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Operator: Greetings, and welcome to the National Energy Services Reunited Corp. Third Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Blake Gendron. You may begin. Blake Gendron: Thank you, Kate. Hello, and welcome to National Energy Services Reunited Corp.'s Third Quarter 2025 Earnings Call. With me today are Sherif Foda, Chairman and Chief Executive Officer of National Energy Services Reunited Corp., and Stefan Angeli, Chief Financial Officer. On today's call, we will comment on our third quarter results and overall performance. After our prepared remarks, we will open up the call to questions. Before we begin, I'd like to remind our participants that some of the statements we'll be making today are forward-looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. I therefore refer you to our latest earnings release filed earlier today and other SEC filings. Our comments today may also include non-GAAP financial measures. Additional details on reconciliations to the most directly comparable GAAP financial measures can be found in our press release, which is on our website. Finally, feel free to contact us after the call with any additional questions you may have. Our investor relations contact information is available on our website. Now I'll hand the call over to Sherif. Sherif Foda: Thanks, Blake. Ladies and gentlemen, good morning, thank you for participating in this conference call. Today's call comes at a pivotal moment in the history of our firm. As our crews mobilized to deliver one of the largest projects in sector history, and company growth hits a new gear. Despite the transition of key contracts in the third quarter, I'm proud of the National Energy Services Reunited Corp. team for strong execution and cost control, with an unwavering focus on safety. As recently announced, National Energy Services Reunited Corp. has secured the winning position for the massive frac tender in Jafurah. This multiyear, multibillion-dollar award is a cornerstone achievement for the company, upon which we will continue to build beyond our revenue target we set ourselves. At the same time, we are also seeing a path activity inflection beyond Jafurah, with continued growth in Kuwait, return of additional rigs in Saudi, and increased activities in the majority of our countries. Our countercyclical investment strategy is allowing National Energy Services Reunited Corp. to capitalize on global weakness and boosting the company into a position of strength and operational readiness. While others are cutting, we are playing offense. I will dig into both Jafurah and our broader strategy later in the call. But first, I want to take a slightly different angle and discuss two, what I call mega themes, that have emerged from the recent FII event in Riyadh, followed by ADIPEC in Abu Dhabi. FII or Future Investment Initiative, known as Davos of the Desert, is one of the largest macro conference and leadership gatherings in the world. And ADIPEC is the largest oil and gas conference globally. Our participation was both timely with the Jafurah award and also crucial with the GCC at the epicenter of these two mega themes. From these events, the message was clear and crisp. Theme one, energy demand and GCC leadership in the AI revolution. Traditional energy is here to stay, and demand growth will be supercharged by the huge power demand of AI, data centers, and cybersecurity. The AI-powered demand commentary was nothing new, but the signals from both Saudi and UAE during this event suggest that the Middle East AI race is on, and significant investment is coming. Both countries presented a vision of becoming number three globally for AI after the US and China. What this means is that the region has moved beyond the concept of energy transition and is now focused on energy addition, in all forms, including more oil, more renewables, in particular, natural gas and solar. For National Energy Services Reunited Corp., this means that its established leadership in unconventional aligns completely with the upcoming AI race in the region. In fact, our largest customer formerly increased its sales gas growth target from 60% to 80% by 2030. This gas capacity for internal consumption will be critical to support AI ambition in the country, a strategy that is being discussed across MENA. Theme two, the Gulf Region geopolitically. The relationship between the US and Gulf States is clearly very strong. This has positive implications for both energy markets as OPEC expands production with an eye on materially higher demand by the 2030 time horizon. And, also, foreign investment as multiple IOCs make moves across the MENA region. Knowledge is power, and now power is knowledge. Cross-border cooperation on AI is at an all-time high between the US and the Gulf, with bilateral investment deals already announced. As the national champion of the Middle East, but also US NASDAQ-listed, National Energy Services Reunited Corp. is a company made for the current political moment. We have a role to play in the bridge-building between the US energy sector and the MENA national oil companies. We can point to Jafurah as a case study of how we can help US expertise navigate the region, leveraging technology and efficiency while empowering local content and human capital. We've talked about how this benefits our NOC partners, but it's worth noting that this also helps our IOC partners feel right at home in MENA. Which is a good segue to discuss our newfound position as the largest frac company in the Middle East. The Jafurah tender represents the single largest single service contract in sector history. And as the outright winner of the committed scope, our National Energy Services Reunited Corp. team has clearly earned its reputation for pushing the envelope on efficiency. It is a remarkable achievement, and we thank our dearest customer for the trust. Having started from zero in frac just five years ago, Jafurah is now as efficient as any leading Permian operation. A world-class case of science and data-driven shale development, orchestrated by Aramco. In the early days of National Energy Services Reunited Corp.'s involvement, this included our open technology platform approach. More recently, this has involved huge investment in infrastructure, logistics, best-in-class supply chain, across sand, water, chemicals, maintenance, and other dimensions across multiple product lines within this integrated frac project. We've driven substantial cost out of the system, initially on integration, efficiency gains, and agnostically, the use of leading technology from around the world. We challenged the status quo and brought fit-for-purpose and sometimes made-in-the-kingdom technology to have the best locally made, that includes site preparation, local sand, chemicals, coiled tubing, perforation, well testing, flowback. Now we are on a path to fully embed AI into our operation, predicting failures, and ensuring flawless delivery and another level of efficiency, breaking world records. But cracking the code on unconventional does not stop at sounding. The service delivery model that we've developed alongside our partners at Aramco is a blueprint that we can take across the MENA region to unlock additional unconventional development, particularly for natural gas. There are huge ambitions and potential in several countries that we operate in, and all of our top customers are coming to National Energy Services Reunited Corp. to fully understand how we can unlock their resources. Which brings me back to our broader growth strategy because National Energy Services Reunited Corp.'s success in Jafurah and across the region would not be possible without our aggressive countercyclical investment playbook. For decades, the oil service industry has matched investment, hiring, and R&D with the activity cycle. But now that the global cycles have accelerated and shortened, the traditional waiting-out-the-storm strategy no longer works. By the time the cycle turns, many companies are left behind. Which is why we've taken a different approach: invest during the downturn. It's been easier said than done, but as the only public MENA pure play, we benefit from the relative stability of activity in the region and agility of decision-making. Rig activity is largely decoupled from commodity price on oil because of focus on capacity building, and in gas, because of domestic needs. If any company is well-positioned to break from the pack and establish a countercyclical investment market position, it's National Energy Services Reunited Corp. And our customers value our bold approach, particularly since our NOC partners themselves are taking a longer-term view of oil fundamentals. As a company, National Energy Services Reunited Corp. is small enough to be agile, but large enough to scale. That is our window. While downturns expose weakness in our industry, they also reveal who's actually planning for the future. Our operational readiness is unmatched among our peers. Blake Gendron: And it's only possible because we are growing and investing Sherif Foda: while others are shrinking. To be honest, it's no walk in the park trying to convince some shareholders and board members of the strategy. Public companies in our sector often suffer from short-term pressure. Everyone wants results, cash, dividends, and they want them now. It is understandable, particularly in the lower oil price environment, and with tight risk mandates in public markets. We spent the last seven years since the founding of the company trying to convince the market that MENA upstream fundamentals are inherently derisked. And our financial results over the past few years have borne this out. Even in the current lower oil environment, the National Energy Services Reunited Corp. outlook only continues to improve. To be sure, we aren't growing for growth's sake. Our countercyclical investment strategy speaks to the fact that there is ample return accretive expansion still out there for National Energy Services Reunited Corp. This strategy perhaps isn't available for others with a more established and mature market position. And with that, I'll pass the call to Stefan to discuss the financials in detail. Stefan Angeli: Thank you, Sherif. Good morning to our audience joining from the United States, and good afternoon or good evening to those joining us from the Middle East, North Africa, Asia, and Europe. We are delighted to have you with us today. I'm pleased to present an update on our financial results for 2025 and to share perspectives on our outlook for the fourth quarter and the full year. In the three months since we last spoke, global macroeconomic volatility has persisted. Factors such as ongoing trade uncertainty, inflationary pressures, reduced subsidies in developing economies, fully supplied oil markets, and additional OPEC plus supply releases have collectively contributed to range-bound oil prices and lower reactivity in certain countries. As we also heard from our peers, these dynamics have weighed on the third quarter 2025 results across the broader oilfield service sector, making short-term forecasting increasingly challenging. Despite these headwinds, and as Sherif highlighted in his market overview, we continue to invest heavily, looking at our long-term vision with contract awards, and getting ready for the years to come. Now shifting to Q3 2025. Our overall third-quarter revenue was $295.3 million, down 9.8% sequentially and 12.2% year over year. Sequentially, revenue declined primarily due to the transition between the major contract in Saudi Arabia, partially offset by solid growth in Kuwait, Qatar, and Iraq. Year over year, revenue declined due to the transition between the major contract in Saudi Arabia, timing and lumpiness of product sales, and partially offset by steady growth in Kuwait, Oman, Egypt, Algeria, Iraq, and Libya. Adjusted EBITDA for 2025 was $64 million, representing a margin of 21.7%, which was in line with the second quarter 2025 levels despite lower revenues. Margins remained steady on strong cost discipline and improved execution across our portfolio. Adjusted EBITDA includes adjustments for certain charges and credits impacting adjusted EBITDA totaling $6.9 million, primarily relating to a loss on inventory and a fire credit loss provisions, costs tied to the remediation of material weakness, controls, which is expected to decline dramatically going forward. Interest expense for 2025 was $8.1 million, and the tax expense was $3.7 million after normalizing for a net release of uncertain tax positions and unrecognized tax benefits in two geographies totaling $9.2 million. As normalized, this corresponds to an effective tax rate of 29.9% for Q3 2025, and 24.8% year to date. Adjusted EPS for 2025 was 16¢. Adjusted EPS includes adjustments for certain charges and credits impacting adjusted EPS totaling $2.3 million, including the net release of uncertain tax positions and unrecognized tax benefits in two geographies described previously. Turning to cash flow and liquidity, areas that have consistently been among our most positive over the past several years. Third-quarter cash flow from operations and free cash flow came in below expectations, reflecting lower working capital efficiency driven by delayed collections, much of which was received in early Q4 2025. Consistent with our countercyclical approach, we continue to deploy CapEx tied to recent contract wins to enable rapid operational ramp-up. As of September 30, our gross debt totaled $332.9 million, net debt was $263.3 million. Our net debt to adjusted EBITDA ratio stood at 0.93, remaining below our target threshold of one time. On a trailing twelve-month basis, our return on capital employed or ROCE was 10.1%, reflecting the continued execution of our robust growth investment strategy. Looking ahead, we expect full-year 2025 revenues to be broadly in line with full-year 2024 levels. Based on this outlook, one can infer our Q4 2025 revenue expectation, which represents a record performance consistent with the start-up of the recently awarded contracts discussed earlier by Sherif. Both Q4 2025 and full-year 2025 EBITDA margin percentages are expected to be in line with Q3 2025 and year-to-date adjusted EBITDA margin percentages, reflecting continued operational discipline and execution consistency. Implied in our outlook is that we'll exit full-year 2025 at a revenue record run rate, positioning us for continued growth in 2026. We anticipate ending full-year 2026 with a revenue run rate of approximately $2 billion, supported by our expanding contract base and sustained execution momentum. For Q4 2025, we expect interest expense to be approximately $8 million and our normalized full-year 2025 ETR to remain in the mid-20% range consistent with prior guidance. Capital expenditures or CapEx for the full year are anticipated to be in the range of $140 to $150 million, in line with the previous guidance reflecting the positive outcomes of the recent tenders. We expect Q4 2025 cash flow from operations to be very healthy, driven by the seasonally high fourth-quarter collections. As a result, free cash flow for full-year 2025 is projected to be in the range of $70 to $80 million, which we view as robust given the significant CapEx investments made during the year to support our recent contract wins. These investments are expected to position us for a very positive free cash flow trajectory in 2026. Finally, we do not expect to be materially impacted by changes in global tariff policy. Now on to housekeeping topics. As noted last quarter, we have remediated all previously identified material weaknesses, and this update has been formally disclosed to the SEC. We continue to strengthen our internal processes and controls, which have played a vital role in supporting our financial health and operational discipline. The company is currently in the process of refinancing its debt facility and remains on track to complete the refinancing by the end of 2025 or early January 2026. This initiative is expected to further enhance financial flexibility. The remainder of 2025 and 2026, given the continued market volatility, the ongoing debt refinancing, and the capital expenditure commitments tied to new contract awards, including the start-up of the largest frac contract in the world, the company intends to deploy all excess cash flow exclusively towards debt reduction. This approach reinforces our commitment to balance sheet strength and financial discipline during this period of strategic investment and growth. Once these initiatives have stabilized by mid-2026, we will reevaluate our capital allocation program to maximize value for our shareholders. The outlook across the Middle East and North Africa region remains favorable. We expect these markets will lead activity recovery as market fundamentals move towards equilibrium, supported by sustained investment in oil capacity and ongoing gas expansion projects across several of our core geographies. National Energy Services Reunited Corp. remains focused on its core strategic priorities: delivering profitable revenue growth, enhancing execution efficiency, expanding our technology portfolio, maintaining disciplined debt reduction, and improving working capital efficiency, all of which are expected to drive sustainable financial performance going forward. On behalf of management, I'd like to thank our entire workforce for their outstanding efforts in delivering these results and awards, as well as our shareholders and banking consortium for their continued trust and support. The outlook for National Energy Services Reunited Corp. remains highly favorable, supported by consistent execution on our major contract wins, strategic investments, and growing market opportunities. I'll turn the call back to Sherif. Sherif Foda: Thanks, Stefan. Let me conclude. In short, a confluence of macro and industry trends are aligning to supercharge National Energy Services Reunited Corp. A wave of AI investment and fruitful geopolitical collaboration in the Gulf is fundamentally positive for National Energy Services Reunited Corp. As a key player in the unconventional gas renaissance, National Energy Services Reunited Corp.'s bold decision to invest and have a solid long-term strategy is working. As our unique position as the national champion of MENA and US NASDAQ-listed, we are in the best position more than ever to build on the appetite of the GCC capacity growth while securing long-term contracts. The Jafurah award elevates our profile significantly and puts the future firmly in our hands. And there are more awards to come and will be announced very soon. With oil activity inflection outside of Jafurah, continued growth in Kuwait, and North Africa, and all-time high activities across most of our countries translating into positive region fundamentals that match the equally positive position we have in the region, and we will capitalize on all those tailwinds. I'd like to close by thanking all of our employees and their families. They broke records, delivered flawlessly, and secured several billion dollars of contracts. We still have big ambitions for the future, not only in more contract awards but in innovation, sustainability, and technologies. Our success would not be possible without the steadfast support of our beloved customers, who we know very well and are honored to be their trusted partner. With that, we are ready to take your questions. Kate, please open the floor. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you'd like to remove your question from the queue. We ask to please limit your questions to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question from the line of David Anderson with Barclays. Please go ahead. David Anderson: Good morning, Sherif, and obviously, congratulations on the big win in Jafurah. The long run to get here. Great to see you guys rewarded for all the efforts you've done there on the unconventional field. Not surprisingly, those who didn't win the contract, of course, they wanted a price that no one else is willing to go to. Can you please respond to that and just sort of tell us how you're able to price this more competitively than others that you're still able to keep these margins at these great levels? How much of this is being a local player? What else is into this mix? Thank you, Sherif. Sherif Foda: Dave, thanks for the congratulations, and obviously, I wouldn't comment on others, but I just can tell you very clearly, as we tried to explain in great detail, we've been on this journey now for several years with our dear customer Aramco. And as we've been part of it, and we've been, you know, performing and, I would say, beating all the records in that domain, we understand exactly how the structure works, as we are very locally embedded with all the ecosystem. And as I tried to explain, we knew how to take the cost out of the system. And look at the future of that project being three times at least what it was before. So how you are going to operate in that new paradigm, your cost control, your new supplier and partners, you know, a lot of it is for the people that do not know. This is an integrated project. So, basically, we look at the sites, the water, the sand, the coiled tubing, the plugs, the flowback, the testing, in addition to frac. We knew exactly how to acquire equipment and use the weakness, if you like, of the US to take full advantage of that. We brought everything to the kingdom already. So we invested, as I say, countercyclically because we knew the downturn could play a very big benefit for us. And this will translate into maintaining our margins in this project going forward. Blake Gendron: So as we try to explain, this is Sherif Foda: it's gonna be much bigger and significantly bigger. So our target is to maintain the same profitability as we had today and as we had before. And the best thing to say is people have just to watch the results and the margins going forward. And that would be the best answer. David Anderson: Well, we've seen it so far. So it's great to see you continue on this journey here. So I was wondering, could you provide us a bit of a roadmap on the pace of development at Jafurah? How many crews are you gonna have in this coming fourth quarter? Where do you expect to be at the end of 2026? And just kind of ultimately, how many kind of wells or stages per month are you targeting? Any details around that you could provide, please? Sherif Foda: Yeah. So, obviously, I mean, I know all the details in great detail, but I will always leave this to my dear customer to say it. But I can tell you we prepared to send all the extra equipment and crews in this quarter. So then we are ready in Q4. So we started the contract November 1. So we didn't have to wait. Obviously, we had the transition, and in the business, and we started executing using our, today, two fleets that are running as we speak from November 1. And our plan is to deliver those stages that Aramco wants us to deliver using the crews and the additional crew that we the equipment that we already bought as well. And it's shipping to the kingdom. They will be there in November. So we would be ready with the additional crew. So our plan after that is in 2026, how to execute the number of stages with the least amount of crews based on the efficiency gain. We get, right, which is very similar to what you have in the US. So we believe that we can make, you know, addition, you know, in north of a thousand stages per month. Every month. And if they want us to increase to all the way to 1,500, we are ready to do it. Right? So that is our plan is to execute with the flexibility up and down as they like, and we have all the crews. We have all the people. Everybody is already there. So as I said, as we planned this extremely well, we did not release people. We did not shut down. So we kept investing. We hired our people. We had very good cost control. And if you do that and you have that flexibility, you will be able to deliver. So, really, Aramco's plan is very aggressive. I think you heard their earning call very clearly. They added the gas to 80%. They are really world-class in terms of planning, so they know exactly what to do. And we work very, very closely with them. We have a full team in their office. So we can be as flexible as they want us to be. David Anderson: Sherif, if I could squeeze in one last question. You've been you've had at least a crew or you've been working on Jafurah for, I think, as you said, about five years or even more now. But now Jafurah has taken this next step up, your company has taken up the next step of growth. Can you help us provide a little bit of a sense of the incremental EBITDA here? Stefan, I think you said can you just repeat what you said? I think you said $2 billion run rate by 2026. And if that's sort of the number incrementally, I come up with something like a $100 million incremental EBITDA. Something in that neighborhood. Is that low? Is that high? Am I in the range? Just trying to get a sense in kind of 26%. On incremental, that's approximately correct. Stefan Angeli: Right? For the full year, for the full year of 2026, I would use the same margin as the full year of 2025, right, as a total. Right? Total corporate. But the $100 million you're quoting is approximately correct. David Anderson: Awesome. Okay. Thank you, gentlemen. Congratulations once again. Thank you, sir. Operator: Thank you. Our next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead. Jeff Robertson: Thank you. Good morning. Sherif and Jafurah, can you talk about the ramp-up in activity over the next couple of years? Sherif Foda: Yeah. I mean, if you look at, I would say, from the big picture, right, you have a first gas at the end of this year, and you have one BCF in 2027, two BCF in 2030 with the condensate and NGL. Right? Which means then you have all the rigs running in Jafurah, and the other two Telgawar and North Arabia, which is all the unconventional in Saudi. Right? So if you take that up and you think about the ramp-up and the number of stages, anything between, you know, two times to three times what we used to do now. So it's a very significant project. A very significant number of wells, number of stages to be delivered. And as I try to reply again, there is a flexibility in the system. And Saudi will definitely decide if they want to do, let's say, 15,000 stages, 20,000 stages, 25,000 stages per year, and you have the flexibility and ability to go up and down with that based on what that demand and, obviously, based on productivity. And the national agenda. Right? So our role is to ensure that we have that flexibility ready, and ensure as well that we can add crew, release crew, or decrease crew or update as they like. To date, our plan is to have full four crews running all the time in a very, I would say, efficient way to ensure that you can deliver those number of stages that are required with the number of wells. Because now the wells are drilled extremely much faster than before. Obviously, again, they did, as I said, the science-driven approach to deliver those wells much faster than before, but in a very efficient way, very professional way. So now there is an inventory of wells. And most of the unconventional projects for people around the world to know, it's really about do you have the inventory of wells and the pads ready? So then you can plan your frac crews to get ready on those pads. Right? So you preintervene. You prepare those wells, and then you frac them, and then they put them online when they are ready. Right? So this project has, again, I keep saying it's the blueprint because it's very differently made than others. Right? Because it's well planned, very high in advance, was an exploration phase. And then, obviously, these wells were not hooked. Right? So they were fracced, but stopped, but then they're all hooked, and then now they're all in production. Right? So we plan to have at least three to four times what we used to have before. And, again, we are ready for the availability up and down as our client wants us to do. Jeff Robertson: Sherif, in the context of a blueprint, can you share some perspective on unconventional development over the next couple of years and where in other markets in the Middle East and North Africa and how National Energy Services Reunited Corp. is positioned to take advantage of that? And then if alongside that, is there any color you could share over the contract value of tenders that you all are working on that might have an impact in 2026 or 2027? Sherif Foda: So let me try to separate. So the unconventional, I mean, again, I'm talking here as well for the wider audience. If you look today on the Middle East, obviously, it's extremely rich in conventional resources. Right? You will never go and develop something that is expensive if you have something very easy to produce. Now because of the success of Saudi unlocking that unconventional play in a very cost-efficient and very professional manner, now people opened up and say, wow. Why can't I do the same in my because, obviously, if you have all these reserves, that means your source rock exists. But is it economical and do you need it? And that's why it's a bit opposite to the US. It's actually because they have a lot of oil but they want a lot of gas again, for what saying for their AI revolution, for internal consumption, etcetera. So now they are looking at all these plays and where are they? So, obviously, you know that Abu Dhabi as well is doing exactly the same, and they started this already. They have a development already on that unconventional play. Very successfully. Two clients already or you have EOG and veterinarians already there doing the same. So you have as well two separate international oil companies looking at unlocking this unconventional in UAE. And then the others are looking at it. So if you look at the basin, Algeria has an amazing unconventional resource. Ahenad Basin. And it's very similar to actually Vaca Muerte in Argentina. You have Libya that has resources. You have Egypt with Abu Rawash and Apollonia. So you have Kuwait now is even looking at it. Qatar as well. So there will be that's why I call it the renaissance. Basically, people will look into all these plays, and see if it's conventional, unconventional, how much does it cost to produce a barrel of gas? How much it's or unit of gas, and how much is to produce oil. If it is economical, they will do it, and then they will develop it. Because, again, the whole narrative changed totally in the world with you need a lot of traditional energy in addition to the others. Which means gives me to the point that you have to look into the unconventional. And I believe you are going to see this more and more in the coming years. Now on your other question was no. That you had another question. Jeff Robertson: Just can you share any color on the value of contracts that National Energy Services Reunited Corp. is currently working on or working to secure that could impact 2026 and 2027? Sherif Foda: So look. I mean, we are tendering huge contracts. Obviously, the biggest by far on a scale with Jafurah and this is done. We are bidding a lot of tenders in Kuwait and in other countries. And I would say it's $23 billion additional tenders we are running. So we are going to announce as we know the results of those. And, obviously, that will translate into all the additional revenue we were signing. So if you that's why I keep saying I mean, we I used to always say we're gonna double the growth of MENA. Now this is irrelevant because if MENA is gonna be, you know, 5%, let's say, we are gonna grow at least 30%, right, minimum. So definitely, now our growth profile and our additional is much higher scale than what the market gonna grow. Blake Gendron: Thank you. Operator: Our next question comes from the line of Shareef El Megrabi with BTIG. Please go ahead. Shareef El Megrabi: Hi, Sherif. Thanks for taking my question. I want to ask about the uncommitted work at Jafurah. Just to make it a two-parter, when could Aramco tender for that, I guess, and what are they looking for? And then also, on your side, what's it gonna take from an investment point of view over and beyond what you've already been able to build countercyclically? Sherif Foda: So okay. Let me clarify. This contract is already done. Right? So the Jafurah, the way it works is there is a tender, and we all participated. They have, what do you call it, winner for the 100% of the committed work, which is us. And then everybody else signed that contract. Right, or a similar contract. And that is what we call uncommitted. So that piece of the pie for Aramco, they decide as they like when to start, who takes it, they want to diversify. Everybody can operate in that. So this is not gonna be this is already done. Finished. And we basically, all the service companies, what they call, they sign these contracts. And, very similar to, by the way, what happened in the last month. So that scope could be big, and people would work. Anyone who was approved in that list and they were qualified and signed the contract can operate and execute that piece of the contract. Shareef El Megrabi: Got it. That's pretty helpful. Thank you. And Sherif Foda: what was the other part? Investment needed? So they invest I was ask Shareef El Megrabi: Go ahead, sir. I was asking about if there's any other rigs or equipment that you need to buy over and beyond what you've already got for this contract. Sherif Foda: Yeah. I mean, obviously, what we did ourselves is we purchased it's in our CapEx number already that Stefan explained. We purchased all the additional equipment that we need to execute on this contract. That's why we managed to start immediately the contract, November 1. Now as we go along, we will definitely keep adding equipment. Right? Because this for example, let's say, we are ready now with three fleets. Need a fourth fleet. We need additional equipment because this has surface well testing, coiled tubing, perforation, wireline, so be it. So we will definitely keep investing in that. Make sure that we can execute the contract professionally. The key for us and I guess the key for you and the investment community, is we said we are going to maintain our CapEx the same. So if we spend $140 to $150 million in 2025, we're gonna spend exactly the same in 2026 with the 30%, 40% growth revenue, which gives you that stability that we know exactly how much CapEx we need to spend and how much cash flow we're gonna get. Because we are, again, taking full advantage of the weakness of the outside market. Right? So the project, I would say, it's very well designed. From our side, we did a very good job and a very detailed work exactly what we need and what we don't need. We already front-loaded that in 2025 to ensure that we can execute flawlessly and deliver to the client without any hiccups in the future. Shareef El Megrabi: Great. Thanks again. Sherif Foda: Thanks. Operator: Our next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead. Jeff Robertson: Thank you. Sherif, can you share any updates on some of the NEDA projects you're working on? Especially with some of the water initiatives in Saudi Arabia? Sherif Foda: Look. We are doing so much in that, but, obviously, because of the, I would say, the significance, we decided to speak about it in the next one when we know the results as well. So as we said last time, we are on several pilots, on water mineral recovery, lithium. Those projects are in the pilot phase now. They are physically in the country. We are doing the test with our customer in several locations. We will be able to really give you a bit more color based on the results of all those pilots. So we're very excited about it. I am personally love the story because I believe that this can make something so different in the world that nobody did in the entire industry. In the universe, actually, where, basically, you're gonna start to say, I can produce oil and gas and I can produce a lot of other material that is good for the world, for the earth, for the climate, I am cleaning the water economically. I am bringing minerals, and I'm selling it to other industries. And the best would be if I can get lithium at an economical scale to make batteries, you know, and, you know, the narrative of the industry becomes extremely positive. Regardless if the ESG is out of flavor now or in. But I think our commitment is a long-term sustainability of our industry. And as they say, if the world needs all this oil and gas and energy, we have to make sure that we can do this sustainably. So we will be able to give you a bit more color in our next call based on the results of all those pilots. Jeff Robertson: Thank you. Operator: As a reminder, if you'd like to ask a question, please press 1 on your telephone keypad. You may press 2 if you'd like to remove your question from the queue. Our next question comes from John Ajae with Ottpam Press. Please go ahead. John Ajae: Yes. Hi. Curious on a couple of things. Can you give us a sense for the visibility and the confidence that you have in hitting the $2 billion exit run rate for 2026, what you think the growth rate National Energy Services Reunited Corp. looks like, you know, over the year or two that follow that. And the level of visibility and confidence you would have in that growth rate, and maybe what like, an 80% confidence level might be for a 2027 and or 2028 exit run rate? Based on that trajectory. Sherif Foda: Thanks, John. So if I will tell you on the 2026, level of confidence 99%, I would say. So those contracts are awarded and those contracts are signed. The work started. So I would say the level of confidence we have on the delivery and, you know, barring anything happening in the world, it should be kind of a very, very steady and very, very sure. Now if I look at our growth profile 2027-2028, definitely, it's gonna still growing because this contract, for example, and others are four, five years. We have a backlog of tenders that are very, very solid. So we believe we win our fair market share on that, at least with the growth that we see in Libya in Kuwait, that is more than the average of the 5% growth rate that the region will see definitely, we will have the continuation of that growth rate. It will not be obviously 30, 40% like we're gonna have in 2025, but you'll have a very good at least 10, 15% growth rate following that. Now if we are more successful in the tenders that are coming, which, obviously, that's our plan, and we ensure that we can secure those and deliver on them in a same way flawlessly that we're planning to do the Jafurah, then definitely we can opt for much higher growth rate in 2027 and 2028. In addition to that, we have obviously our technology and kind of out-of-the-box portfolio that the market that we're trying to create. So we have NEDA, which is our decarbonization arm, there is plenty of pilots, plenty of investment, a venture capital style as we have, on water, on emission, and definitely on the lithium story, if this cracks, I keep saying this our target is to have this segment that's $500 million. So now you need to make sure it's economical. So we don't have this in our plan. This is what I call all the add-on if we crack the code. And then you have, obviously, our technology on Ruya, which is the rotary steerable MWD, LWD, again, we need to commercialize it professionally. We are doing all the extensive testing. And we have a plan or our target internally for a much bigger market share. We don't have this again in the numbers. All this is add-on to our growth profile, and this will all translate, I would say, as revenue growth. That is significant would be, to answer your question, 2027, 2028, 2029, 2030. Right? Because now you know that these projects are economical, commercial, bigger in size, and can translate to significant revenue and margins. John Ajae: Yeah. That sounds great. Curious also, what type of margin do you have high confidence in for the next few years? Just, you know, without the water and you know, just kind of on what your high confidence baked-in growth is from existing contracts, what would you see as the multiyear margin evolution? Stefan Angeli: I'll take that. For 2026, as I said to David in a few questions before, we see the margin for 2026 being the same as 2025. So it'll be somewhere between 21-22%. Right? Plus or minus 1% on that. It's probably in the high 90% confidence levels. Right? Going forward in 2027 and 2028, right, we will use the same margins for our own internal model, but we'll try as efficiencies come more supply chain, greater revenues, so you have revenue efficiencies, overhead efficiencies, supply chain savings. We'll endeavor to try and get margin improvement. And, over time, we want to try and get back to the 23 to 25% level. Right? That's our goal. John Ajae: And how is ROYA progressing relative to what we might have thought at the beginning of the year? And what type of growth is embedded in that, you know, that $2 billion exit run rate? And you know, is this an area that could contribute above it? The $2 billion, if it goes really well, or is it kind of baked success there baked into that $2 billion? Sherif Foda: Yeah. So the our numbers straight is a very limited Roya in 2026. It's going from 2027 onwards, right, as a number, again, as a significant number to that ecosystem. Why? Because ROYA, rotary steerable, LWD, all this, what we call it, we do an extensive testing. To the technology to ensure it is working, and I commercialize it when we are happy. So, actually, it's the push-pull. So the clients are pushing us to do more work, and we are resisting that because we want to make sure it works perfectly. Right? So I would say it will contribute, and you will see it in the numbers in 2027-2028. They will it will be there in 2026, but it's not a significant number and it is included in our $2 billion exit rate. John Ajae: Great. Thanks a lot. Sherif Foda: Thank you. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Mr. Sherif Foda for closing comments. Sherif Foda: Thank you very much. We don't want to take any more of your time. Appreciate all the support, and we thank again all our shareholders, employees, customers for their trust and looking forward to an amazing 2026. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Welcome to Nexxen International Ltd.'s Third Quarter Earnings Call. At this time, participants are in a listen-only mode, with a question and answer session to follow at the end of the presentation. This call is being recorded, and a replay of today's call will be made available on Nexxen International Ltd.'s Investor Relations website. I will now hand the call over to Billy Eckert, Vice President of Investor Relations, for introductions and the reading of the safe harbor statement. Billy, please go ahead. Billy Eckert: Thank you, Operator. Good morning, everyone, and welcome to Nexxen International Ltd.'s third quarter earnings call. During today's call, we will discuss our financial and operating results for the three and nine months ended September 30, 2025, as well as our forward-looking guidance. With us on today's call are Ofer Druker, Nexxen International Ltd.'s Chief Executive Officer, and Sagi Niri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexxen.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution in reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our future financial and operating performance, market opportunity, growth prospects, strategy, and financial outlook. These statements also include, without limitation, statements regarding our partnerships and anticipated benefits related to those partnerships, anticipated benefits related to the company's intended growth and platform investments, forward-looking views on macroeconomic and industry conditions, as well as any other statements concerning the expected development, performance, and market share competitive performance relating to our products or services. All forward-looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those implied by these forward-looking statements, including unexpected changes in our business or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the US Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors" in our most recent annual report on Form 20-F. Nexxen International Ltd. does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional detail, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker, CEO of Nexxen International Ltd. Ofer, please go ahead. Ofer Druker: Thanks, Billy. Nexxen International Ltd. delivered a strong Q3, generating 10% year-over-year programmatic revenue growth or 15% ex-political, driven by omnichannel strength, rising enterprise DSP adoption, and growing data demands. Throughout 2025, we have been leveraging the combined assets we have built and acquired over the years, strengthening and better showcasing the power and interconnectivity of our full stack to drive greater enterprise demand. Q3 results show this effort is paying off. Our SSD benefited from proprietary data assets like Nexxen Discovery, delivering stronger performance and greater market recognition. Our renewed and expanded data partnership also adds a long-term growth engine via exclusive ACR data and CTV media while enabling innovation like the industry's first solution for programmatic smart TV on-screen through the Nexxen DSP and SSS. SSD. This opens a new frontier for advertisers to reach send OEM media via high attention placement never before available programmatically. With an advanced enterprise DSP, proprietary data, and a unique and growing CTV and cross-device media footprint, Nexxen International Ltd. is creating a very impressive value proposition that sets the stage for meaningful long-term growth. We have continued investing in our omnichannel DSP, enhancing automation, performance, and user experience to bring more enterprise partners onto the platform and believe it can now compete directly with and win against top standalone DSPs. What truly depreciated is how it connects across and benefits from our full stack, combining text data, AI, creative, and media to deliver superior performance and efficiency to enterprise customers and independent agencies. Recent upgrades have not only enhanced the DSP itself but also strengthened the data, AI, and media engines that power it. In the DSP, we have improved buying algorithms and automated budget optimization, lowering media costs and increasing return of expense. Meanwhile, Next AI continues to elevate its performance and efficiency. The NextAI DSP assistant is helping users gain and act on powerful real-time insights faster, enhancing results and usability with customer satisfaction scores often above 90% and some reporting efficiency gains of up to 97%. We are also leveraging our data platform to strengthen the value proposition of our enterprise DSP. Nexxen Discovery, our proprietary insights and audience segmentation tool, is now central to agency and brand conversation and integral to pitching and winning new clients. It unifies cross-channel data sources, including exclusive Asia data, enabling advertisers to uncover, build, and activate high-performing audiences at scale while generating critical insights and reporting. We have enhanced discovery in our broader data platform through Next AI by improving our customers' first-party data connects with Nexxen International Ltd. and improving usability for users of all skill levels. This has resulted in greater adoption, expanded reach, more precise targeting, and measurable performance gains. Discovery has become a true competitive advantage that we believe will grow over time. Together, these advancements are driving stronger cross-channel performance across targeting, activation, optimization, media buying, and measurement. End-to-end users are achieving roughly two times higher retail of ad spend and 30% lower costs. Key reasons we are winning more in ad-to-ad USP evaluations. Our DSP's performance, connected to and driven by our full stack, has brought dozens of new enterprise customers on the platform in 2025, creating significant long-term growth potential. As more enterprise customers onboard, we capture greater direct demand, strengthen our end-to-end revenue opportunities, and reduce reliance on third parties, which is critical as major DSPs continue to tighten SPOs within their ecosystem and work directly with publishers. With a stronger DSP, more powerful and connected data solution, and deeper AI integration, we are now focused on capitalizing on strategic partnerships and scaling platform adoption. We believe this will further our end-to-end revenue opportunities, drive increased growth potential, and create greater resilience against evolving industry dynamics. In Q3, we announced our updated partnership with Vida, successfully renewing and expanding it through 2029, extending exclusive global access to the ACL data, and securing third-party ad monetization exclusivity on their North American media. This provides a durable advantage over peers lacking exclusive and unique assets. We believe we struggle to differentiate and drive value in the future. As advertisers need alternatives to walled gardens, Nexxen International Ltd. is well-positioned to fill that gap as an open, independent platform. Our ratio data cements us as a fundamental targeting and measurement data provider, fueling both platforms' spend and licensing opportunities. For example, our ACR audience segments recently became available for targeting in the Yahoo DSP, underscoring growing demand and paving the way for licensing growth in 2026 and beyond. Our media exclusivity also creates leverage to attract new partners and incremental spend through unique opportunities unavailable anywhere else. And as Vida's footprint grows, so does the value of our facilities. The new agreement is already powering breakthrough innovation. We recently launched the industry's first solution for programmatic smart TV on-screen activation that will be available exclusively through the Nexxen DSP. It provides direct access to native smart TV inventory via the Nexxen SSD across iSense CTVs and other CTV OM brands powered by Vida's operating system. This marks a major step forward for the CTV industry, unlocking previously inaccessible scaled OEM media for programmatic activation and creating exclusive eye attention placement that commands premium pricing. Advertiser interest has been strong, and this solution differentiates us as major competitors cannot offer similar capabilities. We believe this will become a powerful intermediate and long-term growth engine for Nexxen International Ltd., one that can accelerate DSP adoption, expand end-to-end spending, and reinforce our leadership in programmatic smart TV innovation. While we are encouraged by our momentum and strategic progress, we are disappointed to lower guidance due to near-term headwinds, including softness in select channels and a shift in our leading DSP customer reinforcing its SPO strategy. That said, our platform's interconnected advanced technology solutions, TV data, and robust omnichannel media footprint give us confidence we can navigate these dynamics and emerge stronger in 2026 and beyond. Our strategy is evolving, not changing, as we are doubling down on our DSP, discovery, and broader data platform to drive enterprise adoption, strengthen end-to-end revenue opportunities, and reduce third-party reliance. In 2026, we are releasing new DSP innovations, expanding infrastructure and capacity, and deepening new AI integration to enhance usability and performance. To insulate against disruptive open Internet trends, like LLM-driven traffic sheets, we are enhancing our CTV capability through innovative product launches like our first-to-market programmatic smart TV home screen activation solution. In addition, we are entering new scales mobile in-app partnerships. Finally, we are aggressively pursuing new sizable strategic commercial partnerships, leveraging our Vida exclusivities and first-to-market programmatic smart TV on-screen activation solution. These assets provide leverage with ecosystem partners, agencies, postcos, and data providers and can ask if you last spent commitments, greater enterprise adoption, and scale licensing opportunities. While Q4 presents near-term charges, our long-term outlook and conviction in our strategy remain strong. The actions underway, combined with continued investment in our enterprise DSP, cross-device capabilities, and data and AI innovation and integration, position us for a stronger 2026 and beyond. We are on a clear path to becoming a strategic and partner of choice for industry leaders, fueled by exclusive TV data, advanced tech, and innovative smart TV solutions unavailable anywhere else. With a solid foundation, expanding partnerships, and critical capabilities unique to Nexxen International Ltd., we are confident in our positioning to drive greater enterprise adoption and outsized long-term growth. With that, I will turn it over to Sagi Niri. Sagi Niri: Thank you, Ofer. In Q3, we delivered contribution ex-TAC of $92.6 million, a Q3 record reflecting an 8% increase year-over-year or 14% ex-political. Programmatic revenue also reached a Q3 record of $89.6 million, up 10% year-over-year or 15% ex-political. Growth was driven by data product self-service, desktop and mobile, alongside increases across our health, business, and finance verticals. In contrast, contribution ex-TAC from our non-programmatic business line declined roughly $1 million year-over-year. We also observed year-over-year decreases in CTV and display, as well as reduced spending within our government, retail, and education verticals. CTV revenue declined 17% year-over-year in Q3, or 13% ex-political, to $24.5 million. Results were impacted by decreased activity from select third-party deals, partners within our ONP and PMP channels, tariff-related spending reductions from certain customers, and more competitive CTV CPMs. Though these pressures have persisted in Q4, we continue to see significant CTV revenue growth opportunities in 2026 and beyond, particularly following the renewal and expansion of our strategic partnership with Vida. In Q3, desktop revenue increased 67% year-over-year, and mobile revenue rose 3% as our targeting tools continue to help advertisers find audiences across devices, while overall video revenue represented 70% of programmatic revenue. Contribution ex-TAC from PMP declined 4% year-over-year in Q3, and contribution ex-TAC from display decreased 2%. Despite headwinds across some formats and devices, we achieved record Q3 contribution ex-TAC, thanks to the benefits of our diversified omnichannel approach and continued momentum across focus areas we've invested heavily in over the past several years. In Q3, self-service contribution ex-TAC grew 11% year-over-year amid greater enterprise DSP adoption, while contribution ex-TAC from data products increased 164%. We generated adjusted EBITDA of $28 million in Q3, reflecting a 30% adjusted EBITDA margin as a percentage of contribution ex-TAC. We remain confident in our ability to expand margins over time through contribution ex-TAC growth, cost discipline, and anticipated benefits from our AI initiatives. In Q3, we generated $35.8 million in net cash from operating activities, compared to $39.9 million in Q3 2024. As of September 30, we had $116.7 million in cash and cash equivalents, no long-term debt, and $50 million undrawn on our revolving credit facility. Non-IFRS diluted earnings per share were $0.20 in Q3 compared to $0.27 in Q3 2024, on a post-reverse split basis. We repurchased roughly 1.8 million shares in Q3, investing approximately $18.1 million through our now-completed $50 million program and recently launched $20 million program. From March 2022 through 2025, we repurchased roughly 36.6% of outstanding shares, investing approximately $247.4 million. As of October 31, approximately $13.9 million remained under our authorization, and we intend to evaluate implementing a new repurchase program following completion of our current program. We invested $20 million in Vida in Q3, with an additional $15 million planned for Q3 2026, and we are also continuing to explore M&A opportunities focused on accelerating programmatic revenue growth and enhancing our data, CTV, and mobile in-app capabilities. With that, I'll turn to our outlook. Despite meeting our expectations for both Q3 and the first nine months of 2025, we are lowering our full-year 2025 guidance. We now expect contribution ex-TAC in the range of $350 million to $360 million, adjusted EBITDA in the range of $113 million to $117 million, for programmatic revenue to represent roughly 95% of total revenue. Our updated guidance now reflects full-year 2025 contribution ex-TAC growth of approximately 3% at the midpoint or 6% ex-political, and programmatic revenue growth of approximately 6% at the midpoint or 9% ex-political. Our revised guidance reflects several factors impacting Q4 performance. We have experienced lower-than-expected activity from certain third-party DSP partners in our OMP and TMP channels, which has impacted contribution ex-TAC within the Nexxen SSP. That said, demand generated directly through the Nexxen DSP to the Nexxen SSP has remained in line with expectations. The majority of softness within our ONP channels has been attributable to changes in spending behavior from one DSP customer. While the customer remains active on our platform, its activity to this point in Q4 has decreased significantly year-over-year following a sizable increase in spending during Q4 2024, partly driven by the 2024 U.S. Election cycle. We expect contribution impact related to this customer's reduced spending to be isolated to Q4 2025 and to not have a material impact on Nexxen International Ltd.'s performance in full-year 2026. In Q4, we've also observed more competitive CTV CPM as well as reduced spending from certain customers reflecting some macro softness, which we believe has been driven largely by tariffs. Additionally, we've experienced continued weakness in our non-core non-programmatic business lines for which we are actively evaluating all options. As Ofer mentioned, while we are disappointed with our reduced guidance, we are confident in the swift actions we've taken to address near-term headwinds in our long-term strategy and positioning. Our strategic shift towards revenue generators from our omnichannel self-service DSP and data products continues to gain momentum, supported by our unique data and media assets fueling greater enterprise adoption and growing end-to-end opportunities. Over time, we believe this combination will continue to attract new partners and increase spending, create larger growth opportunities, and drive more predictable and resilient contribution ex-TAC. We expect contribution ex-TAC from our Vida partnership to increase in 2026, supported by ACR data licensing revenue, exclusive third-party ad monetization opportunities, and the launch of our programmatic smart TV home screen activation solution. Adoption of Next.ai is strong and growing, and as usage increases, we expect it to be a driver of operational efficiency, adjusted EBITDA growth, and margin expansion over time. We will continue investing in AI, data, and technology to reinforce our platform advantages and depreciation. Through the actions we've taken to address Q4 challenges and continued execution on our long-term strategy, we are confident we will become a stronger, more resilient, leading platform well-aligned with where the industry is heading and better positioned for sustainable long-term growth and margin expansion. As always, thank you to our shareholders, employees, and partners for your support. Operator, we'll now take questions. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up question. Our first question comes from Matt Swanson from RBC Capital Markets. Please go ahead. Matt Swanson: Great. Yes. Thank you for taking my question. When thinking about this DSP headwind, Sagi, I think you mentioned that you do not expect it to be a material impact to 2026. Could you just talk a little bit about the steps that you're taking in Q4 to kind of help rectify some of these headwinds? The one thing I know we've seen from some of your SSP peers is leaning heavier into more DSP diversity, especially DSPs that may be set in the mid-market. I'm just curious if that goes into your strategy as well. Sagi Niri: Hi, Matt, first of all, and thank you for your question. We have a very clear path that we are taking, but we are going, of course, to accelerate according to what we are feeling in the market. The first thing is about CTV media. So a lot not far, like, the last month or so, we announced that we basically launched a new product that enables us to run programmatically TBS on the platform of the OS of the operating system of Vida and others. And this is very meaningful because the amount of media that you have on the CTV is massive. And basically, users are spending about ten to eleven minutes a day on a TV in front of the operating system, and we will have the opportunity to engage with them in a programmatic manner for the first time in the industry. So this is, like, something that we believe that also is resilient for the AI changes in the world and is supporting us. The second thing is, of course, when you mentioned about the DSPs, so what we feel is that we see that our sales team this year and in Q3 and also what we are seeing going forward is reaching their targets, which means that our offering is very compelling, and we are able to satisfy the needs of the clients with our technology and capabilities. And we are going, of course, to continue doing that. Our self-serve solution we are going to enhance what we did until now. We already see very good traction to that. It grew 14% in the first nine months of the year compared to last year. And it grew about compared to last year. Percent in Q3. Which is very nice numbers. And I think that with the push in resources and capabilities, we will be able to achieve even more. So we are going to do that in order to lower the reliance on third-party DSPs in the market. That's the reason that we made this investment a few years ago. We built the capabilities, and we believe that this is a unique capability that we got. And if we enhance it, we'll enjoy that in the future. On top of that, we are also adding one of the key things that we are doing all the time, which is like a differentiator, also, is the way that we are dealing with data. And the discovery tool that we basically acquired from the acquisition of Amobee, and we made it like a standalone platform that is attracting a lot of advertisers and partners. We are going to also add to this platform now mobile data that is coming from partners that we are talking to or already got agreements with. And this will enable us to put it side by side with our strong and exclusive data sets that we have from the agreement that we got with Vida. Which is super important. They share data globally and especially in the US and Canada, which is more related to us because more than 90% of our revenues are coming from the US. The last point that we feel is important to mention is also to add in-app mobile media to the mix because we tried in the middle of the year to understand what basically channels of media will be less affected by AI. We got into the resolution that basically also in-app mobile is less affected by AI, and we are investing in that. We already signed a few agreements around that, and we stopped moving resources into this channel of media. And we believe that everything that I just said, like CTV, the TV ads, native ads in the operating system, in-app mobile media, and data that we are adding, moving resources to the self-serve solutions that we are basically already showing and demonstrating growth year over year. All of that, including the fact that our sales teams are able to reach their targets with our offering, give us optimism and the belief that we can continue next year with full power. Matt Swanson: That's really helpful. You mentioned AI a couple of times. One of the big points of emphasis at your Investor Day earlier this year was talking about the power of your AI platform once you've got all three pieces, right, working kind of interoperability of being full stack with AI. I know we have a couple of products launched. Can you just talk about how close we are to getting that kind of full stack vision completed? Sagi Niri: So first of all, we keep, of course, the investment in AI. For us, it's already, like, a part of everything that we are doing. And basically, what we see is that if we are looking at, for example, the discovery tool and we mentioned it also in the script, basically, what we see is that sellers that are using the discovery plus AI, in the past, it took you, like, a few hours to issue a report. You need, like, an expert to do that. And people were like I will not say they were not tempted to use it so much. But now we see that people are using the AI, our discovery tool, and data segments. They are getting in a few minutes, like, a very good speech. It basically doubled the revenues that the seller that is using our tools is generating compared to a seller that is not. So, of course, it's encouraging us, and we keep pushing for this development. The second thing is that we release and we are getting really good feedback. Feedback is from the usage of AI on our in order to buy media, and it's helping buyers not just to buy smartly, but also more efficiently, and we see very good engagement around that. We now, as we mentioned before, are moving to the SSP side. I feel that early next year, we'll have, like, news also around that. Because this is the third element, as we mentioned, and you have a good memory, Matt, because this is the third piece that we are building, which will be around the SSD side. Building these capabilities, improving the way that publishers can interact with our media, with our data, and understand also their needs. And I think that then in the middle of next year, we will add the layer that will help us manage the full platform, meaning connected to all these three elements of the DSP, DMP, and SSD, and enable us to work much more fluently, much more effectively, and generate better results for our clients. Operator: Our next question comes from Jason Kreyer from Craig Hallum. Please go ahead. Jason Kreyer: Thank you, guys. So I just wanted to ask about the current trend line in CTV. We've seen a deceleration there over the last few quarters that culminated into a bigger decline in Q3. So just wondering if you could unpack that a little bit. My understanding is that the changes with this DSP partner are less attributed on the CTV side, but maybe you can talk about kind of what that trend line looks like and what's ahead for CTV. Ofer Druker: Thanks. Of course. Thank you, Jason. I think that our CTV strategy is solid, as I mentioned before. But in Q4, and also earlier this year, we felt softness in some of the categories that are basically usually supported by CTV in order to advertise their product, and it's, of course, affected us. The second thing is basically competition in the market that is very fierce in the last six months between some of the big companies in the market that are basically lowering their prices in order to attract advertisers. So the CPM in general, what we feel again at least is, went down. So people can deliver their results with less budgets, which was, of course, affecting companies like us because if a company used to spend $1 million in order to achieve certain results, maybe today, they can do that with a few dozens of percentage less in order to do that, and it's affecting the revenues of a company like us. And the last point that I feel is also the political element that last year in Q3 and Q4 was meaningful for us. And, of course, it's not existing almost totally this year. So all these things together I think basically affected us in the second half of the year. But when we are looking at 2026 and going forward, I think that what I mentioned before when I spoke to Matt, when I'm looking at that, this TVS, native ads that we are running, and the agreement with Vida, the investment that we did in order to kick in more TVs in the US, will give us more ground because we have also a full exclusivity on that media, which is growing. ISense and Vida is becoming a very big player in the market. Currently, like, number two globally in pushing new TVs to the market according to the last professional reports that we see. And when we are looking at the TV ads, and our ability to turn them in programmatically, I'm getting a lot of interest in the market from other publishers like Vida, which is OEMs, which need this solution in order to simplify the sale process and make it more competitive. And the second thing is, of course, to advertisers that it will be more like a commodity for them to buy this media than today that they need to deliver the campaign to the OEM in order to run it on this platform. And, of course, it's heavier and it's more difficult to run and to maintain. So I feel that the CTV part, we feel that in 2026 onwards, we start seeing the effect of that, and we will be able to return to growth on that piece of media. Jason Kreyer: Appreciate that, Ofer. Just one follow-up. So recently, one of your competitors announced a win with an advertiser you've worked with in the past. Just wondering if you could talk to that at all and maybe help us understand why that perhaps a more isolated event. Thanks. Ofer Druker: So, this specific client used to work with us for many, many years. Sometimes people want needs or want to change, which makes sense. We did it in good terms and all good. We are winning other accounts in the market as I just mentioned. Our self-serve grew in the first nine months by 14%. And I think that our offering we have a lot of advantages in our offering that we are even going to enhance now. Which is about data platform that we are connected to our DSP. Including exclusive TV targeting, TV data for targeting and measurements. That is very important. We see now, as we also integrated some of these data elements, but it's giving us a clear advantage in the market around data and TV, whichever is related to TV. And the second thing is the fact that we are an end-to-end solution and we can also generate revenues from them by media that can turn our offering to much more attractive and we are going to use this, of course, in the near future. So I think that overall, you win some, you lose some, you are trying to win more than you lose. And I think that we have a strategy that can support our growth. And we see the growth already in 2025 even that it was not an easy year because some of our clients are already using the platform. Even some of them lower a little bit their spend. But I see that we are winning, 14% in the last nine months growth compared to last year. 11% in Q3, and I'm optimistic that with more resources that we are shifting there, and with the capabilities that I just mentioned, we will see much more growth in 2026 and going forward. Operator: Our next question comes from Laura Martin from Needham. Please go ahead. Laura Martin: Yes. My first question is on, could you remind us how much of your total traffic is from a desktop browser? And you mentioned that traffic was you're seeing traffic down. How much was traffic down in Q3 for you? So that's my first question. And then my second question is on the DSP. So your three-quarter numbers were great, which means this DSP loss for the fourth quarter was a surprise, and I get presumably you didn't really have visibility until this quarter started. If you don't have visibility so I don't understand why this DSP spending less money doesn't affect next year at all. But even if that's true, you didn't have visibility for this, how can you have confidence that 2026 is gonna be okay since I don't think you're anticipating this DSP disappearing in April. Those are my two questions. Yeah. This will disappear. Ofer Druker: No problem, Laura. First of all, this DSP didn't disappear. It's there. It's buying media. We didn't close the DSP. A major one on our platform. They keep buying from us. There is a few issues with the big DSPs right now. Some of them changed the way that they are buying media. And they prefer more media that is basically related to their algorithm and to their SPO processes. And it's affecting the market. The second thing what I mentioned is that we are trying to lower the reliance on third-party DSPs. And we are increasing the resources and pushing forward our plans to enhance our self-serve capabilities, which we see that is growing and is making a very good effect on our revenues because it's not just the taxes that we are winning, but also these clients are shifting some of their budgets to our SSP. So this is a solution that basically helps us to mitigate risk that is coming from third-party DSPs. The second thing is that the fact that we are now adding really important pillars of CTV media. We already started discussions with big DSPs and partners in order to enhance their spend with us. Mainly on CTV because of this unique technology and unique capabilities. And we believe that it will compensate and even generate growth next year. We didn't mention in my conversation drop, but I said is that when we look at the market for the future, sometimes you need to plan ahead, of course. And what we understood the display that we invested in that in 2024, in the '25, we see that it's like a we don't feel it so much in our revenues. We see very, very small drop in revenues of DSP, but we feel that it will it can be a challenge in the future because of AI. And people are surfing some sites and so on and even mobile browsing. So we shifted more attention also to in-app mobile that is basically will grow our revenues and lower our dependency on media that can be affected by AI. Operator: Our next question comes from Andrew Marok from Raymond James. Please go ahead. Andrew Marok: Hi, thanks for taking my question. Another theme we've heard across some of your peers has been kind of leaning into performance objectives in kind of what are considered maybe traditional brand formats. I guess, you talk a bit about how you're positioned for that trend and maybe any advantages provided by things like the Nexxen Data Platform? And to the extent that you're able to capitalize on those types of trends, the type of potentially insulating impact it could have on '26? Thank you. Ofer Druker: Amazing question. Thank you, Andrew. I think that performance is now is the right time to basically push for that, and we are doing it in the last twelve months. Our DSP is built for performance and generating amazing results when it's being compared to other DSPs around measurement of performance. And that's also one of the key things that is helping us to win new accounts because when they run us head to head with another DSP or a couple of DSPs, we are generating most in most cases, better results. So it's helping us, of course. I think that also the combination with CTV, which was until now more challenging. And my background is performance for many, many years. It was the price of the CTV. Because when the price was the average price was a note of $15 to $20, it was very difficult to generate results from performance on CTV. But now when the prices are basically dropping, the volumes are growing, we can see that there is a bigger opportunity to combine basically performance with CTV and we are putting a lot of efforts on that. And we have also additional advantage with that because when we mentioned the PVS, this is basically PVS are getting a lot of attention from the clients because they can be alone on the screen for a certain time, we can basically achieve additional impact by using that. So I think that the near future, which is giving us opportunity because the lower CPM that I mentioned, that also reduced our revenues, will help us to basically enable us to do more things around performance and our DSP is basically built for that. It was we built a lot of algorithms that are helping the buyers to generate better results. And I think that in the past few years, we basically moved it to the level that now is one of the top DSPs that is related to performance in the market. Andrew Marok: Great. Thank you. And maybe a quick follow-up, if I could. On your non-programmatic business, you called that out as one of the potential headwinds to Q4. Just wondering, to the extent that it provides any benefit to the programmatic business, is it kind of completely in its own little silo, or are there some benefits that the programmatic business can realize from it maybe in terms of data sharing or something like that? That's all. Thank you. Ofer Druker: Thank you. No. There are totally silos. There is no relationship between this performance element and our core business. Basically, it's business units that we acquired in one of the major acquisitions that we did in the past with RhythmOne. That we basically inherited two business units that were not related to what we are doing today. They are in silos. We are not getting from them any benefit of data, as you mentioned, or around that, and it will not affect us when we will take these steps. And we kept them basically running as long as they were generating value for us. But now, as I mentioned, we as we mentioned, we are basically evaluating what we should do with them because they are not hitting their targets and, of course, cause us a loss of revenues in our forecast, which is meaningful. So not so meaningful, but still meaningful. And but there is no relationship to any of the other business that we are doing, and it will not affect us at all when we will basically take action with them. Operator: Our next question comes from Matt Condon from Citizens. Please go ahead. Matt Condon: Thank you so much for taking my questions. My first one is just on you guys announced in the press release a new data licensing partnership with Yahoo DSP. Can you maybe just refresh us on how The Trade Desk partnership is going and then how big Yahoo can be and then maybe overall just how big data licensing can be for you guys? Ofer Druker: Very good question also. So basically, there are a few elements for us to cooperate with partners around our data. The easiest way for us is basically to create segments and to send them to the DSP that basically wants to utilize them in order to contact targeting. That's what we are doing mostly with The Trade Desk and now with Yahoo. And it's growing. I cannot reveal numbers, but it's growing. And it's showing good signs, and we have a list of new DSPs that are showing interest in order to grow basically with us and embrace this technology and these capabilities. And we need to remember that, basically, the profit or the net revenues of this initiative are 100% because it's coming to utilizing our data that we own. And when we are looking at more advanced solutions, it's basically licensing this data for measurement, integrating raw data into DSPs or other DMPs, this is a very big this is even a bigger opportunity. And we tie it with, basically, the ability to utilize our discovery tool, which is the platform that enables clients to utilize the data but also enrich their data. Meaning, they can upload their first-party data into the platform, enrich it with our TV data, and get, like, unique reach, which changes sometimes their perspective about their audiences. And this is also something that we start selling and generating revenues. And I believe that in the near twenty-four months, we'll see these segments grow in our revenues. The licensing, and the licensing of data in segments, like I mentioned, but also even AVL platform like the discovery plus data that we are licensing to companies in order to utilize them on their platforms and in favor of their activity and their clients. Matt Condon: That's very helpful. And then maybe just a follow-up. You mentioned also in the press release just the potential to do more M&A transactions with smaller than what you did with Amobee. Just what are the key areas when you look at your business today that you think that you need to round out or different functionalities that you need to add on to? You know, via M&A. Ofer Druker: Okay. So I think that from a technology perspective, we have everything that we need. We have a very strong DSP, a very advanced and robust DMP, and a very powerful SSP. But I think that there are supposed to be now more opportunities to buy sometimes clients or verticals activity in verticals you are less exposed to or less working in these verticals and can enrich your technology. I think that also from an integration point of view, we are not interested right now to buy another DSP or another SSP or DSP or DMP because we have this platform, but also from an integration process. We did a heavy lifting in the last two or three years that we have we got to the point that we are really happy with the technology stack that we got. So what we are looking more is to buy activities for clients, as I mentioned, or knowledge or client-based or activity-based that we are not familiar with that we can integrate into our platform and generate additional revenues from them. Operator: Our next question comes from Barton Crockett from Rosenblatt. Please go ahead. Barton Crockett: Okay, great. Thanks for taking the question. I'd like to try and understand a little bit better the DSP impact being just a one-quarter phenomenon. In your guide. I guess the first thing I just want to understand around that are you saying that that's because whatever revenue you lose in the fourth quarter will come back to you in the first quarter, or is it because you see other revenue sources offsetting whatever the negative impact is that you see this quarter and next quarter being offset by new revenue sources starting by next year. Sagi Niri: Hey, Barton. Thanks for the question. I think that's what we are trying to say. You know? I think you answered your question by yourself. So it's like first of all, aforementioned a couple of times, like, all the actions we are doing in order to have our usual growth in 2026, you know, the in-app focus, the self-serve focus, the data focus, the Vida deal, focus. Which are our main growth engines going forward. The one DSP that's, like, you know, is part of the gap in Q4. It's something that we expected this DSP to do with us or to spend with us in Q4 because this is what it did last year, which some of it, of course, connected to the political spend. And this series is spending much less. It's not going with us into 2026 because we already acknowledge that this is the new base, and this is its level of spend. And we are not, like, taking into consideration that for some reason, he may spend more in 2026. Yeah. That's what So I think this answers your question. I hope. Barton Crockett: Okay. And so when you say your normal level of growth mean, you guys think of normal growth being double-digit. Sagi Niri: Yeah. I think that, yes, the lower double-digit, I think that according to the growth engine in front of us and, of course, we are already working very extensively on the 2026 budget. I think that we can achieve this growth of 10% in programmatic activity. Operator: Our next question comes from Tyler DeMatteo from BTIG. Please go ahead. Tyler DeMatteo: Great. Thank you. Appreciate the time. I wanted to start with on the double growth comments right there. When you think about the different product solutions and how you're trying to go to market, I mean, what physically needs to happen with the different business and product solutions to get you back to double-digit growth? Like what's the real needle mover to get you there? And can you just kind of unpack that for us? And then my second question here is I want to talk about the Vida partnership. How much of a contribution I think you kind of quoted this on an ex-TAC basis. How much of a contribution do you actually expect next year? And how is that going to flow through? Thank you. Ofer Druker: First of all, Tyler. I think that the main thing that will bring us growth next year will be the CTV part because, generally speaking, this is something that we put emphasis on it for a long time. We suffered from weakness in the last quarter and also, the last quarter was not a great one for CTV, as I mentioned. But I think that by integrating this solution, building relationships with a lot of buyers that are interested in this type of media will see a growth in that section from the feedback that we are getting in the market and from even additional publishers that are interested to integrate with big volume of media and so on can be very helpful. The second thing is again, in order to reduce the reliance on third-party DSP, in 2022, we acquired Amobee for that reason. We saw it coming. We knew that basically the big DSPs in the future will have to build their own end-to-end solution in order to increase their margin and so on. That's why we made we look for DSP that can add to us enterprise capabilities and can grow and can help us to grow in dependency. That's why we acquired Amobee, and we invested a lot of money and time in order to build and improve the technology, grow the talent, build the models, integrate them with data, not in silos, but as one piece. And we believe that the growth that we are seeing from the beginning of the year will continue and even emerge more next year. And will support our growth in the future. And the in-app that we are testing now is showing really good results. From the middle of the year, we are testing and running media on in-app, and we see that by utilizing our capabilities in the ecosystem of the programmatic world, we are able to drive meaningful revenue into the in-app. And we feel that also next year with the agreement that we already signed, and we will announce some of them soon. We will see that basically we believe that this sort of media will generate for us growth also in 2026 and going forward. And the last point is about data. It was tough in the beginning to educate the market, and to also to build the models for ourselves. As I mentioned before in the call, selling segments, selling raw data, or selling it as part of the discovery tool, and now we feel that the market is getting to the notion of how to work with us. Because we need to remember this ACR data and TV data is not common in the market. Most of the companies that we are looking at or other OEMs are keeping it in their gaze for obvious reasons, and we are one of the only ones that is basically willing to use it in order to build partnerships and to enhance cooperation between us and other partners. And this is, of course, with the full support of Vida. And we feel that this is unique and getting more and more attention from the market as we indicated the traders, the Yahoo, and other DSPs that are basically looking to work with us. To give you an exact number of net revenues of Vida, I think it's too early to say, but it will be much more meaningful, of course, than today because today it's very, very small. Operator: Our next question comes from Maria Ripps from Canaccord Genuity. Please go ahead. Matt Swanson: Hi. This is Matt on for Maria. Thanks for squeezing me in here. We just wanted to ask about the increasing focus on mobile and app. As we think about Nexxen International Ltd. scaling this channel further, how much of that is a function of building supply versus adding specific in-app targeting and measurement capabilities? And then just on supply specifically, based on an earlier response, it doesn't sound like, you know, M&A is in the works here in terms of scaling supply. So just could you just talk to why you feel ostensibly, I don't want to put words in your mouth, that a partnership approach is more appropriate here. Thanks so much. Ofer Druker: I didn't understand the last question. What you said about the attitude? The attitude is just trying to Matt Swanson: Yeah. I just just thinking trying to think through the puts and takes in terms of, say, you know, acquiring another SSP to sort of, you know, build out mobile and app supply versus, you know, partnering with other SSPs? Just trying to understand, you know, how you're thinking about those two options. Ofer Druker: Okay. So I will touch first on the last question because I think that it's easier to, you know, to give a quick answer. But basically, today, with all the SPO laws, if you want to regulations and practices, if you want to utilize your programmatic capabilities and footprint, you cannot basically jump between yourself and another SSP in order to drive media. You need to be connected directly to the in-app, and we are doing it by working with the SDK companies that basically we are connected to them, and then we can basically bring the app into the market and pay them directly. And maintain the SPO rules and get, like, more of a traction by the buyers. Which is you can audit it by pulling this media from another SSP. It will not work anymore. In the current market conditions. I hope that it's understood. If not, I can explain more. The second thing, your first question was about INAP. And acquisition. Basically, you don't need to buy an SSP in order to get connected to more SDK inventory. Basically, what we are doing is we are, as you mentioned, we are signing agreements, cooperation agreements, partnership agreements with SDK companies that allow us to monetize and interact introduce us to their clients in order for us to generate additional revenues from the apps that they own. And this is until now, we found it very successful and promising, and we believe that it could grow even further, of course. Operator: That concludes the question and answer session. I would like to turn the call back over to Ofer Druker, CEO, for closing remarks. Ofer Druker: Thank you. I think that, as we mentioned, we deliver a good Q3 numbers, you know, record in many fields, maybe not in CTV, but in revenues. And in growth year over year and so on. But when we are looking at the full year, of course, it's disappointing to reduce guidance. But even after reducing guidance, we need to remember that we are growing year over year around 3% to 6% in general, but six to 9% programmatically. If we are looking at that. And I think that the fact that we are more heavier in the US it's showing that the US lately was more of a challenge to grow the business than other markets. And we are, like, more than 90% in that market. So it affected us maybe a little bit more than others. But again, when we are looking at growth, we didn't shrink. We grew still even with a disappointing Q4. And what we saw until the end of September was a good result. In October, usually, from year to year, we see, like, an increase in demand. Coming from not just one DSP or other DSP, but from the market as a whole. And mostly. And now this year, we didn't see this wave of growth coming into the system. So we basically felt that we need to announce this guidance reduction because we didn't see this wave of growth coming and supporting our growth. It's usually from Q3 to Q4 statistically, is meaningful. So that's the issue, but we believe strongly in our strategy, in our platform, in our technology, in our talent, and we are willing to work hard in order, of course, to improve our performance in 2026 and going forward. So thank you very much, all of you, for your support. Thank you to our employees, our shareholders, stakeholders, and we are obligated to work hard in order, of course, to have a better 2026. