to make their decisions on formulary inclusion, which provides coverage for patients. That said, there's usually a path forward to help these insured patients get their prescriptions, and we are working our way through all of this now. As with a large proportion of launches, once payer decisions are made and coverage and access are achieved, this fill rate should improve. However, even during this period of launch, while awaiting payer coverage, we have found that approximately 40% of Orlynda prescriptions have gone through these payer approval processes and have been filled, which aligns with our expectations. As for the patient's out-of-pocket exposure, we have a co-pay support program that helps defray the cost for appropriate commercial patients. While this may be of help to some patients, it is our intention to work with insurance carriers, including Medicare plans, to gain access to and coverage of Orlynda to help optimize this adjudication process and patient out-of-pocket exposure over time. We will discuss more on our progress here in just a moment. With Orlynda promotion gaining momentum each week, we have received a number of inquiries from physicians interested in obtaining Orlynda to whom the specialty pharmacy is outside of their business practice model. Given the number and frequency of inquiries such as these, we have been working with two of the most widely used specialty distributors, McKesson and AmerisourceBergen, to tuck into these particular physicians' ways of practicing. This specialty distribution model allows these physicians to purchase Orlynda through their preferred distributor and it supports how they like to practice. At this time, we have already shipped Orlynda to McKesson, and we will be shipping Orlynda to AmerisourceBergen shortly. Customer feedback and insights continue to be received as our efforts expand weekly to a wider set of healthcare providers and as utilization deepens with those providers who have already prescribed Orlynda. Some of the important learnings include physicians welcoming Orlynda as a new alternative for physicians to help treat their uncomplicated urinary tract infection patients effectively, but especially where resistance is a challenge. Physicians can clearly see a place for Orlynda to help them break the cycle of patients being treated with multiple antibiotics which have been resistant. Orlynda provides physicians with a new option. Additionally, our customers have reported the importance of Orlynda helping them to keep their patients out of the hospital. Being able to treat with a new oral option that helps keep their patients at home has been reported of great importance by our physicians. Also, physicians' clinical experience with Orlynda and their patients has been as expected. Lastly, customer feedback coming from our recent presence at the Infectious Disease Week conference, which was held last month in Atlanta, our efforts included a poster session and a learning lab presentation, confirms very high interest from both key thought leaders and large infection disease group practices with requests for follow-up discussions. Overall, we are pleased with the steady progress we have made, particularly given the modest commercial infrastructure we currently have in place. The field team continues working with healthcare providers as trial and adoption of Orlynda continues. Now regarding our field operations, we continually monitor an array of performance metrics to help us capitalize on opportunities quickly as we discover them, as well as optimize areas where effectiveness needs to be improved. Based on these diagnostics, we reduced the in-person field team to 10 representatives from our original plan of 20 and are in the process of augmenting our efforts with both in-person and virtual sales representatives. Once fully in place, the combination of the existing resources and our new supplemental resources should provide Iterum the equivalent coverage in at least the initial 20 target geographies, if not more, and it will be done with greater efficiency. Christine Coyne: Now I'd like to spend a few moments and talk about managed care and market access. Overall, Iterum coverage discussions are advancing well, with positive feedback from both pharmacy benefit managers and health plans across both their commercial and Medicare Part D formularies. Iterum's national account managers continue to engage strategically with key stakeholders across the U.S. payer landscape. Orlynda's differentiated value proposition and ongoing formulary discussions with state, regional, and national health plans, including the three largest pharmacy benefit managers, have been met with strong interest and positive feedback. Today, we are pleased to announce that we have a signed rebate agreement with one of the top three Medicare Part D pharmacy benefit managers. This agreement enables Orlynda to be added to their Medicare Advantage prescription drug plan and Medicare prescription drug plan formularies for coverage beginning in 2026 or 2027, depending upon the individual plan structures. Also, Iterum has been invited to bid for formulary inclusion across commercial, Medicare Part D, and government segments managed by these pharmacy benefit managers. With submissions now complete, we are aiming to secure long-term formulary positioning later this year and into Q1 2026. Orlynda's access continues to grow, with or without prior authorization or medical exception pathways. Coverage now reaches 16% of insured lives with increasing adoption by employer groups and payer formularies integrating Orlynda into their standard benefit designs. We expect additional decisions in the coming quarters and continue to see an increase in patient access and early prescription growth, reinforcing our confidence in the commercial trajectory. Now I'd like to turn it back over to Corey. Corey N. Fishman: Thanks for the update on Orlynda's commercialization, Christine. I'll make a few additional remarks. With regard to our patent estate, we continue to expand our coverage. We've been granted a patent in China that covers a combination of probenecid and valproic acid for treating specified diseases. This patent is expected to expire in March 2041, absent any patent term extensions. We have also been granted a patent in Mexico that covers a bilayer tablet comprising sumopenemethodroxil and probenecid, methods of preparing the tablet, and the bilayer tablet for use in treating specified diseases. This patent is projected to expire in December 2039, absent any patent term extensions. I now would like to provide some financial guidance. As you may have seen in our financial statements, Iterum generated net product sales of $400,000 in the third quarter, which included some stocking at our specialty pharmacy. We expect modest sales in the fourth quarter of this year as well. As we look ahead to 2026, with our existing field organization continuing to call on their targets, the additional resources we plan to add that Christine mentioned earlier, as well as obtaining coverage in key pharmacy benefit manager insurance plans, we currently expect our full-year 2026 net product revenue to be in a range between $5 million and $15 million. It's important to note that if Iterum were to achieve this revenue guidance for next year, it will have done so with a modest field organization relative to other antibiotic launches in the U.S. As it relates to total operating expenses, we currently estimate these will be between $25 million and $30 million for the full year 2026. Our existing cash and cash equivalents provide an operating runway into 2026. In order to continue commercialization throughout 2026, we will need to raise more capital. We have and will continue to discuss potential financing opportunities with available sources of capital, including non-dilutive funding options, but to date have yet to secure a viable transaction. As such, we will likely look to obtain approval from our shareholders at an extraordinary general meeting over the coming months to grant our Board of Directors authority to issue additional shares. If we are successful in getting this approval and raising incremental capital, we would use those funds to continue the ongoing Orlynda commercialization as well as potentially putting additional resources against high-value territories or expand into other highly valuable territories not yet tapped by us, or both. Of course, our goal over the next couple of years is to generate revenue in excess of the amount of expenses we have and be self-funding. In summary, the feedback from physicians, payers, and patients has been very good for Orlynda, and we are encouraged by the results we've achieved to date. If we're successful in raising additional capital, we believe we can continue to drive revenue growth and position Orlynda for broader market adoption. Now I'll turn the call over to Judith Matthews for our update. Judith M. Matthews: Thanks, Corey. Net product revenues were $400,000 in 2025 with the launch of Orlynda in the United States in August 2025 and included initial stocking at our specialty pharmacy locations serving our targeted territories. Total operating expenses were $8.1 million in the third quarter of 2025 compared to $4.9 million in the third quarter of 2024. Operating expenses include cost of sales, the amortization of an intangible asset, research and development expenses, and selling, general, and administrative expenses. Cost of sales expense for the third quarter of 2025 was $20,000 and primarily consisted of royalty payments pursuant to our license agreement with Pfizer. Note that prior to approval in October 2024, costs incurred for the manufacture of Orlynda were recorded as research and development expenses. Amortization of intangible asset for the third quarter of 2025 was $300,000 and related to the finite-lived intangible assets recognized in relation to the regulatory milestone payment payable to Pfizer upon approval by the FDA. R&D costs were $1.3 million for the third quarter, compared to $3.1 million for the same period in 2024. The primary driver of the decrease in R&D expense for the third quarter was lower chemistry, manufacturing, and control or CMC-related expenses. Following approval, costs incurred for the manufacture of Orlynda have been capitalized to inventory. SG&A costs were $6.5 million for the third quarter compared to SG&A costs of $1.8 million for the same period in 2024. The primary driver of the increase in SG&A expense for the third quarter was commercialization activities associated with the August 2025 launch of Orlynda in the United States. Our net loss on a US GAAP basis was $9 million for 2025, compared to a net loss of $6.1 million for 2024. On a non-GAAP basis, which excludes certain non-cash adjustments, our net loss was $7.3 million in the third quarter of 2025 compared to our non-GAAP net loss of $4.8 million in the third quarter of 2024. The $2.5 million increase in our non-GAAP net loss for the third quarter was primarily a result of commercialization activities for Orlynda, partially offset by lower CMC-related expenses. As of September, we had cash and cash equivalents of $11 million. Based on our current operating plan, which includes our forecasted sales, we expect that our cash and cash equivalents, together with $2.6 million of net proceeds raised under our at-the-market offering program from October 1, 2025, through November 13, 2025, will be sufficient to fund our operations into 2026. As of November 13, 2025, we had 52.8 million ordinary shares outstanding. Now we will open it up for questions. Operator: Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause momentarily while we compile the Q&A roster. Our first question comes from Ed Arce from WestPark Capital. Your line is now open. Please go ahead. Ed Arce: Great. Thanks for taking my questions and congrats on the initial launch here. A few questions. First of all, I appreciate all the detail here with the launch metrics around the commercialization. I am wondering if these specific numbers around patients and prescribers and reps coverage are data points that you intend to report for the first few quarters of the launch for us to track. And related to that, I was wondering if you could discuss the number of actual physician details and also the number of sales regions that you currently plan to continue. And I have a follow-up. Thanks. Corey N. Fishman: Yep. Thanks for the questions, Ed. I'll cover this. The question around the metrics, yes, we do plan to report the, you know, the kind of the prescription, the growth, the number of physicians, the general information so people have a sense of how the launch is going. I think at some point, if all goes well and we're generating, you know, tons and tons of scripts, we'll do things like most other companies do, which is report the growth quarter over quarter, that kind of thing. So we will be more specific in the first couple of quarters till we have some data behind us. And then we'll probably branch out to providing the same information, but maybe not quite as granular. With regard to details and territories, we're not talking about specific number of details. What I will tell you is what I think is important. We started out our initial thinking was having 20 territories with high-value targets. And I think with this change in the organization as Christine mentioned, as well as the supplemental resources we will be putting on, we will be in a position to at least effectively cover 20 of those territories, maybe a little more, but ultimately, more efficiently. So I think that's probably the range that we'll be in. And again, we'll continue to report that as we do going forward with regard to how our performance is. Ed Arce: Great. Okay. And then around the guidance for net sales next year, you in your release, discussed two particular drivers: payer coverage, which I think you said, is currently at 16% of insured lives, and uptake. I'm wondering if you could give a bit more color or details around those two drivers. And in particular, with uptake, if there's any initial feedback you've gotten from physicians around, you know, the product profile of being oral and keeping the patients at home and how that's driving their interest. Thanks. Corey N. Fishman: Sure. So I will cover the second part first, which is the feedback. Feedback from physicians has been very good. I think there's a variety of reasons that physicians are using the product, as Christine mentioned. One of them is certainly to keep those patients that are most at risk out of the hospital. One of them is when you have recurrent infections, you want to make sure you're treating that infection appropriately since these folks have been on potentially multiple drugs over a short period of time that haven't worked. And also the folks who have those comorbidities and who are on that higher end of the risk spectrum, I think physicians see this as an excellent option. And we'll continue to work with physicians to get that message across. Your other question, I think, was around, you know, access and coverage. We are, I think, in a good spot as most of the folks on this call know, you really don't get coverage in the first six months from any plan post-launch. That is just something that the PBMs, the pharmacy benefit managers generally do not do. And so we're approaching that six-month time frame in kind of February time frame for us. And as mentioned, we have submitted bids to all of them. So now it's just a question of being able to get on those plans and get coverage, which will make the process even more efficient. Even though there is a process in place, of course, where you can get those prescriptions filled, we can make it a more efficient process through the addition of Orlynda to those formularies. So I think we're really looking at that as an opportunity to have additional efficiency in the system so more and more scripts can be filled while you're continuing to have strong uptake with these physicians who are prescribing. And again, we've got a lot of physicians that have written multiple scripts already. And I think that's really an important metric because oftentimes, especially in these places where you haven't had a new product for many, many years, and we know that this has been that place. Twenty-five, thirty years, docs are pretty ingrained in what they're writing. So it does take a few visits to get them to write, and the folks who have written many of them have come back and written again and again and again. So I think we're feeling like we've got a real opportunity here to continue that momentum, and that's really the drivers for us of how we're arriving at the revenue guidance. Ed Arce: Thanks so much. I'll jump back in the queue. Operator: Thank you. Our next question comes from Jason McCarthy from Maxim Group. Your line is now open. Please go ahead. Jason McCarthy: Hi, Corey. Nice job of getting things off the ground so far. So just to follow-up on the prior question, did I catch it right you expect formulary I guess you submitted this already, with PBMs in February? Of 2026 or sometime in the first quarter? Corey N. Fishman: Yes, we're hoping that's the case. Obviously, we don't have control of that, Jason. But all of our, you know, we're doing everything we can on our end to make that as feasible as possible by having our bids already submitted. So we have now submitted our bids to all the three big PBMs as well as the big Medicare Part D plans. So as we said, we've secured one contract so far on the Medicare Part D side. So these will hopefully be coming in over the end of this quarter and the first quarter. And that would give us that opportunity to really kind of give an extra boost to the efficiency of the process. Jason McCarthy: Is there any effort by Iterum or strategy rather in terms of advertising or using social media outlets to get the word out on Orlynda to try to drive uptake? Corey N. Fishman: Yeah. It's definitely something we've thought about. We are, you know, at this stage, we have put the majority of our investment into the field organization and the materials necessary to support that, but it's definitely something that we continue to look at and think about the ways to optimize that social media presence and how we can get that message across. Given that we've got that modest infrastructure. Jason McCarthy: Okay. Do you plan on, and I this might have been covered already. Do you plan on in addition to script data down the road, releasing any information on the types of patients that are being treated? I don't know if that data is being accumulated, meaning are they high risk or even further, specific types of comorbidities and high-risk aspects to these patients that you'll gain access to? Corey N. Fishman: Yeah. We're not going to have a lot of those specifics because that, you know, that gets into the doctor-patient relationship. I think what we'll end up having is more anecdotal information from those prescribing physicians. And, you know, we certainly will always be cognizant of who's writing, what information can we get from them about the patients and how it's working, we can optimize? And to your point, if we find that a certain comorbidity has been really important for a number of doctors, you know, we certainly can get that from them through the sales organization. And then figure out a plan to, you know, to optimize that. But it's a little bit trickier just because of all the confidentiality around patient information, and, you know, you can't really know any of the details on the, you know, the name and anything like that of the patient. It would really have to be more just anecdotal from the docs. Jason McCarthy: Got it. And lastly, and this is not really sure the type of answers you expect from this. This is more of a broad thinking question because I've been doing this for a long time, and I see a lot of one-product companies drug launches that they're slow to start, they're choppy. Some people question what that road is going to look like. But my pushback in this case has been, oral has been sought after for decades, and it's not just for community infections, like urinary tract infections. Have you do you think people are going to want this oral pendant for a variety of things? Have you got an inbound interest, in getting access to the drug, for any kind of infection? Corey N. Fishman: Yeah. We've gotten a lot of inbound interest from people that aren't on our call list, that people that we're not covering infectious disease physicians, etcetera. So I think there's a lot of interest in that. You know, we obviously have an indication that we will promote on, and that is, you know, that's the only thing we'll be talking about. But to the extent that there are physicians who call us up and ask for the product, we will absolutely supply it simply because we believe that it's an important piece if a physician's asking for it. And that's why we've gone to McKesson and AmerisourceBergen because going through a specialty distributor like ours is out of the kind of their business model for these types of physicians who are giving us inbound calls. So we obviously are going to be very, very mindful as an organization to stay within our approved indication. But we will certainly respond to physicians' inquiries because that may very well be for uncomplicated UTI. We just we don't know. And a physician has the flexibility to write it for whatever it is they choose to write it for. Jason McCarthy: Great. Thank you, Corey. Corey N. Fishman: Thank you. Operator: We have another question from Ed Arce from WestPark Capital. Your line is now open. Please go ahead. Ed Arce: Great. Thanks for taking the follow-up. I just wanted to ask about this effort to augment the now 10 reps with the virtual effort, especially because you've characterized this as at least replacing the other 10 from the original 20 that you had targeted, and perhaps a bit more. And so I'm wondering if you could provide some more detail in terms of the capabilities and the ability to engage with physicians through these different virtual platforms. Thanks. Corey N. Fishman: Sure. Thanks, Ed. So I want to be really clear. We will probably do a combination of both in-field and virtual, to get to that at least 20 effective territories, if not more. And so on the virtual side, I think what you have seen, and you've probably seen this in your experience as well, many companies have used virtual reps who tend to be very efficient because they are using the same target lists but they're doing this all virtually. So it's all through phone and computer as opposed to reps who are out there having to drive, having to wait, etcetera. They can schedule meetings. They can be quite a bit more efficient on the interactions with physicians simply because they are sitting at a desk not trying to drive around and find people and or get in through the office. So those people tend to be based on the experience that Eversana has had as well as a lot of other companies that we've all spoken to have had a very good reputation of being efficient in terms of producing performance. So we believe that those virtual reps can be a very important part of our organization in addition to the in-field reps. I don't want to minimize one or the other because they're both incredibly important. But we do think the combination of the two is really going to give us the opportunity to reach a lot of targets in an effective way and hopefully drive that performance to the place where we, you know, we are we're talking about. Ed Arce: Okay. At this point, are you considering other marketing channels like medical journals or engagement via social media or other channels like that? Corey N. Fishman: Yeah. I think, you know, what we've talked a lot about with our partners at Eversana is, you know, things like social media tend to be more effective nowadays than the traditional kind of journal ads and things like that. But we will continue to look at them. We'll continue to look at historical return on investment for those types of investments over various companies like ours that have used them. And we'll try to optimize those as best we can. Again, we're trying to be as mindful as we can about the capital we have. And putting it where we believe we're going to get the biggest bang for the buck. And right now, that tends to be the field organization. Hopefully, we'll have a little more flexibility if we're successful in raising more capital to put some of those other things into play. And, you know, altogether then, it makes everything more efficient. It's just a question of having that flexibility. Ed Arce: Sounds good. Thanks again, and congrats and best of luck as you continue this launch. Corey N. Fishman: Thanks for the questions. Operator: This concludes our Q&A session. So I'll hand back over to Corey N. Fishman for closing remarks. Corey N. Fishman: Thank you, Becky. In closing, we believe we've made some very solid progress in the first ten weeks of Orlynda commercialization. Physicians see a place in the market for Orlynda, and many physicians have begun prescribing for multiple patients. We will continue to work tirelessly toward growing the Orlynda patient base and driving incremental revenues. We really appreciate your support as we continue the Orlynda commercialization and are looking forward to keeping you updated as our key milestones are met. Thanks again for joining us today and have a good day. Operator: This concludes today's call. Thank you for joining us. You may now disconnect your lines.
Operator: Good morning, and welcome to MiNK Therapeutics, Inc. Third Quarter 2025 Conference Call and Webcast. Please note this event is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the conference over to Stephanie Perna Nacar, Chief Communication Officer. Stephanie? Please go ahead. Stephanie Perna Nacar: Thank you, operator, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will include forward-looking statements including those related to our clinical development, regulatory and commercial plans, timelines for data releases, and partnership opportunities. These statements are subject to risks and uncertainties. Please refer to our SEC filings available on our website for a detailed description of these risks. Joining me today are Dr. Jennifer Buell, President and Chief Executive Officer, Dr. Terese Hammond, Head of Development, and Christine Klaskin, Principal Financial and Accounting Officer. I'd like to turn the call over to Dr. Buell, to highlight our progress from this quarter. Dr. Jennifer Buell: Thank you, Stephanie. Good morning, everyone. This quarter marks a defining period for MiNK Therapeutics, Inc. We are now a fully independent operated company focused, agile, and singularly dedicated to the advancement of our INKT cell therapy platform. Over the course of this year, we have not only strengthened our science but also elevated our global visibility, presenting major new findings at ASCO GI, AACR IO, the inaugural meeting, and most recently last week at the Society for Immune Therapy of Cancer, the SITC Annual Meeting. MiNK was founded on a bold idea: that a single naturally derived immune cell type, one of the most highly conserved cells in immunology, the invariant natural killer T cell, a very potent subset of T cells, could be harnessed to both ignite and regulate immunity. In this quarter, that idea became a reality. We are going to go through this in some detail. At SITC this year in Washington, D.C., we presented updated clinical data from our ongoing trial of AGENT-797, our allo, off-the-shelf iNKP cell therapy. This product was administered alone or in combination with approved anti-PD-1 in patients with relapsed or refractory solid tumors. These were patients with heavily pretreated immune therapy-resistant and in most cases without remaining clinical options. What we observed was really nothing short of remarkable. Patients who received 797 in combination with PD-1 achieved a median overall survival of approximately 23 months. This is really unexpected given this Phase I clinical trial in a refractory setting, we would expect survival to really be under six months. We observed a complete remission in a patient with metastatic testicular cancer who had failed prior chemotherapy, stem cell rescue, and checkpoint inhibition. We also observed a durable partial response in the second-line gastric cancer patient who has failed prior therapies. We also saw disease stabilization with prolonged survival across multiple other difficult-to-treat cancers. These cancers include thymoma, cholangiocarcinoma, renal cell carcinoma, and adenoid cystic carcinoma, with survival extending beyond two, even three years in some cases. These observations demonstrate not only the durable activity of 797 but also its potential to restore immune function in patients who had exhausted all available therapies. And crucially, this was achieved without the hallmark toxicities that have limited other cell therapies. We observed no cytokine release syndrome, no neurotoxicity, no graft-versus-host disease. The most common treatment-related event was mild fatigue. In just a few moments, you are going to hear from Dr. Terese Hammond. She will delve deeper into our findings, the immune mechanisms underlying the results, the translational data that explains Agent-797's unique biology, and how these insights are shaping our next generation of trials. What we are seeing in our data is beyond a response. It's really a substantial improvement in immunity, immune restoration. These NKT cells are doing what the immune system was really designed to do: detect danger, coordinate a response, and resolve inflammation with precision. In the case of cancer, what we observed is a controlled inflammatory response that was correlated with prolonged survival and in some cases with deep, durable, and complete remissions in some cancer types. Mechanistically, 797 operates through dual pathways, both a T cell receptor-dependent and a T cell receptor-independent pathway. These cells recognize glycolipid antigens through CD1D. They are naturally engineered in that way, enabling them to target both malignant and cells in ways conventional T and NK cells cannot. At the same time, these cells can reprogram the immune microenvironment. We have published these data and presented them publicly from our clinical trials. What we have observed is that INKT cells can activate dendritic cells, repolarize macrophages towards an M1 pro-inflammatory phenotype in cancer, and reinvigorate exhausted T cells. The result is a potent but controlled immune reaction, a rise in interferon gamma, IL-2, TNF alpha within 48 hours of infusion that turns these cold, otherwise cold tumors hot without systemic toxicity. Our data over the course of this year really reinforced 797's position as a platform therapy, and that's how we intend to advance it. It also underscores how MiNK Therapeutics, Inc. has become the most clinically advanced company in the world developing allogeneic iNKT cells. Our science alone isn't the only component that makes MiNK unique. It's really how we are building with public-private partnerships and with very disciplined capital use and a clear sustainable strategy. I'll go into that in a little bit more detail. This quarter, we were honored to witness our leadership and Board of Director member Dr. Robert Kadlec participate in his confirmation hearing by the U.S. Senate. Dr. Kadlec is a national leader in biodefense and preparedness whose partnership has helped us forge deep collaborations with federal and academic institutions that have really propelled MiNK forward. As Dr. Kadlec continues his honorable life of service, and upon his recommendation, and to our tremendous enthusiasm, we also just recently welcomed Dr. John Holcomb to our Board of Directors. Dr. Holcomb is a U.S. Army colonel, trauma pioneer, and author of over 700 scientific papers whose work has saved countless lives. These two leaders embody what MiNK stands for: science with purpose, innovation, and service of human survival. Building on that foundation, we have established a strategic partnership with experts from the University of Wisconsin Carbone Cancer Center to advance our INKT program in immune reconstitution following stem cell transplantation. Each year, tens of thousands of patients face the risk of graft-versus-host disease, infection, and relapse following hematopoietic stem cell transplantation. And in fact, this impacts more than half of the patients undergoing stem cell transplantation. Our invariant natural killer T cells, by enhancing immune balance and also naturally preventing graft-versus-host disease, we believe, help prevent these complications and improve recovery and outcomes for these patients. We have two major public-private grants that are now supporting our work in delivering these therapies in the prevention and treatment of graft-versus-host disease. First, the Department of Defense and NIH STTR awards enabling MiNK and the University of Wisconsin teams to develop and test 797 in preclinical transplant models. And a second, a philanthropic clinical grant to our team at the University of Wisconsin that directly funds patient enrollment, immune monitoring, and biostatistical operations for the trial. These awards allow us to execute a first-in-human Phase I study with minimal capital impact, demonstrating how MiNK's partnership model can amplify scientific impact while preserving shareholder value. As we advance these programs, we are also preparing for a global Phase two, possibly Phase two/three clinical trial in acute pulmonary dysfunction with multidrug-resistant infections. This is a setting where immune failure drives mortality. The study will launch within weeks in collaboration with a network of critical care centers that mirror U.S. patient demographics. Our objective is to confirm that INKT can restore immune homeostasis, reduce ventilator days, and improve survival in critically ill patients. These studies are building on the phase one findings that Dr. Terese Hammond published in Nature Communications a short time ago. We believe that these cells and in this critically ill population can potentially transform how we treat immune collapse in both civilian and military populations. As we prepare for a more formal and comprehensive public announcement of the imminent launch of our grant-funded clinical trial in graft-versus-host diseases and the advancement of our late-stage program in severe pulmonary inflammatory disease, I want to underscore the clinical leadership now guiding these efforts. Today marks the first participation of Dr. Terese Hammond as a member of MiNK Therapeutics, Inc. Therese is a nationally recognized leader in pulmonary and critical care medicine with extensive experience advancing registration stage programs in severe pulmonary and inflammatory diseases. She has served as principal investigator on pivotal trials and including those at MiNK is the lead author of our landmark Nature Communications publication demonstrating the clinical impact of AGENT-797 in patients with acute respiratory distress syndrome. Importantly, Therese will be leading the charge as we advance our INKP platform into a broader range of inflammatory diseases, areas where patients face a profound lack of effective therapeutic tools. This includes interstitial lung disease, idiopathic pulmonary fibrosis, and other immune-driven conditions where our translational data and clinical observations point to compelling opportunities for impact. Her leadership, grounded in real-world ICU and pulmonary critical care medicine, will ensure that these programs are shaped by scientific insight and patient need. With that, I'm pleased to turn it over to Dr. Hammond who will take you deeper into the biology, mechanistic underpinnings, and the clinical findings that make these opportunities so meaningful for patients. Dr. Terese Hammond: Thank you so much, Jen, and good morning, everyone. At the heart of our work lies a fundamental question: What if the immune system could be retrained to heal itself? As both a physician and a scientist, I've spent decades caring for patients with cancer, respiratory failure, and severe infection. Watching them decline not because we lacked medicines, but because we lacked a way to reconstitute the requisite immune function. Our INKT cell data now show for the first time that such restoration may finally be possible. In much the same way that AGENT-797 has been able to rescue patients with heavily pretreated solid tumors, we've observed that these cells can also rescue critically ill patients in respiratory failure who have failed all available standard of care treatments. Building on Jen's summary of the Phase one solid tumor study, I want to emphasize the depth and breadth of what we've observed. We treated patients with relapsed or refractory cancers, 82% receiving AGENT-797 alone, and 18% receiving combination therapy with PD-1 blockade. These patients had a median of four prior lines of therapy, so heavily pretreated. Nearly half had already failed PD-1 ligand inhibitors, and most had exhausted every standard option. Yet AGENT-797 drove meaningful and durable activity across a diverse range of tumor types. The complete remission observed in metastatic germ cell testicular cancer, now ongoing for more than two years following a single infusion of AGENT-797 in combination with PD-1 blockade, is, to our knowledge, unprecedented in this population. The durable partial response in second-line gastric cancer is equally impactful in a disease where expected survival is typically measured in single digits. Beyond these published cases, we also saw exceptional survivors across both monotherapy and combination arms. A patient with myeloma treated with AGENT-797 monotherapy remains progression-free more than three years after a single infusion. This finding is scientifically intriguing given the immune dysregulation inherent to thymic malignancies and the association with autoimmune conditions such as myasthenia gravis. In the combination cohort, a patient with metastatic renal cell cancer and another with adenoid cystic carcinoma each demonstrated prolonged survival far exceeding historical expectations, remaining progression-free beyond two years. These cases underscore the potential breadth of the platform and reveal a consistent pattern: when you restore immune coordination rather than simply intensifying cytotoxic pressure, you get long-term survivors. What made these outcomes even more compelling was what we observed when we analyzed the patient's tumor biopsies and peripheral immune signatures. In responders, we saw dramatic infiltration of CD8 positive T cells, NK cells, and antigen-presenting dendritic cells into the tumor microenvironment. We also detected transient, well-regulated increases in interferon gamma, granzyme B, TNF alpha, and VEGF D, reflecting a localized and productive pro-inflammatory burst rather than systemic immune toxicity. RNA sequencing confirmed broad activation of cytotoxic pathways with gene set enrichment demonstrating strong cytolytic and innate immune signatures emerging after treatment. These findings collectively revealed that AGENT-797 does not merely lyse tumor cells; it reprograms the tumor microenvironment, shifting it from exhaustion to activation. Tumors that have been immunologically cold became immunologically hot, and previously exhausted T cells regained killing potential. Mechanistically, this makes sense. Our translational research work shows that AGENT-797 acts through dual TCR-dependent and TCR-independent pathways, recognizing glycolipid antigens presented by CD1D and stress ligands, such as MICA through NKG2D. This dual targeting enables direct cytolysis of malignant cells while simultaneously triggering a cascade of immune-modulating events. We saw dendritic cell activation and maturation, reversal of an immunosuppressive M2 macrophage phenotype back to the inflammatory M1 phenotype, and rescue of particularly exhausted tumor-specific T cells. In co-culture experiments, exhausted T cells that had lost killing function regained it in the presence of INKTs or even the soluble factors they secrete, the so-called secretome. Demonstrating that AGENT-797 acts both as a killer and as an immune orchestrator, which I think is the most profound statement here. This mechanistic foundation helps explain why long-term survivors emerge even from monotherapy and why the combination cohorts show such disproportionate benefit despite small numbers. This immune reprogramming capacity extends far beyond oncology. In preclinical ARDS and respiratory injury models, INKTs protected the alveolar barrier, prevented the runaway inflammation of cytokine storm we often see in the ICU, and reduced bacterial and fungal outgrowth in the lungs. They restore coordination between innate and adaptive immune systems in settings where this coordination usually collapses. These findings form the rationale for the upcoming global Phase two trial with potential expansion to Phase three in acute pulmonary dysfunction. Importantly, this trial uses endpoints already accepted by the FDA: ventilator-free days and 28-day mortality. Finally, our work in transplantation advances its immune restoration theme even further. Our University of Wisconsin graft study, supported by the Department of Defense STTR grant and a federal clinical grant awarded to UW, will evaluate AGENT-797 as a means to accelerate engraftment, reduce relapse, and prevent graft-versus-host disease, all without lymphodepletion. The concept is simple yet profound. Rather than suppressing immunity to control inflammation, we aim to reeducate the impaired immune system so it can function correctly from the outset. This is what sets MiNK apart. We are not layering another drug onto existing regimens. We are not iterating on old ideas. We are redefining the architecture of immune recovery in cancer, infection, critical illness, and transplantation. And the opportunities ahead are vast. I look forward to sharing more of our aggressive clinical and translational plans for 2026 during our next call. And with that, I'd like to turn the call over to Christine Klaskin to review the financials. Christine? Christine Klaskin: Thank you, Therese. During 2025, we executed and implemented an at-the-market sales agreement and ended the quarter with a cash balance of $14.3 million. Since quarter end, we have raised an additional $1.2 million through this program, providing a runway through 2026. Our net loss for the quarter ended September 30, 2025, was $2.9 million or $0.65 per share, compared to $1.8 million or $0.46 per share for 2024. For the nine months ended September 30, 2025, our net loss was $9.9 million or $2.39 per share, compared to $8.3 million or $2.24 per share for the same period in 2024. These results reflect ongoing support of our operations and the activities supporting our AGENT-797 programs discussed by Jen and Therese. I will now turn the call over to Jen for closing remarks. Dr. Jennifer Buell: Thank you, Therese and Christine. As you've heard, we've strengthened our leadership team with the onboarding of Dr. John Holcomb and Dr. Terese Hammond. We've also fortified our balance sheet and expect to continue to do so through strategic and collaborative partnerships. With this foundation in place, we're entering a period of meaningful execution. As Christine highlighted, there are select areas where our spend has expanded beyond the same time period of last year. And I want to reiterate some of these activities are reimbursed through our STTR grant and that the upfront spend associated with our pulmonary and GVHD programs is reimbursable under the innovative awards from our government and collaborators. In addition, we have prospectively acquired critical reagents to ensure a seamless and uninterrupted U.S.