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Operator: Ladies and gentlemen, welcome to the Hapag-Lloyd Analyst and Investors 9 Months 2025 Results Conference Call and Live Webcast. I'm Iruna, the Chorus Call operator. Hapag-Lloyd is representative by Rolf E. Jansen, CEO; and Mark Frese, CFO. [Operator Instructions] The conference is being recorded. The presentation will be followed by a Q&A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rolf E. Jansen. Please go ahead, sir. Rolf Jansen: Thank you very much, and welcome, everyone, and thanks for taking the time to be with us today. Yes, short presentation, as always, before we jump into the questions that you may have. I would say that when we look at the first 9 months, a couple of things to mention. I think good strong volume growth over the first 9 months, again, a decent quarter in Q3, on the back of that, good revenue growth. When we look at Q3, I think earnings improved sequentially. But of course, year-to-date performance remained below last year. When looking at Q3 in isolation, I think that was actually a fairly solid result. I think we start to see that the first cost savings from Gemini are starting to come in. We see the network running smoother and smoother. So that gives us a lot of confidence that we'll see further improvement as we go towards the end of the year and moving into 2026. We will continue to invest into the future. We also have some things -- we also continue to work on our Terminal division, but nothing specifically announced there at the moment. think we have narrowed our outlook a little bit going forward. And when you look at the midpoint on EBIT, then you see that we have slightly raised that compared to what we had a couple of months ago. Switching to market. Let's still say it's a fairly robust market. When you recall all the forecast that there were for the container trade in the beginning of this year, but also in fairness in the beginning of last year, then certainly over the last 7 quarters, we have seen a stronger market than many people had expected. In 2024, the market grew over 6%. The first 9 months now, we are again looking at close to 5%. That's a lot more than people had anticipated. And I think that's pretty encouraging and shows also that global trade is quite resilient. We still expect the last quarter to be somewhat weaker, but of course, that remains to be seen. Spot rates under pressure after the relatively early peak season, seen a bit of an uptake in the last couple of weeks with last week again a bit weaker. But I think we also see that demand still remains fairly strong and utilizations remain high. So hopefully, we'll see some further recovery of those spot rates as we move forward. Switching briefly to Gemini. I think it is fair to say that we have set a new benchmark for reliability in the industry. I think with very consistent performance even in very volatile markets and under difficult market positions. I think the network has delivered on its promise pretty much every month. I also believe that drives our above-market growth. We also see customer feedback very positive with our Net Promoter Score that we measure twice a year at the moment at an all-time high. And we also still see, as I mentioned before, quite a lot of things that we can still do better. And we will continue to implement those smaller improvements month after month after month, and that will allow us to get to our anticipated cost saving run rate in the course of 2026. Next steps. make sure that we continue to grow volume on the back of an excellent product and also make sure we get adequately paid for that because if we are able to help our customers to run their supply chains a lot better, then that must be more efficient for them as it allows them, for example, to take out inventory. And of course, we would like also to be adequately paid for that. We will also come with the introduction of a new quality promise for on-time delivery on box level because that's, in the end, the ultimate promise to customers that we make that we deliver their box on time. A little bit on investments before I hand it over to Mark. We have announced also this morning a decision to invest in up to 22 new ships in smaller vessel classes as we have a significant amount of tonnage in those vessel classes that is going out of service in the second half of this decade. That means we need to replace them. We also have to reduce our exposure to the highly elevated time charter at the moment -- market at the moment. And of course, that also helps us to reduce our operational cost base, and it helps us also on our decarbonization journey. The ships that we will order will probably be in a couple of different classes, one around 1,800 TEUs, class around 3,500 and class around 4,500 TEUs. With that, let me now first hand it over to Mark. Mark Frese: Thank you, Rolf. Good morning also from my side, and thank you for joining us today for our 9 months results presentation, which will show that in a complex and volatile market environment, we have delivered a solid operational performance. Our strong volume growth, which is well above the market average, demonstrates the benefits of our strategic positioning, particularly the successful implementation of our Gemini East West network. In the coming quarters, we aim to sustain this growth momentum and still keeping the flat capacity stable. As anticipated, earnings are lower than last year's exceptional performance, and that is primarily due to softer freight rates and continued cost pressure. To address this, we are intensifying our cost discipline and further optimizing our network to enhance efficiency and competitiveness. At the same time, we maintain a robust balance sheet with ample liquidity and a moderate leverage, providing the flexibility to pursue whatever strategic priorities. We focus on or opportunities come up, and we navigate market volatility effectively with that. Let's now take a closer look at our financial performance. Revenue and earnings in the third quarter improved sequentially, driven by a temporary higher spot rates resulting from front-loading effect in the U.S. EBIT increased from USD 189 million in Q2 to USD 228 million in Q3. However, compared to last year's exceptional results, earnings were lower due to the significantly weaker overall freight rate environment. Looking at the first 9 months, revenue grew by 5%, supported by strong volume growth across both operating segments, which helped offset partially the lower freight rate environment. At the same time, persistent cost pressure weighed on operating performance, for the period, group EBIT reached USD 905 million and group profit totaled to USD 946 million. Looking now at the performance of the Liner segment, we can see that revenue in the business segment increased to USD 15.7 billion in the first 9 months. This development was driven by above-market volume growth, particularly in the Gemini trades. EBIT amounted to USD 858 million in the first 9 months, that is compared to USD 1.9 billion during the same period of previous year. In Q3, EBIT improved sequentially to USD 219 million, a temporarily higher cost -- higher spot rates out of Asia lifted our average freight rate by around about 5% compared to the quarter before. After the 9 months of '25, we transported or in the month '25, we transported 10.2 million boxes, representing a volume growth of 9%. As said, well above market rate. This strong performance reflects our sustained investment in efficient fleet capacity and the successful transition to the new Gemini East West network. Particularly noteworthy given the tariff-related demand fluctuations we have navigated through. So growth was especially strong on the Pacific and Asia-Europe trade routes. In contrast, Atlantic volumes improved only modestly due to the soft demand between Europe and North America, while transport volumes between Latin and Europe -- Latin America and Europe were constrained by operational disruptions in ports. Following a persistent decline in the average freight rate improved, which improved 5% in Q3 2025 quarter-over-quarter, driven by front loading effects. However, the first 9 months of '25, the average freight rate stood at USD 1,397 per TEU, almost 5% lower compared to the prior year. Having a look on the unit cost in the first 9 months of '25, they increased by 5% to USD 1,338 per TEU, and this increase was driven by higher storage costs due to port congestions and operational delays, increased hinterland transportation costs from growing the growing share of door-to-door business and plant start-up investment associated with the Gemini Network. In addition, external factors such as rising trade imbalances, higher regulatory compliance cost and for sure, as we all know, the FX effects, which we have experienced generally, elevated the cost base. To mitigate these external factors, you can assume we structured strong, and we are executing already a comprehensive cost program. I would also like to provide more context on the Gemini startup costs as these are likely more pronounced for Hapag-Lloyd than for Gemini partner, as well as on the initial cost savings that are already becoming visible. For us, the new network represents a more significant transformation, which is temporarily associated with higher unit costs. We have not only redesigned the network but also changed the terminals we call the capacity we operate. While we already see clear cost benefits per available slot right now, such such as reduced ship system costs and lower bunker consumption, the unit cost per transport book are still elevated for now. But when we look ahead, growing volumes at stable capacity and further network optimization will drive unit cost down, resulting in tangible positive impact on our P&L in the coming quarters. Let's now have a closer look on the T&I segment. Revenue in the Terminal business increased, as you can see here, by 15% to USD 370 million -- USD 375 million in the first 9 months. This growth was supported by encouraging throughput developments. We have seen and the acquisition of our Terminal in Le Havre, in France this year in March. EBIT amounted to USD 46 million, which is below the prior year level, primarily due to weaker performance at Latin America terminals. This was driven by the U.S. tariff related market volatilities. And we have seen strong unfavorable weather conditions there. Additionally, we continue to ramp up this relatively new business segment which is quite normal that is associated with a temporarily higher cost base. Turning to our cash flow development on the next chart, operating cash flow for the first 9 months. As you can see here, '25 amounted to USD 2.6 billion. We invested around about USD 1.5 billion, mostly investment in containers, as well as in the modernization of our fleet, under our fleet upgrade program. These investments are designed to enhance the cost efficiency and to reduce CO2 emissions across our operations. Including income from interest, dividends and divestments of USD 309 million in net cash outflow from investments totaled to USD 1.2 billion resulting in a robust free cash flow of USD 1.4 billion. Financing cash outflows amounted to USD 2.5 billion, primarily reflecting the dividend payment of more than $1.6 billion to our shareholders, along with debt redemptions and interest payments. Overall, the cash position decreased by USD 1.1 billion, resulting in a still robust cash balance of USD 4.6 billion at the end of Q3. For sure, we continue to maintain a very resilient balance sheet with ample liquidity and moderate leverage. Strong liquidity reserves still there, which includes cash fixed income investments, undrawn revolving credit facilities, which totaled to USD 7.5 billion. This provides us with significant flexibility