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Operator: Thank you for standing by, and welcome to Bitfarms' Third Quarter 2025 Earnings Conference Call. I would now like to hand the call over to Jennifer Drew-Bear from Bitfarms' Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms' Third Quarter 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note, this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website, bitfarms.com, under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to consult Bitfarms' MD&A for a complete list. Please note that references will be made to certain measures not recognized under IFRS and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our MD&A for definition of the aforementioned non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars, unless otherwise noted. And now turning to Slide 3. It is my pleasure to turn the call over to Ben Gagnon, Chief Executive Officer and Director. Ben, please go ahead. Ben Gagnon: Good morning, everyone, and welcome to Bitfarms' Third Quarter 2025 Earnings Call. We made strong, steady progress in Q3, building on the momentum from the first half of the year as we advance our transformation into a leading North American HPC and AI infrastructure company. Today, I'll walk you through our investment thesis, value proposition and key developments, including updates on our energy portfolio and site-specific advancements, all of which gives Bitfarms a competitive advantage to capitalize on the surge in demand for HPC and AI infrastructure. Turning to Slide 4. I would like to kick off today's call by outlining our market thesis, one that we believe differentiates us from our peers and best aligns Bitfarms with long-term investors in our transition to HPC and AI. Infrastructure is not a bubble. Since the invention of modern compute, the supply of compute has increased exponentially. As compute grows, so too does the data center industry that powers it. This is a trend that has a trajectory of over 20 years of exponential growth and an annualized growth rate of 8.8% behind it. This isn't a bubble. It's a reflection of a new paradigm that showed no signs of slowing down before AI and now as AI rewrites the rules of how humans interact with computers, the demand for data center capacity is accelerating. But the demand for compute and infrastructure has reached an impasse. Data centers that used to be measured in kilowatts are now being measured in megawatts and gigawatts. Racks that used to support 10 kilowatts are now being designed to support 370 kilowatts. The exponential increase in demand for power can no longer be met at the pace of the market demands. And as a result, the lease rates for data center infrastructure, which have grown at an average rate of 3% over the last 20 years, are now growing at an average rate of 12% since 2022, and we expect this trend to continue. Turning to Slide 5. Infrastructure is a bottleneck. As manufacturers continually introduce newer, more efficient chips and increase production every year, this trend continues to accelerate. Next year, NVIDIA alone is expected to be shipping somewhere between 10 and 15 gigawatts of GPUs. And that doesn't include, of course, AMD, Intel, Qualcomm and others who are also producing their own hardware with over 100 gigawatts of chips expected to be produced by 2030. While the supply of compute chips continues to increase, the growth in data center infrastructure is happening at a much slower pace. It is not silicon nor capital that will be the real bottleneck for continued growth in HPC and AI, but power and infrastructure. Over the next few years, the gap between the amount of chips that are being produced and the megawatts and the racks available to plug them in and operate them will continue to widen significantly. We strongly believe that as this dynamic continues to play out, the value and the economics will continue to move in favor of those who own the energy and data center infrastructure. We've watched this play out in the market with the contracts that have been announced in the industry to date. When Core Scientific and CoreWeave announced their landmark transaction in April of last year, the rates were contracted around $120 per kilowatt per month. As we've moved further along this curve that's shown on the slide, those rates have continued to trend upward. Most of the contracts over the past few months have been around $150 per kilowatt per month. As time goes on, this trend is expected to continue with analysts predicting a massive shortfall of nearly 45 gigawatts of power for data centers by 2030. Just within the last 2 weeks, Satya Nadella, the CEO of Microsoft, confirmed the shortfall when he publicly stated on a recent podcast that they have GPUs they cannot deploy. We believe that over time, the companies who've allocated and will continue to allocate billions of dollars into compute will be increasingly economically incentivized to pay rising prices in order to deploy their compute faster and with greater certainty, because every day they do not deploy is a day of revenue they will never recover and because their customers will simply move on to a competitor. With direct operating margins for new GPUs typically in the 80s or 90% range, this infrastructure expense is a modest cost driver for those who own the compute, equivalent to a low single-digit percentage of OpEx. If this cost were to double, it would not impact direct OpEx for the customer by more than a low single-digit percentage. These rates, which are largely inconsequential for the customer are very significant for Bitfarms as the developer. With OpEx costs that are largely fixed, every additional dollar earned in a lease goes to the bottom line. This is what Bitfarms is aiming to optimize for, not the fastest contract, but the highest value per megawatt and the greatest margins for the longest period of time with great customers. We believe this will be the primary driver of our multiple expansion and what drives shareholder value creation long term. Our investment thesis is clear and backed by decades of data. Our conviction is high, backed by consistent incoming demand. We don't want to cap our upside by signing leases prematurely. Instead, Bitfarms plans to optimize and achieve higher lease rates and margins through the following 3 strategic actions: one, prioritize infrastructure development first by minimizing the time between signing a lease and generating revenue for a customer, we will minimize the discount that would otherwise be applied to the lease rates and locked into multiyear contracts; two, take advantage of the increasing gap between supply of data center infrastructure and data center demand to lock in higher rates and greater margins under multiyear agreements; and three, while the industry is focused on NVIDIA GB200 and GB300, Bitfarms plans to leapfrog NVIDIA's Blackwell architecture and lead the industry in developing infrastructure for NVIDIA's next-generation Vera Rubin GPUs across 99% of our 2026 and 2027 development portfolio. With Vera Rubin GPUs expected to begin shipping in Q4 of 2026, and the infrastructure requirements to support them largely incompatible with facilities designed for Blackwell GPUs, we believe Vera Rubin infrastructure will be in the greatest demand and shortest supply in 2027 and will command significantly greater economics. Turning to Slide 6. We are able to take this approach because we have a robust balance sheet to fund development and know the value of what we own. While we don't have the largest portfolio of power among the public miners who are transitioning to HPC and AI, we do have the largest portfolios of power in each of the regions in which we operate, none of which are in Texas and all of which are either existing or emerging data center hubs. With consistent inbound demand for our sites, we have high conviction in the value of our unique energy portfolio, the demand for our power and our ability to develop next-generation HPC and AI infrastructure. We believe that not all megawatts are created equal. Our megawatts are strategically located in high-value areas that have multiyear waitlist to secure the power we have today. Our campuses are close to major metros and existing data center clusters, have ample access to major fiber trunk lines and undersea fiber optic cables and benefit from temperate climate compared to places like Texas. While Texas is undisputably a great energy market and arguably the easiest market to grow and develop megawatts in the U.S., there are, of course, trade-offs. The trade-off to short-term development efficiencies is long-term operating inefficiencies. It is no secret that besides power, the primary challenge with data centers is cooling and cooling is becoming an increasingly more difficult problem to solve as energy density continues to increase with every generation of new hardware. Building and operating data centers in a hot, arid desert climate like Texas as opposed to cooler northern climates like Pennsylvania, Washington and Quebec means more CapEx and OpEx for cooling. This isn't an opinion. It's math and engineering. If we built our exact same data center for Panther Creek with the same design, equipment and materials in Texas, it would have a PuE of about 1.4 to about 1.5. Whereas in Pennsylvania, Quebec or Washington, it would be about 1.2 to 1.3. That means for every megawatt we are converting, more of those electrons are going to compute, which is the revenue-generating activity for customers as opposed to supporting revenue generation through cooling. Simply put, our megawatts are harder to get in higher demand areas, produce more value for customers and are worth more per megawatt. In Pennsylvania, we have the strategic foresight to acquire our 3 campuses and submit our energy applications in 2024 before the HPC and AI demand really came into play in the state earlier this year. This has positioned us with secured power at Panther Creek and Sharon and at the front of the queue with very well-advanced power applications at Scrubgrass. In Quebec, new power allocations are almost impossible to get with numerous data center applications denied by the province in the past year. Bitfarms has 170 megawatts operating with some of the cheapest power rates for data centers in North America and 100% renewable. 100% of these megawatts are currently being utilized for Bitcoin mining. And just in the last month, we confirmed that we will be able to convert our Bitcoin megawatts for HPC and AI. This means our Quebec portfolio represents a unique and strategic opportunity to increase total data center megawatts in the province by 25% from about 700 megawatts today, while fulfilling 2 strategic national and provincial objectives, the scaling back of Bitcoin mining megawatts while increasing HPC and AI infrastructure and data sovereignty. In Washington, we have 18 megawatts of secured power in the largest data center cluster on the West Coast with the cheapest power in the U.S. for data centers and 100% renewable. Because of this, the area has a 10-year wait list for power. Everybody is looking to grow here, and it is nearly impossible to do so outside of secured megawatts like ours. This means that despite the relatively smaller scale of Washington, sites in the area are in high demand by both enterprise and hyperscalers alike. I'd now like to spend a few minutes discussing Washington and the news we issued this morning in more detail. Turning to Slide 7. Earlier this morning, we announced plans for the conversion of our 18-megawatt Washington site to HPC and AI workloads. We signed a fully funded binding agreement for $128 million for all the critical IT infrastructure and building materials to develop the full 18 megawatts of gross capacity with anticipated industry-leading energy efficiency between 1.2 and 1.3 PuE. The state-of-the-art facility will feature: one, validated reference designs, ensuring compatibility and performance with NVIDIA GB300s; two, modular infrastructure, enabling phased deployment and scalability, reducing the downtime of Bitcoin mining revenues and ramping up our time to HPC and AI revenues; and three, proven thermal and power management systems critical for HPC and AI operations. The construction team is in Washington today with the general contractor and are kicking off the conversion of the Washington site, which is targeted for completion in December 2026. Turning to Slide 8. I would now like to discuss monetization strategy at Washington. With decade-long wait times for new power and the cheapest power in the U.S. for data centers, we are actively pursuing colocation for both hyperscaler and enterprise, where we can capitalize on the long wait times as previously discussed. This morning, for the first time, we announced we are also pursuing GPU as a service or cloud. While our focus is on developing next-generation Vera Rubin infrastructure across most of our portfolio, we believe there are some compelling reasons to potentially go with cloud as a monetization strategy at Moses Lake specifically. One, GPU as a service would enable us to capture the benefit of the lowest cost power for data centers in the U.S. for ourselves and generate what we expect to be above-market margins and returns for cloud. Two, the relatively smaller scale makes cloud at this site easier to execute and finance. We have more than enough liquidity to consider the site and strategy fully funded today and are in active discussions with leading GPU manufacturers on GPU sourcing and financing, which we believe could be done on very attractive terms. GPU financing could materially reduce CapEx requirements and enhance expected returns. Three, we expect that by demonstrating our ability to execute across the entire stack, we will also be able to better understand customer needs, provide better quality service and negotiate better leases at our other facilities. Lastly, but most importantly, despite being less than 1% of our total development portfolio, we believe that the conversion of just our Moses Lake site to GPU as a service could produce more net operating income per year than we have ever generated with Bitcoin mining, providing the company with a strong cash flow foundation that would fund OpEx, G&A, debt service and contribute to CapEx as we wind down our Bitcoin mining business. I will now walk through the rest of our sites in a bit more detail, starting with Panther Creek. Turning to Slide 9. Panther Creek is our flagship HPC and AI campus in Eastern Pennsylvania. As we've discussed previously, we have 350 megawatts of secured power with PPL. This power is contractually obligated to be delivered with 50 megawatts at the end of 2026 and 300 megawatts at the end of 2027. The site has sufficient acreage for the development of the entire 350 megawatts with capacity to go beyond that. Additionally, we have $200 million remaining on our project facility with Macquarie that is intended to finance Phase 1 of the project as well as a few long lead time expenses for Phase 2. We also have some exciting news around potential further capacity expansion at Panther Creek. Lately, there have been a number of developments, including the recent 403 letter from the Department of Energy and commitments to deploy more natural gas energy generation in Pennsylvania that have given us line of sight to expand beyond the existing 350 megawatts of secured power capacity. We have received positive indication on converting our existing interconnection service agreement, or ISA 60 megawatts to a firm energy service agreement, or ESA, of 60 megawatts to expand power to 410 megawatts and on a recent load study to expand power capacity to over 500 megawatts of growth capacity. With these positive developments that could meaningfully expand capacity at this campus and in line with our investment thesis, we are modifying our original Phase 1 designed for Blackwell GPUs and planning a new Phase 3 and Phase 4. The entire campus will now be developed for NVIDIA's Vera Rubin GPUs and their greater energy density to accommodate our new expectations on future expanded power capacity. This is expected to delay the energization of Phase 1 marginally from December 2026 into the first half of 2027, with no anticipated impacts to Phase 2 time lines. We believe this will enable the company to achieve significantly higher economics in line with our long-term thesis and strategy. Turning to Slide 10. Moving on to Sharon, where we have 110 megawatts of power secured by an ESA with FirstEnergy and PJM under development. We are currently operating 30 megawatts of Bitcoin mining on site, but have started development on an additional 80-megawatt substation, bringing the total available for HPC and AI uses to 110 megawatts. We expect to have the full 110-megawatt substation online by year-end 2026. We recently closed on the purchase of the land for the site, effectively ending our lease and enabling us to move forward with our planned development of HPC and AI infrastructure. Similarly to Panther Creek, we will be working to develop the campus for Vera Rubin GPUs, targeting site completion and revenue in the first half of 2027 for the full 110 megawatts of gross capacity. Turning to Slide 11. In Quebec, we have 170 megawatts of low-cost hydropower currently operating across multiple Bitcoin mining sites, almost all of which are within a roughly 90-minute drive from Montreal. This is an incredibly attractive opportunity for hyperscalers who are following what's called a regional campus strategy. This is something that was pioneered by Amazon, where smaller sites can be directly connected with direct fiber infrastructure in order to reduce the latency between sites below 2 milliseconds, enabling many sites to be connected together to function as one larger site. As I mentioned, it's almost impossible to grow organically in the province. And in October, we confirmed the ability to convert over our Bitcoin mining infrastructure to HPC and AI with regulators and utilities in the region. With that pathway clear, we are accelerating our plans in Quebec. We will focus our development efforts on the city of Sherbrooke, where we have 96 megawatts, robust fiber connectivity, a strong and developed local labor force and ample support from the local energy utility and municipality. We will be applying some of the standardized engineering and design plans completed for our Washington site to Sherbrooke in order to convert these facilities from Bitcoin mining into next-generation HPC and AI infrastructure adapted for Vera Rubin GPUs. Similar to Washington, Quebec has a cool climate and some of the lowest cost energy in North America for data centers. With strong unmet demand for GPU cloud in Montreal, Sherbrooke also represents a potential opportunity to scale up a cloud business in 2027 with VR200s, a strategy that we will evaluate as we work through the engineering and development plans for Sherbrooke. The remaining 74 megawatts of Bitcoin mining in the province are earmarked for potential expansion in 2028, and we look forward to providing more detailed plans for Quebec in 2026. Turning to Slide 12. Last, but certainly not least, we have our Scrubgrass campus in Pennsylvania. This is about 30 minutes away from our Sharon, Pennsylvania campus on the western side of the state. With the exception of the new Panther Creek Phase 3 and Phase 4, which I spoke to a minute ago, this is the only power in our portfolio that is not 100% fully secured today. This is a very, very exciting development opportunity for Bitfarms. We believe this is the only campus outside of Texas for public miners converting to HPC and AI that has over 1 gigawatt of potential capacity. And while we have made great progress on developing the power story for this giga campus, there are still quite a few steps to be taken in order to contractually secure the power, which falls into 2 buckets. First, we have completed 3 conceptual load studies with FirstEnergy, starting with 250 megawatts, 500 and then 750 megawatts, thus moving over to what's called a detailed load study with FirstEnergy, which would eventually be converted over to firm service in an ESA. Second, we have made substantial progress on evaluating the potential to add additional generating capacity on site. This could be accomplished by building a 3- to 4-mile pipeline from our campus to the second largest natural gas pipeline in the U.S., the Tennessee Natural Gas Pipeline, which we have confirmed could supply up to 550 megawatts of natural gas, multiplying our generation capacity on site. We're still in the early stages of evaluating how we would expand the generating capacity, and we'll provide more details as we progress. Combined, the 2 buckets could potentially provide 1.3 gigawatts of gross capacity. And additionally, there is very good fiber infrastructure in the area with our 8 fiber infrastructure networks nearby and is in close proximity to Pittsburgh and Cleveland as well as the other data centers, which are starting to pop up throughout the state. The earliest time that we anticipate we could have additional power at this kind of scale implemented at Scrubgrass is around 2028. Though this is a longer lead time campus for us, we believe that with the forecast on power and demand for HPC and AI infrastructure, the timing for our giga campus will play-in well with the cycle, our investment thesis and our other development plans. Turning to Slide 13. To sum up, we believe that we are incredibly well positioned to execute against our investment thesis in 2026 and 2027 and maximize long-term shareholder value. One, we have a very unique portfolio of energy assets that we aim to fully convert to HPC and AI infrastructure. Two, we have announced our plans to convert our Washington site to HPC and AI workloads and lead the industry in the development of next-generation data centers for NVIDIA's Vera Rubin GPUs. Three, we are actively evaluating a potential cloud monetization strategy for our Washington site, which we believe would be a meaningful driver of cash flows and could eclipse any Bitcoin mining cash flows we have ever generated. Four, we are well capitalized to make our currently planned investments with a financial flexibility that exceeds $1 billion across cash, Bitcoin and our Panther Creek project facility with Macquarie, all of which are going to fund CapEx. As we continue to produce strong free cash flows from our Bitcoin mining operations that fund OpEx, G&A, debt service and contribute to CapEx with no further planned minor CapEx. And lastly, we continue to execute on our U.S. pivot with the anticipated sale of our Paso Pe facility and our full LATAM exit. Our transition to U.S. GAAP for Q4, the establishment of our New York City office and working towards a U.S. redomicile in 2026. We believe this would give us significantly greater index inclusion and meaningfully improve the institutional composition of our cap table. I now have the pleasure to hand the call over to our new CFO, Jonathan Mir. Turning to Slide 14. Jonathan, over to you. Jonathan Mir: Thank you, Ben, for the warm introduction. I'm excited to join Bitfarms at this pivotal moment in the company's transformation. My principal objectives as the new CFO are centered around capital allocation, capital sourcing and capital structure. I'm working hand-in-hand with the operations and development teams on the ground to ensure we implement financing plans that are appropriate for the company and its assets, efficient and support long-term shareholder value creation and that we are also allocating capital to its best possible risk-adjusted returns. With an extensive background in energy infrastructure strategy and financing, I believe there's an extraordinary opportunity to use our strong balance sheet, unique assets and the talents of our people to create value in the high-growth HPC/AI space. I look forward to working closely with the team to deliver on our strategy and capture the exceptional long-term shareholder value that would accompany our successful execution. Turning to Slide 15. Today, Bitfarms has the strongest balance sheet and most available capital in the company's history. In Q3, we were able to execute across several initiatives. First and foremost, we recently completed a very successful convertible note offering, where we were able to upsize the offering to $588 million while improving on pricing, preserving upside and minimizing potential equity dilution through a 125% capped call. Bitfarms chose to issue convertible notes because they allow us to access capital at a lower coupon than straight debt and with less dilution than straight equity. The cash settled capped calls we purchased allow us to offset economic dilution up until $11.88 per share, representing a significant premium to the share price today. It is also important to highlight that investor commitment to Bitfarms is strong. 100% of institutional investors that management met with during the marketing process participated in the transaction and invested their capital in Bitfarms. We're thrilled with the outcome of this raise, and it will allow us to advance our pipeline in tangible ways. Second, we converted our previously announced $300 million debt facility with Macquarie to a project-specific financing facility dedicated to the development of our Panther Creek data center. Moving the debt facility from a corporate level to the asset level materially enhances financial flexibility for the entire company. In October, we drew an additional $50 million from the facility in order to accelerate development of the site for a total of $100 million drawn to date. Finally, we maintained steady and efficient mining operations throughout the quarter, achieving approximately $8 million in monthly free cash flow after G&A. We expect to use this cash flow to support our HPC/AI development projects. Looking ahead, we anticipate continuing to use a mix of both corporate level and project level debt and equity financing as we advance our project milestones. On an ongoing basis, we will evaluate a wide range of opportunities and choose those that we believe support both a strong, stable balance sheet and realize the full potential shareholder value creation that would accompany the successful execution of our plans and fund milestone objectives. Turning to Slide 16. Let's focus now on our third quarter financial performance. In Q3, we achieved a total revenue of $84 million from continuing and discontinued operations. With the intention to sell the Paso Pe site in order to complete our Latin American exit, all revenue from that asset is classified as discontinuing operations. From continuing operations, we earned 520 Bitcoin and achieved revenue of $69 million, representing a year-over-year increase of 156% in revenue. For our continuing operations, our gross mining profit was $21 million, representing a gross mining margin of 35% and an average direct cost of $48,200 per Bitcoin mined. During the third quarter, we introduced a new program for digital asset management, Bitcoin 2.1, which is designed to offset Bitcoin production costs and achieve higher value per Bitcoin sold as a low-cost and low-risk funding mechanism for the energy infrastructure investments that define Bitfarms going forward. It is important to highlight that we are not a Bitcoin treasury company. The goal of this program is not to accumulate Bitcoin, but rather to offset the production cost of Bitcoin and by doing so, contribute to cost effectively funding our HPC/AI initiatives. This is a multi-strategy program that primarily sells both short and long-dated out-of-the-money covered calls on the Bitcoin and treasury as well as for Bitcoin production. During Q3, we incurred an all-in cost per Bitcoin of $82,400 from continuing operations. When considering our net gain of $13.3 million from derivatives against our all-in production costs, it would bring the effective all-in cost down to $55,200. Cash G&A for Q3 was $14 million compared to $20 million in Q3 2024. The improvement was largely driven by lower professional services costs. Operating loss from continuing operations was $29 million for the quarter, including impairment charge of $9 million of nonfinancial assets. As a result, net loss from continuing operations for Q3 was $46 million or $0.08 per share. For the third quarter, our adjusted EBITDA from continuing operations was $20 million or 28% of revenue, up from $2 million or 8% of revenue year-over-year in Q3 2024 and up from $9 million or 15% of revenue in Q2 2025. Turning to Slide 17. Before we begin Q&A, I'd like to reiterate our strong financial position and review our expected capital investment plans for the next 12 months. We are extremely well capitalized to fund our HPC/AI growth initiatives. We have a war chest of over $1 billion, comprised of roughly $820 million in cash and Bitcoin and the remaining $200 million available to draw from our Macquarie facility. With these funds, we expect to be able to fully finance the build-out of our Washington site and the initial phases of construction at our Sharon, Sherbrooke and Panther Creek sites. As we advance our development, the actual investment in our projects will be dependent on a number of factors. We are currently focused on executing on the initial phases of our projects, beginning construction and securing long lead time items to ensure our project time lines. We will continuously evaluate a wide range of financing alternatives at both the corporate and project level, maximizing shareholder value with accretive financing will determine our choices as well as the need for a healthy balance sheet. In closing, I'll underscore that Bitfarms is in the strongest financial position in the company's history, and we have a clear vision of how we are going to best utilize this capital to advance our HPC/AI build-outs in North America. The entire Bitfarms team is incredibly enthusiastic and engaged about the opportunities ahead. With that, I'll now turn the call over to the operator for Q&A. Operator: Our first question comes from the line of Mike Colonnese of H.C. Wainwright. Michael Colonnese: Appreciate all the color on the HPC strategy this morning. First for me, Ben, you mentioned that infrastructure for the Vera Rubin GPU should command a premium to the Blackwell infrastructure. Can you share more on how you guys are thinking about economics there and the CapEx differences? Ben Gagnon: Thanks, Mike. Yes, happy to speak to that a little bit. There's kind of 2 driving forces there with our expectations on Vera Rubin economics. The first is that as the dynamic continues to play out where the infrastructure is going to be an increasingly greater and greater shortage, there's going to be a driver there that will drive the economics. And the second part of this is that the economics around supply and demand imbalance are really specific to GPU models. So if you look at H100s, H200s, the GBs, the 200s and 300s and then what's going to be the next series, the VR, there's a lot more infrastructure available to support those older GPUs, which have less specific requirements. And when you look at what's going to happen with the VR series, the energy density is going up from 190 kilowatts per rack with the GB300s to upwards of 370 kilowatts per rack with the VR200s. And so a lot of the infrastructure that's being built right now is not going to be compatible with the next generation. And as companies allocate all this money into those Vera Rubin GPUs, they're going to be very economically incentivized to deploy them. And what I spoke to with regards to our investment thesis earlier today, is that as this dynamic continues to play out, would you rather sit on your GPUs and not deploy them? Or would you rather pay a higher infrastructure expense in order to deploy them and start monetizing the asset. And really, the margins are so high on these GPUs, especially when the GPU is the newest, most cutting-edge state-of-the-art GPUs as the Vera Rubins will be in 2027, that the economic incentive to deploy those faster with very few options available should drive higher economics. We don't have a firm price point of exactly where that's going to lie, but we think the trend is abundantly clear that the economics next year and in 2027, they're just going to continue to get better and better, especially as the shortfall continues to get exacerbated. Michael Colonnese: Really helpful color there, Ben. And how should we think about the wind down of your mining operations in the coming years, specifically as it relates to the pace and timing of hash rate coming offline as you start to convert and make further progress in converting your data centers over to HPC/AI? Ben Gagnon: Yes, happy to speak to that. I mean the first area is the LATAM export that we've been working on. We obviously shut down our Argentina facility earlier this year. And I think one of the big areas here is the Paso Pe facility, which is an asset that's being held for sale. That represents around a little bit under 20% of our hash rate. And so that will impact the hash rate for the company rolling forward. But when we look at transactions like this, just like how we looked at the economics around shutting down the Argentina facility, we expect to pull forward a significant amount of expected free cash flow from those operations today so that we can reinvest them more immediately in the U.S., in North American HPC and AI infrastructure to greater effect. So while it should have an impact on the free cash flow from operations, really the impact is very mitigated by the fact that we're taking 1 to 2 years' worth of free cash flow from operations and bringing it forward for reinvestment now. And then we also have the derisking factor with regards to having less and less Bitcoin exposure or Bitcoin mining exposure, I should say. So as we move forward through 2026, the next sites that would be coming offline, would be coming offline as we develop the HPC and AI infrastructure and they would get replaced. Washington would probably happen sometime in the -- probably middle of the year, and that would be about 1 exahash and everything else will kind of come off slowly as we convert over the facilities to HPC and AI. So it would be a bit of an orderly transformation, and we'll continue to update the market as we announce those plans. Operator: Our next question comes from the line of Brett Knoblauch of Cantor Fitzgerald. Brett Knoblauch: Thanks for a lot of the color on the different sites throughout the call. I guess when it comes to maybe your PA sites and getting additional power, I feel like that's kind of like the biggest catalyst maybe over the near term. I believe Stronghold was kind of in queue before you guys went out and acquired it, which was probably, I don't know, over a year ago now. Do you have any idea on an update of when you expect to maybe expand the power capacity at both Panther Creek and Scrubgrass. Is that a couple of months thing? Within 6 months thing? How should we think about the timing there? Ben Gagnon: Thanks, Brett. Yes, it's a pretty exciting development there at Panther Creek because just over the last couple of weeks, we've received positive indications on the conversion of the ISA to an ESA as well as the expansion with an additional load study. It's a little too early to say exactly when that would come on to site. What we're planning here is an additional Phase 3 and Phase 4, which would come likely after Phase 2. But it's possible that the conversion of the ISA to an ESA could happen very quickly because all of the infrastructure is in place. There is no investments that need to be made. It's really just subject to the regulatory approval and signings and paperwork for all of that to be converted over. So I would think within the Phase 3, it's not really clear exactly when that's going to take place, but it could happen quickly. It could take several months. When it comes to a Phase 4, that's likely going to be a 2028 deal. Brett Knoblauch: Awesome. And then on the GPU cloud as a service, the CapEx figure that you've noted on, I guess, maybe converting that Bitcoin mining to host GPUs, that was not including the GPUs, correct? Ben Gagnon: Correct. That's not including GPUs and some of the construction costs associated with converting over the facility. So there will be additional expenses at the Washington site. We've had several conversations now with some of the leading GPU manufacturers, and we think that there's very attractive financing options on the GPUs as well that would really keep the CapEx requirement down to basically the infrastructure expense, and we'd be able to fund potentially up to 100% of the compute through these GPU manufacturers, which could be done on what we believe to be really attractive terms. And we also think that it would provide a significantly greater return profile on doing GPU as a service or cloud. Brett Knoblauch: And from a capital allocation, I guess, standpoint, what is your guys' preference? Obviously, the PA sites appear to be leaning more towards colocation, Washington site cloud. Do you guys expect to kind of grow both businesses at the same time? Is there a preference for one to kind of get online sooner than the other? Ben Gagnon: The expectation is that the Washington site will be the first site that's fully online. The Sharon site will probably be the second site that's fully online because Scrubgrass -- sorry, Panther Creek is split out into those 2 phases in 2027 with additional Phases 3 and Phase 4, which still needing to be confirmed. Our priority is managing the critical path and all the project management time lines that we have across our various facilities. But when we're looking at capital and how we'd allocate it across, it's managing the critical path, and it's also making sure that when it comes to looking at the opportunities around cloud, we're doing so in a way that makes sense and is affordable. And one of the benefits of doing it at Washington is a relatively smaller scale does make it very cost effective to do it. It's something that we could consider fully funded today. It's something that we could get financing for it at scale, whereas when you're looking at the really large campuses that we have in Pennsylvania, a colocation strategy is going to be a lot easier to finance. Operator: Our next question comes from the line of Stephen Glagola of JonesTrading. Stephen Glagola: On the $128 million critical IT supply agreement for Washington, can you clarify the counterparty to that agreement? Is that T5? Or is that another firm? And then additionally, just a follow-up to the last one on the GPU cloud model potentially at Washington and Sherbrooke. Can you maybe elaborate on what factors make GPU as a service compelling relative to standard colocation in these markets? And sort of how are you evaluating both potential GPU risk and your, let's say, return on invested capital IRR hurdle for the cloud opportunity? Ben Gagnon: Yes. Thanks, Stephen. When it comes to the supply agreement that we have for the Washington site, it's not with T5., it is with a large publicly traded American national company who serves and supplies data center equipment and data center services. The facility is really an attractive facility for both colocation and both cloud. But when you look at the opportunities that we have here to go fully up the stack and what that might mean for the company, both in terms of a free cash flow perspective as well as our ability to really demonstrate ourselves not only as a developer, but as an operator, I think there's a lot of tangible benefits there that will pay dividends in the long run. The conversion of the site according to our modeling and similar transactions that have happened in the market over the last couple of months, indicate that this one site could be worth significantly more than the entire Bitcoin mining business that the company has been operating for multiple years. And so that would provide us with a really strong free cash flow foundation as the Bitcoin mining business winds down. It will also enable us to better understand and better learn these facilities as we're looking to provide service and work with hyperscale and enterprise customers and neocloud customers on really large campuses. And so the benefit of doing it at the smaller facility is that we should be able to extract a lot of knowledge and value that we can apply to a lot of our other facilities as well. Operator: Our next question comes from the line of Mike Grondahl of Northland. Mike Grondahl: Ben, just curious, what would you describe as the 2 biggest challenges to maybe meeting your time lines for Washington, Sharon and Panther Creek? Like what's going to be the potential bottlenecks and how are you dealing with them? Ben Gagnon: Mike, I mean the potential bottlenecks in construction are a little hard to forecast. I mean construction is something that is changing every single day on the ground. I think that the key way that you mitigate potential risk in construction is having great partners with your owners rep, your general contractors, having a great team of project managers internally who are making sure they're on track of everything, every step of the way, and they're trying to think forward on all the potential problems in managing that -- those critical paths. It's not possible, I think, to identify what would be the key bottleneck or the key risk. But I think with the team that we have in place, the strategic partners that we have in place and the kind of groups that we're working with on the contracting side or on the owner's rep side, we're in a really strong position to execute. Mike Grondahl: Great. And then any rough guidelines or framework you can give us for sort of like 2026 CapEx? Ben Gagnon: So when we're looking at 2026 CapEx, we've outlined some of the numbers for Washington. We're still working on clear path forward as we're revising for Vera Rubin. The real challenge with providing full CapEx figures for 2026 is that the Vera Rubin infrastructure is so new that even NVIDIA hasn't completed their validated reference designs to support that equipment and that infrastructure. So that's something that's adjusting in real time and still moving forward. We should expect to have a better indication of what CapEx looks like in 2026 in Q1. From our conversations that we're having with the various different engineering firms and suppliers and partners of NVIDIA, NVIDIA is going to be producing the first Vera Rubin GPUs and taking them for their own purposes in probably Q2 of next year. And so sometime in Q1, the reference design should be relatively final, and we should be clear in terms of what the CapEx implications are for 2027 and 2026. Operator: Our next question comes from the line of Nick Giles of B.Riley. Nick Giles: Appreciate all the detail here. Ben, you mentioned the higher rack density of the Vera Rubin gen and that it could make the rack density suited for Blackwells obsolete. And it wasn't that long ago that 100 kilowatts per rack was the high end of the rack density. So how are you thinking about future proofing as this trend continues? And are there any contract structures that could protect you from the need to upgrade later down the road? Ben Gagnon: Thanks, Nick. It's a great question. The evolution of hardware is happening at a rapid pace, right? The GB200s were 150, the GB300s were 190 kilowatts per rack. And now the Vera Rubins are going to be over 370. And what that means is that your cooling needs to provide a lot more capacity in a very small footprint. It also means that your electrical distribution is very different. Most of the networking is more or less the same. But on the cooling and the electrical, it's a really big challenge. And one of the things that NVIDIA is looking at doing is increasing the voltage and even going to direct DC systems for the Vera Rubin technology. So they're looking at switching over to 800-volt DC. That doesn't mean that you necessarily have to go upwards of 800 volts or switch over to DC, but it does mean that as the increasing energy density continues to accelerate, you need to be rethinking your energy infrastructure and how you're actually building out these facilities. I think one of the ways that you try and do this is you try and build for the hardware at the time and then you try and lock that in with multiyear agreements, which help you to recover your investment and capitalize those investments over a long period of time. When you're signing an agreement for 5, 10, 15 years, most of the time, those agreements don't anticipate material upgrades to the infrastructure or any upgrades to the infrastructure. And so you're locking yourself in, the customer is locking themselves in with the infrastructure that they have in hand. And so I think the best way to mitigate those risks is to spread out your facilities, make sure you have a pipeline that exists over multiple years and make sure that you're building to the technology that's coming, not to the technology that already exists today because if you're building for today's technology by the time the facility is done, it's obsolete. Nick Giles: I really appreciate that perspective. That takes me to my next question. You mentioned the pipeline. Obviously, you have a lot of growth in front of you, but how much time are you spending on M&A opportunities? And where does that ultimately rank in terms of capital allocation? Ben Gagnon: Virtually none, Nick. Our focus as a management team is execution, execution, execution. We don't believe that there is a tremendous value that comes for our shareholders for looking at opportunities that are 2029, 2030 and these kind of long lead time items. We believe the value comes from executing against our existing portfolio. And we continue to get inbounds in terms of new opportunities and growth opportunities, but none of them seem to compare at all with what we already have in hand. And so I think the best opportunity for us is to continue to execute against our existing pipeline. There will be a time in the future where we're going to want to continue to expand that pipeline. But that's probably an easy year or 1.5 years out from today. Nick Giles: Got it. That's good to hear. Maybe one more, if I could, just for Jonathan. Sorry if I missed any commentary around this earlier, but how are you ultimately thinking about the Bitcoin treasury? Would you look to liquidate these holdings around the time that mining operations wind down? Or would those be separate time lines? Jonathan Mir: So to be -- first, it's nice to meet you. So we are definitely not operating as a Bitcoin treasury company, and we don't want to be one. What we're doing right now through programs like Bitcoin 2.1 is offset Bitcoin production costs and achieve higher value per Bitcoin sold in a low-risk, low-cost funding mechanism for the energy infrastructure investments that define Bitcoin going forward. The program primarily sells short and long-dated out-of-the-money calls on the Bitcoin and the treasury as well as for Bitcoin production. So our efforts are focused around maximizing yield and minimizing costs. And we expect the Bitcoin treasury to wind down into strength as we allocate it to CapEx. Operator: Our next question comes from the line of Martin Toner of ATB Capital Markets. Martin Toner: Congrats on all this progress, guys. My question is around the GPUs. What's your confidence in being able to acquire them on a timely basis? And would you go through a distributor that comes with the financing or who might finance them? Ben Gagnon: Thanks, Martin. Yes, happy to speak to that. We've had quite a few conversations with leading GPU manufacturers. As you probably know, NVIDIA produces GPUs themselves, but they also sell chips to a lot of OEM manufacturers. When you speak with those manufacturers, they often have finance programs in place, and those finance programs are -- can be pretty attractive, especially if you have the right infrastructure to ensure the quality and the lifespan of those GPUs. So going with an OEM manufacturer has a lot of benefits. They'll provide a full turnkey solution with regards to the servers themselves, and they can often come with financing. With our time line for end of next year on Washington, we're highly confident in sourcing our GPUs, and we believe that there's a lot of financing options out there that we are evaluating and could really juice up those return profiles. Martin Toner: That's great. Is there a good exahash number to use for Q4? Ben Gagnon: Our exahash should stay relatively consistent in Q4 when you're looking at our continuing operations. It's not possible right now to really forecast the impact or when the impact from the Paso Pe sale is going to happen. But the site continues to run today. It continues to hash. It continues to generate free cash flow. It's just not classified there under normal revenue according to IFRS standards, we have to hold that under discontinuing operations. But I think if you just look at the hash rate associated with our -- the rest of our portfolio, that will stay relatively constant -- it will stay constant throughout Q4, and then we'll make adjustments to it throughout 2026 as we execute on the HPC and AI development. Martin Toner: Fantastic. Can you give us a sense for initial conversations with customers of the GPU as a service product, reaction and confidence in being able to like contract them on a timely basis? Ben Gagnon: So conversations on the GPU front are really new for us because we've only started evaluating this in the last month or 2 as we've seen the market dynamic really take hold. I think the inbound demands that we've had across Washington and specifically Panther Creek is a lot. And when we're looking at what's the best way to service those customers, what's the best way to lock in long-term value under those agreements, there's a variety of different customers who are coming to us, and some of them want the GPUs included in there, and there's an associated premium that could be potentially extracted from that. So it's a little too early to indicate exactly what we would expect with economics, but we do believe the economics from our conversations and from the internal modeling that we've done and from the transactions that a lot of the companies in the space have announced in the last couple of months is very compelling, especially when we can execute it at a smaller site like Washington, which we can consider fully funded today. Operator: Our next question comes from the line of Brian Dobson of Clear Street. Brian Dobson: I guess more broadly speaking about Bitcoin mining, as more and more miners transition megawatts to HPC? How do you see the global hash rate evolving over the next few years? Ben Gagnon: No, interesting question, Brian. Personally, I think the hash rate is going to continue to evolve at the same rate that it has been evolving. But if Bitcoin price is not moving up meaningfully, that would be a major headwind to further growth. I think what you'll see more likely is that Bitcoin miners will continue to rotate out to lower and lower cost jurisdictions. And I think one of the big dynamics that is taking place is that the public miners represented almost 1/3 of the entire network, and they all seem very keen on moving over to the higher economics associated with HPC and AI. So that removes a lot of the available and current existing infrastructure for Bitcoin mining. So there could be some potential headwinds in exahash growth for the network. But I think what you'll see is it's just going to rotate off to different jurisdictions. We've seen huge growth in the Middle East, in Africa. I think Russia is a very large booming market for Bitcoin mining right now. And I think the best opportunity for most miners in the United States really is this transition to HPC and AI. And the economics are really going to drive that forward because the U.S. is the best market to invest in for HPC and AI, whereas Bitcoin mining is largely location agnostic. And it's happy to go to cheaper locations, higher-risk locations, more remote locations than HPC and AI is. Brian Dobson: Yes, excellent. And then just a quick follow-up. So as you're reviewing your portfolio, do you see an opportunity to engage in this type of megawatt redeployment in a broader sense? Ben Gagnon: When we're looking at whether or not we could redeploy our Bitcoin mining assets somewhere else, I think the opportunities are really few. And really, I don't think that's a great use of management's resources or time. I think the best opportunity is to basically bring forward what should be estimated free cash flow for mining operations today into cash and reinvest those into HPC and AI. Operator: Our next question comes from the line of Michael Donovan of Compass Point. Michael Donovan: Ben, you mentioned dollar per kilowatt trends. Can you quantify a premium on dollar per kilowatt that you're seeing for power secured in Pennsylvania or Washington versus Texas? Ben Gagnon: Yes, it's a good question. There's a few variables that go into dollar per kilowatt on these leases. One is obviously time line, one is location. Another one is risk factors that go into the development time line. And so it's not really possible to pinpoint an exact price per location because there's multiple factors which come into play when you're looking at what the total lease rates can accumulate to. I think if you look around at the transactions that are here and you look around at kind of what Bitfarms could secure today at Pennsylvania before it's even really broken ground at our Panther Creek site, which we plan to do next month, we could probably lock in $140 to $150 per kilowatt per month. But I think when you look at that rate, that rate takes into consideration the location. It also takes into consideration the shovel has not been put in the ground yet. And what we don't want to do is we don't want to lock in a lot of discounts that would be associated with the build time line and the uncertainties around the build time line into a 10-, 15-year agreement. What we'd rather do is we'd rather execute against our construction milestones utilizing the substantial war chest that we have today. And the closer we can bring that window down from signing a lease to actually generating revenue from a customer, the more that we should expect to get. It's hard to put an exact price, but I would think that if that window was shorter, we could probably get upwards of $180 per kilowatt per month if we didn't have the risk and uncertainty priced into the time line that would bring it down to $140 to $150 per kilowatt today. That's internal estimates and modeling. So there's a lot of factors that go into that. And we also think that as you execute against 2026 and as the gap between data center supply and data center demand continues to exacerbate, those numbers could get even better. And when we look at how does the margins work out for these contracts, you're largely looking at pretty fixed OpEx. And so the difference for the company between getting $140 per kilowatt hour, $140 per kilowatt per month versus $150 or $180 is not only a huge increase in terms of the top line revenue, but it's an even larger increase in terms of the profit margin, in terms of what your adjusted EBITDA is going to be. And then not that all translates out into that multiple expansion that we're targeting with this transformation, right? So if you're getting a significantly higher free cash flow out of that operation, that's what the multiple expansion is going to be based on. So we really want to make sure that -- we're not pricing in those discounts. We're trying to maximize the dollar per kilowatt per month in the lease, and that's going to be the way that we achieve the highest multiple expansion for shareholders in the long term. Michael Donovan: That's helpful, Ben. And you talked about connecting data centers to be one campus, and I was hoping you can unpack this a bit more. How can we think about distance between hauls or pods versus theoretical loss and performance for compute? Ben Gagnon: Yes. There's a strategy that Amazon pioneered. It's called the regional campus strategy, and they've effectively determined that somewhere around 300 miles is the cost-effective range to build direct fiber infrastructure. But the real thing is the latency that you could get between your sites. Now obviously, when you're looking at these facilities, you're even concerned about the latency in rack and in between racks or inside the facility to go from one rack to another rack on the other side of the facility. So that latency is becoming an increasingly bigger bottleneck as you're looking at performance on the high, high end of GPUs. But what we've seen is that most of our facilities in Montreal, where we'd be looking at this regional campus strategy, they're much closer than 300 miles. They're all within 90 minutes of Montreal. Many of them are 15-, 20-minute drive apart from each other. And so it would be possible to reduce the latency below 2 milliseconds with direct fiber. It would be pretty cost effective to do so. And you'd get a lot of benefits from doing that in terms of the scalability, given it's just so difficult to scale up new megawatts in the province. Operator: I would now like to turn the conference back to Ben Gagnon for closing remarks. Sir? Ben Gagnon: Thank you very much. I would like to thank everyone for attending our earnings call this morning. The management team is very excited. Our long-term investment strategy, we believe, is fully aligned with long-term investors. And we are really, really excited about the future of this company and what we're building at Bitfarms, and we appreciate your continued support. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Chicago Atlantic BDC, Inc. Quarter Three 2025 Earnings Call. By pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Tripp Sullivan of IR. Please go ahead. Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC, Inc. conference call to review the company's results. On the call today will be Peter Sack, Chief Executive Officer; Thomas Napoleon Geoffroy, Interim Chief Financial Officer; and Bernardino M Colonna, President. Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website, and in our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC, Inc. assumes no obligation or to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, November 13, 2025. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. And now I'll turn the call over to Peter Sack. Please go ahead. Peter S. Sack: Thank you, Tripp. Good morning, everyone. During the third quarter, the results continued to demonstrate that Chicago Atlantic BDC, Inc. is a uniquely positioned BDC with the experience and expertise to capture above-market returns while protecting principal. We remain the only BDC focused on and able to lend to cannabis companies, together with a focus on the lower middle market, commonly underserved by capital providers. We believe that this differentiation provides uncorrelated distinct credit opportunities. Net investment income per share was 42¢ for the 2025, demonstrating the potential of the business model to generate a 12.5% yield to book value. For the third quarter, we are excited to announce that we executed on our pipeline and funded $66.7 million to 13 new investments, of which seven were new borrowers. This improved diversification of the portfolio and allowed us to utilize our credit facility. I'm proud to say that's a new originations record for us. I believe we're all familiar with the issues that arise in the broader private credit markets, such as borrowers defaulting, interest rate sensitivity, dividend coverage, and in some cases, outright fraud. With our company seeming to trade as if these issues apply to us equally, it's worth pointing out some specifics when we say Chicago Atlantic is a differentiated BDC. The public BDC industry data point that I'm about to mention is taken from Oppenheimer's Equity Research Industry Update as of August 20, 2025, except for the average yield, which was taken from October. Our weighted average yield on debt investments as of September 30, 2025, was 15.8% compared to 11.4% for the average BDC. 99.5% of our portfolio is senior secured, compared to other BDCs with an average of 19.5% exposure to subordinated debt equity, and JV investments. The balance of fixed to floating interest rates in the portfolio has improved with 31% of the debt portfolio fixed and 69% floating, better positioning the company against a drop in interest rates. We calculate that a 100 basis point drop in rates only impacts 17% of the portfolio, demonstrating the impact of high interest rate floors. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of. We conduct full due diligence on new credits ourselves, instead of relying on underwriting conducted by banks or co-investors. We carefully monitor the performance of each of our companies ourselves. The portfolio is under-levered with only $11 million of debt as of quarter end, compared with the BDC average of 1.2 times debt to equity. Assuming full utilization of our $100 million credit facility during the year, we would still be well below industry averages. Lastly, we have no non-accruals compared with an average of 3.5% of cost. Today, we announced a 34¢ dividend marking the fifth consecutive quarter at that rate. This dividend is also well covered this quarter with net investment income per share of 42¢. As we continue executing our strategy, we will focus on further diversifying the portfolio, utilizing the credit facility, and managing interest rate sensitivity while maintaining the overall strength of the portfolio. Now I'll turn it over to Thomas to discuss the numbers in greater detail. Thomas Napoleon Geoffroy: Good morning. Thanks, Peter. I want to highlight our investor presentation that we filed with the SEC this morning that serves as our earnings supplemental. I'll start with the investment portfolio. We have 37 portfolio company investments. 24% of the portfolio is invested in non-cannabis companies, across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio. 69% of the portfolio has floating interest rates, and 58% of these loans have already reached their respective interest rate floors. The gross weighted average yield of the company's credit investment portfolio is approximately 15.8%. And all loans are performing. As of September 30, 2025, the company had $11 million of debt outstanding. All of which was drawn from the new credit facility. As of November 12, 2025, the company had approximately $97.8 million of liquidity comprised of $92.5 million of borrowing capacity and $5.3 million of cash on the balance sheet. Which is available to deploy. This gives us ample liquidity to deploy additional capital over the remainder of the year while remaining relatively underlevered compared to other BDCs. Financial highlights for the third quarter were gross investment income, totaling $15.1 million compared to $13.1 million for the second quarter. Interest income included $1.9 million of onetime prepayment and make-whole fees from unscheduled repayments. Net expenses were $5.6 million which is net of the expense limitation agreement. Compared to $5.4 million of net expenses in the second quarter. Net investment income was $9.5 million or 42¢ per share, up from $7.7 million or 34¢ per share in the second quarter. Net assets totaled $302.9 million at quarter end and the net asset value per share was $13.27, up from $13.23 in the second quarter. At quarter end, there were $22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Bernardino to talk about our origination efforts. Bernardino M Colonna: Thanks, Thomas. During the third quarter, we funded $66.3 million in new debt investments to 11 portfolio companies. A record quarter for us. Seven of these investments are new borrowers to BDC. Of these new debt investments, 100% of them are senior secured and 84% are either fixed-floating rate loans at their respective floors as of quarter end. During the third quarter, we also had loan repayments and amortization totaling $62.7 million which included early principal payoffs of $59.6 million. As of the end of the third quarter, there was approximately $27 million in total unfunded commitments for the portfolio. To date in the fourth quarter, we have funded $5 million to one new borrower. We expect additional deployment activity between now and year-end but at a more measured pace than the robust gross originations activity we have seen in the last two quarters. The pipeline across the Chicago Atlantic platform as of quarter end which includes cannabis and non-cannabis opportunities, totaled approximately $610 million in potential debt transactions. The breakdown of the opportunity set includes approximately $415 million in cannabis opportunities and approximately $195 million in non-cannabis investments. As Thomas mentioned, we have approximately $98 million of dry powder to grow the portfolio, but we will maintain our high bar when it comes to underwriting and structuring investments that deliver above-market risk-adjusted returns. We've had to show patience in the past when the markets around us seem to underprice risk, and we will continue to adhere to that discipline when needed. Both the cannabis and non-cannabis verticals continue to show healthy performance in the portfolio and strong demand for new debt capital within the lower middle markets, where our focus lies. As Peter noted earlier, this is in contrast to some middle and upper middle market credit lenders which are experiencing growing credit issues where there is some overlap among lenders and even certain challenges maintaining existing dividends. At Chicago Atlantic, our focus has always been on building credit portfolios with attractive risk-adjusted returns. We believe our approach to lending is unique, and our results thus far have highlighted our ability to create alpha in the private credit market. As a result of our direct origination model, 84% of our portfolio company investments are agented internally. This model allows us to be highly selective. And not dependent on syndicated deals, which tend to have overlap among other public BDCs. Lastly, our rigorous approach to underwriting and structuring loans while maintaining pricing discipline has allowed us to craft a differentiated portfolio with strong credit metrics. Thank you for your continued support, we look forward to updating you again next quarter. Operator, we're now ready for questions. Operator: We will now begin the question and answer session. You were 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. At this time, we will pause momentarily to assemble our roster. Operator: First question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead. Pablo Zuanic: Thank you, and good morning, everyone. Congratulations on deploying, you know, the large amount of new loans in the quarter I think it's at $66.6 million. I'd I guess the question is more about the repayments of loans in the quarter, you know, were they in line with your expectations, or were there some repayments that were unexpected And did that in a way, you know, force you to be more aggressive in lending in the quarter to show some book growth If you can comment on that, And then the second question, in the context of other lenders, they are sounding pretty bearish about the cannabis industry outlook. It seems to me that you have a more constructive view about the industry. And that's allowing you to increase your book. If you can comment on that. Thank you. Thomas Napoleon Geoffroy: Sure. Thank you, Pablo. You know, our pipeline is more longer takes a long time to develop. A long time to mature into deployment. These are relationships that are nurtured over many months and sometimes years. And so while we had a larger amount of repayments in Q3 than expected, that does not impact the pace of our deployment because our pipeline and deployment is simply not that reactive to liquidity for better or worse. I think we are extremely proud of our deployment. We executed 13 new investments. That's almost one investment per week in the quarter. To which seven were new borrowers. I think that's a testament to the work to build relationships and nurture relationships across the industry that goes back in time way long way before this quarter. With regards to our outlook on the industry as a whole, I think from the start of our involvement in the cannabis industry, we haven't viewed the industry as a monolith. The industry is challenging to speak as one national industry because it's really a collective of 40 or 41 different jurisdictions in which adult use and medical markets are active. And each of these reflects its own supply and demand dynamics, its own growth expectations, and its own competitive dynamics. And our focus within each of those jurisdictions evolves over time as certain markets are growing, certain markets are declining, certain markets are facing more difficult margin pressure, and certain markets are facing less difficult margin pressure or none at all. And so I think this is where the investment in a very fulsome originations platform, a very fulsome underwriting platform pays off. It's the ability to be able to pivot from challenging markets to less challenging markets, to be constantly developing relationships with the strongest borrowers possible, to maintain the broadest pipeline possible. And pipeline and relationships are the lifeblood of our industry. Ultimately, the quality of our deployments is determined by the quality of the relationships that we can garner at the beginning of the process in the development of that pipeline. Pablo Zuanic: Right. Thank you for that. And congratulations on all the deployment in the quarter. Look, this is again a bigger picture industry question, and I know the bill was only signed last night. But, some people have estimated the hemp derivatives industry to be north of $20 billion. I don't know if I totally agree with that number. But if that's the right number, you know, and that were to flow to the cannabis industry, that would be a big lift for the industry that we're all involved in. Right? Do you see it that way? Do you see a lot of that, with a lot of hemp derivatives being recombinized that type of volume flowing into cannabis players benefiting the industry? And I know that this has yet happened how do you think about that in terms of the industry outlook? Peter S. Sack: Mhmm. I think that part of price compression that we're seeing in many cannabis markets over the last year, while data is difficult to ascertain, I suspect that part of that price compression is driven by competition with the hemp derived THC markets. And so the closing of the hemp related loophole, I suspect, is going to support state regulated markets. Going to be a positive catalyst for most of our borrowers. I think on the flip side, there are some negatives that are worth recognizing. I think that the hemp derived beverage market in particular was successful in expanding the pie and the market of users of the THC ecosystem. I think it brought consumers into the THC ecosystem that were not consumers previously. And it is somewhat unfortunate that this area of the market that was not necessarily well served by dispensaries in the state licensed market will not exist anymore. But I think overall, this is an unequivocal positive for our target markets and for our investment base. Pablo Zuanic: K. And then one more, in terms of what you can share publicly, I know we've talked about two eighty many times before. What we are hearing is that Trulieve in their 10 Q disclosed that there's a penalty being charged by the IRS because of their uncertain tax provisions. And, of course, you are going to contest that. That's the only company that disclosed that so far. We are hearing that other companies are starting to negotiate terms on those long-term uncertain tax provisions with the IRS and they are beginning to pay them over time. Without interest, without penalties, but paying them over time. I don't know if you can comment in very general terms about what you are hearing in terms of how companies are starting to deal with paying back those long-term uncertain tax provisions that are in most companies' balance sheets. Again, it is the way you can share, Peter. Peter S. Sack: Sure. I think our outlook is a little bit different. In that we assume that uncertain tax liabilities, unpaid tax liabilities, we view them as indebtedness that ultimately will have to be paid. When and under what terms is difficult to forecast, but we view it in no uncertain terms as a liability and obligation of our borrowers. In our loan documents, we aim to limit the incurrence of such liability as it does add ultimate risk to the balance sheet. I'm not surprised by such articles and not surprised that companies ultimately do want to reduce the liabilities on their balance sheet because it leads to a healthier, more sustainable enterprise. But I don't have additional information beyond what you've been reading, Pablo. Pablo Zuanic: Right. Look. And apologies if there's more people on the queue here, but, I'm gonna ask a couple of more. You know what? Obviously, because of a BDC's structure, you are able to lend against cash flow and not just real estate backed loans. But a lot of these loans are to medium sized, maybe smaller private companies. Right? There's very few large public MSOs here. Obviously, Curaleaf is a large one. There's a new loan to Cresco. I'm looking here in the October. But in general, they are mostly smaller mid-sized companies in which we don't have a lot of visibility. I don't know if you want to comment on that. I mean, from my perspective, that would imply a little bit more risk, but maybe I'm interpreting it wrongly. Peter S. Sack: Mhmm. With smaller companies, we have more leverage and bargaining power to negotiate greater asset downside protection in our loans. And so with smaller companies, we find the ability to limit leverage, have greater negotiation power in structuring our loan documents, in structuring covenants, in structuring portfolio monitoring activities. And so we try to balance the risk of lending to smaller enterprises with lower leverage, with stronger portfolio monitoring characteristics. And with a very strong focus on the markets in which we are lending. Pablo Zuanic: Right. Understood. That's all for me. Thank you. Operator: Again, if you have a question, please press star then 1. This concludes our question and answer session. I would like to turn the conference back over to Peter S. Sack for any closing remarks. Peter S. Sack: You, Pablo, for your questions, and thank you to our investors for your support. We look forward to finishing out the year on a strong note and reporting earnings in the first quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to the Ardent Health Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Dave Styblo, Senior Vice President of Investor Relations. You may begin. David Styblo: Thank you, operator, and welcome to Ardent Health's Third Quarter 2025 Earnings Conference Call. Joining me today is Ardent President and Chief Executive Officer, Marty Bonick; and Chief Financial Officer, Alfred Lumsdaine. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include a discussion of certain non-GAAP financial measures including adjusted EBITDA and adjusted EBITDAR. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release, which was issued yesterday evening after the market closed and is available at ardenthealth.com. With that, I'll turn the call over to Marty. Martin Bonick: Thank you, Dave, and good morning. We appreciate everyone joining the call and webcast. Ardent finished the quarter with 2 contrasting realities. On one hand, our performance reflects a continuation of growth momentum we've experienced across our business, driven by robust demand, improving surgical trends and disciplined execution. Year-to-date, adjusted EBITDA is up 30%, and we've made meaningful progress on margin expansion, cash flow and our balance sheet with lease adjusted net leverage improving 1.5x since our IPO last summer. On the other hand, our earnings performance this quarter did not meet our expectations. As noted in our release, we've revised our full year adjusted EBITDA guidance to $530 million to $555 million, reflecting persistent industry-wide cost pressures, particularly those around professional fees and payer denials that have proven more durable than anticipated. We view this revision as a prudent recalibration grounded in a pragmatic assessment of current conditions and establishing a reset baseline from which we can build. These pressures are not demand driven and our revenue guidance remains unchanged, but our earnings pull-through has been impacted and we are taking decisive actions to address it. Through our IMPACT program, we've already launched targeted initiatives to further optimize cost and strengthen margins. These actions have been building momentum and are expected to begin contributing in the fourth quarter and will continue to ramp through 2026. With strong demand across our markets and a solid balance sheet, we remain confident in our ability to deliver sustainable growth and long-term shareholder value. To frame today's conversation, I'm going to focus my comments on 3 key areas. First, I'll walk you through our 3Q results and the strong demand environment. Second, I will provide color on the industry headwinds that are impacting 2025 earnings more than previously anticipated. And third, I will provide details of how we are already working to address and mitigate these challenges. Let's start with our third quarter performance. At a high level, we generated strong volumes and revenue growth driven by improving surgical trends and sustained strength in industry demand. Our markets are growing 2x to 3x faster than the national average and are further bolstered by rising care complexity, structural trends that reinforce our long-term growth thesis. Ardent's leading positions in these growing midsized urban markets give us a durable advantage, and these demand dynamics provide a strong foundation for continued strategic inpatient and outpatient growth. Our strong platform combined with initiatives to improve capacity and efficiency drove admissions growth of 5.8% in the quarter. This is a continuation of the favorable trends we've observed in the first half of 2025 with year-to-date admissions growing 6.7%, well above the 2% to 3% population growth we see across our markets. Additionally, adjusted admissions increased 2.9%, landing near the top end of our 2025 guidance range of 2% to 3%. Surgical volumes also improved with total surgeries up 1.4% in the third quarter, reversing a small decline of 0.4% in the first half of the year. Turning to financial performance. Revenue grew 8.8% in the quarter or 11.7%, excluding a onetime revenue adjustment that Alfred will detail later. Adjusted EBITDA increased 46% in the third quarter to $143 million, with margins expanding 240 basis points to 9.1% and further lowering our lease-adjusted net leverage from 2.7x to 2.5x. Of note, third quarter adjusted EBITDA included approximately $15 million to $20 million of earnings we previously expected to realize in the fourth quarter. Excluding this timing benefit, underlying third quarter adjusted EBITDA was below our expectations, which we factored into our updated guidance. That's a good segue to the second topic of today's discussion: industry headwinds. While our revenue growth has been strong, earnings did not reflect the level of pull-through we anticipated. First, professional fee expense growth. This has been a persistent challenge across the industry for several years now. For Ardent, growth peaked at over 30% in 2023, moderated to 12% in 2024 and was expected to moderate further this year. Instead, professional fees increased 6% in the first quarter, 9% in the second quarter and accelerated to 11% in the third quarter. We now expect second half growth in the low double digits versus the high single digits previously assumed. This accounts for roughly half of the 2025 adjusted EBITDA guidance reduction. Payer denials were the second factor impacting our adjusted EBITDA guidance outlook. After a sharp increase in denials beginning in the second quarter of 2024, trends largely stabilized through the first half of 2025 consistent with our outlook. However, these payer pressures moved higher again in the third quarter and our updated adjusted EBITDA guidance reflects the development of this trend throughout the second half of 2025. In summary, our updated outlook prudently assumes these industry headwinds observed in the third quarter will persist at elevated levels in the fourth quarter. While these dynamics are industry-wide, we are taking decisive action to mitigate their impact and strengthen our performance, which brings us to my third and most important takeaway, what we are doing to close the earnings gap. We are taking swift and decisive action to improve our near-term earnings profile while maintaining a disciplined approach to strategic investments that support long-term growth. Immediate priorities, including contract renegotiations and targeted staffing adjustments are already underway with additional initiatives ramping in early 2026 that are expected to drive measurable impact across revenue cycle, labor and supply chain performance. Under our IMPACT program, we have launched an expanded set of margin enhancement and efficiency initiatives. As an example, we've renegotiated terms of an exchange plan to secure meaningful rate improvement with an additional step-up in 2027. We've recently completed a targeted reduction in workforce, and we revised the key agency labor contracts to lower base rates and reduce premium pay. These 3 actions will phase in during the fourth quarter and reach full run rate benefit in early 2026, generating an expected annual benefit of more than $40 million. Beyond these near-term actions, we are executing on initiatives to build momentum in 2026 and beyond under the leadership of our Chief Operating Officer, Dave Caspers. These include precision staffing to better align patient care resources with real-time volumes, optimizing contract labor and accelerating speed to hire. We are also driving supply chain discipline and savings through vendor consolidation, commodity standardization and tighter inventory management. In our operating rooms, our OR excellence program is focusing on improving case mix and evaluating additional service line rationalization opportunities to ensure the right surgeries happen at the right time in the right setting. While payer headwinds remain an industry-wide challenge, we are taking proactive steps within our control to drive sustainable improvement. We've mobilized a multidisciplinary team that combines expertise in clinical operations, contracting and revenue cycle management to respond with an integrated strategy. This team is leveraging innovative processes and advanced analytics to reduce denials and aligned payer contracting to maximize net yield. Early results are promising, and we anticipate broader impact as these initiatives scale in the near term. We are also taking steps to rightsize professional fees. We are renegotiating certain vendor contracts, particularly in anesthesia to introduce more flexible cost structures that better align with patient volumes, helping to eliminate excess fixed costs in our business. Additionally, given our increased scale, we are strategically replacing [ locums ] with more cost-efficient full-time hires. Collectively, these initiatives are strengthening the organization and will better position us for future earnings growth. While industry headwinds remain, we are confident in our ability to execute with discipline and deliver long-term shareholder value. With that, I'll turn it over to Alfred to provide more detail on our third quarter financial performance and outlook. Alfred Lumsdaine: Thanks, Marty, and good morning, everyone. I'll focus my comments on third quarter performance, detail the 2 nonrecurring items we noted in our release and elaborate on our outlook for the business. Building on Marty's comments, we again delivered strong volumes during the quarter. Third quarter admissions growth was 5.8%, driven by double-digit increases in exchange and managed Medicaid, and 8% growth in non-exchange commercial. Inpatient surgery growth was 9.7% in the third quarter while outpatient surgeries declined 1.8%. Total surgeries grew 1.4% in the third quarter, which is continued improvement from a 0.7% decline in the first quarter and a 0.2% decline in the second quarter. Adjusted admissions increased 2.9% in the third quarter and are up 2.4% year-to-date, consistent with our 2025 outlook of 2% to 3% growth. Now turning to financial performance. Third quarter revenue increased 8.8% to $1.58 billion compared to the prior year, driven by adjusted admissions growth of 2.9% and net patient service revenue per adjusted admission growth of 5.8%. Excluding a nonrecurring adjustment that I'll discuss in a moment, revenue growth was 11.7%. Adjusted EBITDA increased 46% in the third quarter to $143 million compared to the prior year, and adjusted EBITDA margin increased by 240 basis points to 9.1%. Year-to-date through the third quarter, adjusted EBITDA grew 30% and margins expanded 150 basis points to 8.7% compared to the prior year. The largest driver of the third quarter margin improvement was in salaries and benefits. As a percentage of total revenue, salaries and benefits improved by 90 basis points to 42.9%, or by 200 basis points when excluding the onetime revenue adjustment. Inside of this dynamic, we're pleased with our contract labor improving to 3.5% of salaries and wages in the third quarter down from 3.8% in both the first and second quarters of this year and down from 3.9% in the same prior year period. Moving on to cash flow and liquidity. We ended the third quarter with total cash of $609 million and total debt outstanding of $1.1 billion. Our total available liquidity at the end of the third quarter was $904 million. Cash flow from operating activities during the third quarter was strong at $154 million compared to $90 million for the third quarter of 2024. Capital expenditures during the third quarter totaled $59 million, and we'd expect a modest increase in capital spending the remainder of this year. At the end of the third quarter, our total net leverage was 1.0x, and our lease adjusted net leverage was 2.5x, which is an improvement from 2.7x at the end of the second quarter. As Marty outlined, our third quarter adjusted EBITDA did not grow as fast as we previously projected due to the elevated level of professional fees and worsening payer dynamics. As a result, we're revising 2025 adjusted EBITDA guidance to $530 million to $555 million, which at the midpoint implies growth of 9% and 20 basis points of margin expansion. However, we're maintaining our previous revenue guidance of $6.2 billion to $6.45 billion or 6% growth at the midpoint. Before concluding, I'd like to elaborate on the 2 nonrecurring items we recorded in the third quarter. First, we recorded a $43 million revenue reduction as a result of a change in accounting estimate during the quarter. This change in estimate reflected our transition to the Kodiak RCA net revenue platform. As many of you may know, Kodiak is an industry-leading revenue cycle platform with more than 2,100 hospital customers, including public, private and not-for-profit health care systems. At the simplest level, this is a change in methodology to one that recognizes reserves earlier in an account's life cycle, all other things being equal. This transition reflects a strategic move from an internally developed model to an efficient and scaled system with enhanced real-time reporting capabilities, all of which are important as we grow in scale. As we indicated in our earnings release, the $43 million adjustment reduced total revenue for the third quarter, but is excluded from adjusted EBITDA. Second, we recorded an increase to our professional and general liability reserves of $54 million, fully attributable to our New Mexico market. This reserve change primarily relates to adverse claims development for a single provider who Ardent has not employed for several years as well as overall social inflationary pressures in the New Mexico market. The $54 million adjustment was recorded within third quarter other operating expenses but is excluded from adjusted EBITDA. I want to be clear, we consider both of these items isolated matters, and they were not a factor in revising our 2025 adjusted EBITDA guidance. So as we think about the business on a go-forward basis, we remain encouraged about our ability to drive durable top line growth. Our volumes have been quite strong, and we continue to execute on initiatives to optimize demand to our system. From an earnings perspective, we have a number of opportunities that we can control to drive improvement of our adjusted EBITDA base. As Marty already mentioned, many of the revenue and earnings enhancement initiatives under our IMPACT program are well underway with others expected to begin in the near term. Execution with discipline and urgency is paramount and a top priority for our entire organization. Our strong balance sheet and liquidity position give us the flexibility to invest through cycles, pursue strategic growth and support operational transformation without compromising financial discipline. We're continuing to support future growth with our outpatient build-out. In the second half of 2025, we will have opened several urgent care and imaging centers. And in 2026, we expect to open 2 ambulatory surgery centers, 4 more urgent cares and 1 freestanding emergency department. Further, our strong cash flow generation and balance sheet give us the flexibility to support strategic growth into new markets. Collectively, this positions us well to deliver long-term shareholder value, grow adjusted EBITDA and expand margins over the next several years. With that, I'll turn the call back to Marty for concluding remarks. Martin Bonick: Thank you, Alfred. I want to leave you by reinforcing 3 key takeaways. First, we operate in a strong and durable demand environment. Our markets continue to grow 2x to 3x faster than the national average, supported by demographic tailwinds and rising care complexity, structural trends that reinforce our long-term growth thesis. Second, we've prudently adjusted 2025 guidance to reflect industry pressures. And importantly, we've already begun implementing decisive actions to mitigate these challenges. Under our IMPACT program, we are harvesting operating efficiencies through initiatives in labor, supply chain and revenue cycle that will strengthen margins and position us for sustainable growth. Third, we remain financially strong and strategically positioned to create long-term shareholder value. Our balance sheet and cash generation gives us flexibility to invest through cycles and deploy capital to support long-term growth. Looking ahead, these fundamentals position us to expand margins and grow adjusted EBITDA over the next several years. Before I turn the call over for questions, I want to take a moment to thank our 24,000 team members and 1,800 affiliated providers across Ardent. As the health care industry continues to evolve, we are deeply grateful for their continued commitment to our purpose, caring for people, our patients, our communities and one another. Their resilience and focus enable us to adapt and improve how we work while continuing to deliver exceptional care to our patients. With that, I will turn the call over to the operator for our question-and-answer session. Operator: [Operator Instructions] And our first question comes from the line of Jason Cassorla with Guggenheim. Jason Cassorla: Great. It sounds like the payer denial and professional fee pressures are going to spill over into next year. There doesn't seem to be much incremental DPP development in your markets at this juncture, but there's the rural transformation fund to consider. You've discussed $40 million of annual run rate benefits from the IMPACT program next year, and demand in your market seems durable at this point. I mean your volume growth speaks to that. So maybe just stepping back, I know it's early, but for 2026, could you just help frame the headwinds and tailwinds that we should be considering a bit more? And then ultimately, if you would expect to grow EBITDA next year? Martin Bonick: Jason, this is Marty. I appreciate that. Yes, as we -- you've covered a lot in that question. As we think about where we're at, we're going to wait until our fourth quarter call in February to provide that '26 guidance, so we'll have a more complete view of pro fees and payer dynamics and progress on our income -- or our IMPACT program and the economy. And so there's a lot of things in there. But yes, you framed it right. We see strong durable demand as we go into next year. Our markets are growing. We're well positioned in those markets, and we're still executing on our outpatient development program. So a lot of positive tailwinds as we look at the growth side. Our IMPACT program, we do expect to -- it is ramping, and we expect that to continue to provide benefit, but it's a little bit too early to give definitive guidance in terms of what that growth is, where we do expect to see our long-term growth thesis continue and both EBITDA growth and margin over the next several years. Jason Cassorla: Okay. Got it. And maybe just as a follow-up. Even with the EBITDA headwinds this year, you're still producing solid free cash flow. You talked about the M&A environment, the pipeline you have, the puts and takes on how that's materializing in this volatile backdrop. Your leverage is in a solid spot. You've got $900 million of available liquidity. You've got growth opportunities ahead of you. There might be some IPO or other ownership nuances to consider. But are there discussions around the consideration of implementing a share repurchase program at this juncture? Or any thoughts around that? Alfred Lumsdaine: Jason, it's Alfred. It would be premature. We wouldn't want to speak to the Board. But I think management and the Board are committed to optimizing shareholder value. And so over time, I'm confident the Board will look at every option to optimize shareholder value. Operator: Next question comes from the line of Whit Mayo with Leerink Partners. Benjamin Mayo: I just wanted to go back to the malpractice development and why you think that this won't lift your recurring accruals given that the frequency is higher and the size of the claims is higher, and why we shouldn't also expect that your revenue yield is impacted on a go-forward basis with this payer denial issue? Or I'm sorry, not payer denial, but the revenue cycle change. Alfred Lumsdaine: Sure. Thanks, Whit. This is Alfred. There's obviously 2 questions incorporated there. I'll speak first to the New Mexico medical malpractice charge. As we indicated, 100% of that charge relates to the New Mexico market where we have seen significant social inflationary pressure in medical malpractice cases the past several years. So this is not new. There has been an increasing dynamic year-over-year of increasing premiums, increasing costs in the New Mexico market. The amount recorded in our charge represents our best estimate for Ardent's liability for this market, for the adjustment for those pressures. And for an individual provider who was with Ardent between 2019 and 2022, and who is no longer employed by Ardent and for whom the statute of limitations has expired. So I guess the short answer to your question is, yes. We do believe the environment we're in. This is a headwind to the business and has been for a number of years. This adjustment was specific to the specific set of facts around a single provider and a single market. Moving to the AR charge. I would say at the simplest level, we -- this is a change in accounting estimate. Our current net revenue model, the one that we've moved to under the Kodiak platform reserves for an account earlier in its life cycle as compared to our internally developed model, which had utilized a 180-day cliff at which time an account became fully reserved. So I would say the difference is reserve timing between the 2 models, and it results in a reduction in net revenue just upon implementation. And that reduction is essentially attributable to the fact that Ardent is a growing company. And so it's adding reserves to that, call it, that growth layer, and it's a onetime adjustment. Going forward, the models would essentially produce the same results. So we would not expect going forward, any difference between the existing or the model that we've moved to under the Kodiak platform and our previous internally developed model. Benjamin Mayo: Okay. And I think I heard -- maybe it was Marty that referenced maybe $15 million of a benefit in the third quarter that was favorable versus expectations? Maybe I got that number wrong. If you could just maybe provide a little bit more detail on that? Alfred Lumsdaine: Yes. This is Alfred again. Marty noted that we, in third quarter, we had roughly $15 million -- somewhere between $15 million and $20 million of benefit that we previously had expected in Q4. So when you think about the reduction in guidance, it's relatively evenly split between Q3 and Q4, maybe a little bit more weighted towards Q4 simply because we still are not -- until we see tangible evidence of the turn in pro fees and payer behavior, we're still expecting a little bit of an acceleration of those dynamics. Benjamin Mayo: But what exactly was the $15 million? Was it DPP or something? Alfred Lumsdaine: There was a DPP component in that. Operator: Next question comes from the line of Scott Fidel with Goldman Sachs. Scott Fidel: Just to just put a bow on Whit's last question. So just on the $15 million to $20 million, just so we make sure that we're modeling 4Q correctly. So it sounds like -- is that just all in revenue per adjusted admission and pricing in terms of how we should be thinking about that $15 million to $20 million? Or are there other line items on the expense lines that are affected as well? Alfred Lumsdaine: No, I think that's fair. This is Alfred. I think it's fair to say it's all in the [ rev per. ] Scott Fidel: Okay. And then I guess my real question would be around the payer denials and I guess sort of how you maybe think about the exit rate in terms of where that sits. I know that you gave us sort of the details in terms of how much of the guide down it reflects. Just thinking about, I guess, as you try to address this, how widespread first would you say that those -- the ramp in denial activities are across your key payers? Is it 1 or 2 of maybe who we would think to be the most likely suspects or is it more broad-based? And then I guess you're thinking about '26, and I know you're not ready or comfortable yet to provide guidance. But how will you, I guess, contemplate that level of payer denial sort of pressure, I guess? What would you sort of think about sort of just taking the 4Q and annualizing that and then sort of try to work off of that and see what you could improve and that could be upside? Or do you think that you'll be able to implement initiatives that could start to bring that down in '26 relative to the 4Q run rate? Martin Bonick: Scott, this is Marty. I'll start, and I'll let turn it over to Alfred for the second half of your question. But yes, as we look at the payer denials, we saw that initial step up in the second half of last year largely stabilized and then started to drift up and accelerated as we went into this third quarter. It's largely across the managed payers, and we've got some good data statistics to show that, which is informing how we are changing our response. Clearly, we're delivering the care. We know that the services we're providing are necessary and warranted and the payers, through policy changes and impacts are either just downgrading claims, denying claims or slow claims, all of which have had an impact, which we're describing here. The managed care -- the managed products, Medicare, Medicaid health exchanges are the culprits, and it's fairly uniform across all of those different categories. We've ramped up our contracting. We've integrated how we are approaching this from an internal perspective in terms of our teams coming together, working with our revenue cycle partner, working with our legal team, ramping up our litigation efforts and demand letters as a result because we know that these services were warranted and provided and taking steps to get more aggressive in our response and action for their behavior and push back on us. Alfred Lumsdaine: Yes. And just taking off on Marty's point, again, obviously, we're not prepared to speak to 2026 but -- in terms of financial details. But in terms of the things we're doing, Scott, as we mentioned, putting a finer bow, final denials in Q3 were up 8% over the first half of the year. So we are expecting this. We think it's prudent to continue to expect this level of denials for the immediate future. But in terms of the actions that we're taking, and we've significantly stepped up the number of appeals we're filing, I think we're up in terms of -- over the prior year, like 60% in terms of appeals. Appeal turnaround time by the same token is down 25%. And then just taking off on Marty's point on recent organization -- recent organizational changes, that has resulted in us filing 60 demand letters with payers with delinquent adjudication just in the last 90 days with an expectation of somewhere of a $15 million benefit. These are just some of the actions that we're taking. So to your point, I mean, I think it's prudent to not expect that payer behavior is going to change in the foreseeable future. And we're focused on what are the things we can do to improve the throughput and to get paid for the work that we're doing fairly. Operator: Next question comes from the line of Kevin Fischbeck with Bank of America. Kevin Fischbeck: I appreciate that you're not interested to talk about next year. I don't think almost any hospital company has talked about next year. But you have said a few times that the second half is creating a base up of which you think you can grow. Can you just help us think a little bit more about how you view this change of guidance and how if you were to pro forma the 2025 base, how we should think about that? And then we can make our own decisions about how that grows next year. Is that like the current guidance but annualized the [ 50, 55 ] And then maybe add back [ 40. ] Is that like a good way to start about 2025 on a normalized basis? Or is there something else that we should be thinking about the timing of the $15 million to $20 million? How to think about that as I try to think about what a core base '25 looks like? Alfred Lumsdaine: This is Alfred, Kevin. Thanks for the question. Yes, obviously, like you said, given the policy uncertainty and exchange uncertainty, it would be imprudent to speak to 2026 at all. But as we think about the exit run rate for 2025, again, we think it is prudent to think about the current headwinds. We think an appropriately prudent reset, which is what we've done to incorporate that is the right thing to do. And again, it would be too optimistic to think that pro fees are going to take a turn in the other direction and payer behavior. At the same time, we've already articulated some of the things that we're doing. Marty talked about the impact initiatives and the $40 million, which is actually simply incremental efforts that we've made recently that should fully manifest in the run rate next year. And there's a lot of other things we're doing from an IMPACT perspective. It's focused, I would say, in 7 buckets around revenue integrity, productivity, payer disputes, supply chain, management, purchase services, revenue cycle management and professional fees. And so we have strategies across all of those buckets. The things we can do that are in our control to combat these headwinds. Again, we think as we forecast out, it's appropriate not to believe that things are going to change fundamentally, but then what are the actions that we can take to tangibly offset that. So we would expect that $40 million to grow next year in terms of the potential offsets in IMPACT program. Again, would be preliminary to actually quantify all those dynamics for 2026. Kevin Fischbeck: Yes. Okay. That makes sense. And I guess just my second question would be, yes, you guys are growing very well. I guess though we've seen another company kind of grow by shrinking, if you will, and focusing on high-margin businesses. I just wonder, is there any scenario where some of the margin pressure that you're seeing is because of some of the volume growth that you're pursuing? Or do you believe that the cost issues are really kind of separate from that? Just trying to think through if there was another option or opportunity to improve margins in a different way. Martin Bonick: Thanks, Kevin. This is Marty. Yes, as we think about our IMPACT program, this is part of that. That IMPACT stands for improving margins, performance, agility and care transformation. And so we've talked a lot about our service line rationalization efforts and we're seeing the pull-through of growth, 9%, 9.2% growth in surgeries, strong adjusted admissions growth. We're growing that outpatient platform. And through our transfer centers, we've seen robust inpatient growth better than most of our peers. And so yes, as we look forward, we are looking at those conversations to make sure that we're maximizing the opportunities to bring the right acuity cases in there into the hospital, into our platform and making sure we can service those patients well. So yes, that's definitely part of our thinking as we continue to rationalize our services, rationalize the programs and focus on that high acuity growth. So that is part of the IMPACT program that we'll be expecting to see continued progress on as we go into next year. Alfred Lumsdaine: And this is Alfred. I would just add to what Marty said. We are committed to expanding our margins. We're not -- again, we're not speaking to 2026 as we sit here, but we continue to believe that we have a platform that can deliver mid-teens EBITDA margins, and we are focused on creating shareholder value, not just through growth but by also growing margins. Operator: Next question comes from the line of Matthew Gillmor with KeyBanc. Unknown Analyst: This is [indiscernible] on for Matt. I just wanted to ask on the professional fees. It seems like they stepped up pretty quickly. I just was asking kind of what drove this? Was this tied to any one specific contract? Any additional color that you could provide just kind of what transpired during the quarter would be helpful. Martin Bonick: Thanks, Matt. This is Marty. As we look at the last several years, we sort of detailed out how these fees have grown, and they are moderating, just not quite to the extent that we anticipated. But what gives us a little bit more confidence is this has gone in cycles, and we've seen the rise in ER, anesthesia. This year, we've seen a little bit more pressure on radiology. And so as we lap through these contract renewals, we've got better visibility with the terms in which we're negotiating. We've got preferred partners in most of these specialties now that are giving us the ability to pool our resources across markets and make sure that we can demonstrate strength and visibility in terms of these trends. And as we've lapped through now, most of these specialties that gives us better visibility that we will continue to see moderation as we go forward, hopefully at a slower pace than what we've experienced thus far. But yes, this year, the radiology step-up accounts for a lot of the increases that we've seen. Unknown Analyst: Helpful. And then just as a follow-up, I wanted to touch on the partnership with Ensemble. I guess are they seeing similar payer denials across their network? Or is this more isolated to your partnership? Martin Bonick: Yes. So as we look at the national statistics, we're still outperforming sort of the national benchmarks with Ensemble. So they've been a strong partner to us, and we've seen a step up and that step-up is seen across the industry. We're not -- I'd say we're growing the trend of denials inside of that and still better than average across the industry, but more than we had expected. So they've been a strong partner for us. We know they're investing a lot in their capabilities just to continue to make sure that we've got clean claims going out the front door and taking away those opportunities for denials to happen. And we can see that in that and the payers have just gotten more aggressive at unilaterally either down quoting claims or flat out denying claims to [indiscernible] is an example that stands out as continued pressure across the industry. So those are -- Ensemble is performing very well, better than the average. It's just that the entire environment has gotten more difficult. Operator: Next question comes from the line of Raj Kumar with Stephens. Raj Kumar: Maybe just kind of touching on the EBITDA margin expansion still targeting mid-teens. Kind of given the rebasing of 2025, that would kind of imply instead of $100 million to $200 million of core margin expansion, that's like 200, 300 now. Does that change the time line of achieving that mid-teens EBITDA target? Or do you think that over '26, '27 and '28, that time line still stays intact? Alfred Lumsdaine: Thanks, Raj. This is Alfred. No, good question. And I think it's -- it would, again, be early to give specificity. I mean, it is fair to say, right, that with these headwinds that there is near-term pressure that wasn't expected and that all things being equal, that it would extend the time line out. And as we've said, we are focused intensely on accelerating and increasing the volume of the impact programs to offset these headwinds. So I think when we come to 2026 guidance, we'll be in a better position to frame those time lines out a little bit better and put additional quantification around the IMPACT programs. But again, the message I would want you to take away is that the we are intensely focused on increasing the aperture of offsets given these headwinds and are accelerating those -- that intensity in order to, as much as possible, stay on the time line. Raj Kumar: Got it. And then kind of as my follow-up, just looking at the exchange markets, it seems like kind of one of your core states, New Mexico is looking to kind of fully fund the enhanced subsidies up to 400% of FPL, kind of do internal means next year. So it seems like a kind of cushion to the potential headwind on the enhanced subsidy side. And then you talked about your contracting dynamics in Texas. So maybe just kind of any updated framing you can provide on that front in terms of -- I know maybe not a -- probably not a number given that uncomfortability on 2026 framing, but just any kind of gives and takes on that front would be helpful. Alfred Lumsdaine: No. Good question. And again, I think, I mean, great to call out that there will be the individual states are not going to sit by and a lot will obviously still depend on what is the ultimate outcome of the exchanges, still very much in the air and anybody's guess into where it ultimately land is. But I your example of what New Mexico has come out is a good one that -- and again, it's one of the reasons why it would be very imprudent to forecast. What we have obviously said and our exposure to exchange lives is lower than many in the industry. And although it has been the single largest driver of growth among our payer mix this year. So important to us. But as we continue to say, not an extremely highly profitable segment of our business. And yes, we're keeping a close eye on all those dynamics within the states. But again, good call out on the New Mexico land. Operator: Next question comes from the line of Craig Hettenbach with Morgan Stanley. Craig Hettenbach: Just going back to the IMPACT program. Is this really kind of an acceleration of pull forward in terms of time line? Or do you think over time, you could expand that program further? How do you think about that? Martin Bonick: Craig, this is Marty. It's both. These efforts don't just produce immediate value. There's a number of things in line, and we sort of bucket them into the revenue cycle, supply chain and SWB. And so all of those things have various initiatives underway, that's what give us confidence that we'll see these things continue to provide benefit, and it starts to provide more benefit in Q4 and then continue to ramp as we go through the year. And we're adding to that. This is really a focused effort across the organization, led by our COO, Dave Caspers, and his focus in getting all of our teams marching in the same direction around these IMPACT initiatives. And so we've got good conviction that as these things continue to ramp that it's spurring more opportunities and presenting more levers for us to continue to pull, but it does take some time for this to get going, and we can start to see that momentum building, and we'll continue to build. So that's the way in which we're looking at that going forward. Craig Hettenbach: Got it. And then just a follow-up, Marty, just given some of the challenges near term on profitability. How does that, if at all, kind of influence some of the growth initiatives that you have? Like can you kind of handle some of this and still kind of march forward? Or do you pause a little bit? How are you kind of planning around that? Martin Bonick: Yes, no. I mean it doesn't impact our focus on growth. This -- we went public last summer with a thesis around growth starting in our core markets, and we've continued to execute on that. As Alfred referenced, we've opened more urgent cares. Next year, we'll be opening 2 ambulatory surgery centers at least that those are already well underway and continuing to build out that outpatient platform. Our Chief Development Officer has been very active since he began several months ago, building interest in our partnership model, both to continue the expansion of growth within our core markets as well as looking for new market opportunities. We've got the balance sheet to support that growth. And we don't -- we are not deterred by this short-term headwind. When we look at it, we're still showing with this guidance, 9% EBITDA growth. That's nothing to be ashamed about not as robust as we anticipated, but certainly strong growth helping us to delever the balance sheet and putting us in a position to continue to capitalize on these trends across the industry. So no, not deterred at all. Operator: Next question comes from the line of Ben Hendrix with RBC. Benjamin Hendrix: Great. I believe you mentioned in your prepared remarks the one exchange contract renegotiation, and I know you've called out elevated denial activity in exchanges on the second quarter call and potential to renegotiate or even maybe exit some contracts. I'm wondering just how much of this denial activity headwind you believe you could address in the near term from kind of shrinking your already small footprint in exchanges and exiting certain contracts or renegotiating. Martin Bonick: Yes, that's a great call out, Ben. Yes. And the one contract that we cited in prepared remarks is just one example of the tangible things we're doing, and we put that into the revenue integrity bucket under our impact initiatives. And it is an example that -- to the earlier question, we're not just going to grow to grow from a top line perspective. We have to see profitable pull-through. And the changes we've made from an organization structure to create alignment between our revenue cycle and our payer operations should continue to yield more opportunities in this area. It does take time. It does take time to say, put out an early termination. And then hopefully, that can yield a renegotiation of appropriate terms. The example that we cited here was one where we were seeing a significant margin erosion in this contract from payer denial activity. We turned it, payer came back to the table, we negotiated a better rate and better terms to prevent the denial activity that we were seeing. And so again, just a tangible example, but a good call out of things that we are doing and accelerating from an offset perspective. And again, we'll be incorporating the strategies into our 2026 view. Operator: [Operator Instructions] And we'll take our last question from Benjamin Rossi with JPMorgan. Benjamin Rossi: Just following up on the negotiations and just where your commercial negotiations stand for 2026, 2027, and maybe now even 2028. I believe last quarter, you said you were about 55% for 2026. How are those conversations coming along? How much of those contracts have been negotiated at this point? And how do those contracts compare to the last couple of negotiation cycles? Alfred Lumsdaine: Sure. This is Alfred. Good question. Compared to when we last spoke, we're about -- we're close to 3 quarters contracted for 2026. I would say the headline rates are -- have hedged down from historical levels. It is a tougher environment. You've heard it in all the payers. We're getting closer to what I would call the traditional type of increases. And we're very focused, not just on that top line rate, but also creating the things that lead to better yield under our contracts to stem some of the denial activity. So it's not just a -- it's important not just to think about a top line number, but more important to think about the ultimate yield under our contracts. And I would say that is a much greater focus than in past renewal cycles. Benjamin Rossi: Got it. Appreciate the color. I guess just as a follow-up maybe on why you're seeing higher denials here. I guess just on your rates, were your rates here higher than the industry average in your markets? You've noted that your [ NJ ] pricing is the highest in the state? Or is there any particular states where your denial activity was higher or maybe where you're overindexed? Martin Bonick: Ben, this is Marty. No, I wouldn't characterize it exactly that way. For the most part, we arethe value-based provider in our markets. While we have leading shares #1 or #2 in the majority of our markets, from a payer perspective, we're still a little bit behind a lot of those trends. And so our managed care team has been working to bridge that gap, but I wouldn't say that our rates are particularly higher in our markets, the activity across the payers, and I think that the pain that they're seeing is trickling down into the provider segment. So we know that we've still got opportunity to continue to bridge that gap and to strengthen our performance. But again, it's not just headline right, as Alfred was talking about. It's getting to the terms because more and more increasingly, we're seeing the sort of technical denials or payment slowdowns because of policy changes that are outside of the contract. And so we're trying to button down the hatches to make sure that, again, whatever that top line increase that we are able to negotiate with payers is translating into bottom line yield. Operator: That will close the question-and-answer session. I would like to turn the call back over to Marty Bonick for closing remarks. Martin Bonick: Thank you. As we conclude, I just want to thank the investor community for their interest in Ardent, and thank our teams across the company for their continued commitment and resilience in fulfilling our purpose. As we've talked about, we operate in a very strong and durable demand environment. And while these industry pressures have impacted near-term earnings, we've taken decisive actions to mitigate those challenges and continue to strengthen our performance. Our IMPACT programs are ramping and delivering meaningful efficiencies and our financial strength is going to give us that flexibility to continue to invest in our -- and pursue strategic growth. Looking ahead, we're very confident that these fundamentals position us to expand margin and grow adjusted EBITDA over the next several years. So thank you all for your continued support, and this concludes our call. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Good day, everyone. Welcome to the Stran & Company, Inc. Third Quarter 2025 Earnings Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Alexandra Schilt. The floor is yours. Alexandra Schilt: Good morning, and thank you for joining Stran & Company, Inc.'s 2025 Third Quarter Financial Results and Business Update Conference Call. With us today are Andy Shape, Chief Executive Officer, and David Browner, Chief Financial Officer. Yesterday, we issued a press release detailing our results, which is available on our website at ir.stran.com. Before we begin, please note that today's remarks may include forward-looking statements that involve risks and uncertainties as described in our SEC filings. With that, I will turn the call over to Andy Shape. Please go ahead, Andy. Andy Shape: Thank you, Alexandra, and good morning, everyone. Taking a step back for a minute, those who may be new to the Stran story, it began over thirty years ago when we went door to door helping local businesses promote their brands through creative high-quality merchandise. What started as a small two-person operation has grown into a national platform serving many of America's most recognizable brands, all built on the same foundation: customer service, innovation, and trust. We have grown from that small startup into a publicly traded leader in the promotional marketing industry. I am proud that the same leadership team that built Stran continues to guide us today with that entrepreneurial spirit, and I am excited for the future of Stran. Our client base includes over 30 Fortune 500 companies and some of the largest brands in the world. These companies chose Stran because we deliver creative, high-impact marketing solutions that drive engagement, loyalty, and measurable results. We are not just a distributor; we are a strategic marketing partner helping these brands connect with people in powerful, authentic ways. Our corporate motto is driving brand awareness and affecting behaviors through visual, creative, and technology solutions, and we continue to work tirelessly to deliver the best products and experiences to our customers. Now moving on to our financial results. The third quarter was another strong and productive period for Stran, one that underscores the power of our platform, the resilience of our operating model, and the disciplined execution of our team. Sales increased 29% year over year to $26 million in Q3 compared to the prior year, and sales reached $87.3 million for the first nine months of 2025, a 56.7% increase from the same period last year. Importantly, we achieved this growth while driving continued improvement in profitability. Year to date, our EBITDA improved by approximately $2.8 million compared to the same period last year. Our clear indicator that our strategy to scale responsibly while managing expenses is delivering results. We have had many nonrecurring expenses over the past eighteen months and are happy that we are now able to concentrate on our business, both top-line and bottom-line growth, especially as we are now in Q4, which is historically our strongest quarter of the year. Both of our business segments contributed meaningfully to our results. The Stran segment achieved nine-month revenue of $60.3 million, up from $52.2 million last year, driven by deeper client relationships and new enterprise wins. The Stran Loyalty Solutions (SLS) segment, which includes the Gander Group business acquired in August 2024, delivered $26.9 million in revenue compared with $3.5 million last year. The Gander business has become an important contributor to our results, with momentum and tremendous opportunity ahead. The integration of Gander has gone well as we continue to identify synergies and cross-selling opportunities while we deliver end-to-end loyalty and incentive programs that strengthen Stran's position across casino, gaming, and the hospitality market. At the same time, our core Stran business continues to experience strong growth. This segment remains the cornerstone of our brand, representing decades of trusted relationships with leading organizations that rely on us for creative design, efficient fulfillment, and continuous marketing support. We have deepened client partnerships, expanded digital ordering capabilities, and delivered measurable results for our customers. We are continuing to execute on initiatives to streamline operational efficiencies. Operating expenses grew only 30.3% year over year for the first nine months of 2025, while sales grew 56.7% during that same period in 2024. As a result, operating expenses as a percentage of sales declined to 31.3% during the first nine months of 2025 from 37.7% during that same period in 2024. This contributed to the $2.8 million improvement in EBITDA from negative $3.2 million for the first nine months in 2024 to negative $384,000 for the first nine months of 2025. As we grow, we continue to benefit from efficiencies that come with scale, improving our purchasing leverage, streamlining logistics, and enhancing fulfillment capabilities. These advantages not only strengthen our margin but also create a competitive edge that smaller regional players cannot easily replicate. During the third quarter, elevated tariffs led to a meaningful increase in product costs for direct import orders, especially with our SLS segment. While we were able to pass on some of those costs to our customers, not all could be offset, which compressed our margins. Just as importantly, the uncertainty surrounding tariffs created buyer hesitation, particularly in the loyalty and casino segments, impacting both top-line activity and profitability for the quarter. Despite these temporary headwinds early this year, demand remains strong, and our client base continues to show confidence in our capabilities. We also continued our share repurchase program during the third quarter, buying back approximately 267,000 shares of common stock at prices between $1.45 and $1.81 per share, totaling about $408,000. With no debt and $11 million in cash and investments, we remain well balanced to fund growth initiatives, pursue acquisitions, and continue opportunistic buybacks. Stran continues to actively evaluate acquisition opportunities as strategic M&A remains a key pillar of our growth plan. We are executing a disciplined roll-up strategy in a fragmented industry, identifying smaller distributors that complement our business and integrating them efficiently into our shared infrastructure. This model provides low-risk, high-synergy growth and gives us powerful margin expansion potential through economies of scale. Our focus is now also on transformative acquisitions, the kind that can move the needle and accelerate our long-term growth trajectory. Finally, we are proud of our progress that's been recognized externally. This past quarter, Stran was named by the Promotional Products Association International (PPAI) as one of the greatest companies to work for in 2025. It's an acknowledgment of the environment we've built, one that empowers employees, fosters collaboration, and drives creativity across every aspect of our business. Our people are the foundation of our success, and this distinction is a direct reflection of their talent, dedication, and shared commitment to Stran's mission. After several years of investing in our growth, technology, and infrastructure, we are now entering a new phase, one focused on driving consistent profitability and margin expansion. With our systems, talent, and scale in place, we are well-positioned to translate our operational foundation into sustainable earnings growth. Overall, I am very encouraged by how we are executing against our strategy, balancing growth, profitability, and shareholder value creation. With that, I'll turn the call over to David Browner, our CFO, to review the financial results in greater detail. David, please go ahead. David Browner: Thank you, Andy, and good morning, everyone. I'm pleased to provide a detailed overview of our financial performance for the three and nine months ended September 30, 2025. For the financial results for the three months ended September 30, 2025, sales increased 29% to approximately $26 million from approximately $20.1 million for the three months ended September 30, 2024. Sales by our Stran segment increased to approximately $17.6 million for the three months ended September 30, 2025, from approximately $16.7 million for the three months ended September 30, 2024. Sales by our SLS segment, which consists of the former Gander Group business, increased to approximately $8.3 million for the three months ended September 30, 2025, from $3.5 million for the three months ended September 30, 2024. For the Stran segment, the increase in sales was primarily driven by higher spending from existing clients as well as business from new customers. The SLS segment's increase in sales was due to the acquisition of the Gander Group assets in August 2024. Gross profit increased 18.8% to approximately $7.1 million or 27.2% of sales for the three months ended September 30, 2025, from approximately $6 million or 29.5% of sales for the three months ended September 30, 2024. Gross profit margin decreased to 27.2% for the three months ended September 30, 2025, from 29.5% for the three months ended September 30, 2024, primarily due to the acquisition of the Gander Group business in August 2024, which operates at a lower gross margin than the Stran segment. Operating expenses increased 8.8% to approximately $8.9 million for the three months ended September 30, 2025, from $8.2 million for the three months ended September 30, 2024. As a percentage of sales, operating expenses decreased to 34.1% for the three months ended September 30, 2025, from 40.4% for the three months ended September 30, 2024. Net loss for the three months ended September 30, 2025, was $1.2 million compared to a net loss of approximately $2 million for the three months ended September 30, 2024. The financial results for the nine months ended September 30, 2025, show sales increased 56.7% to approximately $87.3 million from approximately $55.7 million for the nine months ended September 30, 2024. Sales by our Stran segment increased to approximately $60.3 million for the nine months ended September 30, 2025, from approximately $52.2 million for the nine months ended September 30, 2024. Sales by our SLS segment, which consists of the former Gander Group business, increased to approximately $26.9 million for the nine months ended September 30, 2025, from $3.5 million for the nine months ended September 30, 2024. For the Stran segment, the increase in sales was primarily due to higher spending from existing clients as well as business from new customers. For the SLS segment, the increase in sales was due to the acquisition of the Gander Group assets in August 2024. Gross profit increased 49.3% to approximately $25.4 million or 29.1% of sales for the nine months ended September 30, 2025, from $17 million or 30.6% of sales for the nine months ended September 30, 2024. Gross profit margin decreased to 29.1% for the nine months ended September 30, 2025, from 30.6% for the nine months ended September 30, 2024, which was primarily due to the acquisition of the Gander Group business in August 2024, which operates at a lower gross margin than the Stran segment. Operating expenses increased 30.3% to $27.3 million for the nine months ended September 30, 2025, from approximately $21 million for the nine months ended September 30, 2024. As a percentage of sales, operating expenses decreased to 31.3% for the nine months ended September 30, 2025, from 37.7% for the nine months ended September 30, 2024. Net loss for the nine months ended September 30, 2025, was approximately $1 million compared to a net loss of approximately $3.6 million for the nine months ended September 30, 2024. As of September 30, 2025, we had approximately $11.8 million in cash, cash equivalents, and investments. I'll now turn the call back to Andy for closing remarks. Andy Shape: Thank you, David. As we close out the third quarter, I'd like to take a moment to reflect on where we stand. Over the past year, we've made steady progress across every part of the business, improving execution, strengthening operations, and positioning Stran for consistent, sustainable performance. Our focus has remained the same: serving our clients well, managing growth responsibly, and ensuring that every initiative we take on creates measurable value. Looking forward, we believe Stran is entering its next phase of maturity, scaling our operations while delivering steady profitability. We see a clear path to long-term margin improvement driven by continued operational leverage, technology investments, and disciplined execution. We have built a strong foundation, designed not just for growth, but for lasting value creation. Looking ahead, our priorities are clear: one, deepen and expand client relationships. We are working to drive measurable results for our clients and build long-term partnerships rooted in transparency, service, and reliability. Two, increase operational efficiency. We will continue to simplify processes, invest in automation, and apply data to improve margins and execution speed. And three, maintain financial discipline. We aim to keep a balanced approach, investing where it strengthens our business while preserving a solid balance sheet, and allocating capital where appropriate. Thank you for joining us today and for your continued support of Stran. With that, I will open the call to questions. Operator? Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold for a few moments while we poll for questions. Your first question is coming from Greg Womack. Please pose your question. Your line is live. Greg Womack: Hi. First question, how are tariffs accounted for from an accounting perspective? Does that pass on to adding more revenue? Andy Shape: Yeah. Hi, Greg. Thank you for your question. Yeah. Tariffs, in terms of the tariffs, increases were unprecedented as we all knew, and it did affect us for some of our orders that were in production, that were essentially at our factories, that were on the water in production. And when we were charged those tariffs, we had the opportunity to go to some of our customers and ask them if they could pay more. Some of them were agreeable to it, some were not. And, as a result, if we were able to pass on the tariffs, it increased revenue slightly. But more importantly, with our cost increase at a greater pace than we were able to charge more. So the analysis that we've done shows a direct impact is a seven-figure amount, just over a million dollars for direct costs that we were not able to pass on to our customers. It also does not include some of the buyer hesitation that I mentioned in the call in April and May, but now we are seeing in Q3. Greg Womack: That buyers were uncertain. Typically, when there are tariffs involved, we have time to go increase prices because it's over time. But when we are in the middle of production of merchandise and with time-based events that we need to give them out, we did not really have a choice. So it was a very short window, and that answers your question. Greg Womack: Yeah. So I've got one other question too. I guess, do you guys feel like you're still gonna be positive net income for Q4? Or how are you feeling about year-round cash flow positivity? Are you feeling confident about that? Andy Shape: Yeah. I mean, historically, Q4 has always been our strongest quarter for the Stran segment, Stran promotional segment, just because of end-of-year holidays. So we are also very excited about Q4, as it's always been heavy sales. So, yeah, I mean, we obviously do not give guidance, but we feel good about where we stand. Again, like I've said in the earnings script, we are concentrating on continued growth while keeping an eye on managing expenses. So, yeah, that's our plan. Our plan is to have sustained profitability moving forward, which includes Q4. Appreciate it. Operator: Once again, if you do have remaining questions or comments, please press 1 at this time. Please hold one moment while we poll for any additional questions. You have a question coming from Vlad Cat with Freedom Call LLC. Please pose your question. Your line is live. Vlad Cat: Thank you, guys, and congrats on a great quarter. Looking forward to Q4 results in a few months. How should we think about potential contraction in the economy? How does the business typically perform during contractions? Andy Shape: Yeah. Great question. So, first, yeah, we're satisfied as a business with the growth that we've seen. We do want to increase our profitability. We know that. So, you know, we want investors to know that although we accomplished a lot in the third quarter, we need to be more profitable. We know that, and we're making efforts to do that, and we plan every intention on doing that moving forward. So appreciate the positivity, and we like that, but we have some work to do, and we know it. And we will. In terms of your question surrounding the macroeconomic trends. So one thing with our business is there's not a lot of capital expenditure. The majority of our costs are human capital and overhead. And if our business shrinks or if the economy shrinks, first and foremost, we can pivot fairly easily to that. And secondarily, a lot of the business that we have isn't necessarily discretionary. It may seem like it is, but it isn't. A lot of the programs that we have customers that have this integrated in their marketing initiatives, whether it's for new employees, whether it's for new customer acquisition, whether it's creating loyalty. As well as we're spread around multiple verticals, whether it's the casino and gaming, if the economy goes down, that goes well. Beverage and alcohol, the spend goes up as well. So we try to potentially be in our client base so that we can address any macroeconomic trends. And then finally, we think that the strength of our balance sheet provides us also with a competitive edge over our competition. If the economy does falter, it gives us the opportunity to look at additional potential for acquisitions as well as compete against people who may not be able to have the resources and the capabilities that we do. So, you know, we're conscious and aware of the recession in the economy. It doesn't scare us because we've been in business for thirty years, and we've seen it go up and down. And we know how to react to it pretty well. Vlad Cat: Clear. Thank you for that insight. One follow-up question, if I may. Andy Shape: Yes, sure. Vlad Cat: What is the methodology that you use to find acquisition targets? Andy Shape: Sure. So, the industry, as some of you may know, is about 25,000 to 30,000 distributors within our industry. Stran is ranked number 12, so we're already a leader. We're well known within the industry as being one of the only few public companies out there. The only one that's core on core the only publicly traded company on a major exchange in the US, but that's the core business that we do, and that's all that we concentrate on. So we're well known within the industry. So we get a lot of inbound inquiries. I would say dozens a month, if not more. Secondarily, I attend quite a bit of industry events as somewhat of an expert in adding value to your business, how to do that, as well as how to establish exit plans. And as a result, I'm introduced to quite a bit of people who want advice and then say, would you be interested in acquiring our company? So there's a lot of people now within our industry that don't necessarily have a succession plan for their business, and that's where we come in and help them plan for that with Stran as their exit and their succession. That makes financial sense both for us and for them. To make a win-win going forward. So, you know, we really look at that, but we're being a little bit more scrutinizing of our acquisitions moving forward than we have in the past potentially because we just wanted to make a little bit bigger of a difference and also know, we want those resources to work as soon as possible. Vlad Cat: Clear. Thank you. I appreciate your focus on creating shareholder value. Happy holidays. Andy Shape: Thank you. Likewise. Operator: Thank you. There are no additional questions in queue at this time. I would now like to turn the floor back over to Andy Shape for closing remarks. Andy Shape: Great. Thank you, everyone, for joining and your continued support of Stran. As mentioned, I think we're entering a new phase of Stran where we've built scale. If I continue to say to everyone that I speak to investors and anyone else in the business that you go back and you read our initial S-1 when we filed to go public, we've delivered on what we said, which is to continue to create scale through growth. Invest in our infrastructure, and really create a leader in the industry. And we've done that since we've gone from about $35 million in revenue to almost $120 million in trailing twelve months revenue. So we're excited about what we've done. We recognize that now that we've hit that scale, we can start turning some dials to really drive that profitability and create even greater shareholder value. And in all honesty, as the second largest shareholder, the value means just as much, if not more, to me than anybody else in the world. So I have very specific motivations to see the company really progress and do very well. And I'm determined to do it. So thank you everyone who believes in Stran and who's committed to us. And we look forward to finishing up the year strong and reporting our results at the beginning of next year. Thank you, everyone, and happy holidays. Operator: Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Good day. Thank you for standing by. Welcome to Spectrum Brands Holdings Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message device when your hand is raised. Please note, today's conference is being recorded. I will now hand the conference over to your first speaker today, Jen Schultz, Division Vice President, Financial Planning Analysis and Investigations. Please go ahead. Jen Schultz: Welcome to Spectrum Brands Holdings Q4 2025 Earnings Conference Call and Webcast. I'm Jen Schultz, Division Vice President of FP&A and Investor, and I will moderate today's call. To help you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Maura, our Chairman and Chief Executive Officer, and Faisal Cutter, our Chief Financial Officer. After opening remarks, we will conduct the Q&A. Turning to slides three and four. Our comments today include forward-looking statements, which are based upon management's current expectations, projections, and assumptions and are, by nature, uncertain. Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated 11/13/2025, our most recent SEC filings, and Spectrum Brands Holdings' most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statements. Our statements reflect our expectations regarding tariffs, which are based on currently known and effective tariffs and do not reflect tariffs that have been announced or delayed or other additional tariffs which could result in additional costs. Also, please note that we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and 8-Ks filing, which are both available on our website in the Investor Relations section. Now, I'll turn the call over to David Maura. David Maura: Good morning. Thank you, Jen. Good morning, everyone. I want to welcome everybody to today's fourth quarter earnings update. I appreciate everybody taking the time to join us today. For today's call, I want to begin with a few big picture opening remarks. First, I'm delighted and thankful to our teams for navigating the most difficult year. And I am excited to let you all know that we believe that the worst of the tariff and economic disruptions to our businesses are now behind us. Secondly, we expect our two highest value businesses, Global Pet Care and Home and Garden, to return to growth in 2026. Our adjusted free cash flow of $171 million or approximately $7 per share beat our own expectations in fiscal 2025, and our strong free cash flow generation will continue into fiscal 2026 and beyond. Fourth, our balance sheet is strong with $124 million in cash at the end of the year, zero drawn on our revolver, and we ended the year with just 1.58 turns of net leverage after returning approximately $375 million to shareholders throughout the year through buybacks and dividends in fiscal 2025. Last, but certainly not least, we are hell-bent on improving the profitability and competitive positioning of our HPC appliance business, and as the headwinds dissipate, we are excited to work towards a strategic solution for this business once again. We are also highly confident that we are well-positioned within our industry to be the consolidator of choice within the pet, and home and garden industries. As we wrap up a very challenging year, navigating through headwinds largely outside of our control, I again want to start this call by simply saying thanks. Thanks to every one of our global team members for battling through tough times, thank you to our vendors and retailers for your in addressing the macroeconomic conditions that we collectively continue to face. And lastly, thank you to our investor base for your continued trust. I know this year has been tough, but I am proud of how we have proactively and decisively reacted to these outside forces, and I believe that actually it's creating a competitive advantage for us as we look forward to the future. If I could have everyone now turn your attention to slide six, during the year, we saw a significant decline in the macroeconomic environment, which impacted overall consumer sentiment. Not just here in the US, but globally. Trade policy uncertainty and volatility led to softening demand in the US starting in the second quarter and impacted global markets more noticeably in 2025. When tariffs were at their highest point earlier this calendar year, we were looking at an annualized tariff exposure of approximately $450 million. This exposure is now approximately $70 to $80 million on an annualized basis. And the good news is thanks to the diligence and the incredible efforts of our global supply team, we are extremely happy to report to you that we have offset substantially all of this exposure through a combination of vendor concessions, painful internal cost reductions, supply base reconfiguration and diversification, and lastly, pricing actions. I shared this with you last quarter that we had implemented a number of cost reduction initiatives that would result in over $50 million of savings in fiscal 2025. This included a reduction in force that spanned all three of our business lines and our corporate functions. While it's never easy to take these kinds of actions, we know that the impact has been tough on our employees. We also know, however, that it was necessary to rightsize our cost structure and to protect the health of the businesses. We have also made significant progress in diversifying our supply chain to increase both its resiliency and its flexibility. Heading into fiscal 2025, we had approximately $300 million of our sourced product coming into the United States from China. We have since reduced these Chinese sourced products to the US market by nearly 50%. Further diversification will remain a priority for us going forward. We expect to only have approximately $15 million to maybe $20 million of direct spend in China for our two most highly valued businesses, Global Pet Care and Home and Garden, by the end of fiscal 2026. We will also continue to move product out of China within our home and personal care businesses when it's the right financial decision to do so and when it does not sacrifice the standards that we have for our quality. I would also like to take the now to thank our agile global supply chain team who have worked tirelessly to navigate this volatile environment and to make sure that our supply chain going forward is much more resilient and flexible to whatever challenges may arise. Earlier in the year, I emphasized that with all this uncertainty, we would control what we could control. And one of the priorities when we pivoted our operating strategy was to maximize cash flow generation and deliver to you over $160 million in free cash flow in fiscal 2025. And in fact, we over-delivered this number. We delivered $170 million plus in free cash flow through disciplined CapEx management, and better working capital improvements. We ended the year with net leverage of 1.58 times well below the stated goal of two to two and a half, all while continuing to reward our shareholders with approximately $375 million of capital returns split between share repurchase and dividends in fiscal 2025. During just the recently completed fourth quarter, we repurchased an additional 700,000 shares of stock and we continue buying during our pre-earnings quiet period through a 10b5-1 plan put in place in June later which was amended by our board in September to increase the cap on that to $100 million. In fiscal 2025, we repurchased approximately 4.4 million shares for roughly $326 million. And since the close of the fiscal year, we have purchased approximately 0.4 million shares, roughly $21.5 million in total. Since the close of the HHI transaction, we have returned over $1.37 billion of capital to our shareholders through our various share repurchase programs, and reduced our share count by approximately 44% since the close of that deal. I can now everyone turn to slide seven. I'll give you a quick overview of fiscal 2025 results. As I mentioned earlier, it was a challenging year for the businesses. We're faced with a variety of external headwinds. The volatile trade policy landscape not only impacted consumer demand, but it also led to a temporary pause in shipments from China into our US businesses when the tariffs were at their highest point. In fact, we paused all incoming and inbound traffic from China for about six to eight weeks, and that impacted our ability to fill orders throughout the second half of the fiscal year. Overall, fiscal 2025 net sales declined 5.2% compared with fiscal 2024. Actually, and this was after actually starting the year off with top-line growth as you remember, in 2025. And while our fourth quarter net sales also declined by 5%, we're actually encouraged that consumer demand was stabilizing during throughout the quarter in our key markets and our categories as trade policy has become a little less volatile and the supply shortages we experienced in the second half of the year are now behind us. Largely behind us, I should say. We have been relentless in addressing the top-line declines by initiating further cost reduction initiatives and cost savings. In addition to the fixed cost reductions, with the elimination of permanent salary headcount, we have also been reducing selectively our advertising and marketing spend in light of category softness and we have significantly reduced our office and distribution footprint as well. All these actions are mitigating some of the EBITDA declines in the various macroeconomic headwinds. We can now look to slide eight, and focus now on our strategic priorities for this upcoming year of fiscal 2026. The fundamentals of our business are actually strong. And I'm confident the decisions we've made over the last six to nine months actually make us a stronger, more focused business. And that brings me to the first key element of our strategic focus. We will continue to be good financial stewards of the businesses as we navigate the current macroeconomic landscape. The actions we took in fiscal 2025, while difficult, were quite necessary to address the external headwinds we were faced with. And with that said, the hard work is not over. We have to continue to be diligent and we actually need to be more efficient with our spending and investing profile. We need to demand and we will demand better returns on our investments while continuing to reduce the overall complexity of our businesses. The teams are now focused on fewer, bigger, better initiatives to maximize the impact of our investments. As you've heard me say before, we believe that the strength of our balance sheet sets us apart from our peers. We will continue to remain disciplined in managing working capital, while at the same time maintaining high fill rates supported by our best-in-class supply chain team. The second element here is continued focus on operational excellence, by leveraging technological advances that we're building for the future. As you know, we've been on a multi-year journey to upgrade and implement the new ERP system, SAP's S/4HANA. This is a project that's been underway for the last several years. And it started off with a successful implementation in our Global PetCare North America business at the end of 2024, and it was shortly therefore followed up by a successful go-live in our Home and Garden business, which is mostly a North American business. Over the last few months, we've also started now to move portions of our international business over to the new platform. While no new ERP implementation program is flawless, we have been incredibly pleased so far with the progress we've made by implementing this without any or trying to minimize any sort of disruption to our customer base. We've also made the decision to extend the implementation of our S/4HANA to our Home and Personal Care business. Our third key element is centered around our people. While we've had a challenging year and made a lot of difficult decisions, particularly around human capital that's impacted our employees, I am proud of our team, and I believe that their focus and resilience are critical components of driving the next chapter of growth. Our last key element is around transformation. Our continued plans to focus on becoming the pure play global pet care and home and garden business that we've set out a few years ago. Starting with global pet care, under Ori's new leadership, the team is embracing a new data-driven approach that has already yielded small wins and is resulting in improved operational trends. The innovation pipeline is strong, with fewer, bigger, better new product launches on the horizon, that are grounded in consumer insights. I'll continue to push this team to go faster, because I believe in the strategy, and I'm excited about the future of pet. Moving to the home and garden business, as you may recall me saying before, we've been on a bit of a turnaround over the last couple of years since Javier joined the team. Javier has set the right tone for a high-performing team with a culture anchored around growth, development, and employee engagement. We have had some highly successful innovation launches I'm really pleased with the progress the R&D team has made here. And if these products have landed well with the consumer, and we're expecting this momentum to actually continue and build with exciting new product launches planned for fiscal 2026. I remain optimistic about the evolving M&A landscape. We expect to continue to pursue acquisition opportunities in both our global pet care division and our home and garden businesses as additional assets become available at better price points. Lastly, on home and personal care, the most impacted of our three businesses by the latest trade policy volatility, the team has stepped up to the challenge. They've made meaningful changes to address our current reality. While we had a tough fiscal 2025, we are committed to maximizing the business' value and we expect an improvement to overall profitability in fiscal 2026. We remain committed to the vision of finding a strategic solution for our HPC business. If I can now everyone turn to slide nine, I'm gonna give an overview of our high-level 2026 earnings framework. We expect net sales to be flat to up low single digits versus the prior year. The external headwinds that suppressed consumer demand for the vast majority of fiscal 2025 are expected to continue particularly in the first half of our fiscal year. Despite these external pressures, we believe Home and Garden and Global Pet Care are both positioned to resume growth in fiscal 2026, offsetting an expected decline in our home and personal care business as we navigate through category softness and supply chain simplification initiatives that will reduce the product portfolio in North America. From an adjusted EBITDA perspective, we are targeting low single-digit growth primarily driven by continued expense management. Cost improvement initiatives and favorable FX offsetting lower volumes. The additional cost of tariffs are largely mitigated through a variety of actions including pricing. And lastly, for adjusted free cash flow, we expect another strong year ahead at approximately 50% conversion of adjusted EBITDA. Heading into the fiscal year, we are seeing signs of improved predictability in the macroeconomic environment, giving us the confidence to reinstate our earnings framework. We are focused on delivering on our goals to our investors. We believe this framework provides a challenging but achievable financial goal to the team as we look forward to a stronger fiscal 2026. Before I turn the call over to Faisal, I'd like to sincerely thank our outgoing Chief Financial Officer, Jeremy Smeltser. He's been a tremendous asset to me and the company and helped us navigate some really challenging times. I'm confident that Faisal will continue to drive strong execution and financial discipline in the years ahead and I'm already enjoying my new partnership with him as my CFO. With that, I'll turn the call over to Faisal to share more on the financials and additional business unit insights. The call is now yours, Faisal. Faisal Cutter: Thank you, David. Turning to slide 11. And a review of our Q4 results from continuing operations. Beginning with our net sales. Net sales decreased 5.2% excluding the impact of $10.5 million of favorable foreign exchange. Organic net sales decreased 6.6% primarily driven by supply constraints as a result of our decision to pause purchases from China for the US market during the third quarter and continued category softness in our global pet care and home and personal care business. These headwinds were partially offset by a delayed start to the season for our home and garden business that benefited current quarter results. Gross profit decreased $31.4 million and gross margins of 35% decreased 220 basis points largely driven by lower volume, unfavorable mix, inflation, and higher tariffs. Partially offset by pricing, cost improvement actions, and favorable effects. Operating expenses of just over $227 million decreased 14.6%, due to lower spend in advertising and marketing, and general expense management in light of category softness. As well as lower restructuring-related project spend. Operating income of $29.4 million increased by $7.5 million due to the lower operating expenses, partially offset by a decline in gross profit. GAAP net income and diluted earnings per share both increased, primarily driven by a one-time tax benefit for the quarter resulting from a tax entity realignment initiative. Lower share count, and higher operating income. Adjusted EBITDA was $63.4 million, a decrease of $5.5 million driven by lower volume and reduced gross margins partially offset by lower operating expenses. Adjusted diluted EPS increased to $2.61 driven by a one-time tax benefit that I referenced earlier. And the reduction in shares outstanding partially offset by lower adjusted EBITDA. Turning to slide 12. Q4 interest expense from continuing operations of $7.9 million increased $1.2 million due to higher average borrowing on our cash flow revolver in the current quarter. Cash taxes during the quarter decreased $10.2 million from the prior year. Depreciation and amortization of $23.9 million decreased $1.7 million from last year. And separately, share-based compensation increased to $5.8 million from $4.6 million in the prior year. Capital expenditures were $13.2 million in Q4, essentially flat to last year. Cash payment towards strategic transactions restructuring-related projects, and other unusual nonrecurring adjustments were $7.3 million versus $10 million last year. Moving to the balance sheet. We had a quarter-end cash balance of $123.6 million and $492.3 million available on our $500 million cash flow revolver. Total debt outstanding was approximately $581.4 million consisting of $496 million senior unsecured notes and $85.3 million of finance leases. We ended the quarter with $457.8 million of net debt. Turning to Slide 13 and an overview of our full-year results. Net sales decreased 5.2% and organic net sales decreased 5.3%. Sales performance was driven by category softness in light of macroeconomic conditions and supply shortages, from the six to eight weeks pause previously mentioned. These had been significantly impacted results both in our global pet care and home and personal care businesses. Despite strong performance by our key brands, sales in the home and garden business were modestly down driven by unfavorable weather conditions. Full-year gross profit decreased by $77.4 million and gross margin of 36.7% decreased 70 basis points driven by lower volume, higher inflation, increased tariff costs, and unfavorable mix. This was partially offset by cost improvement initiative pricing, and favorable FX. Adjusted EBITDA decreased to $289.1 million excluding investment income of $52.7 million in the prior year, Adjusted EBITDA decreased $30 million or 9.4% primarily driven by lower volume, and a decline in gross profit, partially offset by a reduction in operating expenses. Adjusted free cash flow was $170.7 million, or approximately $7 per share. $7 cash per share. Exceeding the $160 million free cash flow framework previously provided. During the year, we prioritized the health of our balance sheet through active management of CapEx investments, and improved working capital. Now let's get into a review of each business unit where I'll provide you more details on the underlying performance drivers of our operational results. I'll start with our global pet care business. Which is slide 14. Reported net sales decreased 1.5% and excluding favorable foreign currency impact, organic net sales decreased 3.3%. Sales in Aquatics increased high single digits offset by mid-single digits decline in companion animals. North America, companion animal brands continue to trend favorably. Our brands maintained or gained market share driven by innovation and successful commercial activations. With our retail partners in spite of category softness. In aquatics, we successfully mitigated category declines and delivered improved results. Driven by distribution gains in pet specialty and mass channel. Comparisons for the quarter in both companion animal and aquatics were impacted by a strategic pull forward of orders by retailers in the prior year in preparation for our S/4HANA ERP implementation. Resulting in an approximately $10 million headwind for the quarter. Also as expected, our decisions to pause shipments for a six to eight weeks period when tariffs were at their highest point during the third quarter led to continued supply shortages during the current quarter. Our inventory levels are now generally healthy, and shortages are not expected to be a significant headwind heading into fiscal 2026. Conversely, results were favorably impacted by our decisions in the third quarter to stop shipment to a key retailer as tariff pricing negotiations stalled. By the end of the third quarter, negotiations were complete but it did result in shipment delays benefiting our fourth quarter results. In EMEA, companion animal sales increased driven by the continued strength of our Good Boy brand, market share gains, in the UK, and expanding further in Continental Europe. Net sales also increased in our dog and cat food led by our Eucanuba brand. Aquatic sales also increased with the TETRA brand gaining shares in key markets mitigating category softness. Our innovation continues to resonate with the consumer. And is largely focused on further expansion into adjacent categories. Green Bone Collium, you may recall we recently launched a product that focuses on health and wellness benefits for pets. We also continue to launch new innovations in the treats categories, as our Good and Tasty product launches continue to perform well with further plans of expansion and more unique innovations, coming in the coming months. Our investments in Nature's Miracle also continue to yield results as the brand is gaining share and new points of distributions. In the fourth quarter, Nature's Miracle grew across pure play online, mass, food, dollar, and drug channels. Our Good Boy brand is the number one brand in dog shoes in the UK, and it's the fourth largest brand in overall pet and continues to grow market share driven by consistent innovation. The brand's expansion across Continental Europe continues to perform really well. Most recently becoming one of the top five treat brands in The Netherlands. In dog and cat food, we are continuing to expand IMs into more markets. And recently launched a refreshed portfolio on Yukonuba. This quarter's adjusted EBITDA of $49.6 million is $5.3 million higher than the previous year. An adjusted EBITDA margin was 16.6% compared to 14.6% last year. The improvement to adjusted EBITDA was primarily driven by expense management through cost savings initiatives announced earlier in the year lower investment spend due to category softness, and pricing. These actions more than offset the lower sales volume, higher tariff cost, and inflation experienced in the quarter. While GPC's fiscal 2025 sales fell short of the prior year due to macroeconomic and category headwinds, we believe the business is well-positioned heading into fiscal 2026. And we expect to return to modest growth as underlying category fundamentals and macroeconomic trends begin to stabilize. With generally healthy levels of inventory, we continue to be optimistic about our performance in the category. With the recent wins in product distribution and placement, together with the positive pace of sales and consumer acceptance of our innovation, we believe we will continue to outperform the category. While consumers continue to be challenged, we are encouraged by the overall resilience strength of our brand. I'll now move to our home and garden business, which is on slide 15. Net sales increased 3.2% in the quarter, reflecting a delayed start to the season that pushed volume from the third quarter into the fourth quarter. While July experienced favorable weather conditions leading to an improved POS, and strong retailer reorder patterns, unfavorable weather conditions across key regions in the latter half of the quarter negatively impacted POS and shipments. Net sales and controls, which is our largest category in home and garden, were up high teens as Spectrocyte continues to outperform the category. With a strong finish to the quarter in home insect control and herbicides. Household pet, hotshot also gained share with the positive POS while the overall category was flat. We are particularly pleased with the recent innovation launch of our flying insect traps that continues to outperform the rest of the category. Repellent sales were down mid-single digits with softness at key retailers driven by unfavorable weather conditions. Net sales in cleaning were also down for the quarter. As weather patterns evolve, and shift POS into the fall, our late season program continues to gain incremental support from our key account partners with activations for the quarter at four times the number of stores as compared to last year. Our Big Bet innovations are gaining support from our retailers and resonating with consumers. Exceeding our expectations. This year's innovation launch, the Spectracide wasp, hornet, and yellow jacket trap, was a hit with consumers and quickly gained penetration within the category. Earning one of the highest penetrations of any new item in overall pest control. POS performance was above expectations, with additional PAMs to expand distribution and capacity heading into fiscal 2026. The Hotshot flying insect trap launch also performed very well with its strong value proposition. We're excited to see expanded distribution on this new product as well in fiscal 2026. Adjusted EBITDA was $16.9 million compared to $19 million last year. And the adjusted EBITDA margin was 12.1%. 200 basis points lower than the prior year. The decrease in adjusted EBITDA was driven by unfavorable mix, inflation, tariffs, and incremental brand-focused investments partially offset by pricing, productivity improvements, higher sales volume as our innovation continues to resonate with consumers. As we look forward to fiscal 2026, we believe retailer inventory levels are generally healthy, and we expect reorder patterns to closely align with POS. Our sales team will continue to work closely with our retail partners to understand consumer demand expectations and what it means to our production and shipment plan. Expect our category will continue to be well supported by our retail partners, and the strength of our brands will continue to drive share growth. While weather is unpredictable, early indications are that our retail partners expect a normal weather pattern for fiscal 2026. Precipitation and temperatures expected to go back to historical level. Most of the POS for our home and garden business comes in the second half of our fiscal year, with the first half largely focused on preparation and staging for the seasonal business. As a result, timing of inventory builds can vary and impact quarterly results. Our fiscal 2025 first quarter benefited from an earlier than normal seasonal inventory build as well as a pull forward of orders in advance of our S/4 go-live by certain retailers that we would not expect to repeat in fiscal 2026. Overall phasings of net overall phasings net sales in home and garden are therefore expected to be similar to fiscal 2024. And finally, moving to home and personal care, which is slide 16. Reported net sales decreased 11.9%. Excluding favorable foreign exchange, organic net sales decreased 13.4%. Net sales in the personal care category were down low single digits this quarter while sales in home appliances were down double digits. Organic net sales in EMEA were down double digits with softness in both home appliances and personal care. Lower consumer confidence continues to be a headwind in European markets. Impacting both personal care and home appliances categories. We have also seen an influx of Chinese competitors targeting the region in response to the higher tariffs in the US. We continue to be nimble and evaluate new strategies to ensure our brands, remain relevant to our consumers in the current environment. As the consumer moves increasingly to digital markets, our near-term focus is increasing our digital shelf space and ensuring our presence in all relevant channels. In addition, one of our retailers experienced high inventory levels following a major sales event that negatively impacted replenishment orders within the quarter. North American sales decreased around 25% driven by lower sales from appliances. Much like GPC, HPC's fourth quarter results were impacted by inventory availability constraints from the six to eight weeks pause on Chinese sourced products to the US when tariffs were at their highest point. Our inventory levels are now generally healthy, and shortages are not expected to be a significant headwind heading into fiscal 2026. Overall share was also impacted by pricing taken to offset cost of tariffs. May recall last quarter, that we were one of the first to negotiate pricing with our retail partners. And thus, our product was among the first to see tariff-related price increase hit the shelves. We expect that this will normalize in the coming months as pricing goes into effect across the categories. Personal care appliances sales increase in both brick and mortar and e-commerce channels, benefiting from a softer prior year comparison. Organic net sales in LatAm grew high single digits with growth in both categories driven by new product launches in personal care, and distribution gains in the cooking category within home appliances. On the commercial side, you may recall we recently launched the PowerXL Air Max at Walmart, and our ad campaign is seeing strong consumer engagement. We also recently launched our Remington gloss collection exclusively at Target stores target.com. The new line of styling tools is designed to deliver high gloss results and offer a wide variety of styling tools. In LatAm, our Remington brand, saw record quarterly sales in the fourth quarter, after brand refresh initiatives resulting in distribution gains. LATAM continues to be a compelling market for our HPC business. And we are excited about our plans to introduce our Russell Hobb brands to the market in the coming month. We continue to be pleased with our launch on TikTok in the UK. Where our products are resonating with consumers, closing the year with another record month. We plan to build upon the success we're seeing in the UK and take these best practices to other markets in the near future. This quarter's adjusted EBITDA was $15.7 million compared to $19 million in the prior year. The adjusted EBITDA margin was 5.3%. The decline in adjusted EBITDA was driven by lower volumes, unfavorable mix, and tariffs. These significant headwinds were largely offset by pricing lower brand-focused investments in light of tariff supply issues, reduced distribution costs, and expense management as we actively address our fixed cost structure. As we look forward to fiscal 2026, we expect softness in global consumer demand for durables to continue. Compared to the prior year, this is expected to be most impactful to our first quarter results. In North America, tariff-related disruptions are expected to reduce sales volume as we prioritize our overall financial health and right-size the business. HPC will continue to evolve as we reduce our US queue count to simplify our chain and diversify our supply base, while maintaining overall profitability through increased scale on a smaller subset of product offerings. In EMEA, our largest market, we expect category softness and increased competition to continue while we expand our presence in the direct-to-consumer channel helping to partially offset consumer confidence headwinds. Now turning to slide 17, our expectations of fiscal 2026. We expect net sales to be flat to up low single digits compared to the prior year. While we expect growth in both our home personal by in our global pet care and home and garden business, our home and personal care business is expected to decline due to continued category softness and our supply chain simplification initiative the North American market. Adjusted EBITDA is expected to grow low single digits driven by the return to sales growth in our global pet care and home and garden business continued expense management, continuous improvement initiatives, and FX favorability, offsetting lower volumes in home and personal care. Tariffs are expected to be largely offset through the various mitigation actions which we have taken. Including pricing. I do want to point out that in our model, we have fiscal 2026 corporate at approximately $66 million, up from $54 million in fiscal 2025. As you will recall, in fiscal 2025, we had a little over $20 million in TSA cost reimbursements from our sale of HHI that do not repeat in fiscal 2026. We have mitigated approximately half of the cost headwind thus far and intend to address the remaining $10 million during the coming quarters. From a phasing perspective, we expect the first quarter to be the most challenged, primarily due to the shift in consumer sentiment in the middle of the prior year prior fiscal year. We also expect retailer reorder patterns will generally more closely align with POS, which is expected to be most impactful to our home and garden business given the earlier buy-in of inventory in fiscal 2025. And lastly, adjusted free cash flow conversion as a percentage of adjusted EBITDA is expected to be around 50% as we continue to prioritize the strength of our balance sheet. Depreciation and amortization is expected to be between $115 million and $125 million. Including stock-based compensation of approximately $20 to $25 million, cash payments towards restructuring, optimization, strategic transaction costs expected to be between $25 million and $35 million. Capital expenditure expected to be between $50 and $60 million. Cash taxes are expected to be between $40 and $50 million. For adjusted EPS, we use an effective tax rate of 28%, including state taxes. To end my section, I want to echo David and thank all of our global employees for their hard work during these very challenging times. Back to you, David. David Maura: Hey. Thanks, Faisal. Let's look at slide 19. Thanks, everybody, for joining us today on the call. Again, I'll take a few minutes just to recap the key takeaways findings on slide 20. Fourth quarter financial results conclude a very challenging year for us. We took decisive actions, as I've mentioned. They were necessary to protect the company and the balance sheet. But it did have short-term impacts on the P&L, and that's reflected in the numbers we reported today. We will continue to be good stewards of the businesses going forward. We'll be disciplined in our actions while utilizing a strong balance sheet. As you know, earlier in the year with all the macroeconomic uncertainty, we made the strategic pivot and started running this business to maximize free cash flow. I'm proud that this decision paid off. We were able to deliver over $170 million or roughly $7 per share in free cash flow to our investors. And these actions are now embedded, quite frankly, in our DNA and we're gonna continue to focus on this going forward. We're really excited to report, quite frankly, that both the global pet care and home and garden businesses, which are two most highly valued businesses, they're going to return, we're expecting them to return to growth in fiscal 2026. We're excited about that. We believe in the categories, and we believe in our teams in these businesses. Our new product development pipeline is strong, and we're gonna continue to focus on launching fewer, bigger, better initiatives. For successful commercialization as we move this company forward. I also continue to be optimistic about the evolving M&A landscape. We expect additional assets to become available at better price points, and with that said, we will remain disciplined in our process as we look for highly assets while being mindful of maintaining our lower leverage. We are confident that despite the current headwinds, that were largely outside of our control, we are a stronger, more focused company as we move the business forward in its strategic transformation. We will continue to be good stewards of this appliance business, focused on overall profitability improvement as we navigate a challenging environment we remain committed to finding a strategic solution for this asset. As trade policy stabilizes and consumer sentiment improves, we believe synergistic growth opportunities are on the horizon, with a higher probability of consolidations in this space. Which we believe, frankly, is long overdue. We are committed to executing on our operational goals, delivering improved business performance and driving value to our stakeholders. Again, I think the good news today with today's call, we believe that the worst of the tariff and economic disruptions to our business are behind us. Expect our two highest value businesses, Global Pet Care and Global Home and Garden to return to growth in fiscal 2026. We're gonna continue generating a lot of free cash flow as we go forward. The balance sheet is strong. And we're gonna continue returning lots of capital to shareholders through buybacks and dividends as we move this business forward. I'll turn the call back over to Jen, and we'll be very happy to take your questions. Jen Schultz: Thank you, David. Operator, we can go to the question queue now. Operator: Certainly. Star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. The first question coming from the line of Chris Carey with Wells Fargo Securities. Your line is now open. Chris Carey: Hi, everyone. Hello. Morning. Can we just get updated thought process around the various options for the HPC business? Both strategic, but also, you know, fundamental as you continue to run the business. I realize you've had comments in the press release and the prepared remarks around still looking for strategic alternatives, but can we just dig a bit deeper into the potential outcomes that you're seeing, you know, weather changing and tariff backdrop evolves those potential outcomes and just any sort of update on how you see the past year? David Maura: I mean, the short answer is no because I'm not gonna discuss M&A or opportunities on a live public call. A more broad response to your question would be, it's pretty obvious when you're dealing with $450 million of tariff headwinds that it will sideline a process, with strategic parties for completing a synergistic, you know, merger, if you will. And so we had a very robust process, you know, about a year ago at this time. That got derailed by trade policy out of the United States. We pivoted to run the business to maximize cash. We're taking the fixed expense base of that business down to base deal with the realities of the current economic situation. We've materially diversified the supply chain there, made it more resilient and less reliant on China. We're gonna improve the profitability of appliances in fiscal 2026 as we move the company forward. And we're telling you that as the trade situation becomes less volatile moving forward and macroeconomic headwinds subside, we are excited to resume strategic discussions around finding a strategic solution for the business, which we believe there are many. Frankly, this industry is littered with small competitors that are subscale. Barely profitable, and most of them over-levered, and some of them will go bankrupt. Intend to capitalize on that because we're the strongest player in the space. Chris Carey: Helpful. Thank you. Just on, you know, follow-up on the pet category. You've worked through a period of intense competitive activity including from some large private label competitors. You know, where are we, you know, in the journey of the pet business? And, you know, I think you've sounded a bit more confident about shelf placement and some stabilization and go forward potential and return to growth. So can you just maybe help us understand the journey and how you see the next twelve months? David Maura: Yeah. Really happy. Thank you for that question. And, you know, I'll turn it over to Faisal when I'm done for any additional remarks. But look, we are thrilled because we've infused that business with some new talent. It's got some new direction. It's got a higher level of energy to it. The team is embracing a more data-driven consumer insight. I would tell you geographic, category, specific, analysis of that business. In terms of your comment on private label, yeah, we saw some competition there. You know, post-COVID, the entire pet industry has kinda been in a recession. We were able to kinda reset some mods and some shelf space with some major players just a few months ago. We're seeing much better trends now with that done in terms of takeaway, POS, and frankly, shipments been improving pretty consistently. So that's why you hear a much more bullish outlook for the business looking into 2026. But more importantly, you know, there were branded ankle biters that entered into this space. Anybody that had access to, you know, social media and the Chinese product could kinda come in here and nibble at you. We are seeing people go by the wayside. And we are seeing products like Nature's Miracle really take a lot of market share because the product actually works, does what it says, and a lot of competitive products simply does not. So, look, I think it's still early innings. We're making incremental progress, but, you know, we are launching a lot of new product. We are getting a better response from the retail customer and consumers seem to be buying our product at a greater rate. And then quite frankly, I think this is gonna be a fantastic M&A platform. My vision of getting us to $3 billion of revenue and $500 million of EBITDA in PAD is unchanged from the prior call. And in fact, I'm seeing more and more assets come to market at better price. We have missed on a few of them because we simply refuse to overpay. But we will find highly synergistic businesses that complement this platform from both a cost synergy and revenue synergy standpoint. And I'm really looking forward to that opportunity to capitalize on it. Appreciate the question. Faisal, did I miss anything? Faisal Cutter: Well, I think you've covered it. The only thing I'll add is just if you look at our performance through the year, you kinda see the signs of stabilization and how our Q4 certainly seem to be heading in the right direction for the global pet care business. And we do feel that's the one business that returns to growth faster just based on where the category stands. And to David's point, how our products have recently done in each of the categories that we play in. And we also have expansion opportunities like we referenced in our prepared remarks about expanding into adjacent categories. There. So a lot of opportunity for the global pet care business. Chris Carey: Okay. Thanks, guys. Faisal Cutter: Thank you. Thank you. Operator: Thank you. Our next question coming from the line of Bob Labick with CJS Securities. Your line is now open. Bob Labick: Good morning. Thanks for taking our questions, and congratulations on solid execution in a obviously, really tough year. David Maura: Hey, Bob. How are you doing, man? Bob Labick: We're well. Thank you. Yeah. No. Good. As I said, nice job. It's good to chat again. To start. I know this is a kind of a category and product basis question, so maybe we can dig in a little. And the question is, how much is pricing going up at retail, you know, for your categories, products, etcetera, in kind of in aggregate? And when do you expect to get clarity on consumer acceptance of that? And, you know, how has that been playing out so far? David Maura: Yeah. Great question. Look. I'm kinda stunned at how little pricing we actually had to take. You know, I thought, you know, February, March, you know, when I was hardly sleeping, staring at $450 million of challenges that we have to take a lot more pricing than we actually did. But, you know, that resulted in us having to take a lot of internal pain and make some very difficult decisions to remain competitive at shelf. We had to take down, you know, fixed cost salary headcount, and that's not fun to do. You know, it But we've done it, and it's in the past. We'll continue to address the fixed cost structure of the company going forward, strictly corporate overhead, and we're gonna be aggressive on that as we move through 2026 and complete the S/4HANA implementation in Europe. But, you know, again, you know, in my opening remarks, I thanked our supply base. You know, we've worked really hard with our suppliers to remain competitive particularly given the consumer landscape. And our retailers and so it's really those three levers. Right? Working really hard with your vendor base. Frankly, taking out internal costs and being more efficient with what you have and then taking a little bit of price at retail. The greatest price increases came on the durable side on appliances. We were the first to move there, believe it or not. And, you know, I don't think anybody in that space actually knows their numbers. I think you're still figuring out elasticity of demand, particularly in the North America market. I think we took our pain early. And, frankly, I think we're gonna capitalize on that now going forward. But we got our work cut out. I appreciate your comments saying that we executed pretty well. I'm not pleased with the performance yet, but I'm sure looking forward to getting into 2026 and seeing how we do. So appreciate the question. I'll turn it to Faisal if I missed anything. Faisal Cutter: No. I think you covered everything, and I think I'll just reiterate the point that we took our medicine early for our HPC business. And that's where we saw a lot of the impact of price elasticity, which should play in our favor going forward as the rest of the market kinda come up because I think everyone will have to eventually take price there. Bob Labick: Okay. Great. And then just, you know, for my follow-up, and what do you see as the keys for you? And maybe you addressed it earlier, I guess, with new products a little bit, but maybe dig into, the keys to returning to above category growth over the coming years because I know that's, you know, been how you've operated in the past and generally as a goal. So maybe know, what's it gonna take to get back there? Above category growth in your categories? David Maura: No. It's a great question. Look. We still have to do a better job on the commercial side. And that's what we're trying to do here. And that's quite frankly, that's where in the early innings of, I think, in PET, and, hopefully, that story can evolve the narrative that I think it can be, which is, look. We have phenomenal products. We need to do a better job, and it's in process right now. It's what I'm most excited about, about letting the consumer know that. And the most effective way we can do that is by making claims that resonate with the consumer and get a better packaging and communicate that on shelf is always gonna be our better best market. And we've gotta continue to drive digital. We gotta continue to drive social media. And that's omnichannel. And, you know, we are seeing early success there. It's still early innings, but Bob, that's, you know, away from operational excellence. Supply chain management, working capital management, fill rates, all the rest of that we've taken three years getting right. We have still not gotten to the level that I wanna be at from a commercial standpoint. And it's innovation, it's advertising and marketing, and it's really getting efficient returns on that spend. We over the last couple of years, we've allocated a lot more resource to R&D, marketing, advertising. This year, the teams are challenged to figure out hey. Look at all those line items, guys, and get more on the spend you're making and figure out where the deadweight is and get rid of because, you know, it's you gotta do more with less in this market. So we're gonna be more efficient with it. We're gonna get more out of it, but it is an exciting opportunity for us. We're not there yet. Bob Labick: Got it. Super. Alright. Thanks. Faisal Cutter: Thank you. Operator: Our next question coming from the line of Ian Zaffino with Oppenheimer. Your line is now open. Ian Zaffino: Hi. Great. Thank you very much. You know, just want to ask you on the tariff side and how you're thinking about it if we move back to a no tariff or kind of a pre-liberation day. Tariff scenario, is there get back to price? Can you keep anything? How do we think about that as because I know you've taken a ton of different actions. And so I want a little color on you know, how it would play out if things do get overturned. Thanks. David Maura: Hey, Ian. I can only deal with the facts in front of me. You know, don't mean to be aggressive with the answer, but been a Super Bowl year. I've dealt with, you know, 16 different tariff rates all at, you know, weeks apart. We've been really aggressive in responding to all that. I have no belief that tariffs will go back to zero at all. And, you know, if they do, I'll deal with it then. I really that's how I see it. Ian Zaffino: Okay. And then, you know, just maybe as a follow-up, looks like aquatics you know, held in, you know, relatively well. And this has really been in kind of a category that's just been, you know, somewhat tough for you guys, especially on the hard good side. You know, are you noticing any changes in the consumer or maybe is has anything driven that? Is that just coming off of a very low base? Maybe any kind of color you could give there. Thanks. David Maura: Man, we're the world's largest player in Tetra. We have the best brand. You know? It's recognized without having to advertise. Right? You don't need any awareness. We've got a great product. Frankly, I'm excited about the new leadership in Pet because I think we have a price pack architecture issue. And I think we have a lot of opportunity there. We're doing better in Europe than we have in North America. Kids like to live on these iPhones all day long. You know, they don't like taking care of fish tanks. The hobbyist community has been the install base. Need to do a better job communicating that kids actually love aquariums. Taking care of fish teaches responsibility, and it's actually a very therapeutic thing to do with the family, and it's an enjoyable thing to have in your household. Ori's got a big task in front of him. He's addressing it. But we are the leaders, and we are responsible for changing the narrative in that space. And driving growth no matter what the external environment is. Doing a decent job in Europe. We gotta get a better job going here in North America. Hope to achieve that during fiscal 2026. Ian Zaffino: Alright. Thank you very much. David Maura: Thank you, sir. Operator: Thank you. Now last question are coming from the line of Steve Powers with Deutsche Bank. Your line is now open. Steve Powers: Great. Thank you, David, Faisal, good morning. Couple of cleanups. Last quarter, I think you exited with about $20 to $25 million annualized in tariff headwinds that related to the EU and Southeastern Asian markets that you hadn't mitigated at the time? Just maybe an update on any steps you've taken to address those costs and whether you feel like you have addressed them going into 2026. You know, maybe start there. David Maura: No. I think we've eliminated most of them. I think there's two different numbers that we're giving you. Right? We're giving you the gross exposure was $450 million. You know, if that was at $145 out of China plus all the other countries. Right? Then we're giving you an updated one because China rates lower and so apples to apples, that's, like, $70 to $80 million. But we're telling you we've mitigated the vast majority of it. And then we're also telling you that, you know, look, you know, things move around so much, man. I used to have $120 million of exposure out of China just on pet. I think I just told you on this call that my gross exposure on it global purchases for my two most high-value businesses, which is Global Pet and my home and garden business are somewhere between $15 to $20 million by the end of 2026. I mean, we've really worked this thing down to nothing. And, you know, we'll continue to flex it around whether it's Cambodia, Nam, US, where we can do it. But that's where it economically makes sense for us today. Faisal, if I mess the messaging up please clean up what I said. Faisal Cutter: You're exactly right. And we have for the most part, we've taken most of the actions including pricing actions everywhere. There's a little bit more to do getting into next year, but we'll do that with a combination of, again, cost reductions supply base changes, supplier concessions, as well as pricing. But the majority of it, the vast majority of it is fine. Steve Powers: Perfect. Thank you. And so two other if I could. Just one is just your category growth expectations in '20 relative to your call your own call for low single-digit top-line growth, just you know, how you think, like, end market demand compares to your top-line expectation. And then separately, you know, as you think about rolling out S/4HANA to I think you've mentioned moving that into HPC, David. Just any implication there on your ability to pursue strategic solutions there while that's in flight? You know, just you know, does that delay you know, or cause any impediment to moving strategically as that business as that is project is underway? And then are you able to implement it in such a way that it's sort of modular enough to potentially carve out if a separation is the ultimate solution. Thanks. David Maura: No. It's a great question. Appreciate you answering I'll take the second one. Faisal will touch on the first one. Look, the whole goal of S/4HANA is to get those single source truth and quit using, you know, 10 different systems all over the place. And run the company more efficiently and then liquidate, quite frankly, corporate costs. Right? You know, AI, the whole movement's to be more efficient. Period. End of story. We're basically done with that in North America. We still have to get the synergies for it. Europe is rolling that out. You know, HPC is on a bunch of different platforms. You know, it's been a series of acquisitions over twenty years. You know, putting that on a single source of S/4HANA is actually gonna create a lot of efficiencies and create a platform there that enhances the business. It will in no way slow down anything that we have on the table now or in the future for strategic solution. We will pursue that. And if we find something great, we're gonna execute it, and you'll hear about it then. But in the interim, it actually will make that business more valuable to any potential partner in the future because it will have a more dynamic operating infrastructure that can actually be more plug and play, which is, quite frankly, where the industry needs to go. There are way too many subscale players selling product from the same supply chain. There are way too few retailers. That space makes no sense in its current configuration. And, again, I think S/4HANA will be not only a great enhancement to the operating income and efficiency of the company that is in existence today, but will actually enhance it as an M&A partner for future combinations. That's my opinion. Faisal? Faisal Cutter: I'll just maybe address the category question. So I think the home and garden category remains strong, but it's weather dependent. Like we said, we expect a more normalized weather year next year, and that automatically gives you growth over this year. On the global pet care categories, aquatics, I think we're seeing signs of bottoming out, and it's kind of flattening and turning around. Same with our companion animal area. I think we're starting to see the category stabilize. Our growth is also dependent on just expansion in our own portfolio, including in adjacent categories. As well as just gaining market share. We're actually seeing our products perform and our brands perform better in the marketplace. Home and personal care is the one category that remains under pressure. It will be for both Europe and North America going into next year. We have to see what the market does from a pricing perspective. I think our competitors will come in the market with the price, and then the next few months, we should see all that play out. So that should in the second half of the year, play out to our advantage. But in the short run, that category remains very challenging for us. Steve Powers: Okay. Perfect. Thanks for all that. Appreciate it. David Maura: Thank you. Operator: Thank you. And that's all the time we have for the Q&A session. I will now turn the call back over to Jen for any closing remarks. Jen Schultz: Thank you. With that, we have reached the top of the hour, so we will conclude our conference call. Thank you to David and Faisal. And on behalf of Spectrum Brands, thank you for your participation this morning. David Maura: Thank you. Everyone have a good day. Operator: This concludes today's conference call. Thank you for participation. You may now disconnect.
Operator: Good morning, and welcome to our third quarter 2025 earnings call. As a reminder, this call is being recorded. A webcast replay of today's conference call will be available on our website at lanternpharma.com shortly after the call. We issued a press release before the market opened today, summarizing our financial results and progress across the company for the third quarter ended September 30, 2025. A copy of this release is available through our website at lanternpharma.com, where you will also find a link to the slides management will be referencing on today's call. We would like to remind everyone that remarks about future expectations, performance, estimates and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Lantern Pharma cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated. A number of factors could cause actual results to differ materially from those indicated by forward-looking statements, including results of clinical trials and the impact of competition. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in our annual report on Form 10-K for the year ended December 31, 2024, which is on file with the SEC and available on our website. Forward-looking statements made on this conference call are as of today, November 13, 2025, and Lantern Pharma does not intend to update any of these forward-looking statements to reflect events from circumstances that occur after today, unless required by law. The webcast replay of the conference call and webinar will be available on Lantern's website. On today's webcast, we have Lantern Pharma's CEO, Panna Sharma; and CFO, David Margrave. Panna will start things off with introductions and an overview of Lantern's strategy and business model and highlight recent achievements in our operations, after which David will discuss our financial results. This will be followed by some concluding comments from Panna, and then we'll open the call for Q&A. I'd now like to turn the call over to Panna Sharma, President and CEO of Lantern Pharma. Panna, please go ahead. Panna Sharma: Good morning, everyone, and thank thank you for joining us to hear about our third quarter 2025 results and corporate progress. As many of you have heard me say in the past, computational and AI-driven approaches are increasing their presence and usage at both large and emerging pharma companies for all facets of drug discovery and development. Lantern's leadership in the innovative, efficient and pragmatic use of AI and machine learning to transform the process of developing precision oncology therapies should yield significant returns for investors and for patients as our industry matures and adopts an AI-centric data-first approach to drug development. This past quarter has been transformative in many respects for Lantern Pharma, a quarter where we have met many clinical, regulatory and validation milestones. And we have also significantly advanced the commercial availability and launch of our AI modules. The third quarter of 2025 represents a pivotal inflection point for Lantern Pharma. We've made significant advancements across our clinical stage portfolio, while simultaneously expanding the capabilities of our proprietary AI platform, RADR. And we've also set up the future of our CNS-focused subsidiary, Starlight Therapeutics. These achievements position us well for multiple value-creating catalysts in the coming quarters and years. Let me share with you some of the more notable achievements this past quarter. Let me start with what I believe is our most significant milestone to date clinically. Our LP-184 Phase Ia clinical trial successfully achieved all primary endpoints, demonstrating a 48% clinical benefit rate in evaluable cancer patients who received doses at or above the therapeutic threshold. What's particularly exciting is that we observed marked tumor reductions in patients harboring DNA damage repair mutations, specifically in CHK2, ATM, and STK11/KEAP1 genes. This validates our AI-driven precision medicine approach and the hypothesis of synthetic lethality and DNA damage repair that guided this program from the start. On the regulatory front, we completed a productive FDA Type C meeting for our subsidiary, Starlight Therapeutics, a company is focused entirely on CNS cancers. The agency provided clear guidance and pathway clarity for our planned pediatric CNS cancer trial targeting an ultra-rare brain cancer, ATRT. Importantly, the FDA confirmed our strategy to combine LP-184, which we will call STAR-001 in this indication with spironolactone based on our preclinical synergy data. We also made important progress across our broader pipeline. Preliminary Phase II data from our LP-300 HARMONIC trial were presented at the 66th Annual Meeting of the Japan Lung Cancer Society. We're planning a more comprehensive data update via webinar this December. For LP-284, our non-Hodgkin's lymphoma program, we showcased clinical data at the 25th Annual Lymphoma, Leukemia and Myeloma Congress. The presentation generated interest from both biopharma companies and clinical investigators, and we've initiated several discussions around combination therapy opportunities. Building on the Phase Ia results from LP-184, we're now positioned to advance LP-184 into multiple targeted Phase Ib, Phase II trials. Our precision biomarker-driven strategy will focus on 4 high-value indications, triple-negative breast cancer, non-small cell lung cancer with KEAP1 or STK mutations, bladder cancer with DNA repair deficiencies and first recurrent GBM. Collectively, these indications represent a combined annual market potential exceeding $7 billion. To provide additional insight into the LP-184 data and our development plans, we're hosting a KOL-led scientific webinar on November 20 at 4:30 Eastern. Dr. Igor Astsaturov from Fox Chase Cancer Center will join us to discuss the clinical results and what they mean for the future of this program. Beyond our clinical programs, we demonstrated the commercial readiness of our RADR AI platform at the inaugural AI for Biology and Medicine Symposium. We showcased several platform modules as deployable, highly scalable web accessible AI tools that can be licensed to biopharma partners and research centers. It's an important step in our strategy to monetize the technology that powers our drug discovery efforts. Finally, I want to emphasize our continued commitment to disciplined capital management. As of September 30, we had approximately $12.4 million in cash, cash equivalents and marketable securities. Based on our current operating plans, we expect this provides runway into approximately the third quarter of 2026. Before we turn to the financials, let me provide some color and details around our programs, both our drug programs and our growing program of AI modules, which we believe have the market potential of several hundred million on their own as AI tools and services. First, some context on the Phase Ia trial. This is a first-in-human study that enrolled 63 patients, a fairly large number given that we started at a very low dose and escalated upwards. This was in advanced solid tumors who had exhausted all standard treatment options, which is fairly normal for Phase I studies. These are heavily pretreated cancers, oftentimes in very difficult to treat tumors. The trial, which you can find on clinicaltrials.gov as NCT05933265, successfully met all of its primary endpoints. The headline number that I want you to focus on is this. We observed clinical benefit with 48% of evaluable patients who were treated at or above the therapeutic dose threshold. In a Phase Ia trial in heavily pretreated patients with advanced disease, that's a unique and promising signal of activity. But what's even more compelling is where we saw that activity. The data validated our core hypothesis about synthetic lethality. Patients whose tumors harbor specific DNA damage repair mutations, particularly in CHEK2, ATM and also STK/KEAP1 and actually also BRCA showed marked tumor reductions. This is what exactly what our RADR platform predicted well before starting this trial. And seeing it play out in actual patients is tremendously validating, but also very uplifting for our team where we can see how AI is being used for good and having a real-world impact on improving and changing outcomes. For us, this also gives us a very clear safety standpoint. LP-184 demonstrated a favorable profile with minimal dose-limiting toxicities. This is critical because it gives us flexibility. We can now pursue both monotherapy approaches and combinations with agents that we have identified as synergistic such as PARP inhibitors and immunotherapy, also spironolactone. Both -- these all have been predicted through our AI platform, again, as I note, before the trials even began. Let me give you a few clinical examples that really illustrate the potential here. In recurrent GBM, one of the most aggressive in treatment-resistant cancers, 2 out of 16 patients showed disease stabilization despite prior exposure to multiple therapies such as TMZ, lomustine and radiation. In GBM, as you will learn during our webinar on the 20th, we have the flexibility to modulate and enhance the efficacy of LP-184 by a factor of 3 to 6x, a potentially game-changing improvement. Even more encouraging, 2 patients at a dose level 10 have now maintained disease control for over 8 months and remain on treatment today. This is much more durable than has been expected for most Phase I studies. We also saw durable clinical benefit in other notoriously difficult tumor types, gastrointestinal stromal tumors and thymic carcinoma. These aren't common cancers, but they're devastating when they occur and options are extremely limited. Our work in these rare cancers has also encouraged us to double down on our desire to transform the world of rare cancers and develop an open access tool for rare cancer drug development, codenamed withZeta, which I'll talk about a little later this morning. Transitioning to clinical expansion. So the obvious question is this, what do we do with these results? And this is where our AI-driven development strategy really shines and demonstrates its value. Rather than pursuing a traditional broad Phase II basket type trial, we're taking a precision medicine approach. We're positioning to launch in 4 targeted Phase Ib, Phase II trials. Each one focused on a specific biomarker-defined patient population, where LP-184 has the highest probability of success and the best synergy agent for that particular tumor indication. One of these trials in Denmark in recurrent advanced bladder cancer is an investigator-led study. We have made this molecule into a portfolio of opportunities using data and precision oncology approaches. So let me walk through these quickly. The first one is in triple-negative breast cancer. It's our largest market opportunity, almost $4 billion. We're pursuing 2 parallel approaches, one in monotherapy with DNA repair gene mutations and a combination study with a PARP inhibitor, olaparib, specifically in BRCA-mutated patients. We've already received FDA Fast Track designation, which will expedite our development time line. We expect to enroll approximately 60 patients across both arms upon full enrollment. Second, non-small cell lung cancer with KEAP1 or STK11 mutations. This is a genetically defined subset of lung cancer who typically have very poor responses to immunotherapy. We're combining LP-184 with nivolumab and ipilimumab, 2 checkpoint inhibitors in patients with low PD-L1 expression. This represents, we believe, just in the U.S., close to $2 billion and probably closer to $3-plus billion globally. Again, we have an FDA Fast Track designation submission in process, and this trial will enroll approximately 34 patients. Third, an investigator-led trial in bladder cancer, recurrent advanced bladder cancer. This is being led by Dr. Pappot at Rigshospitalet in Denmark. It's focused on patients with advanced urothelial carcinoma who have specific markers indicating DNA repair deficiency. This represents, we believe, about a $500 million-plus global market opportunity, and we expect to enroll about 39 patients. Finally, first recurrent GBM, which we're pursuing through Starlight Therapeutics. Here, we're combining LP-184, which we will call STAR-001 and CNS indications with spironolactone. This combination showed synergistic activity in our preclinical models. We have both FDA Fast Track and Orphan Drug Designation for this indication. This trial will use a Simon 2-stage design with 2 separate arms based on IDH mutation status. We expect to enroll about 38 to 40 patients and represents what we believe is about $1 billion in U.S. market and probably closer to $2 billion globally. When you add up these indications, they represent a combined market opportunity exceeding $7 billion. And critically, each trial is designed with biomarker-driven enrollment criteria that increase our probability of success. In fact, as you've probably heard me say in the past, biomarker-driven cancer trials increased the success by 4 to 12x. Now rather than pursuing broad basket-like development, we're taking a very directed approach investing our resources exclusively in patient populations where the Phase I data and our AI-driven RADR insights predict meaningful clinical benefit and where there is real commercial opportunity and patient need. This is precision oncology at its best, using AI to identify the right patients in the right indications with the right combination drugs. And it all flows directly from what we learned in the Phase Ia trial, which was also heavily supported and predicted by the in silico AI work of our team and with multiple publications prior to that. Now let me turn to our LP-300 program and the HARMONIC trial, which addresses a significant growing need in lung cancer, lung cancer and never smokers that have progressed after treatment with TKIs. This is an important distinction. In Asia, never smokers represent 33% to 40% of all cases compared to only about 15% to 16% in the U.S. and Europe. This demographic reason is one of the reasons why we expanded this trial into Japan and Taiwan. It gives us access to the patient population, and it gives access to pharmas who want to develop therapies for this population. The market opportunity here is substantial globally, approaching $4 billion annually, and there are no current therapies approved for this patient population. But it is a space that more companies are interested in and are developing interested -- and are developing interest and are trying to approach it with various targeted combination opportunities. There's a real white space here that we're going after and the potential even to get to an earlier line of treatment. We completed enrollment in Japan this past quarter at 5 clinical sites, and we presented data at the 66th Annual Meeting in the Japan Lung Cancer Society, which was presented by Dr. Jonathan Dowell from UT Southwest. Now the preliminary data from this trial, which we've already shared publicly, showed 86% clinical benefit rate, which is very encouraging. And we have one patient who has demonstrated a durable complete response with survival continuing for nearly 2 years, a remarkable outcome. I think we have another patient, which is now approaching a year. Now we're planning a more comprehensive webinar in December before the year closes where we'll present additional patient follow-up data and clinical readouts from both the Asian and U.S. cohort. This will give us an opportunity to discuss the data in much greater depth and provide regulatory strategy insight and positioning moving forward. I should also mention that during the third quarter, we made a strategic change in our clinical operations in Asia. We transitioned our CRO services in Taiwan with a specific focus on cost reduction and operational efficiency. In Japan, we supplemented our team by bringing more activity in-house. This is part of a broader commitment to disciplined capital management and efficiency while maintaining the quality and integrity of the trial. The strategic positioning of Harmonic also opens doors for potential regional partnerships in Asia and co-development opportunities where the never smoker population is most prevalent. Now let me turn to LP-284, a program targeting recurrent non-Hodgkin's lymphoma, which has generated interest from clinical communities and also from biopharma to approach combination approaches. This is our first in-human trial for LP-284, which we expect to enroll about 30 to 35 patients with aggressive recurrent non-Hodgkin's lymphoma, including mantle cell and high-grade B-cell, where we have orphan indications for both. This represents a global market opportunity of about $3 billion and with patients who have failed multiple prior lines of therapy and have very limited options. In fact, in October, we presented clinical data from this ongoing trial at the 25th Annual Lymphoma Leukemia Myeloma Congress in New York City. The cornerstone of that presentation was a heavily pretreated patient with aggressive grade 3 B-cell lymphoma, specifically DLBCL, who had exhausted standard therapies, and we saw a complete metabolic response with LP-284 as monotherapy after 2 doses, 2 cycles. This is exactly the kind of signal we're hoping to see and validates many of our preclinical hypothesis for this drug. It also validates the mechanistic insight, and we saw complete metabolic response and the lesions around the hips and spine completely went away. This patient has now remained cancer-free since we initially reported this result in July Q2 of this year. LP-284 has a novel mechanism of action. It demonstrates particular lethality in cells with DDR, a targetable vulnerability that's common in non-Hodgkin's lymphoma. This mechanistic differentiation is what's driving interest from partners. Now following this presentation, we've started discussions with investigators and companies around opportunities for combination therapy development with existing FDA-approved agents, post-immunotherapy treatment strategies and leveraging the 284 mechanism where current therapies are failing, especially in what's exciting indications beyond lymphoma. Based on preclinical data, we're evaluating 284 and rituximab as a potential alternative to cyclophosphamide and methotrexate in lupus, systemic lupus SLE. Our preclinical models showed that 284 reduced urinary microalbumin and kidney damage -- which is a key marker of kidney damage in lupus by approximately tenfold and depleted B cells by fourfold when combined with rituximab. We saw even greater B-cell depletion when both agents were used together. This suggests LP-284 could become a next-generation B-cell depleting therapy in a number of autoimmune diseases, which would dramatically expand the commercial opportunity for this asset. LP-284 also benefits from strong intellectual property protection. We have composition of matter patents granted in U.S., Europe, Japan, India and Mexico, providing exclusivity through at least 2039. The molecule, as I mentioned, also has Orphan Drug Designation in mantle cell and high-grade B-cell lymphomas. We're now focused on recruiting additional sites with a focus on non-Hodgkin's lymphoma and high-grade B-cell lymphomas. The momentum we're seeing with LP-284, both clinically and in terms of partner interest reinforces our view that this asset has significant opportunity, both stand-alone as a wholly owned program or as part of a strategic collaboration. And we're very open to those discussions, both again in combination in non-Hodgkin's or in other autoimmune categories. Now transitioning to our AI platform discussion. As I mentioned earlier, I want to shift gears and talk about what I believe is an increasingly important value driver for Lantern, our RADR AI platform and the commercial opportunities it represents independent of our drug development programs. For those less familiar with RADR, it's our proprietary AI and machine learning platform. And it's not just a tool we use internally. It's now a commercial asset with its own revenue potential, which is growing. The platform has demonstrated over 80% prediction success across multiple use cases, and now it's been validated in natural clinical trials through programs like LP-184, LP-284 and also with Actuate Therapeutics. In all cases, it's correctly predicted biomarker responses and in many cases, combination synergies before we've even actually enrolled a patient. We've developed 8 distinct AI-powered modules that address critical pain points in oncology drug development. And we've developed cases for these pain points, which we're now developing into modules for the broader drug development community. In October, we showcased the commercial readiness of 2 RADR modules at the inaugural AI Biology and Medicine Symposium. We demonstrated that our AI platform, PredictBBB achieves a 94% accuracy for BBB permeability prediction and can screen 200,000 molecular candidates in under a week. To put that in context, our algorithms currently hold 5 of the top 11 positions on the therapeutic data comments, and that's a best-in-class performance. We also presented our LBx-AI liquid biopsy platform, which has achieved 86% to 90% accuracy in predicting treatment response initially in non-small cell lung cancer, which will be very useful for us. And now we're extending it through collaborations with research centers into other indications as well. Both of these opportunities, we believe, are significant. Blood-brain barrier technology market alone is predicted to be close to $1 billion. And when you consider a very few percentage, 2% to 6% of the molecules actually cross the BBB, there is a need for better predictive tools, one that don't take weeks or months and end up destroying animals. So the need there is obvious and urgent. The interesting thing, PredictBBB is it also gives us access to a lot of other molecular characteristics of that compound, and we can predict a lot of other drug-like features that are important, both for drug manufacturing and also predicting potential drug activity once delivered internally. Now let me introduce Zeta. It's our multi-agentic AI platform for rare cancers. Very excited about this and what connects directly to our experience with both LP-184 and 284 in rare tumors like gastrointestinal and thymic carcinoma. It's our newest initiative. We're calling it withZeta. It's a multi-agentic co-scientist. Now here's the fundamental challenge. In rare cancer research and drug development, which often comes after molecule developed that often comes much later, the critical insights in rare cancers are scattered across disconnected data sources. A researcher or a clinician trying to understand treatment options for a patient with a rare sarcoma or a rare pediatric brain tumor has to manually search through clinical trial databases, PubMed genomic databases, drug interaction databases, molecular feature databases. It's fragmented, time-consuming and inevitably incomplete. For drug developers, this fragmentation slows discovery, increases cost and often means that promising connections between existing molecules or indications and rare cancer vulnerabilities are [Audio Gap]. What Zeta does is a multi-agentic AI system. Think of it as a co-scientist that addresses this problem head on or actually a series of co-scientists. We've integrated curated rare cancer databases and ontologies across over 500,000 clinical trials, 250,000 publications with over 1.2 million knowledge objects into an agentic large language model architecture that uses recursive reasoning loops to transform fragmented biomedical knowledge and insights into an interconnected investigational platform. And it interacts with you in plain English. So -- and it's an AI system that thinks like a scientist, connects dots across disparate data sources and can answer complex questions in minutes about rare cancers. These are things that would otherwise take researchers weeks or months to investigate manually. We'll dig into more of the details about Zeta in the coming days, and we'll have more information as -- but the key is that it will help you design and improve and optimize molecules that can target vulnerabilities or mechanisms across these hundreds of rare cancers. So you can ask questions to Zeta like what existing molecules with blood-brain barrier penetration have shown activity against mutations commonly found in a specific pediatric brain tumor and will search, reason and provide evidence-based answers with citations, and you'll be able to have it quickly pick potential combination regimens as well for that rare cancer benchmarked against successful and not successful trials across drug classes that you can help Zeta understand. And it can actually also predict potential efficacy in subtypes of that rare cancer and give you considerations that can then be taken to the lab. From an industry and business value perspective, withZeta delivers several things: Speed, smarter decision-making, novel discovery and potential for improved patient outcomes faster and most importantly, massive cost and time savings across the rare cancer drug development cycle. I'd like to think about withZeta strategically is that we're positioning Lantern as a unified team of AI co-scientists, always available, always updated for rare cancer research and drug development, a unified AI interface for complex scattered data and models that accelerates and improves novel therapy discovery and trial design. This is a tool that can shorten development timelines by months and years, particularly in rare cancers where that data is sparse and every delay means challenges and time and lives lost. By making Zeta available to researchers and clinicians over the next month, we'll establish Lantern as a central hub for rare cancer drug development and insights. This creates network effects, brings more users and data into our ecosystem and positions us as a trusted partner when those researchers need to take the next step, whether it's preclinical development, biomarker validation, clinical trial design or co-development. Now we believe our AI tools and services in the future can represent several hundred million dollars in stand-alone market potential and will attract a lot of interest in the broader big tech community, and but most importantly, lower the risks and costs associated with creating cancer drugs. And that's a very powerful complement to our drug development strategy. Now I'll turn over the call to our CFO, David Margrave, who will provide details on our financial results for the quarter. David Margrave: Thank you, Panna, and good morning, everyone. I'll now share some financial highlights from our third quarter ended September 30, 2025. Our R&D expenses were approximately $2.4 million for the third quarter of '25, down from approximately $3.7 million for the third quarter of 2024. The decrease was primarily due to decreases in research study and materials expenses relating to the conduct and support of clinical trials as well as decreases in consulting expenses and in payroll and compensation expenses. Our general and administrative expenses were approximately $1.9 million for the third quarter of 2025 compared to approximately $1.5 million in the prior year period. The increase was primarily attributable to increases in business development and investor relations expenditures as well as increases in other professional fees and increases in patent costs. We recorded a net loss of approximately $4.2 million for the third quarter of 2025 or $0.39 per share compared to a net loss of approximately $4.5 million or $0.42 per share for the third quarter of 2024. Our cash position, which includes cash equivalents and marketable securities was approximately $12.4 million as of September 30, 2025. We believe our cash, cash equivalents and marketable securities on hand as of the date of this earnings call will enable us to fund our anticipated operating expenses and capital expenditure requirements into approximately Q3 2026. We will need substantial additional funding in the near future, and one of our key objectives is to pursue additional funding opportunities. In July of this year, we entered into an ATM sales agreement with ThinkEquity as sales agent, pursuant to which Lantern may offer and sell up to $15.53 million of its common stock from time to time in at-the-market offerings to or through our sales agent. During the quarter ended September 30, 2025, we sold 212,444 shares of common stock under the ATM for gross proceeds of approximately $989,000. Between October 1, 2025, and the date of this earnings call, we've sold an additional 144,204 shares of common stock under the ATM for gross proceeds of approximately $634,000. As of September 30, 2025, we had 11,040,219 shares of common stock outstanding with outstanding options to purchase 1,218,828 shares and no warrants outstanding. These outstanding options, combined with our outstanding shares of common stock, give us total fully diluted shares outstanding of approximately 12.26 million shares as of September 30. And I'll now cover some near-term milestones that we think will accelerate value for investors. And these are several value-creating catalysts that we see in the near future. In the immediate near term, in this November, and Panna talked about this earlier, and we're very excited about this discussion. Next week, November 20, at 4:30 p.m. Eastern, we're going to have a KOL-hosted scientific webinar on LP-184 Phase Ia details from the clinical study and clinical development strategy. And in December of this year, we'll be giving for LP-300, an interim patient follow-up and additional clinical data. And then also in this upcoming quarter, we'll be discussing continued commercial developments for the AI platform modules, including the multi-agentic system that Panna discussed about withZeta for rare cancer development. And I'll now turn things back to Panna for some closing remarks. Panna Sharma: Thanks, David. As you know, we've had a number of catalysts and objectives that continue to '26, which you can see on the slide, but we'll be talking about those in follow-up meetings with investors as well. But as you can see, by integrating our capabilities in AI and bringing them to the public, we're not just building better tools. We're actually fundamentally reimagining what's possible in precision oncology, an era that I call the golden age of AI in medicine. As we advance into 2026, we're laser-focused on executing our dual engine strategy. We got really 2 powerful engines of the company. One is the ability to generate new molecules that are very precise and focused on very unique cancers. And the second engine is the engine of our AI platform that we're now ready to commercialize and make available. So we're advancing our clinical assets while simultaneously scaling our platform for commercial deployment. So I want to thank our exceptional team, our partners, our shareholders for their continued support. Together, we're lighting the way toward precision oncology solutions, solutions that can improve outcomes for cancer patients while very importantly, transforming the economics of drug development. With that, I'd like to open the call to questions and also thank our team for helping to prepare us for these calls and preparing the content. Panna Sharma: So we've a question in about tracking toward an interim event analysis for LP-300 trial. At the December webinar, we do not believe we'll be at the 31 events, which is good news because that means that patients are coming off of the trial. So the positive news is that patients are on the trial longer, but we will report out data, clinical data and insights that have resulted. We expect 31 events right now, we're tracking to be sometime in early '26, which we think is actually a very positive news. We do expect to see the Denmark trial. There's a question for the Denmark trial. That has now been approved. IRBs are set. project manager has been assigned. We expect that to start sometime either in late December or early January at one site, which is investigator-led in Denmark. Another question is that we've guided for an IND submission for the pediatric CNS program. Yes, now that the FDA is kind of back in business and looking and renewing new INDs, we're already prepared to submit that, and I expect that submission to happen here in the next few weeks. In terms of when we anticipate initial patient dosing, hard to say. We're already beginning discussions with sites, but I expect that to be sometime in early '26. There's a question about the withZeta portion of our AI platform. We will have additional news next week on withZeta, which is very exciting. Like most software, we expect the early rollout to be interesting and bumpy. We'll learn a lot from it. We've already begun using it internally. And in fact, we'll talk about this next week, but we've got a number of really exciting programs that have already been designed and are now being tested as a result of withZeta. But it will be available as select demo to collaborators and select partners. And so December will be a lot of demo and learning and broader rollout throughout January and February and Q1. Next question is for 184. Yes, for the indications, we do plan on figuring out what is the best of those indications where we're getting the biggest impact and move that into larger scale trials ideally with partners. As I mentioned, [ Boris ], all those indications are very exciting indications, and we've had interest from pharma companies. Of course, they want to see some of the early Phase Ib, Phase II data, but all of those are potentially partnerable. Next question is Zeta. Yes, Zeta was initially developed as a culmination of our internal efforts to develop drugs initially 184 and 284 for rare cancers. We wanted to go after categories where there was no therapy approved, categories there was high need, categories where we thought the mechanism would work and could be exploited. As we did that and we gathered information about some of these cancers, we said, well, we can do it for all rare cancers. There's no tool out there. In fact, when we talk to other rare cancer experts, many of the cancers we're pursuing, it was scattered. Papers were hard to get, hard to get in front of experts, hard to get data. Trials were oftentimes took way too long and standards of care often changed or the best drug often changed. And we said, this is part of the frustration in these cancers, and that's why they take time or too much money. What if you could actually have one source and then train that source to think in the way that a drug developer thinks. So yes, it was an internal effort, and now it's going to be a front-facing natural language interface tool. And I'm happy to give you [ Boris ], if you'd like peek at it and even early demo, happy to provide that to you. Another great question on STAR-001 trial design for pediatric brain tumors. Yes, I do believe that the trial design allows for inclusion of other pediatric high-grade gliomas. Yes, we designed it to allow for that, including specifically diffuse midline gliomas. Okay. If there are no further questions. I want to thank everyone for joining and very importantly, for listening in this morning. We know it's a little past the market open. So I appreciate all of you staying online. Thank you very much for your time, and I appreciate everyone's effort and also more importantly, your support as Lantern Pharma continues to transform drug development in oncology. David Margrave: Thanks a lot.