-based manufacturing supply of our allogeneic iNKT cells as our programs advance. These proactive steps reflect intentional and disciplined investment aligned with our development priorities. During 2025, we also executed and implemented an at-the-market sales agreement to leverage a substantial more than 700% increase in our equity price. This enabled us to access cash that limited dilution to shareholders and extend our cash runway through 2026, covering critical deliverables and meaningful inflections. In the coming quarters, we will advance our grant-funded GVHD study, progress our late-stage program in severe pulmonary disease, and broaden our INKT platform to inflammatory conditions where patients have few or no effective therapies. And by this time next year, we expect to have multiple clinical programs actively enrolling patients, early readouts emerging from our GVHD and pulmonary cohorts, and a clear line of sight towards pivotal enabling pathways across our inflammatory and critical illness portfolio. Each of these represents potential value-creating inflection points supported by strong biology, peer-reviewed activity, and data, and a defined regulatory framework. We look so forward to updating you as we continue disciplined, patient-focused execution. With that, I'll turn the call back over to the operator to open the line for questions. Operator: Thank you. To ask a question, press star then 1. To withdraw, press star then 1 again. And our first question comes from the line of Emily Bodnar with H.C. Wainwright. Your line is open. Emily Bodnar: Hi. Good morning. Thanks for taking the questions. I guess, first one, obviously, very nice to see long-term survival in some of the combination monotherapy patients that you presented at SITC. I was curious, given the combo portion was pretty small with six patients, have you thought about maybe expanding this cohort to include more patients or potentially initiate a dose expansion based on some of the tumor types that you've seen the most benefit in? And then separately, if you could provide a bit more details surrounding timing for the launch of the severe pulmonary disease trial and any kind of funding updates for that trial. Dr. Jennifer Buell: Thanks. Hi, Emily. Thank you so much for your call and your questions as always and your continued support. With respect to the combination with PD-1, as we are seeing an enormously growing population of patients who are previously treated with anti-PD-1 therapies, and what we've now published on a few occasions is that we could salvage patients who have failed PD-1 therapy, and we've seen this now in areas where PD-1 is standard of care as well as where it's being experimentally used. So the opportunity to add the cells on and see this salvage opportunity I think is really quite enormous. The patients that we have seen the most dramatic responses with are patients who have otherwise failed PD-1 but have continued it on. And indeed, the data that we've observed does set us up to expand this cohort. We're actually doing so very creatively right now, and we'll be announcing relatively soon an expanded cohort that will be moving into a phase two that we anticipate will be largely externally financed to support some of this effort in tumor types that we have previously demonstrated this combination benefit. The data that we've observed in second-line gastric cancer have set the stage for a study that is currently active at Memorial Sloan Kettering, and Yelena Janjigian's group presented data at AACR IO, and we'll continue to read out clinical findings now that we've achieved some lengthy follow-up time. That gives us an indication of the survival benefit. So we see immunologic activity, and next will be the clinically associated clinical activity in second-line gastric. Those data will help us understand where to take the program next in second-line gastric cancer or in an earlier disease setting, and that's something that we're currently discussing. Secondly, the data that we observed that was a complete clinical response in a patient with testicular cancer, seminoma, germ cell, opens up an enormous opportunity for us, we believe, in a cohort of patients that could be super selected. This is not the only case that we observed in the germ cell family where these cells have been quite active. So this is a study that's also very much under discussion. It allows us to homogenize the patient population and really interrogate dose and combination benefit in a population of patients that could enable a relatively rapid development pathway in an area of high unmet need. So the findings, I agree, have really set us now to do a deeper investigation. We have a small cohort where we saw some profound benefit and really quite remarkable long-term survival in a very refractory population. And so those data are now leading us to take these into extended cohorts, but really, I'd like to get them into a more formally designed phase two study as opposed to an expanded cohort in the phase one where we could have some stepping-off points with early signals of activity into rapid development pathways. Your second question was, I'm sorry. I forgot it. Can you remind me your second question? Emily Bodnar: Sure. Just around timing of launch for the severe pulmonary disease trial and any funding updates. Dr. Jennifer Buell: Uh-huh. Okay. So we are in the activation phase right now. And we're hosting the team is hosting a couple of activation visits really imminently as we speak, which will set us up for dosing of our first patient. We were targeting this year, but it will be no later than very early next year. So our goal is to work to get a patient on the cohort imminently this year, but we're working with the centers and the holidays, and so it's going to be at the latest very, very early Q1 of next year. So it's moving. Emily Bodnar: Great. Thank you so much. Dr. Jennifer Buell: Thank you. Operator: Our next question comes from the line of Mayank Mamtani with B. Riley. Your line is open. Mayank Mamtani: Yes. Good morning, team. Thanks for taking our questions. And appreciate the progress here on the broader allogeneic platform. So on the prior comment about the GVHD and the severe pulmonary inflammation condition, this program looks like multiple trials. Could you maybe share any details on the endpoints you're evaluating and maybe the number or kind of patients being enrolled? And, obviously, relative to where standard of care, for example, is in acute GVHD, what does clinical success look like? Would be good to hear. And then I have a follow-up. Dr. Jennifer Buell: Okay. Thanks very much, Mayank. There are a couple of clinical trials that are moving forward. There's quite a bit of interest in the products. And these are areas that we've been building on. Our preclinical models support advancing in our data now do so specifically in the pulmonary disease setting. Start with GVHD. This is a trial that's been funded preclinically and now clinically. So the preclinical activity is being conducted in advance in partnership with government collaborators at the NIH, the DoD, through an STTR grant. And those data are building off of one of our scientific advisors' really seminal findings that INKT cells have an important role. Not only do they prevent GVHD, they naturally do not induce GVHD. They prevent it and can mitigate it as well. Mechanistically, Jenny from the University of Wisconsin has elucidated that in some elegant publications. We are building on that work in both preclinical settings as well as now in the clinical setting. The clinical study will be funded and has been announced through the University of Wisconsin by an award that will enable us to interrogate number one dose, number two engraftment success. So dosing the cells after engraftment to increase the probability of success for engraftment. And currently, as you know, these cells do not require cytotoxic lymphodepletion and can be administered without the lengthy hospitalization that's required and sometimes intolerable to many patients that are undergoing these procedures. Therefore, there's an opportunity and an unmet need for patients who either cannot tolerate the toxic lymphodepletion or who are at high risk for engraftment failure or GVHD. The standard endpoints here from a regulatory perspective would be the GVHD presence or absence, essentially continuously, but finally, at day 100. So a relatively rapid readout in this setting. Based on the tolerability profile of these cells, the lack of a need for cytotoxic lymphodepletion, there is an opportunity that's really quite differentiated here. And we believe with the cell's durability of response, expect that this could be quite a differentiated therapy for patients beyond what is currently available. Success here currently still about half of the patients undergoing hematopoietic stem cell transplantation do succumb to GVHD. And so bringing that down by a fifty percent improvement or more would be substantially beneficial. And in fact, in interactions with experts in this field, even a twenty percent reduction could be really quite meaningful. But we're looking for not an incremental change, but a substantial benefit to patients. So that is moving along, and we're looking forward to continuing to announce some upcoming milestones associated with the program. And we'll also expect to have some clinical data early next year. We've already been meeting with teams on building on the findings based on some of the success observations we anticipate. And what would registration interactions with the agency look like. So we're in the process of those FDA interactions as well to ensure that this program is set up to move quickly. Pulmonary diseases. Well, I have no one better than Dr. Therese Hammond to speak to you about the selection of patients in this population. Now we will soon be posting the detailed eligibility of these of the patient population to clinicaltrials.gov the moment that formally activate the program for enrollment. So this will become publicly available relatively soon. In collaboration with Dr. Hammond, her experience with the cells in critical care and with patients who have really had a substantial benefit both on trial and through emergency use, we've designed a population of patients in which we're going to be able to interrogate a few very important endpoints. And I'll have Therese come on and speak a bit about the eligibility of those patients. We're being somewhat broad, effectively looking at patients with hypoxemic pneumonia. That's a substantial number of patients. We have some technical definitions that we've designed, and they're consistent with interactions with the regulators to interrogate survival, ventilator-free days, and other regulatory endpoints. What's different about our program is we also believe that we may, based on our observations from the phase one, we may also be able to prevent secondary infections as we had seen in a very strong signal of that in our earlier trials. And we may be able to combat some substantial challenges that we anticipate could be an important advancement, and those are atypical bacterial issues or fungal complications that could result in premature death in this population. So I'll turn it to Therese to build on that. Dr. Terese Hammond: Thank you, Jen, and thank you so much for your question and interest. I think all told, the idea behind this is to try to use endpoints that have been well established in acute respiratory distress syndrome and hypoxemic respiratory failure. So as Jen said, our primary endpoint will be 28-day mortality. But as we release more public information as we post this on clinicaltrials.gov, I think you'll find that there are some really intriguing secondary and also exploratory endpoints here. The concept of using these cells in respiratory disease and critical illness, I think, is really timely. I always say that I've learned so much of what I know now in medicine from listening to oncologists. And I think as a pulmonary critical care doctor, we are now the time is nigh for us to start incorporating cell therapies into the treatment of these really ill patients, patients that oftentimes have higher mortalities than most solid tumors or hematologic cancers these days. So the concept will be to look at a broad population of patients with severe pneumonia, who also have moderate to severe hypoxemic respiratory failure, and get a better sense both clinically and immunologically of what these cells are doing in this setting. So we're excited. I think we're excited on multiple fronts to use these cells and to see the results more as, almost as an agnostic treatment for a variety of organ failures. And I'll just sort of end this by saying that I think the integration between our knowledge in solid tumors, especially tumors that are very immunologically active like thymoma, and our increased interest in illness and pulmonary disease will be a very exciting avenue for us to pursue as we head into 2026. Mayank Mamtani: Super helpful color and look forward to that clinicaltrials.gov posting on the protocol. And then as you think about, like, having a product here, that can be commercialized, Jen, if you can maybe help us understand the manufacture scale-up activities, and how do you think of having a scale here, knowing that you've been investing in manufacturing for a little while, and how you may be thinking of maybe even a nondilutive financing or funding in case there are some stocking requirements for some of the use cases you are discussing? Thanks for taking my questions. Dr. Jennifer Buell: Fantastic question. And I'm remiss that I didn't bring this up sooner. The manufacturing team, as you know, has just have such an incredibly talented group of manufacturing experts and manufacturing scientists. We've been able to get ourselves, even since our last earnings call, we continue to exponentiate the number of cells that we can really pull out of some of our donors. We're working with a new team of donor groups that can bring in new donors. And what we're observing right now is that we not only can optimize our donors for enrichment, but also our manufacturing process could has continued to increase the number of cells. We're getting billions of cells per donor that give us not only substantial cost advantages but also the ability to stockpile. We currently have quite a bit of material on hand to launch our trials, and we're going to continue to build that stock. Now as I think about the future, and I particularly think about data that's coming out of this large study with potential multidrug-resistant organisms and benefits on mitigating those as well as addressing a substantial need in patients with severe pulmonary complications. We have, we expect and have launched some interactions for nondilutive financing that would allow us to expand beyond the current infrastructure that we have today. So I'll say stay tuned, but I think there's an opportunity for us. The cells are stable. We can store them for now stability beyond two and a half, almost three years. And we can demonstrate that they still function. Therefore, there's an opportunity for us to continue the production at scales that we as an organization don't necessarily need unless there is a substantial threat that would require a treatment beyond what our current commercial needs would be. And those are that's what we're getting ready for, and those are discussions that we currently have underway. And I think it's best fit for collaborators who either have substantial scale in the private sector or substantial interest which is in the public sector, and both of those discussions are actively underway. Mayank Mamtani: Thank you, Jen. Dr. Jennifer Buell: Thanks so much, Mayank. Operator: Seeing no further questions at this time, this concludes the Q&A session. I now turn the call back to Dr. Jennifer Buell for closing remarks. Dr. Jennifer Buell: Thank you all very much for your continued support. And I look forward to continuing to update you in the future. Operator: This concludes today's call. A replay will be available in the events and presentation section of our Investor website at https://investor.minktherapeutics.com/events-n-presentation. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to the NET Power Inc. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I would now like to turn the conference over to Bryce Mendes, Director, Investor Relations. Thank you. You may begin. Thank you. Good morning, welcome to NET Power Inc.'s third quarter 2025 earnings conference call. Bryce Mendes: With me on the call today, we have our Chief Executive Officer, Danny Rice, and our Chief Operating Officer, Marc Horstman. Yesterday, we issued our earnings release for 2025 along with an updated presentation, both of which can be found on our Investor Relations website at ir.netpower.com. During this call, our remarks may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements, due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. With that, I'll now pass it over to Danny Rice, NET Power Inc.'s Chief Executive Officer. Danny Rice: Thanks, Bryce. Thanks, everyone, for joining our call today. We are going to reference some slides in our latest Investor presentation. So I'd ask you to have this handy and follow along. Then after our prepared remarks, we'll open the line for questions from the analysts. Let's start on Slide three, talking about our mission. So back in 2021, the team at Rice Acquisition Corp. Two, which included myself, noted there had been a major underinvestment in baseload power generation for the better part of the prior decade. This is really driven by a confluence of three things. First, a broad social desire to decarbonize. Second, very healthy subsidies for renewables, which made these intermittent forms of power highly economic to deploy. And third, we had a very healthy grid system that didn't appear to need additional baseload power generation capacity. Load growth was flat. We could supplant existing baseload capacity with intermittent renewables and we'd be okay. However, what was really missing from this viewpoint was the reality that at some point, we'd eventually need to replace our nation's aging fleet of baseload facilities. In the U.S., the average active coal, gas, and nuclear plant is over 40 years old. And we ascertained that if we experience a load growth scenario, one that suddenly forces an industry that's been dormant for the last decade to have to begin building again and doing so in a regulatory environment that is increasingly making it harder, more expensive, and longer to get things built, we're going to be in a little bit of trouble. Unfortunately, that's the situation we find ourselves in here in North America. For the first time in a long time, we're seeing unprecedented demand growth for power primarily driven by artificial intelligence and data centers, also from reonshoring of U.S. manufacturing and growing residential demand for power. So it really begs the question, how do we balance the desire to reduce emissions without compromising access to affordable, reliable energy? The answer to that question will come from the companies that are innovating supply-side decarbonization solutions that don't compromise energy affordability or reliability. When most people think of clean power, they think of nuclear, hydro, geothermal, wind, and solar. But the metrics that really matter are carbon intensity, land intensity, water intensity, and air quality. Those are measurable. And more importantly, they are energy agnostic. So we took a somewhat contrarian view, one grounded in science and economics, that said, the lowest cost form of clean, reliable power can and should come from natural gas. Yes, we'll need to advance technologies to make it happen, but so too does every other form of energy in order to deliver the energy trifecta: clean, affordable, reliable power. We believed that back then, and we still believe today, that the lowest cost form of clean, reliable, affordable power will come from natural gas. And NET Power Inc. has stood out in its singular mission to transform natural gas into the lowest cost form of clean firm power. And we decided it was important that we pursue this mission in the public spotlight to educate and to help inform the paradigm-shifting narrative of natural gas as the cleanest, lowest cost source of baseload power. So the industry today is at a really pivotal point as are we at NET Power Inc. We can choose to continue to allocate our scarce resources, namely our financial capital and our human capital, towards what we've all been doing for the last decade or two, or we could take a step back, reassess, and allocate those resources towards solutions for what the world really needs looking ahead. The market is saying the highest value solutions are those that are reliable, scalable power that can be deployed as quickly as possible. This isn't just the hyperscalers saying it. It's local communities, grid operators who understand if we don't build new generation fast enough, the cost of power for ordinary Americans and small businesses will go way up. It's also the federal government who sees losing the AI race as an existential threat to America. The common denominator here across these cases is our ability to build reliable, scalable power as quickly as we can. And if this power can also be clean, that's the icing on the cake. With all things power, you can't have icing without the cake. Reliable, affordable power is that proverbial cake. I believe this is becoming an arms race for AI and this really is a call to arms moment for the energy industry. If you're a company that possesses the ability to design, build, and operate power plants safely, and in a timely manner, you should do it. If you have access to the natural resource inputs and outputs for power generation, I think you should find ways to utilize them towards power. If you know where and how to do this in a way that minimizes the impact on the environment, those resources should certainly be prioritized. That is the pivotal moment we really find ourselves at NET Power Inc. We have a choice to singularly keep our heads down the path of proving our oxy-combustion technology, which I would say is a very noble path and one that we believe is the right power solution long term. Or we can take our differentiated and valuable resources and skill sets and prepare to allocate them towards more pressing and more valuable near-term opportunities, ones that have proved to be successful will help fund our long-term ambitions in a more accretive way to our shareholders. The pivot that we'll discuss with you all today is one that stays true to our mission. To transform natural gas into the lowest cost form of clean, reliable power. At a cost that people can afford with reliability that we cannot afford to lose. And as I mentioned above, speed to market is paramount. We, as an industry, cannot afford to wait five to seven to ten years for new generation. We need to get building now for the benefit of our shareholders, our prospective customers, and the communities where power demand is increasing. That's what we intend to do. Responsibly, but with conviction. So turning to slide four. As we've noted on previous calls, the power sector faces unprecedented load growth through the end of this decade to support AI and data center build-outs. The market has shifted dramatically in favor of natural gas for all the reasons I've mentioned. Conventional gas turbines, reciprocating gas engines, all of them are being deployed as quickly as they can to meet data center demand. The U.S. is in a very fortunate place where we have over fifty years of ultra-low-cost natural gas reserves. In fact, we in the States have essentially stopped exploring for new gas many years ago simply because we possess a very deep inventory of proven reserves across the major sedimentary basins from Northeast Appalachia to Texas and everywhere in between. Our energy resources are totally different than any other country on earth. Unlike places like China, India, and most of Europe, the U.S. doesn't necessarily need to pursue new forms of energy today. We have the lowest cost energy to last us for many, many decades. What we really need to ask ourselves, are we advancing these other forms of energy because we need the energy or are we doing it to reduce emissions? Nuclear is probably the greatest example. It holds great long-term promise, but it's not necessarily needed to meet our energy needs today. Nuclear is more competitive in places that are short energy today and more so ones that are short natural gas. Europe comes to mind. But not here in the U.S. If the U.S. has sufficient low-cost gas to supply the AI industry, can we advance the technologies that reduce natural gas's environmental impact? Now if you thought we weren't going to need to build new gas power generation, you probably wouldn't think about CCS. But here we are at the beginning stages of a natural gas power super cycle and I think folks are just now beginning to see the relevance in the importance of CCS. For example, Google just signed the industry's first power offtake for a gas plus CCS project in Illinois. We think with the right projects in the right areas, there should be a lot more to come. Gas plus CCS can be meaningfully lower cost than any other scalable clean, firm power solution. That's always been our thesis, and we think it's about to begin playing out as such. So the signals beginning to form that natural gas with CCS is being embraced. Simply because natural gas power generation is quickly being accepted as the only scalable power solution that can be deployed on the hyper-accelerated timeline to meet accelerated need for 24/7 power. So let's flip to slide five and talk about the steps we're taking to best position our company for success. So we can call this an expansion of our business. We can call it a pivot. But at the end of the day, it's really focusing our resources on actionable opportunities to transform natural gas into clean, affordable, reliable power. Over the past decade, we at NET Power Inc. have built an incredible team of technical leaders to develop our oxy-combustion power generation technology. Which is arguably one of the most challenging and promising technologies in the energy sector second, probably only to nuclear fusion in both complexity and potential. And while the team has been diligently working to design, develop, and improve our technology both in the lab and at our pilot plant in La Porte, Texas, we've been assembling a small portfolio of ideal locations to site these NET Power Inc. projects. And you can really see that on the bottom of this slide. We really consider this setting the table for successful future commercial deployments. So within NET Power Inc., we possess a very good understanding of where our projects, where these NET Power Inc. projects make really, really good economic sense and also where they don't. And in most cases, for them to make economic sense, you really need three things. You need access to gas, the lower the cost, the better. You need proximity to a high-quality carbon sink. The lower the cost to transport and sequester, the better it is for the power economics. And if you can find someone to purchase the CO2 for an industrial use, that's even better. That just means lower power prices at the end of the day. And then there's proximity to high-capacity transmission lines. And in North America, the optimal combination of these features that I just mentioned are predominantly within deregulated competitive power markets, where anyone with the capability to build, own, and operate a power plant can do so. So for the last couple of years, we've assembled a couple of high-quality locations that were really meant to prove and commercialize our initial NET Power Inc. deployments. Because we had always been planning to license our oxy-combustion technology, we didn't really see the rationale to continue to secure additional high-quality locations in these and other areas. But I'll come back to the bottom of this page in a second. One of the setbacks we've faced at NET Power Inc. is the rising cost for our first facility and learning it was going to be much more expensive than we previously anticipated. And we've come to that hard realization that trying to fund and then build a $1.7 billion 200 megawatt first-of-a-kind facility before completing all of our testing is a low probability event. In a best-case scenario, we'd be looking at a COD of that first plant in 2030 or 2031. But just given the persistent inflation that we're seeing in the industry sector, in the energy industry sector, those costs could be higher in a few years. So we can either keep our heads down and continue investing 100% of our capital to advance our oxy-combustion technology, which we have great confidence can be the right long-term solution, or we can slow down that spending in order to free up some of our resources for near-term accretive opportunities. We strive to allocate our capital in a responsible manner that maximizes shareholder value and is aligned with our mission. The day that we can't do that will be the day we return that capital to shareholders. But today is not that day. I'm really excited to talk about the right side of this page for a few reasons. Conventional gas power with post-combustion carbon capture technology, or PCC for short, conventional power side of the facility, gas turbines and gas engines, are proven bankable technologies. The other half of that configuration, the PCC side, has also been proven, but it hasn't been widely deployed or as quickly as it should. And it's not necessarily a technology issue, it's been an economic and timing issue. It could take a long time to permit sequestration wells. It could take a long time to permit new CO2 pipelines. And if you're in areas where it's uneconomic to transport and sequester, or the underlying power project doesn't operate at sufficient uptime to justify the capital investment in PCC, in those instances, it's just not economic to install PCC versus just doing a simple cycle or combined cycle facility. But as we all begin to see the tangible support for adding new 24/7 power and the differentiated value the market is willing to pay for clean firm power, PCC becomes very interesting in the right geographies. So for us and everyone else in the power and data center space these days, speed is everything. We believe gas turbines with PCC can and should be the fastest to market and most cost-competitive clean firm solution for our prospective customers. So we connected with the Entropy team over the summer and discussed ways we could work together to accelerate the deployment of clean gas projects together in the U.S. Entropy, which I'll cover on the next slide, is a Canadian-based company. They're a bit under the radar here in the States, but they have the only operational natural gas CCS facility in North America and it's been running for a few years now. They've fine-tuned their solvent mixture for carbon capture from natural gas. And between our two companies, we recognized an opportunity to combine NET Power Inc.'s power generation and site origination skill set with theirs on PCC, to accelerate the deployment of clean gas power projects in the U.S. Which takes me back to the bottom of the page. One of the immediate commercial synergies we can realize with Entropy is the ability to accelerate deployment of their technology at NET Power Inc. sites, specifically starting with our Project Permian site in West Texas, and our second originated site in Northern MISO region. I think each of these locations is great in their own right. Our West Texas project has real potential to be the lowest cost clean firm power project in North America. We're targeting a below $80 LCOE for the first phase of this project and below $70 per megawatt hour as we scale to 300 megawatts and beyond. In our Northern MISO project, we can add much-needed 24/7 power to a grid system that is not seeing enough new baseload power showing up in the queue, not to mention zero new clean firm baseload showing up. So by utilizing our existing sites, we have the instant ability to deploy up to 600 megawatts in these key power markets with the ability to do even more through additional interconnect upgrades or behind-the-meter colocation. And through this exclusive partnership, both us and Entropy will have the ability to co-invest in equity of the projects we develop. So the price of this partnership is building high-quality, clean firm power projects in markets that value 24/7 clean power on an accelerated timeline. And over the course of the next several months, we'll be working several work streams in parallel with the Entropy team. First, we'll be finalizing definitive documents of the LOI. Second, we'll wrap up technical diligence to fully confirm this is the right path. As well as complete design work around our first project, which Marc will talk about in some detail. It's worth flagging that if we choose to complete this transaction, we'll be making a small strategic investment into Entropy to help fund their ongoing business and technical work supporting our joint development. I have to mention there's no binding obligation on the part of either of us or Entropy to consummate the transaction. But sitting here today, assuming everything continues to track the progress we've made to date, we expect to finalize the JV in 2026, in conjunction with preparations to FID the first phase of our West Texas project. So when we take a step back and we think about what NET Power Inc. is becoming, we're still a company with a singular mission to transform gas into the lowest cost form of clean, firm power. But instead of just having one solution to do it, we now can have two. And in a market that's operating with a very near-term focus, on scalable, reliable power, but still thinking about a cleaner end state, we think us having a high-impact deployable solution today to complement our game-changing long-term patented product is the optimal setup for our business, our shareholders, and our future power customers. Turning to Slide six, we wanted to briefly summarize the landscape of our new product portfolio, which has really evolved to prioritize speed to market and technology readiness. In summary, we have a technology in the oxy-combustion, the top line, that looks a lot like new nuclear. Ready in the 2030s, an LCOE in the mid one hundreds, with a pathway to sub-one $100 LCOE. Or lower with an extremely low environmental impact. We are keeping that technology in our arsenal and will methodically advance its development on the right timeline. But then skipping down to the bottom of the slide is where we'll be with Entropy today. Conventional turbines with capture, proven technologies, ready to be deployed today, in the right areas, areas that we control with very compelling breakeven economics. We think this can be the most competitive near-term solution that the market needs. Now. So turning briefly to Slide seven, I wanted to provide a brief overview of Entropy. As I mentioned before, we've signed an LOI to partner with them. To deploy its proprietary aiming-based solvent, solution for the build-out of clean firm power in the U.S. Entropy is based in Calgary and has a world-class ownership group that includes Advantage Energy, Brookfield, and the Canada Growth Fund. They operate the world's first and I believe it's the only natural gas facility equipped with post-combustion carbon capture and sequestration at the Glacier gas plant in Alberta, which has been operating consistently since 2022. 90% of CO2 emissions associated with gas power generation, we put it at the highest level of technology readiness, a TRL nine, which enables us to develop and deliver clean power hubs before the end of this decade. We're really excited to work with the Entropy team and get these clean firm power projects off the ground quickly because that's what the market wants. The Entropy solution coupled with our power generation knowledge and product approach, allows us to deploy a clean natural gas-fired solution meeting the current market demands. I think it would be helpful if we could share some of the early work we've already been doing around this program and these projects. So with that, I'd like to turn the call over to Marc Horstman, NET Power Inc.'s Chief Operating Officer. Marc Horstman: Thanks, Danny. Slide eight details how we'll be leveraging the existing infrastructure that has been established through our project permitting efforts to develop our first clean power hub. Where we're preparing to deploy gas turbines with post-combustion capture in a modular scalable configuration. This site represents a pathway to ultimately deliver up to one gigawatt of capacity as we expand over time. We are leveraging the existing Project Permian land position near Midland Odessa. Phase one is being structured around a 60 megawatt module and a clear expansion path to one gigawatt as demand and offtake agreements mature. Our gas turbines for Phase one are being prepared by Relevant Power Solutions or RPS. Carbon capture will be delivered through Entropy's proprietary amine solvent technology, which is designed to achieve greater than 90% CO2 capture. On the commercial side, we have already begun to set this project up for a successful FID in 2026. We've reached indicative terms with Oxy to purchase 30 megawatts and 100% of the captured CO2 under a long-term agreement. And we're in advanced discussions with another major oil and gas off-taker for the remaining capacity. One of the core advantages of this project is the ability to use the existing Permian infrastructure. Land, interconnect, gas supply, and offtake. With that foundation in place, we can deliver our clean firm power by utilizing gas prepared by RPS and paired with Entropy's PCC technology. This approach enables a faster development timeline and lower cost relative to greenfield alternatives. Strengthening Project Permian's position as a repeatable, scalable build-out platform. Our current schedule targets a financial decision in 2026. Assuming that is achieved, construction will begin in 2026 with commercial operation expected in 2028 or 2029. This project is structured to demonstrate speed, repeatability, and long-term commercial durability of our clean power product. Key steps in building a gigawatt-scale footprint in the Permian. Turning to slide nine. Slide nine focuses on our development pipeline. I want to provide an update on our Northern MISO project, which represents our next major clean firm power build-out alongside our Permian project. This project continues to progress on schedule. We're targeting commercial operations between 2029 and 2030. We secured the project site and are actively working with a local carbon capture and sequestration development partner. This partnership is central to our plan as the project is expected to utilize Class six sequestration for long-term CO2 storage. Our partner currently holds two Class six well applications and both are on track for permitting in 2028. Similar to the Permian, we're designing Phase one of this project to utilize gas turbines paired with Entropy's PCC technology. FID is targeted for 2027 and we expect commercial operations to come as soon as 2029. NET Power Inc. is in active dialogue with strategic off-takers for the power at this site. Overall, MISO is moving forward as an anchor site for our next phase of growth. Complementing the Permian program and reinforcing the scalability of our Clean Power product platform. Slide 10 shows that project permitting remains on track for its first power in 2028. Phase one is designed around a 60 megawatt module with more than 90% carbon capture and target availability of 95% plus. Our current estimates point to a levelized cost of energy or LCOE under $80 per megawatt hour. With interconnect capacity secured at 300 megawatts, we see a clear path to more than 750 megawatts of future expansion at this site. Our MISO project is progressing with first power targeted for 2029. The project features similar performance expectations, 95% availability and greater than 90% carbon capture. With a projected LCOE of roughly $100 per megawatt hour. This site also holds 300 megawatts of interconnect capacity and supports more than 400 megawatts of future phases. Moving to the right-hand side of this slide, we'll continue to leverage our people and skill to build a robust project pipeline. Following the same blueprint we have thus far. Finding the bright spots, securing interconnect spots, securing the pore space to sequester CO2, negotiating long-term supply and offtake agreements, and leveraging our strategic owners to establish clean firm power hubs that can scale into large multi-gigawatt campuses in the early part of the decade. These actions set the foundations for scalable, repeatable project execution. Big picture, we're designing these clean firm power hubs to come online beginning 2028 through 2030 with the potential to expand into multi-gigawatt campuses by the early to mid-2030s. We're excited for this next stage of our story and look forward to sharing updates on our progress in future quarters. With that, I'll pass it back to the operator to open up the line for Q&A. Operator: Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Nate Pendleton with Texas Capital. Please proceed with your questions. Nate Pendleton: Good morning. Thanks for taking my questions. With the pivot you announced here, can you provide your perspective on what makes NET Power Inc. uniquely positioned to take advantage of this opportunity compared to some of the others, given your prior focus on the Oxy-combustion cycle? Danny Rice: Yes. Good to hear from you, Nate. That's a great opening question. I think when you really get down to it and you look at the skill set that NET Power Inc. has, you know, it's not just about the skills, but it's about, like, the resources and assets that we possess today. I think it starts with having a fundamental understanding of both power, really the above-ground piece, along with a really, really solid understanding on the subsurface. I think, you know, when we take a step back and you just ask yourselves, like, why hasn't, like, gas with CCS really taken off in the past? I think it's because when you look at all of these potential projects that have really been proposed on the CCS side for PCC, it's always been through, like, a first sort of approach. Where's the best place to put a power plant? And then secondarily is, well, can we do PCC here? And if you're not close enough to the sink, if you're not close enough to a high-quality reservoir, the PCC economics fall apart pretty quickly. So it's all about, like, location, location, location, and finding the best place to be able to put these sites. You kind of pair that up with, as I mentioned in, like, the prepared remarks, how long it takes to actually permit a lot of this stuff? This isn't something where you can just wake up tomorrow and say, let's start doing PCC here. It takes years to be able to permit the wells, years to be able to permit the pipelines. That will be changing over time as you see permit reforms start to accelerate and shorten those timelines to get this infrastructure built. But sitting here today, I think the biggest differentiator, who has actionable projects in the right areas to be able to deploy. So I think one of the unique synergies that I sort of mentioned earlier was we're kind of sitting in this unique position where over the last several years, we've started to originate high-quality sites to put these NET Power Inc. plants. And these sites work just as well for PCC as they do for NET Power Inc. Because it's the same exact inputs and outputs, the same quality of natural gas comes in and the same amount of high-quality, high-purity CO2 comes out. And so as we think about the best places to be able to put PCC, NET Power Inc. is sitting here today with a couple of high-quality sites to put these projects. And so part of just the obvious synergies that we saw with the Entropy folks is, hey, we've assembled, like, really great sites to be able to put on NET Power Inc. plants. The deployment and commercialization of those NET Power Inc. plants is many years away, so we're going to have interconnect ready for 300 megawatts in West Texas, 300 megawatts ready in Northern MISO that could potentially sit there unutilized if all we said was we're going to wait to deploy NET Power Inc. This opportunity that we see in front of us is we can actually accelerate the deployment of a clean gas technology on these sites much sooner than we would if we just waited for NET Power Inc. And so you kind of end up in this place where, you know, when Marc's talking about getting to FID in '26 and COD in that first plant in 2028, that positions us to have the first clean, firm gas power plant online in the United States. Years ahead of the next guy. And that's really just the first phase. Right? I think over the course of '28 through 2030, 2031, if we do this right, we're going to have the ability to scale and develop multiple phases across both West