to fund strategic initiatives and for sure, navigate effectively through difficult market period and volatility. And with that, I will hand it back to Rolf now for the market update and our outlook. Thank you. Rolf Jansen: Thank you, Mark. Yes, maybe just a few words on supply and demand. I think we see here the trend that we have seen over the last years, I would say, a remarkably strong growth in '24. Personally, I would also expect that the '25 is going to come in a little bit stronger than we anticipated. That's a better picture we have seen over the last couple of years. Of course, it's uncertain what's going to happen in '26. It's, however, quite encouraging that over the last 2 years, if you add them up, I think, 6-plus percent in '24, I think we're going to be close to 4% in '25. That's accumulated close to 11% in 2 years, which is well above what everybody expected. For next year, the expectations for now are a little bit lower, but also also fleet growth will be a little bit lower. So for now, we anticipate an environment where there is going to be somewhat lower growth. But when we look at the last couple of years, there's certainly also a scenario thinkable where things remain fairly robust because also when we look around the globe this year, then we certainly see that trades to and from the U.S. have been under pressure, but quite a few other trades have actually done fairly well. Looking at the order book. Order book is still quite big. Could that be lower? Yes, could be. On the other hand, let's also not forget that we are still expected until the end of the decade, overall growth will be 15% to 20%. And we also expect that there's quite a bit of the capacity that is going to be taken out as towards the end of this decade, more than 4 million TEU of capacity will actually have to be replaced by newer tonnage, which is also the background of the order that we just earlier talked about. And on the back of the demands that are being put upon us to work on decarbonization. Also, that is certainly an incentive to sell a little bit slower, which normally would require a bit more capacity. So all in all, no very significant change in the order book. It definitely remains on the high side, but it means it also covers a much longer period as when people order ships today, you can get them in '28, '29 or sometimes also only in 2030. So contrary to what we used to look at in the past when we had an order book typically covering 2.5 years. Today, it covers more to even 4, 4.5, sometimes even 5 years. Moving to the outlook before we hand it -- before we wrap it up and then hand it over to you. We made some slight adjustments to the outlook. As you can see here, mainly on group EBITDA and group EBIT, where we narrowed the range, which we would also expect, if we get closer towards the end of the of the year, and we also raised the midpoint a bit. Then when we look at priorities, I would say, make sure that we leverage the Gemini performance to continue to grow our business at adequate pricing but also make sure that we get all the savings into the book, make sure that we continue to focus on high customer satisfaction. We've been doing that now quite consistently over the last number of years, and we need to make sure that it stays like that. We will try to further expand our Terminal division through acquisitions and potentially also investments here and there also because it drives quite a lot of synergies with the Liner business. We also will invest in the expertise and resilience of our team amongst through a large leadership program. And then finally, we have to ensure that we maintain strict cost discipline as costs are currently definitely at an elevated level. We already mentioned [indiscernible] , and we need to ensure that over the next 12 to 18 months, we see the planned improvement in unit costs. And with that, I would hand it over to the operator, as I think we now move to Q&A. Operator: [Operator Instructions] The first question from the phone comes from Omar Nokta with Jefferies. Omar Nokta: I have a couple of questions. Maybe just first on the new buildings. Can you give us a sense of what kind of capital expenditure you're anticipating for these vessels? When you expect to take delivery of them? And also, where do you plan to deploy them? Are these going to be in that sort of the ideal workhorse for the Gemini network? Rolf Jansen: Okay. If I take that, maybe, Mark, you can say probably something around the CapEx but I think if we look at delivery, most of that will come in '28 and '29. And when we look at where we can deploy them, those are many places across our network, but it would not be illogical to expect quite a few of them to be deployed in our shuttle or feeder networks in Europe or Asia, but only some of them will also be used in IoT Americas or in Africa in Latin America. Omar Nokta: And then in terms of cost, any sense? Rolf Jansen: I mean, I think in the end, we will commit to those ships. I think we're still figuring out what will be the exact split between the various categories and some of it will be time charter and some of it we will own. So it's a bit too early to say something about what the overall CapEx will be. Omar Nokta: Okay. And then just a final one for me, just on the operational costs. I know you mentioned that 2026 is when we'll start to see the benefits of Gemini. Are you able to give any kind of maybe quantify the type of cost savings you anticipate to show next year? Rolf Jansen: I mean what the type or the -- sorry, I didn't hear it -- type or size? Omar Nokta: Yes, just like the dollar amount you anticipate or percentage change versus this year, any kind of range you're able to share? Rolf Jansen: I think when you look at the cost savings that we expect from Gemini, we have, I think, earlier on, gave an indication that we expect it to be net [ $350 million to $400 million ]. And at the moment, I have no reason to have -- to pull out a different number. Operator: The next question from the phone comes from Alexia Dogani with JP Morgan. Alexia Dogani: I have 3 please. Just firstly, on the 4Q outlook, clearly, the low end of the range is very negative and we're only 6 weeks away from the end. How should we interpret that low end that you've provided today? And should we see this as the potential exit rate into 2026? That's my first question. Secondly, Rolf, you made some comments about the Gemini pricing. And can you elaborate a little bit on what the alliance wants to do in terms of kind of capturing the value of this new operating model? Is it really about pricing? Or is it about volume gains? And there has been in the press some discussion around Maersk considering an on-time surcharge. This is slightly counterintuitive because obviously, you operate a scheduled business, customers should expect it to be on time, otherwise, the schedule -- kind of point is missed. And I think at the 2030 strategy presentation, you showed that actually the top thing that customers want is low price. How does that actually change given your experience over the past 12 months? And then my final question is, you helpfully show that the market expects container volumes to grow 15% to 20% by 2030. That implies a 4% to 5% per annum volume CAGR and suggest a multiple of 1.5 to 2x real GDP based on kind of current global forecast. What gives you confidence the multiple can be staying at these higher levels? Because clearly, in '24 and year-to-date, '25, we've had a lot of, let's say, external events affecting demand, be it disruption and tariff front loading. Is that your feeling? And if not, isn't it slightly counterintuitive that tariffs have no impact on trade? Rolf Jansen: Let me maybe try and take them one by one, and then Mark, you may want to add something on the outlook. Maybe start from the bottom. To be honest, I can't really reconcile your math, yes. Because when I look at 15% growth until 2030, that's 5 years. So that's roughly 3% a year growth, which is roughly a multiplier of 1x of GDP when you look at the long-term average of 3%. So personally, I think that's actually not looking at 1.5x GDP, but more looking at just onetime GDP, which I think also when you look at the last number of years, it will not come every year, but on average, we're actually not so far from that. Then when we look at Gemini pricing, I think there is definitely value to be captured from a difference in reliability and a difference in OTD between one and the other, whether you should call it a separate charge for being on time. I think I can relate to your comment that putting a separate charge for being on time is probably odd. But I would also say that if I can choose between 2 carriers, where one of them is going to be on time, and the other one is very unpredictable, that I am willing to pay a little bit more for people that are on time because it allows us to take -- it allows me to take money out of my supply chain. And we have clearly seen in discussions also with customers that they see that and that they do see real opportunity to take 1 or 2 weeks' inventory out of the supply chain, which clearly has value. And then, of course, we need to make sure that we sell that value as well. And part of that to your point, will come in terms of hopefully higher prices or adequate prices and the other one may also be above market growth. I agree with you that there's a those 2 value components in there. And then maybe, Mark, do you want to comment on the outlook. Mark Frese: Yes. Thank you. Yes, on the outlook, you might call it a cautious view. It's maybe 2, but it's due to the scene short-term volatility, which is more attributed not only to the general shipping volatility but also due to the geopolitical uncertainties we are facing, and we are looking at a freight rate environment, which is under pressure right now. Volume growth is slightly slowing down. So let's see what the last weeks are bringing for this year, but I think that is the character of our outlook overall. Alexia Dogani: Thank you for clarifying the growth rate. Can I just do a little follow-up on the GEMINI pricing. When you're competing or when you are on the same route, and you're offering kind of your customers a contract price, should we expect much differentiation between you and your partner? Or given you operate the same network, you're on the same alliance, kind of the pricing opportunity is equally spread? Or just trying to understand a little bit kind of the potential divergence or not. Rolf Jansen: I think your pricing differential you should mainly see with those that have a different product. So I would expect, but I don't know -- and we operate completely independently from that perspective. But I would assume that the Gemini partners are able to get a price premium for being on time compared to those that are not on time. So that's where I think the delta that you will see and that will not come from one day to another, and it will not come in every customer segment. But I think the delta that you will see will be more between Gemini and the other networks then between the partners within Gemini. Operator: The next question from the phone comes from Cristian Nedelcu, with UBS. Cristian Nedelcu: If I can please come back on the cost savings. Could you help us a bit what was the run rate in $1 million that you expect in terms of cost savings in Q4? And what is the time line to get to the $1 billion cost savings that you are flagging in the past? The second one on Gemini. Could you remind us, looking at your ocean volumes, what's the percentage split between BCOs and forwarders. And within your customer base, what proportion do you believe are the time-sensitive BCOs that most likely will find on time proposition as very appealing? Rolf Jansen: Maybe start with the cost savings. I think what we have