Operator: Good morning, ladies and gentlemen. And welcome to the Ideal Power third quarter 2025 results conference call. At the end of management's remarks, there will be a question and answer session. Investors can submit their questions anytime within the meeting webcast by typing them into the Q&A button on the left side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, as a reminder, this event is being recorded. I would now like to turn the conference over to Jeff Christensen. Please go ahead. Thank you, Jenny. Jeff Christensen: And good morning, everyone. Thank you for joining Ideal Power's Third Quarter 2025 Results Conference Call. With me on the call are David Somo, President and Chief Executive Officer, and Tim Burns, Chief Financial Officer. Ideal Power's third quarter 2025 financial results press release is available on the company's website at idealpower.com. Before we begin, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and company prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described on the call. Please refer to the company's SEC filings for a list of associated risks. We would also refer you to the company's website for supporting company information. Now I'll turn the call over to Ideal Power's President and CEO, David Somo. David? David Somo: Thank you, Jeff. I appreciate everyone joining us today. I couldn't be more excited to join you today for my first Ideal Power results conference call. As many of you know, my new role was announced last week. That said, I want to touch on a few things before handing the call over to Tim Burns. We look forward to your questions after our prepared remarks. I'd like to briefly discuss why I took the role at Ideal Power and then I'll discuss my approach and near-term plans. First, why did I take the CEO role here? Ideal Power has created a compelling and customer-validated solution addressing secular high-growth power applications emerging in the data center, industrial, and automotive markets where power efficiency, power density, and cost are key requirements. There is a multibillion-dollar addressable market for our B-TRAN technology. With the ongoing electrification of our society, we are commercializing our technology at an opportune time by delivering innovative and enabling power semiconductor solutions for a broad array of growing and B-TRAN enabled applications. Obviously, I have high confidence in Ideal Power, or I wouldn't have joined. I want to commend and thank my predecessor, Dan Brdar, for his leadership and strong contributions in guiding the company to where it is today. Second, I see Ideal Power as a technology innovator with its B-TRAN technology, that enables inherent advantages in delivering ultra-low conduction losses, improved power efficiency and power density, and bidirectionality. All on widely deployed low-cost silicon. These are competitive differentiators as we begin to commercialize our B-TRAN solutions with customers. Third, I believe I can help Ideal Power to accelerate its commercial opportunities. I know Ideal Power's markets from my more than thirty years of experience in the semiconductor industry spanning a variety of end-use markets, including data centers, industrial, and automotive. I plan on leveraging my extensive commercial experience and relationships to drive revenue growth in our target markets. Revenue is a priority. I'm sure you are wondering what I plan on doing. David Somo: What you should expect from me. Having joined Ideal Power just last week, and spending time getting my hands on the details of the business. Feedback from our customers during the next several weeks, I will be listening closely to distributors, suppliers, and the outstanding team here at Ideal Power. Because I like to be highly visible with customers, both existing and prospective, I'll be meeting with them to understand their priorities, opportunities, requirements, and listen to their feedback about our technology and their applications. I'll review our opportunities, progress, road map, and strategic initiatives. Those discussions will deepen my understanding of our business and enable me to fine-tune our vision and strategy going forward. Building on the strong foundation that is in place today. Upon completion of that process, I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth including my perspective for product commercialization. Before setting expectations, I want to take the necessary time to thoroughly understand the current state of our business. As an organization, we will strive to execute in all aspects of the business with rigor, discipline, and a strong sense of urgency. We will endeavor to execute on what we communicate not put ourselves in a position to have to reset expectations. Goes without saying that this is important to establishing and maintaining credibility. One thing is abundantly clear. With the strong foundation in place from which to drive our future growth, I'm not going back to the drawing board. We're well-positioned to drive long-term value creation for our customers, suppliers, employees, and stockholders. In closing, I look forward to partnering with Tim Burns, our CFO. I'd like to recognize the entire team for the third quarter progress and results. I'd also like to thank my predecessor, Dan Brdar, for assisting with the transition and providing a strong foundation for our growth. I'm thrilled to be joining Ideal Power at a time when the company has such exciting opportunities ahead. Now I'd like to turn the call over to Tim Burns to discuss our recent progress. Tim? Tim Burns: Thank you, David, and good morning, everyone. Since David just started last week, I'll share an update on our progress since the start of the third quarter. First, we secured a purchase order from Stellantis in late August for custom development in packaged B-TRAN devices targeting multiple electric vehicle applications. We successfully completed our first of five deliverables under the purchase order in late September. The remaining deliverables are expected to be completed next year. Second, we expect Stellantis to award us with a multiyear EV contactor program. As part of the program scope, Stellantis has told us they want to install B-TRAN based contactors in Stellantis test vehicles potentially as early as late 2026. We'll know more about the scope and timing specifics as we work through the program details with Stellantis in the coming months. This program has broad and substantial potential as Stellantis recently shared with us that they are evaluating the deployment of B-TRAN based contactors across all of their EV models and platforms. Third, we are engaged in early discussions with a sixth global automaker. This automaker is evaluating B-TRAN for next-generation high-voltage EV power switching and protection applications where bidirectionality and low conduction losses enable more compact, reliable, and efficient vehicle and charging architectures. We will share further updates on this opportunity as the engagement progresses. Fourth, our first design win customer has successfully completed tests of the updated solid-state circuit breakers that we provided them during the third quarter. We're currently working with them on the finalization of their product design as they prepare for end-customer sampling and production. Fifth, we shipped additional solid-state circuit breaker reference designs to large potential customers including a global power management market leader in Asia. Reference designs are an important part of our commercialization strategy as B-TRAN is a new technology and customers are eager to get hardware in their hands that demonstrates the advantages of B-TRAN in their target applications. Sixth, we increased the power rating of our discrete B-TRAN product by 50% and commenced shipment of these devices with a higher power rating and power density. Development has sparked greater interest from both existing customers and new prospects in our sales pipeline as it aligns well with the market moving to higher power architectures for many applications. Seventh, we continue to expand our global reach, adding our first direct salesperson in Asia. He's already conducting face-to-face meetings with current and prospective customers. Interest in B-TRAN is growing across Asia, which is the world's largest market for power electronics. Excited about the opportunity for B-TRAN in this region as Asian companies typically adopt new technologies faster than their European and American counterparts. Eighth, third-party automotive qualification in testing of B-TRAN devices is well underway with more than a thousand packaged B-TRAN devices from multiple wafer runs. Early test results are positive with zero failures to date. As a new semiconductor device without a long operating history, third-party reliability testing and the data it generates is key for both industrial and automotive customers as they evaluate and adopt B-TRAN for their applications. Moving on to the initial market for B-TRAN, the industrial markets, in particular, solid-state circuit protection for data centers, microgrids, industrial facilities, and grid infrastructure. Our first design win customer is one of the largest circuit-protected equipment manufacturers in Asia, serving data centers, industrial and utility markets, and renewable energy applications. As we have previously mentioned and based on the first design win customer's projections, initial product from this customer could translate to several hundred thousand dollars of revenue for Ideal Power in its first year sales with the opportunity to exceed a million dollars in revenue for us in the second year sales. Importantly, this marks only the beginning. The initial product is anticipated to be the first of multiple products from this customer that will incorporate B-TRAN into solid-state circuit breakers. This customer provides a variety of circuit breaker products across various power ratings, and it is expected that they could expand their portfolio to add a full family of solid-state circuit breakers in ratings similar to their current family of electromechanical breakers. Discussions of other B-TRAN enabled solid-state circuit breaker products have already started, and our team recently built the solid-state circuit breaker prototype with a higher rating to share with this customer. Looking briefly at innovation, we increased the power rating of our discrete B-TRAN product by 50% in commencement shipment of these devices with a higher power rating and power density. This development has sparked greater interest from both existing customers and new prospects in our sales pipeline. Our approach to power ratings of our products is deliberately cautious. An approach that has been well received by our customers as we bring new solutions to their markets and applications. As we accumulate more testing hours and go through additional reliability testing, including the ongoing third-party automotive qualification testing, we're finding that we have more than ample margin in our design to increase the power rating of our products. Elevated product ratings will expand our SAM to include additional applications. It will also strengthen our product's competitiveness in the marketplace as it translates to smaller, lower-cost OEM products for customers to choose B-TRAN as their power semiconductor solution. We previously mentioned that orders near term are not dependent upon the successful completion of automotive qualification. However, achieving third-party automotive qualification would provide additional confidence among industrial customers, regarding B-TRAN's long-term reliability. We would also provide evidence of the device's reliability under extreme conditions, such as high humidity and temperature, which exceeds typical industrial application requirements. Additionally, given that engineers tend to be cautious when adopting new technologies, achieving automotive qualification could help accelerate the adoption of B-TRAN based products by early adopters in our initial target industrial markets. Our B-TRAN patent estate continues to grow. Currently, we have 97 issued B-TRAN patents with 47 of those issued outside The United States. Our patent coverage spans North America, China, Taiwan, Japan, South Korea, India, and Europe. Representing our high-priority patent coverage geographies. As a result of our continued innovation, our list of pending B-TRAN patents is now at 73. To safeguard our intellectual property further, we treat the proven double-sided wafer process flow we developed to make our devices as a trade secret and do not disclose the identity of work under strict confidentiality with our wafer fabrication partners. Even if a competitor studied our patents, they wouldn't have the know-how to fabricate the device. Next, I'll discuss our financial results. Our third quarter 2025 cash burn from operating and investing activities was $2.7 million, up from $2.4 million in 2024 and up from $2.5 million in the second quarter of this year. Our Q3 cash burn was at the lower end of our guidance of $2.7 million to $2.9 million. Our cash burn from operating investing activities for the first nine months of 2025 was $7.4 million, up from $6.6 million in the first nine months of 2024. We continue to manage expenses prudently and aggressively. We expect fourth quarter 2025 cash burn to be approximately $2.5 to $2.7 million with a full year 2025 cash burn of approximately $10 million. This compares to a 2024 cash burn of $9.2 million excluding the benefit of warrant proceeds. The higher forecasted cash burn in 2025 compared to 2024 is due to increased semiconductor fabrication spending, and hiring. Cash and cash equivalents totaled $8.4 million at 09/30/2025. We have no debt, a clean capital structure. We recorded modest revenue for 2025 as customers continue to evaluate our technology. Initial orders from the large companies evaluating our products for potential inclusion in their OEM products will be small with order sizes increasing as customers start to prototype their OEM products, progress through their design cycles, and build inventory for the rollout of their B-TRAN based products. Operating expenses were $3 million in 2025 compared to $2.9 million in 2024 with the increase due to higher wafer fabrication costs at our second foundry. We expect operating expenses to increase modestly in the coming quarters due to recent and future hiring, and costs associated with our development and commercialization efforts. We also continue to expect some quarter-to-quarter variability in operating expenses particularly our research and development spending. Due to the timing of semiconductor fabrication runs, product development, other research and development activities, and hiring. The timing of equity grants and related stock-based compensation expense will also cause variability in our quarterly operating results. Net loss in 2025 was $2.9 million compared to $2.7 million in 2024. Considering our asset-light business model, no debt, and modest planned cash burn, we have sufficient liquidity on our balance sheet to fund operations through at least mid-2026. We'll potentially see several sources of funds over the next year such as product sales, development agreements, and other commercial agreements with upfront payments. Additionally, we are exploring strategic relationships with our well-capitalized and large global partners with these opportunities strengthening as we further advance these customer relationships. As a publicly traded company, we also have access to the capital as necessary providing us with additional financial flexibility. At the end of September, we had 8,511,403 shares outstanding, 824,760 options and stock units outstanding, and 653,827 prefunded warrants outstanding. At 09/30/2025, our fully diluted share count was 9,989,990 shares. In summary, we are thrilled to share that our first design win customer has successfully completed testing of the updated solid-state circuit breakers and are now finalizing their product design as they prepare for end-customer sampling and production. We're also delighted to announce that not only securing the purchase order from Stellantis for custom development, and package B-TRAN devices targeting multiple EV applications, but also completing our first of five deliverables under this purchase order. Overall, it is an exciting time at Ideal Power and I look forward to working with David to capture the significant market potential for B-TRAN as an ultra-low loss and bidirectional power semiconductor. At this time, I'd like to open up the call for questions. Operator? Operator: Thank you. At this time, we are conducting a question and answer session. Investors can submit their questions on the left side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please. For anyone using speakerphone, we ask that you please pick up your handset before you press the keys. Our first question is coming from Casey Ryan of Park Capital. Casey, your line is live. Casey Ryan: Thank you. Good morning, gentlemen. David, welcome. Great to have you on board. Tim, thank you for this good update. So I just wanted to start with generally automotive. It feels like the opportunities are with EV platforms and the growth of those platforms. Generally. And so I just want to sort of confirm that for myself. Before we go a little further. David Somo: Yeah. Thanks, Casey. Glad to be on the call, and I appreciate the question. So automotive is one of multiple markets that we're able to sell our products into where there's a strong fit to the applications requirements. As you understand, automotive is also one of the longer development cycles and projects are typically multiyear programs. So we continue to work to I would say, move from the initial engagement through continued evaluation where we've made progress now in delivering enhanced products. To our customers. We've continued multiple stages of the development programs. And each of those is a necessary step in moving towards completing the R&D evaluation of the products and qualification then moving into series engineering and eventually landing into vehicles. On the EV side. Casey Ryan: Okay. Terrific. And then sort of on that EV track, what's driving the automakers to look for better solutions and say what they have currently or what they've had previously because, you know, generally, they must be facing some limitations with sort of existing solutions. Is it battery density or the power of the amount of electronics per vehicle? I'm sort of happy for Ideal Power, but I'm curious what sort of driving it and what sort of barriers they're running into with sort of their current solutions. And, of course, you guys are bringing a better solution to market. David Somo: Sure. Well, one of the fundamental trends in power electronics is a move to higher power architectures, and one of the fundamental ones in EV architectures is the adoption of 800-volt main battery systems. Which is driving redesign of the overall architecture and action inverter, charging systems, contactors, battery disconnect and so forth. So that's what's the reason for continuing to evaluate technologies that provide higher power efficiency, improved power density, and manage the cost. Casey Ryan: Okay. Terrific. And then sort of quickly on, like, charging stations, which I think is also a potential market for Ideal Power. I think charging stations are also moving to 800-volt systems, right, which might cause the same sort of trend where people would be interested in your solution. David Somo: Yeah. Fast DC charging stations actually continue to increase the power. To multiple kilovolts. Gets partitioned out across multiple terminals. So it does present an opportunity for us. Also, in some instances, particularly home charging, they're bi-involved where you can feed into the battery pack and then off hours feed out from the battery pack back in. That district power. So that's unique to the design of our B-TRAN technology. Casey Ryan: Okay. Terrific. That's really helpful. And then I wanted to ask about the Asian I think power management company is what we're talking about them as a customer. So it sounds like, and, Tim, you said sort of a couple $100,000 might be kind of a target range for potential revenues in year one. But what I wanted to ask was, is the product currently available for sale you know, hypothetically today, or will it start to go on sale to the commercial market sometime in '26? Tim Burns: Yeah. So it's not currently for sale. So they're finalizing their product design. We're working with them to do that right now. Don't know the specific timing whether it'll be here later this year or whether it will be next year. That's something we can cover here when we have the update call. In terms of timing. But have the updated prototypes. They've completed testing. It was successful. So those prototypes look good. And we're just waiting for them to share a little bit more on their timing specifics as it relates to their rollout plan. Casey Ryan: Yeah. Well, from my perspective, what's significant, right, is going from concept to testing to sort of turning into a commercial product as having completed cycle, I think, is really impressive. So, that's it for me right now. Thank you for the terrific update. Tim Burns: Thanks, Casey. Appreciate it. Operator: Thank you very much. I will now turn this call back to Jeff Christensen to read questions submitted through the webcast. Thank you. Jeff Christensen: Thank you, Jenny. Gentlemen, the first submitted question is any additional context around the CEO transition? Is this something that was planned for? Tim Burns: So, yes, Dan's retirement was planned. There was an extensive search that was conducted and led by our board. That Dan was involved with to identify our next CEO. And that resulted in us bringing David on board. And I'm actually really excited particularly because of his past experience in semiconductors and commercial expertise. Then it's a great time to bring him on because I think it will really help with what obviously is our priority and what's on investors' mind in terms of revenue generation. Jeff Christensen: Thank you. Our next submitted question is, how do you see the markets evolving? And this is a question for David. How do you see the markets evolving, including data centers, industrial, automotive? David Somo: Casey alluded to part of this question, but I'll give a more thorough answer here. Our B-TRAN enabled solutions from my perspective, it's Excel and high power applications delivering lower conduction losses for improved power efficiency. Smaller systems size for improved power density, bidirectionality, and an enabling lower systems cost. Power levels have continued to trend up, as I mentioned a moment ago, across these applications, including the AI data center, which is now planning a move to 800-volt rack architectures commencing sometime in 2027. Automotive EV with the adoption of 800-volt battery systems and fast DC charging. Terminals. As well as other industrial infrastructure applications that the power grid is enhanced to support these growing applications. In addition, grid to system and system to grid power transfer requires bidirectionality where there is also a growing trend to migrate from electromechanical to solid-state semiconductor enabled systems. Each of these major technology trends involve applications such as circuit breaking and protection, UPS, and battery disconnect system among others, that B-TRAN solutions excel at enabling. So in summary, we could see a continued trend towards higher power levels across these multiple applications looking for improved power efficiency, improved power density, and managing costs that are all strong fit for our B-TRAN technology. Jeff Christensen: Thank you. Our next submitted question is, do you expect the initial sales ramp and milestones to be achieved within 2025? David Somo: Having been in the seat here, a total of eight days, I'm currently spending my time deepening understanding of the details of our business. Once I've been through that process, including the opportunity for face-to-face meetings with key customers, to understand thoroughly the details of the engagements that we have with them. I anticipate scheduling a call and webcast to share more detailed information and discuss certain topics in greater depth. Including my outlook for product commercialization. Revenue is a priority, and I plan on leveraging my go-to-market experience achieved in my thirty-plus years in semiconductors across many end sectors and customers to drive revenue growth in our target markets. Jeff Christensen: Thank you. We have several investors that have submitted questions, and please submit your questions using the ask a question button. And as you think of questions, submit them. Don't, you don't need to accumulate all your questions and submit it at one time. Our next submitted question is, what is Ideal Power doing to expand the sales pipeline? David Somo: Yeah. So as discussed in our prepared remarks and shared by Tim, we have added direct sales in Asia, and are already conducting meetings with current and prospective customers. And we're excited about the opportunity for B-TRAN in the region as Asian companies generally adopt new technologies faster than their North American and European counterparts. While we continue to expand the sales funnel, we have a strong focus on closing the many opportunities available to us from current customer engagements. So having the additional sales capability on the ground in Asia is important to us. We view it as a market that can actually move faster in the adoption of new technology than some of the others. Jeff Christensen: Thank you. Would you compare B-TRAN to competitors, including silicon and silicon carbide solutions? David Somo: Yes. I think about it in this way. B-TRAN has two significant advantages. First, it has ultra-low conduction losses, meaning the higher power efficiency and improved power density. And second, it's bidirectional. These advantages translate to more power-efficient and compact customer products at lower cost compared to alternative silicon and silicon carbide power solutions that are in the market today. Jeff Christensen: Okay. Thanks. Can you provide us with any additional information on tier ones and OEMs besides Stellantis and the automotive? David Somo: Yeah. So we're engaged with several automotive OEMs and tier one suppliers as we've previously said. These prospective customers are considering a range of applications and include power switching, EV contactors, and battery disconnect units, charging systems, and inverters. With the auto industry increasingly moving to the 800-volt architectures, as I talked about earlier, my comments. The opportunity for us in this market is expanding. At this point, it also seems likely there'll be a replacement of electromechanical contactors with Solid State Solutions in EVs. Jeff Christensen: Okay. Thanks. Our next submitted question is when mentioning EVs with Stellantis, is either the drive train or contactor program likely to be included in hybrids? Tim Burns: Yeah. The way this program is really focused on vehicles, but our technology would bring the same benefits to hybrid electric vehicles. So we're obviously engaged with several global automakers, several tier one automotive suppliers, I assume once we start getting adopting EVs, hybrid is also a natural extension of that. So there's definitely an opportunity there for B-TRAN. Jeff Christensen: Thank you. Our next submitted question is a long one. Just to understand, you upgraded the power rating to 75 amps. You stated in the release that this maintains a significant design margin to a tested long-term continuous basis of 150 amps. What does that mean? How would you, at some point in time, increase to 150 amps or would you have to test it at above that at a safe design margin? Is there a standard margin that the industry uses, and how does the 75, 150 margin fit within the standard? David Somo: Sure. So I'll take that one. You can think about it in the following manner. Increasing our power rating enables customers to evaluate our B-TRAN solutions for a wider range of applications as well as increase the power rating while lowering conduction loss in existing applications their current designs. There isn't a specific industry guideline for safe design margin, however, we remain very conservative in rating the device at 75 amps we've tested it up to 150 amps. We want to ensure that we're providing the proper safety margin to our customers, and that varies by customer and by applications. But I would say that we have sufficient headroom to continue to scale the device up for higher power solutions as the trend continues in that direction. Jeff Christensen: Thank you. Our next submitted question is, please provide any color on where we stand with manufacturing. Tim Burns: Yeah. So we have two foundries as we've mentioned, one of them is in Europe. One of them is in Asia. We've been working with the Asian foundry for a little bit longer than we had the European foundry, so I'd say they probably are still ahead of the European foundry in terms of things like yield. But we're comfortable that we could utilize devices from either one for end product sales to customers. And we also have a great relationship with two packaging houses, one that we're using, we use primarily for production, that's actually in Asia and one here in the US that we also continue to do some development work with that we could use for production if necessary. For instance, if we received a government program that required US manufacturing. So overall, I'd say we're in really good shape. Right now, it's just about commercializing the technology. Jeff Christensen: Thank you. Our next submitted question is, what are the main barriers to closing sales? David Somo: Introducing B-TRAN with it being a new semiconductor technology and device structure begins with educating the customers. Engineers are generally familiar with IGBTs and MOSFETs, but B-TRAN features innovative and distinct architecture that functions differently from traditional semiconductor devices. So to help our prospective customers evaluate our products for their applications, we provide evaluation kits and reference designs to simplify this undertaking. Additionally, engineers often adopt a cautious approach, which can extend the evaluation period. Achieving automotive qualification, as we mentioned during our prepared remarks, will help to speed up adoption by demonstrating the technology's proven long-term reliability for their applications. Jeff Christensen: Thank you. Our next question is how should investors think about tariffs and trade policies on Ideal Power? Tim Burns: Yeah. We continue to see that the tariff situation is very fluid. But we anticipate minimal impact on our operations from tariffs in place today. And notably, power semiconductors are often exempt from many of these tariffs, which really limits the potential effect on us. While the situation continues to evolve, we're confident that we're well-positioned to manage and mitigate the impact of future tariff changes, trade policy shifts, and also supply chain disruption. Jeff Christensen: Thank you. That concludes our question and answer session. I'd like to turn the call back over to David Somo for closing remarks. David Somo: Thank you, Jeff. I want to thank everybody for participating in today's calls and for the good questions. As I mentioned earlier, we anticipate scheduling a call and webcast in advance of our year-end results call to share more detailed information and discuss some of the topics explored today in greater depth. Operator, you may end the call. Operator: Thank you. This concludes today's conference. All parties may disconnect, and have a great day.
Operator: Ladies and gentlemen, good morning, and welcome to SuperCom Ltd.'s Third Quarter 2025 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the appropriate key. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. This call is broadcast live over the Internet and is also being recorded for playback purposes. Joining me from SuperCom Ltd.'s leadership team is Ordan Trabelsi, SuperCom Ltd.'s President and Chief Executive Officer. I'd like to remind you that during this call, SuperCom Ltd. management may be making forward-looking statements, including statements that address SuperCom Ltd.'s expectations for future performance or operational results. Forward-looking statements involve risks, uncertainties, and other factors that may cause SuperCom Ltd.'s actual results to differ materially from those statements. For more information about these risks, uncertainties, and factors, please refer to the risk factors described in SuperCom Ltd.'s most recently filed periodic reports on Form 20-F and Form 6-K and SuperCom Ltd.'s press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes EBITDA, a non-GAAP financial measure that SuperCom Ltd. believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, a comparable GAAP financial measure, please see the reconciliation table located in SuperCom Ltd.'s earnings press release that accompanies this call. Reconciliations for other non-GAAP financial measures and comparable GAAP financial measures are available there as well. The content of this call contains time-sensitive information that is accurate only as of today, November 13, 2025. Except as required by law, SuperCom Ltd. disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to SuperCom Ltd.'s President and CEO, Ordan Trabelsi. Thank you, Operator. Ordan Trabelsi: And good morning, everyone. Thank you for joining us today. Earlier this morning, we released our financial results for the third quarter ended September 30, 2025. You can find a copy of the press release in the Investor Relations section of our website at supercom.com. We continue to deliver strong operational performance and strategic momentum across key markets, building on top of our record-breaking first half of the year. Since mid-2024, we have secured over 30 new electronic monitoring contracts in the US alone, including entry into 12 new states and 14 partnerships with regional service providers. These wins reflect growing demand for advanced scalable EM and validate our ability to rapidly expand our US footprint. Importantly, many of these new partnerships involve replacing incumbent vendors. A recurring theme that speaks to the strength of our Pure Security platform and the trust it continues to earn from agencies seeking modernization. We've seen this in states like Virginia, Utah, and Alabama, where multiple agencies have transitioned from legacy systems to SuperCom Ltd. technology within a short time span. In Alabama, for example, we recently launched our third and fourth deployment in less than a year. In Utah, a second sheriff agency selected our platform to overhaul its GPS tracking program after evaluating competing technologies. And in Virginia, another service provider fully transitioned its GPS operations to SuperCom Ltd., marking our second reseller partnership in that state this year. These examples illustrate a growing trend. As agencies seek more reliable, flexible, and cost-effective solutions, they increasingly turn to SuperCom Ltd. for both technology and long-term partnership. Our ability to serve both direct government agency contracts and third-party service providers gives us the versatility to operate effectively in varied regions and support distinct program structures. In addition to these wins, our US presence is reinforced by the continued success of Leaders in Community Alternatives (LCA), our wholly-owned subsidiary in California, which recently secured a five-year reentry service contract valued at up to $2.5 million. LCA remains an important part of our integrated offering, supporting rehabilitation and compliance outcomes alongside our core EM technology. Since our acquisition of LCA, we've secured over $35 million in new contracts in California alone. While our progress in the US has been substantial, we've also continued to expand our presence internationally. We strengthened our presence in Europe with an award of a $7 million national electronic monitoring project in Germany, Europe's largest economy. This milestone marks a strategic foothold in a highly advanced public safety market, achieved by displacing a vendor that had served the German government for more than twenty years. We see this award as a clear validation of our competitive edge and execution capabilities on a global stage. Our leadership in domestic violence electronic monitoring continues to grow. We now support nine nations with domestic violence programs across the US, Europe, and other regions. Governments increasingly rely on our PureTrack and PureChoose Shield technologies to support victim protection and offender accountability. Beyond new market entry, we're also seeing our proven track record lead to deeper engagement in existing territories. A key growth pattern for SuperCom Ltd. has been our ability to enter new countries as a single project and expand into multiple programs as trust and performance are established. In Europe, we've seen this in countries such as Sweden and Latvia, where initial deployment has evolved into broader national coverage. We're now seeing a similar pattern play out in the US. We have entered states like Utah, Kentucky, Virginia, and more with pilot or regional projects and have since expanded into additional counties and service areas. This repeatable expansion model remains a key driver of our long-term growth strategy. Our ability to replicate our expansion model efficiently also ties into how we operate at scale, especially in the US. A core operational advantage for us in the US is our cloud-based centralized platform, as well as integrated inventory management and 24/7 support. This centralization enables us to support nationwide deployments efficiently from a unified infrastructure in one language. In contrast, European projects often require country-specific servers, local language customizations, and decentralized support models, which introduce additional complexity, local partner support, and increased costs. As a result, we can launch new programs in the US more rapidly and cost-effectively, whether at the county level or statewide, enabling faster time to revenue and higher margin potential. This operational advantage supports not only organic growth but also potential expansion through other means. In parallel, we continue to evaluate strategic acquisition opportunities in the US market, targeting established local service providers can help us accelerate our market penetration, enhance vertical integration, and unlock operational synergies. A proven example is our acquisition of LCA in 2016, which, as I said earlier, has contributed to over $35 million in project wins in California alone. And as we scale, we see meaningful potential to replicate this success in additional regions in the US. Alongside these expansion strategies, we remain focused on addressing the core challenges facing modern justice systems. Our solutions directly address some of the most pressing challenges facing criminal justice systems worldwide, including high recidivism rates, prison overcrowding, excessive costs, and unsafe communities. By providing modern scalable alternatives to incarceration, our technology helps governments improve supervision, enhance public safety, and reduce the long-term burden on public safety and correctional systems. Tackling these systematic challenges requires continuous innovation, and that's where our technology leadership plays a central role. Our sustained investment in innovation has been key to our success. Over the years, we've invested more than $45 million in R&D for electronic monitoring solutions alone, enabling us to develop one of the most advanced and versatile electronic monitoring platforms in the world. This ongoing commitment to innovation is powered by our stellar research and development team, a group of highly skilled electrical engineers, software developers, product managers, QA personnel, and other domain experts who continue to push the boundaries of what's possible in public safety technology. Their contributions are a core reason why SuperCom Ltd. continues to win competitive tenders globally, often displacing long-standing legacy providers. As our capabilities advance, so does our ability to capture share in a rapidly growing market. The electronic monitoring market is projected to reach $2.3 billion by 2028, with approximately 95% of that opportunity concentrated in the US and Europe. Notably, the US market is estimated to be more than six times the size of the European market, making it particularly attractive as a driver for long-term growth. As more jurisdictions adopt electronic monitoring as a core public safety strategy, SuperCom Ltd. is well-positioned to capture this growing demand through our proven solutions and expanding footprint. I'll now turn to the financials, reviewing our performance for the third quarter of 2025 compared to the same period last year, 2024. In the third quarter of 2025, we achieved continued profitability and margin expansion, driven by operational efficiencies and improved cost structures. Our revenue for the quarter came in at $6.2 million compared to $6.9 million in Q3 of last year. We delivered significantly improved profitability across all key metrics. Gross profit actually increased this quarter to $3.8 million, with gross margins expanding to 60.8%, up from 45.6% a year ago. This marks one of the highest quarterly gross margins in our history, driven by disciplined cost management, operational automation, and reduced reliance on third-party service providers. It also reflects a favorable revenue mix, with a growing share of higher-margin international project phases and US programs also contributing to the results. As we continue to bring more work in-house and streamline deployment and adoption processes, we're seeing operating leverage as well as margin expansion. Operating income surged to $640,000 this quarter, up from around $30,000 in Q3 of last year, with operating margins increasing to 10.3%. EBITDA doubled to $2.2 million from $1.1 million in 2024, reflecting EBITDA margins of 34.6%. Net income reached $700,000, a turnaround from a net loss of $400,000 in the prior year. And non-GAAP net income surged to $1.9 million, up from $350,000 last year. Non-GAAP EPS came in at $0.39 compared to $0.17 in 2024. And now let's have a look at the nine-month performance of 2025 compared to the same period of 2024. Revenue was $20.4 million compared to $21.3 million in the first nine months of 2024, reflecting a modest decrease due to revenue mix and timing of contract launches. However, despite the lower top line, we delivered strong improvements in margin and profitability. Gross profit actually increased to $12.5 million, up from $10.7 million, with gross margins expanding to 61% compared to 50.1% last year. Operating income nearly tripled to $3 million, with operating margin improving to 14.7%, up from 5.3% last year. EBITDA reached $7.2 million, a 56% increase from $4.6 million in the prior year, reflecting an EBITDA margin of 35.4%. Net income more than doubled to $6 million from $2.5 million in the first nine months of 2024, supported by our improved cost structure, disciplined execution, and the positive impact of certain non-operational financial gains recorded during the period. Non-GAAP net income increased to $9.3 million, with net margin more than doubling to 45.7%. And non-GAAP EPS for the period was $2.17. We also made progress in strengthening our balance sheet. In the past two years alone, we reduced our net debt by nearly $25 million. This was achieved through a combination of strategic debt-to-equity exchanges, executed at premiums of up to 100% or more above market price, and amendments to our senior debt agreement, which extended maturity to December 2028 and lowered the interest rate significantly. In parallel, we raised over $16 million in gross proceeds, including $6 million for a registered direct offering completed in 2025 and an additional $10.2 million for warrant exercises. These steps in unison contributed to a stronger cash position and enhanced our financial flexibility to support future growth opportunities, including new project appointments, continued investment in technology, and potential M&A activity. As of September 30, 2025, working capital stood at $41.8 million, up from $26.1 million just a year ago. Book value of equity tripled to $40.8 million, up from $13.3 million a year ago. And cash and cash equivalents surged 111% to $13.1 million, up from $6.2 million a year ago. While current margins reflect the favorable mix of projects and contracts, they're not yet at a steady-state level. That said, we believe our progress in streamlining operations, automating processes, and improving launch execution is sustainable and positions us for long-term margin resilience and expansion as we scale. Before closing, I'd like to highlight the broader transformation that continues to define SuperCom Ltd.'s trajectory. Since implementing our new strategic roadmap in 2021, we've consistently strengthened the business across revenue growth, profitability, and balance sheet health. We find the results even more compelling when viewed over a multi-year horizon. Revenue more than doubled from a five-year consistent decline, reaching $11.8 million in 2020 to four years of continued growth, reaching $27.6 million in 2024. As of the first nine months of 2025, we reached $20.4 million in revenue, reflecting continued scale relative to previous years. Gross profit grew by 140% from $5.6 million in 2020 to $13.4 million in 2024, and gross profit for the first nine months of 2025 reached $12.5 million, closely aligned with the 2024 full-year figure. GAAP net income turned from a loss of $7.9 million in 2020 to a $660,000 profit in 2024 and has since surged to $6 million in the first nine months of 2025. Non-GAAP net income improved by over $10 million, turning from a loss of $1.7 million to a $6.3 million profit, and stands at $9.3 million year-to-date in 2025. EBITDA has improved from $2.8 million in 2020 to $6.3 million in all of 2024 and has already reached $7.2 million in the first nine months of 2025. These improvements were achieved while navigating macroeconomic headwinds, a global pandemic, supply chain disruptions, rising interest rates, and a regional war, and they underscore the strength of our operating model, technology differentiation, and long-term execution strategy. Furthermore, they underscore the essential role of our solutions, which is resilient through market cycles. And as we continue to scale, we believe this foundation positions us well for long-term value creation. In closing, we are proud of our execution this quarter and the trust our customers continue to place in us. I'd also like to thank our global team for their dedication and performance. Their expertise, commitment, and hard work continue to drive our success. As we look ahead, we remain focused on leveraging our momentum to expand strategically, deepen customer relationships, and continue delivering innovative solutions that improve public safety outcomes around the world. With that, I'll turn the call over to the operator to open for questions. Operator? Operator: If you wish to ask a question on today's call, you will need to press star then the number one on your telephone. If you are using a speakerphone, please pick up your handset before entering your request and speaking on the call. If your question has been answered and you wish to withdraw your question, you may do so by pressing star 2. One moment for the first question. Your first question for today is from Matthew Evan Galinko with Maxim Group. Matthew Evan Galinko: Hey, thanks for taking my question. I'd like to start with the market opportunity in Germany. Sounds like a nice first step into that market. Is there an opportunity to expand there and what would the process look like to expand within that market? Ordan Trabelsi: Good question. And we announced the win in Germany just a couple of months ago. It's a great win and a very lucrative market. The project already that we won has four different types of projects in it, including alcohol monitoring, GPS monitoring, domestic violence, and house arrest. And like we've seen in many other nations in Europe, once we enter with an initial project, and we do good work, and that's what we typically do, we have an impeccable record for our deployments, we end up winning more projects and expanding the existing ones. So while it's our first one in Germany and it's valued at a budget of $7 million, just like we've seen in the past, we expect this to potentially grow in numbers and to grow in scale as it adds additional capabilities from our ongoing growing product offering. Matthew Evan Galinko: Great. Thank you. Second question is, I think you mentioned a service provider in the US that completely switched their GPS tracking over to SuperCom Ltd. products. Can you maybe expand a little bit on is that a repeatable opportunity and how do you see that sort of engagement with the service provider versus M&A like you know, with an LCA? Ordan Trabelsi: Great question. And, we actually had 14 service providers just this year that signed on, and, the model in the US is so fragmented. It's not like in Europe, where it's just a national project. There are many different counties, and each has its own programs, multiple programs in each county. And what's beautiful is that there are these service providers who become mini experts in the field, and they've tried all the technology. And then we come to them. We show them our technology. And they're able to quickly evaluate just how much, you know, more advanced and superior it is in many aspects to what they've tried. So in many of these service providers, it's actually completely replaced the technology they have with our technology. Sometimes it's all immediately. Sometimes it's in process, but they swap out from live offenders. They bring them back in to swap the technology because the advantage is so significant that they want to go through that. Now when you go directly to an agency, and some of the larger agencies have the personnel in-house to run these programs, they know how to put the bracelet on, to write the report, to run the technology. Then we sell directly to that agency. When it's a service provider, they aggregate five, 10, 20, more agencies, and so that's an advantageous angle as well. Both of them are valuable. Are great strategies for expansion, and both have been working very well for us. Matthew Evan Galinko: Great. Thanks. And final question for me before I jump back in the queue. It looks like your debt position declined by about $2 million in the third quarter. I know you mentioned historically doing those debt-to-equity swaps, but I'm curious if you can talk about if there was another one in the third quarter? Ordan Trabelsi: As we discussed in the past, we strategically with our lenders have been doing conversions of debt to equity. It's a small ones, and then in aggregate, they become meaningful to the company as you've seen over the last few years. And we typically do that at a premium, and that helps reduce our debt balance. As described. And you see that as well in the numbers as you follow the quarters. And one thing I wanted to add about your question with the service providers, another thing that's unique in the US that we're doing because we're already in nine countries around the world with our domestic violence solution, and we have a very strong small bracelet with long battery life. It becomes very effective to put on people and ensure that after someone hits his wife, for example, he doesn't come anywhere close to the victim. And our technology does a great job in that. And many other vendors have struggled with this. In the US, of course, like any other place, there is domestic violence, and the fact that we can offer this with such a high level of experience and seamlessness allows our service providers to add a whole new solution to everything they're offering today. So that's also something else that helps us with these service providers together with the normal GPS and house arrest that you've been asking. Matthew Evan Galinko: Thank you. Operator: Your next question is from Gregory Mesniaeff with Kingswood Capital Partners. Gregory Mesniaeff: Yes. Good morning, guys. Couple of questions. When you kind of analyze your revenue number of $6.2 million, if you break that down by geography, how does that compare to a year ago? It seems to me, correct me if I'm wrong, that your US business has been quite strong, and it appears to me that the softness has come from other geographies in the world. Can you kind of give us some color on that? Ordan Trabelsi: Yes. It's a great question. In Europe, most of our revenues are still from Europe and other geographies outside the US. And that's where our focus was originally. We won over 50 national programs around the world with our Pure Security suite. And these projects are multiyear projects and have various phases. Some phases are more deployment and then scaling, and then afterwards, additional add-ons and changes and so forth. So many different projects are running at the same time around the world. And we need to, when we report the financials, we aggregate the revenues from each of them. And that, you know, can mix differently in different quarters. It's not a consistent monotonous growth or monotonous decline. It's just one quarter, there could be more of this project and less of the other ones. So the volatility that you would see, between the quarters, a lot of that comes from those projects. In the US market, which is newer for us, we have a strong base in California that we've been running for years. And then over the last twelve months, we signed over 30 new contracts. And some of them, some start small. Some of them start at a medium size, but they typically continue to grow and add more and more units. And what's beautiful with the market is that almost everything is recurring revenue per unit per day. Now the majority of our business is recurring revenue, but there are still components that are not, especially in Europe. In the US market, those numbers will grow and grow. And over time, because the US market is six times that of Europe, we expect more recurring revenue to be the prevailing part of our revenues, and we've the more consistency upon the quarters together with improved margins. So we continue to grow in Europe and around the world, but the US is becoming and will become in the future based on our expectations and plans a more consistent and predictable element for our total revenues and our financials. Gregory Mesniaeff: Great, Ordan. Thank you. And, if I could expand on that just a bit. As you win contracts in the US, what are typically their time spans? Compared to similar wins in, say, Europe. You had mentioned that the US opportunities have been much more recurring in nature, which is a good thing. But if you could just kind of give us some idea of how long what's the typical length of one of these contracts? And, also, what is the renewal rate that you've been seeing on them as a on a percentage basis? Thanks. Ordan Trabelsi: Okay. Great. Great questions. And let me try to structure it in a way. First of all, in the European market, these are national projects with long bid cycles. And with a competitive process for RFPs, and that could take from four months to twenty-four months or even more sometimes to win these. And, usually, the projects are structured at a five-year span, nine-year span, something like that, between five and ten years. And, typically, the incumbent vendor wins it over and over again. I mean, we displaced the incumbent vendor in Sweden. They were there for twenty-four years. Since then, we won two more projects in Sweden. When we displaced the incoming vendor in Israel, they were there for over twenty years. When we displaced the incumbent vendor in Germany right now, they were there for twenty years. So even though the initial contract is for five years, or ten years, you typically see the incumbent winning again and again. Now for someone to come and displace them, you have to have a significant value proposition that's more advantageous than what they have today. And that's exactly what we've been doing with SuperCom Ltd. in Europe. We've been coming in, displacing long-term incumbents, showing that there's a better way to do things with newer technology, and that's helped us enter the market and then expand. And, naturally, once you win one project or two, you have an easier time winning the next projects. So in Europe, when there's projects coming out in countries where we already exist, we have a much higher likelihood to win them than it was originally. And, originally, we had in our expansion, roughly a 65% win rate in Europe. Now that's the European market. In the US market, you have a mix. You also have, of course, these large RFPs like for ICE, and you have it for some state-level contracts. And some counties are very large. Some county projects in the US are $30 million, $40 million, $50 million alone. But there are also many smaller counties and many smaller programs, and then you could start with them, especially if it's with a service provider. It's not a government RFP. It's a private company at the end, and they sign a contract with you. And the idea is they continue running with you indefinitely. The contract just continues to renew. And they run with you for many years just like in Europe because once comfortable with you and they approach with you and they like the technology, then there'll have to be a big change for them to teach everyone brand new technology. So in the US, it's faster to deploy, especially with the smaller programs. We're able to deploy them faster. Might even start with fewer units and then grow the amount of units, whereas in Europe, you start with a large amount pretty quickly on. And over the years, because we've been deploying so many programs, you have such a high win rate, and we've been expanding so fast. We've reached very fast deployment rates. Some of our projects in Europe, we deploy within a few weeks, and we're able to manufacture very fast and deploy very fast and do it with an impeccable record of doing it seamlessly without causing issues, whereas some other vendors take a much longer time for the deployment. That's one of our advantages. But in the US market, almost everything is recurring. They usually charge per unit per day. So it'd be $4, $5, $3.5. Depends what services are included. And they like their technology. They start with you, and then you see the numbers. Right now, we're doing the US with over 30 contracts in over 12 different states because we're just putting the seeds in different states. And you can see that after a deployment, shortly afterwards, there's another deployment in the same state. And then in some states, already a third and fourth deployment. I think that speaks to the satisfaction of the customers and to the work that we're doing there. So there's a mix, and it's a little bit different between Europe and the US. But the US, as the projects grow in size, just like they did in Europe, then you also see the RFPs in the larger project sizes. But we'll hopefully, as we do continuously, the speed of the deployment will continue to improve as we get better and better at doing more deployments. Gregory Mesniaeff: Okay. Great. So is it fair to say that as more and more of your revenues come from the US, your revenue volatility should decrease over time? Ordan Trabelsi: Yes. That's a great statement. And, also, over time, the margins should expand. So predictability, margin expansion. As I said in the prepared remarks, everything in the US is on the cloud. Everything's in English. We have inventory management centralized, a 24/7 monitoring center that's centralized. You can imagine that's much more simple than having a server farm in Sweden, another one in Denmark, another one in Finland, another one in Germany, with local partners in different languages and different inventory management systems in different regions. So the US has a lot of advantages in that regard, and we're very excited that we're able to expand so effectively into the US market with our technology. Gregory Mesniaeff: Got it. Thank you. Operator: Your next question is a follow-up question from Matthew Evan Galinko. Your line is live. Matthew Evan Galinko: Hey, thanks for taking my follow-up. Just wanted to touch on operating expenses for a moment. It looks like R&D has been steady for a pretty long time. As well as, you know, sales and marketing has been pretty level. I'm just wondering as you continue expanding in the US market, should we expect to see operating expenses pick up at all to help support that effort? Or if you put more spending into boots on the ground in the US, would that help to accelerate kind of your uptake into the US market? Ordan Trabelsi: Good question, and it depends on how much growth you're talking about. The beauty in this market and in our industry is that the contribution margin of each additional bracelet into an existing region is extremely high. It's just that there's fixed costs from running these operations. In that server farm, on the cloud, with inventory management, with the 24/7 support. And so now that we're in the US market and we have a good hold, adding additional units doesn't require a lot of additional costs. Our sales team is still fairly small, and maybe there could be some expansion to it. We've won most of these projects around the world based on our technology. We come to technology first, less, leveraging some relationship that other vendors might have. And we come with new technology that works and that's been resilient and successful in many other projects around the world, and that's how we enter these new markets. So there could be some expansion, but minimal to our operating expenses in order to achieve the continued plan that we're seeing. And in terms of research and development, doing very well. We already put over $45 million in technology. We're far ahead of most of our vendors in almost all aspects. And we continue to invest to maintain and make sure that we are ahead of them. And even if a competitor comes with a brand new technology that they spent tens of millions of dollars on, it's still gonna take them five to six years to get that operational to the level that a large contract would take. They wanna see it first run in smaller projects for a year or two. And then another project, another project, and only afterwards, they'll take it on to larger projects. And we're already in the large projects. Some of our projects, like Romania, over 15,000 units. So we're in a very good place with our technology. We continue with every new project to add more capabilities. We continue to add more seamless integration. We're able to bring a lot of the things that are serviced that our local partners do. We're able to bring a lot of that in-house. We're able to bring all the technology that third-party vendors have developed in-house. We're able to optimize to make the promise more seamless, to have lower cost, and also to make things much more efficient as we continue to deploy and improve our product offering. Matthew Evan Galinko: Great. Thank you. Operator: Once again, if you would like to ask a question, please press 1. Your next question for today is from John Mason with Aegis Co. John Mason: I guess in terms of the rep sorry. Can you hear me? Ordan Trabelsi: Yes. Yes. John Mason: Okay. Great. In terms of the revenue year over year, I know, you know, you've been winning all these contracts in the US. Like, when do you expect to, you know, sort of return to growth year over year on a quarterly basis, as those contracts sort of start to flow in? And I know you mentioned the, you know, they're essentially seeds at this point. But, you know, I guess, one, when do you expect that to inflect? And then, I guess, b, is it essentially that there's turnover on the European market or, like, lower usage? Like, what is causing that kind of year over year decline? And I have a second question. Sorry. But Okay. Ordan Trabelsi: Good question. Good question. So we don't really we're not really losing customers, essentially. As I said, many of these customers stay for a very long period of time. And as you see, we continue to announce more wins in the same region, either with the same government or with sister agencies in the same government. So it's not that we're losing customers. It's that some projects that are not recurring have phases where they're more heavy and they have more deployments, more expansion, more work. And then there are phases that require less work. And then until they again purchase more equipment and more expansion and more capabilities and more units, in the US market, that's less of a metric because everything is pretty much recurring per unit per day, and that helps you just consistently grow. Just like with any software as a service model. We lease our equipment, but a lot of it is software on the cloud, and that's the model that's prevailing in the US. As I said, the US is six times the size of Europe. So over time, we expect that our financials look very much in that way. Currently, there's still some volatility, and it's because of the mix of different projects and different stages that some have recurring revenue and some have purchases and other one-time items, and that can create naturally some volatility. Now we don't give specific guidance and I said that some of them are seeds, but some of the projects in the US are also larger. It's just that any project that's in a new territory, and all of these are brand new, we see as a seed that can grow into many different plants or very large trees. Just like when we started in Europe, the projects were Lithuania of $100,000 or Latvia of $100,000. And now we're talking about projects that are $7 million, $33 million. And there are others that we're bidding on that are also fairly large. So, it's just a process. We entered the US just a year ago. We've been doing great, and we've won many different projects, and we're winning against incumbents that are in the US market for a very long period of time and have very strong relationships. And we're still able to come in brand new with our technology and displace them. And I think that speaks volumes to the potential that we'll see going forward. And, so over time, we hope that everyone will see the benefits of our progress. John Mason: Right. Thank you. And then last question, I guess, you know, I think there's been quite a buildup of accounts receivable or trade receivable on the balance sheet. And I know, obviously, it's a testament to the increased book value growth. But I guess, how do you see the cadence of release of that? Right? I think it's been a pretty big drag on free cash flow. I think you've reported operating cash flow on, like, a semiannual basis. But, yeah, would love to know kind of how you expect that to flow through and when you expect to see that free cash flow. Ordan Trabelsi: Yes. Good question. It's not, and I don't know if you followed SuperCom Ltd. historically, but there was a period of time where we were working in Africa and South America. And over there, collections are sometimes delayed. And it was more of a matter to look at here. We actually don't have that in the US market and the European market. Things are timely. If we do see expansion to And the amount of to our AR, it's because sometimes you have percentage of completion in these projects. The time and effort to recognize revenues is different from the time when you get paid. So there's the misalignment in timing with percentage of completion projects, which is mainly coming from the, again, the long multiyear project deployments of the national scale in the European market. But we don't see an issue there. They're paying on time. We don't have any we haven't had to have bad debt or anything of that sort in a significant manner like we had in Africa. And, sorry, South America. And, when you look at the bad debt that's done on an annual basis, that's typically from the e-gov business, from old debt from those regions, not from the electronic monitoring business in the US and Europe. And one of the reasons why we expanded and shifted into this market was because of the very good collectability and predictability with these customers. John Mason: Got it. Thanks. I think that's all my questions. Thanks so much. Ordan Trabelsi: Thank you. Operator: Your next question for today is from A. J. Hoffman, a private investor. A. J. Hoffman: Hey, man. Congratulations on everything. I may have missed this earlier. But did you state a win rate so far for all these contracts you're getting in the US for the ones where the bids have closed? Is it as high as Europe? Is it lower? And yeah. Ordan Trabelsi: That's a good question. We haven't yet assessed in the US. We've been doing very well. It's probably higher than Europe, but we haven't assessed it because we're still looking at such a large variety of projects in different sizes. So we're gonna wait till we have more, a consistent flow and size of projects before we start to do analysis. But so far, as you see, we're announcing many wins in many new states with many new resellers with direct agencies. And we have very good feedback from our customers. A. J. Hoffman: And as far as scalability in the United States, have you guys calculated what your let's say, after you launch everything, after you put everything on the ground and you're expanding inside of that state, maybe to different municipalities, and at that point, all you're doing is adding, you know, just bracelets to the equation. What is the breakeven for putting that bracelet on somebody to recouping the cost of that bracelet? Like, is it one quarter? Is it a year to recoup your cost? Can you break that down for us so we can kinda understand the longevity of these contracts versus when ROI is complete on actually assigning the bracelet to somebody? Ordan Trabelsi: A great question, and I would love to share that with you. But for competitive reasons, we don't share that specific number. As you can imagine, there are 10 other players in the industry, and everyone is trying to understand the cost structure and the exact prices per bracelet, that the competition and all the customers as well. So we at an aggregate level, you could see from my financials, when there's a new project, a large one, there's cash that's outlaid to manufacture them. And then over the lease, we bring it back. But the margins, especially the additional contribution margins for additional bracelets, are high. And, over time, we expect to see margin expansion in our business as we continue to have the same cost leverage for high revenues. A. J. Hoffman: Thank you. I can appreciate that response. Final question. There have been rumors circulating that you guys have been approached for a buyout. I'd take it with a grain of salt, but is getting bought out something that you guys are considering? Ordan Trabelsi: I don't know where these rumors come from, but I'll share, and I've shared before that we've been approached by a variety of strategics or financial firms to acquire us. Our decision of the board, as always, will be what is best for the shareholders. So I can't get into any specifics on that, but I have shared that that is a situation that has occurred to us. And it's natural considering our performance in the market. We have a very high competitive rate. We're expanding very nicely in our technology. I believe it's highly coveted by other players and could perform very well to help disrupt the criminal justice industry. A. J. Hoffman: Awesome, man. I appreciate your answers. Ordan Trabelsi: Thank you very much. Operator: At this time, I will pass the call back to Ordan for closing remarks. Ordan Trabelsi: I want to thank you all for participating in today's call and for your interest in SuperCom Ltd. Please contact us directly if you have any additional questions. We look forward to sharing our progress with you on our next conference calls, filings, and press releases. Thank you very much, and have a good day. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by, and welcome to the Suburban Propane Partners Fourth Quarter and Fiscal Year End Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I'd now like to turn the call over to Davin D'Ambrosio, Vice President and Treasurer. You may begin. Davin D'Ambrosio: Thank you, Rob. Good morning, everyone. Thank you for joining us this morning for our fiscal 2025 fourth quarter and full year earnings conference call. I'm here with Michael A. Stivala, our President and Chief Executive Officer, Michael A. Kuglin, Chief Financial Officer, and Alex Centeno, our Senior Vice President of Operations. This morning, we will review our fiscal 2025 fourth quarter and full year financial results, along with our current outlook for the business. Once we have concluded our prepared remarks, we will open the session for questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. While subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements, our annual report on Form 10-K for the fiscal year ended September 27, 2025, which contains additional disclosure regarding forward-looking statements and risk factors, will be filed on or about November 26. Once filed, copies will be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as a discussion of why we believe this information to be useful, in our Form 8-Ks, which was furnished to the SEC this morning. Form 8-Ks will be available through a link in the Investor Relations section of our website. At this time, I will turn the call over to Michael A. Stivala for some opening remarks. Mike? Michael A. Stivala: Thanks, Davin, and thank you all for joining us today. Fiscal 2025 was another outstanding year for Suburban Propane Partners, L.P. In our core propane business, propane demand was strong as a result of a sustained period of more normal winter weather in the heart of our footprint from mid-December through February, the most critical months for heat-related demand, as well as strong demand in our Southeast operations in the aftermath of Hurricanes Helene and Milton in the first fiscal quarter. And incremental volumes from our acquisition of a well-run propane business in our Southwest territory, which we closed in November 2024. I am extremely proud of how our field personnel at every level worked tirelessly to meet the surge in demand when our customers needed us most, while also opportunistically taking on new business when some of our competitors were unable to keep up. This was a real testament to the preparation by our operations teams and the flexibility of our operating model to ramp up when demand dictates. And with safety as our highest priority, what's even more impressive is how our employees performed during a prolonged stretch of very high activity levels and some harsh operating conditions while not compromising on our highest standards for safety. As a result, propane volumes for fiscal 2025 increased nearly 6% compared to the prior year. Strong volumes, combined with effective margin management during a rising commodity price environment and good expense discipline, contributed to a $28 million or 11.2% increase in adjusted EBITDA compared to the prior year. In addition to the higher earnings, we had a number of key accomplishments in fiscal 2025 in support of our long-term strategic growth initiatives. Just to highlight a few, we acquired and integrated a well-run propane business in strategic markets in New Mexico and Arizona for a total consideration of approximately $53 million. Subsequent to the end of fiscal 2025, just in October 2025, we further invested in the growth of our core propane business with the acquisition of two high-quality businesses in attractive markets in California for a total consideration of $24 million. We created a dedicated sales and business development team focused on specific propane verticals that are less weather-sensitive and present opportunities for growth as the advantages of propane become a bigger part of the conversation. These verticals include opportunities in material handling, agriculture, power generation, and over-the-road vehicles. We continue to identify and pursue new market expansion opportunities to establish and extend our presence in certain attractive markets. We secured an incremental supply of renewable propane and exceeded 2 million gallons of renewable propane sales focused primarily in the California market, coupled with expansion into the Florida and Virginia markets to meet customer demand for a renewable alternative. We entered into a multiyear partnership with NASCAR and Speedway Motorsports, making Suburban Propane the official propane partner of NASCAR and Speedway Motorsports, reflecting the reliability of our national presence and demonstrating the power and versatility of propane at one of America's top spectator sports. In our RNG operations, we continue to implement several operational improvements at our Stanfield, Arizona facility to stabilize and grow RNG production, enhance safety protocols, modify feedstock intake practices, and improve our overall plant efficiency to strengthen the long-term performance and returns of the facility, while also advancing the capital projects at our Columbus, Ohio, and Upstate New York facilities, both of which are expected to come online in 2026. We also expanded our RNG management team with dedicated safety, construction, and compliance personnel to bring more expertise in-house. And focusing on our balance sheet, we launched an at-the-market equity program to sell up to $100 million of newly issued common units, raising $23.5 million in net proceeds from the sale of 1.3 million common units at attractive prices during fiscal 2025. Proceeds from the ATM program are being used to support our ongoing pursuit of opportunistic growth and to accelerate debt reduction. During the year, using excess cash flows and proceeds from the ATM program, we deployed nearly $53 million for propane acquisitions, over $25 million for our growth projects in the RNG business, and reduced our overall debt by nearly $2 million. With the increased earnings and slightly lower outstanding debt, we ended fiscal 2025 with a leverage ratio of 4.29 times, a significant improvement from 4.76 times at the end of the prior year. In addition to the strong operating and financial performance during fiscal 2025, we embarked on a multiyear technology modernization initiative that will simplify the way we operate, consolidate our systems platform, and improve the tools we use to serve our customers, delivering a better experience for both our employees and our customers. This initiative will not change our personalized hyper-local business model that sets Suburban Propane apart as best-in-class operators within the propane industry. So fiscal 2025 was a very successful year for Suburban Propane, both in terms of our financial performance and from executing on our long-term strategic growth plans, while remaining patient and disciplined to maintain financial flexibility through a strong balance sheet. A little later, I will provide some closing remarks. However, at this point, I will turn the call over to Michael A. Kuglin, who will discuss our full year and fourth quarter results in more detail. Mike? Michael A. Kuglin: Thanks, Mike, and good morning, everyone. I will start by focusing on our full year results, then give some color to the fourth quarter at the end of my remarks. To be consistent with previous reporting, I am excluding the impact of unrealized noncash mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $2.4 million in fiscal 2025 compared to an unrealized loss of $14.6 million in the prior year, along with certain other noncash items we have identified in the reconciliation of net income to adjusted EBITDA in the press release. Including these items, net income for fiscal 2025 was $128.4 million or $1.97 per common unit compared to $107.7 million or $1.68 per common unit in the prior year. Adjusted EBITDA for fiscal 2025 was $278 million, an increase of $28 million or 11.2% compared to the prior year. Retail propane gallons sold in fiscal 2025 were 400.5 million gallons, an increase of 5.9% compared to the prior year. The volume increase was driven by sustained widespread cold temperatures during the most critical months for heat-related demand, increased demand for backup power generation, and other applications in the aftermath of Hurricanes Helene and Milton, continued growth in our counter-seasonal national accounts business, and incremental volumes from our recent propane acquisitions. With respect to the weather, average temperatures for fiscal 2025 were 9% warmer than normal and 4% cooler than the prior year. During January and February, average temperatures were comparable to normal and 13% colder than the same period last year. From a commodity perspective, average wholesale propane prices for fiscal 2025 were 79¢ per gallon, basis month billed, which was 5.8% higher than the prior year. According to the most recent report from the Energy Information Administration, US propane inventories at the end of last week were at 106 million barrels, which was 6% higher than a year ago and 13% higher than historical averages for this time of year. Given the strength in inventories, wholesale propane prices have trended down from the end of the fiscal year and are currently in the 60¢ range, compared to the 80¢ range at the same time last year. Excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margin of $866.4 million in fiscal 2025 increased $46.8 million or 5.7% compared to the prior year, primarily due to higher propane volumes sold and higher propane unit margins. Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2025 increased 2¢ per gallon or 1%, with margin expansion experienced across all customer categories. In our RNG operations, average daily RNG injection for the fiscal year was approximately 13% lower compared to the prior year, primarily due to downtime experienced during several operational improvement projects designed to enhance future RNG production, as well as multiple power outages and extremely cold ambient air temperatures in the Arizona area during the winter that impacted anaerobic digestion. While we remain focused on executing controllable operational improvements, revenues at the Stanfield facility continue to face headwinds from lower prices for both California LCFS credits and federal D3 RINs. California LCFS credit prices remain depressed relative to historical levels, though average prices for fiscal 2025 increased 2.5% compared to the prior year. We are encouraged to see the finalization of amendments to the LCFS program implemented by CARB, made effective as of July 1, 2025, with accelerated carbon reduction targets aimed to create a better balance in the LCFS credit bank. Since the amendments were finalized in June 2025, LCFS credit prices have increased over 30%. Conversely, average federal D3 RIN prices for fiscal 2025 decreased 25% compared to the prior year. With respect to expenses, combined operating and G&A expenses increased $23.7 million or 4.2% compared to the prior year. The increase was primarily due to higher payroll and benefit-related expenses, overtime, and other variable operating costs to support increased activities associated with incremental customer demand, as well as higher variable compensation expense associated with the increase in earnings and costs related to the technology initiative that Mike mentioned earlier. Net interest expense of $76.3 million for fiscal 2025 increased $1.7 million compared to the prior year, due to higher average outstanding borrowings under our revolving credit facility, partially offset by lower benchmark interest rates. Total capital spending for fiscal 2025 of $72 million was $12.5 million higher than the prior year, primarily due to advancing construction efforts at our RNG facilities in Columbus, Ohio, and Upstate New York. For fiscal 2026, capital spending for our propane operations is expected to be consistent with historical levels, which is between $40 million and $45 million, and CapEx for the RNG projects is expected to range between $30 million to $50 million, with the spending concentrated in the first half of the fiscal year. We expect the capital spending at our RNG facility in Upstate New York to qualify for investment tax credits under the Inflation Reduction Act at a rate of 30%, which equates to a range of $7 million to $9 million in tax credits that could be earned and monetized on the assets placed into service. Turning to our results for the fourth quarter of 2025, consistent with the seasonality of our business, we typically report a net loss in the fourth quarter. With that said, excluding the effects of certain noncash items in both years, we reported a net loss of $35.7 million for the fourth quarter, or 54¢ per common unit, which is flat compared to the prior year. Adjusted EBITDA for the fourth quarter was $700,000, which was also essentially flat compared to the prior year. Retail propane gallons sold during the fourth quarter increased 1.8% compared to the prior year. Total gross margin increased $5.3 million or 4% compared to the prior year, primarily due to higher volumes sold and higher unit margins. Combined operating and G&A expenses increased $5.8 million or 4.5%, primarily due to higher volume-related variable operating costs, higher variable compensation, and costs related to our technology initiative. Excluded from adjusted EBITDA for the fourth quarter of 2025 is an impairment charge of approximately $6 million to fully write down the carrying value of our investment in an early-stage energy technology company, as well as income with the reversal of the earn-out reserve associated with the RNG acquisition. The earn-out was contingent upon the acquired assets achieving certain EBITDA thresholds over a certain period. During the fourth quarter, we determined that the contingent consideration would not be earned. These noncash items were reported within OtherNet's statement of operations. Turning to our balance sheet, during the fiscal year, we utilized a combination of cash flows from operating activities and net proceeds of $23.5 million from the issuance of common units under the ATM program to fund a propane acquisition for a total consideration of $53 million, growth capital expenditures of $25.5 million for advancing construction activities at our RNG production facilities, and repayment of outstanding borrowings under our revolving credit facility of $1.8 million. With the improvement in earnings and debt reduction, the consolidated leverage ratio for fiscal 2025 improved to 4.29 times. We have more than ample borrowing capacity under our revolver to support the completion of our planned capital expansion projects, as well as our ongoing strategic growth initiatives. As we continue to focus on the execution of our long-term strategic goals, we also stay focused on maintaining a strong balance sheet. With that, I will turn it back to Mike. Michael A. Stivala: Thanks, Mike. As announced in our October 23 press release, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of the fourth quarter of 2025. That equates to an annualized rate of $1.30 per common unit. The quarterly distribution was paid yesterday, November 12, due to the Federal Reserve closing on the eleventh for Veterans Day, to our unitholders of record as of November 4. Our distribution coverage continues to remain healthy, at 2.13 times for the trailing twelve months ended September 2025. I also want to take a moment to thank and honor our great American veterans for their service, including so many that are part of the Suburban Propane family, as we just passed Veterans Day. So just a few closing remarks regarding our long-term strategy. Our long-term strategic growth plan remains to foster the growth of our core propane business while making strategic investments in lower carbon renewable energy alternatives through our Suburban Renewable Energy subsidiary, leveraging our core competencies in safety, customer service, and logistics, especially in the localized energy distribution markets. The energy evolution is a long journey, one that requires a pragmatic and balanced approach to identifying and fostering energy solutions that can lower greenhouse gas emissions and our country's overall carbon footprint. It requires solutions that can deliver energy that is reliable, affordable, and sustainable. We have definitely seen a shift in the conversation that is benefiting propane by recognizing propane's versatile, affordable, on-demand nature and its clean qualities as an immediate and long-term solution to helping lower the carbon footprint. We are very well positioned to take advantage of this growing respect for propane given our operational and financial strength and stability. We are also maintaining our focus on innovation to ensure that Suburban Propane continues to be regarded as a trusted local distributor of energy for decades to come. That innovation includes our advancements in delivering renewable propane and renewable natural gas as direct drop-in replacements for their traditional energy equivalents. The energy evolution is in the early innings. The investments we have made have been very measured and focused on long-term growth and sustainability. It is great to see a more pragmatic approach toward the energy evolution and also great to see a supportive regulatory and policy framework that contemplates a more deliberate and inclusive environment to drive down emissions over time and with an all-of-the-above philosophy for energy solutions. We are very excited to be starting a new heating season, and our people and platform are very well prepared to handle whatever this year's weather dictates. With that, I want to thank our more than 3,300 employees for helping make fiscal 2025 another successful year for Suburban Propane and for their unwavering commitment to safety for our customers, our employees, and the communities we serve. And as always, I hope you and your families remain safe and healthy, and I wish everyone a very happy holiday season. We appreciate your support. We would now like to open the call up for questions. And, Rob, if you could help us with that. Operator: Thank you. We will now begin the question and answer session. We will pause for just a moment to compile the questions. And, again, if you would like to ask a question, please press. And we have no questions. I will now turn the call back over to Michael A. Stivala for some final closing comments. Michael A. Stivala: Great. Thank you, Rob. I think we have said enough. We are excited about the new year, and we look forward to talking to everybody after our first quarter in February. And please have a safe and happy holiday season. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to Bitcoin Depot's third quarter 2025 Conference Call. My name is John, and I will be your operator today. Before this call, Bitcoin Depot issued its third quarter results in a press release. A copy will be furnished in a report on Form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Bitcoin Depot CEO, Brandon Mintz, and CFO, David Gray. Following their remarks, we will open the call for questions. Before we begin, Cody Slach from The Gateway Group will make a brief introductory statement. Mr. Slach, please proceed. Cody Slach: Thank you, operator. Good morning, everyone. Before management begins their formal remarks, we would like to remind everyone that some statements we make today may be considered forward-looking statements under Securities and involve a number of risks and uncertainties. As a result, we caution you that there are a few factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities Exchange Commission. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date forward-looking statements are made except as required by law. We also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances including but not limited to risks and uncertainties identified under the caption Risk Factors in our recent filings. You may get Bitcoin Depot's SEC filings for free by visiting the SEC website at www.sec.gov. I'd like to remind everyone that this call is being recorded and will be available for replay via a link in the Investor Relations section of Bitcoin Depot's website. A supplemental earnings presentation highlighting our performance has also been made available on our IR website. Now I will turn the call over to Bitcoin Depot's CEO, Brandon Mintz. Brandon? Brandon Mintz: Thanks, Cody, and good morning, everyone. Thank you for joining our third quarter 2025 earnings call. Bitcoin Depot delivered another strong quarter exceeding the preliminary results we announced in October. Our third quarter performance once again demonstrates the operating leverage in our business model, supported by continued kiosk expansion, higher transaction volumes, and disciplined cost management. As a result, we achieved meaningful revenue growth, a substantial increase in adjusted EBITDA, and further improvement in profitability and cash generation. Consumer demand remained quite strong in the third quarter, with median transaction size up 40% year over year to $350 and total transaction volume moving steadily higher to $162.5 million. Our kiosk growth and optimization plan continued to deliver the intended results, with Q3 gross profit up 40% year over year and adjusted EBITDA up 75% to $16.1 million. We ended Q3 with approximately 9,300 active machines and expect to see continued growth in kiosks for the remainder of the year. As for our BPM relocation strategy, today, 3,800 of our kiosks have been installed for less than one year. As these machines ramp up, we expect to drive further cash flow as our Bitcoin ATMs typically see payback periods of less than eight months regardless of Bitcoin price. Now turning to an update on our growth strategy. First, international expansion. We have now deployed over 260 kiosks to support our ongoing launch in Australia this year. Australia continues to emerge as a global hotspot for Bitcoin adoption, currently ranking third worldwide in total Bitcoin ATMs. While it's still early, we are encouraged by the retail partnerships and expansion opportunities we have identified so far. Beyond Australia, we just commenced operations in Hong Kong, as announced earlier this week, and continue to work through the regulatory process in other jurisdictions. Next is scaling our domestic footprint. We continue to deploy kiosks from the large inventory we secured last year. Once fully deployed, these units could bring our total active fleet to approximately 10,500 kiosks. This will enhance our reach and support further efficiencies across the business. Given the strength of our business and our improved balance sheet, strategic M&A is also an opportunity to scale domestically and internationally. In fact, in early October, we acquired the assets of National Bitcoin ATM, a prominent BPM operator across 27 states. The acquisition adds over 500 kiosks to our network, further solidifying our leadership as North America's largest Bitcoin ATM operator and accelerates our mission to provide accessible, secure, and convenient access to Bitcoin across communities nationwide. Turning to corporate and financial governance. We continue to make significant improvements. In early October, we announced the rollout of our new compliance standards that make Bitcoin Depot one of the only operators in the industry to require customer identification before transacting for any amount of money. This initiative applies to all new and existing customers, ensuring they benefit from the highest level of protection well beyond what is currently required by federal law. We also introduced additional protections for seniors, reinforcing our leadership in consumer protection and responsible access to digital assets. These steps reflect our belief that long-term growth in this industry depends on trust and accountability. While our enhanced compliance standards have had a modest effect on near-term transaction activity, the more meaningful headwind to our outlook stems from recent state regulations that imposed transaction size caps or fee caps across several states. We view both developments as constructive for the long-term health of the industry. As the largest and most compliant operator in North America, Bitcoin Depot is well-positioned to navigate this evolving regulatory environment. These changes are expected to weed out smaller, less compliant operators, further differentiate our business, and support continued growth and leadership in the market. Looking ahead, with over $70 million in cash and digital assets, we remain well-positioned to pursue growth opportunities and strengthen the crypto ATM market. We continue to focus on scaling efficiently, enhancing our compliance protocols, and using our strong balance sheet to pursue accretive acquisitions. Our team's execution, operational discipline, and financial strength position Bitcoin Depot to deliver sustained value for our customers, partners, and shareholders. With that, I will now turn it over to our CFO, David Gray, who will walk through our financial results in more detail. David? David Gray: Thanks, Brandon, and good morning, everyone. I'm pleased to share the financial highlights for our third quarter as follows. Revenue was $162.5 million, up 20% from 2024. This growth was driven primarily by increased kiosk deployment, higher median transaction sizes reflecting strong consumer demand, as well as the results of our kiosk redeployment efforts. Gross profit in 2025 increased 40% to $28.2 million compared to $20.2 million in 2024. Gross margin in the third quarter increased 250 basis points to 17.4% compared to 14.9% in the third quarter of last year. This margin increase was largely driven by leveraging the cost structure of our BTM networks against higher revenue. Total operating expenses were $18.3 million compared to $16.9 million in last year's third quarter, with the increase due to higher non-cash stock compensation expense and indirect taxes. GAAP net income for 2025 increased 139% to $5.5 million compared to $2.3 million for 2024. GAAP net income attributable to common shareholders increased to $5.5 million or $0.08 per share compared to a net loss of $900,000 or negative $0.05 per share in last year's third quarter. The increase was due to higher revenue and income from operations in 2025. Adjusted EBITDA, a non-GAAP measure, increased 75% to $16.1 million in 2025 compared to $9.2 million in the third quarter of last year. This increase was primarily due to revenue outperformance and margin expansion. Now turning to our balance sheet and cash flow. Cash, cash equivalents, and cryptocurrencies as of September 30, 2025, increased to $72.9 million compared to $31 million in 2024. We generated $33 million of cash from operating activities in the first nine months of 2025 compared to $17.3 million during the same period last year, an increase of over 90%. Subsequent to the third quarter end, we raised gross proceeds of $15 million in a registered direct offering. This additional liquidity was raised proactively to afford us the opportunity to be strategic with further M&A opportunities. Debt, which includes a term loan, finance leases, and profit share arrangements, was $70 million at quarter end compared to $60.9 million in 2024. Of the total debt balance, $25 million is our term loan, and $39 million is comprised of profit-sharing liabilities. As a reminder, these profit share arrangements entail an upfront lump sum payment to the company by our partners in exchange for a portion of future profits generated from a specified group of kiosks for a specified period of time. Because we continue to operate and typically retain title on the machines, we must account for these arrangements as debt under US GAAP. We currently do not anticipate further expansion of the profit share program going forward. Now turning to our outlook. We anticipate Q4 revenues to range between $112 to $115 million and adjusted EBITDA to be in the low single-digit millions. As Brandon highlighted, we expect fourth-quarter results to reflect the impact of typical seasonality, recently enacted state regulations, and to a lesser extent, our enhanced compliance standards. While these factors are expected to weigh modestly on near-term results, we believe they reinforce the integrity and sustainability of our business over the long term. As the largest and most compliant BTM operator in North America, Bitcoin Depot is uniquely positioned to lead the market through this evolving regulatory landscape and capture share as smaller, less compliant operators exit the market. We remain focused on operational excellence, maintaining strong profitability, and advancing our leadership position while continuing to invest in growth initiatives, compliance, and technology that will deliver durable shareholder value. With that, we are now happy to take your questions. Operator? Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question, please press 1 on your telephone keypad. If you would like to withdraw your question, simply press 1 again. Your first question comes from the line of Harold Goetsch with B. Riley Securities. Please go ahead. Harold Goetsch: Hey. Good afternoon. Good morning, guys. Can you give us a bridge maybe to the components of the difference between the guidance today and maybe prior estimates on the street in terms of, like, how much of it is state regulation, what are the states that are involved, how much do you think this is seasonality? And how much of it is enhanced compliance standards? Like, what would you stack it up as contributors to the guidance? Because it looks to me like you're gonna have a quarter this one of the lowest revenue quarters you've had in three or four years. Scott Buchanan: Yeah. Hey, Hal. This is Scott Buchanan. Thanks for the question. Yeah. If you were gonna stack rank those, the biggest impact is definitely the state regulation. Because those, as you're aware, place limits on transaction sizes or fee limits. And so that's the biggest impact. The second biggest would be seasonality, as we always see Q4 being the lowest quarter. And that'll continue to be the case here. And then third would be the proactive compliance changes that we've made internally, that we announced a couple of weeks ago, with the collecting ID for every customer and enhanced protections for elder customers. I don't have, like, percentage breakdowns of how much I think each of those impact because it's not black and white, but that's definitely the order they would be in of how much impact there is to the volume. Harold Goetsch: Could you give us a feel for what states were kind of the biggest regulatory changes in the quarter and what others might be on tap if that's a major trend? Scott Buchanan: Yeah. So it's less, like, one specific state and more that there's been so many recently. So this year, there's been over 15 states that have enacted some sort of restrictions, whether on transaction sizes or fee caps. And like, six of those went into effect in Q3 into early and go into effect early Q4. And so a bunch of those came in in the past couple of months, and so that's where the bigger decline coming into Q4 is. And kinda like we saw with California, you see the biggest drop initially when you first implement these changes. And then as the rest of the space catches up and becomes compliant as well, then we see volume recover and come back a little bit. So we expect the steepest drop to happen initially. And then as it levels the playing field again and everyone's compliant with the new requirements in each state, I think volumes will recover a little bit in those states from that point. Harold Goetsch: Okay. And if I had a follow-up, what, you know, National Bitcoin ATM is is that deal closed. Right? Is is that how much is that gonna maybe contribute in in the fourth quarter? Scott Buchanan: Yeah. That deal is closed, and we still have to convert all the kiosks. So we buy them, and then we have to convert all the kiosks for our platform to fully get all of the revenue and profits. And so we're most of the way through that now, and it'll be fully completed by Q4. Harold Goetsch: But could you give us an idea of what kind of productivity they were having before you acquired them? Scott Buchanan: I don't have the exact numbers in front of me, but if you take their kiosks as a percentage of our kiosks, they're roughly in line with us in terms of volume per kiosk. Harold Goetsch: Okay. Thank you. Operator: Once again, if you would like to ask a question, please press 1 on your telephone keypad. Your next question comes from the line of Pat McCann with Noble Capital Markets. Please go ahead. Pat McCann: Hey, guys. Thanks for taking my questions. I wanted to piggyback on the question regarding the transaction limits in the states and whatnot. I guess what I'm wondering is, you know, back when that was an issue with California initially, you know, there was that problem of other operators not being compliant. So it was an uneven playing field. And, Scott, you kind of alluded to that, you know, as others become compliant in these recent states to enact regulations, the playing field will level, and that should help recovery of volumes. Is there anything to give you confidence that in these more recently enacted regulations that these states will be strict in enforcing those regulations so that your other competitors will eventually become compliant as you are? Brandon Mintz: Hey, Pat. It's Brandon. Great question. Yes. We've started to see the playing field level in some of the states that were early on in passing legislation. Once bills like this pass, it takes a state a little bit of time for the regulator to kind of evaluate the space and figure out if operators are complying and then figure out how to enforce the law if operators are not complying. Now that SB 401, which was the original bill that had transaction and fee caps that passed in California a couple of years ago, has been active for a while, we've started seeing some enforcement actions against smaller operators who are not complying. And that has helped level the playing field there, and there is now a large reduction of kiosks in California compared to the number of kiosks that were there a couple of years ago. So the remaining kiosks that we have in California are actually doing pretty good volumes today compared to, you know, a year or so ago, for example, when a lot of the operators that were not complying were still able to continue to operate. And so I think that enforcement action that's been happening in California amongst the noncompliant operators is sending a message probably across the entire country to all operators who maybe previously weren't complying with these laws in the states that have passed them that they need to. And it will further put pressure on them to either sell or shut down their businesses. Pat McCann: Thank you for that. And then my other question was regarding 2026. I was just wondering as we look ahead to that, if you could give an overview of what you expect the dynamics to be between your new kiosk deployment versus a redeployment or optimization of existing kiosks? Brandon Mintz: Well, we still do have a large number of kiosks in our inventory today. We still have over a thousand currently, so we do expect to have still a significant number of newer deployments, but at the same time, we do expect to have a significant number of relocations. Obviously, some of the states that have passed legislation this year, it's still just so early. And we don't know the full impact of it since some of the states were just passed a couple of months ago. But as Scott alluded to, we're typically seeing some recovery over time, and typically the worst impact is right after the legislation is passed, and then some competition may be reduced because of that, and then we may recover a bit. So I think you'll continue to see still a number of machines that are less than a year old, you know, in the thousands like you have been seeing. And it's hard to say exactly how much net new kiosks there will be because we don't know how many exactly we will relocate from states that have had legislation passed. But we anticipate for states that have had legislation passed, that we will relocate more machines from those states than states that have not had legislation passed. And I will say if you guys look back a few quarters ago, when we originally had that impact from the California SB401 bill pass, we had a downturn in our numbers temporarily, and then if you look at 2025, we've put out some very excellent beats against guidance and analyst expectations. So we're still confident moving forward that we can continue to optimize our fleet even though there may be temporary bumps in the road. There's still a lot of geography out there for us to deploy in that has not had a regulatory impact yet. And we're continuing to diversify with the international expansion as well. As you saw within the past day or so, we announced that we've entered Hong Kong. Actively working on other international jurisdictions as well that do not have any of these fee caps or transaction limits in place, and we're not seeing any activity brewing in the near future. So you'll continue to see in summary, the relocations, and we will do our best to focus on net new deployments, but hard to specify an exact number. Pat McCann: Thanks very much. Operator: Your next question comes from the line of Mike Colonnese with H.C. Wainwright. Mike Colonnese: First for me, is there any way you could size the market opportunity in Hong Kong as it relates to Bitcoin ATM deployments? And are there any interesting or major players there that are acquisition candidates for Bitcoin Depot? Brandon Mintz: Mike, thanks for the question. The Hong Kong market for the size country it is is kind of interesting because you have a handful of players that are in the 100 plus kiosk range. And even though the industry compared to the US is smaller, we see it as an exciting market to enter into. I wouldn't expect the Hong Kong market currently to grow to, you know, many thousands of kiosks just based on the size of the country. But we do see it as a good opportunity to diversify and build a decent-sized fleet of kiosks that could be meaningful to our overall revenue number and our bottom line. And the operators there potentially could be acquisition targets. Of course, we're open to having discussions with operators wherever we want to expand to, and we always focus on a two-pronged effort of organic expansion and having conversations about acquisitions, and it's all just about ROI and cost-benefit analysis to determine which way we move forward. Mike Colonnese: Got it. Thanks for that, Brandon. And any updates you can provide on your BitLicense with NYDFS? I know you guys seem to be getting closer and closer to that, especially with the more favorable regulatory backdrop in the United States. Just curious if you have any updates or spending any advancement on that front. Brandon Mintz: Right now, it does not seem very likely that it will happen anytime soon for us. We're still not aware of any Bitcoin ATM operator that has received a BitLicense. And I'm not sure of the state's appetite to allow any operator to operate a Bitcoin ATM company in the state based on how it's going today. Mike Colonnese: Thank you for taking my questions. Operator: At this time, this concludes our Q&A session. I would now like to turn the call back over to Brandon Mintz for closing remarks. Brandon Mintz: Thanks, everyone. We'll talk to you guys next quarter. Thank you for joining today for Bitcoin Depot's conference call. You may now disconnect your lines. Have a pleasant day, everyone.
Operator: Greetings, and welcome to Eagle Point Credit Company's Third Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Dougherty from Protech Partners. Please go ahead. Darren Dougherty: Thank you, operator, and good morning. Welcome to Eagle Point Credit Company's earnings conference call for 2025. Speaking on the call today are Thomas Majewski, Chief Executive Officer, and Ken Inorio, Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our third quarter 2025 financial statements and investor presentation with the Securities and Exchange Commission. These are also available in the Investor Relations section of the company's website eaglepointcreditcompany.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chief Executive Officer of Eagle Point Credit Company. Tom? Thomas Majewski: Thanks, Darren. And good morning, everyone. We're glad you've joined the call today. We were very active in managing our portfolio during the quarter, both through deployment into new investments and rotation and optimization of portfolio investments already on the ground. We deployed almost $200 million into new investments, taking advantage of attractive opportunities in both the primary and secondary markets. The CLO equity investments that we made during the quarter had a weighted average effective yield of 16.9%. Additionally, during the quarter, we proactively completed 16 refinancings and 11 resets which strengthened our CLO equity portfolio's earning power and helped partially offset the loan repricings that we faced throughout the year. Importantly, we still have a robust pipeline of additional resets and refinancings planned into 2026. Third quarter recurring cash flows came in at $77 million or 59¢ per share. This is a decrease from $85 million or 69¢ per share in the second quarter. During the quarter, the company generated net investment income less realized losses from investments of $0.16 per share, consisting of 24¢ of net investment income and offset by 8¢ of realized losses from sales on certain investments. The realized losses from investments were primarily driven by rotating some of our underperforming September, our NAV stood at $7 per share, which is down 4.2% from $7.31 per share as of June 30. For the third quarter, the company generated a GAAP return on equity of 1.6%. Our portfolio's weighted average remaining reinvestment period or WARP ended the quarter at 3.4 years, roughly 26% above the market average of 2.7 years. This is slightly higher than the 3.3 years as of June 30, and reflects our long-term strategy to seek to maximize our portfolio's WARP when the reset market is open. As I mentioned at the beginning of the call, we focused efforts during the quarter on portfolio rotation and optimization, which should ultimately enhance our cash flows and earning power going forward. Our position as a majority CLO equity holder in most cases gives us multiple levers to pull to unlock value for the company over time. As many of you know, the loan market has been facing pressure from loan repricings in recent quarters. We did see repricing activity slow down when the credit markets were spooked recently by the idiosyncratic bank of First Brands. However, 42% of loans are trading above par again and we may see repricing activity return. I'd also like to point out that ECC's exposure to First Brands was small, and the losses related to the name were well within our annual credit loss assumptions. In addition, we saw a pickup in LBO activity during September, which is healthy for the market overall and supportive of loan spreads. In other words, an increased supply of new issue loans should help mitigate spread compression pressure, which is ultimately a good thing for our cash flows and our NAV trajectory. During the quarter, we utilized our at-the-market program selectively issuing $26 million of common stock at a premium to NAV. We also issued approximately $13 million of our 7% series double a and b convertible perpetual preferred stock as part of our continuous public offering. We believe this is a highly attractive cost of capital for the company and presents a real competitive advantage for us. We are unaware of any other publicly traded entity focused primarily on investing in CLO equity that has such an attractive program. During the quarter, we paid 42¢ per share in cash distribution to our common shareholders across three monthly distributions of 14¢ per share. Earlier today, we declared regular monthly distributions of 14¢ per share for 2026. The company's board of directors considers numerous factors when setting the monthly distribution level, including cash flow generated from the company's investment portfolio, GAAP earnings, and the company's requirement to distribute substantially all of its taxable income. Before I hand the call off to Ken, I'd like to highlight Eagle Point Income Company, which also trades on the New York Stock Exchange under the symbol EIC. That entity principally invests in junior CLO debt securities. We'll be hosting EIC's investor call today at 11:30 AM Eastern and invite you to join us for that call as well. Ken will now provide details on our financial results. After his remarks, I'll share additional insights on the loan and CLO markets broadly. Thank you, Tom, and thanks, everyone, for joining our call today. Ken Inorio: For 2025, the company recorded net investment income less realized losses from investments of $21 million or 16¢ per share. Net investment income was 24¢ per share. This compares to NII less realized losses from investments of $0.16 per share in the last quarter and NII less realized losses of $0.23 per share in 2024. Additionally, for 2025, the company recorded losses from forward currency contracts of 1¢ per share. Including unrealized gains, the company recorded GAAP net income of $16 million or $0.12 per share for the quarter. This compares to a GAAP net income of $0.47 per share last quarter and 4¢ per share in 2024. The company's third quarter GAAP net income was comprised of investment income of $52 million and unrealized gains on investments and forward currency contracts of $4 million, partially offset by financing costs and operating expenses of $21 million, realized losses on investments of $10 million, distributions and amortization of costs on temporary equity of $6 million, and unrealized losses on certain liabilities held at fair value of $2 million, and realized losses from forward currency contracts of $1 million. As a reminder, temporary equity refers to our multiple series of perpetual preferred stock. In addition, the company recorded an other comprehensive loss of $2.5 million for the third quarter. The company's asset coverage ratios as of September 30 for preferred stock and debt calculated pursuant to Investment Company Act requirements were 239% and 529% respectively. These measures are above the statutory requirements of 200% and 300%. During the third quarter, we deployed nearly $200 million in gross capital into new investments. Our debt and preferred securities outstanding at quarter end totaled 42% of the company's total assets less current liabilities, above our target range of 27.5% to 37.5% when operating the company under normal market conditions. Consistent with our long-range financing strategy for the company, all of our financing remains fixed rate, and we have no maturities prior to April 2028. In addition, a significant portion of our preferred stock financing is perpetual with no set maturity date. So far in the current quarter through October 31, we've collected $70 million in recurring cash flows and expect additional collections throughout the balance of the quarter. Additionally, management's unaudited estimate of the company's NAV as of October month-end was between $6.69 and $6.79 per share. With that, I'll turn back to Tom for a look at market insights and closing thoughts. Thomas Majewski: Thanks, Ken. Stepping back to the market, loan fundamentals remain quite strong. The S&P UBS Leveraged Loan Index returned 1.6% for the third quarter and has continued to perform well through October, returning 30 basis points for the month. There were five leveraged loan defaults during the third quarter, and as of September 30, the trailing twelve-month default rate stood at 1.5%. This is up from 1.1% as of June 30 but well below the long-term average of 2.6%. The widely reported First Brands default drove most of the increase in the default rate, though its impact on the broader CLO market was actually minimal. First Brands accounted for only 30 basis points of our portfolio on a look-through basis, and we do not view it as a widespread indication of credit weakness. While the First Brand loan itself was large, it's important to remember that a good portion of that loan was held in BDCs, not CLOs. Our portfolio's look-through default exposure as of September 30 stood at 34 basis points, which is well below the broader market levels. With rates expected to fall further, we believe defaults should remain muted as loan issuers will have lower interest costs. In addition, corporate fundamentals across the loan market remain quite resilient with issuers generally continuing to grow revenue and EBITDA despite the effects of inflation, tariffs, and movements in interest rates over the past years. During the quarter, the market saw approximately 6.8% of the leveraged loan market or roughly 27% annualized prepaid at par. In general, loan issuers continue to be proactive in tackling their near-term maturities, and the maturity wall we have mentioned on prior calls continues to be pushed out. Unfortunately, while pushing out the maturity wall is good, many of these refinancings by borrowers have also included reducing the spread on loans leading to the spread compression that we've talked about over the past few quarters. On the CLO side, the market saw $53 billion of volume during the quarter, which was up slightly from $51 billion during the last quarter. Reset and refinancing activity for the third quarter was $69 billion and $36 billion respectively, and both of these measures represented significant increases on a quarter-over-quarter basis. Our portfolio metrics continue to stand out versus the market. As of quarter-end, triple C rated exposures within our CLO equity portfolio stood at 4.6%, which is lower than the broader market average of 4.8%. Similarly, only 2.7% of the loans in our CLOs were trading below eighty, and this compares to 3.4% across the market. Our weighted average junior OC cushion stood at 4.6%, well in excess of the market average of 3.7%. These are all important measures that underscore the quality of our CLO equity portfolio. And overall, we believe we have a higher quality portfolio than the market more broadly. The Fed's recent rate cuts have had limited direct impact on CLO equity, as our returns are largely driven by spreads not base rates. In many respects, lower rates can be constructive for the CLO equity asset class easing interest costs for loan issuers. It also helps increase LBO activity, which contributes to new loan supply and potentially wider loan spreads in the future. Looking ahead, we're excited about our near-term investment pipeline. Market conditions have continued to stabilize following the volatility earlier this year. Loan fundamentals remain resilient. If CLO debt spreads remain flat or continue to tighten, we expect to take action on over 20% of our portfolio and unlock refinancing upside in the coming months and quarters. To wrap up, we opportunistically deployed capital at attractive levels, executed resets and refinancings that strengthened the recurring cash flows on our portfolio, and maintained portfolio metrics that are favorable to the broader market. We are positioned with strong fundamentals, meaningful reinvestment optionality within our portfolio, and the flexibility to capitalize on opportunities as they arise. We thank you for your time and interest in Eagle Point Credit Company. Ken and I will now open the call to your questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate you may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Gaurav Mehta with Alliance Global Partners. Gaurav Mehta: Thank you. Good morning. I want to ask you on your comments around portfolio resets and refi. I think you mentioned over 20% of your portfolio will be reset and refi. Just want to get some more color on the timeline for that and what would the impact be. Sure. Thank you. Thomas Majewski: Thank you for your question, Gaurav. As we laid out, we completed a significant number of refis and resets during the third quarter, so we were very proactive with our portfolio. And when we talk about our outlook for the future, we're anticipating another 20% of the portfolio makes sense to have some actions taken over the next one to two quarters generically. It's all market condition specific. The biggest thing I would draw your attention to in our investor deck is page 28 or 25 through 28 now where we lay out position by position every single CLO that we have. And what the, what the triple A's are. You'll see the weighted average AAA spread is 134 basis points over SOFR. Right now, generically, you should think of the market as one twenty to one twenty five. Some deals wider, some deals tighter. But and then start looking through the deals that have the highest AAA spreads, and those are gonna be the ones that we that we go after. Combination of triaging, and making an, you know, an educated decision. It's as much of an art as a science of which CLOs will get the biggest potency for us, whether or not we're doing a refi or reset, which ones have the most upside savings or the value in lengthening the reinvestment period. You can see over the course of the year, we've done, I think we're on pace for comfortably over 75 different corporate actions. So, a highly, highly proactive ownership program. And I would expect that to continue market conditions permitting. We may have even a few more slated for this year, and we'll kick off into next year. So I would expect a slow and not slow, but a consistent reduction in triple A costs across the CLO portfolio and lengthening or lengthening of the reinvestment periods of those that were resetting. That said, it is all market dependent, and there's been a period of time. If you look back to Q1, it was reset mania until March 1. And then we put pencils down because the market didn't cooperate proverbially. So there is always that market caveat, but we are working very hard, and we'll do everything, you know, within reason to to to keep the cost lower on the right side of our balance. And I would say no one in the market has done more than us is my belief. Gaurav Mehta: Thanks for that color. Second question, I want to ask you on your near-term investment opportunities. Can you provide some color on what you guys are seeing in the primary and secondary markets for senior equity? Thomas Majewski: Yeah. The market continues open and active right now. Primary market, we continue to see plenty of issuance opportunities. We have a number of loan accumulation facilities, which are kind of the precursor to creating CLOs. Some of those are ripe and ready to go into CLOs whether or not we issue any more this year, a little bit market dependent. As I'm sure you're aware, insurance companies are big buyers of a lot of the rate tranches, and they often have annual budgets to deploy. And they have a funny habit of deploying that budget before the end of the year. So sometimes you see things back up a little bit. In the last week or two. So we may get one or two new done this year. But certainly a robust pipeline into Q1 of next year. And then on the secondary side, you know, hundreds of millions of dollars CLO equity trades every single week. The market's not cheap today by any stretch. It's not you know, bond equity is not being given away. That said, there are still selective opportunities out there. We have both been buying and selling in the secondary market. One of the things we made reference to in our remarks was some rebalancing and lightening on a handful of collateral managers in positions where you know, perhaps we saw more more risk than upside. That said, we've also been deploying in the secondary market in investments where we see more paths for upside. So market is open and active right now. And we are an active participant in every segment of it. But we do remain very selective in the in the areas we're in in the investments we're making. Gaurav Mehta: Okay. Thank you. That's all I had. Thomas Majewski: Great. Thank you very much. Operator: And our next question comes from Mickey Schleien with Clear Street. Mickey Schleien: Good morning, Tom and Ken. I hope you're well. Tom, you mentioned the impact of First Brands on loan spreads. Could you characterize how trends and CLO loan asset spreads in October and maybe even, you know, through mid-November relative to September? Thomas Majewski: Let's see here. So loan spread compression has slowed somewhat. If a few weeks doesn't make a trend. I unfortunately, I wish I could say better there. You know, when we look across our portfolio, you know, this the you know, lots of people ask us about default rates and all that stuff. You know, the number one thing that I don't like right now and you've heard it from us in earnings here for a few quarters, is spread compression. And the weighted average spread on these loans is down I'm gonna say, circa 50 basis points, give or take, over the last year. That is not good. We're doing our part to tighten on the right side through our reset and proactive and refinancing program. An analogy I like to make to people, and this is an analogy, we've got well over a thousand loans and a little over a 100 CLOs. It's kinda picture a wall of sand coming at us on one side. That's the loans repricing. While our team is tossing boulders on the other side. It just things move at a different pace and sometimes a different activity. To your point, there's always a silver lining in clouds, and while, you know, First Brands is certainly not the credit market's finest moment, ironically, it was actually a repricing that they were working on that gave rise to figuring out the fraud, and their quality of earnings were my understanding is the quality of earnings report was getting prepared. And as part of that, some of the things going on at the holdco above the borrower became known. That has certainly put a chill on the repricing market. There are far fewer repricings right now than you'd expect 40% of the loan market trading above par. Regrettably, I'll say it's too soon to declare a victory, though. And, you know, we, you know, we wouldn't surprise me to see a little more pick back up, but it certainly has slowed since the First Brands news. By a non by a healthy margin. Mickey Schleien: Tom, you sort of segued into my next question, which is sort of the longer-term outlook for spreads. Loan spreads. When I look at page 19 of your presentation, you know, those spreads look like they're heading down to their long-term average, as you said, you know, we don't know for sure. Spreads, you know, can move up and down. Over long periods of time, but over the long run, looking at the supply and demand of capital in the loan market, you know, what is your outlook long-term for loan spreads? Thomas Majewski: That's a tough one. Yeah. And we show two averages here. We show the, you know, thirty-five-year average, give or take, and the ten-year average. Obviously, I like the ten-year average better than the thirty-five-year average. What I will say when you think about the pre-2007 average, you know, in the old, old days, and our good friend Peter Gleisstedt might get might I might be slightly off on this. He might know better. Loans had two two two spreads, two fifty and two seventy-five. Like, those are the two choices when you called the loan desk at Chemical or Manufacturers' Hanover a long time ago. Obviously, the market's gotten a lot more sophisticated. When loan spreads were two fifty back in 2006, and I remember as a CLO banker modeling, you know, two fifty, two forty spreads. That was back when AAAs were twenty-five and thirty basis points over. So the funding cost in the market was much, much lower. The loan market and CLO market, whether we like it or not, are inextricably linked. The CLO market, you know, owns about two-thirds of the loan market, even a little more right now. So while we are at the low on spreads over the last ten years at $3.47, I'd love to call a bottom. I can't quite call a bottom there. But when I think about the long-term average going back to the early nineteen nineties, that was influenced significantly by the availability of in those days, LIBOR plus 25 triple A's. When, you know, we're up. A 100 basis points away from that. So if I had to guess, we're closer to the bottom in the ten-year band than well, certainly than the top. You get one or two other credit things pop up. You know, frankly, you know, the way media cycles work, like, I'll use an example. Like, our friends at, you know, Citibank for a while, it felt like they could do nothing right. They had the mistake with the Revlon loan, then that, like, $27 trillion wire. You know, just everything that went wrong, you know, kind of seemed to get attention. My sense is the credit markets are gonna be that kinda get that focus from the media. You know, there was some headline I saw in Bloomberg about a loan in a, you know, in a BlackRock BDC that took a big write-down. Again, it's probably one loan in a portfolio of hundreds, but it got attention. The good news around that is it probably helped abate loan spreads and, you know, potentially even a path for widening. One of the pieces we did share is that M&A activity does seem like it's picking up, which is good. To the extent, you know, what's been going on is a lot of the same loans are just getting repriced and handed around and refinanced and repriced tighter. To the extent we see new names coming into the market, which it feels like we are with loan spreads lower. It makes M&A a little more easy. Could we see a little new supply which would help? So can't call a bottom. I'd love to. We are at the ten-year low if you look at this chart. Hopefully, that means there's some upside to go. Our focus from the media, the credit industry broadly, odd as that sounds, probably is a good fact at least to get on spread compression. Mickey Schleien: I appreciate that, Tom. It's pretty much in line with my thesis. Couple more questions if I can. On page 24, you show that your recurring cash flows dipped below the total of the distribution and your operating expenses. So I'd like to, you know, understand what drove that decline. And could you also walk us through what factors the board considered when you look at that decline in keeping the dividend stable? Thomas Majewski: Yes. We have a prepared answer for the latter one. But to the first one, you know, combination the principal thing, spread compression. Was a nontrivial factor there. I'm gonna say the weighted average spread fell at eight or so basis points. Eight basis points this quarter. So that's you know, it's while we're lowering our costs on the right side of the balance sheet with resets and refis, we're, you know, we didn't lower our weighted average eight basis points, unfortunately, quarter over quarter. So that's you know, that's the principal manifestation of it. That said, there are a and we do say this often, but there seems to be, as I was looking through it the other day, a disproportionate number of investments that haven't yet made their first payments in the portfolio. So that there are some green shoots. It's not as if everything is paying yet. And not that there's a problem with those investments, just a little bit of a delay. In getting in in in you know, when you make investments, sometimes it's six months before the cash flow turns on. So a little bit of that principal driver spread compression, a little bit offset by some reset activity that we do. Even the reset activity hurts cash flows in the first quarter because you gotta pay the bankers, the lawyers, the rating agencies, and that all comes out of your distribution. In the quarter you do that. So in many cases, the equity distribution comes down as for one period as a result of that activity. So those are some things going on there. In ECC, we did maintain the distribution at 14¢ a month. For the first quarter. The board considers any number of factors, all factors regarding both the outlook for company, the portfolio, the economy, taxable income are all drivers in there. You know, obviously, the board reviews these matters every single quarter. No one thing is a particular driver of the decision, but a collage of all the factors. Went into the board's decision. Mickey Schleien: I understand. One last question, Tom. You talked about borrowers taking advantage of tighter spreads and CLO managers and equity holders like yourselves. Also taking advantage of tighter spreads. To refinance. But if I'm not mistaken, your most expensive liability, the series F preferreds, will become callable soon. I might be wrong, but I think I'm right. Thomas Majewski: Yeah. Ken's smiling even when you say that just to on the comes to mind to me. Am I right on that, Ken? Ken Inorio: To tip our hand down. Yeah. It's hard for me to keep track of all of them, but I those are the most expensive. They're callable. Very soon. Under current conditions, does it make sense to refinance them? In other words, did Ken's smile just get broader? Thomas Majewski: And the banker smile might have gotten as well. No. I'm sure if they're listening. But yeah, no. As we look at the capital structure, and this is on page 10 of the deck, a very astute observation on your part. You know, interest rates have certainly come down a bunch. You know, we're above our target leverage limit. You know, target leverage guidelines, I should say, that we say we wanna run the company, and we're well within our statutory limits. And, you know, we talk about while we're doing it very slowly, right now because of where we are, you know, we've got that 7% perpetual preferred program that we issue through Eagle Point Securities the series double a, double b, you know, that I say this. This is a meaningful advantage. No other principally CLO equity-oriented vehicle has such a program. I love that program and, you know, could you see us opening up or doing something with the F five the board will make the decisions on the appropriate days. But the call date is 01/18/2026, and it wouldn't surprise me if Ken has a reminder in his calendar around that day. Mickey Schleien: Yeah. Me neither. Okay. I appreciate it. That's it for me this morning. I appreciate you taking my questions. Thomas Majewski: Thanks so much, Mickey. Operator: And we'll go next to Eric Zwick with Lucid Capital Markets. Eric Zwick: Hey, Eric. Good morning. Thomas Majewski: Good morning, Tommy. Eric Zwick: Hey. Good morning, Tom again. So wanted to my first question, maybe a bit of a follow-up on some of kind of the kind of broader topics you've been talking about. But in terms of, you know, you've mentioned there's quite a bit of opportunity still for some of the, you know, the borrowers, the asset side of the CLOs to refinance. You have opportunities remaining on, you know, the liability side. Just from quarter to quarter, you know, one may outweigh the other, but over the long term, you know, that the kind of the changes should be offsetting, so to speak, your arbitrage opportunity remains the same. Is that the right way to think about it? Thomas Majewski: Generically, yes. Over the long term, and given period, it widens or tightens. You know, the days loans are widening are usually the days CLO debt is widening. Know, that's kind of a you know, a bad fact. The good news is CLO debt is longer than loan debt. And yeah, we things these things move in cycles. Credit spreads tighten. Credit spreads widen back and forth. The good part about loans being shorter term than CLO debt is when things get choppy in the credit markets, you see if you look back historically, and we have the data going back to 2014 on our website, you'll see there's periods of time where the portfolio spread on the underlying loans increases and sometimes increases quite handsomely. The triple A's we're locking in today can be around for twelve years if we need them. So your statement is absolutely correct. When you look over the long term these things have a nice habit of balancing out. And some of it is just due to the CLO market and loan market again are so intertwined. There are periods. And if you were to listen to our calls in 2018, I'm the recordings are gone, but the transcripts are still around. We might have lamented the same thing of spread compression beating us up. And then when it went the other way, and we had the triple A's, you know, locked in place and you know, from January 2020 to the January '21 was a great period. Not a straight line, but a great destination. So over time, these things should all balance out. They rarely feel like they balance out on any given day. Eric Zwick: Got it. That's helpful. And you anticipated that the second part of the question there with your answer, so I won't go on there. Just in terms of, you know, funding activity going forward, you know, it's certainly been a rerating of not only your stock, but the other, you CLO funds that are traded out there. Trading now at a discount to NAV. How does that, you know, change your thoughts about potentially shifting to a share buyback, you know, kind of strategy as opposed to using the ATM? Thomas Majewski: Yep. And, certainly, yeah, so we look at things over a long term. You know, in the vast majority of the decade plus we've been public, the you know, ECC, we've been fortunate, and investors have been demanding the stock such that it's traded at a handsome premium. To NAV. Right now, it has been at a discount as I think have all of the or so substantially, certainly all of the major CLO equity funds. It's a little bit frustrating why that, you know, why that is. There's you know, it could be any number of reasons. The BDC index is down a bunch over the last kinda six days as well. You know, frankly, BDCs, in my opinion, are more levered to interest rates than we are and that they have floating rate loans where the floaters are falling. And they have fixed rate debt which is gonna have to be refinanced wider. So, you know, any number of things. And then overlay, you know, the credit news in the world doesn't help matters. The impact on the major CLO equity funds, ours including, is frustrating. We do make long-term decisions about these things. And our, you know, our management style that Ken and I bring to the table as well as the advice and direction from our board. Very much long-term focused. We won't make hair-trigger decisions around any stuff. That said, I will say all things are, you know, up for consideration at the company, and we'll continue to be. But we think about these things very much on a long-term basis. Eric Zwick: And last one for me, just looking at the, you know, the decline in NAV. Curious if you could kind of frame how much of that is related to changes in kind of market pricing and spreads versus maybe, you know, return of capital, you know, how much of that, you know, could potentially be recaptured if there are changes in the market. Thomas Majewski: Yeah. I have the exact yeah, I don't have the exact split. I'll say the vast we did have some realized losses from repositioning. By and large, those prices were already factored into the NAV. So that's more of just a reclass from unrealized to realized, not our favorite, but not a big NAV impact. And then, you know, the NII was less than, you know, unfortunately, nontrivially less than the cash distributions paid. So I don't have the exact components, but I'm gonna judgmentally say right now, and we can check the numbers later, the largest component of the NAV move in the quarter was the excess of distributions over NII and Ken is nodding. Yes. K. With a yes. That's I'm right, which is good. We're directionally right. It was the myriad of factors that go in there. But the biggest factor, in my opinion, on the NAV move, frankly, was the distribution relative to NII. Eric Zwick: And then I guess my follow-up to that would be in I know Mickey kind of already asked about the dividend a little bit, but I guess maybe what levers or what would need to happen, you know, in the market, or what can you do to potentially get the NII back above the dividend? Thomas Majewski: Yeah. You know, all things are, you know, considered at all times. You know, continuing to rotate the portfolio into higher earning investments. Is something we've been doing a lot of. We haven't used the word rotation, too much lately. Or in a while, but we have used it recently here. In terms of working on a couple of positions that have, you know, not bad, but have underperformed our expectations. And are rerotating into things that we think have some higher earnings potential. I think Mickey was kind enough to suggest we call the apps. And maybe replacing 8% financing with 7% financing. That might, you know, that might have a nice ring to it. Obviously, we'll make the decision on that day based on market conditions. And continuing to optimize, you know, every aspect of our portfolio. At the end of the day, I'm just looking at some numbers here. Bear with me one second. Rotation. Yep. So here to there. So the things we of a selection of things we exited, had a look like, in about an 11% effective yield. And this is the you know, the 20 plus percent effective yield on things that we were putting into the ground during the past quarter. So it's rotating out of some things that were, you know, for whatever reason, either late in life. I'm looking at a 2015 vintage CLO. That just you know, that's one of the larger sales largest sales we had. One of the sales we had, not the largest necessarily. But looking at a nine and a half percent yield, but the weighted average effective yield on the things we sold was 11. And the weighted average, of the things that of a handful of investments that were some of that kind of rotation offsets that have to handle in front of them. So doing everything we can to get more earnings into the box is part of it. We can do that through resets and refis. As well as buying and selling CLO securities. We can also do it by optimizing the right side of our balance sheet. I am mindful of where we are on the leverage ratio. We're, you know, we're comfortably on sides with all the limits, but we are operating outside our target band as well. We do like to be within the target band most of the time, so that's something in the equation. But, you know, it's very much a collage. And very much things that we think about on a long-term basis. We don't know, while we do these calls every quarter, you know, we think about where we wanna be over multiple years, not just are we gonna say on the next quarterly call. Eric Zwick: But we like to have good things on the next quarterly call, of course. Not to dismiss it either. Thomas Majewski: Of course. Thanks for taking my questions today. Eric Zwick: Yep. Thank you very much, Eric. Very thoughtful questions. Operator: And we'll go next to Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Hey, guys. How are you doing? Tom, on your comments on the twelve-month trailing default rate, I presume that's for industry. And is that First Brands at all? I know First Brands is small, but I'm trying to get an understanding why the trailing default rate starts creeping up the way it is. Thomas Majewski: If yeah. It picked up to that's that's market-wide. It's not really I mean, our default exposure is relatively low. That said, you know, CLO managers have a funny habit of selling things a day before they default to keep their optical default rates low as well. So know, there's any number of factors. That go into that. The pickup in defaults, I think we said there were five defaults during the quarter. First Brands was a roughly $5 billion loan. So that's one of the biggest fees we've had in a long time. So that's the principal driver on a quarter-over-quarter basis. The good news you know, as I that that or the I don't good news, at least for us, I'm in the CLO market. A lot of that loan was held in BDCs. And it was not a CLO only loan by any stretch. It was think that's SOFR plus 500 loan. Which met the met the requirements to get into a lot of BDCs. So our exposure to it was quite low. You know, we model significant amount of reserves for losses. Obviously, we like not to use them. But and this this was well within our tolerable band that we know we're always gonna have a few problems every year. So for us, it was fine. But the overall pickup, which I think we're, like, one thirty or something, 1.3% trailing twelve months, still well less than the long-term average, but you know, if we were talking six months ago, I think that was a double-digit basis point number. So trending up a bit, but driven by, you know, First Brands at 50 basis points, of a $1.5 trillion or $5 billion of a $1.5 trillion market. That one can move the percentage quite a bit. Christopher Nolan: And excuse the what might be a dumb question, but in the case of fraud, let's first who's responsible for vetting that fraud before the CLO's packaged and sold? Thomas Majewski: Let's see. So an investment bank underwrote the loan and placed it. And then institutional money managers who manage the CLOs reviewed the loan and push buy. And we review those institutional money managers to determine that they have, you know, processes they have the right people in place and processes in place. So it's, you know, the chain is somewhere in there. And auditors audit things and tell you what's going on and, you know, that's, you know, the that's kind of the, you know, the broad things that go on in a system like that. One of the interesting things about First Brands, as best I'm aware, and is a lot of the things that were of that are raising questions for sure today. And if you read the headlines and the bankruptcy court docket, a lot of things going on were going on at a holding company. Above the operating company where this $5 billion senior secured loan was. Doesn't make it right or wrong. Obviously, it's still wrong what happened. But it seemed like there were, you know, move money moving up and down from holdco to opco. Our loan at Opco is where that $5 billion loan was facing. The subsidiary of Holdco. It seems like they were getting advances from Holdco, best I'm aware based on factoring some receivables. But it sounds like they may have been, you know, multiple factored. The company had something like a billion dollars of EBITDA a year ago. I might mine might be slightly off on that, but directionally accurate, I believe. And, you know, on the surface, like, you know, $5 billion of debt against a billion of EBITDA, that's, you know, that's not low, but that's not absurdly high either. In the credit market. That said, and while they talk about brands and First Brands, you know, things they made, you know, or generic, you know, aftermarket auto parts, with limited exception. Do you know what brand windshield wipers you have on your car? You know what I mean? It's not like you think about, like, a J. Crew, which went bankrupt many years ago. J. Crew still exists. The brand is valuable. And, you know, and that, you know, people, oh, I buy my stuff at J. Crew. My son likes to get his stuff there. He thinks he looks cool. A lot of the products, I think Fram is one of the brands that First Brands. Maybe some people have some loyalty to that for oil filters and things like that. But there's not a lot of you know, the biggest challenge that I see is a lot of those parts, while they're essential to the operation of your automobile, if you're a kind of person purchasing at a, you know, at an aftermarket shop, are you gonna buy one versus the other? Who knows? And if these guys are not able to produce and get product to the stores, someone else will, and they lose their shelf space. So when we look at the ultimate recovery on First Brands, which is still quite uncertain in my opinion, some CLOs still own it, we've got this dynamic of okay. Let's say they were at a billion of EBITDA a year ago. That doesn't mean they're gonna be at a billion of EBITDA next year. I would certainly take the under on that. They did get some additional funding on their DIP facility released but it sounded like cash was extremely tight there. For a while. So my sense is it probably continues in some way, shape, or form, but it's probably a much smaller company. The ultimate recovery for the creditors, you know, the jury's still out. Doesn't look great, but not but I think a lot of it will be how quickly they can get back into business and if they're a $700 million EBITDA company, versus a $300 million EBITDA company, and I'm just pulling those numbers out of the air, could be very, very different outcomes for the creditors that remain. Christopher Nolan: Great. That's great color. Thank you. Thomas Majewski: Welcome. Thank you. Operator: And we have time for one final question, and that will come from Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Hey, Tim. How are you? Thanks for taking the question. Good. How are you? Great. Thanks for taking the question. Joining a little bit late here, I apologize if I'm reiterating anything. But in the press release, you mentioned that your common stock issuance via your ATM was issued at a premium to NAV. Was just wondering if you could quantify how much accretion to NAV that created. Ken Inorio: Yeah. Sure. It was a few pennies. We have it in the press release. I would say 2 to 3¢ accretion. Timothy D'Agostino: Okay. Great. And then just one another quick question. In the third quarter, you did 11 resets in 16 refinances. I was wondering if you could provide an update quarter to date of how many you've done for the fourth quarter. Thomas Majewski: I don't think we we don't publish that number. And that sometimes it's episodic earlier versus late. We do give the cash flow collected because most of it comes in and out in the first month of the quarter. We haven't published it per se, so if you wanted to figure it out, what I'd probably see we do list every investment we have. If you look on Bloomberg, you can see which of those have been reset. I recognize that that would take a little bit of time. So we don't we don't publish the stats around that. Just because at this midpoint in the here we are exactly roughly at the midpoint of the quarter. It may not be indicative of the total volume. So I can assure you we've continued with them and we will continue with them. But we don't we don't share a mid-quarter stat on that. Timothy D'Agostino: Okay. Great. Thank you so much. Yeah. Those are the two quick ones for me. Thomas Majewski: Thank you very much. Operator: And this now concludes our question and answer session. I would like to turn the floor back over to Thomas Majewski for closing comments. Thomas Majewski: Great. Thank you very much, everyone, for joining the call today. We really appreciate your attention and frankly, the very thoughtful questions from all the analysts. Ken and I are around for the balance of the day. If people have further questions, we're happy to continue the discussion. Thank you very much for your time and interest in Eagle Point Credit Company. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, have a great day.