Texas and Northern MISO. And so I think when you get to 2031, 2032, when the next competitor's clean gas project comes online, we're going to have three to four years of operational run time as well as three to four years of multiple deployments under our belts by the time the next project comes online. But the key to all of this is having the right location in the right areas that are really conducive to clean gas power and NET Power Inc. just coincidentally possesses those today. Nate Pendleton: Yeah. It seems like a compelling opportunity. So thanks for laying that out. Then if I may, looking at Entropy, there seems like a phenomenal partner from what I understand about their history and what they've been able to achieve. So with our Glacier project and their Entropy 23 solvent, it does seem quite a bit better than what's in the market today. On an array of metrics. So can you maybe elaborate on why specifically you chose to partner with them? And what you see in that technology that may make post-combustion carbon capture truly competitive economically? Danny Rice: Yes. I'll start and then Marc can certainly fill in the holes. I mean, first and foremost, I think they're just a great group of people. And I think, like, one of the things I've learned over my career is it's always better to work with great people. It makes the experience a lot more fun. And I think that ultimately is what leads to, like, the best potential economic outcome at the end of the day, partnering with good people. And the Entropy guys are top of the class. I think what is really differentiating about the Entropy folks is their operational experience with the solvent technology. I think because the industry as a whole hasn't really gotten off the ground, the real differentiators are the ones that have actionable real projects in the ground today and the Entropy guys have done that. And as a result of being able to have, like, real projects, you're able to fine-tune the technology. You're able to fine-tune the assets to optimize for performance. And so being able to have three years of runtime on the facility, they've been able to optimize and improve the performance of their technology, which is both the infrastructure, but also the solvent technology. And so they've been able to optimize their essentially, cocktail for capture. I think when you take a step back and you said what differentiates one solvent from the next, you know, there's a couple ways to measure it. It's the amount of energy it takes to separate the solvent from the CO2. It's the capture efficiency of the CO2. It's the degradation rate of how long does it take before that solvent breaks down. And then it's also the inhibition of that solvent to or the amines to become nitrosamines, which is not good. And the Entropy solvent, they've done a phenomenal job, you know, essentially, like, building what is a peer-leading sort of technology. And so that's really where this whole synergy comes in is they have what we would say is a TRL nine product that should and can be deployed in the power markets that need clean power the fastest. That happens to be the U.S. And we have these sites that are ready for clean power projects. So this sort of coming together of us enables them to accelerate the deployment of their technology in the largest market in the world, the U.S. power market. And for us, it allows us to accelerate the deployment of clean power projects that stays true to our mission. And I think where we both sort of win is we both will be participating in the equity in the investment of these projects side by side. So the goal here is let's stand up and develop, build, own, and operate high-quality, clean, firm power projects leveraging Entropy's solvent and PCC expertise, combine that with our power generation and site development expertise, we end up with this win-win situation for both of our firms. Nate Pendleton: Got it. I really appreciate the detail and thanks for taking my questions. Danny Rice: Yeah. Thanks, Nate. Operator: Thank you. Our next questions come from the line of Martin Malloy with Johnson Rice. Please proceed with your questions. Martin Malloy: Good morning. I wanted to ask if you could maybe talk broadly about the financing strategy with Phase one and then follow-on projects. It sounds like from Marc's comments with Phase one, you've got potentially all the power, you've got an offtake for and as well as the CO2 going to Oxy. Maybe if you could talk about just broad terms of the financing strategy in terms of being able to put debt on these projects? And also, I did see on Entropy's website that Brookfield is an investor in them. If that plays a role here at all? Danny Rice: Yeah. No, Marty. Great to hear from you. Those are really awesome questions. Yeah. I think starting on just the financing of these projects, I think when you take a step back and you look at just what we were planning to do on the NET Power Inc. side because, you know, NET Power Inc.'s oxy-combustion technology was going to be a first-of-a-kind facility. One of the things we told the market is, hey, we're most likely going to have to equity finance the entirety of that first facility. It's talking about $1.7 billion of what would most likely need to be 100% equity finance because there's no, you know, quote, unquote, bankable technology within that plant. And that's okay. And that's sort of common across new first-of-a-kind technologies. I think you contrast that against what we're doing here with Entropy with the gas turbines and the PCC. Like I mentioned before, you know, half of that facility is existing proven bankable technologies, the gas turbine, steam turbine, the HRSG, that's all stuff that is financeable because these are proven equipment that has real value in the market. So you buy the equipment, it maintains its value if you want to transfer or sell it. So that becomes very financeable on the project financing side. And so the way we kind of look at it is we know we're going in with at least half of the CapEx very, very bankable. With just project financing. So it's not going to require equity financing. I think you kind of wrap this whole thing within long-term contracted cash flows. And, you know, we're talking ten to fifteen years. Contracted cash flows, and you get to a place where you could probably project finance a good chunk of the total CapEx spend of this project. That is really just because, like, sort of what we're targeting in terms of how competitive is this from an LCOE perspective. I think LCOE isn't the end all be all in what project economics are. But knowing if you're on, like, the low end of the LCOE range, and you're able to command a higher price for that power, that implicitly says these are going to be, you know, mid-single to mid-double-digit sort of IRRs, 10% to 15% on a levered after-tax basis. That provides sufficient capacity to be able to have project financing on the whole thing. And so as we look at the financing piece, this isn't going to be NET Power Inc. is going to have to put up 300 or $400 million of equity dollars for the first project. It's going to be a much smaller portion of that. And then one of the arrangements that we have with Entropy is their ability to participate alongside us in these projects. And that certainly becomes really interesting for Entropy's investors, for Brookfield and CGF and Advantage. And potentially for other Entropy investors to be able to participate through Entropy in these projects alongside us. So the equity capital burden that we're going to be looking at on West Texas phase one, but also on the future phases as we expand this thing, the equity capital needs are going to be a whole lot less intensive on a per megawatt basis, on a per dollar of CapEx basis. Than we would have otherwise seen with NET Power Inc. projects. So it's sort of like a perfect setup where we're enabled to deliver clean firm power sooner. It's more accretive to our equity dollars that we're investing. On an accelerated timeline in terms of speed to market with new power generation. Martin Malloy: Great. That was very helpful. And then, for a follow-up question, just wanted to see if you could share with us maybe any anecdotes of conversations that you have had with potential off-takers in the data center market that are looking for this type of solution for their power needs and might be willing to enter into a longer-term offtake agreement. How they're viewing this? And I know you mentioned the Google announcement recently. Danny Rice: Yeah. I mean, it's quite interesting. I mean, today is really, like, us like, this is sort of, like, our coming out party as far as starting to say, these are the projects. This is the timeline for the projects. This is the carbon intensity profile. This is the reliability profile. Of us doing this in both West Texas and in Northern MISO on these sites that we control. I think the conversations have historically been around the NET Power Inc. technology. Which is a great technology, but I think the one just challenge on the NET Power Inc. piece is you're talking about projects that would start in 2030 or 2031. And then the second plant in 2033 or 2034. And I think when you think about the urgency of power for the hyperscalers, for these data centers, for AI, 2030, 2031, is eons, I mean, in dog years or cat years or pick any other animal that has a really short shelf life, like, the way they think about time value is totally different than we do to, like, a traditional financial lens where we think of time value as like a 10% or 12% cost of capital from year to year. I think they're thinking about things like multiples, multiples, multiples of that. And a project that comes online in 2031 is a 100 times less valuable than the same project if it could come online in 2027 or 2028. And so these conversations that we can now start having with strategic off-takers become a lot more real and a lot more interesting because we're talking about projects on a very accelerated timeline than the conversations we've been having with them in the past about projects starting in 2031 or 2032. And that all plays into, like, why this sort of partnership eventually makes a whole lot of sense that accelerates not just the deployment of these projects, but it really starts to bring forward a lot of the strategic conversations around strategic offtake with folks that are in dire need for as much clean, reliable power coming onto these grids or behind the meters as soon as realistically possible. So, I think this really sets us up to have much more constructive, much more tangible and real conversations. But at the end of the day, it all depends on our ability to continue to progress these projects and deliver the right solutions on the right timeline. And I think this partnership with Entropy allows us to do that. Martin Malloy: Great. Thank you. That was very helpful. Danny Rice: Yep. Thanks, Marty. Operator: Thank you. Our next questions come from the line of Betty Jiang with Barclays. Please proceed with your questions. Betty Jiang: Hello. Good morning. I want to ask about slide 10. And then just unpacking the economics of the project, what enables the sub $80 LCOE in the Permian compared to roughly 100 in MISO. And if you could just speak to maybe how you're thinking about the CapEx cost and then some of the other credit stacking attributes on the Permian project. Danny Rice: Yeah. No. That's a great question, Betty. And I think this is an important one for everybody to understand. You know, it really comes down to, like, two simple things that make a clean firm power project in West Texas lower cost than anywhere else. I would say almost in the world. And it comes down to the cost of the energy feedstock for the power generation. And in our case, it's natural gas. It just happens to be lower cost in West Texas than just about anywhere else in the country. That's really thanks to the oil and gas industry that's been able to unlock the shale gas potential out there. So there's that factor. And then the other really, really important differentiating one, and this into the subsurface side of things is you have the ability to utilize that CO2 versus having to just permanently sequester. And so what that really means is we have active buyers of that CO2 that are able to ascribe real value to the CO2 because it has an industrial use. So most other places where you're just permanently sequestering the CO2 and there's no value, you're having to pay somebody to take the CO2, transport it, and permanently sequester it. And so that comes out of the 45Q proceeds that you get. So in a place like Northern MISO, you know, we're going to collect the $85. And then from the $85, you'll pay a certain fee per ton to transport and sequester the CO2. And that's the way it works. In most of these applications for CCS. West Texas is a totally different animal. West Texas is an area that's been purchasing, you know, 10, 15 million tons of CO2 per year. For industrial use. For enhanced oil recovery specifically. And so that's a market where they can ascribe the value to purchase the CO2. Without you having to then pay to transport and sequester it because they have real industrial value there. And so in a place like West Texas, the plant is going to get paid the $85 per ton. But rather than paying somebody 20 or 30 or 40 or if you're in a bad area, 50 or $60 per ton, out of that $85 that you're getting paid from the 45Q, you're actually getting paid on top of the 85. So you can kind of think about it as, like, carbon stacking where you're getting paid the $85 in the 45Q, and then you're collecting another amount per ton to sell the CO2 to an industrial user. And the biggest industrial user of that CO2 in West Texas is Oxy. They have been pioneers in enhanced oil recovery for a long, long time. We're going to be using oil in this country and in the world for a long, long time. And so there's real industrial value that then gets valued back to these plants. So what that really means is the more value that we can capture on the CO2 side of this facility, the lower the power price can be. And so that's really, like, the really interesting setup that we see in West Texas is this is arguably the lowest cost place to do clean gas power. And so I think a lot of people are now starting to see a lot more power projects pop up in West Texas more so than anywhere else. In the United States. And it's specifically because of the low-cost nature of natural gas there. Then I think if you take it a step further and you say, okay, well, where's the most economic place to do clean gas power projects? It also happens to be in West Texas. Because of the utilization of the CO2. So, you know, we kind of recognized this way back in the day with NET Power Inc. We said, hey. The absolute best place to do our first NET Power Inc. oxy-combustion project is West Texas. And so that's why we already have the infrastructure in progress with the interconnect, with the site, with the offtake stuff for the CO2 is because we've been working on it for the oxy-combustion the same thing applies to what we're going to be doing with Entropy on the PCC side of things. So it's a great place to be able to demonstrate that clean, reliable, affordable power can come from natural gas. In the right areas. And so that project Permian site is going to be a great place to be able to demonstrate that on a very accelerated timeline with the Entropy folks. Betty Jiang: Got it. That makes a lot of sense. My second question, bigger picture. So if I think about your business model now, or prior, it was capital light. It was a licensing model. And others spend the money on the big capital dollars to build these plants. And now since you're pivoting to a more capital-heavy model, where in order to scale you have to grow and spend more money to build these plants. So how are you thinking about the project financing or just the longer-term capital needed to scale this business? Danny Rice: Yeah. No. It's a great question, and I think that's one of, like, the exciting parts about what we're trying to do here. And it all comes down to making sure that we're sizing these things appropriately for what NET Power Inc. can accommodate with its balance sheet and its access to capital. I think one of the things you're seeing with what we're doing on phase one, you know, we could just as easily say, hey. Let's go do a 300 megawatt facility right out of the gates. There's really not going to be any technology scale-up risk because we're deploying this PCC technology in a very modular small-scale fashion. So we could do four or five of what we're doing in phase one. We could just replicate that to do full 300 megawatts right out of the gate. But in doing that, you're going to get to a really large CapEx number, which is going to require a lot more equity capital than NET Power Inc. has access to today. And that's a position we don't want to put our balance sheet or our shareholders in that position. What we're really doing is we're really right-sizing the scale of these facilities to be able to accommodate NET Power Inc.'s ability to participate to its fullest in the economics of these projects, to be able to participate for our full economic potential without it being dilutive to the balance sheet or to our share count. And so phase one of that project is going to be smaller, but it's smaller by design. Both to prove this modular concept, which isn't really a concept that we have to prove because this is what the Entropy folks have been doing. Up on their Glacier facility. But it's really sizing in the way that we can establish a commercial project that requires only a small portion of our existing cash on hand. And so we're in this unique position where, you know, we're going to exit the year with around $390 to $400 million of cash. And one of the capital allocation decisions that we're actively assessing is, okay, how do we slow down some of the spending that we're doing on the oxy-combustion side? Because that frees up capital that we can then allocate to an equity investment into economic commercial projects on the turbine and PCC side on an accelerated timeline. And so we're in this unique position where we're going to be able to get project financing, expect to be able to get project financing for a good chunk of the capital spend on this first project. But because we're doing it at such a smaller scale compared to what we ultimately could be able to do it at, it makes the equity requirements on our side a lot more manageable and a lot more palatable knowing that what we really need to do is establish clean firm power generation prudently and then prepare to scale quickly to the 300 megawatts and above. And that sort of strategy is really, like, what we're running with at both West Texas and at the Northern MISO site, where we're going to start smaller. These are going to be sites that are expandable up to a gigawatt or larger. And so we're going to do that very prudently using our available capital on our balance sheet. But we know that if we do it right, and we're able to demonstrate that these are highly economic, highly strategic, and differentiated projects, that will really open up the door on our access to additional capital because the real prize for us is if we can put billions of dollars to work in projects that generate 15 to 20% after-tax returns to us. Access to capital becomes a lot easier to get. So the first key piece for us is being able to demonstrate economic differentiated projects at a small scale and that's ultimately what we're going to be doing with the first phase of this West Texas project. Betty Jiang: That's great. Thank you. Danny Rice: Yeah. Operator: Thank you. Our next questions come from the line of Wade Suki with Capital One. Please proceed with your questions. Wade Suki: Good morning, everyone. Appreciate you all taking my questions. And I might have missed it, but maybe just to dovetail on, I think, the Betty and Marty questions. Can you give us a sense for what Phase one might cost in West Texas or MISO for that matter, sort of including the carbon capture component? Again, might have missed it, but wonder if you could clarify that for us. Danny Rice: Yeah. Absolutely. We didn't really provide any specifics, but, you know, I think, you know, we're still going through a lot of the final preliminary engineering work over, like, the scope of the facility. The rough number just to put it out there for everybody is total installed CapEx on that facility will be between, call it $375 million and $425 million. And then when you just kind of go through the math, Wade, in terms of what that could be on an equity piece to NET Power Inc. If we're doing 50% or 51% of the equity and Entropy is doing the balance, if we can get project financing for 50% to 70% of the total CapEx, you know, that leaves you with around $200 million to $150 million to $200 million of total equity. And so if NET Power Inc. has taken 50% of that, you're talking about $75 million to $90 million on the equity side. Now it could be a little bit more, could be a little bit less depending on where things shake out on total CapEx. And total financeability. But that's probably a good rule of thumb of where we're going to be in terms of potential capital invested in that project. Like, a pretty compelling setup in my mind because we're sitting here with $400 million, you know, at the end of the year, $390 to $400 million. And so you kind of have 2026, you know, capital spend allocated to this of $80 million to $90 million that leaves sufficient capital for us for any projects that we want to FID in 2026 or 2027, whether it's West Texas Phase two or whether it's MISO Phase one. I think the real timing of being able to FID those phases, it's probably less on, like, availability of the real key stuff, which is the turbo machinery. I think Marc's done a good job, an excellent job, not just with securing these turbines for the first phase of West Texas, but really designing this facility so we've become very turbine agnostic. This isn't going to be one where we can only convert, we can only fix this thing with one of, turbo machinery. This is going to be one where we want to do this with recip, we can. If we want to do it with small-scale turbines, we can. We want to do it with larger-scale turbines, we can. So the product design that we're doing on this integrated plant is going to be a lot different than how people have thought about PCC in the past, which is every single plant is bespoke. On the PCC and power side. This is going to be very customized to be flexible to accommodate any which number of turbines. And so we think about the supply chain looking forward for phase two in West Texas, phase one in Michigan, it's not going to be about the availability of the turbo machinery. It's really going to come down to our ability to be able to contract the offtake for the power. To be able to secure the gas supply, the inputs, and the outputs knowing that a good chunk of the economics is already spoken for. The 45Q. And that's, you know, $85 per ton for each ton that you're capturing. And that really is helpful to being able to, like, have, like, a fully contracted cash flow for, I mean, that's twelve years. That really helps underwrite a lot of the upfront investment and the financing that we can get in place for these facilities. So we're pretty excited about what the setup could be on that, the timing, the cadence, and really, like, how accelerated this thing could take off. But the key thing that we're really focused on is let's make sure we have a highly successful FID on this first phase in West Texas. Wade Suki: Fantastic. That's very helpful. Appreciate it. Would you mind just expanding a little bit on the Entropy investment to the extent you can at this point? Danny Rice: Our investment in Entropy? Wade Suki: Yeah. Exactly. Danny Rice: Oh, it'll be a small investment. I mean, the Entropy team is a fantastic organization. You know, as we look at collaborating with them on this program, it's going to require technical resources from both our side and their side to make this happen. Really, it's not so much on, like, the project side, but it's on, like, if you think about the product, and the product roadmap and the program that product is within, it's going to require engineering resources from both their side and ours. And so we said, hey. We'll make an investment on your behalf into your business. So it's a small equity investment. But it's an important one because it gives them the resources to be able to contribute their people and their skill set to ensure that we deliver the right product on this accelerated timeline. Wade Suki: Thank you. One last one if I could, Minh. I apologize. I don't mean to press it here. But, yeah, look. Just kind of taking a step back and, you know, you and I might have discussed this in a previous conversation, but as I look at the business now, kind of new strategy, I guess what's the rationale for being a public entity? And again, hate to ask, mean to be abrasive or anything, but just kind of curious how you think about that. The current chart pivot, I guess. Danny Rice: Yeah. I think, no. It's a totally fair question. It's a question I ask myself every day. And it's not because we don't like being a public company. I think it's really important that we're a public company. The access to capital as a public company is unparalleled. But I think it's really important that if you're a public company, you have the ability to access that capital and that is really a function of do you have places to invest that capital, right? And I think on the NET Power Inc. side, for the standalone oxy-combustion, it is pretty hard to justify why do you need to be a public company if you have all the dollars you need to advance the technology. And the capital needs you're going to need for that first project are way more than you'll be able to capture as a public company, it becomes a harder proposition for standalone oxy-combustion. I think when you now introduce a business that has real actionable projects that can use capital sooner rather than later, and use capital not for the sake of being able to spend money, but invest money into economic projects. That becomes a lot more compelling setup for us to be a public company. And then I think, like, the other part of it is there's no other clean, firm public power company in the space today. Going to have projects online this decade? Yeah. You have the nuclear folks that are out there, but they're in, like, 2030, 2040 sort of time frame. And so this new sort of NET Power Inc. I think, is really differentiated for public market both the institutional crowd, but also for the retail crowd of hey, at the beginning of a natural gas super cycle. What is the absolute best way to be able to play this thesis if clean firm power coming from natural gas is going to be the prevailing source of clean firm power for the next decade. Right now, there's really no the only way to play that really is NET Power Inc. But NET Power Inc., you're making a huge technology bet. A technology that's going to be commercialized in 2030 and beyond. Now, we really bring a whole lot of that actionability forward. With projects that can come online in '28. Years ahead of the competition. And so I think NET Power Inc. now becomes a really interesting position where we have the ability to be not just the premier clean, firm power company, but the one that's actually able to put more capital to work in a very accretive manner both at the project level, but also on behalf of our shareholders. So I think all of a sudden, we're now in a much more compelling place to be able to why it makes sense for us to be a public company. Wade Suki: Understood. Great. Thank you so much. Appreciate it. Danny Rice: Yeah. Thanks, Wade. Operator: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Danny Rice for any closing comments. Danny Rice: Yes. Thanks, everybody, for joining us today. I know the world is quickly evolving. The market is changing. Power demand is exploding, and it's an exciting, exciting time to be in power. And I think, what you really see from us here today is the ability for our team to proactively and at the same time responsibly adapt to this quickly changing market. And I think, you know, when we look forward a couple of years and look back on today, I think everybody hopefully, everybody says, wow, that was a really, really smart expansion of your business to be able to capture this market faster than everybody else. While still preserving not just the mission, but preserving this really differentiated oxy-combustion technology. That combined with our ability to become experts on all things clean gas, really sets NET Power Inc. up for long-term success. So this is the beginning of it. And we're really excited for your support. And we're really excited to come back and visit with you all in a few months and show the progress that this team's going to make. So thank you again for your time today, and we will always be available to answer any additional questions or comments you all have. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good morning or good afternoon. Welcome to Swiss Re's 9 Months 2025 Results Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group CEO. Please go ahead. Alexander Andreas Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate that you're taking the time today to listen to us and also to engage into a hopefully very vivid Q&A. Before our Group CFO, Anders Malmstrom, walks you through the details of our 9 months results, I'd like to start with some brief remarks as usual. After another strong quarter with a profit of USD 1.4 billion, we're pleased to report a net income of USD 4 billion for the first 9 months of 2025, corresponding to an annualized return on equity of 22.5%. This puts us very well on track for our full year net income target of more than USD 4.4 billion. We benefited from exceptionally strong P&C results in the third quarter, helped by a low burden of large claims. These amounted to around USD 200 million in the quarter, well below expectations across P&C Re and Corporate Solutions. The result of the second consecutive benign large-loss quarter is that both our P&C units are tracking well ahead of their respective targets. This is the principal reason why we're in such a good position at this point in the year. You've heard me stress our two key priorities, and they are unchanged. Firstly, deliver on the more than USD 4.4 billion group net income targets; and secondly, increase the group's overall resilience to improve long-term delivery. Now on resilience. This journey started with a complete turnaround of Corporate Solutions and the implementation of a new reserving philosophy, which we subsequently extended to P&C Re, 2 years ago. We also successfully addressed P&C Re's in-force U.S. liability reserves last year. This year, we've been focused on further improving the resilience of the third business unit, Life & Health Re. After 3 quarters, Life & Health Re net income stands at USD 1.1 billion, which is actually a quite solid result and a very important contribution to the group's earnings. But Life & Health Res' result has been too noisy. As mentioned at our half year results, we continue to focus on reducing volatility in smaller portfolios, where experience has lagged expectations, thereby producing negative variances to our expected results. These negative variances are unacceptable, even as our largest portfolios, including U.S. mortality, performed in line with expectations. In the third quarter, we, therefore, decided to partially accelerate efforts to strengthen the resilience of the in-force book based on detailed reviews of underperforming portfolios. Some of these are still ongoing and will be completed at the end of this year. We have full confidence in reaching the group's net income target of more than USD 4.4 billion over the year. But given where Life & Health Re stands after 3 quarters and given our focus on resilience, we feel it is prudent to flag that in a base case, we are likely to fall short of the USD 1.6 billion Life & Health Re full year target. We will do what's required to get this business to produce results closer to expectations. At this point, and I emphasize, we do not expect significantly outsized impacts from Life & Health Re in the fourth quarter relative to Q3. So you heard me emphasizing that. We will update you on this on December 5 at our Management Dialogue Event, and we're looking forward to that. Let me also briefly touch on new business CSM generation across our segments. We remain focused on disciplined underwriting as profitability continues to be our priority. To reemphasize again, we don't have a top line target. New business generation remained resilient with a new business CSM of USD 3.9 billion for the first 9 months, slightly down from last year's USD 4.2 billion. The decline versus last year, partially reflects the more challenging pricing environment that we're facing in some lines of business in the P&C business, but also in Corporate Solutions. It also reflects our continued focus on portfolio quality, including the setting of prudent initial loss assumptions. Overall, we're still satisfied with the margins we're able to generate across the businesses. Importantly, we continue to maintain discipline on terms and conditions and attachment points. I look forward to presenting further details on our group priorities at the upcoming Management Dialogue Event on December 5. On that date, we'll also announce our financial targets for 2026. I'll be joined by our Group CFO, Anders Malmstrom, to provide an update on key topics across our businesses followed by then an extended Q&A session. I think with that, I'm happy to hand over to Anders to give you more flavor. Anders Malmstrom: Thank you, Andreas. And again, good afternoon or good morning to everyone on the call. I will make a few remarks on the results we released this morning before we go to the Q&A session. Andreas has taken you through the highlights of our overall strong results for the first 9 months of the year. Let me add a few further details. On revenues, the group's Insurance revenue amounted to USD 32 billion in the first 9 months, down from USD 33.7 billion last year. The USD 1.7 billion decline has a few major drivers, most of which were already highlighted in the first half of the year. At Q2 2025, we had indicated that group revenues in the second half would be around USD 1.5 billion higher than in the first half. In line with this guidance, Q3 revenues were around USD 600 million higher than the average quarterly revenue in the first half of the year, reflecting the increased claims seasonality. While Q4 is also projected to be higher than Q1 and Q2, we now expect revenues in the second half to be slightly below the USD 1.5 billion previous estimate, primarily due to our continued focus on portfolio quality in P&C Re. As you have heard from us by now, we do not manage for top line. Let me move on to the Insurance Service result of our businesses. In P&C Re, you will continue to notice a decline in the CSM release versus last year's period. The USD 2.1 billion release in the first 9 months is down from last year's $2.7 billion. This decrease is driven by the earn-through of prudent initial loss picks, including impact of new business uncertainty allowance and slightly lower margins. Experience variance and other, which captures all variances relative to initial reserving assumptions, contributed positively by USD 549 million in the first 9 months, including $447 million in the third quarter alone. This quarter's positive experience was mainly attributable to large nat cat losses that came in $678 million below expectations, bringing year-to-date favorable nat cat experience to USD 900 million. In addition, P&C Re benefited from a one-off risk adjustment release in the third quarter in the amount of USD 170 million. Against this very favorable backdrop in the third quarter, we selectively added to both current and prior year reserves. Year-to-date, we have added around USD 300 million to our current year reserves in P&C Re. Nominal prior year reserve releases stand at around $150 million for 9 months, which means we added around USD 100 million in the third quarter. Please note that no further actions have been necessary on the U.S. liability portfolio we strengthened, a year ago. On the back of all the pieces I just described, P&C Re reported a very strong combined ratio of 71.3% in the third quarter, resulting in 77.6% for the first 9 months, well below the 85% target we have for the year. Moving on to Corporate Solutions. The 9-month CSM release of USD 668 million is above last year's $628 million, driven by higher in-force margins. Experience, variance and other was positive at USD 111 million. This reflects favorable large loss experience and a positive prior year reserve result, partially offset by an allowance for potential late claims reporting. Large nat cat claims of USD 60 million came in below expectations for the first 9 months, while large man-made claims of $282 million were slightly above, partially offsetting the favorable nat cat experience. Corporate Solutions continues its track record with a 9-month combined ratio of 87.1%, below our target of less than 91% for the full year. Finally, on Life & Health Reinsurance, as Andreas mentioned, we decided to partially accelerate our efforts to strengthen the resilience of the in-force book, following detailed reviews of underperforming portfolios. This resulted in negative assumption updates hitting the P&L in the amount of around USD 400 million for the first 9-months, [ there ] was USD 250 million in the third quarter. The large majority of the third quarter's impact related to selected Health business in the EMEA and ANZ regions. The fact that this hits P&L mostly reflects the onerous nature of these portfolios under IFRS, and this makes it particularly important that we strengthen them sufficiently. We have also seen negative claims and volume developments of approximately USD 250 million year-to-date, primarily in the third quarter. Q3 was mostly driven by the Americas region, which had a relatively poor quarter in terms of experience, driven by volatile large claims. Importantly, over year-to-date claims experience in our largest -- overall year-to-date claims experience in our largest portfolios, which includes the U.S. Mortality, which was strengthened before our transition to IFRS, continues to perform in line with expectations over the first 9-months. Despite all of the actions and impact, Life & Health Re has produced a net income of USD 1.1 billion in the first 9 months with $280 million achieved in the third quarter. While some of these assumptions reviews also affected our CSM balance in addition to the P&L, our CSM overall remained unchanged at USD 17.4 billion compared to year-end 2024, supported by attractive and prudently priced new bases and favorable FX impact. A few words on investments before concluding with SST. We benefited from a strong investment result, with a return on investment of 4.1% ahead of last year's 3.9%, supported by strong recurring income standing at USD 3.0 billion in the first 9-months. We estimate the group's SST ratio at 268% as of 1 of October 2025, 11 points higher from where we started the year. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A. Thomas Bohun: Thanks, Andreas. Thank you, Andres. Hi to you from my side as well. [Operator Instructions]. With that, operator, could we start with the first question, please? Operator: The first question comes from Kamran Hossain from JPMorgan. Kamran Hossain: A couple of questions. The first one was just on the Life side. I think the commentary you've given around like quantum in Q4 versus Q3 is helpful. I just wanted to clarify a few things. So when you say it's not going to be a much larger quantum than Q3, I'm just trying to understand whether you mean the $250 million you flagged or the $450 million negative experience in Q3 stand-alone? Because there's quite a difference between the two numbers. So any kind of clarification on kind of what that comment kind of meant slightly more precisely? And the second question is in terms of like portfolios left to review, can you maybe talk through kind of the proportion you've got left to review, like what proportion is of kind of Life reserves? How meaningful is this? I'm hoping you're going to say a low number, but I just kind of wanted to hear what you say on that. Alexander Andreas Berger: Thanks, Kamran, maybe I should give Anders the first words on the size, and then I might jump in to give you a bit of background then. Anders Malmstrom: So, Kamran just on the -- when we talk about outsized or not outsized impact in Q4, we basically mean the $250 million impact that we saw in Q3. That's what kind of puts it in a box. So it's not much left. There's a few portfolios that we have to go through. We need to finalize that. And yes, by the end of the year, we should be done. Alexander Andreas Berger: Yes. And maybe just to give you the perspective, the bigger picture. So we have three phases that we looked at, and that's exactly why we come to that small number in comparison. So Phase 1 was introduction of IFRS. That's where we addressed the large portfolios, in particular, critical illness in China and U.S. mortality. Then we had, as a second phase, midsized portfolios, that also have been digested. And now we were turning the attention to the remaining smaller portfolios that are distributed across the regions and also lines of businesses. So what we needed to do, is really to address the individual noise in those many small portfolios, they are actually quite modest, but we needed to address the accumulation of this noise. And that's exactly why we took this view now, and that's the background to the question that, or the answer that Anders gave you. On the details of the regions, I think we will give you more details in the management update on the 5 of December. Operator: The next question comes from Andrew Baker, Goldman Sachs. Andrew Baker: First one, just on the Insurance revenues. So I hear what you're saying on you don't manage the top line. But are you able to give a bit more detail on which areas of the business has led for the, I guess, change -- slight change in view in the second half. Obviously, you previously said it was sort of $1.5 billion, you're expecting it to be higher than the first and now it seems like slightly below that. So just any more color there would be really helpful. And then secondly, are you able just to confirm how much of the uncertainty allowance you've added so far this year and what you expect this to be by the end of the year? Alexander Andreas Berger: Okay. Maybe I'll take the first one on the revenues. So maybe just to give you a bit of context again, and I think maybe it's a bit repetition from the first half. But overall, when I talk about $1.7 billion year-over-year lower, $1.5 billion, I think we already told you. First of all, it's the pruning actions on the P&C Re side, which is about $0.5 billion. It's the termination of an external retro transaction on the Life & Health Re side, which is $400 million, it's a nonrenewal of the Irish MedEx business, which is about $400 million, and it's then the sale of the P&C EMEA IptiQ, which is about $200 million. So that explains basically the majority of that. So overall, the remaining piece is then really coming from the P&C side, where we have this NDIC feature that we talked about, the netting of the commission with the -- that we didn't do before that and then just continued management of the business itself. So I think that explains it. I think that should be clear now. Anders Malmstrom: On the uncertainty note, I think this is a prudency measure. We're not quantifying it. Operator: The next question comes from Shanti Kang, Bank of America. Shanti Kang: So it was just mainly on the Life & Health side. So I understand that the L&H miss today won't derail the group net result target. But I think it does raise a couple of questions about the run rate into 2026. So I'm just curious whether or not the adjustments today will adjust the forward view on the run rate of the Life & Health book, i.e., if that's like a structural concern today that we should be thinking about? And then just given the fact over last 6 quarters, we've had a number of assumption updates. I get that you're saying you'll complete that in the full year, this year. But do we need to take some more caution on our assumptions for those into the next year, i.e., can we get a bit more comfortable as you think about there being no more updates or repeats in the future? Alexander Andreas Berger: Maybe let me do the intro and hand over then to Anders. Maybe just to clarify, we could have let the noise continue, that is another option. But -- and then we could have made our targets also in Life & Health. That's the one option. But again, we want all our business units to look healthy across all portfolios. We want all business units to play their role that they play in the portfolio of Swiss Re Group. We'd like to see the diversification benefits come through over time and consistently. Life & Health is decorated to P&C. That's the strength of our portfolio. Within the P&C, CorSo is not so correlated to the P&C Re business because we buy external reinsurance. So we think we've got a pretty clean setup at group level with all 3 business units. That's why we want all units to play their role and also to have a healthy portfolio to play optimal role. Anders Malmstrom: So maybe just to add to what Andreas said, I mean, I think it's really critical that we get that through. And that's the last phase of -- we started with large portfolios and now we're doing the small ones. But then this is done. We're going to give an update on the target and the expected run rate for the next year's -- at the management dialogue. And that's where you can also then expect a bit more details how this will perform going forward. Operator: The next question comes from Ivan Bokhmat from Barclays. Ivan Bokhmat: My first question would be on Life & Health as well. Maybe you could talk in a bit more detail about the underlying reasons for deterioration in those Health portfolios. Maybe there are any common drivers in these markets that developed negatively and what would make them unique compared to the better performing ones? Just to see if there's some trends that we can monitor from our side. And my second question, I mean, Anders, considering you suggested that the Q4 adjustment will be smaller than $250 million and your run rate is still quite comfortably getting you above $4.4 billion. I was just wondering if you consider taking any additional steps to add prudence in Q4 beyond the run rate that you have shown so far? And maybe if you could just highlight a bit more color on the movements in reserves that you have done year-to-date by portfolios. Anders Malmstrom: Okay. So let me start on the Health side. And this is -- I mean, all the actions are really driven on Health portfolios in EMEA and then APAC. And I think one that I can actually highlight is Australia. You might have seen also the press release that we put out, that in Australia, we're actually pausing new business because the environment is just not sustainable, and this is a market issue. This is not a Swiss issue. This is a market issue. That's really driven by the environment that we have higher claims than what we expected, and that's why we paused that business. So that's -- I would say that's the core. We give you more details then at the management dialogue also on the other portfolios, but that's a key element here. And we're not afraid of actually stopping or pausing a new business, if that's necessary because it's not sustainable in the market. I think overall, when you look at the reserve development, I mean, I can reiterate what Andreas just said in the beginning, I think we have two main objectives. One is to meet our financial targets and the other one is to then strengthen the resilience. We've done that already, I think, year-to-date, you can see that clearly. P&C, we talked about. Life & Health, we also -- and P&C, we also used the benefit of having a risk adjustment release in Q3 of $170 million. We immediately kind of re-purposed in that because we also had a very positive development coming from the nat cat. So all that together helped us to put more resilience in the balance sheet. It has nothing to do with the U.S. Casualty. It's completely different to that, but we took the opportunity now, very strong nat cat results, risk adjustment release to strengthen the balance sheet that I mentioned in my opening remarks. Operator: The next question comes from Iain Pearce, BNP Paribas. Iain Pearce: They're all on new business CSM. So when I look at the new business CSM for the non-Life divisions, if I just look at Q3 stand-alone, they're down by 30% to 35%. I'm just wondering if you could run through why there's been such a big move? I know it's not a massive quarter for P&C Re, but for CorSo, it seemingly is quite a big quarter on new business CSM. So why are they down so much in Q3 standalone? And same for the Life business, where clearly, ex-MedEx, it still looked like the new business CSM would be down quite a lot. So just trying to understand that as well. Any comments would be really useful. Alexander Andreas Berger: Just quickly before Anders answers this MedEx that was mentioned here, not Life & Health, that's actually the CorSo MedEx business in Ireland where the minus $400 million was stated. Anders Malmstrom: Yes. So I think CorSo is clear. I think Andreas mentioned it. It's really the MedEx business. On the Life & Health, you -- I mean, it can be a bit lumpy here because Life & Health, obviously, it also depends on the transactions. We didn't have transaction in Q3. So year-over-year, we were slightly down. Actually, compared to Q2, we're up. So I think overall, I think I'm actually pretty pleased with the Life & Health CSM despite having not had transactions. Obviously, when you have transactions, you have additional CSM. And then on the P&C side, I would say it's mainly driven by the property prices that are coming down that we see. I think other than that, we're pretty comfortable with the new business that's coming through. Alexander Andreas Berger: Yes. And let me make a general statement again on this top line growth aspect versus profitability bottom line view, and the reason why we don't put out growth targets because and I repeat myself again, in our industry, there's no problem to grow. If you want to grow, you can grow. And we learned our lessons, by the way, ourselves also in Swiss Re. The importance here to manage volatility and to manage cycles. And this is critical. Our customers, the [indiscernible], but also the corporates and the public entities, they rely on us being resilient even in stressful market cycles and market environments. And that's why we put the emphasis really on the healthy portfolio and also on growing the bottom line, which is that forces us also to find attractive growth pools where we can then go after. So that's the general statement I wanted to make. Operator: The next question comes from James Shuck from Citi. James Shuck: I'm probably going to go over a couple of areas again, if you don't mind. So on Life & Health Re, I think on the call last time, Anders, I was kind of asking you about the outlook for the experience, variances and loss components, which have been negative previously. And obviously, we've got the same thing coming through just now. You previously indicated you expect those to trend to zero. I presume that the actions you're taking today means that, that trend should actually accelerate. So really kind of just getting an insight into that kind of glide path to getting to zero. So should we expect 2026 to be a clean slate in terms of the experience, variance? And I kind of think linked to that, it's kind of the CSM amortization rate is much higher than the 8%, and I think when I asked previously, you suggested that it would come down. It wasn't clear to me why it would come down. And obviously, you've guided 8%, it's running around 10%. So just keen to get an outlook for the amortization, please. And then secondly, it was also actually on the P&C new business CSM, which is obviously down very sharply in the third quarter, as Iain highlighted. I understand what you're saying about not having top line targets. And -- but on the other hand, margins are very good and should be able to deploy capital incrementally. So if I look at your target capital over time in recent years, you haven't actually managed to deploy any incremental capital over the last kind of 2 or 3 years, and I'm kind of wanting to get an insight, particularly on that P&C Re new business CSM, in terms of the outlook there? And I appreciate you might return to this at the Management Dialogues Day, but I think it's an important point to try and get this feel for, are you still able to grow your earnings through a soft cycle? Anders Malmstrom: Yes, sure. So maybe, James, I'll start on the Life & Health side. I think you're absolutely right. I mean the whole objective of what we're doing here is to reduce the experience variance, and it should come to zero. I mean you will always see normal volatility. That's clear over the quarters, but the volatility for the full year should be close to zero, if not actually positive. That's where we're going to go in the long run. So that's why we took these actions. The other reason also, I think when we looked at this portfolio, all assumption changes here went through the -- because it's onerous business. It's even more important that you take these actions upfront because you don't want to have that noise in the P&L. I think that's really the driver. On the CSM release and the CSM amortization, I think we mentioned a couple of times now that we're running higher than the guidance we gave you. I think this is something that we will address at the Management Dialogue. We give you full guidance where we're going to expect that coming forward because we need to make sure that the guidance is what we see, and we saw a higher release than what we guided you to. On the P&C new business CSM, that's down year-to-date. I mean maybe another -- just -- I think you mentioned this before, your colleague mentioned before, we obviously talked now about the smaller portion that was renewed in Q3. That -- because until Q2, the CSM was actually in line with the previous year. Now you see it coming down from a small portion that got renewed, mentioned, of course, it was driven by the prices, also driven by the casualty pruning that we still continue -- that we say continue on a relative basis. I think Casualty overall, I think we're fine now with the market positioning. I mean, look, the outlook, I think we will see. We're very comfortable with the margins that we're writing. Andreas mentioned that before. We're still in a good position, but we manage to margin, and we just don't manage to volumes. And actually, in our view, that's why CSM is a good measure. That's why we're also explaining it to you that way because it talks about value. It doesn't talk about volume, it talks about value. But obviously, it reflects, if you have business mix changes in the business where you basically move to the more profitable ones, and that's exactly what we did. I don't know, Andreas? Alexander Andreas Berger: Yes. And I mean I can maybe just report out quickly from the discussions I have on the renewal side. We're just in the midst of the negotiations. So I don't have any indication to panic. We're still in very healthy territory, and I'm very careful to say, to guide you here because we're in the midst of the discussions. But you can already sense that I'm not pessimistic here about the outcome of the renewal. It's very constructive. And in cases, even, I would say, for me, quite optimistic. So let's see. The teams are working hard. Operator: The next question comes from Vinit Malhotra, Mediobanca. Vinit Malhotra: I mean some of these topics have been addressed. So I will just have maybe one theoretical question really. The fact that we've had 2 good quarters on tax means obviously, the targets are achievable easier, a bit easier. So I would say, was that one of the reasons why this Life & Health review was initiated? Or actually you were -- you would have initiated that even if 2Q and 3Q were normal cat quarters? Because in that instance, it might have been that the targets would have been a bit more difficult to reach. So I'm just curious about that. And also one question, if I can ask on Corporate Solutions, where the price cuts is a bit worse, minus 7% on just a quick check of 3Q. Could you comment on how the inflation or business mix or something else is changing to get good numbers on CorSo? Which obviously are helped by cat, but I understand even the underlying is good. So could you explain a little bit about the margin management at CorSo with minus 7% pricing? Anders Malmstrom: Just maybe quickly on the first one. Yes, of course, I mean, we are doing quite well at group level. And that helped us to take the decision on the Life & Health actions, and this is very clear. And by the way, we're consistent with all the meetings that we had before the call, in the last quarters or months where we continuously were telling that resilience of the group is really one of our two priorities. And should we be in a position to do that and still make our group target, why wouldn't we do this? So I'll bring this what you call theoretical question to a very concrete action now. On CorSo, I think CorSo, like all other companies in that sector have produced very good numbers. They're in a very healthy margin space. If you see slight reductions on rates, that's the same as in reinsurance, we're still very, very healthy in the longterm pricing adequacy as we call it. So I'm not nervous about this. Now the -- what's the focus of CorSo? CorSo doesn't want to play in this very commoditized space where the pricing pressure is really increasing due to increased competition. CorSo wants to play their advantages in the differentiation, international programs and alternative risk transfer. And I think this is a sweet spot because some of the very large corporates take premium out of the market, and manage it via their captives. And there, they need support through alternative risk transfer tools and solutions. The same actually also you can see also in the reinsurance market. The very large players think of taking business, reinsurance premium out of the market and try to find structured solutions, maybe some access to alternative capital solutions, et cetera. And again, here, we are best positioned to give not only advice but also solutions and those also generate revenues. So overall, for us, not a situation to be nervous in, but we're observing, obviously, and we're growing in areas predominantly where they're not correlated with the lines of business that have a stronger decline in rates. Operator: The next question comes from Will Hardcastle from UBS. William Hardcastle: The first one is just coming back to something we discussed a bit, but just trying to verify that $250 million of our outsized comment a bit relative to that. Are you saying there's not much chance that it could escalate further from this $250 million already done or another $250 million? And just to be clear on it, have you moved up on an actuarial margin basis? Or this is still best estimate still? Coming back to the $1.5 billion higher revenue 2H on 1H. FX hasn't really changed too much, and I guess you knew the parameter deviation already. Of the reduced number that you're thinking about now, how much of that's been a bigger NDIC impact and therefore, maybe a combined ratio offset? Or is it purely organic growth driven? Anders Malmstrom: Okay. So just to confirm on what we said -- what we meant is that for Q4 because we continue to clean up the Life & Health, the smaller Life & Health portfolios. You should not expect an impact that is bigger than the impact we saw in Q3. So to your question, to be very precise, this would be on top of the $250 million that we see. It's not more than $250 million in Q4, that's in a way, what I would expect. Now we haven't done it. We're not fully done. So we're going to give you the final update at the Management Dialogue. That's where you should then see much more details, but that's kind of the direction of travel that we're telling you as a floor. On the revenue side, yes, I think once we have the final run rate now, I think we're fully on this new -- with the full adoption of the NDIC methodology that we introduced last year. So you should then see based on that, a smaller revenue just for the same business on a relative basis, which has marginal impact on combined ratio. That's absolutely correct. Operator: The next question comes from Ben Cohen from RBC. Benjamin Cohen: I had two questions, please. Firstly, on the Life & Health side, could you talk a bit more about the areas in where you did see new business CSM growth? I think you flagged U.S. Mortality and Health and Longevity in EMEA. And specifically, I guess, the reasons why you feel confident to kind of grow those business lines, perhaps particularly with regards to Longevity? And my second question was in CorSo and P&C, I think on a 9-month view, the expense ratios rose reasonably materially year-over-year. Were there some one-off features in there? Do you need to do more to address costs because of the top line pressures that you're seeing? Anders Malmstrom: Okay. So maybe I start on the Life & Health side with the new business CSM growth areas. I think you will continue to see new business CSM growth on Mortality, the classical mortality that we write, that's still a big driver. We have a lot of contracts there and there's new business coming in there, which is good. Longevity is, I would say, a new area that for us became quite important, and we saw some traction there during the year. It's something that will develop. I would love to be more in the U.S. on the Longevity side. I think the problem there is just I think people need to start to realize that they actually have an issue because the local RBC framework in the U.S. doesn't really reflect that and you don't have a longevity chart. But I think the discussion we already have with clients is that this is a topic that will come over the next few years. And then still Asia is a growth driver where we will see CSM growth and particularly also on the Health side, after we have fixed all of the issues on the in-force. Alexander Andreas Berger: So maybe on your expense ratio, the increase of expense ratio is not business driven, and the reason why in Q3, we've got 3% year-on-year increase, that's mainly due to restructuring costs. We have restructured parts of the businesses. For instance, in CorSo, we have decided to exit the Aviation business and concentrate the underwriting on the Reinsurance side. So there were costs attached to that, the restructuring costs. Then we have a slight increase in volume-driven commissions. That's due to shift of some of the businesses, in particular, when you go into businesses that are more volume or facility-driven, those have -- and also specialty lines, those have elevated commission levels and then also slightly the lower insurance revenue. I think that I would look at it. Now we don't look at a quarterly basis for the expense management side because overall, we see a very positive trajectory by reducing actually the expenses because the actions that we took now are coming through and we see it in earning [indiscernible] and also. So I actually applaud then CorSo to address these things in a situation where CorSo was really performing very, very well. So that's the moment when we need to address those things. So you will expect the expense ratio going down. So remember, we put out the number bigger than $300 million cost savings target overall, and we are very, very well on track to achieve this. So even alone this year, we are exceeding the $100 million. So we're well on track to achieve this by 2027. Benjamin Cohen: And we will provide details on that management... Alexander Andreas Berger: Yes, absolutely. Operator: There are no more questions from the phone. Thomas Bohun: There seems to be maybe one more. Alexander Andreas Berger: We actually lost him. So he probably decided not to ask the question anymore. Thomas Bohun: Thank you very much for all the questions and your interest. Should there be any questions outstanding, as always, please do not hesitate to contact the IR team. With that, thank you for attending the call, and have a good weekend. Alexander Andreas Berger: Thank you. Operator: Thank you all for your participation. You may now disconnect.
Operator: Greetings, and welcome to the TechPrecision Corporation Fiscal Year 2026 Second Quarter Financial Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Brett Maas with Hayden IR. Sir, the floor is yours. Brett Maas: Thank you. On the call today is Alex Shen, Chief Executive Officer; and Phil Podgorski, Chief Financial Officer. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represents management's estimates as of today, November 13, 2025. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, please continue. Alexander Shen: Thank you, Brett. Good afternoon to everyone, and thank you for joining us. Please excuse my raspy voice, a little bit of cold here. Fiscal 2026 second quarter consolidated revenue was $9.1 million or 2% higher when compared to $8.9 million in the fiscal year 2025 second quarter. Consolidated gross profit totaled $2.5 million or $1.4 million higher when compared to the second quarter of fiscal year 2025. At both Ranor and Stadco segments, favorable customer mix has resulted in improved margins. Fiscal year 2026 second quarter Ranor revenue was $4.4 million, with operating profit of $1.6 million. Second quarter Stadco revenue was $4.8 million, with operating loss of $0.5 million compared to the same period a year ago. Stadco had an $873,000 improvement in operating income. For second quarter, operating income was $0.9 million, and favorable customer mix enabled 3 drivers. One, better throughput at Stadco, resulting in higher revenue; two, lower provision for losses from specific first article costs; and three, lower provision for losses from onetime one-off contracts. We remain highly focused on aggressive daily cash management, a critical piece of risk mitigation. We continue to manage and control expenses, capital expenditures, customer advances, progress billings and final invoicing at shipment. Our tactical execution focus and success enables us to continuously resecure strategic customer confidence at both segments. At our Ranor segment, sustained delivery and installation of new equipment continues as we specifically execute the $21 million plus of completely funded grant money from our U.S. Navy-related customers. Customer confidence remains high at both Stadco and Ranor. Our customers have expressed their strong confidence as we continue to maintain on-time delivery of quality components. This delivery performance is leading both Stadco and Ranor to new quoting opportunities in air defense and submarine defense sectors with the same customers that already know and trust our capabilities. Both subsidiaries are continuing to experience meaningful new capture of business awards from these same customers, adding to our already strong $48 million backlog. We expect to deliver this $48 million backlog over the course of the next 1 to 3 fiscal years with gross margin expansion. Now I'd like to turn the call over to our Chief Financial Officer, Phil Podgorski, to continue with the review of our second quarter and 6 months ended fiscal year 2026 results. Phil? Phillip Podgorski: Thank you, Alex. As Alex just mentioned, for our fiscal 2026 second quarter, consolidated revenue increased by 2% to $9.1 million compared to $8.9 million in the same period a year ago as we continue to focus on building our strong recurring revenue customer base. Consolidated cost of revenue decreased by 16% or $1.3 million as throughput and customer mix improved at both segments. Consolidated gross profit increased by $1.4 million in Q2 fiscal 2026 to $2.5 million, resulting in double-digit year-over-year consolidated gross margin improvement of 16 percentage points. Consolidated SG&A increased slightly by 1% to $1.5 million in the fiscal 2026 second quarter due to increased office -- general office expenses, but partially offset by a decrease in outside advisory and consulting costs. Fiscal 2026 second quarter interest was higher due primarily to interest rates -- our interest cost rates related to higher borrowing under the revolving loan. Net income was $0.8 million for the quarter, with $0.08 per share on a basic and fully diluted basis. For the 6 months ended September 30, 2025, consolidated revenue was $16.5 million or 3% lower when compared to the same period a year ago. Consolidated cost of revenue was $13 million or $2.7 million lower than the same period a year ago, again due to favorable customer mix and productivity gains at both Ranor and Stadco. As noted, favorable customer mix and productivity gains increased gross profit by $2.2 million or 14 percentage points year-over-year. SG&A decreased by 2% as lower outside advisory and consulting costs more than offset the increase in general office costs. As a result, operating income increased by 126% to $0.5 million. Interest costs increased by 3%, again on higher borrowings under our revolver loan, resulting in net income of $0.2 million or $0.02 per share on a basic and fully diluted basis. Moving on to our financial position. We continue to actively manage our cash flow, as Alex had mentioned. Net cash flow -- net cash provided by operating and investing activities totaled $0.2 million for the first 6 months in fiscal 2026. Net cash used in financing activities totaled $0.2 million, primarily to pay down principal under our revolver and term loans. Our debt was $7.3 million on September 30, 2025, compared to $7.4 million on March 31, 2025. Our cash balance on September 30, 2025, was $220,000 compared to $195,000 on March 31, 2025. Now let's take a little deeper dive into the segments for fiscal 2026 Q2. For Ranor, second quarter revenue was down year-over-year by $0.4 million. However, overall strong margin growth was evident across all projects, resulting in improved margin drop-through of 7 percentage points and contributing $2.2 million in gross profit for the quarter. Stadco Q2 fiscal 2026 revenue increased by $0.6 million compared to the same period last year as we continue to focus on repeat work. Stadco experienced Q2 year-over-year revenue -- year-over-year gross profit margin improvement of 9 percentage points or $800,000. The Stadco improved gross profit versus prior year is primarily the result of improved contract pricing, customer mix and improved production efficiencies. While this is an improvement, the company continues to face headwind on legacy contracts and underpriced onetime contracts. As Alex mentioned, we continue to actively work with our customers on these contracts towards recovery and new pricing. With that, I'll turn the call back over to Alex. Alexander Shen: For those on the call who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal components. The components that we manufacture are customer-designed. We sell to customers in 2 main industry sectors, defense and precision industrial markets, predominantly defense. We do most of our work in industries that are highly sensitive to confidentiality, which preclude us from speaking publicly about many things that a company not operating in TechPrecision's specific environment might discuss. Please understand there are real limits as to what I can discuss, and sometimes, those limits do change. TechPrecision is proud and honored to serve the United States defense industry, specifically, naval submarine manufacturing through both our Ranor and Stadco subsidiaries and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. Overall, at both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in our defense sector, as evidenced by the strength -- by the continued strength of our backlog. We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. In summary, we had a profitable consolidated quarter. We are showing progress and have more work to do with our Stadco subsidiary to get it into the black. We filed on time, and we are targeting to build and sustain this trend. We want to build this trend. Operator, please open the line for Q&A. Operator: [Operator Instructions] We have a question from Ross Taylor with ARS Investments. Ross Taylor: First, I didn't think I'd ever live to see the day you guys actually reported inside the time horizon. So congratulations, really fantastic turnaround on that. What percentage of your Stadco business is still needing to be reworked to become profitable or needs to -- is one-off contracts that you need to run out to become profitable overall? Alexander Shen: I don't know about the percentage, but I think the -- let me parse that question and split it into three chunks. As far as the one-offs, I think those will need to continue. As far as the -- well, I say they continue. They will need to continue, but the ones that are experiencing losses and loss reserves have been dealt with very vigorously in the last quarter that we're reporting on. So that's really good. As far as another piece of it that was causing loss reserves was basically our first article activity. That doesn't mean just the first unit. It means the whole first article activity for our repeating part numbers. So it might be the first one, the second and third one, or it might be the first 10. It depends on the situation. But first article activity, until we can get to a stable, repeatable, sustainable cadence and expectation of manufacturing throughput, those have also been rather vigorously dealt with in the quarter we are reporting on. How much is left? Well, it will be imperative to continue to capture new business with new part numbers. So the first article activity needs to be watched carefully. The risks need to be mitigated. The customer collaboration, we will increase that to the point where we deal with the first article loss reserves. We want to deal with them more effectively. I don't know that we can deal with them as effectively as we did in the reporting quarter that we're reporting on now. But certainly, we've set ourselves a target. We're not going to keep missing these targets. We're going to work towards the target, hit the target. And I'm here to build a trend together with Phil Podgorski. Ross Taylor: Okay. So you said there are three aspects. So you have the one-offs, and you basically -- those are either run through or you -- future one-off contracts, we should expect to be able to be profitable. You've got the first articles, which obviously -- first articles always tend to carry -- they have issues or risks with them, so they tend to carry lower margins that you believe. Is the problem there more -- did you see it more as a -- was it a design issue? Was it the customer changing the designs? Was it underbidding? What did you sense the issue was in those first articles? Alexander Shen: So as I pulled out my playbook of analyses and tried to get these things down to what's the one big thing, it turns out that because we are really concentrating on rather complex, highly complex items and critical items that are critical to the war fighters, it's really dependent on the situation, Ross. I'm not trying to be funny about this. I'm just trying to tell you the truth. The -- it's a case-by-case basis on each part that we're attempting to build. So it's not one thing. It's a number of one things. So when you've got a lot of people touching it and when you have a lot of different people on the customer side also touching it, the number of touches increases the chances of something not going quite right on the handoff back and forth. That certainly happens quite a lot more when it's first article time. Neither side have been working with each other on this particular part number before. So even if we build a second one, it's not going to repeat the same way that we did the first one. It's much more complicated than to try to generalize and tell you that I've identified the main culprit or the first -- top three culprits. They tend to take turns. We need a little bit more experience with these things to understand how to deal with them in aggregate. But the execution and detail, the nuts and bolts are really important for us to grasp each detail. And it helps me quite a bit when I'm on-site and dealing with these things in person, as well as through my subordinates. Ross Taylor: Is this an issue both at Ranor and Stadco? Or is it more concentrated at Stadco? Alexander Shen: I think the first article problems -- so characterizing Ranor being mostly NAVSEA, Electric Boat, Newport News, Virginia class submarine and Columbia class submarine specification-driven. So the overall and overreaching specification sets our Virginia class and Columbia class. At Stadco, it's a little bit more than one set of specifications or two sets of specifications. So the idea is to focus ourselves and make sure we go back to the same customers because we've already proven ourselves at both Ranor and Stadco to these same customers. That we know their specifications, we know how to manufacture and really sustain our on-time delivery, delivering quality parts to their specifications. So as we continue that focus, that's going to lead us towards full recovery in the black at Stadco consistently. Am I making sense? Ross Taylor: Yes, you are. Having spent some time in the defense industry, some of this stuff actually is things I remember and I'm familiar with. If the Korean -- South Koreans turn the Philadelphia Shipyard into a submarine manufacturing facility initially for their boats, which are somewhat different than our boats, but there would be a probably likely overlap in many systems and components, is that an opportunity for you? And is it something that you would have the ability to service out of your current industrial base? Alexander Shen: I'd love to be able to answer that question, and it falls into the area where I can't speak. Can you rephrase or something? Ross Taylor: Do you see the -- at the shifting of the Philadelphia -- former Philadelphia Naval Shipyard to a submarine manufacturer to be an economic opportunity for you? Alexander Shen: We will look at every single opportunity, yes. Ross Taylor: And I would assume that there are things that go into submarines, generally Western submarines that you produce that in this country would -- you would produce in -- since what, 90% or so of your business is, effectively, you are the sole source. I would assume that a lot of that stuff would still end up in allies' boats as well as U.S. boats? Alexander Shen: You've got great assumptions, Ross. I don't mean that in a funny way. I am aligned with your assumption and that way of thinking. Ross Taylor: We went out of the helicopter this time. Can you walk through -- Phil, can you walk through the -- how you guys handle the grants that you've gotten from the federal government and the characteristics of those grants and what restrictions, if any, exists with them? Alexander Shen: Maybe we can answer this jointly. So the restrictions as far as what parts we may use the equipment for, the Navy parts that they're meant for have priority. And if there are none, then we do have the ability to use these assets for non-Navy parts that weren't designated. Ross Taylor: Or other Navy parts? Alexander Shen: Or anybody's parts. Ross Taylor: Anyone's part. And how does it sit on the balance sheet? Alexander Shen: That's a Phil question. Phillip Podgorski: So certainly, when we receive the cash, we certainly have an obligation to protect that, so we do segregate. We do have liabilities also that are established upon receipt of that cash, whether it's to the supplier or to a vendor that we're working with to secure that equipment. Likewise, as we onboard those assets onto our balance sheet, we do have -- depending on what the agreement is with our customer -- I mean, our supplier, we then, at that stage, will create a offsetting liability and depreciate over the useful life of that equipment. So we have assets and liabilities set up to handle each unique agreement that we have. Ross Taylor: Okay. And are any of the liabilities basically future performance or future services delivered that they give you this money and you are required to provide them something or you get paid for everything you build with this new equipment? Phillip Podgorski: We have paid for everything that we build, right, with this equipment. And there is a -- I can tell you on one contract, for example -- sorry, one funding -- that we do have a 10-year agreement with that, whereby we need to continue to perform for that period of time. Ross Taylor: Okay. And one last one for me is you've talked about the ability to garner new business. You're in an industry where a number of suppliers have struggled to either meet quality or timing and things of this nature. Have you -- what kind of new business have you seen? Are you seeing -- are you thinking things on -- by part number? Outside of TPCS, a lot of us think of it as programs. Are you getting involved in any new programs, particularly out of the Ranor operation? Alexander Shen: We are in the giant program mix of Virginia class and Columbia class submarines. There are programs within those two classes of submarines that we are on. Ross Taylor: Is there an opportunity for you in the larger undersea unmanned vehicles? Alexander Shen: Those are different sets of specifications. Ross Taylor: So at this point, no, but if they were to develop things such as -- there's talk that they want to build something that sits on the bottom of the Taiwan Strait, then when the Chinese decided to invade that, they automatically launch missiles. I think of you guys as being involved in that aspect of U.S. submarines. Would that be an opportunity for you guys if we were to go that direction? Alexander Shen: I think at this point, we are -- we have a lot of opportunity with the same customers and the same design shipyard. So if our customers lead us to that type of opportunity, we're absolutely ready to take a look. We just need to make sure that whatever first article activity we choose, it's going to be something that we can mitigate the risk and stay resilient with good backup plans and good planning for advanced countermeasures to counteract the learning that we tend to do as a community on new first article parts and new first article programs. Ross Taylor: It was -- it just strikes me as it would seem that with things like longitude doors and things that there might be a technological capability overlap that as we develop more war fighting unmanned underwater vessels that your skill set would become more in demand. I'll pass it to others. I've taken up a fair amount of people's time. And congratulations for getting back on time. One thing I would love to see that I'm going to leave you with, insiders actually buying stock instead of selling stock would be a nice change of pace. Phillip Podgorski: Duly noted. Operator: Ladies and gentlemen, we have no further questions in the queue at this time, so this will conclude our question-and-answer session. I would now like to turn the call back over to management for any closing remarks they may have. Alexander Shen: Thank you, everyone. Have a great day. Operator: Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Greetings. Welcome to Moving iMage Technologies, First Quarter 2026 Earnings Call. [Operator Instructions] Please note the conference is being recorded. At this time, I'll turn the conference over to Chris Eddie with Investor Relations. Thank you. You may now begin, Chris. Christopher Eddy: Thank you, operator, and good morning to all of you joining today's call. Moving iMage Technologies CEO, Phil Rafnson, will make some opening remarks, followed by a business update from President and COO, Francois Godfrey; and then CFO, Will Greene, will conclude with some financial highlights, after which we will open the call to investor questions. Today's conference is being recorded, and an audio replay and written transcript will be posted to the Investors section of the Moving iMage website in the next few days. As a reminder, except for historical information, the matters discussed in this presentation are forward-looking statements that involve several risks and uncertainties. Words like believe, expect and anticipate mean that these are our best estimates as of this writing, but there can be no assurances that expected or anticipated results or events will take place. Actual future results could differ materially from those statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the SEC. I will now turn the call over to Moving iMage CEO, Phil Rafnson. Philip Rafnson: Thanks, Chris, and thank you all for your interest in Moving iMage Technologies. Our quarter 1 performance was bolstered by the acceleration of some projects we had expected later in the year and by solid operational execution, both in terms of margin and operating costs. The combination of higher revenue, increased gross margin and lower operating expenses enabled us to achieve our goal for profitability for the quarter while also bolstering our working capital position. I'm very proud of the operational progress our team has made that enabled us to achieve profitability results. This progress will benefit MIT as we move forward. However, our ability to achieve profitability in any given quarter remains a function of the timing of customer projects as well as normal seasonality of our business. Visibility into longer-term customer spending plans remains limited despite the substantial scope of industry-wide cinema technology upgrades still to be completed. We believe a major factor in supporting laser projection and audio upgrade investments is the health of the exhibition industry. To that end, domestic box office receipts for the third quarter of the calendar year were approximately $2.4 billion, nearly matching the year ago period. And we are now entering the all-important holiday box office season that offers the potential for improvement given a strong film lineup and steady improving attendance trends. Our strategy within our target markets has been to continue building on our value proposition with new products and capabilities. We believe our recent acquisition of DCS Cinema Loudspeaker line represents an exciting step in executing this strategy. Overall, I believe MIT is making good progress in enhancing our operational and financial performance while also taking steps to expand our capabilities. Through these initiatives, we are improving our ability to support our customers in navigating their cinema technology requirements from design and engineering to equipment supply, installation and system commissioning. Now I'll turn the call over to Francois Godfrey, our President and COO. Francois Godfrey: Thanks, Phil, and good morning, everyone. I'll start by echoing Phil's comments on our team's solid start to fiscal year 2026. Our Q1 revenue exceeded our expectations on the top line as certain projects were accelerated by customers into the period. In addition, our bottom line benefited from the meticulous project execution for which MIT is known, enabling us to achieve an operating income of $350,000. We are particularly gratified by achieving profitability in the first quarter as this resulted from many quarters of work in reducing our overhead, cost structure and building our project pipeline focused on higher-margin opportunities. Given our size, the seasonality of our industry and the variability of project sizes, their timing and revenue mix, we continue to expect operating losses in the future until we are able to scale our business to consistent profitability. To reach that important goal, we continue to advance a range of internal and external initiatives designed to build our revenue base. On the project side, our team continues to engage in a variety of new build and technology refresh discussions with exhibitors and other specialty entertainment venues. These projects range from individual auditorium upgrades to full site refresh or new build initiatives incorporating state-of-the-art laser projection technology, coupled with immersive audio technologies. As we have often said, the timing of these opportunities remains fluid as they are largely dependent on our customers' capital cycles and strategic decision-making. Accordingly, this makes it difficult for us to predict project timing, particularly on a quarterly basis. Fortunately, the scope of legacy equipment in the market is quite considerable. Our ongoing