said is that we expect that in 2026, well over half of that $1.3 billion that we are targeting is going to be effective. We expect to get to full run rate in 2027, and we will see some effects already in the fourth quarter, but those will be limited. In terms of ocean volume, our split traditionally, we have been a bit more focused on the forwarder side. I think at some point in time, we were like 70-30 for orders for BCOs. Today, we are closer to 60-40. And as far as it's around what's the percentage of the customer base are time sensitive, I would say that probably the majority of the BCO business. Cristian Nedelcu: Understood. And could I please add one question if you allow me. Coming back on the very strong volumes from China to the rest of the world. So leaving aside the U.S. for a second. The last 4, 5 months, we've been seeing China, Europe, up 10%, 12% and so on. Do you have any data from your customers, what are the inventory levels in Europe or other LatAm or other countries? I'm just thinking to what extent part of this growth has been just an export push that is currently leading to higher inventories and we actually might see the consequences of that over the next months. And I'm asking this because the value of Chinese exports in October was down 1% year-over-year, and there was a steep deceleration in the exports from China to Europe from double digit to low single-digit growth year-over-year. Rolf Jansen: I think what we saw in October, it's definitely a slower return to work, if you want after Golden Week than we have seen in previous years. In some years, that's good, some years, that's a little bit worse. I think you shouldn't look -- I don't think we should read too much into that. If I look at the last couple of weeks, demand has really been, again, quite strong. We just were a little bit slow coming out of the [indiscernible] After Golden Week. So I don't see too much into that. In terms of inventory, I think that speculation is always out there. I think I'm now hearing since 1.5 years that we are front-loading. At some point in time, one would argue that, that has to stop I think listening to speaking to customers, I do not think that there are many of them that sit on very excessive inventory. What will be critical is what consumer demand will be towards the end of the year, which typically for retail is a peak season, that will probably drive what's going to happen post-Christmas. But I don't see huge amount of front-loading. And yes, you hear -- you speak to one or the other that has high inventories. We also speak to people that have actually fairly low inventory. So difficult judge and there's only a limited amount of really reliable data on that out there. Operator: The next question from the phone comes from Marco Limite with Barclays. Marco Limite: My first question is again on the '25 outlook. This time on the upper end of the guidance because the upper end of the guidance basically implies Q4 EBITDA as strong as Q3, but Q4 is seasonally weaker from a volume perspective. So basically, I guess, implies spot rates up quarter-over-quarter. I mean, is that possible? Do you think that, that sort of scenario? Second question is on your Gemini start-up costs. If you can remind us how much startup costs you had in Q2, how much they have been in Q3 and how much we should expect in Q4? And the third question, if you allow me. I mean if I look at the Q3 results, it just like OpEx was behind of consensus. Is there a single factor or maybe among the many factors that you will point out for higher inflation? Could that be, for example, very strong headhaul growth, but backhaul growth and backhaul volumes not being that strong. And therefore, how can you offset that going forward? Rolf Jansen: Maybe I'll start with the -- I think when you look at the Gemini costs, I think we overall once gave an indication that, that was between [ EUR 150 million and EUR 200 million ]. I think that prediction still holds. The majority of that we incurred in the first half of the year, and we have still a little bit in Q3 and Q4. When you look at OpEx, I think we already mentioned that we also started [indiscernible] Because we believe that OpEx needs to come down. We start seeing that also. So from that perspective, pretty comfortable that, that is indeed going to happen. I think your point to backhaul volume, I think we have certainly seen in the repositioning costs. We've seen a little bit of a spike. Some of that is catch-up and there's still something to do with Gemini, but that's certainly a factor that plays a role. And then I'll leave the comments on the outlook to Mark. Mark Frese: Yes. When we look at that right now, for sure, that scenario is thinkable in the sense that what's reflected in the perspective. And that's why you can see it. But overall, it stays, I think a cautious outlook. Marco Limite: Okay. Just a follow-up to that. Is it fair to assume that you still have got a lag in revenue bookings, so the weak September that includes Q3 actually was in Q4. So basically, we are implying a very strong October, which we have seen also November remaining at very strong with October. Rolf Jansen: I'm not sure we fully understand the question. I think I mentioned earlier that -- and I think it was called out by the previous person asked the question that export volumes out of China have been -- have been a little bit slow following Golden Week. So that's why volume is not exceptionally strong in the month of October. In the last couple of weeks, we see demand picking up again. That's basically what the comment was that we made. It's not technical time shift in a sense when that was your question, too. Marco Limite: I was referring to revenue recognition delay between spot and your revenues, but any your answer was clear. Operator: The next question from the phone comes from Lars Heindorf with Nordea. Lars Heindorff: Also a few one on Gemini. I wonder if you could maybe quantify a bit more about the start-up costs that you have Maersk -- on their call said that I mean, Q3 was the first full quarter with Gemini up and running. So what is actually the difference there between you and them in terms of the start-up cost? Why do you incur maybe later start-up costs compared to Maersk? And then a second one on Gemini, which is the balance again between you and Maersk, are you a net seller or a buyer of capacity? And maybe if you can -- I don't know if you can say anything about the magnitude of that sort of balance in terms of the vessel sharing agreements that you have on -- in the Gemini Agreement? And then the last one is on the rates. Well, I think you said you had a comment in your starting remarks that you said you hope that rates will rebound a bit here into the fourth quarter? Maybe just what is behind that? Are you seeing any signs of recovery? I know there has been a few FAK and GRI successful increases in October and then you have seen a bit of weakness as of lately. But yes, just wondering exactly what is behind that comment. Rolf Jansen: Let me maybe start with the last one on rates. Of course, nobody can predict the rate, unfortunately. I think we saw a bit of a -- we saw some seasonal weakness after Golden Week, then I think we saw rate eroding, which was sort of logical because it took a little bit of time before volumes came back. And we've had a couple of GRIs that ,as you rightfully point out that have been that [indiscernible]. Now we see actually fairly strong bookings. Last week was strong. The beginning of this week is very strong. So I think that gives us some momentum in the market to hopefully get some further rate increase in the short-term market because those [ fleets ] are really very low. I think your second point on the balance. I mean, from all the mainline capacity that we operate and that Maersk operates, I mean, we are balanced in terms of provision. I think we have -- I think we announced it also earlier, we have a 60-40 split roughly on the main line of capacity and Maersk provides 60% of that, and we provide 40% of that. So from that perspective, we're not a net seller or buyer. I know there was a comment on the earnings call of Maersk, and that may have to do with the technical arrangement that we have made on the shuttle space, but I can't look into Maersk books, so I don't know why they exactly treat, but that's my hypothesis. On the Gemini start-up costs, I think it is right. I think you are right. The start the changes were probably a little bit bigger for us than for Maersk because we changed a lot of terminal providers. Maersk was doing a little bit more of hub and spoke already. And whereas the corporation runs really well. And I think we're also happy with network. I think it's also fair to say that there was in some processes, that's probably a little bit more learning for us than there is for Maersk because, for example, in our case, also the empty flows change a lot, and that takes a little bit of time to stabilize that. And that's why, I guess, that some of those cost savings might come a little bit later in our case than what we see at Maersk. Lars Heindorff: Can I just have just another follow-up, but just another one, sorry, is on Suez. there has been a lot of talks lately. We've seen having a few versus going through Suez, also larger vessels. And also now here this morning is some news about Maersk in talks with the authorities down there. Apparently, maybe of course, depending on the security situation that they will return. What's your view on that? I mean, what will it take for you to return to Suez? Rolf Jansen: I mean, I think we've always said that as soon as it's again sufficiently stable and safe, then we will consider a gradual return to Suez. I think we're talking very closely to our partners which is Maersk but also others in other services on when that is the case. We're following it closely while at the moment, I do not see us returning very soon. Operator: The next question from the phone comes from Andy Chu with DB. Andy Chu: Just one question for me. Just on the cost savings, there are quite a few numbers flying around this morning. I think you mentioned in the presentation the full run rate of savings is expected by 2026. But just in terms of the net cost savings, what should we be putting in for 2026 and 2027? Rolf Jansen: I think when you look at our -- there's 2 or 3 things I think that were mentioned. One is, what are the run rate savings we expect from Gemini, that we have previously indicated $350 million to $400 million. And there is no reason to deviate from that number. Then we talk about the [indiscernible] Program, where we are targeting $1.1 billion plus in cost savings, and we expect the vast majority of that to be effective in '26, and we expect the full amount to be effective in '27. Andy Chu: Maybe just one strategic question. Obviously, Maersk has had a pretty good performance in Terminals. So when I look at sort of the weighting of Hapag's business mainly being container shipping focus, does that kind of -- does the current environment sort of shift any kind of thinking in sort of the mix of the business? Rolf Jansen: No, not really. I think we've been -- we've, of course, been in a way we entered the Terminal space much later than some of our competitors. But we will continue to grow that business. I think that if you take into account that we effectively only started somewhere in the beginning of this decade. And today, we are engaged in 22 terminals. I think that's actually a pretty good result, and we will continue to grow that. But of course, we are -- APMT started, I think, in the last century or around 2000. So of course, they have a lot more history and track record there than we have at this point in time. And that's something that we simply need to catch up. Andy Chu: And then just on logistics, you mentioned sort late to the party and Terminals. Is it a party that you'll never join with logistics? Rolf Jansen: We have no plan to go into logistics, the way that others do. Operator: We have a follow-up question from the line of Mr. Nedelcu with UBS. Cristian Nedelcu: Two questions. I wanted to add, the hub and spoke model, how are you thinking about potentially deploying it to other trade lanes and what is the time line there? And secondly, if we leave aside the cost savings initiatives that you mentioned earlier, what is the inherent cost inflation you would expect for 2026? Is it 2%, 3%? Is that reasonable or more or less? Rolf Jansen: I think to take the last one first. I think when you look at cost inflation going into next year, if we would not take measures, then I think that is -- that would unfortunately definitely be more than 2%, yes. I think that's a low mid-single-digit number that you realistically would have to have in mind. And then when you look at hub and spoke, yes, we certainly see the hub and spoke model working. So will that also be used in other trades over time. Probably yes, but I don't see that tomorrow. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Rolf E. Jansen for any closing remarks. Rolf Jansen: Not much to add. Thank you for your time, really appreciate it. Also, hopefully, we were able to give you some insight, and thanks also for the questions. Take care. Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Kaarlo Airaxin: [Foreign Language] Excellent. Well, Luis, please walk us through the Q3 and give us a glimpse on the future ahead. The floor is yours. Luis Gomes: Thank you very much. Just asking the slides. Thank you very much. If we go on to the next -- to the first slide. So we had a strong or reasonably strong third quarter for the year. Our net sales were slightly down on last year for the same quarter. But last year, we're coming back off a bad second quarter. So we had a bit of a spike in the third quarter. We usually expect this to be a quarter with slightly slower in relation to others because there are holidays, summer holidays, summer breaks for ourselves and for our suppliers and also for our customers. So we usually expect to be a slightly quieter quarter. But nevertheless, we maintained the positive EBITDA. And -- the thing that we were less happy about was the cash flow that was very negative, but we expected that to some extent because we had large prepayments on many projects that were now -- we were now paying suppliers, we were paying subcontractors. And that is part of the reality of our business that this goes up and down during this period. Our order backlog has also gone down mostly because we are now waiting for new orders that we have been working on for quite some time. So we have focused our sales force in addressing those big orders. We are waiting for them. They are later to be contracted than we wanted. They are still there. We are still working with them. We are still going through negotiations and discussions with the customers. Probably chief among those orders is Sterna that has been commented quite a lot. We are still waiting for that. And because of that, our order backlog is waiting for those large new orders to come on, but they are late. And of course, our sales force has been very focused on that. But overall, for the year, we are still ahead of last year. We are doing bigger net sales. We are still in positive EBITDA territory. So in general, things are going okay, good even. We have had to announce a reduction in our guidance. I'll get to that in a bit. But that reflects the later arrival of new orders. We can go on to the next slide, please. So as I said, for the year, we have a strong positive EBITDA ongoing. And a lot of this is coming from the -- on the back of our sales of data and services. Not only that is growing in terms of net sales, but we still maintain a very good profitability. And that is contributing very positively to the overall performance of the company and particularly for our positive EBITDA. And this is now the fifth quarter in a row that we have maintained positive EBITDA. And this is something that for us represents quite a positive outcome over the last few years after many years of very variable results. On to the next slide, please. So as I mentioned, we had to announce new guidance for the year, largely due to the fact that some one large new order Sterna is delayed, but also because we have an issue with one of our suppliers on the SKAO project. And those 2 things have reduced our guidance for net sales for the year because we have not been able to do as -- or to recognize as much revenue as we would expect. And we also do not believe that we can maintain a positive operational cash flow for the year, but we still maintain the guidance of a positive EBITDA. Now we have done several actions over the year to mitigate these. We have been waiting until -- the last quarter was the one -- the Q4 was the one where we expected this -- both Sterna to come on and also to have a big revenue recognition from this one project, SKAO project. So when we realized that, that was not happening that we could not meet that, that's when we provided the update. We have nevertheless taken some measures. So there are people that we have not increased our staff, for instance, in preparation for Sterna. We are delaying hiring people to meet the start of that project. We have also done -- we have trimmed our workforce across the Board throughout the different sites to become more efficient throughout the year. So we have taken a few measures to actually mitigate to some extent these delays that we are seeing. Going on to the next slide, please. So just to give an update on Sterna. This is a big European program. It's a big European project. It requires the agreement of different countries. It requires the agreement of different meteorological services around Europe. And what EUMETSAT, the organization that ultimately is the customer has told us is that in July, when they tried to actually secure the agreement of all these countries, 5 countries did not commit and one in particular, needs to commit because not only of budget, but also of their importance in the European meteorological sector that is France. So France, as many might know, has had some issues with the government, and there have been a [ refugee ] issues in the country. And this has all made it harder for the country to commit to the project. We believe still they are still interested. They have committed in the past, said that they would support it, but we have to wait. And what that has meant is that EUMETSAT could not actually give the go-ahead to the project. This doesn't mean that we are not working on it with a prime contractor with ISA, the European Space Agency that is responsible for the implementation of the Sterna project. So that is discussions, negotiations are ongoing. So there are many, many ongoing activities around Sterna, but the reality is that the project -- the award of contract is late. We expect it to have it in quarter 4 this year, and we are now expecting it in quarter 1 next year, subject, of course, to the EUMETSAT Council agreeing this that the project can go ahead. If we go on to the next slide, please. Other events. So the other big event that had an impact on our net sales for 2025 is the SKAO project. So this is a program that we are doing supplying equipment for telescopes, radio telescopes actually on the ground. And what happened there is that one supplier was selected by the customer. The customer said you have to work with this supplier. And there has been a technical disagreement between them in terms of performance about what they are delivering. So we are basically between these 2 parties. But we are -- we believe we are closing on the resolution. But what this has caused is that about SEK 30 million in revenue that we expected to recognize this year, we could not recognize. So that -- this has had a big impact on our net sales for the year. As I say, we are working with both parties to resolve the problem. So we are doing tests. We are doing simulations to show that things work. But this is an ongoing process that we are currently undertaking. So we expect to resolve it, but it's just taking longer than what was planned. And in view of all of these changes, we have actually -- and I know that I have mentioned that I will be presenting a long-term outlook for the company. But because of these changes and because of the changes like, for instance, Sterna has quite a big impact on our forward look. We have decided to delay that presentation that show of what -- where we are going just to let us to see how things happen, when they happen, what are the timings as they have quite a lot of impact on our workload. And so the way we go forward depends on that. At the same time, as I mentioned, we have been streamlining throughout this last year, our operations on missions and systems and products, sorry. As many of you will know, we have shown a reduced order intake, particularly on missions. So we have reduced the amount of staff that we have dedicated to that part of the business. But at the same time, we have had quite good news on our product side. So we had the first CubeCATs delivered earlier this year. So that's our laser communication system. So the first 2 have been delivered. And looking more towards our services side, things continue to grow, to expand and to be very successful. YMIR-1, our dedicated VDES test bed satellite has demonstrated link -- VDES link for the first time in orbit. We are now doing several tests and evaluations with potential customers. We are working with some coast guards. We are working with organizations that are trying to bring in VDES into their operational day-to-day setups. And so we are actually seeing quite a lot of demand for those services, and we see that as a very successful outcome for the last few months for the company. And in that vein, in our maritime intelligence side, we also announced recently that both Sedna-1 and Sedna-2 are now fully operational. So that's quite good for us for our -- particularly our ship tracking AIS business. That is something that having more data is an important part of our business and to grow that side of the business. So we are seeing quite a lot of success in our data and services business. And -- also product admissions, although we are in a right way right now in a bit of a waiting period, we still expect it to be very successful, and we have quite a very strong pipeline on that part of our business. We go to the next one, please. So looking ahead, what we expect to see in the next few months coming. We do expect our order backlog to recover in 2026. As I said, we have a strong pipeline, both on the data and services, but also on the products and missions that we are building. So we expect that recovery to happen. We have launched of VIREON-1 forecast for quarter 1, 2026. So that is something that our teams are focusing very much right now on, preparing the satellite for launch. And INFLECION Phase 2 is approaching. So we are now in contract discussions. We are now with proposals. So we are now just in that final point of securing that second phase with our customers. So that -- all these are quite a lot of -- this represents quite a lot of activity for our teams right now. And next one, please. I think -- the next one, please? Or is this the last -- so I believe this is -- it might be the last one. So this is where we are right now. And I'll open the floor for questions. Kaarlo Airaxin: Right. Thank you. Yes, exactly. I believe there was a last slide saying that this was the last slide. But we have received a lot of questions ahead of this broadcast, and I can see that people are using the live chat as well. But I'll just make a reflection