Operator: Good morning, and welcome to the LiqTech International, Inc. Reports Third Quarter Fiscal Year 2025 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. To submit a question, you may type it into the ask a question box on the webcast screen. Please note this event is being recorded. I would now like to turn the conference over to Robert Blum, with Light and Partners. Please go ahead. Robert Blum: Alright. Thank you very much, and good morning, everyone. As the operator indicated, thank you for joining us today to discuss LiqTech International, Inc.'s third quarter 2025 financial results for the period ended September 30, 2025. Joining us on today's call from the company are Fei Chen, the company's Chief Executive Officer, and David Kowalczyk, the company's Chief Financial and Chief Operating Officer. Before I turn it over to management, I do want to remind everyone that there will be a Q&A at the end. To ask a question through the webcast portal, again, simply type your question into the ask a question feature in the webcast player. Before we begin with prepared remarks, we submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect the good faith and judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different from those discussed during the conference call. The company, therefore, urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of the risks that may affect our business, financial condition, operations, and cash flows. If one or more of these risks or uncertainties materialize or if the underlying assumptions prove incorrect, the company's actual results may vary materially from those expected or projected. The company, therefore, encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of the date of the release and the conference call. The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of the release and conference call. With that, I'd like to turn the call over to Fei Chen, Chief Executive Officer of LiqTech International, Inc. Fei, please proceed. Fei Chen: Thank you, Robert. And good day to everyone on the call. There is a lot of optimism for the future based on the execution during the third quarter. Not simply because of the growth in revenues, improvement in gross margins, and reduction in operating expenses, but also due to the strong order books during the third quarter, which sets the stage for a nice fourth quarter. A key driver during the quarter was the strength within our water treatment systems business, led by our swimming pool vertical, which achieved its highest quarterly revenue to date. Equally important is that the new bookings received during the quarter indicate a continuation of this positive trend. It is clear that the market is increasingly recognizing the unique attributes of our ClariFlow filtration system and the competing alternative it offers to traditional media filtration systems used in commercial pools. Beyond the swimming pool vertical, we are making progress in a number of other applications which leverage our robust silicon carbide membrane technology, including water for energy, industry applications, and the marine industry. The increased order flow and interest is the direct result of the numerous successful pilot programs we have implemented over the past two years, showing the success of our systems in real-world examples. We have long emphasized that this transformation would take time, and we now believe that we are on the verge of broad adoption of our systems across multiple market verticals. Where system sales are the ultimate measure of success, we have spent considerable effort rightsizing the business and electing operational efficiencies to drive down costs, both from an OpEx perspective as well as from a manufacturing side. During the quarter, our contribution margin was one of the highest levels we have seen over the past five years, and the gross profit was at 19.6%, also at an improved level. Further, our operating expenses are at their lowest levels in many years. Let me circle back on a few of the key activities during the quarter, starting with the swimming pool vertical. As mentioned, we delivered systems to six customers during the quarter, totaling $1,000,000 in revenue. The systems delivered were much larger in size than many of our historical systems, and it really highlights the progress we are making within the larger swimming pool systems. The orders delivered during the quarter were fulfilled through our partners Boundary and Total Pool in the UK and Oxidime in Spain. These partners have been instrumental to our success, particularly as we have strengthened our collaborations in the past three years. During the quarter, we continued to expand our pipeline within our key markets, including systems in the UK, Denmark, and Holland. This really shows the depth of what we have accomplished in the past few years, building these relationships, but also the internal team's role in helping move projects forward and showcase what is possible with our solutions. Another key development within our swimming pool solutions has been the development of the modular design system, which allows for ease of deployment. Since I took over, we have worked hard to move away from many customized solutions, which often take too long to create and cost too much money. Further, it created too much confusion among customers. This theme of creating a modular design system and driving down costs is not just applicable to our swimming pool vertical but across other applications as well. To that point, we are working with our joint venture partners in China to reduce the cost of components and assembly of our marine water treatment systems, making them more competitive in the market. We will continue manufacturing the silicon carbide membrane in Denmark, but we are also exploring the potential to leverage our Chinese assembly and sourcing capabilities to drive cost reductions across our systems and applications. Another exciting development we are seeing in our China joint venture has been the receipt of two first orders for marine dual-fuel engine water treatment systems. The marine CP industry is moving towards cleaner, fuel-efficient applications, with most new vessels equipped with dual-fuel engines that require reliable water treatment for exhaust gas recirculation systems. According to published data, approximately 400 new vessels are on order with ISO EGR solutions planned between 2024 and 2027. One of the two marine dual-fuel engine orders is scheduled to be delivered here in the first quarter, with the other set for delivery in early 2026. We believe more opportunities are on the horizon. Transitioning from China to the US, we have talked about this for a while now, but the water for energy market is rapidly growing within the US. We have worked with partners such as Resubac Direct and Renewal Resources lately to build a presence in the US. For this reason, we have moved forward with the opening of a dedicated service center near Fort Worth, Texas. The new facility is being launched in partnership with Hydro Systems and opened a few weeks ago. For those not familiar, Hydro is an industry service provider with extensive experience in energy, oil and gas, and industry sectors. They specialize in equipment servicing, maintenance, and field support. The center will strengthen support for our water for energy business segment, offering deployment of certified service technicians, availability of critical spare parts, remote and on-site technical support, and system maintenance and repairs. As we scale our operations in the US, this new service center allows us to respond faster and support customers with deep local knowledge and reflects our strategy to offer fully integrated filtration solutions, from engineering and commissioning to lifetime service. On the topic of new system deployment, we are actively engaged with several end customers and hope to have updates to share soon. Taking a step back, I think it is important to remind everyone of the number of new systems that we have deployed during the past couple of years. Since the beginning of last year, we have deployed nine pilots or commercial systems across a wide range of industry applications, from multiple oil and gas industry systems to lithium brine production, plastic removal from a US petrochemical company, MEG recovery, tomato processing, the broader marine industry, and the most recent order of an advanced membrane-based filtration system to treat oily wastewater to BlueScope Steel, a major US-based steel producer. We are establishing a consistent cadence for large system deliveries each quarter, alongside our base business, including swimming pools, plastics, and DPF filters, bringing us closer to revenue levels that approach breakeven and profitability. This has been our goal, and I am very pleased with the progress we have made. Let me now turn the call over to David to review the finances in more detail. I will then make a few closing comments and look to open the call for your questions. David Kowalczyk: Thank you, Fei. And good day, everyone. Let me take some time diving into the financial results in a bit more detail and add some color to what was in the press release. So let's start with revenue. Revenue for the quarter came in at $3,800,000, up from $2,500,000 in the year-ago third quarter. Broken down by verticals, sales for the third quarter were as follows: Water system sales and related services of $2,000,000 compared to $700,000 in the same period last year. CPF and ceramic membrane sales were $800,000, down from $1,100,000 in Q3 last year. And finally, plastic revenue came in at $1,000,000 compared to $700,000 in Q3 last year. The key takeaways for the quarter include strong year-over-year improvement in water systems, driven by a combination of multiple swimming pool orders and the remaining portion of the industrial order for the steel industry. Growth in plastics, which was up 54% due to strong external interest, especially within food processing and the upgrade of our production facility in Q3 last year. And stabilization of DPFs and ceramic membranes sequentially but still off the year-ago quarter. Looking ahead to Q4 of 2025, we anticipate revenue to be between $4,600,000 and $5,600,000, which would equate to a 38% to 67% increase from Q4 2024. For the full year 2025, we expect revenue to be between $18,000,000 and $19,000,000, representing a 23% to 30% increase compared to 2024. We do want to note that we do want to be cautious and provide a slight change to guidance solely driven by timing in purchase orders in our systems business. The visibility we have to receive formal purchase orders for two systems during 2024 are likely shifting to 2026. Turning to gross margin, as we continue to be below our optimal revenue level, we continue to have fixed production costs that are not being fully absorbed. Those lower the normalized gross margins. That said, for the third quarter, gross margins were much improved from the year-ago period, coming in at 19.6% compared to a negative margin of 8.5% in the year-ago period. We had previously reported on a contribution margin basis, which excludes the impact from our fixed overhead. This margin for the quarter was significantly higher. The gap between gross margin and contribution margin will narrow in the coming quarters, driven by cost improvements and volume growth. Turning to OpEx, total operating expenses for the quarter were $2,100,000 compared to $2,400,000 in Q3 last year and compared to $2,600,000 in 2025. As we look to the future, our breakeven target, measured on an adjusted EBITDA basis, measured at EBITDA adjusted for amortization, reduced assets, cost of stock-based compensation, continues to be a quarterly revenue of approximately $6,000,000. The one caveat I will state is that there's a product mix component to it. Concluding on the P&L, net loss was $1,500,000 for the quarter, compared to a $2,800,000 loss for the comparable period of 2025. A substantial improvement driven by revenue growth, improved gross margin, and reduced operating expenses. And finally, from a cash perspective, we ended the quarter with $7,300,000 in cash. Everything else was very much in line with our normal operating procedures from a balance sheet perspective. And with that, let me turn it back to Fei. Fei Chen: Thank you, David. Can you hear me? Robert Blum: Yes. Please proceed, sir. Fei Chen: Okay. Thank you, David. To close things out, before I turn the call over to questions, our proprietary silicon carbide filtration technology stands as a foundational element in tackling the planet's most urgent ecological issues. These cutting-edge ceramic membranes deliver exceptional results in the toughest water treatment scenarios, spanning from produced water in oil and gas operations to pool filtration systems. By helping industries comply with rigorous environmental standards, we are cutting down on water and energy use, resolving vital purification problems, and advancing true sustainability. Recent achievements, like landing record orders for swimming pool systems, major contracts for treating produced water, marine applications, and industry applications such as that for the steel industry, highlight the rising worldwide appetite for our innovative solutions. The potential moving forward is immense, fueled by escalating water shortages and tough global regulations. Through key client alliances, we are broadening our impact with application-oriented, ready-to-deploy solutions. Such partnerships enhance our capability to offer complete systems that guarantee regulatory adherence, streamline operations, safeguard assets, and lower costs for customers. In the years to come, we are dedicated to advancing and expanding our filtration solutions to seize these vast possibilities. Again, thank everyone for your support of LiqTech International, Inc. With that, Robert, we would be happy to take any questions. Robert Blum: Alright. Fantastic. Thank you very much, Fei and David, for your prepared remarks. Again, to everyone listening on the webcast player there, if you have a question, you can type it into the ask a question feature on the player there. We do have a few questions submitted already. We'll begin here. Besides swimming pool systems, which segments are seeing the most sustained order momentum? Fei Chen: As mentioned in my speech, we have very much momentum in the water for energy segment as well. And we are also starting to get orders from the marine industry. But I would say compared to the marine industry, it's just that the water for energy is getting momentum. Robert Blum: Okay. Very good. Next question here. Is the uptick in gross margin sustainable? Where do you see gross margins trending over the next few quarters? David? David Kowalczyk: Yeah. Sure. Thanks for the question. I would say, yes, this is very much sustainable, and with expected higher revenues, we will see also further increases in the gross margin. There's a strong link between the size of revenue and really the gross margin. So talking about a defined level, I think it's hard, but we will see increases with an increase in revenue. Robert Blum: Okay. Very good. Next question here is how is your capacity utilization trending? Are there any metrics you can provide there? David Kowalczyk: Yeah. Obviously, we have different matrices for capacity and also different sites. But I think, in general, it's fair to say that we have spare capacity, which is also why we provide the insight on the difference between gross margin and contribution margin. We have plenty of capacity to support growth with very, very limited investments. Robert Blum: Alright. Very good. Again, final reminder here, if you have a question or would like to submit a question through the webcast player, please go ahead and submit that now. Barring any further questions coming in, the last question here is what would be a reasonable target for 2026 revenue growth? Fei Chen: That's a very good question. We're actually in the process of making our budget for 2026, so we cannot say any concrete number yet, but we definitely believe and see a very strong growth trend in 2026. Robert Blum: Okay. Very good. I am not showing any further questions at this time. So with that, I will turn it back over to you, Fei, for any closing remarks. Fei Chen: Thank you, everyone. I would like to thank you all very much for being with us today. We look forward to communicating with you soon. Thank you. Operator: Thank you. The conference has now concluded. Robert Blum: Thank you for attending today's presentation. You may now disconnect. Operator: Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Sunrise Realty Trust 2025Q3 earnings call. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Gabriel A. Katz, Chief Legal Officer. Please go ahead. Gabriel A. Katz: Good morning, and thank you all for joining Sunrise Realty Trust Earnings Call for the Quarter Ended September 30, 2025. I'm joined this morning by Leonard Mark Tannenbaum, our Executive Chairman, Brian Sedrish, our Chief Executive Officer, and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our 10/07/2025 press release and is posted on the Investor Relations portion of our website at sunriserialtytrust.com, along with our third quarter 2025 earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield, and financial performance and projections in 2025 and beyond. These statements are subject to inherent uncertainties in predicting future results. Please refer to Sunrise Realty Trust's most recent periodic filings with the SEC, including our quarterly report on Form 10-Q filed earlier this morning for certain conditions and factors that could cause actual results to differ materially from these forward-looking statements and projections. During today's conference call, management will refer to non-GAAP financial measures including distributable earnings. Please see our third quarter earnings release uploaded to our website for reconciliations of the non-GAAP financial measures with the most directly comparable GAAP measures. The format for today's call is as follows: Len will provide a general business and capital markets overview. Next, Brian will cover our view on the state of the commercial real estate lending markets, discuss our existing portfolio, and provide an outlook for our investment pipeline. Then Brandon will provide an update on our financial position. After that, we'll open the lines for Q&A. With that, I will now turn the call over to our Executive Chairman, Leonard Mark Tannenbaum. Leonard Mark Tannenbaum: Thank you, Gabe. Good morning, and welcome to our third quarter 2025 earnings conference call. The quarter ended 09/30/2025, SUNS generated distributable earnings of $0.31 per share of common stock which covered our dividend of $0.30. Before Brian walks through our pipeline and portfolio, I want to take a moment to highlight what really sets SUNS apart from other commercial mortgage REITs. At SUNS, our investment focus is clear. We originate transitional loans to properties primarily in the Southern United States. This is a region we know well, and that local expertise allows us to generate attractive risk-adjusted returns through disciplined underwriting and thoughtful structuring. As of 09/30/2025, our leverage was approximately 0.4 times. That should increase as our existing loan commitments continue to fund. This is substantially below our targeted leverage of one to one and a half times. The peer average, however, is substantially higher than our target. As our long-term goal is to achieve an investment-grade rating from the top agencies in the next three to five years. Now turning to the portfolio, our weighted average loan to cost at closing is only 56%. This conservative positioning has led to our strong credit performance. Additionally, our new vintage portfolio with no loans made before January 2024 has also contributed to our strong portfolio performance. About 95% of our loans are floating rate, with an average SOFR floor across the portfolio of about 4%. SOFR has now dropped below 4%, and is anticipated to go lower. Given the SOFR floors in place across our loan book and our credit line's much lower floor and approximately 2.6% have the potential to earn additional income through the expansion in SUNS' net interest margin. As the company's largest shareholder, I believe SUNS presents a terrific risk-adjusted return at a lower effective tax rate. My confidence in our company is why I've continued to make frequent share purchases since our first day of trading. In my view, SUNS today offers a compelling entry point and a meaningful discount to book value with stable dividend coverage and clear earnings and dividend growth potential. We've also built a team that's built for success. Our eight-person dedicated real estate team within the larger Tannenbaum Capital Group platform gives us this disciplined underwriting, deep local market knowledge, and a differentiated focus on transitional commercial real estate projects across the Southern U.S. With that, I'll turn it over to Brian to discuss the market environment and walk through our portfolio in more detail. Brian Sedrish: Thank you, Len, and good morning, everyone. Before turning to our current portfolio and pipeline, I wanted to take a minute to discuss what we are seeing generally in the real estate market. We have seen a notable pickup in activity over the past quarter. As financing requests have increased meaningfully relative to the first half of the year. We believe this is a result of borrowers gaining greater confidence that short-term interest rates are on a path of gradual decline. This renewed sense of interest rate stability is encouraging more sponsors to come off the sidelines and actively engage in capital planning, whether it be refinancings or new projects. The increase in activity is not limited to refinancing opportunities, as we are also seeing a rise in financing requests tied to new acquisitions. The bid-ask spread between buyers and sellers continues to narrow, and that is helping to increase transaction volume. We are well-positioned to finance new acquisition business plans where the basis has effectively been reset to levels that better align with current rent growth and for-sale housing assumptions. We are also seeing traditional commercial banks gradually reenter the market, primarily focusing on lower leverage lending. While their activity remains selective, they are playing an important role as back leverage providers for many of the transactions that we have been targeting. We view that as a healthy development indicative of improving liquidity in the broader CRE financing ecosystem. That said, the depth of the commercial real estate market remains out of balance. There remains a meaningful gap between primary and secondary markets, across property types and at different stages of an asset's life cycle, from construction through to stabilization. Most of the new financing activity is concentrated in the bridge lending space, primarily within multifamily and industrial properties. These are assets that have largely completed their improvement plans and are moving towards stabilization. As a reminder, at SUNS, we primarily focus on transitional real estate projects that have yet to reach stabilization or near stabilization. Our focus remains on this segment as we believe this part of the market still provides the strongest risk-adjusted returns. TCG's real estate pipeline primarily comprises loans to transitional assets backed by highly qualified sponsors that require a more structured solution, whereby our team can capitalize on its expertise in prestabilization business plans and complex deal structures. We believe that these unique core competencies allow us to capture the most attractive opportunities emerging in this current market environment. Turning to our active pipeline, we have continued to see improvements in both the quantity and quality of deals sourced. As of today, the TCG real estate platform has two signed nonbinding term sheets in documentation totaling approximately $170 million. We expect funds to be allocated a portion of these investments. Turning to the portfolio, our originations for the quarter ended 09/30/2025 partly reflected the slower market dynamics, which has picked up since quarter end. Specifically, in Q3, the TC real estate platform originated a $60 million senior secured loan for a two-tower condominium development in the Brickell neighborhood of Miami, Florida, of which SUNS committed $35 million. Over the period, SUNS funded $33 million of new and existing loans. As of 09/30/2025, the SUNS portfolio had $367 million of commitments with $253 million funded. Subsequent to quarter end, SUNS successfully closed on $56 million of loan commitments, which include approximately $26 million in a financing package comprised of two senior loans for collection suites and industrial for-sale development, including two projects located in Doral and West Palm Beach, Florida, and a $30 million loan in a senior bridge loan for the refinancing of a seven-story Class A retail property in the Galleria section of Houston, Texas. I remain highly confident in the opportunities set ahead, and I look forward to capitalizing on the many attractive opportunities currently in front of us. With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer. Brandon Hetzel: Thank you, Brian. For the quarter ended 09/30/2025, we generated net interest income of $6.1 million and distributable earnings of $4.12 million or $0.31 per basic weighted average common share, and had GAAP net income of $4.05 million or $0.30 per basic weighted average common share. We believe that providing distributable earnings is helpful to shareholders in assessing the overall performance of SUNS business. Distributable earnings represent net income computed in accordance with GAAP excluding noncash items such as stock compensation expense, unrealized gains or losses, and the provision for current expected credit losses, also known as CECL. For the quarter ended 09/30/2025, the Board of Directors declared a $0.30 dividend per share outstanding. The dividend was paid on 10/15/2025, to shareholders of record as of 09/30/2025. We ended the 2025 with $367 million of current commitments and $253 million of principal outstanding spread across 13 loans. As of 11/03/2025, our portfolio consisted of $421.1 million of current commitments and $295.2 million of principal outstanding across 16 loans with a weighted average portfolio yield to maturity of approximately 11.8%. I'd also like to note that as of 09/30/2025, our CECL reserve was approximately $400,000 or 17 basis points for our loans at carrying value. As of 09/30/2025, we had total assets of $258.8 million and our total shareholder equity was $184.6 million with a book value of $13.76 per share. With that, I will now turn it back over to the operator to start the Q&A. Operator: Thank you. Star one one on your telephone and wait for your name to be announced. And to withdraw your question, please press 11 again. And our first question will come from Timothy D'Agostino with B. Riley Securities. Your line is now open. Timothy D'Agostino: Hi. Thank you. Good morning, and congrats on the quarter. Just getting into the pipeline a little bit. In the investor deck, you had mentioned the pipeline assets are broadening your presence across the Southern United States. I was just wondering what new geographies within the Southern US you're seeing in that pipeline. Brian Sedrish: Sure. Thanks for the questions, Brian. We are staying true to our focus of primarily the Southern U.S. I mean, that has not changed. Florida, Texas, of course, we are currently looking at. We have one signed in the Carolinas. In this case, specifically North Carolina. Georgia, Tennessee, those really remain the primary markets that we're seeing a preponderance of our deals. And then sporadically, as we've said, if there are interesting deals that we believe represent good risk-adjusted returns, we'll look at those, as well. Timothy D'Agostino: Okay. Great. And then I guess within the geographies you just mentioned, are there any that stand out as the most attractive in terms of investment? Brian Sedrish: Not particularly different than what we have historically been looking at. We still are seeing really interesting pockets in the state of Texas. There are certainly some interesting deals still within Florida. It's obviously asset class dependent. You have to worry about oversaturation. So just like anything, you have to be cognizant of the particular on-the-ground dynamics. The Carolinas still remain interesting. Tennessee, we're looking at a bunch of deals right now. Those are continuing to be the areas that we're focusing on, and we're seeing enough deal flow to really enable us to continue to stay focused on those areas. Timothy D'Agostino: Okay. Great. Thank you so much, and congrats again on the quarter. Brian Sedrish: Thank you. Operator: And our next question comes from Jade Rahmani with KBW. Your line is open. Jade Rahmani: How are things going on the debt side of the business strategy? I know you have been focused on further syndication, bank participation, and the repo line. As well as plans for a bond issuance. Leonard Mark Tannenbaum: Okay. Start with the easy one. We're not going for a repo line for sure. We really are differentiated from the other mortgage REITs in that we don't want to do these four-time leverage deals. And repos. We think that's how you get in trouble. We're instead going more after the latter financial model of getting an investment-grade rating over time, not levering over one to one and a half times. From a bank perspective, it's really great. There's a lot of interest in banks. Think Jeff Bacuzzi, who leads our DCM desk, is doing a good job educating these banks as they come in one by one. And they have very positive experiences. But because our portfolio is really strong. So I think so far, so good. With expanding our bank lines at that two seventy-five over SOFR level. So I think that's the way we're gonna continue finance. I did say in the last call that I was gonna look to do a I don't know, either preferred or unsecured offering. We're still working on it. We're watching the tape today as read after read has started to print perpetual preferreds. And they're actually being absorbed by the market. So we are watching that market. We do intend to be there this quarter or next quarter. But, you know, you do have to have the market open. So I think that is gonna be a good Okay. A good enhancer. Jade Rahmani: Where do you think the cost of the preferred would be? Leonard Mark Tannenbaum: I mean, you're seeing them at the at a Right? You see a $7.07 eights today, from one read. Eight got done. Pine got one done at eight. So it seems like that's the number. I really don't wanna price much higher than that. Because, I wanna make sure we get a good net interest margin over time. So we'll wait for the right price if we have to. Jade Rahmani: Okay. And you prefer to do that than to take up leverage through warehouse line? Leonard Mark Tannenbaum: Absolutely. I really I have no desire to do repo. I no desire to do warehouse. In this product. This product, you know, I own 25% of the product. We wanna protect our investors downside by not over levering it. So we oh, we, by the way, may not be preferred. It could be debt. I like I really liked our unsecured debt too. You know, five and six and seven year unsecured, it could be a baby bond, it could be a preferred. There's a lot of variety of things that we could do that we could lever appropriately and not get not get into trouble in the downturn. Jade Rahmani: Thanks. It's been an interesting cycle. We have not really seen you know, I would say, high volatility and sort of violent pressure on the repo side as what we saw in the financial crisis. We've seen managed deleveraging from several of the mortgage REITs that have major credit issues, but it's been, you know, a lot more stable on credit lines or bank you know, warehouse lines are an area that banks definitely seem to be looking to be more active. Could you please comment on the portfolio underlying performance and any trends in the underlying deals? That you're seeing thus far? You know, I know these are construction deals, so completion is probably the the biggest hurdle. But if you could, you know, give a comment on as to how the largest deals are trending. Brian Sedrish: Sure. Yes, Jade, I'll take it. It's Brian. Our portfolio now is performing as really as expected. I mean, of course, in any of these deals, there are always things that pop up that need to be addressed. Borrower calls us and says, know, they'd like to do something because they think it's more value add or maybe there's a two-week delay here or there. But that's just ordinary course. The underlying construction activity and progression has been going well on all the loans that we have. And then on the top line, in terms of if it's presales on condos or whether it's lease-up, they've all been, they've all been moving along as expected. There's nothing particularly exciting about the progress, which is what we love. Slow, steady, expected. And that's that's what we're continuing to see. There's actually been a bit of a pickup recently on a couple of our for-sale projects, just resulting from, I think, just a view of more migration down this particular case to South Florida. I expect that will continue in light of some of the political environment. But other than that, everything's pretty normal course. Jade Rahmani: Thanks very much for taking the questions. Brian Sedrish: Sure. Thanks a lot. Operator: I am showing no further questions in the queue at this time. I would now like to turn the call back over to Brian for closing remarks. Brian Sedrish: Great. Well, thank you everybody for joining. We are excited about the upcoming quarters and the prospects and the pickup of momentum. We look forward to talking to you again in the coming quarters. Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.
Operator: Good day, and welcome to the MarineMax, Inc. Fiscal 2025 Fourth Quarter and Full Year Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. I would now like to turn the call over to Scott Solomon of the company's Investor Relations firm, Sharon Merrill Advisors. Please go ahead, sir. Scott Solomon: Thank you, operator, and good morning, everyone. Hosting today's call are Brett McGill, MarineMax's Chief Executive Officer and President, and Mike McLamb, the company's Chief Financial Officer. Brett will begin the call by discussing MarineMax's operating performance and recent highlights, Mike will review the financial results and provide the company's fiscal 2026 financial guidance. Brett will make some concluding comments and then management will be happy to take your questions. The earnings release and supplemental presentation associated with today's announcement can be found at investor.marinemax.com. And with that, I'll turn the call over to Mike. Mike? Mike McLamb: Thank you, Scott. Good morning, everyone, and thank you for joining this call. I'd like to start by reminding you that certain of our comments are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Any forward-looking statements speak only as of today. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations. These risks include, but are not limited to, the impact of seasonality and weather, global economic conditions, and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share, and numerous other factors identified in the company's most recently filed 10-Ks and 10-Qs and other filings with the Securities and Exchange Commission. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. On today's call, we will make comments referring to non-GAAP financial measures. We believe that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results. These measures can also help investors who wish to make comparisons between MarineMax and other companies on both a GAAP and a non-GAAP basis. The reconciliation to non-GAAP financial measures GAAP measures is available in today's earnings release. With that, let me turn the call over to Brett. Brett? Brett McGill: Thank you, Mike. Good morning, everyone, and thank you for joining us today to discuss our fiscal fourth quarter and full year 2025 performance. Let me begin by recognizing our team's exceptional dedication throughout what has been a challenging year for the recreational boating industry. Elevated interest rates, persistent inflation, and the uncertainty stemming from the trade wars and geopolitical tensions have resulted in many consumers deferring their boat purchases. In the face of these headwinds, our team has remained focused on delivering world-class customer experiences that continue to set us apart as reflected in our industry-leading net Promoter Scores. Our full-year adjusted earnings and adjusted EBITDA were in line with the guidance we gave last quarter. For the fourth quarter, we achieved revenue of over $552 million with same-store sales growth of more than 2%. Despite significant pressure on new boat margins due to the sustained elevated inventory level across the retail industry, our gross margins expanded to 34.7%. Demonstrating the strength of our diversified business model and the benefits of our strategic focus on higher-margin businesses such as finance and insurance, parts and service, superyacht services, and marina operations, including IGY. These diversified revenue sources provide important balance and support our financial resilience through different macroeconomic and industry cycles. We also benefit from cross-selling opportunities between yacht deals, superyacht services, and marina operations, and we are regularly finding new ways to unlock synergies between each of these businesses and deliver greater value for our customers and our shareholders. There are many examples, including a 35-meter Yacht sale at the recent Fort Lauderdale International Boat Show, which resulted from touchpoints across all of these businesses. This is a great example of how we continue to see tangible results across yacht sales, charter bookings, and storage through these connected marketing and sales initiatives. We are confident that our integrated approach will continue to support retail yacht sales and strengthen the connection between superyacht services and marina operations. On the retail side, we continue to add customer service capabilities and strengthen our network. The launch of our flagship yacht sales and service center in Fort Myers, Florida is representative of MarineMax's focus on innovation and customer service. This facility spans more than 30,000 square feet and brings together sales, maintenance, storage, and on-water services in one convenient location in one of Florida's top yachting and boating markets. Locations like these, which combine world-class service and traditional retailing, enhance the customer experience and support efficient cross-selling of our products and services. As the industry's recognized technology leader, we set the standard for digital innovation in recreational marine services. And we are continuing to invest in technology to support customer growth and engagement. A great example is Boatyard, our subscription-based customer experience platform. Which streamlines service ordering, payment, invoicing, and estimating making the boating experience frictionless for both customers and dealers. Since its launch, Boatyard has been well received by the dealer community and has been recognized as one of the industry's most innovative companies on six occasions. Boatyard's active subscriber growth has increased by more than 160% over the past twelve months. And while still in its growth phase, this momentum validates our technology leadership and positions us well for continued expansion. In addition to Boatyard, we are harnessing the power of proprietary technology platforms like CustomerIQ, our business growth intelligence engine, CustomerIQ integrates artificial intelligence and automation to provide us with real-time insights enabling our sales teams to engage more efficiently and effectively with customers and drive conversions. We're in the process of rolling out CustomerIQ across all MarineMax businesses, including IGY and Financial Services. It's a step we believe will further amplify the technology's contribution to company-wide growth. Along with these investments in customer service, technology, and innovation, support long-term value creation, we are also taking steps to optimize our business to enhance operational efficiency. By eliminating underperforming brands and refining our product portfolio, we're aligning more closely with evolving customer demand and driving greater value. Combined with strategic store optimization, this brand and portfolio rationalization enhances operational efficiency and positions MarineMax for stronger returns when macroeconomic conditions normalize. Before I conclude my prepared remarks, I want to take a moment to update you on the success we had at Fort Lauderdale as well as a few other developments. MarineMax had a significant presence at the recent Fort Lauderdale International Boat Show. I am happy to report that the show was stronger than last year and several of our displays produced modern era records. Which along with great customer engagement is very encouraging. Collectively, we sold more boats at the show than any time post-COVID and generated a sizable increase in contracted versus last year. Across the show, we saw exciting developments in sustainable materials, autonomous features, and enhanced vessel connectivity from a wide range of OEMs. Innovative brands are advancing the industry and we are exceptionally proud to be partnering with many of these companies. I would add that our brand Cruisers Yachts launched several new models at the show, including a new 50 flybridge and the 38 VTR. Overall, cruisers set a post-COVID record show in terms of units and dollars. Last month, I had the privilege of joining senior executives from the world's largest marina organizations at the ICOMIA World Marinas Conference. It was a powerful opportunity to reinforce our role as a strategic voice in marine services. Shared perspectives, emerging global trends, and deepened relationships with key stakeholders across the industry. These platforms not only elevate our visibility but also ensure we remain at the forefront of shaping the future of marine experiences worldwide. To support our strategic initiatives and long-term positioning, we recently added two distinguished new members to our board of directors, Odilon Almeda and Dan Shiapa. Odilon and Dan each have proven track records in driving innovation and scaling complex global operations and we're confident that their expertise and fresh perspectives will yield immediate contributions to our board and company. Looking at the broader industry landscape, we are optimistic the sector is near or at an inflection point. While the industry is currently managing inventory normalization, and macroeconomic uncertainty. The underlying fundamentals for premium recreational boating remain exceptionally strong. Now let me turn the call over to Mike for our financial review. Mike? Mike McLamb: Thank you, Brett. I want to echo Brett's appreciation for our team's outstanding performance during this challenging period. Total revenue for the fourth quarter was over $552 million which was down modestly from last year due to the impact of our store rationalization efforts including the strategic closure of 10 stores since 2024. During the quarter, same-store sales increased over 2% driven by growth in used boat revenue, finance and insurance, parts and service, and contributions from superyacht services, and Marine operations, including IGY. In terms of units, they were down in the quarter as we continue to see a migration to higher average unit prices. Gross profit was over $191 million and our gross margin increased to 34.7%. The increase in gross margin as Brett noted reflects continued growth in our diversified higher-margin businesses and was achieved despite historically low boat margins due to the challenging retail environment. Selling, general and administrative expenses were over $177 million. The increase primarily reflects the greater contribution of service-related revenue which drives gross margin dollars, but does have a higher cost dynamic than retail store operations. Along with increases in targeted marketing investments incurred to maximize sales opportunities in a challenging environment as well as higher foreign currency translation costs. Due to a weaker dollar. Interest expense was down slightly year over year. The reported net loss in the quarter was just under $1 million or $0.04 per share which was the same as the adjusted loss per share. Adjusted EBITDA was $17.3 million in the quarter. For fiscal 2025, revenue was $2.31 billion reflecting a same-store sales decline of just over 2% due to the challenging industry environment while total revenue declined 5% given our strategic store and brand optimization efforts. Our full-year gross margin was 32.5%, down slightly from last year despite historically low boat margins across the industry. Our reported net loss per share was $1.43 with adjusted earnings per diluted share of $0.61. Adjusted EBITDA for the full year was about $110 million compared with the $160 million in the prior year. Our balance sheet remains strong with cash of more than $170 million despite buying back a significant amount of shares this year acquiring a great marina and retail operation in Shelter Bay in the Keys, as well as making regular investments in our business including the opening of IGY Savannah, the Stewart Marine expansion, and the opening of the expanded Fort Myers operation among other initiatives. Inventories decreased by nearly $40 million year over year. Reflecting our continued efforts to optimize inventory levels with our manufacturing partners. Our net debt to adjusted EBITDA ratio was about two times quarter end. Providing substantial financial flexibility. Based on current business conditions, recent industry registration data, retail trends, and other relevant factors we expect fiscal 2026 adjusted EBITDA to be in the range of $110 million to $125 million with adjusted net income in the range of $0.40 to $0.95 per diluted share. Our guidance assumes industry units for our fiscal year will be down slightly to up slightly depending on the various factors that have affected consumer demand. This implies same-store sales growth will be flattish to slight growth subject to mix. Retail margin pressure is expected to continue across the industry through the end of our fiscal second quarter which corresponds to the seasonally slower winter months. We expect industry inventory levels to be healthier in the second half of the fiscal year than the same period in fiscal 2025. Given the success of our higher-margin business expansion, we expect to be able to maintain our annual consolidated gross margins in the low 30s. Our guidance incorporates the currently announced interest rate cuts, and uses an annual effective tax rate of 26.5% with a share count of around 22.8 million shares. These projections exclude the potential impact of material acquisitions or other unforeseen developments, including changes in global economic conditions. When you think about 2026, keep in mind our revenue EPS, and EBITDA was tracking well for the first six months of 2025 through March. Despite the challenging environment. It wasn't until after Liberation Day that things grew much more challenging. As such, our front half comparisons overall are more difficult than the back half comparisons. Now let me comment on current trends. October finished with positive same-store sales growth, and Brett discussed the successes we had at the Fort Lauderdale Boat Show. In both cases, we are encouraged but we also recognize the undeniable softness that has persisted in the industry as evidenced by a soft September. Especially for fiberglass boat sales. But while we are encouraged, we are also balanced. Now let me turn the call back to Brett for closing comments. Brett? Brett McGill: Thank you, Mike. Although our fiscal 2026 outlook reflects a prudent approach in light of macroeconomic uncertainty and persistent industry headwinds, we remain confident in MarineMax's long-term strategy and growth opportunities. Our management team has guided the company through multiple challenging economic cycles, and we believe that the continued execution of our strategy will drive sustainable and profitable growth for our shareholders. Our diversification across higher-margin businesses, combined with our strong balance sheet, support our resiliency in the face of industry headwinds while also providing us with the flexibility to invest in growth and seize emerging opportunities. We will continue to focus on strategic initiatives and product innovation, digital engagement, and customer experience. Areas that are becoming increasingly valuable as buyers become more discerning. The recreational boating industry is approaching several potentially positive inflection points. Industry-wide, inventories are expected to more normalized levels over the coming quarters, which should provide margin relief. Additionally, interest rate cuts are generally positive for our consumer, and the further rate cuts that many expect to occur over the coming months should support improved customer demand. The fundamentals supporting recreational boating remain exceptionally strong. Interest in the boating lifestyle continues to accelerate. As evidenced by robust activity levels at our marinas, service centers, and at the recent Fort Lauderdale Boat Show. Premium consumers increasingly view boating not as a discretionary purchase but as an essential lifestyle. As macroeconomic conditions improve, our strategy positions us to emerge more resilient, more diversified, and uniquely poised to capture the long-term opportunities in the global recreational marine market. With that, Mike and I will be happy to take your questions. So operator, please open up the line for Q&A. Thank you. Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star, and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, in the interest of time, please limit yourself to one question. One moment, please, while we poll for questions. We take the first question from the line of James Hardiman from Citi. Please go ahead. James Hardiman: Hey. Good morning. Thanks for taking my questions. So obviously, the same-store sales number accelerated nicely from 3Q to 4Q. I was hoping you could help us out just splitting sort of how much of that was units versus ASPs and then I guess similar question on the month of October. I think you said positive same-store sales for October. Are you actually seeing, you know, unit acceleration, into the off-season? Thanks. Mike McLamb: Yeah. A great question, James. So, obviously, you guys follow the industry. The industry for the core categories that we're in has seen softness, double-digit declines in July, August, and September. Some categories, 25%, etcetera, from a unit perspective. So we typically outperform the industry. So our units for the quarter are down in the mid-single-digit range, which is better than the industry overall. So the difference from down mid-single-digit to up 2% is the increase in average unit selling price during the quarter. And then on the month of October, you gotta keep in mind the month of October last year, we were dealing with a hurricane in Florida. But our units were up in the month of October and we all did see a modest increase in average unit selling price. James Hardiman: That's really helpful. And then just very briefly, just wanted to dig into the rate environment. Obviously, we've gotten a couple of 25 basis point rate cuts. I think the ten-year is modestly lower than maybe the last time we spoke. Are you seeing that show up in terms of relief from your lenders and, you know, is that having any impact from a consumer perspective as they contemplate, you know, lower payments? Mike McLamb: Yes, James. Good I I think, you know, rates for the consumer, obviously, we're kinda dealing in a higher-end segment as we've always talked about. So, you know, monthly payment maybe isn't driving the need to just rush out and buy something. But I've said before, a lot of our customers are small business owners, you know, construction companies, etcetera. And, you know, when there's a rate environment that's more favorable for their business, they get a little more excited and optimistic about things and, you know, they come forward with a boat purchase. So I think both of those things are helping, but, consumer feeling better about the rate, I think, we see some of that, like even at Lauderdale, feeling better about that things are going to come down is, you know, given a positive news that they haven't had in a while. James Hardiman: Got it. That's helpful color. Thanks, guys. Mike McLamb: Thanks, James. Operator: We take the next question from the line of Mike Albanese from The Benchmark Company. Please go ahead. Mike Albanese: Hey. Good morning, guys. Thanks for taking my question. I just want to ask about gross margins. Obviously, jumped, I think, 34% in the quarter. You've been pretty consistent keeping them above 30% here in tough, you know, market. And, obviously, you know, some of that is mix, but it appears your adjacencies are holding up well. Could you just, you know, kinda tap into that a little bit deeper? And I'd love to kind of understand, you know, how much of that has been kind of strategic initiatives, cross-sell synergies, etcetera versus just sustainable demand within those segments? Thank you. Mike McLamb: I can comment. I'll take a first stab that, yeah. In the current environment, boat margins are the second lowest I've seen in twenty-seven years. They're not down as far as they were in the great financial crisis, but they're very low. They're, like, three to 350 basis points below normal. And so hopefully over time, we'll see some upside in boat margins as inventories normalize. But I do think our strategy of expanding in these higher-margin categories, whether it's the marinas, superyacht services, finance and insurance, service, parts, and accessories. A lot there's a lot of different higher-margin components that we've been expanding with. I think, really shines in an environment like this and helps us maintain elevated gross margins overall. It comes through in the quarter. And, Mike, when we set out with this strategy and we're very focused on it with these higher-margin business businesses and the growth we've had in those and the investments we've made in those businesses. It does show through. It shines. And you ask a question. Yeah. Those businesses, you know, have what's close to recurring type revenue as you can get. So you kinda rely on those types of things. Of course, you gotta manage the business. But we're continue to unlock different synergies, cross-selling, know, consumers feeling good about, you know, buying a larger yacht at a MarineMax, you know, Fort Myers location, let's say. Then feeling good about, wow. What if I wanna put that in charter with Fraser Yachts or whatever it might be so that they feel comfortable with that all the way up to, you know, where are they gonna put their boat when they get to The Caribbean through our IGY marina. So we're seeing a lot more of those synergies. And we'll continue to unlock those as well. Mike Albanese: Got it. Thank you, guys. Thank you, Mike. Operator: We take the next question from the line of Joseph Altobello from Raymond James. Please go ahead. Joseph Altobello: Hi, good morning. This is Martin on for Joe. Just wanna take a finer point onto the promotional drag in the quarter. Could you a little bit more color to what that headwind was and sort of what we can expect entering the New Year. Mike McLamb: Yeah. If I understand your question right, Martin, good question. So the I'd say this entire fiscal year, we've seen a very challenged environment because of elevated inventory levels. Really across the industry. Certainly true in the current quarter. I just commented a little while ago just how soft boat margins are. When we think about 2026 and in our guidance, we're not expecting much of a lift in boat margins. I think I commented in my prepared remarks that at least through the wintertime when there's a lot of dealers who are, you know, are feeling softer sales and increased pressure, when it comes to carrying costs, etcetera, I think the margin the pressure will still be there. It is thought that later on in the year when you get into the summer selling season as inventories begin to normalize, that we could see some relief on the margin side. But obviously, it won't snap back overnight, but it will potentially begin to improve like in the summertime in the back half of our. Joseph Altobello: Thank you, Mark. Thank you. Operator: We take the next question from the line of Eric Wold from Texas Capital Securities. Please go ahead. Eric Wold: Thanks. Good morning. Mike, kind of looking at the guidance for fiscal 2026, I guess, your industry assumptions relative to your same-store sales. It looks like, I mean, unless I'm reading this wrong, it looks like you're expecting kinda more in line of performance with the industry versus kind of more of the outperformance that you've had before, especially given the mix towards, you know, higher-end premium boats. Am I reading that wrong? Are you are you trying to take a little more cautious view? On mix, or how should we think about kind of what's embedded in that guided in terms of, you know, relative performance to the industry? Mike McLamb: No. Eric, I think you're reading that right. I think the, you know, the first assumption is does the industry get the flattish units from negatives. That's one assumption that's in there. And then, obviously, what happens with mix from our perspective. But I think we're trying to be prudent in terms of our guidance figures because you're right. We typically do outperform what the industry does. But I think we're really trying to see let let's let's get through fiscal 2026. Let's see that the industry really does get back to, you know, first to zero instead of negative and then to slightly positive in the second half of the year. Eric Wold: Got it. And then just quickly, update us on where you are with, you know, rationalizing kinda operating expenses and in general and overhead and kinda what you expect, as you move through fiscal twenty-six? Mike McLamb: Well, I commented that we've, we have closed 10 stores now since last year and we've made other cost cuts and savings. There is a current drag that's going on within the business, which is just additional marketing spend, additional inventory maintenance spend, etcetera, really that the whole industry is having with the slower turns that we've had, which would improve. But in our 2026 guidance, we're not baking in any substantial, additional cost savings from what we're seeing in the current levels of 2025. Eric Wold: Got it. Thanks, Mike. Mike McLamb: Thanks, Eric. Eric Wold: Thank you, Eric. Operator: Thank you. We take the next question from the line of Anna Glaessgen from B. Riley Securities. Please go ahead. Anna Glaessgen: Hey. Good morning. Thanks for taking my question. I'd like to start on same-store sales cadence. On the one hand, it seems that we're assuming some sequential improvement as we get to the back half in terms of market performance. But then on the other hand, we have some sort of one-time lapse, like, you know, lapping the hurricane in Florida last year, which drove, you know, the easiest comp in one Q. So just trying to understand the puts and takes as we think about the shape of the year. Mike McLamb: No. It's a great question. You're right. I mean, the state of Florida was impacted by hurricanes. We were down negative 11% in the December quarter, then up 11 in March. So technically, we do have an easier comparison right now, which is why I said with October being up, it's up against storms. And then when you go out throughout the year, obviously, the quarter with Liberation Day, which is the June quarter, in theory, is another easy comp. We were down 9%. And then it sort of levels off in September. So you do gotta bake all it in from an assumption perspective. I think the point that I was trying to make in my prepared remarks is that when you look at our bottom line financial performance in the December and the March, we exceeded, you know, our thinking in the street and our guidance in those two quarters. From an EBITDA and from an earnings perspective. So when you're modeling out the whole year, factoring in the same-store sales questions that you're asking. We actually have an easier comparison from an earnings perspective in the back half of the year than the front half of the year. Anna Glaessgen: Got it. Thanks. And then turning back to the boat margin question, you know, understanding the seasonal aspects of maybe getting some improvement once we get through the March when we enter the retail selling season. But trying to understand kind of, like, the key drivers of improvement there. Is it getting through some of the aged inventory that maybe competitors feel? Is it improved market performance? Or is it really just, you know, that seasonal aspect that's impacting the first February of the year? Thanks. Mike McLamb: Yeah. And I'll comment. Yeah. I think that aged inventory, you know, getting rid of that, getting inventory levels down to a more, you know, manageable level and to kind of balancing the supply-demand side is fundamental to everything. The promotional activity is strong. You know, there's also, I think, a consumer sentiment. You know, boat prices have really increased over the last five years. So there's pressure on, you know, just a consumer feeling like they need a discount. Even if there's, you know, not an age inventory or too much inventory. So just gotta kinda lap through that and let customers, you know, get back to a more normal buying pattern. But inventory levels are definitely gonna help, get the margins squared away. Yeah. Industry levels. Yep. Anna Glaessgen: Great. Thanks, guys. Mike McLamb: Thanks, Anna. Operator: Thank you. Ladies and gentlemen, I will now hand the conference over to Mr. McGill for his closing comments. Brett McGill: Well, thank you, everybody, for joining us today, and look forward to keeping you updated on our next call. Have a great day. Operator: Thank you. Ladies and gentlemen, the conference of MarineMax, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Good day, and welcome to the American Shared Hospital Services Third Quarter 2025 Earnings Conference Call. 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 Kirin M. Smith from PCG Advisory. Please go ahead. Kirin M. Smith: Thank you, operator. And thank you everyone for joining us today. American Shared Hospital Services' third quarter 2025 earnings press release was issued today before the market opened. If you need a copy, it can be accessed on the company's website at www.as.com under the Investors tab. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. Please note that various remarks that may be made on this conference call about future expectations, plans, and prospects for the company constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's filings with the SEC, including the company's quarterly report on Form 10-Q for the three-month period ended June 30, 2025, and the annual report on Form 10-K for the year ended December 31, 2024. The company assumes no obligation to update the information contained in this conference call. Before I turn the call over to management, I'd like to remind everyone about our Q&A policy where we provide each participant the time to ask one question and one follow-up. As always, we are happy to take additional questions offline at any time. With that, I'd now like to turn the call over to Raymond C. Stachowiak, Executive Chairman. Ray, please go ahead. Raymond C. Stachowiak: Thank you, Kirin, and good afternoon, everyone. Thanks for joining us today for our third quarter 2025 earnings call. I'll begin with some opening remarks, then turn the call over to Gary Delanois, our CEO, for additional details, followed by Scott Frech, our CFO, for a financial review of our third quarter and first nine months of 2025 results. Following our prepared remarks, we'll open the call for questions. I'm pleased to report third quarter and September 2025 revenue increases, respectively, which were primarily driven by increased direct patient care services revenue as our new physicians in Rhode Island start to ramp up. I'm also happy that we continue to realize improved margins and we remain diligent and focused on operational efficiencies. We are continuing to see the benefit from our transition from a medical equipment leasing focus to a more patient-centric service model, providing clear benefits. I'm happy to see our diversified model is working, and we look forward to the remainder of 2025 and 2026. We remain focused on building long-term shareholder value and a continuation of our historical trend of consecutive years of significant revenue growth and improved margins. As with many small growth businesses, there will be normal fluctuations quarter over quarter. But over the medium to longer term, we're primed to continue our long-term track record. As we continue to execute on our strategic initiatives and upcoming milestones, I believe this will positively benefit our long-term investors. We have set the course for long-term outperformance as we execute on our growth strategy and work towards building significant shareholder value. Now I'll hand the call over to Gary and Scott, who will walk you through our overall business, quarterly and year-to-date financial results, and our business development pipeline that provides for exciting strategic growth opportunities. With that, Gary, please proceed. Gary Delanois: Thanks, Ray. And good afternoon, everyone. This is an exciting time for the company, and I am very enthused by our near and longer-term growth opportunities. Our business growth strategy is solid, and I'm excited as we continue to execute our business plan. For this past quarter, we saw a 2.5% year-over-year revenue growth, and year-to-date revenues are up 5.6% from last year at this time. I am pleased to share we saw significant growth from our new radiation therapy treatment center in Puebla, Mexico, which showed a 263% annual revenue growth. It was also great to see an almost 17% year-over-year increase in 56% of our total revenue for the third quarter. I am also very happy to report that our gross margins increased almost 16%, and our operating loss narrowed with a 92% improvement as we remain focused on operational efficiencies. As we continue to execute on revenue growth initiatives, we also remain focused on improving profitability. Our third quarter 2025 adjusted EBITDA came in at $1.9 million compared to $1.3 million in 2024, a 42% increase. We remain diligent in controlling our costs and are primed for growth as treatment volumes, particularly in Rhode Island, continue to increase. We continue to capitalize on operating efficiencies and growing the business. And while we do expect to see continuing quarterly improvement in treatment volumes, I am energized by the growth we have been seeing in overall business and with our business development initiatives that we have in motion. I'm also excited about the benefits from our acquisition of the three Rhode Island cancer treatment centers and our newer one in Puebla, Mexico. At the Rhode Island centers, our new radiation oncologists are seeing new patient consultations at our three centers where volumes have recovered back to historical levels, and we expect to see additional growth in the fourth quarter. Having the right team in place is a critical element for growing our market share to propel future growth. I remain confident that we will see steady growth in treatment volumes through continued physician engagement with the healthcare community and particularly with our health system joint venture partners, Care New England and Prospect CharterCare. We also remain focused on further optimizing our equipment leasing segment by working closely with our health system customers to increase greater community awareness among referring physicians to drive increased utilization of their Gamma Knife systems, which is recognized as the gold standard for stereotactic radiosurgery. Our international business segment represents another large growth opportunity. We expect continued momentum. We have the only Gamma Knife centers in Peru and Ecuador. At our third international center in Puebla, Mexico, we are treating cancer patients for a full range of cancer diagnoses with the most advanced radiation therapy treatment capabilities available in our catchment area. We're also excited about the opening of our fourth international center, a Gamma Knife Center in Guadalajara, Mexico, where we expect to start treating patients and generating revenue in 2026. This will be the only ESPRIT Gamma Knife in a country of 130 million people and not only provides a major benefit to patients in Mexico, it also clearly represents an untapped growth engine for us. Over the months and years ahead, we expect stronger international growth from additional treatment volume in Ecuador, strong volume from our newly upgraded center in Peru, and our two new centers in Guadalajara and Puebla, Mexico. We also continue to expand our footprint in Rhode Island beyond our three existing radiation therapy treatment centers, which were our first direct patient care cancer treatment centers in the U.S. As we have discussed, we were granted a Certificate of Need (CON) to construct and operate a fourth radiation therapy center in Bristol, Rhode Island, where permitting is underway. And we also officially obtained a CON this past December to construct and operate the first proton beam radiation therapy center in the state of Rhode Island, where we are making progress on securing land and starting the permitting process. These two new facilities represent major growth opportunities for the company, and we look forward to providing additional updates as they progress. In closing, we are extremely confident in our overall business plan. We are positioned to weather short-term fluctuations, and we remain focused on current operations and new business developments. I have great confidence in the strategies we have in place, our management team, and the prospects for long-term growth. And lastly, our solid track record of long-term revenue growth and improved margins, together with our balance sheet, gives me great confidence that we will accomplish these initiatives in the coming years. And with that, I'll turn the call over to Scott Frech, our CFO, for a financial review. Scott Frech: Thank you, Gary, and good afternoon, everyone. I'll start with an overview of our third quarter results, followed by the year-to-date nine months results, and then we'll open the call for Q&A. For the third quarter ended September 30, 2025, total revenue increased 2.5% to $7.2 million compared to $7 million in Q3 2024. For Q3 2025, revenue from our Direct Patient Services segment increased 9.4% to $4 million compared to Q3 2024. This growth is primarily driven by increased procedures at the new facility in Puebla, Mexico, where we launched operations last year. Although off of a small base, revenues grew by 263%. Clearly, we're off to a great start there, and it also exemplifies the powerful growth these centers represent. Revenue from the medical equipment leasing segment decreased to $3.1 million from $3.3 million in Q3 2024 due to lower proton beam radiation therapy (PBRT) volumes. Revenue from PBRT increased 16% year over year to $2.1 million for Q3 2025, and the number of Gamma Knife procedures in Q3 2025 was 231, up from 218 in Q3 2024. Revenue from proton beam radiation therapy (PBRT) increased to $2.1 million in Q3 2025, a 10.8% increase from 2024. Total proton therapy fractions for 2025 were 1,150, an 8.1% decrease from 2024. This decrease was primarily due to normal cyclical fluctuations. Revenue from linear accelerator (LINAC) systems was up 15.9% from Q2 2025 to $2.9 million for Q3 2025 and up 51.2% compared to 2024 due to the launch of operations in Puebla, Mexico, and being fully staffed with radiation oncologists in our Rhode Island operations. Our gross margins for Q3 2025 improved to 22.1%, with an increase of 60% year over year to $1.6 million, primarily due to higher treatment volumes. Q3 2025 operating income dramatically improved to a loss of $344,000 compared to a loss of $889,000 in 2024. Net losses attributable to American Shared Hospital Services for Q3 2025 improved significantly to $55,000 or $0.00 per diluted share compared to a net loss of $207,000 in Q3 2024 or $0.03 per share. Adjusted EBITDA, our non-GAAP financial measure, increased 41% to $1.9 million for Q3 2025 compared to $1.4 million in Q3 2024. And now I'll review our nine-month results. For the first nine months of 2025, total revenue increased 5.6% to $20.4 million compared to $19.3 million in the first nine months of 2024. Revenue from our Direct Patient Care Services segment increased 36.5% year over year to $10.7 million for the first nine months of 2025 compared to $7.8 million in the first nine months of 2024. This significant growth is primarily driven by revenues from Rhode Island Radiation Therapy operations and the new operations in Puebla, Mexico, in 2024. Revenue from the equipment leasing segment decreased to $9.7 million from $11.5 million in the first nine months of 2024. Gamma Knife revenue declined 4.2% to $6.8 million for the first nine months of 2025 compared to $7.1 million in the first nine months of 2024. The number of Gamma Knife procedures in the first nine months of 2025 was 703, compared to 831 procedures in the first nine months of 2024. This decline was primarily due to the expiration of three customer contracts since 2024 and lower PBRT volumes. Revenue from PBRT decreased 23% to $5.7 million in the first nine months of 2025 compared to $7.4 million in the first nine months of 2024. Total proton therapy fractions for Q3 2025 were 3,095, an 18% decrease from 3,764 fractions in the first nine months of 2024. This decline was primarily due to normal cyclical fluctuations. Revenue from the linear accelerator (LINAC) systems was $9.7 million for the first nine months of 2025 compared to $4.8 million in the first nine months of 2024 due to the acquisition of the Rhode Island Radiation Therapy operations and the launch of operations in Central Mexico. Our gross margins for the first nine months of 2025 improved 20.4% to $4.2 million compared to $6 million in the first nine months of 2024. This decline in gross margin reflects lower volumes and increased operating costs driven by the shift to direct patient services, which have lower margins compared to the leasing segment. For the first nine months of 2025, operating loss was $2.2 million compared to a loss of $975,000 in the first nine months of 2024. Net loss attributable to American Shared Hospital Services for the first nine months of 2025 was $922,000 or $0.14 per diluted share compared to net income of $3.5 million or $0.54 per diluted share in the first nine months of 2024. This was primarily due to the $3.9 million bargain purchase gain generated from the Rhode Island acquisition and net income earned from Rhode Island facilities acquired. Adjusted EBITDA, our non-GAAP financial measure, was $4.6 million for the first nine months of 2025 compared to $5.1 million in the first nine months of 2024. Now we'll look at our balance sheet. We ended Q3 2025 with a strong financial position supported by our solid balance sheet. As of September 30, 2025, cash and cash equivalents, including restricted cash, stood at $5.1 million compared with $11 million at December 31, 2024. This decline includes $7.5 million spent on capital expenditures for Peru, Bristol, Rhode Island, and North Westchester locations. Shareholders' equity, excluding non-controlling interests, was $24.6 million or $3.78 per outstanding share compared to $25.2 million or $3.92 per outstanding share at December 31, 2024. Fully diluted weighted average common shares outstanding were 6,856,000 for Q3 2025 and 6,482,000 for Q3 2024. This concludes the formal part of our presentation. Thank you again for joining us today. We look forward to updating you on our progress in the quarters ahead. We'd now like to turn the call back to the operator to open it up for questions. Operator: We will now begin the question and answer session. Our first question comes from Tony Kamin with Eastwood Partners. Please go ahead. Tony Kamin: Thank you. Ray and Gary, congratulations. It's really encouraging to see the execution and the sort of integration of Rhode Island really starting to work in, as you've said, Ray, with kind of the long-term vision you've had. You can now start to see it really where it's going to go. And also, I guess, with your pipeline seeming so strong with real projects, and I would guess even more projects or more early-stage stuff you haven't talked about. I would imagine the pipeline is strong. So the company is doing well. My question is that the shareholders are not doing well. And I think the simplest way to sort of illustrate that and my concern is if I annualize, again, just to make it simple, the EBITDA this quarter, it's about $8 million. You came in this morning with a $13 million market cap, and that's about 1.5 times EBITDA to market cap, whereas I would think a company like this would trade much more likely conservatively at a six maybe up to a 12 multiple. And even if you look at the low end of that at a six multiple of EBITDA to market cap, the shares would be over eight. And unfortunately, they're still in the very low twos. So my question is, now that you've got the company going and I know you've been wanting to focus on that, isn't it now time and in the interest of all shareholders and all constituencies of the company to do a little bit more in terms of investor outreach, going to conferences, etcetera? And my last sort of comment on that is, would you, I know Ray, you've bought a lot of stock. It would be nice to see the rest of the Board members make some significant purchases to demonstrate their alignment with the shareholders and their belief in the company. I think a lot of the long-term shareholders really believe in the company, and we want to see that stock start to reflect what seems to be an incredibly undervalued situation. Raymond C. Stachowiak: Thank you. Ray, you want to go ahead and start on that? Gary Delanois: Yeah. Sure. So, Tony, thanks for joining us again today. I appreciate your question as well. You do have to recognize we do have some debt in there when you talk about an $8 per share valuation. You do have some debt. So, you know, we've attended some investor conferences, and with your opinion here, we probably should be doing more. It's duly noted. I think management has been so focused on cost efficiencies, operational efficiencies, you know, they're doing the blocking and tackling. We'd like to see our results speak for themselves. But sometimes that doesn't take place without a bullhorn at the investor conferences, so to speak. So, Tony, very duly noted. Operator: Great. Thank you. Our next question comes from Anthony Marches, private investor. Please go ahead. Anthony Marches: Yes. Hi, good morning, guys. Again, good results. Ray or anybody else, I'd love to hear your opinion as to why we're trading at a fifty-two-week low when everything that you're talking about the future, even today's results seem to be all positive. There seems to be a significant disconnect between the market and what you guys are saying. So I'm trying to understand what's your opinion as to why that's the case? Why is it that people don't want to, I don't want to use the word acknowledge, but why don't people want to take into account what you've been doing relative to the market valuation? Raymond C. Stachowiak: Yes, I think a lot of it has to do with we're so thinly traded and we've got such little exposure, and it kind of goes back to Tony's first question about increasing that exposure. And, Kirin, I might ask you for your thoughts and opinions on this matter as our Investor Relations firm. We've tried a few things here and there. And what I'm hearing very loud and clear here is, we ought to be doing more outreach. Kirin M. Smith: Yes. Thanks, Ray. And, yeah, I echo those comments as well, Tony. I think getting the story out there, telling it more often definitely increases the exposure for the overall company. I also echo Ray's comments. Getting the fundamentals down straight sometimes takes several quarters in a row. If you note, the last three quarters in a row have shown sequential improvement, so it does take a little time for that to get on the radar. Management's had their heads down nicely, focused on the operations of the business. And I think now is a good time for them to get out there and increase that exposure as well. Operator: This concludes our question and answer session. I would like to turn the conference back over to Gary Delanois for any closing remarks. Gary Delanois: Thank you, operator, and thank you, Tony and Anthony, for your questions. We'll reflect on them, and thank you. And thank you all for joining us today. We are at a key point in time as we execute on our growth strategy. With large business development opportunities in our pipeline, we have the right team and the foundation in place and are acutely focused on building strong momentum as our growth strategy takes hold for the long term. We look forward to updating you on our progress as we drive further top-line growth, profitability, and long-term success. As always, if you have any questions, please don't hesitate to reach out to us. And thank you for being here today and have a great one. Kirin M. Smith: Thank you, operator. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems Third Quarter twenty twenty five Results Conference Call. As a reminder, participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Sumit Kundu, Investor Relations. Please go ahead. Sumit Kundu: Thank you, operator, and good morning. Welcome to Ballard's third quarter financial and operating results conference call. Joining me today is Marty Neese, Ballard's President and Chief Executive Officer and Kate Igbolodi, our Senior Vice President and Chief Financial Officer. Before we begin, please note that we will be making forward looking statements that are based on management's current expectations, beliefs and assumptions concerning future events. Actual results could be materially different Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. I'll now turn the call over to Marty. Thank you, Sumit, and welcome everyone to our third quarter earnings call. Today, alongside our quarterly financial and operational highlights, and updates on our market verticals, Marty Neese: I'll share progress on our recent restructuring and strategic alignment. Discuss our path toward becoming cash flow positive and provide updates on key developments across our global organization. I'll begin with an overview of our business and markets. Overall, I'm pleased with our performance in the quarter. We continue to progress on pace with order delivery resulting in 120% year over year revenue increase largely from our deliveries to the bus and rail segments. Representing more than 70% of this quarter's revenue. Net order intake was approximately $19,000,000 and we achieved a positive gross margin of 15%. Reflecting meaningful progress in reducing product costs and a net reduction in onerous contract provisions. While this margin result may not represent a new ratable baseline, it demonstrates the progress of our product cost improvements and overall profitability trajectory. Our revenue makeup highlights the importance of the bus market. A market we expect to continue growing in the coming years. I recently had the opportunity to attend Bus World and meet with bus OEMs and transit operators. What was truly eye opening was the interest in electrification for buses has grown substantially with combustion engines, largely absent from the show and an almost exclusive focus being on electric alternatives. Including fuel cells. This is not surprising when considering that nearly 60% of new bus sales are now zero emission. In this electrified space, the advantages of fuel cells to serve a wide variety of routes short refueling times and the increasing infrastructure costs in face of grid constraints is becoming ever clearer. As the market attractiveness and technical and competitive merits of fuel cell buses grow, so too is the competition in the fuel cell bus engine space. With new entrants coming in, it is more important than ever for us to continue to differentiate ourselves as the fuel cell industry leader. Here, we believe that our decades of innovation and hundreds of millions of delivered kilometers positions us well. Having the most experienced and most durable reliable products with the lowest demonstrated total cost of ownership sets us apart. We are also ready for the next generation of buses At Bus World, we launched the FC Move SC, and initial feedback from OEMs has been very positive. Customers recognize the potential benefits of higher power density simpler and more integrated functionality a smaller lighter footprint and higher operating temperatures. These are all features that lower their total cost of ownership. Further, we continue to improve our core stack life and industry leading durability. Taken together, our customers are excited with these innovations. In terms of timing, product availability is expected to line up well with OEM timing for homologation into their next generation of vehicles. Additionally, we are enhancing our product cost leadership and long product life with a more comprehensive focus on delivering best in class service. We are complementing our products with additional services including digital operations and maintenance services, extended warranties, spares management, and on-site and virtual technician training and support. Our strong balance sheet and commitment to long term service and support sets us apart and our customers are eager to engage with us further to enhance these offerings. Moving briefly to our Rail and Marine segments. We continue to see momentum for freight and passenger rail locomotives. Recently in a milestone for sustainable transportation, Stadler's Flirt H2 hydrogen powered train officially entered service in San Bernardino, California. Another important step towards carbon free public transit. The train sets a new benchmark for clean, efficient and passenger passenger friendly rail travel in the region that we are proud to be powering. In the Marine segment, during the quarter, we recorded our largest order ever to the marine market with our order totaling 6.4 megawatts to ECAP and Samskip. These are both interesting markets for Ballard though I would add that both these markets remain at early stage of development and customer adoption. For the stationary power market, let me address the topic that is particularly hot at this time. AI data centers. It is clear that the rapid growth and the need for data centers and related is creating challenges for local grids and there's a shift to evaluate potential sources of off grid power as well as address CO2 emissions rules and noise requirements in many jurisdictions. This applies for both backup and primary power sources. Ballard's stationary solutions to date have demonstrated that we can supply kilowatts to megawatts of power. Our near term product offering for this market is focused on backup power solutions to replace diesel generators. Unit volumes in our forecast continue to increase as does our product evolution. From hundreds of kilowatts to multi megawatts. We are leveraging these factors to innovate further with our stationary power and data center customers. Our FC Move XD product enables us to increase power densities today to 500 kilowatts and up to two to three megawatts in a small form factor module in the near future. This leading power density in a compact footprint opens the door to potential additional use cases. Hydrogen supply partnerships are essential and we are actively working on collaboration opportunities in this area. This is an exciting area of product innovation. We will continue to provide updates as customer engagement engagements develop further. Turning to our strategic realignment. We are making meaningful progress as we work toward cash flow positivity. On the cost side, our recent restructuring actions are delivering tangible benefits. With significant reductions in cash operating costs and total operating expenses excluding restructuring charges. On margin and revenue, we remain focused on driving down product costs in the expanding our order book and total order back. Backlog. Building out our order pipeline is taking additional time as we work with current customers to secure more sustainable Sumit Kundu: contract terms Marty Neese: and some orders have shifted to Q4 twenty twenty five or Q1 twenty twenty six. We believe this extra time is well invested to ensure long term sustainability and appropriately balanced commercial agreements. Looking ahead to 2026 and 2027, we anticipate further improvement in gross margins supported by ongoing pricing and growth initiatives. Additional product cost reductions and the initial sales of our FC Move SC product. In addition, we expect further growth as we reenter the material handling market. We are seeing interest in our extended durability stack offering which more than doubles current material handling stack lifetimes available in the market today. Customers see this product as an excellent way to increase their delivered value and lower their overall cost. Especially related to stack service and maintenance. As mentioned, as we further refine our product offering, for the stationary power market, we expect growth in this market as well. For both material handling and stationary power, we'll provide more details on pipeline and order book conversion efforts as these potential opportunities mature. Taken together, these efforts are critical in moving us towards our goal of cash flow positivity. While there is still work to be done to achieve long term sustainability, we are taking the right steps to grow our business in areas that make strategic sense all while maintaining a strong balance sheet for our long term resilience and in support of our customers. Moving to two other items of note for Ballard's global operations. First, due to changes in funding options and updated capacity outlook, we have decided not to pursue the Texas Gigafactory development. Our analysis shows our existing global manufacturing capacity with minor adjustments will meet forecasted volumes. This decision underscores our commitment to capital discipline and focus on efficient execution. And second, as part of our strategic focus, we are further reducing our involvement in the way Ballard joint venture in China. Allowing us to concentrate resources on North America and Europe. Before I pass the call to Kate to review our financials, I would summarize this quarter as showing progress on our turnaround efforts. Year over year growth in shipments and revenue progress on margin expansion, executing disciplined capital spending and launching compelling new products and services that deliver lower costs and more value to our customers is a really good start. There is much more to do to further transform the company and get to cash flow positivity and we are committed to this overarching goal. With that, I'll turn the call over to Kate for a detailed review of our financial results. Sumit Kundu: Thanks, Marty, and good morning, everyone. Kate Igbalode: For the 2025, Ballard delivered revenue of $32,500,000 an increase of 120% year over year driven primarily by the bus and rail deliveries. Gross margin improved to 15%, compared to negative 56% in Q3 twenty twenty four. A 71 improvement. This reflects lower manufacturing overhead, continued product cost reduction, and a net reduction in owner's contract provisions. This reduction in owner's contract provisions coupled with a higher margin one time off road sales transaction contributed to the outsized gross margin performance in the quarter. Without these one time benefits, our gross margin would be slightly negative, still illustrating a marked year on year and quarter on quarter improvement. As Marty highlighted, we continue to make measured progress towards gross margin expansion and expect this to be reflected in our 2026 outlook. Total operating expenses were 34,900,000.0 down 36% year over year or 55% lower when excluding restructuring costs. Cash operating costs declined 40% year over year as the benefits of restructuring actions flowed through to our results. The rightsizing of our corporate cost structure, while never easy, was critical for our long term sustainability and financial health. Adjusted EBITDA improved to negative 31,200,000.0 compared to negative $60,100,000 in the prior year. Cash used by operating activities was 22,900,000.0 an improvement from $28,600,000 in 2024. We ended the quarter with 5 and $25,700,000 in cash and cash equivalents no bank debt, no near term financing requirements. Our strong balance sheet and firm hand on prudent capital allocation is a amongst peers key differentiator and provides us with business flexibility and resilience in this dynamic macro environment. Looking ahead, consistent with prior practice, are not providing specific revenue net income or margin guidance given the early stage of market development. We continue to expect revenue to be back half weighted for the year and total operating expenses excluding restructuring charges are expected to be below the low end of our 100,000,000 to $120,000,000 guidance range. Including restructuring costs expenses are expected to be towards the high end of the guidance range. We now expect capital expenditures of 8 to $12,000,000 down from our prior guidance of 15,000,000 to 25,000,000 reflecting disciplined capital allocation and deferred facility investments. Operator: Looking to 2026, Kate Igbalode: you can expect us to maintain our lean organizational cost structure and continue to demonstrate capital discipline. Maintaining a healthy balance sheet and accelerating our pathway to profitability is critical for our success and to deliver value to our shareholders. With that, I'll turn the call over to the operator for questions. Sumit Kundu: Thank you. Operator: We will now begin the question and answer session. We ask callers to kindly limit themselves to one question and one supplemental. The first question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Sumit Kundu: Hi, good morning. Marty Neese: Just wanted to get your thoughts on the growth kind of Rob Brown: rates in the bus market. Are there additional kind of growth order activity that you're pursuing? And get a successful kind of conference activity. But just wanted to get your sense on the growth rate in the bus market going forward? Marty Neese: Yes, would answer that Rob. By saying that the reception at Bus World was tremendous. The The new product is being very well received. And that's by both existing OEMs and some OEMs in development. If you will. Sumit Kundu: Further, the Marty Neese: constraints I mentioned around infrastructure pinch points per battery electric charging infrastructure if you will is starting to change the dynamics for fuel cells where we look much more compelling than previously outlined if you will relative to battery electric. So I would say that that's a a good news for fuel cell story and starts pointing towards larger fleet size adoption Rob Brown: especially where Marty Neese: the infrastructure constraints can be overcome by adopting fuel cell buses. So in general, I would say Europe is making steady and improving progress and adoption rates for fuel cells North America is essentially flattish year over year and that's that's where I'd leave it. Rob Brown: Okay. Thank you. Then quickly on gross margin, I think you talked about slightly negative sort of adjusted out. Is that the baseline you expect to grow from or improve from going forward? Marty Neese: The short answer is yes. But Kate maybe you provide some more details on the gross margin bridge. Rob Brown: For Marty Neese: Q3 and then kind of what you're out looking from there? Kate Igbalode: Yes, absolutely. So you're spot on, Rob, in that in our remarks we did highlight that without this kind of one time pieces in the quarter, would be slightly negative. That's kind of where we expect to close out in Q4 as well. Looking into 2026, again, I think you can expect Sumit Kundu: low to mid single digits on our gross margin. Kate Igbalode: We don't provide margin guidance, but I think you do expect us to see incremental progress going forward from here on out. Rob Brown: Okay. Thank you. I'll turn it over. Operator: The next question comes from Jeff Osborne with TD Cowen. Please go ahead. Sumit Kundu: Thank you. I was going to ask on the former Project Ford in the Texas facility, some of the targets that were laid out for the restructuring there. Jeff Osborne: Are those still achievable without the Texas facility? Can you remind me how important that was as it relates to getting gross margins higher than what Kate just mentioned? Marty Neese: Yes. Would say Project Forge is primarily automation and materials efficiency And that is in fact still in flight yielding well heading in the right direction and not dependent on Texas in any way shape or form. Texas was more of an integrated view for a complete stacks and modules with Project Forge and the automation being a core attribute. But that's being done in Canada as we speak. So we're good on that front. Jeff Osborne: Good to hear. And then Marty, you mentioned reentering the material handling space. I think from memory, years ago, you were just in the liquid cooled side for the ride on units versus I think the smaller pallet jack lifters were air cooled? Are you doing both? Or are you just doing the liquid cooled? Can you just further detail what specifically the strategy is on material handling? Marty Neese: Yes. The near term interest we're seeing is for air cooled. And so air cooled with additional durability is resonating well with a handful of new customers And when I say additional durability, I mentioned at least 2x the state of the art as we see the market today. That really is attractive when you think about the service obligation for customers over the long run. And so different customers are really valuing that in a more thoughtful way as they get more and more experience servicing and managing a long lifetime fleet. And so that durability equation is starting to show economic clarity for them. Jeff Osborne: Got it. Thanks for the detail. Operator: The next question comes from Craig Irwin with ROTH Capital. Please go ahead. Sumit Kundu: Hey guys, it's Andrew on for Craig. One quick one for me. So Congrats on the signing your largest marine order to date with the Samskip vessels I know you've been working with this partner for a couple of years now, think since 2021. So can you kind of talk about the just evolution of this agreement, how it came about and maybe what you can take away from it and learn from -- for other customers? Marty Neese: Yes. I might pass that to Kate for additional clarity. But the headline is we have been developing this opportunity for a couple of years. And the product, FCwave product is [ DNB ] certified for a marine application. And so that took a good bit of time on certifications and standards bodies, but we were the first ones to do that. And after that heavy lift was complete on the [ certs, ] then we started seeing an adoption rate like the Samskip order. Noteworthy is that FCwave product has additional use cases beyond marine, and that certification of DNB, if you will, for the marine application, provided a lot of comfort to other customers in using that product and the approach that we use relative to that product. So that's kind of what I know from a background or context standpoint. If there's more relative to the contract evolution, Kate, that you want to add, feel free. Kate Igbalode: No, I think those are excellent points, Marty. And I think I'm glad you asked about this, Andrew, because I think there's a number of key learnings, not only on a technical basis, but also commercial and contractual with how we work with customers. I mean these are large projects. They take years to develop and form. And I think for me, one of my big takeaways was how are we listening to our customers in terms of what's important to them from a technological point of view and how we're using that to inform our next generation of product development. And then I think the other piece, too, is understanding their entire ecosystem around how they're getting hydrogen supply at a cost that is affordable to them. So it's kind of looking at the whole holistic view of what it really takes to get these projects across the ball line. And it's a very collaborative effort for us with our technical teams, our commercial teams, and also on the after care and service piece is incredibly important in these types of applications, which really require very high reliability and ease of maintenance. So I was really happy to be involved on this across the last number of years, and I'm thrilled to see it coming to fruition. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Marty Neese for any closing remarks. Please go ahead. Marty Neese: Thank you, everyone, for participating in today's call. Really appreciate it, and we look forward to providing additional updates in the future. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Thank you for standing by, ladies and gentlemen. Welcome to the EuroDry Limited Conference Call on the Third Quarter twenty twenty five Financial Results. We have with us today Mr. Aristides Piras, Chairman and Chief Executive Officer and Mr. Tazos Aslidis, Chief Financial Officer of the company. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed Before passing the floor over to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, EuroDry will be making forward looking statements. These statements within the meaning of the federal securities laws. Matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide number two of the webcast presentation has the full forward looking statement and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to turn the floor over to Mr. Pizzas. Please go ahead, sir. Aristides Pittas: Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Mr. Tatius Aslivis, our Chief Financial The purpose of today's call is to discuss our financial results for the three and nine month period ended 09/30/2025. Please turn to Slide three of the presentation. Our financial highlights are shown here. For the 2025, we report total net revenues of $14,400,000 and the net loss attributable to controlling shareholders of $700,000 or $0.24 loss per basic and diluted share. Adjusted net loss attributable to Controlli shareholders for the quarter was $600,000 or $0.23 loss per basic and diluted share. Adjusted EBITDA for the quarter was $4,100,000 Please refer to the press release for the reconciliation of adjusted net loss and adjusted EBITDA. Our CFO, Patmos, go over our financial highlights in more detail later on in presentation. Our work today will have purchased about 135,000 shares of our common stock in the open market for a total of $5,300,000 under our $10,000,000 share repurchase plan, which we announced in August 2022. Our Board of Directors has approved an extension of the program for an additional year. We intend to continue executing a processes up to the originally approved amount of $10,000,000 at a disciplined rate. Taking into account the company's liquidity needs, and relatively small free flow. Please turn to Slide four to view our recent On 10/21/2025, we delivered motor vessel LNVP to have new owners and unaffiliated third party. The EVP was one of our oldest ships and the longer held vessel in our fleet. She was sold for $8,500,000 On the chartering plant, our fixtures during the third quarter were predominantly short term. Several of our vessels are currently employed under time charters ranging between a month to a little over three months. conditions improve. Allowing us to position our vessels to the advantageously as well While the Red Sea disruption disruptions continue to influence route decisions and freight premiums, their impact on drybulk charter rates has largely stabilized. Towards the end of the quarter, seasonal patterns began to reassess themselves and the market showed signs of recovery which still continue. The specifics of the charter is fixed during the period, are outlined in the accompanying presentation. Most notable are often due to the length of the charter is the motor vessel, the administrator, which secured an extension of its index linked charter at 115% of the average Baltic ship from end time charter index. Until at least November 2020. Six, During this quarter, motor vessel Santa Cruz completed a special survey and dry dock over a period of thirty five days. Slide five shows Eurodrive's current fleet, which consists of 11 vessels with an average age of approximately ten point eight years and the total carrying capacity of about seven sixty seven thousand deadweight tons. In addition, we have two Ultramax vessels of the construction each with a capacity of 63,100 tons scheduled for delivery in the 2027. Upon delivery, our fleet will expand to 13 vessels with a total carrying capacity of just under 900,000 deadweight tons. Now please turn to Slide six for a visual update on our current fleet employment. As of 09/30/2025, our fixed rate coverage for the remainder of the year stands at approximately 5%. Based on existing time charter agreements. This figure excludes vessels operating under index linked charters which, while subject to market fluctuations, still have secured employment. We currently have four vessels the Maria, Goodheart, Molyboslak and Jani Peters trading on index linked charters with durations ranging till March 2026 at least November 2026. Turning to Slide eight, we will go over the general market highlights for the third quarter ended 09/30/2025 and up until recently. Panama export rates rose steadily through the 2020. Five. Increasing from an average of about $14,100 per day to approximately $14,950 per day by corporate rent. Reflecting a slight increase. As of November 7, spot rates for Panamax vessels increased further and now stands at around $15,500 day. Now, one year tax time charter rates are a bit lower than the spot rate and Clarksons gives the standard Panamax one UTC rate at $15,125 per day. During the third quarter, the Baltic Dry Index and the Baltic Panamax Index recorded year over year increases of approximately 614% respectively reflecting a slight market slightly better market compared to the same period last year. This recent recovery in the Super range was supported by stronger than expected demand from minor bulks robust grain trade flows and the marginal tightening in vessel supply driven by longer volume distances and regional trade disruptions. Please now turn to Slide nine. According to the IMF's October 25 projections, global growth is expected to ease slightly from 3.3% in 2024 to 3.2% in 2025 and three point one percent in 2026. With advanced economies growing around 1.5%. And emerging markets and developing economies just above 4%. Persistent trade tensions and ongoing policy abandoning investment and trade activity And as tariffs work the way, through supply chains and onto consumers. The IMS predicts a gradual, but not too severe global growth deceleration. Global inflation is projected to moderate worldwide though unevenly across regions, remaining above target in The United States where risks attempted to the upside and most subdued elsewhere. U. S. Growth is projected at 2% in 2025 and two point one percent in 2026. The modest upgrade revision from earlier forecast reflecting smaller than expected effects from tariffs and more favorable financial conditions. In late October, the Federal Reserve load lowered the target range for the Federal Funds rate by 25 basis points to 3.775% to 4%. Chair Powell has not ruled out a possibility of an additional rate cut at the December meeting. The overall outlook remains fragile with downside risks stemming from persistent uncertainty potential protectionist measures and ongoing labor constraints. Among emerging markets, India is growing the and is forecast to expand by 6.6% in 2025 and six point two percent in 2026. Supported by robust domestic investment resilient agricultural output and the vital services The ZM5 economies are also expected to post solid growth of around 4.2% in 2025 and four point one percent in 2026. Underpinned by the healthy regional rate and the continued industrial activity. China's economic outlook is projected to continue well at a decelerating pace. These challenges include the widening gap between supply weak domestic demand. As well as ongoing trade tensions with The U. S. Including the new tariffs on Chinese goods export controls and restrictions on high-tech exports. China's growth is consequently expected to moderate to 4.8% in 2025 and four point four percent in 2026. Despite domestic headwinds, Chinese economy is being supported by strong export performance to regions like Southeast Asia and the EU And the still resilient manufacturing sector. Turning to the drybulk sector to see how the global growth affects the demand for drybulk Clarkson Research now projects drybulk trade demand growth at just 1.4% in 2025 two point one percent in 2026 and one point eight percent in 2027. Indicating a stronger trajectory than previously estimated growth. The recovery supported by steady output in Asia continued demand from iron ore bags and improving agricultural and coal trade flows. Please turn to Slide 10 to review the current state of the order book in the drybulk sector. As of November 2025, the order book stands at approximately 10.9% of the existing fleet. Longer higher than the 7% recorded in 2021, it remains amongst the lowest levels in history. For context, the order book accounted for 8% of the fleet in 2008 and nearly 30% in 2004. Fourteen. Current ordering activity remains limited due to shipyard capacity constraints high new building costs and uncertainties surrounding future fuel technologies and environmental regulations. Turning to Slide 11, let us now look into the supply fundamentals in a little bit more detail. As of November 2025, the total drybulk fleet comprises roughly 14,150 vessels. According to Clarkson's latest estimates, new deliveries as a percentage of the existing fleet are projected at 3.7% for 2025, 4.2% for 2026 and three point four percent for 2027. With actual fleet growth expected to be slightly lower due to slippage and demolition activity. The fleet age profile shows that about 10.6 of the global fleet is over twenty years old. Representing a pool of potential scrapping candidates particularly if market conditions worsen and environmental requirements tighten further. Overall, fleet renewal remains balanced amongst the various vessel size. The majority of vessels are concentrated in the ten to fourteen year old range while still most vessels built around that time were not ECO ships. Therefore, the number of ECO vessels available in the market is still a minority amongst the existing fleet. Please turn to Slide twelve, where we summarize our outlook for the drybulk market. The drybulk carrier market spreads at notably junior sales courses with average time charter rates for Sucom and Panamax vessels increasing by roughly 13% quarter on quarter. Reflecting improved demand trends. Across several key commodities. The Red Sea attacks earlier in the summer disrupted Canal transit further. And tightened vessels supply further supporting trade Demand for larger vessel classes remains while smaller segments also recorded strong gains adding to the overall positive event. We Looking ahead to the remainder of 2025, market conditions still remain uncertain. Shaped by the recent Geopolitic geopolitical and policy developments. In October 2025, as we all know, The U. S. And China escalated its the trade dispute introducing reciprocal port fees on each other's vessels. Which added complexity to shipping operations. However, following the meeting between President Trump and Xi, last month, both sides signaled a temporary de escalation and port fees postponed. Meanwhile, the ceasefire between Israel and Hamas has also drawn attention to potential leasing of Red Sea disruptions. For now, shipping companies are still adopting the cautious wait and see stance and no immediate changes in routing patterns have been experienced. In 2026, the market still faces challenges around trade growth and protection pattern of trade. Adjustment. However, Chinese demand from both and iron ore will remain a key driver while global infrastructure spending should continue to support industrial Materials trade. Strong harvest in The U. S, Brazil and Russia are also expected to sustain robust grain exports for the Sukhovix Panamax Also expected is a rebound in corn trade and steady minor bulk demand. However, the potential normalization of Red Sea traffic could result in lower ton mile demand as routes resorted again. On the supply side, ordering activity remains limited due to shipyard capacity constraints in continued uncertainty about fuel technologies. Especially after the recent IMO decision to postpone the adoption of of its proposed environmental friendly new routes ship owners are confused on what type of ships to order. The order book to fleet ratio currently near historical launches I said before, provides a solid backdrop for the charter rate and casualty should demand strengthen. Although there is a clear industry shift towards alternative fuels, the pace of transition is likely to be slower than anticipated. Constrained by technical challenges, economic consideration and ongoing delays in the IMOs next net zero framework. Azerbition related measures such as the EXI, CII, EU ETS, UME, UMAD Times. Are fully implemented apparent supply could tighten further through increased scrapping and slower vessel speeds. By 2027, the drybulk market is expected to enter the rebalancing phase with new deliveries declining and scrapping activity picking up leading to a more balanced supply demand environment. Let's turn to Slide 13. As of 11/07/2025, the one year time charter rate for Panamax vessels stood at $15,125 per day remaining modestly above the twenty year historical median of $13,375 per day. As of the 2025, the market for ten year old Panamax bulk carriers remains firm. In fact, we have seen an approximately 10% increase over the low seen in Q2 which represented the lowest point since mid-twenty twenty three. Current asset value stands at approximately $26,000,000 which are well above the historical median of $15,500,000 and the ten year average of 18,000,000 Underscoring continued resilience in second revenue building orders. And also the disposal of one of our we are in a position to continue modernizing our fleet and preparing ourselves for the next bull run which will as usually, perhaps suddenly and possibly when least expected. Let me now pass the floor over to our CFO, Tassos Ostovidis, to go over our financial highlights in more detail. Tassos Aslidis: Thank you very much, Aristin. This Good morning from me as well, ladies and gentlemen. Over the next four slides, I will give you an overview of our net Aristides Pittas: financial highlights Tassos Aslidis: for existing vessels financial and also the disposal of one of our we are in a position to continue modernizing our fleet and preparing ourselves for the next bull run which will as usually, first suddenly and possibly when least expected. Let me pass the floor over to our CFO, Patrice Ostlidis, to go over them. Our financial highlights in more detail. Thank you very much, Aratindis. Good morning from me as well, ladies and gentlemen. Over the next four slides, I will give you an overview of our financial highlights for the third quarter and nine months of 2025. And compare them to the same periods of last year. For that, turn to slide 15. For the 2025, we reported net revenues of 14,400,000.0 representing a 2.2% decrease over total net revenues of $14,700,000 during the third quarter last year which is primarily the result of the decrease decreased average number of vessels we operated and relatively lower market compared to the same period of last year. Details and other financing costs including interest income, for the 2025, amounted to 1,600,000.0 compared to $1,900,000 for the same period of 2024. Interest expense third quarter of this year were lower primarily due to partly offset by the increased average amount of debt that we sell. Adjusted EBITDA for the 2025 was 4,100,000.0 compared to $05,000,000 achieved during the 2024. Basic and diluted loss per share attributable to the the controlling shareholders for the 2025 was $0.24 calculated on approximately $2,800,000 base diluted weighted average number of shares outstanding compared to loss per share of $1.53 probably to about the same number of basic and diluted weighted average number of personal savings for the third quarter of last year. Excluding the effect from the loss attributable to controlling shareholders, for the quarter of the unrealized loss on derivatives The adjusted loss for the third quarter of this year would have been $0.23 per share based to diluted compared to an adjusted loss of $1.42 per share basically diluted for the same period third quarter twenty four. Let's now look at the numbers for the corresponding nine month period. Ended September 30, 2025 and convert them to the same period the nine months of 2024. For the first nine months of 2025, we reported total net revenues of 34,900,000.0 representing a 25% decrease over total net revenue to 46,600,000.0 that we said during the first Operator: And the decrease and the offset partly for the increased level of debt we gave. Adjusted EBITDA for the first nine months of 2025 was five compared to $7,600,000 during the first month month of 2024. Again, excluding the effect on the net loss attributable to the controlling shareholders for the first nine months. Of the year. Of the unrealized loss on the EBITDA and the net gain on sale of a vessel the adjusted loss for the nine months period ended 09/30/2025 would have been $3.39 per share, basically diluted compared to adjusted loss for the nine months ended 09/30/2024. Please move now to Slide 16. To review our fleet performance. We'll start our review by looking at our fleet utilization rates for the third quarter and nine month period of 2025 and convert them to the same period of last year. During the 2025, our commensurate utilization rate was 100% while our operational utilization rate was 99.3% compared to 100% commercial and 98.5% operational in the corresponding period of 2024. On others, we own and operated 12 vessels in the first nine in the first three months in the third quarter, sorry. Of 2025 earnings and other time charter equivalent rate of $13,232 a day compared to 13 vessels in the same period the 2024 and another $13,105 per vessel per day. Our total daily operating expense including management fees general and administrative expenses but excluding buybacks and costs, were $7,013 per vessel per day in during the third quarter twenty twenty five compared to $6,851 per vessel per day for the same period of last year. The new charter down is stable, We can see the cash flow breakeven level. Which also take into account in addition to the above expenses, for the entire growth and expenses interest expenses and loan repayments. Thus, for the 2025, our daily cash flow breakeven level was $12,200,182 dollars per vessel per day compared to $15,145 per vessel per day for the first quarter of last year. Reviewing out the same figures for the nine month period, and comparing to the same period of last year We said commercial utilization rate about 99.6% and operational acquisition rate of 99.2% for the first nine months of this year compared to 99.9 commercial and 98.7% operational for the same period of last year. On average, we operated 12.3 vessels during the first nine months and then another trade of $10,210 compared to operating 13 vessels during the same period of last year, earning on others $13,639 per vessel per day. Fuel analysis further down for operating expenses, Our operating expenses including management fees and G and A expenses, excluding the operating costs were $7,285 per vessel per day in the first nine months of this year compared to $6,927 for the same period of last year. And if we include on this figure, the interest expense the loan repayment and the direct working expense, our total cash flow breakeven level for the first nine months of 2025 would be $12,071 as compared to $13,789 per vessel per day for the same period of 2024. Let's now move to slide 17. To give you some highlights regarding our debt. And our forward cash flow breakeven. As of 09/30/2025, UroGiles debt stood at 97,900,000.0 with an average margin of about 2.05%. Assuming a three month short rate of 3.84% cost of our senior debt is approximately 5.9%. The repayment schedule of our debt you can see on the top right chart of this slide which shows total debt repayments of $13,100,000 in 2025, 10.3 of which have already been made. And if on the top of that, include interest expenses and loan As of September 30, 2025, cash and other assets in our balance sheet stood at approximately $18,800,000 while we said advances for newbuildings amounted to about 7,200,000.0 In addition, on the asset side, we have the book value of our vessels which was about 176,000,000 resulting in total book value of our assets of roughly $2.00 2,000,000 On the liability side, total bank debt as I mentioned in the previous slide stood at 97,900,000.0 which is roughly 48.4% of the book value for our assets We have other liabilities of 5,200,000.0 representing about point 6% of our This result in the book value for shareholders' equity of almost 9,000,000 translating into a net book value per share of $31.8 Based on our own estimates, though, the market value for our fleet is higher than the respective book value We estimate it to be about $214,000,000 as compared to $176 as I mentioned earlier. Approximately $38,000,000 above the book value. In plan, the net asset value of our fleet on a per share basis to be in excess of $44 If we compare this to the recent trading days of our sales, which is around $13 per share. It becomes evident one more time that there is significant potential upside potential for share appreciation should market conditions improve or other capital costs but discount to level. And with this, statement, I would like to pass the floor back to our teams to continue our call. Thank you, Basos. Let us now open up the floor for any questions you may have. Thank you. We will now be conducting Aristides Pittas: Thank conducting a question and answer Our first question comes from the line of Hans Baldahl with NOBLE Capital Markets. Please proceed with your question. Hello. Operator: The market fundamentals Tassos Aslidis: are looking more promising for 2026, and we've seen the rates push up And I know you mentioned a breakeven rate of 12,000 Can you talk about your threshold for shifting from the short term index linked exposure in possibly securing some longer term coverage Are there specific rates you're looking for Operator: Yes. We will reach to longer term coverage if we see numbers between around 16,000, 15,000, 16,000, 17,000, that's that's the area where we will be concentrating to Tassos Aslidis: to get some exposure hedged. Operator: Through time charters or FFAs Tassos Aslidis: Okay. And is that across the board or is that average between the Kamsarmax, Panamax Supramax, Operator: It's another let's say, what I just told you. Obviously, our Elder Panamax es earn less So we might fix something at a little bit lower rate. The younger cancer MAXs and Tassos Aslidis: the Supra and Ultramaxes. Operator: They are probably around the same these days. Tassos Aslidis: Okay. Tassos Aslidis: And I see the Exterini is looking for employment Do you have a time line of when you expect that vessel to start start up again? Operator: The Irini was sold Tassos Aslidis: Not the Ectorini. Ekaterini. Operator: Yes, the Catarini was fixed a couple of days ago. So we didn't make it here in the presentation. For trip via South America back to the Far East. So about ninety to one hundred days at the level which is about $16.5100 dollars a day. Tassos Aslidis: Okay, understood. My last question is the near term debt. I know with the Arini sale and the refinancing step your liquidity improved recently. But you still have the $12,200,000 in current debt. Do you have any plans to improve the near term liquidity? Operator: Yes. Our liquidity has improved significantly because we did a couple of things. We they're not reflected in the numbers for the nine months, but because they kept in or are about to get in. We're refinancing Janus Pitas which will release about $4,500,000 We have sold Tirini, which will release about $6,500,000 I think. After we paid couple of million of debt that was there. And we have also it's in the press release arranged to finance the pre delivery installments Tassos Aslidis: payments for our newbuildings. Operator: One, which has already been paid by the new the debt we arranged So, I think we have improved significantly our liquidity The difference by end of the year is plus $15,000,000 after this test that we did. That we took. Aristides Pittas: Okay. Tassos Aslidis: Thank you very much. That's everything for me. Operator: Our next question comes from the line of Poe Fratt Alliance Global Partners. Please proceed with your question. Operator: Yes. Good afternoon, Aristides. Good afternoon, Tassos. Aristides Pittas: Just wanted to follow-up on the newbuild financing Tassos Aslidis: Tasos, did you say that you're going to draw down the first one of the two newbuild facilities in the fourth quarter Operator: Yes. So we've already done that. The second these new buildings had the second payment that that was to be made this year. For one of them that the payment was due, we already made that We already took a loan and the payment was made using that loan. The other payment is still coming up. And we have another loan with a different bank I think it's in the press release. And which will bring you forward that payment as well. Tassos Aslidis: So, I'm trying to to figure out when you're going to show the incremental debt on the the balance sheet. Because the new bill payments, as I understand it, they're call it, 60% of the total cost of the new builds, and those aren't due until mid-'twenty seven. So can you just sort of give me an idea of what Operator: the incremental debt looks like in 'twenty seven? And Tassos Aslidis: 'twenty six and 'twenty seven? Passes? Operator: I mean, by the end of by the delivery of these vessels, we would have drawn approximately $53,000,000 debt to finance the two new buildings. Dollars 26,000,000 and 26,900,000.0 I think is the numbers. So that's by the delivery of the vessels. And if we draw debt to finance pre delivery installments, we'll show obviously in our balance sheet. Yes. Okay. Just to clarify that. Tassos Aslidis: And then, Aristides, can you talk about the market a little bit? I'm trying to reconcile the one, the sudden increase in rates on the Alexandros P and Christos K in sort of the August, September time frame. And can you just highlight the reasons you think that the rates went from Alexander's P went from $6,000 to 28,000 And then Christos went from call it, the low teens to 28%. And then can you give me an idea of sort of the rate outlook for both of those into the rest of the fourth quarter? And into the early twenty twenty six timeframe? Operator: Beautiful. The market, the overall market is slightly improving as is shown also by the various indices. However, the indices are comprised of various different voyages. The voyages from the Far East to the Atlantic generally, are low paying voyages. The voyages from the Atlantic to the Far East are high paying voyages. So if you secure a trip like the Ecuadorini, Which Starts From The Far East, goes to South America, and returns to the Far East, then you will get the average rate, which today is around $16,005 that we fixed. But in the two cases that we're talking, we're talking about the first two voyages were positioning voyages to places where you can get higher rates to go back out. And that is why you see those big differences in the earnings. Is it clear? Aristides Pittas: Yes. I guess the next Tassos Aslidis: sort of question would be then they'll have to probably reposition for the rest of the fourth quarter. So we should look at a lower rate for the rest of the quarter. Is that fair? Operator: Aristides, on those two things? I think on average, you should be looking at average charter rates. So the way we run our models at least we take those assumptions into in account and we run our models for three, six months or a year or whatever. So, we generally use vein decks to reflect what we think will be happening, because it's very difficult to decide exactly how to value every ship. But yes, if a vessel is in the Far East, is in China, it will have a cost to go to a place where it will be able to command higher for us. Freight rates. Clearly, it depends on the type of the next picture. If it's within the Paris, it will be closer to the average. If it's back and forth in the Atlantic, Again, for the average. If it's go to the Atlantic, it will be lower the lower rate that I previously mentioned because then you get a better rate to go to the Pacific So, wherever the cutoff falls from the end of the quarter, but so taking the average is probably safe bet. Tassos Aslidis: Yes. Okay. Fair enough. And then when I just want to clarify that the 115% of the BSI-fifty eight Is that number on Page eight so that the four that you have on the index right now or earning 115% of right now, it looks like sixteen point six hundred and twenty five Is that correct? Operator: Yes. It takes the BS Tassos Aslidis: Index Operator: and multiply it by 1.6 to get what we have paid for these four vessels as we say. Tassos Aslidis: Okay. And on your your chart that shows your employment on Page I think it's page six, You don't have any dry docks on through the middle of 'twenty six. Will there be any dry docks over the next nine months? Or could you just highlight what your dry docking schedule might look like in the Operator: Yes. There is a dry dock of Vixenya that is going to happen very soon. Other than that, I don't think we have something else within the next six months to nine months. We only have one of our dock within 2026, I can't remember which ship it is. And it's towards the second half of this. For the whole year, there is just one write off. Have explained now and one in 2026. Tassos Aslidis: Okay. And then typically, I guess, you talked about your fleet renewal business or program. And it was more in the context of lower rates. And making that decision of doing a dry dock on a twenty year old plus asset versus selling it And can you just highlight when the dry docks might occur on the Starlight and the Blessed Buck, which you're still two of the oldest Panamaxes you have out there. The Santa Cruz was done in the third quarter, so I'm assuming you're going to keep it for a while. Operator: Yes. I think less luck and starlight are super drives your in. 2027, I think second quarter. Aristides Pittas: Mr. Pettus, it appears we have no further questions at this time. I'd like to turn the floor back over to you for closing comments. Tassos Aslidis: Thank you. We will Operator: thank everybody for participating in today's call. And we will be back to you in the New Year with the results of the full year. Thank you. Thanks everybody for attending. Aristides Pittas: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good morning. My name is Martin Fernandez, and I will be your operator today. At this time, I would like to welcome you all to the Imunon Third Quarter Financial Results Conference call. All lines have been placed on mute to prevent any background noise. Following the speaker's prepared remarks, there'll be a question-and-answer session. You may press star and one on your phone to ask a question at that time. Please keep in mind, if you're using a speakerphone, you must release your mute function to allow the signal to reach our equipment. Again, that's star and one to ask a question during the Q&A session. I would now like to turn the call over to Peter Vozzo from ICR Healthcare, Investor Relations Representative for Imunon. Please go ahead. Peter Vozzo: Thank you, Myron. Good morning, everyone, and welcome to Imunon's Third Quarter 2025 Financial Results and Business Update Conference call. During today's call, management will be making forward-looking statements regarding Imunon's expectations and projections about future events. In general, forward-looking statements can be identified by the words such as expects, anticipates, believes, or other similar expressions. These statements are based on current expectations and are subject to a number of risks and uncertainties, including those set forth in the company's periodic filings with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. I also caution that the content of this conference call is accurate only as of the date of this live broadcast, November 13th, 2025. Imunon undertakes no obligation to revise or update comments made during this call except as required by law. Peter Vozzo: With that said, I would like to turn the call over to Dr. Stacy Lindborg, Imunon's President and Chief Executive Officer. Stacy. Stacy Lindborg: Thank an you, Peter, and good morning, everyone. Joining me on the call this morning is Dr. Douglas Faller, our Chief Medical Officer, and Ms. Kim Graper, our Interim Chief Financial Officer, who will be reviewing our financial results for the third quarter of 2025. Mr. Michael Tardugno, the Executive Chairman of our board, and Dr. Khursheed Anwer, our Chief Scientific Officer, are also on the line and will be available for Q&A. We continue to make meaningful progress with our proprietary IL-12 immunotherapy, IMNN-001, through the OVATION 3 pivotal phase III trial for newly diagnosed advanced ovarian cancer. The urgency of this program remains front and center to our efforts to create value for shareholders and to address the unmet need of ovarian cancer, which continues to claim far too many lives as the standard of care in the frontline setting has not advanced in over 30 years. Stacy Lindborg: Our OVATION II study demonstrated the first-ever overall survival benefit in a critical FDA endpoint in our randomized frontline trial. We are now laser-focused on confirming those unprecedented results in a well-regarded, rigorous phase III trial. Three days ago, we hosted a highly successful R&D day in New York City at the Harvard Club, featuring renowned ovarian cancer opinion leaders, clinicians, statistical experts, alongside members of our leadership team. The event underscored the transformative potential of IMNN-001 for women with newly diagnosed advanced ovarian cancer. The investment community and those interested in advances in ovarian cancer treatment and women's health more broadly heard directly from investigators about the unmet need in this disease affecting globally 300,000 new cases each year and claiming the lives of 13,000 women each year in the U.S. alone. Stacy Lindborg: This is why IMNN-001's potential to deliver a 13-month median overall survival benefit in phase II, with a hazard ratio as low as 0.42 in PARP-maintained patients, represents a potential paradigm shift. We have just come off a powerful series of presentations at the world's leading oncology and scientific forums, including ASCO, SITC, ESMO, the AACR Ovarian Cancer Special Conference focused on advancements in ovarian cancer, and finally, IGCS. The momentum is undeniable. OVATION 3 enrollment is surging ahead of plan, and this one-to-one randomized trial is evaluating IMNN-001 plus the standard of care, neoadjuvant and adjuvant chemotherapy with interval debulking surgery versus standard of care alone in women who have treatment-naive advanced ovarian cancer. In July, we initiated a 500-patient all-comers trial of women with advanced ovarian cancer, which has the flexibility to prioritize a 250-patient HRD-positive subgroup. Stacy Lindborg: This would enable us to realize a 40% cost savings with this prioritized group. The study design employs interim analyses for early efficacy stopping rules demonstrating trial success with power above 95% on the clinically meaningful primary endpoint of overall survival. As was discussed at R&D day, this analysis is accelerated over a traditional trial, which would only read out the overall survival at the end of the study. Success with these interim analyses is expected to deliver full approval, not accelerated approval. Key updates since our last call that I'll just quickly tick through. First, the site activation status of Ovation III. We have been deliberate and consistent with our cash management responsibilities, which applies to our decisions around site activation. Four sites were initially activated in the U.S., and we expect this to double before year's end with four additional sites well-progressed in startup activities. Stacy Lindborg: Returning investigators from OVATION 2 are being joined by additional top-tier centers, many of which are proactively reaching out to Imunon following the recent publication of the OVATION 2 study results in the Journal of Gynecologic Oncology, which was published on the same day as the 2025 ASCO platform presentation. We also have inquiries about the trial from interested sites at other recent conferences. Furthermore, while we have moderated the activation of sites in 2025 to reflect our current cash position, we are preparing for a site activation surge. To this end, we have accelerated the engagement of a global CRO to identify new study centers for startup in the new year, and we estimate we will have all sites in the new trial activated before the end of 2026. Next, I'll comment on enrollment velocity. Stacy Lindborg: You know, the first patient in OVATION 3 was randomized and treated in July of this year, and we have seen strong investigator enthusiasm for the trial, which has surpassed our internal enrollment target set for the end of 2025, with nine patients randomized by the end of October. I think you can all appreciate how important it is to have strong momentum at the start of the trial, and we have started this trial with an impressive pace. Moving to regulatory and design validation, the FDA has endorsed overall survival as a single study registration endpoint, and based on precedent and European regulations, we expect OVATION 3 to meet regulatory expectations for approval in Europe. During our R&D day, Dr. Stacy Lindborg: Giorgio Poloni, PhD in statistics with the company Berry Consultants, a highly regarded statistical consulting firm, highlighted this adaptive event-driven study design, a technique that is well-aligned with precedented FDA approvals in oncology via interim analysis of overall survival. He also highlighted the robust statistical foundation of our phase III trial with conservative power estimates, yielding high estimates of probability of success of this trial. Let me just pause, and if you did not have the opportunity to join our symposia live, I would encourage you to look on our website, the imunon.com website, in the Investor tab and under Scientific Presentations to watch it. We provide details of the power assumptions, and it is remarkable to hear directly from these experts that were on the faculty that day. Lastly, new translational data and our MRD study. We had Dr. Stacy Lindborg: Amir Jazari from MD Anderson Cancer Center presenting at our R&D day. He's the lead PI for the ongoing phase II minimal residual disease, or MRD study, being conducted in collaboration with the Breakthrough Cancer Foundation. Dr. Jazari spoke to data collected so far in the trial, demonstrating IMNN-001's preferential uptake by peritoneal macrophages, including profound tumor microenvironment remodeling. Patients achieved complete pathological responses with durable intratumoral IL-12 and interferon gamma expression, all with negligible systemic exposure and excellent tolerability, even as IMNN-001 in this trial is being administered with bevacizumab, and treatment has continued in maintenance settings. Additional biomarker data, which was presented at CITSI last week by Dr. Faller, further confirmed T-cell and macrophage infiltration and immune activation that's predictive of superior prognosis. Dr. Stacy Lindborg: Primal Thacker from Washington University emphasized during the R&D day that IMNN-001 is able to turn what are immunologically cold ovarian tumors hot by engaging both innate and adaptive immunity, renewing the promise of immunotherapy in this devastating disease. These mechanistic insights, paired with unprecedented survival signal, have fueled investigator commitments to accelerate enrollment. We estimate full enrollment in OVATION 3 will occur by late 2028, and I'll note that this can be accelerated with financing. I'll now turn over the call to Dr. Douglas Faller for some clinical commentary and comments. Douglas? Douglas Faller: Thank you, Stacy. As Stacy noted, our R&D day on Monday in New York really crystallized the excitement we are seeing within the gynecologic oncology community regarding IMNN-001 and OVATION 3. Dr. Thacker's and Dr. Jazari's presentations, followed by the rich discussion during the Q&A portion of events, underscores the clinical importance of the data collected and reported in both OVATION 2 and in the MRD study in women treated with IMNN-001. Excuse me. As Stacy mentioned, over the last three months, we've been invited to present our OVATION 3 trial and the emerging translational data from OVATION 2 at four prestigious international scientific and clinical congresses. These include the ESMO 2025 in Berlin, the International Gynecologic Cancer Society meeting in Cape Town, the AACR Special Conference on Ovarian Cancer in Denver, and the Society for Immunological Therapy of Cancer CITSI International meeting in 2025 in Washington, D.C. Douglas Faller: These global forums gave us the opportunity to interact with both scientists and clinicians. After our presentations, a number of clinical investigators, impressed by our novel therapy and the patient benefit realized in OVATION 2, approached me asking if their hospital could participate in the OVATION 3 trial. Similarly, scientists intrigued by the demonstration in patients that IMNN-001 turns immunologically cold tumors into hot tumors with anti-tumor activity asked about the possibility of collaborating with us. Interestingly, at the CITSI meeting several days ago, several participants noted the renewed interest in harnessing the powerful anti-tumor effects of interleukin-12, as evidenced by at least 15 interleukin-12 related presentations. However, they also noted that with the exception of ours, these presentations were focused on their early attempts to formulate or deliver interleukin-12 so as to avoid the well-known systemic toxicities. These attempts include intratumoral injection, which is not a long-term strategy. Douglas Faller: All of these efforts were preclinical or early phase I. In contrast, Imunon, as you know, has a pivotal phase III registrational trial, OVATION 3, actively recruiting. This OVATION 3 trial has been fully leveraging the excitement of IL-12 as a cancer therapeutic and the remarkable OVATION 2 clinical outcomes. As Stacy mentioned, study startup, as defined by protocol approval, to patient enrollment was achieved in 15 weeks, nearly half of what is typically seen as the industry standard for phase III trials. As we engage with our first set of study centers, we continue to see great interest and enthusiasm from our investigators, with the early sites so far activated far exceeding monthly estimates of the number of patients enrolled per site per month. OVATION 3 is still in its early stages, but we're observing clean safety run-in data from the first patients. Douglas Faller: Meanwhile, the ongoing phase II MRD study, as Stacy mentioned, continues to reinforce IMNN-001's favorable profile, giving us real-time confidence as we scale the pivotal trial. Following a recent MRD study DSMB meeting, we're pleased to share that the benefit-risk profile of IMNN-001 has been further strengthened in this MRD study and mirrors what we have seen in OVATION 2: no dose-limiting toxicities, no discontinuations due to IMNN-001, and no elevations in immune-related adverse events. Furthermore, preliminary clinical data presented by Dr. Jazari at R&D day highlights a high probability of progression-free survival on the IMNN-001 arm, a lower MRD positivity rate, and a lower percentage of biopsies positive during second look in the MRD patients. Douglas Faller: Lastly, the MRD study's demonstration of the feasibility and safety of combining Imunon with bevacizumab and the preliminary view into the idea of IMNN-001 as maintenance positions IMNN-001 uniquely for future trials and possible label extensions that could contribute even further to the fight against this terrible cancer. Back to you, Stacy. Stacy Lindborg: Thanks, Douglas. Before turning to our financial update, I'd like to offer and really further highlight progress in advancing our MRD trial and share an update. First, notably, the Breakthrough Cancer Foundation selected this trial for funding from hundreds of competing proposals, which is a very strong endorsement that echoes Dr. Jazari's remarks at our R&D day of the importance of frontline therapy as the best opportunity to achieve a cure for ovarian cancer. Based on the preliminary clinical data from the trial that Douglas just reviewed, we are thrilled with the consistency of IMNN-001's effect compared to our OVATION 2 clinical results. We've made great progress in the enrollment of the MRD trial, with three patients being randomized and treated in the month of October, resulting in a total of 25 patients randomized to date. Stacy Lindborg: Based on this progress, in September, we reviewed the MRD study and confirmed that its core objectives, which include those that we have internally for the IMNN-001 development plan and Breakthrough Cancer Foundation's goals as well, these core objectives can be fully met with a smaller cohort of patients. Accordingly, we decided to cap enrollment at 30 patients in the intent-to-treat population, a milestone that we expect to reach in the first half of 2026. We will be thrilled to close out this trial and capture its full learnings, enabling us to channel our resources into the pivotal OVATION 3 phase III trial. In fact, I'll mention that we've already begun conversations with this success in mind. We've started conversations with MRD investigators about transitioning their sites to OVATION 3 at that time, a move that would further accelerate enrollment in our registration trial. Stacy Lindborg: I'll note that we've received positive reactions to these inquiries. Turning to our financial strategy, we continue to navigate a challenging biotech capital markets environment with discipline and foresight. Our multi-pronged approach, combining the potential for non-dilutive partnerships with prudent equity raises, opportunistic use of our ATM facility, remains on plan, and we've made significant progress. Shareholder dilution is a valid concern, and we share it. That's why every financing decision is a stress test against our commitment to preserve value while actively working to fully fund this pivotal program. We have ongoing reviews for potential partnerships with Theraplast and interest expressed by pharmaceutical companies on PlaCCine from a recent scientific meeting, but nothing that is imminent. These kinds of partnerships take time to build, and I look forward to providing more detail if we advance these discussions to terms. Stacy Lindborg: On the equity side, we've raised $4.5 million during the third quarter through warrant exercises and targeted ATM usage. Monthly cash burn is now approximately $1.25-$1.5 million, reflecting streamlined G&A expenses, renegotiated facility leases, and a laser focus on advancing IMNN-001 milestones. Furthermore, operating expenses for nine months ended September 30 between 2025 compared to 2024 is 31% lower, which includes a 44% decrease in R&D expenses and a 52% decrease in CMC expenses. Mind you, this is all while manufacturing product for phase III, conducting CMC development work in preparation for reduced cost of products sold in the commercial landscape, and accelerating site patient activation. With cash through mid-Q1 2026 and multiple near-term catalysts such as enrollment momentum, regular presentations at medical and scientific congresses, and the potential for partnership progress, we are well poised to extend our runway further, ideally through value-enhancing non-dilutive transactions. Stacy Lindborg: A few other updates of note: the NASDAQ compliance matter is closed. We achieved the dollar minimum bid price requirement on August 9th. We sustained shareholder equity above the $2.5 million confirmed on August 22nd. In fact, we're far above this. This matter was also formally closed by NASDAQ on September 3rd, 2025, and I'm delighted to report that, as reported in the current NQ, we are at $4.1 million in the shareholder equity threshold. Now I'll turn over to Kim Graper for our review of the third quarter 2025 results. Kim Graper: Thank you, Stacy. Detail of Imunon's third quarter 2025 financial results are included in the press release we issued this morning and in our Form 10-Q, which we filed before the market opened this morning. As of September 30, 2025, cash and cash equivalents were $5.3 million. During the third quarter, the company received approximately $4.5 million of net proceeds from the exercise of warrants and sales under our ATM equity facility. The ATM facility carries a nominal 3% fee with no warrants. We project that this cash balance extends our operating runway into mid-quarter, first quarter of 2026. R&D expenses were $1.9 million for Q3 2025, down from $3.3 million in the same period last year, primarily due to completion of the OVATION 2 study and lower costs associated with the phase I PlaCCine DNA vaccine trial and development costs for the PlaCCine DNA vaccine technology platform. Kim Graper: G&A expenses were $1.6 million in Q3 2025, down from $1.7 million in the same period last year due to lower employee-related legal and travel expenses. Net loss for Q3 2025 was $3.4 million, or $1.16 per share, compared to $4.8 million, or $3.76 per share in the third quarter of 2024. Please note that all shares and per-share amounts have been adjusted to reflect a 15-for-1 reverse stock split of our common stock, which we effected on July 25th, 2025, and the 15% stock dividend we have declared in the quarter. With that, the financial review, I'll turn the call back to Stacy. Stacy Lindborg: Thank you, Kim. Before we open the line for questions, I want to reflect on the questions we received through the webcast, the live webcast at Monday's symposia. I was able to work the majority of these questions into my prepared remarks, with the exception of one question that I'd like to address as we kick off our Q&A. This question came from David Bouth through our tool, and I'll read the question. It looks like macrophages are the primary cell type that takes up IMNN-001, but how long do these cells continue to produce IL-12 based on the presence of IMNN-001? Is there some type of feedback mechanism that IMNN-001 produces to prolong the production of IL-12 in these cells after IMNN-001 is metabolized, or is there an IMNN-001 plasmid that encodes IL-12 long-lasting? It's a very great question. Stacy Lindborg: I apologize, David, we did not see it and were not able to address it day of the meeting, but I would like Khursheed to offer comments to this question. Khursheed Anwer: Sure, Stacy. Yeah, it's a good question, of course. The unformulated plasmid, which is administered into the peritoneal cavity, typically clears, I would say, within 24 hours and may last a little longer if it is formulated with a delivery system such as that in IMNN-001, where the nanocomplexes have a protective effect on the DNA. However, once the plasmid is taken up by the cells of the peritoneal cavity, such as macrophages or other immune cells or epithelial cells, it is internalized into the cell nucleus and can stay much longer, giving rise to long-lasting, up to several days, the levels of gene product, which is IL-12 in the case of IMNN-001. Yes, it is indeed the plasmid inside the cell that lasts longer, giving rise to the pharmacokinetic that we have seen with IMNN-001 of IL-12 and interferon gamma production. Stacy Lindborg: Thanks, Khursheed. I appreciate that. Operator, with that, please open the call for questions. Operator: Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star and then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star and then two. We'll pause for a moment as the callers join the queue. We have the first question from the line of David Bouth from Zacks. Please go ahead. David Bouth: Hey, good morning, everyone. Stacy, I appreciate you answering that question that I had the other day. Sorry, I wasn't able to ask it in person there. Thank you for that response there. I wanted to start, actually clear something up to make sure I understood. You had mentioned that positive results in one of the interim efficacy in looking at the interim analysis would lead to a full approval, you think. Is that a full approval for all ovarian cancer patients, or would it be just for the HRD population? Stacy Lindborg: Yeah, you're clarifying that. I think that when we were talking about the ability to accelerate the analyses through the use of an internal interim analysis, I wanted to make sure that people understood that that was the acceleration of getting to results. If we are successful and we meet the statistical thresholds that are outlined and agreed to by the FDA, we would expect full approval in the group that we're testing. The trial is continuing in an all-comers population, then at the end of the trial, that would allow a broader label indication. I think it is really important to understand we're really reflecting the devastation of this disease and the need, as we saw. We know that we're also making rather conservative assumptions, power assumptions. Stacy Lindborg: It is very possible, like Giorgio spoke to, the likelihood of being successful at one of the two interim analyses. We want that urgency to be very clear. We want to be able to move forward rapidly with a BLA filing based on that data, and then to be able to allow for the product to be approved in that indication and accessible to patients. It would allow the trial to continue to the end and to have to then potentially expand to the all-comers population. Operator: Okay, thanks. That makes sense. Kind of keeping along the same theme, what P-value, or can you say what P-value needs to be hit at either the first or second interim analysis in order to be able to stop the trial if it's efficacious? Stacy Lindborg: Yeah, unfortunately, it's a little more complicated than just a raw P-value, and this is where Giorgio did a really great job of really highlighting the simulation results. They set complex operating characteristics that ultimately are needing to take into account kind of an information fraction of where you are in the trial and therefore appropriately control type 1 error rate. The logistics of it are very well documented, and there was a very large report that was submitted to the FDA that these simulations really documented proper control of type 1 error rate, and then all of the operating characteristics that the FDA would be keen to understand. It's not just a fixed P-value, and if you are interested in more, we can have perhaps another conversation on it. It's very well laid out based on where this would occur. Stacy Lindborg: Because when in the point of the trial, when the 50th HRD event, which is the trigger for the first interim, would occur, that's not a fixed point in time. It's an unknown that will evolve, and then that will affect these thresholds. Operator: Okay. Yeah, understood. Lastly, I believe it was Dr. Hazard had talked about pain management for when IMNN-001 is administered and kind of how that pain management has evolved, basically, with her experience with the drug. I'm just curious, is there a set protocol for that pain management at all the different clinical sites, or is it kind of up to the clinician's discretion? Stacy Lindborg: That is a really great question. Douglas, do you want to take that? Douglas Faller: Be happy to. Thank you for asking the question because, obviously, patient comfort is critical for us and for the ability of patients to get the drug. In patients who have ovarian cancer in the peritoneal space, they are often quite tender because of the inflammation that is there before the drugs start to work. Infusing anything into the space can cause discomfort for patients. This happened in some patients in OVATION II, and the physicians, in combination with Imunon, decided that rather than waiting for this to occur, we could prophylactically treat patients, give them some analgesia prior to the infusions, prior to even the first infusion. If there were going to be any discomfort, this would alleviate it. If it turns out it is not necessary later on, that could be stopped for individual patients. It has been quite useful, quite successful. Douglas Faller: We're not seeing this was this, and it's, to answer your question more fully, this is part of the protocol. This is mandated for all patients. This was also incorporated into the MRD study, and we have data from Dr. Jaziri's sites that he's managing that this has been very successful. They've not had problems with any sort of abdominal discomfort in patients. In Ovation III, we've not seen that either. The prophylaxis for potential discomfort with the infusion seems to be working very well. Operator: Okay, great. I appreciate that, and thanks for taking the question. Douglas Faller: Thank you. We have the next question on the line of James Malloy from Alliance Global Partners. Please go ahead. James Malloy: Good morning. Thank you very much for taking my questions. I had a question for Dr. Faller. One of the things you talked about on the R&D day was about the durability response in sort of speaking to the mechanism of action of triggering the immune system and some of the IL-12 expression in the fluid and tissues. Can you walk us through that a little bit, please? Douglas Faller: Very happy to. Please stop me if I'm telling you something you already know and it's not appropriate to your question. The problem with IL-12 delivered systemically, as you know, has been it's simply not tolerable. It's too potent. Like IL-2, you can't give it at high enough doses systemically, let's say intravenously, because of its, it's hard to call it toxicity. Let's call it adverse events. I don't call it toxicity because it is actually the intended activity of the cytokine. Patients have, just like IL-2, patients with third space, a lot of fluid outside of the vascular system, low blood pressures, fevers, etc. That's prevented IL-12, excuse me, and IL-2 from being used effectively. Here, we're delivering the drug where the tumor is, into the intraperitoneal space. That's where the ovarian cancer has spread in all the patients that we're treating. Douglas Faller: As Khursheed mentioned earlier, this is a gene therapy. The plasmid gets taken up by the tumor cells and also by the tumor microenvironment cells, the stromal cells, and express IL-12. IL-12 then induces interferon gamma and TNF alpha, two incredibly potent immune effectors that stimulate both the adaptive and the innate immune systems. The IL-12 levels in the peritoneal fluid we've reported in Ovation I and Ovation II go up by several logs. There's a tremendous amount of IL-12 and its downstream effector cytokines expressed in the intraperitoneal fluid and in the tissues, as you would expect, in the peritoneum. However, in Ovation I and in Ovation II, we've monitored IL-12 levels systemically, and we don't see increases in IL-12 systemically, no more than twofold. This is the basis for the remarkable safety we have. Douglas Faller: We're not seeing the kind of immune adverse events that everyone else who tries to deliver the drug systemically has seen. We're not seeing any cytokine release syndrome kind of events, which completely goes along with the fact that we're not elevating cytokines, IL-12 or its effectors, systemically. It's just where the tumor is in the intraperitoneal space. The durability, Khursheed already addressed the amount of time that the plasmid is expressed. We can see IL-12 levels in the peritoneal fluid for at least a week after a single injection, and we give the drug weekly, at least during the time that the patient's getting chemotherapy. The durability of responses, when I was pointing to the slides, was just showing that we give the drug during the chemotherapy, which is six cycles essentially, plus interval debulking surgery at the beginning of treatment for the patients. Douglas Faller: Yet we're seeing effects years later. We're seeing the curve separate. We're seeing a benefit for survival in patients. This is long after we've stopped giving the drug. This is consistent with what you would like to see, what you'd expect to see from an effective immune therapy. Once you've educated the immune system to kill the tumor, it should persist. You should not necessarily have to keep stimulating, although in the MRD study, we are exploring maintenance therapy to see if that would add additional benefit. James Malloy: Great. Thank you for that. One of the things that Stacy had mentioned, I think, as well as talking about the OVATION 3 meeting, the regulatory approval for the EU, any details on that process? Maybe also, I know you mentioned, Stacy, that obviously you are constrained by the amount of cash you have to run the trial. If you had more cash, you could run it quicker. If you had unlimited funds, how quickly could you run this trial? Douglas Faller: Stacy, maybe I could address, if you do not mind, the regulatory issues, and then you could talk about the financial ones. Stacy Lindborg: Please, go ahead. Douglas Faller: Okay. The issues in Europe are twofold, as I'm sure you know. One is getting the trial, excuse me, is getting the drug approved by the EMA. Equally important is getting payers to actually agree to support use of the drug in Europe. What payers want to see in cancer is survival. PFS is not something that traditionally, in my experience, payers are willing to pay for. Our endpoint is overall survival. We've already ticked the box that the payers would want to see. The study is designed in a way that should be completely acceptable to the EMA. I've had a lot of experience in dealing with the EMA and many other regulatory agencies outside of the U.S. We could open studies in Europe. Douglas Faller: It's not necessary for European approval, but let me turn it over to Stacy now with respect to what we'd like to do with adequate funding. Stacy Lindborg: Yeah, it's an interesting question. I can tell you that when you think about some of the remarks that Douglas provided that really characterize how quickly we're moving, I can promise you we're going to be very focused on advancing this trial and taking advantage of every opportunity that we can. We've done a number of different kind of internal forecasts. As I shared before, right now, our estimate is that we'll be able to fully enroll this trial in about three years. We have done a forecast that is as quick as two years. I think that is something that we put plans behind to consider how we would achieve it, and we believe that it is possible. Beyond that, I really wouldn't want to go too much further. There are ways that you could actually pull it in even further. Stacy Lindborg: I think it gives you an idea of the way that we're looking at this and ensuring that we will be ready and able to accelerate very quickly some of these proactive approaches with the CRO that we're working with that, interestingly enough and importantly, do not change the overall price that we expect to pay, including even pay the CRO. We're just advancing activities so that we'll be poised and we can actually see the site activations when we want them, rather than waiting to engage them at that time. Those are some of the operational strategies. James Malloy: Thank you very much for taking the questions. Stacy Lindborg: Awesome. Thank you. Douglas Faller: Thank you. We have the next question from the line of Emily Bodnar from H.C. Wainwright. Please go ahead. Stacy Lindborg: Hi. Thanks for taking the questions. First one, I'm curious if you're planning to share an update from the OVATION 2 trial, particularly the PARP inhibitor-treated patients in terms of median OS since in the last update. It was not reached yet. If so, when you might expect to do that? Second question, how many sites for the OVATION 3 trial are you expecting to be sites that were part of OVATION 2? Are those the sites that you're kind of targeting initially? Thank you. Stacy Lindborg: Yeah. Emily, thanks for both of those questions. Let me take a stab at both, and then if there are other points, Douglas, you could maybe add on. In terms of OVATION 2, in our protocol, we stated that we would monitor overall survival. We designated the period of time that we would continue to monitor it. It really puts us in a place where we're starting to wind down sites. We expect by the end of the year that we'll have the data fully refreshed and the sites that will be closing. I think at the end of the day, when you look at this trial, we know that the data that we've collected, even going to the very first interim across the all-comers, the median was observed in both treatment arms. We know the data was mature for very robust conclusions. Stacy Lindborg: I think I would say we shouldn't expect, nor would the medical community expect to see significant changes to these results. We will likely have this process really finalizing towards the end of the year and early next year. Douglas, I don't know if you have any kind of—you already commented on the reflection of how long we're seeing this effect past the treatment period. When we ultimately look at the size of separation, and at R&D day, we looked at some of the graphs that have come out of these recent immune checkpoint inhibitors where you see really no separation. Tell me your reflection as a clinician on the time periods when we were observing and did these two readouts. Really, were these appropriate in terms of when you would be expecting the separation, the phase of the curve to really be well-estimated? Douglas Faller: Certainly. You have actually already spoken to it, Stacy, that in Ovation II, the primary endpoint is median, well, a secondary endpoint was median survival in the entire population. That is when our initial readout, we achieved that information. In trials in cancer, once you have gotten median survival in your primary population, longer observations yield less and less information, I think. Curves with fewer patients on them start to become less informative. We are very pleased to be seeing the effects over time that we have seen. I think that the concept of using this drug in the neoadjuvant setting really was a remarkably smart choice early on in its development. This became of great interest at ASCO. Using immunologically active drugs in the neoadjuvant setting where there is still tumor there allows the immune system to be educated in the setting of the tumor. Douglas Faller: Using it later in an adjuvant setting when there's little or no tumor there, drugs even like checkpoint inhibitors, as was being realized at ASCO, are much less effective. I don't have anything beyond that to say, Stacy. Stacy Lindborg: Thank you. Emily, your second question was about the sites from Ovation II and maybe even I do not know if you were getting at the overlap or the total number in Ovation III, but we will have great overlap in Ovation II and Ovation III. Not surprisingly, we started with sites that were very strong enrollers, very enthusiastic about the trial. We see that certainly extending to many other sites from Ovation II. We will have new sites simply because we are planning to have up to 50 sites. We will ultimately look at the number of sites that we need to really stay with our forecast and keep enrollment going. We will plan accordingly. We have flexibility in the way the protocol is written that we can go higher if we decide we want to do so. Stacy Lindborg: It's a careful, you have to carefully manage not bringing in too many sites, really keeping your sites that are performing extremely well. The enthusiasm of these early sites, and I would say really the sites from Ovation II, not only from their knowledge of the product. You heard Dr. Thacker at R&D day actually comment on the fact that she's been working on IMNN-001 for almost a decade. She was involved in Ovation I. Ovation II now is, again, the study PI for Ovation III. Their confidence and conviction in what's happening in these women, which of course they see when they're doing surgery, they observe as they're meeting with them for years after enrollment in the trial. It's palpable, right? It's incredibly clear. They believe very much that the potential for this product to be transformative to care is great. Stacy Lindborg: It's really wonderful to see these clinicians that are also offering up to meet with new sites. They're very willing to share operational updates as well as really talk about data and what they've observed in patients over time. It really is kind of the best of both worlds. Stacy Lindborg: Thanks for taking the questions. Stacy Lindborg: Thank you, Emily. Douglas Faller: Thank you. Ladies and gentlemen, that concludes the question-and-answer session for today. I will now turn the call back over to Dr. Lindborg for closing remarks. Stacy Lindborg: Thank you. And thanks to everybody for joining the call. With OVATION 3 enrolling ahead of plan, we've talked about the compelling clinical and translational data from R&D day and also recent conferences, including SITC just last week. And active partnership discussions, Imunon is poised for multiple value-inflecting milestones. We remain diligent in stewarding the resources you provided, as I hope you're able to see very clearly in the queue, and are steadfast in our mission to redefine ovarian cancer treatment and deliver lasting shareholder value. So thank you all for your support and look forward to meeting again at the next quarterly earnings. Douglas Faller: Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for participating, and you may now disconnect your lines.