engagement with new and existing customers confirms that there remains a very substantial base of potential work over the next few years. So we continue to believe that it's not a question of if a broad base of upgrades will take place. It's more of a question of when and at what pace. In this environment, we have turned management attention towards the things we can control, which include our cost structure, margin profile and our product and services offering, where we have made good progress. An exciting recent development from these efforts was our purchase of the DCS Loudspeaker line from QSC. DCS is a proven and highly regarded line of premium cinema loudspeakers with a global customer footprint recognized as a de facto standard across cinema, post-production, studio and screening room environments. Like MIT, DCS has an over 20-year reputation for quality, reliability and service, making it a perfect fit with our cinema audio solutions. We believe DCS can become an important part of our growth strategy. The purchase was completed on October 31, and we are now working to integrate the operations and build out our go-to-market strategy, including a couple of select hires to help drive the business. The DCS assets included all intellectual property, customer lists and finished inventory. We purchased for $1.5 million in cash from our $5.5 million in net cash at the close of our first quarter. We feel the acquisition terms should enable DCS to be accretive to our bottom line, and we see real potential to return our full investment in as little as 2 or 3 years. Now it's up to us to go and execute on that potential. We expect it to take a few quarters to integrate the business and get it fully up to speed with MIT. Now let me backtrack and touch on a few reasons why we are very excited about DCS. First, it immediately expands our addressable market, product portfolio, competitive position and brand recognition within the cinema industry. The DCS product line is known, respected, and deployed in auditoriums around the world. The acquisition elevates MIT's visibility while enhancing our audio capabilities and complements the LEA amplifier offering to create a stronger cinema audio offering for a wide range of auditoriums and venues. Second, it builds on our expertise and global distribution relationship with LEA Amplifiers, another hallmark cinema brand, creating an even more compelling audio offering. Third, it provides us access to the exciting base of DCS customers, some of whom are new to MIT and positions us for future opportunities. Fourth, it opens MIT to a range of new overseas markets, particularly in Europe, the Middle East and Asia, where we have had little or no exposure, while also providing potential for cross-selling opportunities for other products as we grow. So far, the feedback from customers and industry partners has been very supportive. We already begun discussions with potential international distribution partners and have received opening orders from both domestic and international customers while we onboard the inventory. Turning back to the overall business. We continue to progress our efforts to trim cost as reflected in our first quarter results. At the same time, we have focused effort on business development that seeks to forge new relationships as well as build on existing accounts. Looking ahead, we remain optimistic regarding the exhibition industry outlook as Hollywood content continues to build after the strike and other impacts. Domestic box office trends continue to improve and should be supported by a stronger and more consistent release calendar on the horizon. Assuming continued progress at the box office, we believe exhibitors will have improved access to capital to pursue deferred cinema technology upgrades and new theaters. The potential for more available capital, combined with continued aging of legacy cinema systems should provide increasing opportunities for MIT. Keeping our solutions front and center in the industry, our business development team will attend CineAsia in Thailand next month from December 8 to 11, and participate in 2 events early next year, the ICTA Seminar Series in Los Angeles in January and the Dine-in Cinema Summit in Austin in February 2026. All are ideal forums to showcase our new DCS line and our other capabilities with key customers and technology partners. To sum up, our team delivered strong Q1 performance, both operationally and strategically, and we remain focused on these disciplines that enabled that success. The DCS Cinema Loudspeaker line is an important and complementary addition to our suite of offerings that elevates our value proposition and should support long-term growth. Our pipeline of project dialogues remains active. Our partnerships are strong, and our focus on innovation and execution continues to differentiate MIT in the marketplace. We are grateful for your investment and support and look forward to updating shareholders as we move forward. Now I'll turn the call over to Will Greene, our CFO, to address some financial highlights. William Greene: Thanks, Francois. We published our financial statements in the press release this morning and expect to file our Form 10-Q by the close of business today. I will touch on select financial results and gladly answer any questions during the Q&A session. MIT's Q1 '26 revenue rose 6.2% to $5.6 million, reflecting the benefit of delivery of a custom cinema project and other client work. Our Q1 '26 gross profit rose 22% to $1.7 million, supported by higher revenue and an improved gross margin of 30% compared to 26.1% in Q1 '25 primarily due to a favorable mix of products and execution efficiency. MIT reduced operating expense by 8% to $1.32 million in Q1 '26 compared to $1.44 million during Q1 '25 due to reductions in compensation, headcount, rent and travel costs. As noted in our Form 10-K for the fiscal year ended June 2025, we streamlined our organization from 32 to 25 full-time employees. We expect continued benefits from this leaner operating model as we move forward, offset to some degree by selected new hires for the DCS operations. Q1 '26 operating income improved to $350,000 versus an operating loss of $68,000 in the same period last year. The improvement reflects revenue growth, a focus on higher-margin opportunities and ongoing expense management initiatives. Similarly, Q1 '26 net income improved to $509,000 or $0.05 per share compared to a net loss of $25,000 or breakeven per share in Q1 last year. Q1 '26 net income included a $128,000 noncash gain from payables extinguishment that more than offset a decrease in net interest income, largely due to lower interest rates. Our Q1 '25 results underscore MIT's potential to achieve profitability and positive cash flow on higher revenues with the benefit of our cost and margin disciplines. Turning to our balance sheet. Working capital rose 12% to $4.8 million at the close of Q1 '26, keeping us in a solid position to fund our business compared to year-end ' 25 working capital of $4.3 million, but below year ago working capital of $5.1 million. MIT continues to have no long-term debt. We closed Q1 '26 with net cash of $5.5 million or approximately $0.55 per common share compared to net cash of $5.2 million in Q1 '25 and net cash of $5.7 million at the close of fiscal year 2025. Our solid cash position enabled us to complete the purchase of the DCS Loudspeaker assets for $1.5 million in cash on October 31, at roughly 1/3 of the way through our fiscal second quarter. Turning to our revenue outlook. MIT anticipates Q2 '26 revenue of approximately $3.4 million, reflecting the impact of the holiday season on cinema exhibitors capital spending and our current window of customer projects and decision-making. As you may know, the exhibition industry seeks to maximize its potential box office potential during the holiday season and as a result, cinema technology and other upgrades are generally limited in scope to prevent any disruption. Reflecting the slower pace of business and the expected revenue mix, we also expect our Q2 '26 gross margin percentage to return to a more historical lower level. We continue to believe that MIT is well positioned to navigate the opportunities and challenges of our industry to pursue growth, profitability and stakeholder value. Our operating structure improvements, business development efforts, the recent acquisition of the DCS loudspeaker line and the long-term scope of that opportunity are key factors supporting our confidence in achieving those strategic goals. With that overview, operator, we are ready to begin the Q&A session. Operator: [Operator Instructions] First question is from the line of Neal Fagan, a private investor. Neal Fagan: First of all, great quarter. It's really, I guess, the word from me is exciting to see that even a modest revenue level of $5.5 million gives you strong GAAP profitability. I was curious just to learn a little bit more about the DCS speaker line. Did I understand that you think you can recoup the purchase cost with revenue over the next 2 to 3 years? Is that the metric you were using? Philip Rafnson: I can take this one. Yes, that is the intent that we modeled out as we're trying to bring the -- that line toward where it used to be. Neal Fagan: Okay. Well, that wording is interesting because here's kind of where I'm wanting to understand this. It was a very small purchase price, $1.5 million. And from your prepared remarks, it sounds like this is a line of speakers that is embedded in a lot of the large displayers, a lot of the medium-sized displayers. Is this a case of where the DCS line in you guys' opinion has enormous potential that wasn't being realized by the previous owners for whatever reasons. Are you guys feeling like you can take this to a much higher level than what was being done when you acquired it? Philip Rafnson: Correct. It's -- this line is well respected around the world, and it has extreme potential and market acceptance. Neal Fagan: Okay. And you talked about how it's a good go-to-market compatibility product with the LEA power amplifiers. So I'm thinking of it, we have DCS, which is an established name and has customers around the world. We have LEA, which is just trying to get into the cinema industry through you guys. I mean, are you feeling like going to market with both is going to potentially accelerate the acceptance and adoption of the LEA power amplifiers? Philip Rafnson: There are synergies there, and so that would be the intent. Neal Fagan: Okay. And when you acquired -- when you got the rights for the -- for LEA, you gave us metrics about the average selling price per power amplifier and the number of power amplifiers that would be used in a typical single-screen cinema. Can you give us a few numbers around the DCS speakers like a typical theater, a single-screen room, what's the revenue opportunity if it was outfitted with new DCS speakers? Philip Rafnson: I don't have those figures in front of me at this time. Neal Fagan: Okay. And final question for me is, you guys have highlighted several times in the announcement pursuing international markets and opportunities. You called out Middle East and Europe. When do you think that you might, in one of these calls, kind of go into more of the detail about the status, how we're approaching that and kind of a game plan, is that something we might hear about soon? Philip Rafnson: Once we finish the process of onboarding the business, we'll have a clear picture. Operator: [Operator Instructions] At this time, this now concludes our question-and-answer session, and this will also conclude today's conference. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.
Operator: Good morning and welcome to Spire's Fiscal 2025 Year End Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist followed by 0. Please note this event is being recorded. I would now like to turn the conference over to Megan McPhail, Managing Director, Investor. Please go ahead. Megan L. McPhail: Good morning, and welcome to Spire's fiscal 2025 year-end earnings call. On the call with me today is Scott Doyle, President and CEO, and Adam Woodard, Executive Vice President and CFO. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under newsroom. There is a slide presentation that accompanies our webcast that can be downloaded from our website under Investors, then Events and Presentations. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward-looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. Now here's Scott, who will start on page four of the presentation. Thanks, Megan, and good morning, everyone. Scott Edward Doyle: Thank you for joining us for Spire's year-end fiscal 2025 update. We appreciate your continued interest and support as we review our financial results, discuss recent developments, and share our outlook for 2026 and beyond. I am incredibly proud of what we accomplished during the year to advance our strategic goals both operationally and financially. We made significant progress towards setting Spire up for long-term success. This includes the pending acquisition of the Piedmont Natural Gas Tennessee business from Duke, which I will provide an update on in a moment. We had a great year, and none of this would be possible without our 3,500 dedicated employees. I want to thank them for everything they do for our customers and the communities we serve. The commitment and hard work of our employees are the heart of these strong results and the opportunities ahead. We are continuing to build a strong leadership team, and I am delighted to welcome Steve Greenlee, our new Executive Vice President and Chief Operating Officer. Steve has over 25 years of utility operations experience and will oversee our gas utilities in addition to our midstream segment. We are excited about the expertise and collaborative leadership style Steve adds to our team. I am confident that he will play a key role as we continue to advance our strategy. Turning now to our fiscal 2025 results. Adjusted EPS came in at $4.44, up 7.5% from $4.13 in fiscal 2024, reflecting growth across all segments driven by infrastructure investments. In fiscal 2025, we invested $922 million, with close to 90% being spent at the utilities, enhancing the reliability and safety of our systems for our customers. On the regulatory front, we are pleased to reach a positive settlement and outcome in the Missouri rate case, and new rates were effective in October. In Alabama, we are currently in the rate stabilization and equalization or RSE rate setting process and are working closely with the key stakeholders to update rates. We remain focused on achieving consistent and constructive regulatory outcomes in all of our jurisdictions, leading to a more sustainable financial performance trajectory. Despite significant critical investments in our systems, customer rate increases over the past several years in both Missouri and Alabama have been in line with the rate of inflation, reinforcing our commitment to affordability. Natural gas remains the most affordable energy source for heating, water heating, and cooking. Across our service territories, electricity is two to three times more expensive than natural gas. In Missouri, new legislation passed establishing a future test year as the rate setting model. This legislation is the result of collaboration among numerous stakeholders across the state. The new forward-looking approach will allow natural gas and water utilities to set rates based on projected costs rather than historical expenses, enabling prudent planning, attractive investments in energy infrastructure, and fueling economic growth statewide. The bill's passage marks a major milestone, and we are grateful for the support that helps strengthen Missouri's regulatory framework for both utilities and their customers. This morning, we issued fiscal 2026 adjusted EPS guidance in the range of $5.25 to $5.45. This range excludes the results of the pending acquisition of the Piedmont, Tennessee business and includes a full year of earnings related to our natural gas storage facilities. Today, we are also providing fiscal 2027 earnings per share guidance of $5.65 to $5.85, which reflects a full year of expected earnings contribution from the Piedmont, Tennessee business and excludes earnings from Spire Storage due to the expected sale of the assets. Our long-term adjusted EPS growth guidance is 5% to 7% using the fiscal 2027 guidance midpoint of $5.75 as a base. Our ten-year capital plan, including expected capital needs in Tennessee, totals $11.2 billion, demonstrating confidence in the long-term fundamentals of our business. I am pleased to say that the Spire Board of Directors approved a dividend increase of 5.1%, bringing the annualized rate to $3.30 per share. Spire has continuously paid a cash dividend since 1946. 2026 will mark the 23rd consecutive year that the dividend has increased. As you can see on Slide five, we checked all of the boxes on our fiscal 2025 key business priorities and more. It was a year of strong execution, and we are committed to delivering strong results in fiscal 2026 and beyond. With a solid foundation, we are confident in our ability to deliver sustainable value for our customers, communities, and shareholders in the years ahead. Let's turn now to Slide six for an update on our pending acquisition of the Piedmont, Tennessee business, which remains on track to close in 2026. We completed the Hart-Scott-Rodino review in September, marking an important milestone in the approval process. We recently received approval from FERC for the transfer of Piedmont, Tennessee's gas supply contracts. Tennessee Public Utility Commission approval is pending, and we continue to work closely with the commission. Turning to our financing plan, we are pursuing a permanent capital structure that is consistent with Spire's current credit ratings. Our approach remains largely the same and includes a balanced mix of debt, equity, and hybrid securities, ensuring we maintain financial flexibility and strength. We expect a minimal amount of Spire common shares to be issued as a percentage of total financing, and we have launched a process evaluating the sale of our gas storage facilities as potential sources of funds. We are targeting calendar year-end for the completion of this evaluation process. Transition planning for the acquisition is well underway. A seamless transition for both customers and employees is our top priority. We are led by an experienced integration team and have an 18-month transition service agreement to provide continuity of support once closed. We are making solid progress on all fronts—regulatory, financial, and operational—and are excited about the opportunities this acquisition brings. We are committed to delivering value to our customers, employees, and shareholders as we move forward. Turning to slide seven. With the addition of Tennessee, Spire will operate across states with constructive regulatory frameworks and minimal regulatory lag. This strengthens our ability to deliver consistent and balanced growth across our utility businesses, improving diversification and stability of earnings. Importantly, each jurisdiction is supported by recovery mechanisms that encourage investment in critical infrastructure. Looking ahead, by fiscal year 2030, we expect our total rate base and capitalization to grow to $10.7 billion from an estimated $8.2 billion at the end of fiscal 2026, driven by our robust capital plan. Our long-term adjusted EPS growth target is supported by compound annual rate base growth in Missouri of about 7% and compound annual growth in Tennessee of approximately 7.5%. We also expect 6% regulated equity growth in Alabama and Gulf. As a reminder, under the RSE mechanism in Alabama, we earn on regulated common equity rather than rate base, which is expected to outpace the total capitalization growth rate. Now I will turn the call over to Adam for a financial review and update on guidance and outlook. Adam? Adam W. Woodard: Thanks, Scott, and good morning, everyone. Let's review our fiscal 2025 results and our guidance for 2026 and beyond. In fiscal 2025, we reported adjusted earnings of $275.5 million or $4.44 per share compared to $247.4 million or $4.13 per share in the prior year. These results included a fourth-quarter adjusted loss of $24 million or $0.47 per share, reflecting the seasonality of our businesses. In the quarter, adjusted earnings were $3.5 million or $0.07 per share above last year but fell below our expectations due to higher utility O&M expense. Looking at the full fiscal year for our business segments, gas utilities earned $231 million, up almost 5% or over $10 million from last year, as ISRS recovery in Missouri and new rates in Alabama were partially offset by slightly lower usage in Alabama, higher O&M, and depreciation expense. Usage net of weather mitigation in Missouri was comparable in fiscal 2025 to the prior year. Midstream delivered earnings of $56 million, up almost $23 million from last year, driven by additional capacity and asset optimization at Spire Storage, partially offset by higher operating costs from higher activity and scale. Gas Marketing earned $26 million, an increase of $2.5 million, reflecting the business being well-positioned to create value. This was partially offset by higher storage and transportation fees. Finally, other corporate costs were $38 million, nearly $8 million higher than the prior year. This reflects the absence of the prior year benefit of an interest rate hedge and higher interest expense in the current year. Turning to Slide 10 and our updated capital plan, which includes the anticipated Tennessee spend. Our latest five-year investment plan totals $4.8 billion from fiscal 2026 through fiscal 2030, and we project a ten-year capital plan of $11.2 billion. The majority of this investment, 70%, is dedicated to safety and reliability, highlighting our commitment to upgrading distribution infrastructure and ensuring the integrity of our systems. Another 19% supports customer expansion and new business connections, helping us to safely deliver reliable and affordable natural gas to more homes and businesses. As a reminder, almost all of our ten-year capital expenditure plan is targeted towards utility investments, and we expect to recover a significant portion through forward test year rate making, true-up mechanisms, or other constructive regulatory tools, helping balance infrastructure investment with customer affordability. Turning now to our growth outlook on Slide 11. As Scott mentioned, we are reaffirming our long-term adjusted earnings per share growth target of 5% to 7%, anchored on the midpoint of our fiscal 2027 guidance range of $5.75 per share. This growth is supported by expected rate base growth of approximately 7% in Missouri, 7.5% in Tennessee, in addition to 6% equity growth at Alabama Utilities. This also reflects timely recovery of investments across all of our jurisdictions. For fiscal 2026, we have issued an adjusted EPS guidance range of $5.25 to $5.45 per share. At the midpoint, that represents over 20% growth from our 2025 results, driven by the rate case outcome in Missouri. This range excludes the pending acquisition of the Piedmont, Tennessee business but does include a full year of anticipated earnings from our gas storage facilities. We will revise our earnings expectations if the outcome of the storage asset sale evaluation materially affects our outlook. Looking ahead to fiscal 2027, our adjusted EPS guidance range is $5.65 to $5.85, which incorporates a full year of earnings from Piedmont, Tennessee, and excludes storage facilities due to the expected sale of the assets. At the midpoint, that is 7.5% growth over the 2026 guidance midpoint and nearly 10% compounded annual growth from our prior long-term base of $4.35 in fiscal 2024. Scott Edward Doyle: This strong growth is driven by execution on infrastructure investment, constructive regulatory outcomes, and the strategic acquisition of Piedmont, Tennessee to expand our gas utility business. Turning to our business segment guidance on slide 12. We anticipate our gas utilities will generate between $285 million and $315 million next year due to the combined impact of new Missouri rates effective October 24 and anticipated ISRS revenues from a filing expected later this month. New rates in Alabama and Gulf under the RSC mechanism are also expected to benefit earnings beginning in December. Partially offsetting these favorable items, we are targeting O&M expense to increase below the rate of inflation in addition to higher depreciation and interest expense. Turning to gas marketing. We anticipate adjusted earnings of $19 million to $23 million, reflecting expectations on our current market conditions. Midstream adjusted earnings are projected to range between $42 million and $48 million in fiscal 2026, including a full year of storage and pipeline operations. Within the storage business, we expect to realize the full benefit of the Spire Storage West expansion. Offsetting this are higher operating costs, increased interest, and depreciation expense in addition to a decline in year-over-year optimization-related earnings. We anticipate the midstream business mix to be 65% storage and 35% pipeline during fiscal 2026. I would like to note that FERC approved our request to merge the STL and Mogas pipeline with the merger targeted for completion by January 1, 2026. Finally, Corporate and Other is anticipated to be in the range of negative $31 million to negative $37 million, an improvement from last year's loss of $38 million, primarily driven by lower interest expense resulting from reduced long-term debt rates. We have updated our three-year financing plan for our base business as outlined on Slide 13. The plan does not include financing related to the pending acquisition of the Piedmont, Tennessee business, which we expect to update along with the conclusion of the storage asset sale evaluation. Our equity needs through fiscal 2028 are minimal and are expected to be managed through our ATM program. Turning to the long-term debt needs. For our current base business, our three-year financing plan assumes refinancing of maturities and incremental debt of approximately $625 million. This includes the $200 million of first mortgage bonds issued by Spire Missouri last month. We continue to target FFO to debt of 15% to 16%, providing 300 basis points of cushion above our S&P and Moody's published downgrade thresholds of 12-13%, respectively. With that, let me turn it back over to you, Scott. Thanks, Adam. As we look ahead to fiscal 2026, our priorities are clear and aligned with Spire's commitment to operational excellence, regulatory engagement, financial discipline, and strategic growth. First and foremost, we remain focused on safely delivering reliable natural gas service to our customers. We are executing on our capital plan for the year, targeting safety and long-term infrastructure resilience while maintaining customer affordability through disciplined cost management. On the regulatory front, we are working toward constructive outcomes across all of our jurisdictions. A key step will be preparing to file a future test year rate case in Missouri to ensure timely cost recovery and support ongoing investments. From a financial perspective, we are committed to delivering on our fiscal 2026 adjusted EPS guidance of $5.25 to $5.45 while maintaining a strong balance sheet that supports both our growth strategy and long-term shareholder value. Finally, we are making significant progress with the acquisition of the Piedmont, Tennessee business. Our focus is on financing and closing the transaction, which includes completing the evaluation of the sale of our natural gas storage assets. We remain laser-focused on ensuring a seamless integration for customers and employees. Together, these priorities position Spire to deliver strong operational and financial performance and sustainable long-term growth. We are confident in our path forward and energized by the opportunities ahead. Thank you for your continued support and interest in Spire. We will now take your questions. Operator: We will now begin the question and answer session. The first question comes from Julien Dumoulin-Smith with Jefferies. Please go ahead. Paul Zimbardo: Hi, good morning team. It's Paul Zimbardo on for Julian. How are you? Hey, Hi, good morning. Thank you for the update. The first question I have is just if you could give a little bit more details and color on the long-term growth rate. And just really, are you expecting continued improvement in earned ROEs within that path? And just any commentary you can share on how to think about gas marketing midstream growth in that profile as well? Scott Edward Doyle: Yes, sure. This is Scott. So clearly we provided two years of guidance on this call. And the primary reason for that is there's a lot of things happening within the business over the next twelve months in this fiscal year. And then using 2027 as perhaps a cleaner year based on the assumptions that we provided in the prepared remarks. So to the point when we think about earned returns within the utility coming out of the Missouri rate case, there's a step up associated with that as we've brought capital into base rates from an extended period over the last several years, capital that had not passed through our ISRS mechanism. And so when we think about earned returns in the utility, particularly in Missouri, we're getting closer to our allowed returns in Missouri. We'll file another case in Missouri in the fall of next year and we'll need to prosecute that case. That case will be based on a future year. But the outcome of that case is not going to be reflected in the FY '27 time period. So when you think about the guide that we're looking at for FY 2027, the earned returns in Missouri will be a little less than what they are in 6% when we think about Alabama, the earned returns are close to or allowed. As we have a forward-looking mechanism there that works annually and we're currently in the process of having it reviewed right now. Marketing and midstream. So as we think about the guide, clearly all of midstream is in the guide for the year. But as we said on the call, we pulled storage out for FY 2027. And then marketing, as you know, we rebase every year and it's not part of our growth story. When we think about how it supports the overall growth picture or at least the guide for 5% to 7%. Paul Zimbardo: Great. So it does sound like you would expect using that '27 base some tailwinds on earned ROE based on that cadence you described, if that's fair? Megan L. McPhail: Yes. Yes. Paul Zimbardo: That's correct. Okay. Megan L. McPhail: Okay. Paul Zimbardo: Great. Then any additional detail on the FFO to debt target, the 15%, 16%? Just how does that also evolve if we use a 2027 kind of jumping-off point? Where in that range do you expect to be? And how does that trend over time? Thank you. Scott Edward Doyle: Yes. Paul, as we've talked, we're at the bottom of the threshold ranges now. But that's a lot of that is premised on just getting back into the right recovery path for Missouri. And so we see a pretty steady movement up into the middle of the threshold bands, both Moody's and S&P going forward, really premised on the recoveries in Missouri. But we're also taking, I think, a very deliberate financing tact with Tennessee to make sure that that is also credit positive as well. Indeed. Yes. Okay. Thank you. That makes sense. Paul Zimbardo: Appreciate it. Megan L. McPhail: Thanks, Paul. Operator: The next question is from Gabe Moreen with Mizuho. Please go ahead. Gabe Moreen: Hey, good morning everybody. I just wanted to ask a question on the financing mix and timing. Adam, has anything shifted in your mind, I guess, since you announced the acquisition, just kind of your latest thoughts? You mentioned the minimal common equity issuance. Just maybe latest thoughts on the financing mix and timing. Adam W. Woodard: Yes, no big update. We continue to feel confident about taking a very balanced mix of debt and equity. Obviously, we're taking on these assets debt-free. So we need to recapitalize rate base at Tennessee. So you can expect that. And then we obviously, part of that is our evaluation of the storage business and more to come there. We don't have an announcement there, but those are terrific assets and we are seeing quite a bit of interest there. But we will be making an announcement at some point in the not too distant future. Gabe Moreen: Gotcha. Thanks, Adam. I appreciate that. And then maybe if I can ask just on your O&M assumptions kind of going forward, it seems like 2026 you're below and aiming to stick below inflation. Does that stick for the rest of the plan? And I guess, just have an overarching basis with the interaction or sorry. The integration planning going on between the utilities any best practices or major initiatives that you think you'd share between the two that would, I guess, keep a lid on O&M? Scott Edward Doyle: Gabe, this is Scott. Great question. Yes, O&M, our guide for this year is to be below the rate of inflation. And historically, that's been our guide year over year, and that would be actually our performance this year was below the rate of inflation. When you think about the integration activities, we're in the very early stages, but that is our theme as we step into the integration activities. Anytime we go through these, we look to best practices across both organizations. And as those that know us or have followed our story for a long time, we have been through this before. And, when we do that, we find things that others do well. We want to make sure we incorporate that into our go-forward business. So we'll have more to talk about that as we get a little further into the integration planning and start working more closely with the assets themselves once we close. Megan L. McPhail: Thanks, Scott. Operator: The next question is from Paul Fremont with Ladenburg. Please go ahead. Paul Fremont: Thanks. I guess my first question is, with the future test year rate adjustment taking place in 2028, could 2028 be a year that falls outside of that 5% to 7% range? Scott Edward Doyle: Given the fact that you'll be further potentially narrowing your under-earning in Missouri. Yeah. Hey, Paul, it's Scott. Maybe Adam and I will both tag team this. I think a couple of things to think about when you pivot to future test year, we're going to bring forward some capital into that process. And so we'll have to get through the process before we know what that will be as well, but within the range of what we're providing, we're basing that based on what we know right now and the best guess that we have. Yeah. We don't get too far ahead of rate making. I think given that that's another couple of years out. But I think your implication, Paul, of a more fully earned ROE is usually the implication around future test year. So we don't want to get ahead of that, but we would expect certainly some improvement there. Paul Fremont: And it sounds to me like you're more confident about your decision to sell storage. I think, on the last call, you know, you had indicated that would depend on levels of interest. I assume the levels of interest are strong enough that you now feel that it will be sold. Scott Edward Doyle: You know, Paul, we're still in the evaluation process. As I mentioned earlier, we do have seen quite a bit of interest and strong interest in the assets, but more to come there. We'll make an announcement once we get to a conclusion of that process. Paul Fremont: Great. And you're expecting to make an announcement one way or another between now and the end of the year, right? Adam W. Woodard: Yes, we're targeting by the end of the calendar year. Paul Fremont: And then just going back to sort of your original comments, if you were to sell the storage, the remaining sort of balance of equity and debt, has that changed since your last call? Adam W. Woodard: Well, that certainly figures into the mix of financing. So that we will, I think, once we get to the point of an announcement, we would shed some more light on that. Paul Fremont: Okay. And last question, can you be more specific in terms of, in other words, if you're not issuing straight equity, what else would sort of fall into the category of fulfilling your equity needs? Adam W. Woodard: I mean, there are certainly other securities that we would have access to markets to that would provide equity-like coverage there, whether those are equity-linked securities, hybrids, or what have you, but there are some other options there. Paul Fremont: And junior subordinated debt, is that included as well? Adam W. Woodard: Yeah. I'm using that sign, you know, along with high. That would use that terminology with the hybrid. Yeah. Paul Fremont: Got it. Okay. That's it for me. Congratulations. Scott Edward Doyle: Thanks, Paul. Thanks, Paul. Operator: The next question is from Alex Kania with BTIG. Please go ahead. Alex Kania: Good morning. Thanks for taking my question. Just would you mind reminding me again, just on the within midstream, just the rough split? I think it was one-third, two-thirds on, you know, kind of pipelines versus storage. And would that be earnings or would it be EBITDA as well as fair? Scott Edward Doyle: Yeah. It's one-third pipeline, two-thirds storage, is kind of the split. And depending on which way you cut the data, it's about the same. So whether it's EBITDA or earnings, about the same. Alex Kania: Great. Thanks. And then, maybe, you know, maybe we're just taking kind of a step too far down that path of an asset sale. But just if there was a decision to move forward with the sale, would that be big enough to sort of change your kind of long-term balance sheet targets, thresholds, and things like that as you look forward? Scott Edward Doyle: You know, given the unregulated assets? Yes. I mean, too early to comment. That's part of the evaluation process. There'll be more as we announce the conclusion of the evaluation process. Alex Kania: Okay, great. Thanks. And my last question just is on the transition to the Ford test here in Missouri. You know, do you anticipate, or I guess, do you think that all parties are sort of on the same page in terms of how the process is going to look as they kind of think about the rate making kind of a slightly different paradigm as it's been in the past? Is there any education that needs to be done or any twists that we should be kind of aware of leading up to the filing? Scott Edward Doyle: Yes. No. I think you're spot on. It's a case of first impression. And so, all the parties are going to need to work together in order to understand both what the filing requirements would be and how to prosecute inside that paradigm. And so all parties will work together. That's historically how it's worked here. And so we look forward to that process and going through it together. Alex Kania: Great. Thanks very much. Adam W. Woodard: Thanks, Alex. Operator: The next question is from Selman Akyol with Stifel. Please go ahead. Selman Akyol: Thank you. Good morning. Two quick ones for me. Maybe you're at the higher end of your growth range. And so could you remind us just in terms of how you think about the dividend in terms of payout ratios and sort of growth going forward? Adam W. Woodard: Yes. Hi, Selman, it's Adam. We would continue to expect the dividend to grow basically at our earnings growth rate. And we do target the kind of the common payout ratio for utilities in that 55% to 65% range. Selman Akyol: Very good. And then also as you think about your sort of long-term capital needs and you gave a ten-year sort of outlook. Can you just remind us in terms of how much equity you're thinking about that for overall? Adam W. Woodard: Yes. So we did refresh our financing needs in this, and you can find that at the back of, I think, the earnings deck. But we really continue to see a minimal amount of equity per year that some of that as some additional support for the utility CapEx program, but when I say minimal, it's kind of in that $0 to $50 million range. So not anything particularly significant. Selman Akyol: Alright. Thank you very much. Scott Edward Doyle: Thank you, Selman. Operator: This concludes our question and answer session. I would like to turn the conference back over to Megan McPhail for any closing remarks. Megan L. McPhail: Thank you for joining us this morning. We look forward to speaking with many of you in the coming weeks ahead. Have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss Sow Good Inc.'s financial results for the third quarter ended September 30, 2025. Joining us today are Sow Good Inc.'s co-founder and CEO, Claudia Goldfarb, and Chief Financial Officer, Donna Guy. Following their remarks, we will open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Cody Slach as he presents the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead. Cody Slach: Good morning, everyone, and thank you for joining us in today's conference call to discuss Sow Good Inc.'s financial results for the third quarter ended September 30, 2025. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our competitive landscape, market opportunities, and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available on the SEC's website or on our investor relations website. Furthermore, we will discuss adjusted EBITDA, a non-GAAP financial measure, on today's call. A reconciliation of adjusted EBITDA to net income or loss, the nearest comparable non-GAAP financial measure discussed on today's call, is available in our earnings press release at our Investor Relations website. With that, I will turn the call over to Claudia. Claudia Goldfarb: Good morning, everyone, and thank you for joining us today. Q3 2025 was a quarter of steady progress and operational strengthening as we continue positioning Sow Good Inc. for long-term sustainable growth. Over the past several months, we have made strategic decisions to align our cost structure with current demand, streamline operations, and enhance efficiency across every part of the business. These initiatives have simplified our footprint, reduced fixed costs, and reinforced our foundation for scalability. While our results reflect a transitional period, they also highlight the meaningful strides we have made toward becoming a leaner, stronger, and more agile company. One that is well prepared to capture the opportunities ahead. We completed lease amendments on our Mockingbird and Rock Quarry facilities, resulting in more than $5 million in annualized rent savings while maintaining full production capacity through automation and improved workflow design. We have completely vacated our Mockingbird facility, reducing our footprint by over 50,000 square feet and delivering immediate cost savings. In addition, we will fully vacate our Rock Quarry facility by January, which will further reduce our footprint by more than 320,000 square feet. Together, these consolidations represent a major step forward in optimizing our operations, driving efficiency, eliminating redundant costs, and positioning us for long-term scalability. We also implemented payroll efficiencies that lowered monthly costs by approximately $40,000 while still preserving our consistent quality and innovation. Together, these actions have strengthened our path toward profitability and positioned Sow Good Inc. to scale efficiently as new growth initiatives come online. Importantly, the operational groundwork we have laid in 2025 provides a direct bridge to a return to profitability in 2026, positioning us to leverage increased capacity, broaden retail reach, and expand into new high-margin product categories. Beyond our operational progress, in March 2026, we are launching two new SKUs with a national retailer in our branded displays that will also feature 10 more of our top SKUs. Our international distribution partners remain excited with our performance and are substantially expanding influencer marketing and retailer marketing partnerships for 2026 to continue supporting the Sow Good Inc. brand. We also reached an exciting milestone in our retail strategy, securing our first private label partnership with a 100-store national retailer for our new caramel crunch SKU, with shipments beginning in 2026. Caramel crunch will be our first fully vertically integrated product, made with no artificial dyes, flavors, or preservatives, and produced using our proprietary long-cycle freeze-drying process. It features real caramel made in-house from scratch with naturally derived colors and flavors, aligning perfectly with the industry-wide movement toward cleaner, simpler ingredient decks. This innovation not only strengthens our leadership in the clean snacking space but also opens the door to a wider range of retail opportunities as buyers increasingly prioritize clean label confectionery products. It reflects where the market is headed and where Sow Good Inc. excels. At the same time, we are seeing a slowdown in traditional SKUs that mirror the broader category softening, while growth and retailer demand are shifting toward our new innovative SKUs, particularly those featuring proprietary textures, novel flavors, and clean ingredients. This shift reinforces our commitment to continuous innovation and to leading the next generation of freeze-dried snacking. Furthermore, we are engaged in ongoing discussions with several national retailers regarding additional private label opportunities, including potential expansion into freeze-dried yogurt melts and other innovative product formats. While these conversations are still early, they demonstrate the growing interest in Sow Good Inc.'s manufacturing capabilities, innovation expertise, product quality, and vertically integrated platform. As the freeze-dried category continues to mature, Sow Good Inc. remains an innovation leader, combining unmatched product quality with proprietary technology and vertical integration that sets us apart in taste, texture, and efficiency. Finally, to support our working capital needs, we have received commitments for additional capital, with insiders personally committing $1 million. This continued insider support underscores our leadership's confidence in Sow Good Inc.'s strategy, execution, and long-term potential. With that, I will turn it over to Donna to walk through the financials. Donna Guy: Thank you, Claudia. It is a pleasure to be here with all of you today. Diving into our financial performance for the third quarter, revenue in 2025 was $1.6 million compared to $36 million for the same period in 2024. The decrease is primarily due to lower average selling prices associated with the closeout of discontinued SKUs. Gross loss for 2025 was $8.9 million compared to a gross profit of $600,000 for the same period in 2024. Gross margin was negative 576% in 2025, compared to 16% in the year-ago period. The decline is primarily attributable to approximately $8.5 million in non-cash charges to inventory associated with discontinued SKUs as the company executes its strategy to streamline its product portfolio and focus on its more innovative upcoming offerings. Operating expenses in 2025 were $3.7 million compared to $3.8 million for the same period in 2024. A year-over-year improvement in operating expenses was driven by lower payroll costs and professional fees as we continue to optimize operations. Net loss in 2025 was $10.9 million or negative 90¢ per diluted share compared to a net loss of $3.4 million or negative 33¢ per diluted share for the prior year period. The decrease was largely attributable to lower revenues coupled with non-cash inventory reserve charges, partially offset by a non-cash gain of $1.7 million upon the exit of two leases. Adjusted EBITDA in 2025 was negative $10.9 million compared to negative $1.9 million for the same period in 2024. The decreased adjusted EBITDA is predominantly due to inventory charges previously mentioned, partially offset by increased non-cash compensation. Moving to the balance sheet, we ended the quarter with cash and cash equivalents of $387,300, compared to $3.7 million as of December 31, 2024. We ended the quarter with a stronger and more efficient cost structure. The actions we have taken to streamline operations, lower fixed costs, and optimize payroll are setting the stage for better leverage as demand grows. Our systems are stable, retail momentum is building, and we are seeing encouraging progress in new product categories. As we close out the year, we are focused on driving growth with discipline and maintaining the financial rigor that is now embedded in how we operate. This concludes my prepared remarks. I will now turn the call back to Claudia. Claudia Goldfarb: Thank you, Donna. Sow Good Inc. is entering the next phase of its growth journey with strong operational discipline and a focused path toward returning to profitability. The foundational work we have completed has made us more efficient, more resilient, and better positioned for sustained profitability. Our focus remains clear and consistent: optimizing our cost structure and conserving cash, expanding retail distribution and private label partnerships, and executing with discipline to deliver long-term growth and a return to profitability. With our facility consolidations and payroll optimization now complete, we are moving into 2026 leaner, focused, and ready to scale profitably. Our private label expansion, beginning with the caramel crunch and the potential addition of yogurt melts, represents a powerful opportunity to diversify revenue while deepening relationships with key national retailers. We also expect the actions we have taken, combined with automation, SKU rationalization, and vertical integration, to drive gradual margin improvement beginning in mid-2026, further supporting our path to profitability. In parallel, we are advancing a number of forward-looking strategic initiatives, including digital asset and partnership strategies designed to strengthen our balance sheet, diversify our funding base, and enhance long-term shareholder value. These initiatives reflect our ongoing commitment to innovation not just in product development, but also in how we think about capital formation, value creation, and financial resilience. We are actively meeting with a range of partners and advisers to explore opportunities that can help unlock new sources of liquidity, improve capital efficiency, and position Sow Good Inc. at the forefront of responsible financial innovation. We are approaching these discussions with discipline, prudence, and a clear focus on shareholder alignment, ensuring that any steps we take are accretive, transparent, and supportive of our long-term strategy. The level of engagement and interest we are seeing reinforces our belief that Sow Good Inc.'s next chapter has the potential to be both transformative and value-driven. As we head into 2026, we do so with optimism and confidence. Sow Good Inc. is leaner, more agile, and more efficient, and better aligned for sustainable growth, supported by exceptional retail partnerships, category-defining innovation, and a culture built on excellence. The work we have done this year positions us to translate operational progress into financial performance, and we are committed to delivering measurable results that drive shareholder value in 2026 and beyond. We appreciate the continued trust and support of our shareholders, partners, and team members, and we look forward to sharing our progress in the months ahead. Operator, we will now open the call for Q&A. Operator: Thank you, ma'am. As a reminder, to ask a question, please press 1 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. And our first question comes from Peter Thomas Sidoti with Sidoti and Company. You may proceed. Peter Thomas Sidoti: Hi, Claudia. Just some quick questions. Please, can you provide any more details on the financial commitments that you have in hand at this point? Claudia Goldfarb: So it is $1 million, and it is me and Ira. Peter Thomas Sidoti: I got that. Alright. Yeah. What do you think your current cash burn is on a monthly basis at this point? Claudia Goldfarb: It is going to decrease pretty significantly after January. Once Rock Quarry comes off. So, you know, this $1 million gives us the runway we need to put into effect the private label. Some of the DAP strategies that we are looking at, so we feel comfortable that this will get us through, you know, the short term. Peter Thomas Sidoti: Okay. And is this $1 million coming in as equity debt? Or it is not formal yet at this point? Claudia Goldfarb: It is not formal yet at this point. It should be within the next week. Alright. Good luck. And thank you. Eric Des Lauriers: So on revenue, when do you think you need to do revenue to break even at this point? Or after January? Claudia Goldfarb: That is a really good question. A lot of it is going to depend on the yield and throughput for the caramel crunch SKU. And so, you know, I think that we are going to have much more visibility as to what our breakeven point is going to be, you know, probably starting March or April. Okay. But right now, you know, we are getting our cost down significantly to where we are probably going to be at about a $4.50 to $5.50 range on a monthly expense. Eric Des Lauriers: That is great. And the caramel coat crunch business, are the economics very similar to your other products, or is it higher volume growth? Claudia Goldfarb: Very similar. So the advantage to the caramel crunch, and I think that in the later half of the year, we will start seeing improved margins on the caramel crunch as we just start fine-tuning the manufacturing process. Because it is super exciting. We are making it from scratch. And so, you know, we just expect to see some raw material savings in that and just really good margins once we get fully operational. Eric Des Lauriers: Okay. And one last question, though. Get off the phone. I know you have expanded your sales effort quite a bit. Can you talk about how effective that has been and how happy you are with the results so far? Claudia Goldfarb: Sorry. I missed the first part of that piece. You have expanded your sales effort. Eric Des Lauriers: The sales team there. Claudia Goldfarb: Yes. You know, I think that they have done a great job in a very trying time. Right. You know? And I think that we are seeing that in, you know, the private label space. Landing this customer was definitely a big deal, and it is going to be a significant achievement, you know, for next year. ACE, Orgill, you know, expanding to non-retail environments. I think it just really speaks to their dedication and determination to find, you know, great retail partners for us. So Right. We I am very happy with the work they have done. You know, we are looking at private label yogurt melts and other opportunities in adjacent categories. And so they are grinding it out. And so you know. Eric Des Lauriers: Okay. It sounds like everybody is grinding it out. So well, I appreciate it. Thank you very much, Claudia. Claudia Goldfarb: Thanks, Peter. Operator: Thank you. And as a reminder, to ask a question, please press 11 on your telephone. One moment for questions. And at this time, this concludes our question and session. I would now like to turn the call back over to Claudia for any closing remarks. Claudia Goldfarb: Thank you, everyone, for your continued support. We are entering 2026 leaner, more efficient, and well-positioned for sustainable growth that we really believe will set the stage for a return to profitability next year. We remain disciplined and energized and committed and want to thank you again for joining us, and we really look forward to updating you on our progress in the quarters ahead. Eric Des Lauriers: Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Annie Bersagel: Good morning, and welcome to the presentation of Orkla's third quarter results. My name is Annie Bersagel and I'm the Head of Investor Relations and Communications. Our President and CEO, Nils Selte, will begin with a summary of the highlights from the quarter. After that, our CFO, Arve Regland, will go into a deeper dive in the financials. Nils will come back with some concluding remarks before we go over to the Q&A. So just a reminder, we have a video Q&A with analysts first. And after that, we will take all of the questions that come through via the web. So you're welcome to submit your questions via the web at any time. So with that, I think I will now leave the floor to you, Nils. Nils Selte: Thank you, Annie, and good morning, everyone. This quarter, we continued to execute on our active ownership model and capital allocation strategy. The focus is on improving our core business in the portfolio companies and investing in opportunities that drive long-term value. To start with a highlight this quarter. In Q3, Orkla delivered 4.4% organic growth across our portfolio companies. Of this volume mix contributed positively with 1.3%. Underlying EBIT adjusted growth grew by 1.1%. This quarter, we see a mixed development across the portfolio companies. Adjusted earnings per share was NOK 1.85, a 9% increase year-on-year. And the IPO, Orkla India. I said at the Capital Markets Day in November 2023 that we were initiating IPO readiness study. Last week, we reached a major milestone with the IPO of Orkla India. It is the result of a year of steady work, and I'm proud of the persistence shown by our team in India and at headquarters to reach this point. Since we bought MTR Foods back in 2007, we have had an amazing journey starting with strong local brands and strong local management team. Orkla India acquired Eastern -- in Eastern in 2021, and have steadily grown the company to what it is today. Let me be clear, this is not -- this IPO is not an exit for Orkla. Orkla will remain committed -- a committed major owner of the company. As a listed company, Orkla India now has its own currency and the flexibility that comes with it, a tool that will support growth over time. The proceeds from the sale of Orkla India provides additional financial contribution alongside Orkla's robust cash flow from operation. To optimize the capital structure and return excess capital to shareholders in line with our capital allocation policy, we have decided to initiate a NOK 4 billion share buyback program. The program will begin on November 17, 2025, and conclude by the end of December 2026 at the latest. Moving on to organic growth development for the consolidated Portfolio companies here shown over the past 2 years. Nearly all of the Portfolio companies contributed to growth in this quarter. Orkla Food Ingredients and Orkla India had the largest positive contribution to volume mix. Orkla Snack, also a larger positive contributor to price growth due to extraordinary cocoa price situations. Turning to a breakdown of the Portfolio companies' performance. We see a more flattish development in the results this quarter compared to a strong quarter last year. With our continued focus on long-term value creation, we see positive underlying development in several of the companies. Profitability varied across our Portfolio companies, and Arve will present a more detailed picture of the individual companies, but a couple of developments deserve mentioned. Jotun continued to deliver strong results during this quarter with double-digit underlying EBIT growth in local currencies, while maintaining the high margin levels. Orkla Food Ingredients delivered lower EBIT growth compared to past quarters. This led to a weaker development in the Bakery segment, in addition to volume growth, in lower-margin categories in plant-based. The positive growth in the Sweet segment continued. Excluding the impact from Cocoa, Orkla Snacks continued to have a positive underlying development. Moving on the 12 month -- the trail rolling months, EBIT adjusted margin for the consolidated portfolio companies held at 10.3% in the third quarter, a 0.3% improvement year-on-year. This improvement was broad-based with corresponding margin improvement in 7 of the 9 consolidated Portfolio companies. In terms of input cost, the development remains polarized. We continue to expect raw materials prices in sum to stabilize in 2025, excluding cocoa. Beyond 2025, we expect a continued polarized cost development across sourcing categories and for the Portfolio companies with an overall neutral cost outlook despite inflationary market sentiment. At our Capital Markets Day, we laid out our 3-year financial targets for the consolidated Portfolio companies. At the same time, I said that improving the performance of our existing portfolio will create the most value in the short term. I'm impressed by the progress of our Portfolio companies so far delivering EBIT adjusted to compound annual growth rate of 11.8%, margin expansion of 1.3 percent points and an improvement in return on capital employed by 2 percentage points. All in line with our financial target for this strategy period. At the same time, a lot of work remains. We will be fully focused on delivering on each of these goals in 2026, concentrating particularly on continued organic growth, cost management and capital discipline, achieving our 2024-2026 target is central to delivering top-tier long-term shareholder return, which is our overarching mission. I'll now hand over to Arve to walk through the quarter in more details. Thank you so far. Arve Regland: Thank you, Nils, and good morning. Let's start with the income statement highlights for the third quarter. Operating revenue was NOK 17.9 billion, up 4% year-over-year, and EBIT adjusted was NOK 2 million, up 2%. Lower cost in Orkla ASA and the business service companies contributed positively. Other expenses was NOK 401 million in the quarter, and the main element was a write-down of NOK 240 million of trademarks in Orkla Health and a write-down of NOK 130 million in the European Pizza Company equal to the remaining goodwill in New York Pizza's German operations. Profit from associates, which is mainly Jotun, was NOK 603 million, up 10% year-over-year and then landed at profit before tax at NOK 2 billion. And the improvement compared to last year is mainly due to the substantial impairment charges last year. And as Nils mentioned, adjusted EPS at NOK 1.85 per share, up 9%. Year-to-date cash flow from operations was NOK 4.8 billion. We are around NOK 400 million below record last year for 2 reasons. Some working capital buildup due to higher trade receivables and inventory, and increased net replacement investments primarily related to Orkla Foods, Orkla Food Ingredients and Orkla Snacks. These include replacement project at various factories, ERP projects and new long-term leases. Dividend from Jotun is unchanged versus last year at NOK 948 million, and we received the second installment in the third quarter. Turning to capital allocation bridge, and I will comment on specific development in the quarter. Expansion CapEx is around NOK 400 million year-to-date, of which NOK 250 million in the third quarter. And the increase in the quarter is related to -- mainly to increased production capacity in Orkla Snacks and Orkla Food Ingredients. Purchase of companies increased with roughly NOK 100 million and is related mainly to bolt-on acquisition in Orkla Food Ingredients. We maintain a robust balance sheet with a net debt at NOK 17.7 billion, equal to 1.7x EBITDA and 1.3x excluding Orkla Food Ingredients. Moving to some more details on the Portfolio of companies. And as usual, we'll start with Jotun. And please note that the figures and graphs relate to Jotun is the end of August year-to-date as Jotun do not publish Q3 results. However, I will discuss some highlights from the quarter. Operating revenue declined 2% in the quarter, excluding negative currency translation effects, the sales growth was plus 4%. This follows a continuing trend, revenue growth driven by higher volumes as well as increased premium sales in the decorative segment. EBITA increased by 6% over the quarter and 12% excluding the currency effects related to a stronger Norwegian krona. Both higher sales volumes and gross margin from lower raw material cost contributed positively. Jotun had financial gains related to currency hedging in the quarter, but the amount is still much smaller than the negative impact to EBITA related to the stronger NOK. We guided that we expect to report 2025 results on par with last year. We continue to expect currency headwinds to negatively impact growth year-over-year in the fourth quarter. That said, given the strong underlying operational development year-to-date, Jotun's contribution to Orkla results for 2025 tracks ahead of our outlook. Orkla Foods had organic growth of 0.8%. It was a temporary negative volume mix impact in Q3 due to ERP modernization in the Czech Republic. And the go-live process created challenges for our main warehouse resulting in lost sales. Adjusted for this, volume mix growth was slightly positive for Orkla Foods in total. Orkla Foods Norway had a negative volume mix but with a significant improvement compared to the second quarter. Market share in growth categories increased in line with the strategy communicated at the Capital Markets update. Underlying EBIT growth was 2.4% and came primarily from increased sales. Input costs increased during the quarter and Orkla Foods expects higher prices for beef, dairy, marine and berries to continue into next year. Orkla Snacks had organic growth of 7.5%, driven entirely by price. The Chocolate segment was the main driver of the price growth as well as a drag on volumes. Organic growth in the Snacks category was flat in the quarter, while biscuit contributed positively. Underlying EBIT declined 8.4% year-over-year reflecting impact of higher cocoa prices. BUBS launched in the U.S. in September through a production and distribution agreement with Mount Franklin Foods. The BUBS U.S. launch was promising, but was not material in Orkla Snacks P&L for the quarter. We expect limited EBIT effect from BUBS in the coming quarters as we continue to invest in A&P and SG&A to support the rollout. Orkla Home & Personal Care had organic growth of 0.9%, driven by continued volume mix growth in Norway and Sweden. And this was partly offset by lower volume mix in contract manufacturing and Finland. Underlying EBIT growth was 7.6% year-over-year, primarily cost-driven. Organic growth in Orkla Food Ingredients was 8.3% with 3.9% from volume mix. The plant-based cluster drove the volume mix growth but on lower margin products with limited impact on EBIT growth. There was a volume mix decline in Bakery across business units impacted by softening consumer sentiment and intensified competition. Underlying EBIT growth at 1.6% for the quarter was impacted by continued improvement from sweet ingredients, offset by a loss of volume in Bakery as well as lower margins in plant-based, as mentioned. Organic growth in Orkla Health was 2.5%, with volume mix growth of 1.6%. The main positive contributors were Wound Care and Food Supplements in Europe. The growth was offset by continued weak development in both Oral Care and Functional Personal Care categories for B2B customers. Underlying EBIT decline was driven by contribution margin pressure, increased SG&A costs and higher advertising spend in food supplements. The new Orkla Health CEO, Mats Palmquist, joined in mid-August, and initiatives are launched to reduce complexity and improve growth. And we will find the right opportunity in 2026 to present an update on Orkla Health to the Capital Markets. Orkla India reported quarterly results yesterday, so I will only name a few points here. And please note that Orkla India reports to the Indian Stock Exchanges in local currency according to Indian Accounting Standards with the financial year starting April 1. The quarterly numbers we report are according to IFRS, given in NOK and presented on a calendar year basis. Organic operating revenue growth was 4.3%, with positive volume growth and a decline from price. Underlying EBIT declined by 1.8% due to higher advertising costs related to early festive season. Transition expenses associated with recent sales tax reform in India and also Orkla India recorded financial incentives from the government of India in the same quarter last year. Excluding the impact of government grants, underlying EBIT adjusted growth was 6.2%. Organic growth in the European Pizza Company was 2.2% in the quarter with consumer sales growth in the Netherlands, Finland and Poland. Underlying EBIT increased with 7%, driven by consumer sales growth and cost control. And lastly, Orkla House Care had a top line organic growth in the quarter, while the development was flat in the Health and Sports Nutrition Group. But there were substantially improved profitability in both companies compared to the same quarter last year. With that, I'll hand it back to you, Nils, for the closing remarks. Nils Selte: Thank you, Arve. Having now entered the second half of our statutory period 2024 to 2026, I'm pleased with the progress we have made across the 3 strategic pillars presented at our Capital Markets Day. Driving organic value in our existing portfolio, simplifying the portfolio structure and executing value-adding structural transactions. As we enter the last part of the strategy period, we remain committed to delivering on these 3. At the same time, we have initiated development for our next strategy plan, which will guide Orkla through 2030. This work is being carried out in close collaboration with our Board and grounded on the same principles of focus, discipline and long-term value creation. We look forward to presenting the next strategy plan to the market towards the end of 2026. In closing, I want to thank our employees across Orkla and our Portfolio companies for their hard work and our owners for continued support. We entered Q4 with determination to finish the year strong and with confidence in the path ahead. We have more work to do, but we are pleased with the direction. Thank you for your attention. Arve and I are now happy to take your questions. Annie Bersagel: Welcome back. We are now ready to begin our Q&A. [Operator Instructions] So our first question is from Hakon Nelson from Kepler Cheuvreux. Hakon Nelson: I have 2 from me. The first is about Jotun, they delivered a very solid quarter. Could you elaborate on the key drivers by the solid volume growth and margins? And whether do you see this level of performance as sustainable into 2026? And the second is regarding the transformation and exit portfolio. How should we think about the remaining assets in terms of timing? And are there business outside the current transformer exit classification that you could consider opening for a strategic review or potential sale if the right conditions arise? Nils Selte: Let's start with the Jotun question. I think as we describe the result and the good performance of Jotun is very much due to the higher volume and also improved gross margin. I think also we have said that we guide now ahead of what we guided for the total year 2024. So we are -- I think we will be a bit above what we guided early this year. We don't want, at this stage, guide for 2026, but I guess we will get back to that on the Q4 presentation. So can you repeat -- so when it comes to transform or exit portfolio, we have 2 companies left we have never guided on structural deals. So I think we will stick to that policy and not guide on any structural deals. And that goes for the whole portfolio to say so. Annie Bersagel: Our next question is from Ole Martin Westgaard from DNB Carnegie. Ole Westgaard: I'll start with a quick 1 on Foods. You highlighted delivery issues in the Czech Republic in this quarter. Just to be clear, are these issues now resolved? Or is this -- will this also impact Q4? Arve Regland: They are resolved. So that's -- this is also a Q3 incident in relation to implementation of the ERP system, which had -- we had some problems in the main warehouse related to that, but that's resolved at the end of Q3. So it shouldn't be impacting Q4. Ole Westgaard: Yes. And on Snacks, can you be specific on how much snack or sort of chocolate demand was down in Q3? And when do you expect this to stabilize or has it stabilized now? Arve Regland: It has stabilized, but we don't give any clear guidance on exact numbers. But as we have said earlier, we have at least a 10% volume decline on -- due to chocolate price increases. But it's stabilizing, but it's still obviously affecting the numbers year-over-year, as you can see in the report. Ole Westgaard: Yes. And then on the write-downs. I understand this is -- majority of this is related to Nutrilett. What is the remaining book value of Nutrilett on your balance sheet as of now? Arve Regland: There's nothing left on Nutrilett, but it's also several trademarks in Orkla Health that was written down in the quarters. Nutrilett was 1 of them, but they are also consolidated a few other trademarks into Sana-Sol as a new main brand for some of the trademarks or it's a combination of several trademarks that's written down, which then in total was the number, as I presented. Ole Westgaard: Yes. And then last 1 on Foods and Snacks. Can you comment on how you see your market share development in this quarter and how the competition is from private label? And I'll join back in the queue. Nils Selte: I think, in general, we see that we are flattish, more flattish when -- if you look at the prioritized categories within Foods, we see that we are taking market shares. Otherwise, in the other categories in Foods, we are more or less flat. Also that goes for -- but it's a few variation between the different categories in Snack, but all in all, it's more a flattish development this quarter. Annie Bersagel: And it looks like the next question we have is from Petter Nyström in ABG Sundar Collier. Petter Nystrøm: So just a very quick question for me. And that is, could you share some insight on how you see raw material prices developing into 2026 versus 2025? Nils Selte: As I talked about that briefly in my presentation earlier this morning, and I think this -- we are expecting flat development, including cocoa prices going into 2026. And that's the picture we see as of today. A bit fragmented, there are a big variation between the different categories, and it might see the different Portfolio companies differently. But in general. Annie Bersagel: I see Hakon Fuglu has a hand up, if you have another question. Hakon Fuglu: This is the first. But yes, I have a couple of ones, and I'll take them 1 by 1. In the second quarter, you talked about inventory rebalancing within Food for a couple of your clients. Did we have any impact on that this quarter as well? Arve Regland: That was a very limited impact this quarter. Hakon Fuglu: Okay. And looking at your headquarter costs, they continue to decline sequentially also in this quarter. Are we sort of reaching a sort of more normalized level in this quarter? Nils Selte: We don't want necessarily to guide on the headquarter cost. But I think this quarter, we see a reduction in FTEs in the IT part of the Orkla IT AS, and we also see a reduction in number of FTEs in the headquarter, as well as a reduction in bonus cost due to the share price development in this quarter. But we don't want to guide for going forward. Hakon Fuglu: And final 1 from me. Talking about your hero brands. Elevating those brands, now you're going to sort of help and what sort of the expected impact for the other Portfolio companies there? And are you seeing any impact from the ambitions that you launched on the CMU? Nils Selte: Implementing new ways of actually running our portfolio of different brands takes a lot of time, and it takes also time before it gets effect into your performance as well. So I think all the companies are now implementing this new way of thinking. And we presented the Snack and Food, how they are working on the Capital Markets Update in May this year. So this is work going on. We see progress as we have said that in prioritized categories in Food over the last few quarters. And I think that's a good sign on that this will work and this is working, but it takes time before it hits into the P&L to say so. Annie Bersagel: And I see our next question is from Ole Martin Westgaard in DNB Carnegie. Ole Westgaard: Another question for me. When it comes to your marketing spend in this quarter, how is that year-on-year? And what was the underlying margin improvement adjusted marketing spend? Arve Regland: Yes. We haven't given a clear number of that, but it's fairly flattish compared to the last year. Ole Westgaard: Yes. And then just on BUBS. You -- can you say a bit more on how you see the performance of BUBS in Q3 relative to your expectations? How has it changed any perception of how you view the attractiveness of the U.S. market? Arve Regland: No. In U.S., it's still early days. So as we also stated in the report, it's a promising launch in the U.S. Limited, however, limited impact to the numbers in the third quarter given that we launched at the end of the quarter. And we are also now very keen to support that rollout, meaning that we're going to support the sales with SG&A resources and also A&P. So on the back of that, it's promising, but I wouldn't expect a huge impact to the P&L in the coming quarters due to the efforts that we put behind the rollout. Nils Selte: We will in that for the long term in the U.S. market when it comes to BUBS. Annie Bersagel: That seems to be the last video question. So we're going to turn it over to questions from the web. It looks like we've had a couple coming from Marcela Klang, Handelsbanken. The first question from Marcela is on the strategy. Can you give an indication of the continued strategy plan that you will present towards in 2026? What areas are you contemplating on targeting real estate, M&A? Nils Selte: I think that's way too early. I said this is a process that we just started with the Board. It's ongoing discussions, and we have made a plan on how to make a good strategy for the future heading towards 2030. We also, in this process, will dive into the Portfolio companies, and the Portfolio companies will make their own full potential plans and strategy plans, and we need to see the totality before we can give any guidance to the market. And we would wrap in the end of 2026 with a new Capital Markets Day to tell about our strategy for 2030. Annie Bersagel: And the last question from Marcela here is, do you expect the NOK 4 billion share buyback program to be spread across Q1, Q2, Q3, Q4 2026 evenly or more in the first half? Arve Regland: The share back program will be run according to the MAR regulations meaning that we will buy a volume not affecting the share price, meaning up to 25% of the volume in the recent periods. So that it will take the time it will take. And we're not going to give a clear guidance on how many months it will take, but obviously, it will take some time to accumulate that volume in the market. Annie Bersagel: And that appears to be the final question on the web. So before we conclude, let me just remind you that we will report results for the fourth quarter on February 12. So with that, thank you for joining, and please enjoy your day.
Operator: Good morning, ladies and gentlemen. Welcome to Syn's video conference about the third quarter results. This conference is being recorded, and you will be able to access the replay on our website, ri.syn.com.br. The slide deck will also be available for download. [Operator Instructions] And right after the presentation, we are going to have a Q&A session. We will provide further instructions then. I would like to provide that the information that will be informed are related on the information that are responsible or available right now. However, since future results may differ substantially from the results presented and herein due to the various important factors, among other factors, investors, shareholders and stakeholders need to take into account that there are other circumstances responsible for the decisions other than the information contained in this presentation. Here, we have Thiago Muramatsu, the Director at Syn; and Hector, the Investors Liaison Director. Now I'd like to give the word to Thiago Muramatsu for the presentation. Thiago, please go ahead. Thiago Muramatsu: Welcome, everyone. Thank you very much for joining on this call to talk about our results. We are going to start talking about some of our achievements from the third quarter. So let's start with capital reduction that we had for this quarter. It was announced at the end of the month of July, a little bit before we had the second quarter results, we had a total of BRL 330 million reduction, which is about BRL 2.16 per share on the date of September 18. We are also moving on with the Shopping D transaction where we are selling our participation along with XP Malls. The sale of our entire stake represents a total of BRL 8.9 million, and we expect to finalize this transaction in the next coming weeks. Finally, as we mentioned at the beginning of the year, we also closed the sale of Brasílio Machado. We have already received the first 5 installments. There is a final one to be received at the end of this year where we are going to close the entire deal. Now a little bit about our operational performance. Let's start with shopping malls. In this quarter compared to the third quarter of last year, we had an increase of physical occupation of about 1%. Throughout this last year, we started with new rentals and exchanged 7% of our total number of stores focused on food, entertainment and services. We also reduced our share in clothing stores focused on those 3 main factors. When it comes to financial occupation, we also had a slight increase, but we continue at about 95%, which we consider to be a healthy occupation. Now a little bit about our sales. When we talk about sales evolution, we can see that we had an increase of 5.5% with BRL 55 million coming from same-store sales, BRL 44 million from new locations or new stores and 18% from kiosks and events. So when we consider the total sales in percentages throughout the 9 months of this year, we can see an increase of 4.2%, and the same-store rent with an increase of 5.6%. Despite the fact that we had these increments of 5.6% compared to 4.2% in sales, we were able to keep our turnover that represents very healthy levels as well. And the majority of this increase or this growth of BRL 18 million was considered also with this growth in portfolio compared about 50% compared to last year. Now about corporate buildings, we maintained basically the same level of physical occupation compared to the same period of last year. And when we look at 82.7% against 91.6%, we had the vacancy of Brasílio Machado, which was a building that we have sold. So when we take that into account, we go from 91% to 93.8% as well as in financial occupation going from 91% to 92.6%. Lastly but not least, talking about our warehouses, the CLD. As we have been seeing over the last quarters, we have already delivered Phases 1 and 2. Both of them are 100% rented, already occupied. We expect to deliver the Phase 3 on December this year. When it comes to the Phase 4, we expect to deliver that fourth phase on the first semester of 2026, but we have this expectation of being able to deliver the last phase already in the first quarter of 2026. We are already having some conversations about occupation. We already have a proposal for the rental of part of this warehouse of about 30%. And in terms of location, we are talking about 10% compared to the last value of Phases 1 and 3 -- I'm sorry, Phases 2 and 3. Now I would like to talk -- to give the floor to Hector to talk about financial results. Hector Bruno de Carvalho Leitao: Well, on the first phase, we can see the performance of our properties compared to the same period of last year. And in the first quarter, we had a very robust growth of 13.7%. And throughout the 9 months, 11.8%, both for shopping malls and offices. The main driver or leverage of those results are in revenue for malls. We had this increase of 10%; and offices, 11%. This is basically due to the fact that we had an increase of revenue of same stores. As Thiago has mentioned, there were some store exchanges with the best portfolio as well as best profitability. There's another factor for shopping malls, though, which has to do with media and kiosk, events and other merchandise campaigns that have been growing at about 20% rate, which is something that has been providing great results for us. For offices, the results are basically focused on reviews -- or I'm sorry, revisions where we are focused on 3 main buildings, 2 at JK Triple A as well as Leblon in Rio de Janeiro. This growth is above the inflation rate. And also for the last 9 months, we can see the same impact where we grew 11.8%, total 13% in malls getting to BRL 48 million, and 8.7% in offices, bringing us to 17% or BRL 5 million in the year. On the next slide, we can see 2 very important indicators. The adjusted EBITDA. In the third quarter, we can see a growth that is cohesive to the ROI, 15.5%. Our EBITDA of BRL 20.8 million. Looking specifically at the 9 last months, we can see that 5 months of this portfolio happened 5 months before the transactions that we have closed. So there is this decrease of 36.8%. So BRL 95.6 million of last year compared to BRL 60.4 million this year. However, when we look at the adjusted FFO, we can see that there is this growth of about 120% in the first quarter where we had this BRL 20 million FFO adjusted to sales effect, and specifically for the 9 months of 2024. In this, we had BRL 35 million last year and this year, 45.6% (sic) [ BRL 45.6 million ] showing a growth of 30%, showing that specifically for the fourth quarter on, we have already distributed BRL 960 million. So even considering that we have this return for shareholders, and we still have an FFO that is consistently better than the same period of last year. In this slide, we can see the evolution of our net debt. From one quarter to the other, we basically maintained the same level of gross debt. In terms of cash, we have closed at BRL 231 million, and this drop is due to the reduction of capital that we have had at the end of this quarter. So with that, we closed with a total debt of BRL 271 million, which is about 3x our adjusted EBITDA, which is still considered to be a quite healthy level of that, and very important pay for our investors and shareholders as well. So when it comes to our indebtedness or amortization schedule, we can see the profile of our debt, which is mainly focused on IPCA, which led us to reduce our average cost with a very important spread compared to the CDI of 85% over the CDI. And I think now we can go to the Q&A session. Operator: [Operator Instructions] The first question is by [ Reinaldo Veríssimo ]. Unknown Analyst: Congratulations for the results. How do you intend to reduce your gross debt until 2028? Do you have any plans to expand the ABL beyond the CLD warehouse? Thiago Muramatsu: Reinaldo, well, about our leveraging. Yes, we have increased our leveraging rate because we had some extra cash. So specifically for this 3% of gross debt that Hector mentioned, it is already considering this reduction, and it goes hand in hand with our practices keeping the gross debt level. That is due to the fact that our debt is focused on IPCA, which is a great cost. About the next coming years, this leverage is going to happen due to the expansion of our portfolio. This is the picture of the last 12 months, but over the course of the year and the coming years, we expect that due to the evolution of our portfolio results, we can reduce this leverage rate until we get to lower levels that may be even allow for us to leverage our company. This deleverage result is coming again from the results of our assets. And when it comes to the expansion of ADL, specifically for CLD, unfortunately, we don't have any more room on that land. So as soon as we finish the last phases, we get to the limit of its constructed area. But of course, we are still analyzing new developments or maybe some new acquirements or expansions, okay? Operator: [Operator Instructions] So with that, we would like to close the Q&A session. We would like to give it back to Thiago Muramatsu so he can give his closing remarks. Thiago Muramatsu: Okay. So once again, I would like to thank you all for your presence. We had a very positive quarter, and we are at your disposal to clarify any other questions. Thank you very much. Operator: So with that, we will close our video conference. Thank you very much and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Welcome to Twist Biosciences 2025 Fourth Quarter Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the call over to Angela Bitting, Senior Vice President of Corporate Affairs. Please go ahead. Angela Bitting: Thank you, operator. Good morning, everyone. I would like to thank you for joining us for Twist Bioscience conference call to review our fiscal 2025 fourth quarter