here. And so this result was a bit of a mixed bag because the Q3 was down year-on-year, whereas the 9 month was up year-on-year. So what do you think that we in the market should be looking for? Shall we not focus so much on the quarterly and then see this as, let's say, a long-term business and perhaps look at the 6 months and 9 months? Luis Gomes: I usually say that my preference is to look at on a yearly basis. Of course, when we are just coming from restating our guidance or changing our guidance for the year, this might sound strange. But I still think that as a business, if you look at the types of projects we are working on, the types of deliveries we do for our customers, quarterly tends to be quite a narrow time frame. Things change quite dramatically in a quarter. So usually, I prefer to look at on a yearly basis. That's a more -- or a 12 months basis. That's a more accurate way of seeing how our business is doing. Of course, we are still -- if a quarter is the last quarter for some reason, some orders move to the next year, we have a big change. But yearly is a better time scale. Kaarlo Airaxin: Right. But then again, if you're listed on the market, the curse is the quarterly. So I will just throw in a couple of questions here. So margins in the segments, data and services fluctuated significantly between quarters. Why and how should we think about this as the constellation grows going forward? Luis Gomes: So data and services, there have been a few one-offs on our data and services that have improved dramatically our profitability. But it is still a strong profitable business. Our EBITDA there are still in the 36%, I believe. So there are events sometimes that increase that. On the other hand, we have also increased our sales force, for instance. We have grown our team that is actually on the ground, talking to customers, selling more services in preparation for the new satellites for the new constellations. So we expect to maintain a strong profitability and actually grow the profitability in the future. But it will vary, particularly now while we are building the business, that part of the business. Kaarlo Airaxin: And also, I'll just throw in another question that I just received here from the sideline, and that's a more general question. Would you be able to elaborate a little bit of orders from the defense side? Any comments, any updates? What can you tell us? Luis Gomes: We can't talk too much about what we are doing on defense right now. There are several conversations ongoing. It's an area of interest for us. We already do work, particularly on our ship tracking business. A lot of it already goes to the security, defense and security market. Many of our products end up in defense-related satellites, but we do have a few other conversations ongoing. We can't talk much about them right now, but I can assure you that there is quite a lot of interest from that side on our products and our missions and our technology. Kaarlo Airaxin: Okay. And I have a couple of questions here from EUMETSAT and Sterna. And just to recap here, if I understood you correctly here, it's the delay of the decision is very much out of your hand. So it's more of a European community problem where we have an internal problem in France. So it's not really connected to Sterna. That would be the right interpretation. Luis Gomes: Yes, it is. So these big programs usually require full agreement from all countries on EUMETSAT, unanimity. And sometimes that is not reach -- that cannot be reached. And that does create an issue. I believe this was the first time that in a program of this magnitude that was seen that happened. So it was a bit unexpected from everyone, but it's something that is outside our control. We can help by making sure that what we are offering is good and it is appealing, but we can't control politics at European level. Kaarlo Airaxin: No. Well, maybe they can't either. But -- and also, this is -- I'm just reading from one other question here. And I think that, that is also connected to Sterna and the contract. Despite the fact that there is no decision, can the contract still be negotiated ahead of any award? What is the process there? Luis Gomes: So the process is that we are discussing with the European Space Agency, they are with our prime. So our prime is OHB Sweden. So we are discussing with the prime, and they are discussing with the European Space Agency. So discussions -- the setup of the contract, the technical discussions are all ongoing. It's just that we don't have yet the go-ahead. But all the preparatory work is being done now. Kaarlo Airaxin: Okay. And I have some cash flow discussions here, but I'll just pop one up that I received ahead of this, and that's you've been given extended overdraft facility by the banks, I take it. What does that mean? What can we read into it? What would you like us to read into it? Luis Gomes: It means that the space business is very what we call lumpy. So you have large orders, you have -- sometimes you have to pay suppliers quite a lot of money in times when you need a certain amount of flexibility. At the same time, we are also investing in our own constellation during that period. So having that -- having those facilities gives us the flexibility to be able to manage our cash and not having to stop investing, for instance, because we have a big outflow to our subcontractors. So it allows us that flexibility. And that's what we have been trying to build is that flexibility into the business. That is naturally quite variable in terms of cash. Kaarlo Airaxin: So it gives you, let's say, a cushion to continue with operations and perhaps expand operations there. And maybe that, in a way, answered the next question, which is you're not able to have a positive cash flow from operations and the mechanics there. So basically, it's you -- would that be a quarterly situation that you would have a negative cash flow in one quarter and then you have a positive due to the lumpiness of the business? Luis Gomes: Yes, that's usually what happens. So quarters are very variable when it comes to cash. So we expect that our target for not this year probably, but for the years following is to continue to have annual positive operational cash flow. So that's something that we want. That's something that we have thought very hard for. But we are still very dependent on large programs coming in coming then payments to subcontractors. So it's very variable. And in that context, quarter-to-quarter, we'll still see some very big variations. Kaarlo Airaxin: And I would just read a couple of questions here from the chat as well. Although we have talked a little bit of data services net sales, can we expect the data services net sales to stabilize or grow quarter-to-quarter going forward? Or should we be more patient and perhaps look half year and 12 months? Luis Gomes: We expect -- in terms of sales, we expect it to start growing next year. I would expect with new satellites coming online, we have -- middle next year, I would expect it to start seeing an uptake of our data and services. But that's because new satellites are coming online, and that should also improve our profitability at the time. So I do expect it to grow probably on a quarter-to-quarter, but you'll see it more on an annual basis. Kaarlo Airaxin: And we have a technical question here. Well, more or less technical. So have you decided on the number of satellite in INFLECION yet? Luis Gomes: So the baseline continues to be 12, but we do have a few opportunities to grow that number. So we stick to 12 for the time being. That's our design target. There are options for more. Kaarlo Airaxin: Yes. So yes and no. 12, but it could be increased. Luis Gomes: Yes. It's something that we are still in Phase 2. We are entering Phase 2 of INFLECION. So this is when we will probably make the decision. Kaarlo Airaxin: Yes. Another way to -- well, or a segue to that question would be then, so you have decided on 12, but if there is an opportunity to increase that, you would be able to do that. Yes, all things considered. Luis Gomes: And also, even outside the INFLECION program, we have options to actually include. We could build more satellites, for instance. So we have been looking at that possibility. So there are opportunities even without INFLECION. But within INFLECION, yes, we could have more satellites if we decided that there was a market for them. Kaarlo Airaxin: Yes. And if we look at the order backlog, you have previously stated that you have a good visibility and this time, it has decreased and well, connecting that to the visibility, could you just walk us through why? And what can we expect in the future? Do you address that? Do you need to address that? Luis Gomes: So as I say, probably the big item has been Sterna on the order backlog. It is a huge thing. As I say, because we are in negotiations, we are in discussions, a lot of our sales force, a lot of our people that actually -- our sales and business development people have been involved in that. And we are focused on that work. It is the case that sometimes we have to focus on some of these bigger orders. And then if they don't come through, then we have a delay on our reduction on our order backlog. But nevertheless, the pipeline remains very strong. Kaarlo Airaxin: So more to come. And I'd just like to -- well, highlight because I observed that DNB Carnegie recently initiated the coverage of you with a fair value of 106, which is above today's print. And I don't really need you to comment on their target price. But if you don't mind, I would like you to comment on 1 or 2 of their assumptions, if that's okay with you. And in case of Sterna, they expect -- well, or mention initial order value of around EUR 5 million to EUR 6 million for the first 6 satellites while you as a company have previously communicated a total project value of around EUR 60 million. That doesn't necessarily mean a contradiction in terms because there's a difference between 5 and 6 satellites and you are mentioning 12. But could you elaborate a little bit on that? Luis Gomes: I would say that, that guidance is incorrect. So we stick by the total project is worth a lot more. It's worth more than EUR 60 million. So I think they underestimated quite badly the number. Kaarlo Airaxin: And in the report, they compare you to several international satellite operators. And when you look at the stock market, it's -- well, we're in the stock market, we like peer groups. Do you agree with their peer groups? And if anyone wants to know them, I refer them to the report because there's a number of peer groups. Are you comfortable with peering? Luis Gomes: In general, yes, I think they are representative of our sector, even if in some cases, they -- the mix of their business is a bit different from ours. But they represent different parts we operate in. And in that sense, yes, I'm satisfied with that. Kaarlo Airaxin: And they use key metrics would be EBITDA margins and sales. And yet again, not going into your internal key metrics, but for the market, that would be good metrics to look at, I take it. Luis Gomes: Yes. Kaarlo Airaxin: And in that case, would you expect -- would it be possible for you to reach some SEK 370 million, SEK 375 million in sales for the next years -- for the next year, I should say? Luis Gomes: Yes, I think so. I think that's a perfectly achievable number if we look at the kind of pipeline we've got right now. So yes, I'm fairly comfortable with that assumption. Kaarlo Airaxin: Yes. And then also, I received an interesting -- well, an interesting question for many companies listed in Sweden and reporting in Swedish krona. Do you expect the exchange rate difference to further impact Q4 and 2026? Luis Gomes: As always, you're asking me to guess the international markets that