and full year financial results and business progress. We issued our financial results press release before the market, and it is available at our website at www.twistbioscience.com. With me on the call today are Dr. Emily Leproust, CEO and Co-Founder of Twist; Adam Laponis, CFO of Twist; and Dr. Patrick Finn, President and COO of Twist. Today, we will discuss our business progress, financial and operational performance as well as growth opportunities. We will then open the call for questions. We ask that you limit your questions to one and then requeue as a courtesy to others on the call. This call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for 2 weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our press release we issued earlier today as well as more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Dr. Emily Leproust. Emily Leproust: Thank you, Angela, and good morning, everyone. Today, our team delivered a record quarter with $99 million in revenue, exceeding our guidance. This represents an increase of 17% year-over-year and our 11th quarter of consecutive growth. For the year, we reported $376.6 million in revenue, growth of 20% over fiscal 2024. Gross margin for the quarter came in at 51.3%. For the year, gross margin was 50.7% compared to 42.6% for fiscal 2024, demonstrating the leverage of fixed costs with higher volume and reflecting our focus over the last 2 years on continuous margin improvement. I'd like to underscore that over the course of fiscal 2025, we grew our business 20%, leveraging our proprietary silicon chip-based technology platform to deliver high-quality products and services rapidly to our growing customer base. Importantly, through the addition of new products and solutions, we expanded our market share with an eye towards addressing new serviceable market in the year ahead. Our commitment to commercial excellence continues to ensure we meet and exceed our customers' expectations. Today, with our differentiated manufacturing technology, our innovative R&D for the continuous introduction of new products, our base of more than 3,800 customers across multiple industries, our hundreds of SKUs having a wide range of diverse applications and an increasing market share in multiple markets, we're operating with incredible execution and financial discipline. And with adjusted EBITDA breakeven within our reach by the end of fiscal 2026, this year, we focus on setting the stage for future growth acceleration. Turning to our results. SynBio revenue came in at $39.5 million, up 17% year-over-year. Our growth in SynBio continues to be led by the Express portfolio, which remains best-in-class in terms of price, turnaround time and scalability. Two years after launch, our customers have come to depend on the rapid turnaround time, high quality and exceptional experience they receive from Twist as their new normal and what they expect regularly. We have decreased the turnaround time for gene fragments, clono genes, high-throughput DNA preps and high-throughput IgG proteins, and we now run assays and provide antibody characterization data as part of our offering for many customers. One area of substantial growth for SynBio and Biopharma offerings came from customers choosing Twist to power their therapeutics discovery initiatives, both traditional drug discovery and AI-enabled discovery because our platform delivers precision, scale and speed at enabling economics. While traditional discovery continues to be a focus of many customers, the rapid expansion of AI-enabled drug discovery creates powerful new opportunities and amplifies the value of our technology. Recently, this AI-driven discovery fueled significant growth for Twist. In fiscal 2025, orders from customers working on AI discovery projects grew more than $25 million versus fiscal 2024. These projects primarily fall into the SynBio and Biopharma bucket today and a customer pursuing AI-enabled discovery delivered our single largest purchase order to date. And the emergence of dozens of new organizations across pharma, biotech and big tech, pursuing new discovery approaches expands the market opportunity for SynBio and Biopharma groups today. Rapidly, as we have moved further up the value chain from fragment to genes to prep to protein to delivering characterization data and beyond, the strategic connection between our SynBio and Biopharma groups tightens. More customers now leverage both products and services to accelerate discovery and identify breakthrough therapeutics. This growing convergence highlights the power of our integrated platforms and reinforces Twist's unique position to serve the full spectrum of innovation and discovery with more products and services to facilitate this growing opportunity coming in the months ahead. Over the last several years, our product introductions are focused on pharma and biotech customers pursuing therapeutic discovery as well as academic research. As we analyze the future market opportunities, we believe this continues to be the right areas of focus for additional tools and services. Moving forward, we have a robust road map and planned product introductions to augment our portfolio that we believe will continue to drive revenue growth in 2026 and in the future. Turning to NGS. We reported revenues of $53 million, growth of 16% year-over-year, driven largely by continued commercial success from our diagnostic customers' clinical assays. Our NGS products are an integral component within many commercial diagnostic workflows. Recall that we provide tools for customers offering tests for therapy selection, liquid biopsy, comprehensive genomic profiling, rare disease, noninvasive parental testing and progression genetics. In addition, we continue to support minimal residual disease customers with several of these groups targeting commercial launch in late 2026 and planning commercial scaling into 2027. And we are beginning to see conversion of the microarray to FlexPrep sequencing workflow. Introduced about a year ago, we believe this product provides significant potential growth opportunities, both for population genetics and AgBio applications. During the quarter, we had 2 significant population genetic wins with the funnel growing in serviceable opportunity for the $500 million market that uses SNP microarray technology today. Customers in both segments run millions of samples. So once converted, the business is bulky. We have maintained our sequencing agnostic strategy throughout our NGS product portfolio with all sequencing platforms. While the majority of our customer continues to use the Illumina platform, and we have an active OEM agreement with Illumina, we also see growing interest in other platforms. To this end, we announced an advancement of our agreement with Element Biosciences last month that enables us to gain exclusive access to Element's new Trinity Freestyle workflow, facilitating the use of Twist, a full lineup of library prep for the IVT system. Together, Element and Twist shortens the workflow from sample to sequencer from more than 20 hours down to 5 hours, a true time savings. In addition, we are powering the gene by gene population genetics test that runs on the Illumina Genomics sequencing platform. This complements our work with PacBio, Oxford Nanopore and others. We continue to see traction building for RNA-Seq workflows, having customers who offer diagnostic tests as well as labs offering clinical services with growth expected across all areas of our NGS portfolio in 2026. Looking at Biopharma Services, we reported $6.4 million in revenue, an increase of 22% year-over-year. Importantly, orders of approximately $11.5 million for the fourth quarter of fiscal '25 reflect a large order that spans both SynBio and Biopharma from a key account that we do not expect to repeat every quarter. More customers now partner with Twist across the full design, build, test and learn cycle for developability assays and characterization data. This trend continues to grow, especially among AI-driven drug discovery companies. Many of these customers operate without a wet lab and rely on Twist to execute the critical experiments that bring their designs to life. We help them move fast, generate robust data and advance programs with great confidence. We see much more integration between our SynBio and Biopharma businesses as customers increasingly use both our products and services to power their discovery pipelines. To capture this opportunity, we aligned our sales organizations to deepen collaboration and fully leverage the synergies between the two. We also received valuable feedback from investors that our SynBio and Biopharma names for revenue grouping [indiscernible]. Reflecting on this progress and feedback, we will combine SynBio and Biopharma revenue for reporting going forward under the term DNA synthesis and protein solutions, indicating synthesis and manufacturing of sequences for DNA, RNA, protein and data for customers going through design, build, test, learn cycle. DNA synthesis and protein solutions more accurately represents our customer base, and we intend to provide additional insight into industry groupings that better reflects how we serve a broad range of customers. Our NGS tools will now be called NGS applications as its products and services facilitate DNA reading, sequencing workflows. Beginning in the first quarter of fiscal '26, we will be breaking out industry groupings into therapeutics, diagnostic, industry and applied markets as well as academics and government. In addition, something that is underappreciated about Twist is a number of organizations that buy products from Twist and then resell them under a different brand name. As such, we will also share global supply partner revenue encompassing distributor and OEM partners as part of our industry breakdown. These new groupings enhance transparency and better align with how our business operates, providing investor insight into our strong growth engine. I would now like to turn the call over to Paddy for commentary on our growth initiatives for 2026. Patrick Finn: Thanks, Emily. As we close fiscal 2025, it's remarkable what we have achieved in the last year, and I'm even more excited about what is to come. While my comments during earnings throughout the last year focused on margin initiatives, we have now crossed the important threshold of 50% margin, almost 20 margin points increase over the last 2 years. We expect to continue to remain above 50% margin moving forward. And this year, my remarks will focus on our growth plans. Today, I'd like to talk about a remarkable and differentiated product introduction for our NGS product line aimed at empowering our customers in an area of increasing importance for cancer diagnosis, monitoring and treatment. I'm pleased to share that we're in the final stages of optimizing an express product for minimal residual disease, or MRD, which we expect to introduce commercially in early calendar 2026. As you know, MRD for therapy selection, cancer monitoring and early treatment of recurrence offers tremendous promise. We already work with many MRD customers providing library prep and target enrichment panels for tumor-informed and tumor-naive panels as well as whole genome sequencing approaches. And we continue to hear from customers developing tumor-informed assays that they gain better sensitivity and specificity using hundreds or thousands of sequences specific to a patient's tumor. The data presented at recent medical meetings back up these beliefs. Importantly, recent studies also show that physicians desire, the capability to sequence the cancers present and have a test in hand for a patient with cancer within a 4-week window. While we currently manufacture enrichment panels within about 5 business days, we hear the desire for delivery of a tumor-informed panel as fast as 12 hours. Using our proprietary DNA synthesis platform, we developed a process to do just that, manufacture and ship an individualized panel as fast as 12 hours after receiving the sequence data. Our MRD Express solution provides the speed and simplicity of a tumor-naive test while maintaining the precision and sensitivity of a tumor-informed assay, something not possible using any other method of DNA synthesis. Taking a step back and looking at the broader implications, we all know family and friends and maybe many of you personally impacted by a cancer diagnosis. In the midst of the storm, turnaround time is critically important, both to determine treatment and create a personalized panel to monitor recurrence of disease. At Twist, we believe it's our responsibility to respond rapidly, potentially offering a path to enable reduced treatment time or pursue therapy at an earlier stage of disease. This higher calling motivates all of our Twisters to go above and beyond for our customers to play a role in transforming cancer into a manageable chronic condition. On the business side, we believe Twist MRD Express has the ability to support our customers in changing the diagnostic and treatment paradigm, lowering the operational barrier of entry for personalized MRD. We enable this shift through our synthesis platform along with automation, delivering personalized panels in a time line equivalent to tumor-naive workflow. We believe our connection to the customer, our ability to turn a customized panel in as few as 12 hours, all underpinned by our proprietary platform will enable increasing availability of tumor-informed cancer assays. On top of this, we have the capacity today to serve these markets, future-proofing customer supply chain constraints and vulnerabilities. With that, I'll turn the call over to Adam to discuss our financials. Adam Laponis: Thank you, Paddy. Revenue for the fourth quarter increased to $99 million, growth of 17% year-over-year and approximately 3% sequentially. For fiscal 2025, revenue increased to $376.6 million, growth of 20% year-over-year. Gross margin came in at 51.3% for the fourth quarter of fiscal 2025, with the margin for full year of 50.7%, an increase of 8 margin points versus fiscal 2024, with approximately 90% of revenue growth in FY '25 dropping to the gross margin line, supported by our continuous process improvement efforts. Taking a deeper dive into revenue. SynBio revenue increased to $39.5 million, growth of 17% year-over-year. For the full year, SynBio revenue increased to $145 million compared to $123.5 million in fiscal 2024, an increase of 17%. NGS revenue for the fourth quarter grew approximately $53 million compared to $45.5 million in the fourth quarter of fiscal 2024, an increase of 16% year-over-year. For the quarter, revenue from our top 10 NGS customers accounted for approximately 39% of NGS revenue. For fiscal 2025, NGS revenue increased to $208.1 million, growth of 23% year-over-year. We served 588 NGS customers in the quarter with 159 having adopted our products. For Biopharma, revenue was $6.4 million for the quarter, growth of 22% over the same period of fiscal '24, with orders of $11.5 million. We had 84 active programs as of the end of September 2025, and we started 47 new programs during the quarter. Compared to last quarter, these programs are more substantive as we see a shift to AI discovery-driven projects. For fiscal 2025, revenue was $23.5 million, growth of 15%. Looking geographically. Americas revenue increased to approximately $57.3 million in the fourth quarter compared to $52.7 million in the same period of fiscal 2024, growth of 9% year-over-year. For the fiscal year, the Americas accounted for 60% of revenue. EMEA revenue rose to $34.6 million in the fourth quarter versus $25.5 million in the same period of fiscal 2024, exceptional growth of 35% year-over-year. For the fiscal year, EMEA represented 33% of revenue. APAC revenue increased to $7.2 million in the fourth quarter compared to $6.5 million in the same period of fiscal '24, an increase of 9% year-over-year. APAC accounted for 7% of our revenue in fiscal 2025. China continues to be a relatively small portion of our revenue at approximately 1% of total revenue for fiscal 2025. Moving down the P&L. Operating expenses, excluding cost of revenues for the fourth quarter were $80.8 million compared with $74.3 million in the same period of 2024. Operating expenses, excluding cost of revenues for fiscal 2025 were $327.3 million, which marks our third consecutive year of relatively flat operating expenses, excluding cost of revenues. Looking at our progress and our path to profitability. For the fourth quarter of fiscal 2025, adjusted EBITDA was a loss of approximately $7.8 million, an improvement of $9.2 million versus the fourth quarter of fiscal '24. For fiscal '25, adjusted EBITDA was a loss of approximately $46.9 million, an improvement of approximately $46.6 million versus fiscal 2024. Cash flow from operating activities continues to improve, and we are driving to breakeven. For the 12 months ended September 30, 2025, net cash used in operating activities was $47.6 million compared to $64.1 million for the equivalent 12-month period in 2024. Capital expenditures in fiscal 2025 were $28 million, reflecting our investment in growth for fiscal 2026 and beyond. We ended the fiscal year with cash, cash equivalents and short-term investments of approximately $232.4 million. As Emily mentioned, beginning next quarter, we will provide new revenue by industry for the following categories that increased clarity around our key customer groups and transparency on how we are progressing as follows: Therapeutics customers, which include both large pharma and early-stage biotech, diagnostics customers who use our products to deliver a clinical report for a patient; industrial and applied customers, including agricultural bio; academic research and government customers; global supply partners, which will include distributor and OEM partners servicing customers across a variety of industries. We believe these new categories will provide added color and metrics for investors to track our progress in reaching different end markets and customer segments. We do intend to share a retrospective view on the new industry group performance in our fiscal first quarter reporting. Turning to guidance for fiscal 2026. We expect total revenues of $425 million to $435 million, growth of approximately 13% to 15.5% year-over-year. For our DNA Synthesis and Protein Solutions Group, we expect revenue of $194 million to $199 million, growth of 15% to 18% over fiscal 2025, reflecting strong demand from our AI discovery customers. For our NGS Applications Group, we expect revenue of $231 million to $236 million, growth of 11% to 13.5% over fiscal 2025. We see a path back to 20% growth year-over-year by Q4 as we expect a large diagnostic customer will begin ramping their commercial volume in the second quarter. As added color, our NGS forecast assumes approximately 1 to 2 points of growth for MRD in fiscal '26, with the ramp for this particular product group coming in late '26 into '27. We expect gross margin to be above 52% for fiscal 2026, and we expect to exit fiscal '26 with our fourth quarter achieving adjusted EBITDA breakeven. For the first quarter of fiscal 2026, we expect revenue of $100 million to $101 million, growth of 13% to 14% compared to the first quarter of fiscal 2025. Our guidance includes the expectation that our Q1 revenue will be impacted by a large cancer diagnostics customer who is transitioning their assay from research to commercial with a reacceleration of purchasing in the second quarter of fiscal 2026. We also see significant revenue from the record AI drug discovery order such that our 2 product groups will be relatively equivalent to the first quarter. With that, I'll turn the call back to Emily. Emily Leproust: Thank you, Adam. Our team executed exceptionally well throughout 2025, delivering strong results and building the foundation for what comes next. At Twist, we often say for a strong finish, we go again. We see substantial opportunity ahead across all our markets. Staying close to our customers continues to be our greatest competitive advantage. It allows us to anticipate emerging needs and identify the next set of products that would move the needle for growth. Like our customers, we have an ambedance of ideas and a disciplined approach to prioritization. Over the past 2 years, we deliberately focused on gross margin expansion and with gross margins now above 50%, we have successfully positioned the business for continued profitable growth. As we reallocate R&D resources towards growth, we're investing in innovation that we believe will drive sustained top line acceleration. Our road map remains robust and well sequenced to deliver growth over the next several years. Looking forward, we expect balanced growth across our DNA synthesis and Protein Solutions and NGS applications with some normal quarterly variation. We're advancing new products that support customers leveraging AI and drug discovery as well as those using traditional therapeutics development methods. Fiscal 2026 is about translating our margin strength into durable revenue growth. We know where we need to go, and we are already on our way. With that, let's open the call for questions. Operator? Operator: [Operator Instructions] One moment for our first question and it comes from Catherine Schulte with Baird. Catherine Ramsey: Maybe first on gross margins. Guidance for the fiscal year implies, I think, low 60s incremental margins off of '25. So it would be in that 75% to 80% range if we did it off of '24. But I think the expectation was you'd flow more of the '25 upside through. So I guess the question is, is this pricing driven? Do you have some manufacturing investments that you're making? And when do we get back to the kind of 75% to 80% incrementals? Adam Laponis: Catherine, this is Adam. Thanks for the question. Very much encouraged by the progress of the team over the last 2 years. The 20% growth in gross margin has been extraordinary. While we expect to continue to see the 75% to 80% on average, we are lapping some tough comps, particularly given what we saw in Q3 of this year. For the last quarter, we dropped, I think it was over 80% of gross revenue growth dropped to the gross margin line. And generally, I'd expect that to continue to hold in the future. And if you look at that 2-year metric, it absolutely will, but there will be some noise. And I'd say it is more around the specific customer mix that we see in any given quarter that drives it more than anything else. But we expect it to continue to expand. That said, we will continue to focus on revenue growth as well as gross margin and optimize for the gross profit. Catherine Ramsey: Okay. Great. And then for NGS, I think that guide came in a little bit below Street for fiscal '26. Can you just talk through the drivers there and maybe get a little more granular on the expectations for that customer ramping that moving into production. And I think the guide implies 11% to 13% or 14% growth for NGS. How should we think about long-term growth for that business? Is this kind of the new baseline that we should be thinking about? Adam Laponis: I'm happy to take that one. In terms of growth for NGS, we're very excited about the prospects. We mentioned it on the call last quarter that we have a customer transitioning from their verification and validation that there would be an air pocket in Q4, and that would continue through Q1. We expect that, that customer will ramp as well as other customers. A couple of points of commentary and color that we provided. We expect to be back to 20% growth by fourth quarter in the NGS business as well as we expect to continue to see growth from MRD and other new product introductions. And we've assumed about 1% to 2% of overall growth from the MRD business products in 2026. Operator: Our next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Wondering if you can provide a view into -- in SynBio and with the new segmenting, can you elaborate a bit on the Biopharma order? What -- obviously, that's driven by AI, but just trying to understand how sustainable this is? How much of a momentum? What are you hearing from the customer development teams? How meaningful the AI contribution could be in fiscal year '26? Patrick Finn: Puneet, thanks for the question. We've been talking for a few quarters about strategically how important the biopharma business is and the close ties to the SynBio product offering. And I think you're starting to see real validation of that with the order described in our comments today. It leverages everything that we're good at. Our knowledge from a single gene all the way through to discovery. But what we're seeing with the AI potential is -- it's our throughput and scale that really enables and supports that offering. So we continue to be very optimistic in that space and see a fantastic lineup of the total Twist offering all the way through from one gene all the way through to full discovery that basically puts us in a good spot for our future opportunities. Operator: One moment for our next question. It comes from Brendan Smith with TD Cowen. Brendan Smith: I also wanted to ask just a little bit more about guidance into next year. Maybe just quickly for -- I know you're not guiding to GMs in Q1, but can you give us a sense of how you're thinking about gross margin sequentially from Q4 and then over the course of next year to really get to that 52% plus on the full year 2026? And then maybe just quickly on the NGS portfolio, anything that you're hearing specifically from customers really that's kind of driving some of your assumptions to get to maybe the upper versus lower bound of the guide there? Adam Laponis: Brendan, happy to take the question. In terms of gross margin in the guide, we do see improvements throughout the year. I'd say it is going to parallel with revenue growth being the primary driver of our gross margin expansion as we are continuing to see our efforts from continuous process improvements play out, but we're also continuing to invest in new capabilities across the business to drive our new product initiatives and growth. And as mentioned in the call, a lot of focus on the AI drug discovery and capabilities to support those customers. In terms of the exit point and also where to go from here, we are -- we do see a path to continued gross margin expansion, not just in 2026, but well into 2027 and beyond. But again, optimizing for that gross profit dollar, not necessarily just the gross margin now that we're above 50% and not looking backwards. Operator: Our next question comes from Vijay Kumar with Evercore ISI. Vijay Kumar: I had a 2-part question on NGS. NGS, I think your Q1 guidance, it looks like it's going to be down sequentially, maybe revenues up mid-singles. And I understand that Q4 had the customer transition impact, right? So why would Q1 growth be below Q4? Is there some additional timing elements on Q1 NGS? And sort of related on the MRD Express, did I hear you correctly that sensitivity on a tumor-naive assay would be as good as tumor informed? And is there any data that you highlighted? What kind of interest are you seeing in this product? Adam Laponis: All right. Well, maybe I can start with the NGS guidance, and I'll let Paddy talk to the MRD element of it here. In terms of the NGS guidance, Vijay, thank you for the question on this. We gave the update back in Q3's call that we had a customer transitioning from commercial -- from validation to commercial ramp, and that impacted Q1, and it's going to continue to impact Q4, and we expect to see a sequential growth from that point forward for the NGS business starting in Q2. So we will continue to see that air pocket continue in Q1. And then in Q2 and beyond, we'll see the sequential growth such that by the time we get to Q4, we're expecting to be back at 20% year-over-year growth in the NGS business. I'll let Paddy talk to the MRD portion of the question first. Patrick Finn: Vijay, thanks for the question. I think when we look at recent medical conferences, I think you're seeing that the tumor-informed approach is leading to increased sensitivity in the assay. And that's got us excited about potential with the clinical endpoint for the patients that are going through a tough time. So we see sensitivity enhancements from tumor informed. And again, our scale and speed, we think, is really going to help enable the segment of the market that's focused on that approach. Operator: And it's from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Paddy, just a follow-up on that MRD. MRD Express is an exciting launch next year. Could you speak to who the end user is? It almost sounded in your description like Twist is executing the MRD assay for the physician or delivering the panel to a hospital to run in-house? Or is it the same customer as your NGS diagnostics? Patrick Finn: Subbu, a great question, and thank you for the opportunity to clarify. Twist's role in the community is an enabler, okay? We don't run the test. We supply our customers and our partners to enable them to drive their assays to the clinic. So again, our role will be to supply and enable them. Subhalaxmi Nambi: Perfect. So how will you approach pricing for the MRD Express? What are the expected margins here? And I'll hop back in the queue. Patrick Finn: Yes, a good question. So pricing has not been set at this point. It will go from our basic principle, Subbu, which is we're here to enable our customers at scale to truly drive their product to market. And we think with this product, in particular, truly the impact of MRD to health care. We've listened closely to the customer base. I think we understand the value to this market segment of speed and this 12-hour turnaround time. And I think our operating scale and quite frankly, derisking any vulnerabilities in supply chain is good value, and we'll share that value with our customers as we go forward and enable them to drive best-in-class differentiated assays out to the market. Operator: One moment for our next question. that comes from Matthew Larew with William Blair. Matthew Larew: You reiterated the expectation to hit EBITDA breakeven in the fiscal fourth quarter. But obviously, the year is starting a little bit lower on the top line. Given growth is contingent on the expectation of an NGS customer ramp and MRD contribution, how much breathing room do you expect to have in the fiscal fourth quarter? And I guess how air tight are you going to hold yourselves to hitting that mark? I guess that's the first question. And the second is, Adam, just what does the guide include in terms of the macro picture, given we've seen perhaps some recent positive updates relative to your pharma and biotech customers and perhaps there may be some more certainty for your academic customers coming over the next few weeks or months? Adam Laponis: Thanks, Matt. And I say I never want to predict the macro environment. So we always will be on the -- on the side of caution and assuming things don't improve from where we are today. So we've got -- we've obviously left ourselves assumption that the environment stays relatively stable. And in terms of the growth opportunities, we do assume that acceleration of the commercial customer -- the customer ramping its commercial product today. We also have only assumed 1 to 2 points of growth for the year from our MRD products. We know that, that ramp is going to come. We're extremely excited about it. The difficulty is always in timing that. We want to make sure we're on the right side of that timing, but we are extremely excited for that ramp and the opportunity it brings to the business, not just in '26, but in many years to come. Operator: Our next question comes from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: I got a few questions. So thanks for, I guess, getting us in. So first, on SynBio, you had an academic promotion that removed the Express Gene pricing premium for academic customers in response to funding pressure. Is that promotion still in place? And if so, how much longer do you plan on running it? And then building off of that, how should we be thinking about price per gene '26 versus '25? So that's the first topic. The second is there's obviously been a lot of focus on Q1 guidance specific to NGS and the sequential step down. As you have pointed out to others, you have repeatedly noted over the course of the last several months, a pacing dynamic within NGS. Is the guidance simply a function of that? Or is there any change in underlying trends or demand? The third topic, which I think is a pretty important one, and I'm not sure this is the right forum. And if it's not, we can certainly come back to this at our conference next week. But I believe one of the challenges that investors have with Twist is defining the market opportunity. In the newly named DNA synthesis segment, what is the size of the market opportunity and how penetrated are you? And on the NGS side, specific to MRD and MCED, what is the market size? How penetrated are you? And what is average Twist revenue per assay? I think that would make this -- those are questions that I think if people have the answers to, it would help with modeling and frankly, help people basically develop some more conviction in the long-term growth trajectory of the business. Emily Leproust: Thanks, Doug. Great question. This is Emily Leproust. And good job squeezing 3 questions in one. So maybe briefly on SynBio, you're correct that we had an academic promotion where we got customers express for the price that stand out. That has been widely successful. We're in the new year and the price has not changed. It is just working for us commercially. And you can see in the number of genes that the growth in genes from -- in Q4 was really strong, thanks to that. So we are not announcing whether or not it will close. But as long as it's working, we'll keep doing it and it is working. As far as the Q1 guide, yes, it's purely a pacing dynamic in Q1. There's a lot of excitement and we are winning on many fronts. Of course, we've been very, very strong in liquid biopsy. And the MRD bespoke that we're enabling now with adding 12- to 24-hour express delivery. I think that will be a long-term catalyst. Our FlexPrep launch is starting to work well for the AgBio market and the population generic market. So that's another source of long-term strength. We've worked really hard to integrate into a number of sequencers. The workflow of Twist and the Element AVITI really shortens the time between the sample and being on the sequencer. And since you're doing all the washes after the capture on the sequencer, you can be on the sequencer in as low as 5 hours. So there's lots of good things that are happening in NGS. And we definitely don't see a lower demand. It's just that it's the law of big numbers. It's a big customer that has an air pocket. And we've signaled some very good growth coming back in Q4 for NGS. And then the last question around defining market. we totally hear you. Now is not the right forum, but I think we're looking at ways to help our investor base be as excited as we are about the market. We're very far from penetration and we have differentiated product. And so to us, that means that we have a lot of growth coming. It is true that we are a tools company. Right now, diagnostic company have a moment. They deserve it. They worked on their business models. Their reimbursement is really good. And so yes, in comparison right now, maybe our growth compared to diagnostic companies is a little bit lower. But compared to tools company, I think we are -- I don't want to sound arrogant, but I think we are doing really, really well against our competitors. I don't want to say that we're wiping the floor with them, but we're doing really well. And we hear you on finding a metric, like you said, the average test revenue per patient in NGS. We're looking at metrics. Part of the issue, as you may appreciate, is some of the test, people pay more than average and some of the tests, people pay less than average. And that depends on the test complexity. If you have a test that uses 3 million oligos, well, you're going to have to pay more than if you're using 50,000 oligos. The problem is if we have a price per test that's public every quarter, we may have half our customers being really unhappy, even though the value we provide is fair. So thinking about it and not the forum, but we understand that we want to articulate our market sizing better to help our investors. Operator: Our next question comes from the line of Luke Sergott with Barclays. Unknown Analyst: This is Sam on for Luke. Could you talk a little bit about the new DNA Synthesis and Protein Solutions segment and the rough split between Biopharma and synthetic genes in the '26 guide. The combined segment guide came in above Street expectations. And I'm just wondering where that's coming from and if it's driven by that large AI program. Emily Leproust: Thanks for the question. I think the impetus was twofold. One, there was, I think, some confusion with our customer base around SynBio and maybe an under appreciation of how much we are doing in therapeutic discovery and development. So that's number one. Number two, more and more as our sales team go to talk to customers, there was in practice, very little separation from someone who buys a piece of DNA, so DNA synthesis or someone who wants the protein or the characterization. And so as it's one continuous workflow, some customers stop at fragrance, some stop at genes, some stop at protein, some want the full characterization. It just makes sense to put them together. And as far as the numbers, yes, maybe we're getting a little bit ahead of what people thought. I think it's just a reflection of this business is doing quite well. And there are a lot of synergies between the DNA synthesis piece and the protein piece. A few years ago, some people were asking us, why don't you spin-off Biopharma? And we knew that it had strategic benefit. And we are seeing it now. It's not a 1 plus 1 equals 2. It's a 1 plus 1 equals 3. As far as your question around where is the growth coming? Is it coming from DNA and protein. Frankly, the reason we're putting it together is because we -- one, we don't know; and two, it kind of doesn't matter. What's important is that, that growth is there and we meet customers where they are. And customers may change from quarter-to-quarter. Some quarters, they buy the DNA and some quarters, they buy the protein, and we meet them where they are, and we provide great value. Our products are differentiated. We win no matter where they want to be, and we are looking forward to capturing that growth. Operator: Our next question comes from the line of Mac Etoch with Stephens. Steven Etoch: Maybe just a few quick ones from me. Just given this 1 to 2 points of growth from MRD, is it possible to frame up the proportion of MRD revenues in fiscal 2025? And I'll stop there and follow up in a second. Adam Laponis: Mac, great to hear you and happy to share. What we've said in the past is our MRD business is relatively small. It's a lot of small numbers, and we are growing significantly faster than the overall business. Kind of applying that rule, it's a relatively small percentage of our overall NGS business in 2025, but it is growing much faster than the overall NGS business, and we expect that trend to continue, not just in 2026, but well beyond. Operator: Our next question is from Puneet Souda with Leerink Partners. Puneet Souda: Thanks for the follow-up again. I appreciate you providing a lot of input. But I just want to boil down to a key question. What is the real NGS underlying growth ex this large customer in the first quarter and the fiscal year '26? Adam Laponis: Puneet, if you step back a bit and look at where we were in 2025, the overall growth of NGS being around 23% neutralizing for the growth from the one customer, it would be closer to 20%. And if you go into 2026, I'd say the same general dynamic applies as well. Operator: And we have a question from the line of Vijay Kumar with Evercore ISI. Vijay Kumar: Adam. Sorry, on this Q1 NGS question. The -- is the customer headwind -- I know you had the customer headwind in the back half, right? Is that worsening in Q1? Is that what's driving the NGS assumption? And because we already had the headwind in Q4, right? Like why would it worsen sequentially? Adam Laponis: Vijay, you're asking the right question. The air pocket from Q4 is continuing into Q1, but then it will significantly reverse as we expect the ramp to begin starting in Q2 of 2026. Operator: And ladies and gentlemen, this concludes our Q&A session. I will pass it back to Emily Leproust for final comments. Emily Leproust: Thank you for your questions and for your continued support. With our strong execution in 2025 and a clear path to profitable growth in 2026, we remain focused on delivering differentiated products and services for our customers and sustained value for our shareholders. Thank you. Operator: And this concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Bavarian Nordic Third Quarterly Report for the 9-month period ended 30th of September 2025 Conference Call on Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Paul Chaplin, CEO. Please go ahead. Paul Chaplin: Thank you, and hello, and welcome, everyone, to Bavarian Nordic's Q3 results. Before I start, I just want to make sure you've seen our forward-looking statements on Slide 2. On Slide 3, on today's call, you have myself, Paul Chaplin, and I will walk through the key highlights of the first 9 months and talk a little bit about the excellent progress that we've been -- that we've made. And then I'll hand over to Henrik Juuel, the CFO, who will walk you through the commercial performance and the financials. So if you go to Slide 4, it really has been a fantastic first 9 months of the year. We've recorded close to DKK 4.8 billion in total revenues, which is a 32% increase compared to this time last year, which is a fantastic result and one that is really due to a strong performance across the whole portfolio, both Travel Health and Public Preparedness, and that has resulted in an EBITDA margin of 31%. We've had probably the strongest quarter for our Travel Health business, which is an endorsement of our strategy. And as I'm sure we have many new investors on today's call, I want to just take a few minutes walking you through the graph on the bottom right-hand corner of Slide 4. This shows the financial performance over the last 5 years. And before 2020, Bavarian Nordic was really an R&D-focused company. We had our government business, which we now call public preparedness, and I'll talk more about that. But essentially, we were a loss-making company coming to our shareholders frequently for capital raises. In 2020, we took the bold step on our growth journey to commercialize the business, and we bought 2 assets our rabies and tick-borne encephalitis vaccines, which started our commercial journey. And despite COVID, which obviously had an impact on travel, on travel vaccines, we were able to grow that business. And in '22, we sold more doses of rabies and TBE than any other previous owner. And that's exactly the strategy that we implemented. We thought that we could purchase what I call unloved assets that weren't performing well in previous owners' hands. And with our dedication and focus, we could turn them around. And that's exactly what we've done with rabies and TBE, and that actually are the golden jewels that are really driving the performance for travel health that we have today. In '23, we also added 3 more assets from another company, which complemented our Travel Health portfolio. And one of those was a chikungunya vaccine in Phase III, which is now approved as Vimkunya, which we're launching this year and is also adding not only to the performance in the first 9 months of this year, but is a key driver for the future growth. On top of this, we also had our Public Preparedness business, and I'll talk more about that in the coming slides. But basically, what we've seen over the last 5 years is a complete transformation of Bavarian Nordic from a loss-making R&D-focused company to a profitable vaccine company that is having a huge impact on the global stage in terms of public health. Before I move on, I also want to take note, and I'll leave more of the details in terms of the guidance to Henrik later. But we have refined our guidance today. And I just want to address one comment that I've already read that this is a lowering of our guidance. This is actually not the fact because at the beginning of the year, when we provided the guidance, we had a range for both revenue and EBITDA. This is related to our public preparedness business. And I'll come back to why there's a range, but essentially, this is government contract business where you either get a contract or you don't. And therefore, we had a range. We refined that range during the year. And today, we are recognizing that with 1.5 months left, we have secured -- we have the business that we've secured, which is DKK 3.1 billion which means together with Travel Health and other income, we're at the DKK 6 billion range. While that's at the lower end of the guidance, it is still within guidance. And I would say DKK 3.1 billion in terms of Public Preparedness, I have to remind you, is DKK 1 billion above our annual -- normal annual base business of DKK 1.5 billion to DKK 2 billion. So it's an exceptional year in terms of Public Preparedness, and we are still standing by our revised and high increased guidance for Travel Health of DKK 2.75 billion. So a very strong first 9 months, and I want to actually take this opportunity to thank all the employees for a tremendous effort. It's really down to their focus and dedication that time and time again, I'm allowed to talk on a quarterly basis of our strong financial performance. If we go to Slide 5. On Travel Health, as I said, it's probably the strongest quarter since we've built up this portfolio. We've seen a 23% increase in sales compared to this time last year. And our 2 flagships, rabies and TBE, as I said, these were purchased back in 2020. We've really turned them around. Rabies has gone from strength to strength. We've seen both an improvement in the growth in the market, but also in terms of market share. In the U.S., we've seen a 4% improvement in market share compared to this time last year. And in Germany, we're really seeing a strong growth, a 53% growth in the first 9 months of this year compared to last, which is an outstanding performance. On TBE, again, we have stopped the decline in market share in key markets like Germany since we bought these assets, and we're actually beginning to now see an improvement in market share, particularly in Germany. So we're incredibly happy with the performance that we're seeing in terms of Travel Health, and we believe there is future growth in the months and years to come. If you go to Slide 6. Within our portfolio of Travel Health, we have a vaccine against chikungunya. And chikungunya is a mosquito-transmitted disease. And until very recently, there were no vaccines or treatments available. The vaccine -- our vaccine was part of an acquisition that we acquired in '23 and was approved earlier this year. And subsequently, we've launched our chikungunya vaccine Vimkunya in 10 different countries. So we have had an aggressive launch plan, and we've stuck to that schedule. And we're beginning to see an uptake in the sales of the vaccine, which is great to see. And we're on target to meet the DKK 75 million in the first launch year, which is a very strong performance in our first launch year. We filed for further approvals in Canada and with Swissmedic in Switzerland, and we expect those approvals to be coming next year. And we've already begun some of the post-marketing commitments for expanding the label, and we have a pediatric study and an efficacy study all in progress, which, as I said, are commitments that we've made to the different regulators in the U.S. and Europe. So chikungunya or Vimkunya really represents a future growth potential. Yes, we have to educate and prepare the market, but we believe that this market has the potential to grow to $500 million annually within the next few years, and that's for travel alone. So a great future business opportunity. We turn to the next slide on Public Preparedness. And I want to spend a little bit of time talking about Public Preparedness and what it actually is and why it is different to Travel Health. And the best way of walking you through that is to talk about the revenue graph that's again on the bottom right-hand corner of this slide. And Public Preparedness is actually one vaccine. It's based on a vaccine against smallpox. Smallpox is a disease that has been eradicated. But unfortunately, there is concerns by many governments that smallpox could either reemerge through deliberate release in a bioterrorism attack. It is also closely related to another emerging disease called mpox, formerly known as monkeypox. And we've had a long-standing collaboration with the U.S. government in the development of our vaccine, which is now approved in many countries around the world. And if you look at the graph at the bottom right-hand corner, in 2020, we really had 2 customers, one major customer, which is the U.S. government, where we've secured more than DKK 2 billion in both development and acquisitions over the number -- over the years and Canada. So we had 2 customers. This changed in '22 when there was the first outbreak of mpox. And here, we really saw, and you can see a spike in activity in '22 and '23, where we supplied more than 15 million doses of our smallpox mpox vaccine. And coming through that first outbreak, we were left with more customers. So we now have the EU, both HERA, which is a new organization, but also other funding mechanisms in the EU, such as rescEU. We had other EU nations like France. So going from 2 customers to a handful of customers. At that point, we said our base business moving forward would be DKK 1.5 billion to DKK 2 billion annually, but we would see these spikes from time to time in revenue due to either future outbreaks of mpox or one-off large orders from different governments. Then in '24, we also had another outbreak or a larger sustained outbreak of mpox in Africa, and that also led to a continued spike, which has flowed over into '25. So in this year, we are guiding to secure DKK 3.1 billion in revenue, which is, as I said, about DKK 1 billion higher than our base business of DKK 1.5 billion to DKK 2 billion. So with Public Preparedness, it is not as easy to guide accurately in terms of growth or the future revenues simply because it's all down to government contracts. Some government contracts can take many years to negotiate. And unfortunately, I've been involved in government contracts, which we thought were coming through that fell down at the very last minute. So it is a little bit more unpredictable than a traditional vaccine sales like with Travel Health. But as I've said, we have since '22, been guiding with a base business of DKK 1.5 billion to DKK 2 billion. But obviously, since '22, we've been recording revenues much higher due to the 2 spikes that I've explained. In terms of where we are, we are obviously secured contracts of DKK 3.1 billion already this year. We're well on our road to securing. In terms of the first 9 months this year, we've exceeded the DKK 2 billion already in the first 9 months, and we're well on track to secure the guidance for the rest of the year. We have secured contracts for next year for a total of DKK 1.1 billion. So we're well on our way to securing our base business of DKK 1.5 billion to DKK 2 billion moving forward. We have ongoing clinical studies that are funded through a collaboration with CEPI, both in a pediatric study, which will hopefully support a label extension to include children in addition to the adolescents and adults that we already have. So if we move on to Slide 8, just to talk a little bit about the pipeline. One area is what we call MVA cell line. This is actually a trial that was initiated a few weeks ago, and this is moving away from the egg-based production that we currently have to a proprietary cell line that we've developed. The trial that has started is comparing the safety and immunogenicity of the vaccine produced in the different processes. And this is really an initiative that we've taken, which will greatly improve our manufacturing capacity so that not only can we deal with an mpox outbreak as we have since '22, but we would, with partnerships, also be able to deal with a much larger global outbreak either of mpox, [indiscernible], even smallpox. And it also makes us much more robust for any competition that may come later down the road. Other activities in the pipeline relate to chikungunya. These are post-marketing commitments that we have with the regulators, pediatric study, expanding the label and also an efficacy study and other activities are either funded through DoD or early stage such as Lyme and EBV, which is still preclinical. And with that, I will hand over the presentation to Henrik Juuel. Henrik Juuel: Thank you very much, Paul. So on Slide #9, just a few more words on the commercial performance for the period. So we delivered for the 3 quarters in Q3 here, we delivered close to DKK 1.8 billion, and that corresponded to an overall revenue growth of 32%. So very significant growth, supported by both our business mix, 50% growth on our Public Preparedness business and 22% on our Travel Health business. If we take the Public Preparedness business, Paul already alluded in detail to this one here. And so that has really been about, first of all, securing orders and executing on these orders this year. So targeting the DKK 3.1 billion for the full year. So strong growth on that front for first 9 months as well compared to prior year. On Travel Health, it is really our Rabies and our TBE business that has been driving the strong growth we have seen both for the quarter but also for 9 months, 22% overall growth, 23% from our Rabies business, 18% from Encepur And I think for both products, I think we can say here, it's driven by both strong market growth, but also strong brand performance and actually market share gains for both products. So very strong performance. Vimkunya, our new vaccine against chikungunya as we launched earlier this year. We are so far very pleased with the performance. We have in a very short time managed to launch in 10 countries, after the Q3 in the Nordic countries, Italy and Spain as well. So we have in record time, I would say, we have actually made quite a wide launch possible. From the start of the year, we guided on Vimkunya DKK 50 million to DKK 100 million, and we are now refining that to the midpoint. That's DKK 75 million, and we have so far delivered DKK 42 million after 9 months. So going very well and in accordance with our expectations. Vivotif, our typhoid vaccine, we are -- on a 9-month basis, we are seeing a positive growth. We have been struggling somewhat with this product, but we are finally starting to see positive growth, and it's being driven by initiatives taken to gain market share. Unfortunately, the typhoid market has been down by approximately 7% these 9 months compared to prior year, but we have actually year-to-date managed to compensate for that market decline by gaining market shares. Third-party products at the end, these are the main driver of that one is our Japanese Encephalitis product that we have a partnership with Valneva that comes to an end by the end of this year and our partnership on hepatitis B vaccine, HEPLISAV-B with Dynavax comes to an end as agreed April next year. So all in all, very strong growth on both parts of our business, 32% for the quarter and actually the same for the full 9 months. So performance that we are very pleased with. On the next slide, we are looking at the full P&L, where we start with the revenue we just talked about DKK 1.8 billion for the quarter. We have a gross margin of 50%, which is significantly up compared to the same quarter last year. This is driven by volume, obviously, the higher volume, the more busy we are in the production area, the more efficient we can be and the easier it is to absorb all the costs to the products being manufactured. But it's also explained by what we call other production costs, which is typically cost -- it could be cost of idle capacity. It could be cost of scrap. It could be caused by less efficient yield coming out of manufacturing. So we have been successful in all these parameters. And therefore, we are seeing a gross margin of the 50% versus 43% last year. R&D cost varies a little from quarter-to-quarter. You will see that we are actually spending less than last year, both for the quarter and for the 9 months. This is mainly due to timing of some of the committed studies we have on chikungunya that is progressing. And on SG&A, you see quite a substantial increase. It's mainly or very largely explained by the launch efforts we are putting behind Vimkunya, the chikungunya vaccine and also by Bavarian Nordic entering into new markets. We have, during the last 12 months, established ourselves a commercial presence in a number of countries, including Canada, it's U.K. and it's France, which, of course, will give us further opportunities to drive growth going forward. If you look further down the P&L, that gives an EBIT of DKK 1.2 billion nearly. Then we have included in that one other operating income of DKK 810 million, which comes from the sale of the priority review voucher that was recognized in the third quarter. Further below, you can see the EBITDA margin, excluding the other operating income, that is DKK 515 million, which corresponds to an EBITDA margin before special items of 29%. So on a 9-month basis, that takes us to an EBITDA, excluding other operating income of nearly DKK 1.5 billion or an EBITDA margin of 31%. So again, strong performance, all in line with what we have communicated previously and in line with our expectations. On the next slide, a quick overview of the cash flow and balance sheet. We saw positive cash flow from operating activities for the 9 months, driven, of course, by the positive profit that the business delivered, but also impacted by the proceeds or the income we earned from the sale of the priority review voucher. Cash flow from investment activities, here, we recognized actually the last milestones that we paid to Emergent BioSolutions and GSK for the acquisitions we did previously. They were recognized here, not all of them paid yet, though. And then finally, cash flow from financing activities is the sum of the share buyback we did previously in the year and then employee warrant exercise that was executed as well. So all in all, a net positive cash flow for the period of DKK 500 million approximately which obviously improves our cash position, which you can see on the table to the right. We do today have a cash position of close to DKK 3 billion. I have to say here, though, that our accounts payable are somewhat inflated at the moment as we still owe DKK 70 million to GSK, and we also owe royalties on the voucher we sold to NIH and taxes to be incurred in connection with the voucher. But a strong cash position of close to DKK 3 billion. Then one slide on our outlook here. As we talked about already, we have refined our outlook. We have confirmed the outlook within the range that was previously communicated. So right now, we are looking at a guidance without an interval as we are so close to the year-end. We do not operate in an interval for the Public Preparedness business any longer, but are expecting DKK 3.1 billion. We confirm the upgraded guidance that we issued in connection with Q2 for the Travel Health business. So that is now DKK 2.750 billion. And then we have some other income adding up to a total of DKK 6 billion. So a confirmation of all previous guidance, but a refinement now being so close to year-end. We are anticipating an EBITDA margin for the full year, excluding the impact from the voucher of 26% and including the voucher, it will be approximately 40%. The 26% is sensitive to how the last 2 months here pans out when it comes to the R&D projects running at the moment. And depending on how they end, there is an upside here that it could be closer to the 27%. But given the current plans, I think we are guiding 26%, and that's most likely where we will end. We have not guided for '26, obviously, but what we have stated here is that we have previously announced an order to BARDA of USD 143 million. Most of that goes into '26. We also announced recently the HERA framework agreement where there is a commitment of 1.1 million doses, where of 750,000 is impacting next year. So if we add the commitments we have so far, we right now have an order book worth DKK 1.1 billion for '26. And we will, of course, keep communicating to the market when there are material orders being added to this order book. The next slide is simply just a slide we brought to sort of round off the process that we have just been through. I don't want to read out every word here, but basically, it has been a longer process with the takeover attempt on Bavarian Nordic. And we just feel it's important to understand that the company was not for sale. We were approached with an offer, which the Board of Directors rejected to start with later in the process, there was an offer where the Board basically judged that now it is at a level where we have to ask the shareholders -- the shareholders has voted. The offer did not succeed. So that is the situation. And we, of course, we acknowledge that and we respect that decision by the shareholders, and we remain an independent listed company, and we continue to execute on the growth strategy that was in place even before this process started. I think we are very pleased to be today to be able to report these numbers here, and we are very grateful to our organization who have actually demonstrated that they have maintained a focus on the business while this process has been running. That has been extremely important to us. We have even seen in our engagement surveys that the company or the employees have really stayed engaged in the company. So thanks to the organization for that. Without that, we wouldn't have been able to deliver these fantastic results that we're seeing here today. And in order to -- to make sure that the market is well informed about the strategy that we talk about, we have called for -- and we call it an investor information meeting on December 11 during the morning. More details will be announced. It will be in Copenhagen. There will be a possibility to attend in person, but it will also be live streamed and recorded. And yes, basically, the agenda will be about give an update on the business and a recap of our growth strategy. But as I said, more details will follow. We will issue a press release once we have the details in place. So with that, I will give the word back to the operator and open up for Q&A. Operator: [Operator Instructions] we are now going to proceed with our first question. The questions come from the line of Romy O'Connor from VLK. Romy O'Connor: I have 2, if I may. The first being on your thinking about reaching the DKK 75 million for Vimkunya. I'm just wondering what steps you're now taking given that there's only 1.5 months left in the year? And also maybe a bit on the launch steps of into Canada? And then secondly, just maybe a little bit of color on the bid outcome. I was just wondering what your thinking is by future business development or M&A? And yes, what's your thinking now in terms of focus on value creation into the coming months? Paul Chaplin: Yes. Thank you for the questions. The first one related to Vimkunya and the projections of DKK 75 million. It's true there's only 1.5 months left for the year, but we only reported to the first 9 months. So we haven't reported some of the months that we've already gone. So we have launched according to plan. We are seeing good traction in a number of countries, slower in others due to some of the national recommendations, but we are confident that with the launches that we've made and the traction that we're seeing that we will be able to meet that target. I think your second question related to the bid outcome and our future growth strategy. I think it's clear, it's important to stress again that our strategy that we put in place back in 2020 was a growth strategy. It was to grow the portfolio of the assets that we purchased over a number of years to grow public preparedness, but it also included additional M&A. I think in my introduction to the presentation today, I tried to highlight the successful history that we've had of not only acquiring assets, but turning these, what I call unloved assets around and also bringing in manufacturing. It's a capability that very few others have demonstrated, and I think it's a key strength. And I think what we want to do is when the opportunity arises is to continue that M&A journey and bring more commercial assets on board. And that's a strategy that we've had in place since 2020. We've been successful at it, and we will continue to execute on it. Operator: We are now going to proceed with our next question. And the questions come from the line of Thomas Bowers from SEB. Thomas Bowers: A couple of questions. So firstly, just on shareholder returns. Can you give us any color on the current plans for any share buybacks now that we are out of this M&A process? So I think that you were talking a little bit about share buyback of excess cash. So anything that could sort of reflect the PRV sale you did here in the summer? And then second question, just on JYNNEOS. So just wondering the delta between the previous guidance range, so looking at that DKK 3.7 billion at the high end of the range. So we have around DKK 600 million delta compared to the DKK 3.1 billion guidance. So I'm just curious, normally, you only guide for something that you are sort of where you are in negotiations with governments or potential customers. So those DKK 600 million, is that something that we should expect could simply or likely move into 2026 and of course, not part of that DKK 1.1 billion? Or is there something else that we need to be aware of in terms of those -- of that delta? And then maybe just a question on Travel Health, super, super strong momentum, surprises me every time. And now looking at your guidance for '25, so you're sticking to that DKK 2.75 billion. Of course, there as you hit up with some of the [ typhoid ] vaccines. But you are now DKK 400 million short of reaching that DKK 2.75 billion. And looking at the numbers, so you're sort of implying that [indiscernible] should be flat or even slightly decreasing for the remainder of the year. So is there anything here that I'm sort of not seeing? Or are you just maybe a little bit conservative given it's normally a weak quarter, of course? And then maybe if I can squeeze in number 4 here, just on the R&D phasing, can you provide any color on the scenarios from Vimkunya? So we know that this outbreak in Thailand is pending or potentially ongoing. So is there any think that indicate that this should shift into '26? And what could be the R&D spend cost reduction range, so to say, for the '25. So you're guiding still for DKK 900 million. So I'm just understanding whether it's going to save you DKK 100 million or where we are here. Yes, I'll stick to that. I can repeat if... Paul Chaplin: Some of them. But let me take the JYNNEOS guidance. And then maybe, Henrik, I'll let you take the other one. So on JYNNEOS guidance, a few years ago, we would only really guide on Public Preparedness on contracts that we had in hand. And that reflected the fact that we had very few customers. So we didn't have the confidence a few years ago to guide broader I would say that has changed over the last number of years that we're guiding, obviously, with contracts that we know we have in hand, plus what we also think that we can secure within the next 12 months. So it's not actually only things that we're negotiating, it's things that we believe that we can secure. I mentioned in the presentation that sometimes, unfortunately, part of the unpredictability of the part of this business is that it's with governments, right? And even though you can be very -- one day, you're incredibly confident that you're going to secure a contract, there may be a change in a political leader or the government may change, and it completely stops overnight. So it is unpredictable. What I would say is where we guided is where we thought the range would be. That's why we gave a range. Already in Q2, we stressed that DKK 3.1 billion was secure, but that we thought we could secure more. You've seen that we have announced an agreement with HERA. That could have come earlier in the year potentially that could have led to more revenues this year, but it's now pushed into next year. Obviously, that doesn't account for the whole DKK 600 million that you're referring to. But I would say what the guidance reflects is that some contracts came later than we anticipated and some contracts were still unsure whether we can secure. I hope that answers that question. And then Henrik, maybe. Henrik Juuel: Yes. Let me try the other 3, Thomas. I think, first of all, on the share buyback thing, I think what we have communicated previously is that our capital allocation policy, priority #1 there is to pay back the milestone payments to GSK and Emergent. That's soon behind us. It is not yet though. We still owe EUR 70 million to GSK, which we expect to be paid early Q1. Number 2 priority, of course, is to invest in the business, and that means R&D, it also means sales and marketing to grow the top line. And then I think third priority would be to look into our M&A strategy and eventually consider returning money to the shareholders. It's very clear we are not a bank, and we are constantly evaluating that situation. So what is the current need? What do we have on the balance sheet? Is that appropriate for the plans we have? If not, then we will return money to the shareholders. At this point in time, so that as this is a continuous evaluation, I cannot give you any more update right now. But of course, we evaluate the situation constantly. On Travel Health for the fourth quarter and our outlook, we are still guiding the DKK 2.750 billion. And here, I think you need to remember that some of our travel vaccines are seasonal vaccines. We sell in all quarters, but some quarters are better than others. So typically, the fourth quarter is not the strongest quarter. So we are still targeting DKK 2.750 billion for the full year. And on the R&D phasing, we are still targeting the DKK 900 million in R&D for the full year to a large extent driven by the Vimkunya committed trials that we have to do. I'm just alluding to that, there could be some of it phased into next year. And typically with the clinical trials, I think a lot of the steps you go through there, the timing can change. So some of it could slip into next year of the R&D spend. If that happens, then, of course, it could impact our EBITDA margin positively this year. But let's see, the plan is still DKK 900 million. And we're only raising this as it's a little out of control with the exactly at what pace these trials they run. Operator: [Operator Instructions] we are now going to proceed with our next question. And the questions come from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just regarding chikungunya then. In terms of the U.S. launch, I was wondering how important is the MMRW publication when it comes to launching in the U.S.? And then maybe a bit niche, but in similar lines, have you thought about the potential substitute that the New England Journal of Medicine and Public Health Group have talked about replacing the MMRW? And any thoughts on that at all? Paul Chaplin: Yes. Thank you. Yes. So this is a tricky one. So yes, in the U.S., post approval from the FDA, you need an ACIP recommendation, which we're very fortunate that we have for chikungunya. And that recommendation, as you then say, is then published in the MMWR, which is a publication from CDC. And many of the distributors actually want to see the publication, even though it's recommended and it's posted on the website before they will start to purchase. And obviously, the situation where we're in is the MMWR has not been published. And it has, as we said, has slowed down the traction, I would say. The one thing I would also give as another example is that when we launched JYNNEOS in the private market in the U.S., the same situation. We had a recommendation from ACIP, but actual fact, the MMWR was only published earlier this year. And what we did in that situation was that we were able to convince the distributors that they could start to acquire the product before the publication, and that was successful. And I would say we're in that phase right now. We've convinced some already to go ahead with chikungunya, and we're still convincing others. So it has certainly slowed down the traction, but it's something that we've already had experience of with JYNNEOS. And again, one of the main arguments for that is there's always been sometimes a lengthy delay between the recommendation and the publication. And right now, it's very uncertain with ACIP and CDC what would the time will be. And as you say, that is leading to many others talking about alternatives and whatever, but we'll have to just see how that develops. Operator: [Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Thomas Bowers from SEB. Thomas Bowers: Just a quick follow-up here for me. Just on the sales and marketing cost spike you can say here in the third quarter related to mostly Vimkunya, of course. But should we see this as sort of a new baseline going forward? Or is there some one-off expenses in that Q3 S&M number that we should be aware of just to sort of have an indication on how we should model at least going forward? Henrik Juuel: I think that there's certainly an element of one-off in there because typically when you launch a new product, you will be in a launch phase that will require promotional costs for a period of time. So it's for a period of time, but such a launch can easily stretch over like, let's say, 2 years perhaps. And then you will see at least the promotional spend part of it to normalize again. But right now, I think we are spending money establishing the awareness of chikungunya and Vimkunya in particular, in the markets. It's a nonexisting market in most places we go into. So therefore, there is a need to build the awareness. But it will normalize after a couple of years where you can no longer argue you're in a launch phase. Operator: That does conclude the question-and-answer session. I will now hand back to Mr. Paul Chaplin for closing remarks. Paul Chaplin: Thank you, and thanks, everyone, for joining the call and for your interest and the questions. Thanks, and have a great day and a good weekend. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good day.
Operator: Good day, and welcome to the Creative Media & Community Trust Corporation Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead. Hello, everyone, and thank you for joining us. Steve Altebrando: My name is Steve Altebrando, the portfolio oversight for Creative Media & Community Trust Corporation. Also on the call today are David A. Thompson, our Chief Executive Officer, and Barry Neil Berlin, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the Investor Relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call. During this call, we will make forward-looking statements. Forward-looking statements are based on the beliefs of assumptions made by, and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect. Therefore, actual future results can be expected to differ from our expectations. Those differences may be material. For a more detailed description of potential risks, please refer to our SEC file which can be found in the Investor Relations section of our website. With that, I'll turn the call over to David A. Thompson. David A. Thompson: Thanks, Steve, and thank you to everyone for joining our call today. I'll begin with an update on the progress we're making with our strategic initiatives and then review our results for the quarter. As a reminder, our key priorities remain focused on two main goals: strengthening our liquidity and our balance sheet and growing our multifamily business. To advance these objectives, which we first outlined last September, we've been executing a significant refinancing program and evaluating selective asset sales. Earlier this week, we announced that we have entered into a definitive agreement to sell our lending business. This business is primarily focused on originating SBA seven loans for limited service hotels and it was considered a non-core asset for the company. As of September 30, the purchase price was estimated to be approximately $44 million and yield the company about $31 million after repayment of debt transaction and other expenses. The transaction remains subject to Small Business Administration approval as well as certain closing conditions. At the same time, we continue to make meaningful progress on our refinancing initiatives. Since last September, we completed financings on seven assets and put in place a warehouse facility for our lending division. This facility will be retired at the close of our sale transaction. We are also working on an upsize of our mortgage up on Penfield, our creative office asset in Austin. After closing this financing earlier this year, we signed a lease with an investment-grade tenant, which should allow us to upsize the loan. We're now finalizing the loan documents with the lender. Taken together, these actions were important steps for the company. They provided proceeds that allowed us to significantly reduce our recourse debt, including the full retirement of our $169 million recourse credit facility earlier this year. They also supported our growth initiatives, including lease-up activity at our Beverly Hills, Culver City, Brentwood, San Francisco, and Austin properties. We completed renovations at our hotel asset and new loan originations in our lending business enabled us to continue paying preferred dividends. Overall, we're encouraged by the progress we've made in improving liquidity. We are working to position the company to benefit from a recovering commercial real estate market, which is supported by lower interest rates, a significant uptick in office leasing activity, and improving economic conditions in the San Francisco Bay Area. Turning to third-quarter results, our core FFO was negative $10.5 million, reflecting several items that impacted performance during the quarter. Our overall net operating income was $7 million compared to $9.8 million in the prior quarter. Within our office segment, NOI declined by approximately $500,000 from the second quarter, largely due to lower appraised value at one of our JVs. NOI modestly increased at our wholly-owned properties. Hotel NOI was $850,000 in the quarter compared to $4.2 million in the second quarter, primarily reflecting disruption from our renovation of the public space. Q3 is also a seasonally slower quarter for the hotel. Multifamily NOI increased by approximately $600,000 from the prior quarter. Improvement was primarily due to a lower appraisal at one of our JVs that impacted Q3 results as well as a decrease in real estate tax expense at our consolidated properties in Q3. And finally, NOI from our lending segment increased by approximately $360,000, primarily due to a higher reserve taken in the second quarter. Looking ahead, we see opportunities to improve cash flow in 2026, supported by several key drivers. Continued improvement in office leasing activity, the full completion of renovations at our hotel asset, and steady gains in multifamily performance through higher rental rates, improved occupancy, and delivery of new units. We also expect to benefit from a more favorable interest rate environment. Before I turn the call over to Steve to provide more detail on the portfolio, I want to take a minute to thank Barry Neil Berlin for his years of service. As part of the sale of our lending division, Barry will be stepping down as CFO in order to join the acquirer of the lending business. Brandon Hill will assume the role of CFO once the transaction is closed. Brandon has been intimately involved in Creative Media & Community Trust Corporation for years, and we expect a seamless transition. Steve? Steve Altebrando: Thanks, David. We remain focused on improving property-level performance across all segments and growing our premier newer vintage multifamily portfolio. This continues to be a key growth area for us. Including our joint ventures, we now have four operating assets: 1150 Clay and Channel House in the Bay Area, and 701 South Hudson and 1902 Park Avenue in Los Angeles. We are making steady progress on the lease-up of 701 South Hudson, the residential portion of our partial office-to-residential conversion completed late last year. Multifamily occupancy at the property was approximately 81% at the end of the third quarter, up from 68% at the end of the second quarter. As a reminder, the top two floors of the building were converted into 68 high-end residential units, while the Ground Floor creative office component known as 4,750 remains 100% leased. As mentioned on our prior calls, we believe there's an opportunity to develop additional units on the back surface lot of the property given recent zoning changes, and we continue to make progress on those plans. Our fifth project, 1915 Park in Los Angeles, will deliver this month. This 36-unit ground-up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset in Echo Park, a highly desirable walkable submarket with attractive dining and entertainment options. In Oakland, we saw a modest improvement in total occupancy during the quarter. We believe our properties will benefit from limited new construction in the Oakland residential market, as well as the ongoing recovery across the broader Bay Area. In San Francisco, multifamily properties continue to improve with area vacancy at its lowest level since 2011. The third-quarter rent growth of 5.2% in San Francisco is the strongest year-over-year growth rate since 2015. In addition, in January 2026, Samuel Merritt is opening its new campus, which is located just steps from our class A multifamily asset at 1150 Clay. The new campus is expected to draw 2,000 students and 500 faculty members. We see meaningful opportunities to grow our multifamily net operating income through a combination of rising rents, increasing occupancy, lowering operating costs, and the delivery of our fifth asset this month. Turning to the office segment. Earlier this year, we noted that our leasing pipeline was very active, and that translated into very strong leasing activity. Through the first nine months of 2025, we executed 159,000 square feet of leases, a 69% increase compared to the same period last year. This follows 176,000 square feet of leasing activity in 2024. At the end of the third quarter, our office portfolio was 73.6% leased. Excluding our one Oakland office property, our lease percentage was 86.6%, which was up from 81.7% at the end of 2024. Importantly, we believe the headwinds from COVID are largely behind us, and we're now beginning to see the benefits of return-to-office trends, which are creating tailwinds for our portfolio. Turning to our hotel, we believe we're entering 2026 from a position of strength following a couple of years of renovation-related disruption. We're nearing completion of our $11 million renovation of the public space at the Sheraton Grand Sacramento. This project includes upgrades to the ballroom, banquet space, public space, and food and beverage areas. The renovation was funded through a combination of $8 million of key money received as part of the extension of our management agreement with Marriott, cash flow from the property, and future funding on the mortgage. As a reminder, we also renovated all 505 guest rooms last year. With that, I'll turn the call over to Barry, who will provide an update on our financial results. Thank you, Steve. Good morning. Barry Neil Berlin: I'm going to spend a few minutes going over the comparative year-over-year financial highlights for 2025 versus 2024, starting with our segment NOI, which was $7 million in 2025 compared to $7.6 million in the prior year comparable period. Broken down by segment, the decrease of approximately $600,000 was driven by decreases of $400,000 for our office properties, $174,000 from our lending business, and $123,000 from our hotel property. Partially offset by an increase of $284,000 from our multifamily properties. Our office segment NOI for Q3 2025 was $5 million versus $5.4 million during Q3 2024. The decrease was primarily driven by a decrease in NOI at an office property in Los Angeles, California, and at an office property in San Francisco, California, attributable to lower rental revenues resulting from a decline in occupancy, as well as NOI at an office property in Austin, Texas, as a result of higher real estate taxes. Our lending division NOI was $314,000 compared to $688,000 in the prior year comparable period, primarily due to a decrease in interest income as a result of loan payoffs and lower interest rates, partially offset by a decrease in interest expense resulting from net loan paydowns and a decrease in additions to current expected credit losses. Our hotel segment NOI for Q3 2025 was $850,000 compared to $1 million in the prior year comparable period. The decrease was driven by a decrease in food and beverage sale revenues, partially offset by an increase in room revenue. Operations at our hotel property were negatively impacted by our lobby renovation project during Q3 2025, and our room renovation project during Q3 2024. Our multifamily segment NOI was $792,000 during Q3 2025 compared to $508,000 from the prior year comparable period. The increase was primarily driven by reductions in real estate taxes at our multifamily properties in Oakland, California, during 2025. Partially offset by a decrease in revenues at our multifamily properties in Oakland, California, as a result of declines in occupancy and monthly rent per occupied unit net of rent concessions compared to the prior year comparable period. Below the segment NOI line, we had an increase in depreciation and amortization expense of $922,000 due to incremental increases to the depreciable asset base at our hotel property following our renovation projects, as well as an increase in interest expense of $782,000 driven by higher aggregate debt outstanding. Our FFO was negative $11.1 million, negative $14.75 per diluted share, compared to negative $28.4 million in the prior year comparable period. The positive results in our FFO were primarily driven by decreases in redeemable preferred stock redemption expense of $16.1 million and through a reduction in redeemable preferred stock dividends of $2.7 million. Partially offset by the previously discussed decrease in total segment NOI and the increase in interest expense. Our core FFO was negative $10.5 million or negative $13.96 per diluted share compared to negative $11.5 million in the prior year comparable period. This increase in core FFO is attributable to the previously discussed reductions in redeemable preferred stock dividend offset by the decrease in segment NOI and higher interest expense. Core FFO calculations reconciliation items to determine FFO, that relate to preferred stock redemptions, transaction-related costs, and deemed dividends. I would like to conclude by thanking David A. Thompson for his guidance over my roles with Creative Media & Community Trust Corporation since becoming public in 2014. More importantly, as my mentor for my roles in CIM, since then. Thank you, David. And while I am very excited to be following the lending division over to its new home, and I'm looking forward to helping its ownership grow and expand its horizons in the lending arena. I will truly miss the interaction with the ownership and executive management team at CIM that has supported me in my roles with the firm. And lastly, to the amazing teams that I've had the pleasure to work with and that have made my job easier. That includes Brandon Hill, who was on the call today, who has guided the financial oversight for Creative Media & Community Trust Corporation since before I took the CFO position and who has patiently awaited his opportunity to take on the job of CFO. He is well suited to take on the role, and I congratulate him on being provided this opportunity. With that, we could open the line for questions. Operator: We will now begin the question and answer session. To join the queue, please press star and then two. It appears there are no questions. I would like to conclude the conference. Thank you for attending today's presentation. You may now disconnect.