is something that is quite difficult. We try to hedge a lot of our debt on currency. We also operate a business that is very varied across different countries. So yes, we expect it to have an impact. But at the same time, we usually are fairly comfortable because as I say, we buy and sell in many different currencies, and we always -- we tend to hedge all of those. But when it comes to reporting, yes, we expect that to have an impact. Kaarlo Airaxin: And one of the key words there were many currencies. And forgive me my ignorance here, but would it be fair to say that particularly towards the Swedish krona, that would be more, let's say, a translation rather than a transaction, you buy and sell in euros or dollars, but you report in krona? Or should I look at it in another way? Luis Gomes: No, it's exactly that. So we tend to operate very much in euros, British pounds, in dollars. That is a lot of our operation maybe that's in those currencies. So it's more how we translate that into our reporting. Kaarlo Airaxin: All right. All right, Luis, thank you for that. Considering the time here, it was very educational. And there's a lot of questions out there. And any one of you who needs to have more information or granularity when it comes to the satellites and other programs, we would guide them towards yourself, and that will be your web page, I take it. Luis Gomes: Yes, that would be a great place to start. And if you want any more -- if you want to discuss anything, Håkan will be more than willing to actually direct you to the right people. Kaarlo Airaxin: Excellent. And Håkan, that would be the Head of IR. So with that, Luis, I thank you so much, and I wish you the best. Luis Gomes: Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to the Kneat Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Katie Keita, IR Lead. Please go ahead. Katie Keita: Thank you, operator, and welcome, everyone, to Kneat's earnings conference call for the third quarter of 2025. Today's call will be hosted by Eddie Ryan, Kneat's CEO; and Dave O'Reilly, Kneat's CFO. Please note the safe harbor statement on Slide 2 and the forward-looking statements disclosure at the end of the earnings release, informing you that some comments made on today's call contain forward-looking information. This information by its nature is subject to risks and uncertainties, so actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our relevant filings, which can be found on SEDAR and on our website, www.kneat.com/investors. Also during the call, we may refer to certain supplementary financial measures as key performance indicators. Management uses both IFRS measures and supplementary financial measures as key performance indicators when planning, monitoring and evaluating the company's performance. Management believes that these non-IFRS measures provide additional insight into our financial results and certain investors may use this information to evaluate our performance from period to period. For your reference, we have filed our unaudited consolidated financial statements and MD&A on SEDAR, and they are also available on our website. I will now pass the call to Eddie Ryan, CEO of Kneat. Edmund Ryan: Good morning, everyone, and thank you for joining the call today. I will take you through an overview of the quarter and the year so far, what we are seeing and what we are planning. Then Dave will share a high-level recap of the financials. After that, we will open the call for your questions. The third quarter of 2025 reaffirmed Kneat's resilience as the market leader in digital validation. We continue on an expansion journey with our existing customers and continue to sign new logos at a strong pace. As a result, our SaaS revenue grew 33% year-over-year, well ahead of the average for companies our size. This demonstrates the continued demand for our platform even in a more complex investment environment for the life sciences industry, who also have to deal with uncertainty around trade, pricing and funding. While these dynamics are extending buying cycles somewhat, customers ultimately continue to invest in their digitalization journey. As such, our sales team continue to manage a robust pipeline into quarter 4 and beyond. Kneat wins because it delivers compelling value for its customers. Our validation workflow platform, Kneat Gx, is configurable and absolutely no coding is needed. It supports all validation workflows, and it meets strict data integrity requirements. That Kneat has been able to address what our customers need to do the way they want to do it has earned Kneat our excellent reputation as the leader in digital validation. This market leadership was underscored this past quarter by the software review and comparison platform, G2. Its full report on pharma and biotech software awarded Kneat a satisfaction score of 98 out of 100, a full 20 points higher than the second-ranked company's score of 78. We strive to expand this competitive lead by making the platform better all the time. Our engineering team continues to innovate in line with customers' needs and our strategic vision. Our AI strategy is unlocking new possibilities for speed, intelligence and insight while maintaining the highest standards of compliance and integrity. Recent advancements include AI capabilities that enhance usability and global reach with upcoming near-term solutions designed to streamline content creation, content review and data-driven decision-making. Based on the significant opportunity that lies ahead, we will continue to invest strategically in R&D and go-to-market in parallel with our focus on profitability in the year ahead. I will now hand it off to Dave, who will address the financials in more detail. Dave O'Reilly: As I take you through the numbers for the third quarter, just a reminder that the figures are all in Canadian dollars, unless otherwise noted. I'm pleased to report that Kneat's healthy growth continued in the third quarter with annual recurring revenue up 37%, total revenue up 26% and gross profit up 25%. Starting with revenue. For the quarter ended September 30, 2025, revenue came in at $16.1 million, up 26% from $12.8 million for the third quarter of 2024. $15.2 million of that was SaaS license revenue where growth accelerated to 33% over the $11.5 million of SaaS license revenue in Q3 of 2024. The revenue from services of $0.9 million in the quarter compared with prior year services revenue of $1.2 million. This decline indicates partners are stepping up to do more in services, allowing us to focus on our software. These Q3 results take us to $46.3 million in total revenue for the first 9 months of 2025, which is up 31% over last year. SaaS license revenue of $43.2 million for the first 9 months was up 35% year-over-year. Cost of revenue in the third quarter of 2025 was $3.9 million, up 31% from $3 million in the same quarter a year ago. Gross profit for the quarter was $12.2 million, 25% higher than the $9.8 million in Q3 of last year. Gross margin for the period was 76% compared with 77% for the same period last year. For the first 9 months, cost of revenue was $11.5 million, up 31% from the prior year comparable period. Gross profit for the first 9 months of 2025 grew 32% over last year's first 9 months to $34.8 million, bringing gross margin for the 9-month period ended September 30 to 75%, which is even with the same period in 2024. Operating expenses grew 43% in the third quarter of 2025 to $14.3 million versus $10 million in Q3 of 2024. R&D expense growth was 47% year-on-year, net of capitalized R&D. Sales and marketing expense was up 45% year-over-year, and G&A expenses were up 32% year-over-year. Looking at operating expenses year-to-date through September 30, total operating expenses grew 34% over the first 9 months of 2025 to $42.3 million compared to $31.5 million for the first 9 months of last year. R&D expense net of capitalized R&D grew 27% to $16.1 million for the first 9 months. Sales and marketing expense grew 38% to $17.0 million for the comparable period last year. And G&A expenses were $9.1 million, up 42% compared with the first 9 months of 2024. We ended the quarter with total annual recurring revenue, or ARR, of $68.6 million, up 37% from $49.9 million as at September 30, 2024. And our cash position as at September 30, 2025, was $59.8 million. So all in, a solid quarter that sets up for a strong finish to 2025. And with that, I will turn the call over to our operator for your questions. Operator: [Operator Instructions] And our first question comes from the line of Doug Taylor of Canaccord Genuity. Doug Taylor: Congratulations on another quarter for new customer signings, a strong quarter. I'd like to start by, I mean, asking you about both the macroeconomic headwinds that you referenced in your prepared remarks and in your disclosure and also the reference to some increased competition that you talked about in your materials. I just wanted to unpack those a little bit. So first, starting with the macroeconomic, the challenges you speak about as it relates to tariffs and trade uncertainty. I mean, can we talk about the directionality of that in this quarter? Is that improving or getting more challenging? And perhaps you can speak to the pipeline for expansions as you discuss that with some of your installed base? Edmund Ryan: Doug, good question. Yes. So speaking to the pipeline, first of all, I guess, to date, we have -- we are ahead of where we finished last year from a new company customer perspective. So that speaks to our competitive strengths that I'm really proud of in the marketplace today. Looking at the -- looking back over the last 9 months and looking at the macros, I would say there's definitely been an impact there around customer budgets and uncertainty from that perspective and where they do their investments and all of that. I believe from recent information that you know that it's beginning to stabilize from that perspective, especially around the tariff side of things. And there's a lot of optimism, especially state side in the U.S. around new spending and additional spending on new facilities and expansions. And of course, a lot of those customers that are in that space are our customers. So I expect we'll benefit from that as we go forward as well in the coming years. So while it's not huge, the macro, it has had an impact, and we have seen some deals moving out a little bit, still there in the pipeline, still working on them, not closed out or anything like that. So, yes. And we have a very robust -- when I look at the pipeline ahead, we're been very robust on the pipeline ahead as well. Doug Taylor: And so just to maybe go one step further with that, would you say that those macro and the deal slippage, I mean, it clearly doesn't appear to be related to new customer signings. So is that more about expansion plans? And maybe you could tie in your recent changes to some of your pricing models around delayed growth in the initial deal signings in relation to that? Edmund Ryan: Yes. So the initial deal signings, I think you're referring to the incentives around the ARR, which is the leading indicator. I would say that has -- Dave can talk a bit on that as well, but that has come down, and it remains similar to what we would have sort of messaged to the marketplace over the last number of months in the single mid-digit type territory from that perspective. So on the -- what was the question on the macros again, Doug? Doug Taylor: Well, I mean, let me -- I think I got the answer I was looking for there. So let me just circle back then on the competition comments you made in your disclosure overnight here. I believe you're referring to Veeva, maybe some new market entrants or perhaps ValGenesis. I mean maybe you could expand on why you included that, what you're seeing and whether that's impacting -- it doesn't seem to be new customer signings, but is there a pricing impact? Is it impacting expansion plans to any significant degree? Edmund Ryan: No, not to any significant degree. There is definitely new entrants coming into the marketplace. Veeva is looking to get traction with its technology. But by and large, Kneat is still winning all the key deals. There is a bit maybe competition has the ability to slow deals down a little bit, but they still -- Kneat is still winning them in general. So nothing significant there. But yes, for sure, something that I would be concerned about or not concerned about or would be vigilant about into the future. Operator: Our next question comes from the line of Erin Kyle of CIBC. Erin Kyle: I just wanted to follow up on one of the questions that Doug asked there, just on expansions. I think I believe last quarter, we mentioned -- you mentioned the deferral of some expansions out of the quarter and ARR growth of 37%, while strong, it was still below our expectations for the quarter. So maybe you can just comment on whether you've seen more deferrals in customer expansions or just what you're seeing in that context? Edmund Ryan: Yes. I think I missed the first part of your question, Erin, but I can speak a to the latter part, at least. So as I said, the -- we would have seen -- if we look back over the 9 months, we would have seen some slowdown in budgeting and that type of thing, but it's nothing significant. We -- the customers continue to expand, and we're working -- we typically end the year with stronger expansions. And I'm optimistic that will happen again this year. We don't know the end of the year yet. So yes, there's nothing unusual there. Just we have to continue to expand our customers, and they are on that journey with us. They just -- deals, move around from quarter-to-quarter. It can be lumpy. Erin Kyle: The first part of my question there was just whether there were any deferrals out of Q3 specifically? Edmund Ryan: Deferrals out of Q3. I don't have -- Dave, do you have an answer to that? Dave O'Reilly: It's more so have any deals that were due to close in Q3, have they moved into Q4. I think the answer is to that is... Edmund Ryan: Yes, that's true. Correct, Dave. There would have been some deals that would have moved into Q4. Erin Kyle: Okay. And then I just wanted to also follow up on any FX impact on ARR and revenue in the quarter. If you can quantify that, that would be helpful. Dave O'Reilly: I'll step in on that one. So from a quarter-over-quarter perspective on ARR, we have a tailwind of approximately $1 million on our ARR, but the impact on revenue is a lot less in the quarter, the revenue impact is a tailwind of about $130,000. Operator: Our next question comes from the line of Gavin Fairweather of Cormark. Gavin Fairweather: Maybe just to start on the product. I know a big initiative has been to build in agile processes and workflows into the product. Curious if you're starting to see some adoption in your existing customers on those approaches and how you think about that as a driver for 2026 expansions? Edmund Ryan: Yes. We think it's very important going forward. And especially when we're bringing on other technologies, Gavin, around the AI and all of that to have a very robust agile data-centric platform underpinning it all. And that journey continues, and that is something that will take a number of releases. And I would say we're going to see -- the customers are -- early customers are using it and giving feedback on it, and there's iterations on it and -- but it's coming through very strong at the moment, and we're really excited about what it's achieving. Gavin Fairweather: That's helpful. And then maybe just on the G2 report and related to competition. I mean, really nice to see you ranking so well compared to some of your peers. But you did kind of call out increased competition in the MD&A. But so it kind of begs the question. Do you think that your technological edge with all the R&D you're doing is widening? Or do you think that it's stable or shrinking? How would you characterize where your platform sits versus competition? Edmund Ryan: I think we sit in a very good place, Gavin. And I think the plans that we have and what we're bringing through on the platform are also going to be very, very innovative and it's going to put further distance between us and the competition. Notwithstanding that competition have their own journeys and they're working on their things. One of the key things about Kneat is I keep reiterating, Kneat is a platform. On that platform, you can configure multiple workflows, and if you look at all feedback from the marketplace, including the G2, all you're going to see is happy customers, people who love using Kneat, easy to use, easy to set it up, easy to get the business value and everyone actually articulates that business value to us. So it's a huge competitive advantage, the fact that users love using Kneat and that it's really a strong market product fit. So yes, I'd be very upbeat about what we're doing. It's hard to see it in real time, but it takes time for it to materialize. But I believe what we're doing is very positive and very powerful as we go forward, and we'll continue to put -- to reinforce our leadership position. Gavin Fairweather: Appreciate that. And then lastly for me, just on the sales and marketing expense line. It is up a decent amount year-over-year. So can you just discuss where you're investing more in terms of the team and the marketing spend? And how should we think about the time lines to productivity on that increased spend and driving some additional ARR growth? Edmund Ryan: Yes. So on the sales and marketing front, we would be expanding from sales account managers would be responsible for expanding existing customers, sales directors and sales support functions, including internal salespeople. So that's where the investment is going there. And that is continuing to give return, and we've seen more of it going into '26. The other thing to say is R&D. And from that perspective, we would put in strategic hires. And we have a strong journey ongoing around AI and doubling down on that data and agile capabilities of the platform. So there's a lot of work ongoing there, along with addressing ongoing customer requests for features as we go along. So when we talk about these additional things like the data centricity, we've also got to keep the product working very well for other areas of the business. There's multiple products in our platform, as you know. So -- and when I look back at the numbers for sales and marketing and R&D, we're tacking down relative to revenue, and we expect that to continue through '26 as we focus in on profitability and cash flow breakeven later in '26. Gavin Fairweather: Congrats on the results. Operator: Our next question comes from the line of Justin Keywood of Stifel. Justin Keywood: Just on the margins, the adjusted EBITDA was up quite substantially year-over-year. And assuming the growth continues into 2026, that could suggest substantial operating leverage, assuming OpEx moderates. I'm just wondering if we're able to get some bookends on what the margin profile could be going into next year? Dave O'Reilly: I'll give you a high level. Yes, the adjusted EBITDA margin has improved. We expect it to continue to improve. Where we see that going is to a kind of typical SaaS type company profitability, late 20s, early 30s type range. That kind of coincides with our overall view of breakeven from a cash flow perspective on a full year basis. Justin Keywood: Just to clarify, did I hear 20% to 30% adjusted EBITDA margins could be a target for next year? Dave O'Reilly: The next 18 months, I would say overall periods, yes. Justin Keywood: Okay. Still very healthy expansion. That's helpful. And then just on capital allocation. Obviously, the balance sheet remains in very strong shape, net cash position. Are you able to outline the capital allocation priorities, be it M&A, share buybacks or other uses? Edmund Ryan: Yes. Thanks, Justin. So there's no plans to spend any of that balance sheet right now. I mean, as I said, the goal right now is to continue on and target profitability for next year. And as we go into the new year, we will -- we're constantly looking at our options and all of that. But right now, we believe a strong balance sheet is a very positive thing, especially when you're dealing with the large customers and the large partners that we are dealing with. But there's nothing on the short-term horizon, but there's always a discussion around these things. Operator: [Operator Instructions] And I'm showing no further questions at this time. I'll now turn it back to Eddie Ryan, CEO, for closing remarks. Edmund Ryan: Thank you. Kneat was founded with a single mission to help life sciences develop, manufacture and deliver therapies to their patients to the highest safety standard. While we have come a long way since our founding, we are still in the early innings, and our customers remind us of this every day. We are energized by their enthusiasm, and we are grateful for your support as we continue on our journey. Thank you very much. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bragg Gaming Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Stephen Kilmer, Head of Investor Relations for Bragg Gaming Group. Please go ahead. Stephen Kilmer: Thank you. Good morning, everyone, and thank you for joining us for Bragg Gaming Group's Third Quarter 2025 Earnings Call. My name is Stephen Kilmer, and I recently came on board to manage Bragg's IR function. I'm not quite in-house at Bragg, nor would I say that I work for an external agency. I think the best way for me to describe myself, is that I'm a Bragg fractional Head of IR. I've been running that function for technology companies since the mid-'90s. And before that, I worked for one of the top full-tech newswires as well as an investment adviser at what eventually became Merrill Lynch Canada. My contact information is at the bottom of today's press release, and I hope to get to know many of you as well as we move forward. With that said, some housekeeping for this call. If you're connected to our online webcast today, you should see our third quarter earnings presentation on your screen, and you should have control to flip the slides yourself as you listen to this call. If you have joined by telephone, please note that you can find our third quarter earnings presentation as well as financial results press release, financial statements and MD&A on our website at investors.brag.group. Please note that certain statements on this call may constitute forward-looking information or future-oriented financial information. A full explanation of risk factors is available on the second slide in our third quarter 2025 earnings presentation titled Forward-Looking Statements as well as in the recently filed press release and other public filings. Bragg disclaims any obligation, except as required by law, to update or revise any forward-looking statements, whether because of new information, future events or otherwise. And forward-looking statements made on this call speak only as of the date of this call. On this call, Frag Reman Group's CEO, Matevz Mazij; and CFO, Robbie Bressler, will discuss the company's third quarter performance, followed by a question-and-answer session. I'd now like to turn the call over to Matevz. Matevz Mazij: Thank you, Stephen. And good morning, everyone. Thank you for joining us for Bragg Gaming Group's Third Quarter 2025 Earnings Call. We're Bragg, dual listed on the NASDAQ and the Toronto Stock Exchange, and we are a specialist supplier of games and technology to the regulated iGaming market. We create and deliver cutting-edge online casino games, both from our own in-house studios and from top-tier in-demand partner studios. We empower online casino, sports betting and lottery operators to launch, run, scale and optimize their apps and websites. And through everything we do, we enhance the end-user experience by leveraging advanced analytics and AI to drive engagement and smarter, more efficient iGaming operations. During the third quarter, we continued to see high double-digit growth in our focus markets of the U.S.A., where we saw 86% year-over-year revenue growth; and in Brazil, which saw revenue growth of 80% compared to the same period last year. The U.S.A. was a key driver of the 35% year-over-year growth overall that we have seen in proprietary content revenue. And we continue to roll out strong titles from our proprietary game studios, which include Wild Streak Gaming and Atomic Slot Lab. Overall, revenue growth when factoring out the Netherlands, a jurisdiction which I'll discuss further later in this call, was 20% up compared to the third quarter of last year, demonstrating the continued demand for Bragg's products and services in regulated iGaming markets around the world. During the quarter, we continued to showcase our games development expertise with the rollout of 2 new bespoke online casino games developed for our partner, Hard Rock, in the United States, among many other game launches. We secured a Tier 1 credit line with the Bank of Montreal, underscoring Bragg's creditworthiness. We continue to be focused on optimizing our cost structure, which allows us to deliver operational leverage. And as Robbie will now go into in more detail, we are pleased to be reporting revenue, gross profit and adjusted EBITDA in line with our expectations for the third quarter of the year. I'll be back to discuss some of these points in more detail after you have heard from our Chief Financial Officer, Robert Bressler, who will now discuss the third quarter financials. Robbie? Robert Bressler: Thank you, Mat. In the third quarter of 2025, revenue was EUR 26.8 million, up 2% year-over-year. Excluding the Netherlands, revenue grew a strong 20%, underscoring continued execution of our diversification strategy and the strength of our high-growth markets. As expected, the Netherlands remains impacted by regulatory changes with revenue down 22% year-over-year. The region now represents a smaller share of our total revenue as our business outside the Netherlands accelerates. Much of the underlying growth was led by North America and Brazil, which together accounted for 22% of our total revenue for the quarter, up from 12% a year ago. Our other markets, primarily across Europe, delivered 4% growth, supported by steady performance from our content aggregation and turnkey solutions. From a strategic point of view, the quarter reflects clear progress towards our goal of building a higher-margin, more diversified business. We continue to shift our revenue mix towards proprietary content, which grew 35% year-over-year in Q3 and remains our best performing margin contributor. This transition is a key driver of our expanding profitability profile. Our gross margin continues to trend upwards, supported by the growing contribution from proprietary content. In Q3, gross profit increased 5% year-over-year to EUR 14.7 million, with gross margin improving 115 basis points to 54.7%, reflecting sequential improvements versus Q2. Adjusted EBITDA also grew 9% to EUR 4.4 million, with adjusted EBITDA margins rising 100 basis points to 16.6%, benefiting from actions to optimize processes and realize efficiencies, which kicked off in the prior quarter. We expect these operational leverage benefits to continue into Q4. Moving to the balance sheet. We remain focused on maintaining a strong and flexible balance sheet. As Mat noted, during the quarter, we successfully completed our new working capital revolving credit facility with Bank of Montreal. This facility enhances our liquidity position, supports continued investment in high-growth, margin-accretive initiatives and significantly lowers our borrowing costs. Finally, we are seeing the benefits of a more margin-accretive revenue mix, continued discipline in optimizing internal processes and structures and profitable growth from our expanding footprint in North America and Brazil. Our strategy is delivering. We are becoming a more efficient, diversified and higher-margin business, and we remain confident in our ability to deliver sustainable long-term growth and shareholder value. Going into 2026, we are very focused on continuing to optimize our product mix and optimize our internal processes and structures, and we believe that there are significant opportunities to refine and improve our margins and cash flow. With that, I'll pass the line back to Mat. Matevz Mazij: Thank you, Robbie. We've been talking about the growing vertical of proprietary casino content at Bragg and how we have made a strategic focus because it's a high-margin product, which supports growing gross profit and EBITDA margins. Online casino content that we own also delivers compounding recurring and long-term revenues. We talked about our 35% year-over-year increase in proprietary content revenue. What is especially encouraging is that half of our proprietary content revenue in the third quarter of this year came from the United States, making the U.S. our strongest market for our fully owned casino game IP. And the U.S. market continues to grow. According to H2 Gambling Capital, the U.S. online casino market will grow from around USD 10 billion in 2025 to over USD 30 billion in 2030, a compound annual growth rate of 26% over the next 5 years. By the end of the third quarter of 2025, we have launched 35 new proprietary casino games, and that's just so far this year. We have been building our portfolio of games for several years now, and 70% of all proprietary content revenue in the third quarter of 2025 came from games that we released before 2025. So we're demonstrating longevity, our strong player retention in industry terms. And we are delivering long-term recurring revenues from our growing mountain of fully owned IP. As I mentioned earlier, third quarter 2025 revenues in Brazil are up 80% compared to the same period last year, which was pre-regulation, highlighting a successful regulated market entry this year for Bragg. We are on target to see 10% of revenues coming from this important jurisdiction in the full year of 2025. Now I want to touch on why we're talking about our performance in terms of the Netherlands and non-Netherlands revenue. The Netherlands continues to be an important market for Bragg, and we are proud to be a market-leading iGaming supplier in the jurisdiction, with approximately 30% of the entire regulated market gross gaming revenue running through our products and technology. This market share has been stable for us for several years now. However, with increasing and well-documented headwinds facing regulated operators in the Netherlands, including our customers, we're especially interested and proud of the growth we're seeing in regulated markets outside of the Netherlands, such as the United States and Brazil. Our 20% year-over-year growth in other markets, over 80% in some, shows what we can achieve when factoring out the unusual market conditions currently seen in the Netherlands. Our geographic diversification has consistently improved over the past 4 years, with non-Netherlands revenue rising from 51% of all revenues in 2022 to a projected 68% of all revenues in 2025. And as our industry continues to grow and evolve, we expect to continue this trend of diversified growth. Newly regulating jurisdictions such as Finland, which has announced the launch of its regulated iGaming market in January 2027, offer great potential ahead for companies like Bragg. As we have previously communicated, we expect one of our customers in the Netherlands, BetCity, to migrate off the Bragg PAM in H1 of next year. And also as previously communicated, we expect the impact on the bottom line post migration next year to be minimal due to the margin profile of that particular customer. Our PAM and full technology and content portfolio remains in strong demand in the Netherlands as well as in regulated jurisdictions around the world. And we look in particular to those markets outside of the Netherlands to continue to drive our revenue and margin growth in 2026 and beyond. Bragg is well placed to capture significant value in the world's most attractive regulated iGaming markets. We saw a record third quarter revenue in focused growth markets, 86% up year-over-year in the United States and 80% in Brazil. We continue to release more proprietary games, and this fully owned IP continues to deliver recurring higher-margin revenue for us. Proprietary content revenue increased 35% compared to the same period last year and now makes up 16% of all revenue when split by product mix. When factoring out the Netherlands contraction, which I discussed earlier, we are pleased to see 20% revenue growth year-over-year across our other markets. And as we continue to diversify our revenue streams, we're on track to book 68% of all revenue from non-Netherlands markets in 2025. As we keep our focus on improving product mix, processes and margins, delivering operational leverage and having delivered on-target third quarter overall revenue growth of 2% and adjusted EBITDA growth of 9%, I can confirm we are maintaining our full year 2025 guidance. We project full year 2025 revenue of between EUR 106 million and EUR 108.5 million and adjusted EBITDA of between EUR 16.5 million and EUR 18.5 million. Our combination of rapid growth in the United States and Brazil, the increasing contribution of our high-margin proprietary content and the resulting margin expansion positions us strongly for the future. Thank you. Robbie and I are now available to take any questions you may have. Operator: [Operator Instructions] Your first question comes from the line of Jordan Bender of Citizens. Jordan Bender: Nice flow-through in the quarter. Guidance for the fourth quarter also implies nice flow-through margin expansion. I do want to touch on some of the cost buckets here without kind of getting into guidance for next year. It sounds like proprietary content, we can see it here, is trending pretty nicely, growing strongly. How should we think about that progressing and the impact that it has on margins into next year? And then kind of the second cost bucket question here. Your SG&A looks like it has picked up pretty substantially year-to-date. Anything to call out there? Robert Bressler: Thanks for the question, Jordan. I'll start with the second question. In terms of our run rate compared to 2024, as you're seeing, we do think there is opportunity for structure and process optimization. We started that process in Q2, continued it through this quarter, and we're going to continue it into 2024. So we do think there's opportunities to, as Mat mentioned, realize operational leverage next year through optimizations of structures and processes. Second question in terms of proprietary content, we do believe that there is lots of opportunity for growth, especially in the U.S. We -- in terms of cadence of titles that are going out and investment, that should continue through 2026. We will be coming out with more comments on 2026 performance and guidance probably early in the new year. But we do think proprietary content and actually, we're very confident that proprietary content is going to be a key accelerator in driving better margin performance and cash generation. And as a reminder, only 12% of the U.S. population is underregulated iCasino. And also, iCasino is growing substantially in the jurisdictions where it is legalized. And I noted just anecdotally, DraftKings mentioned that they were up 25% on their iCasino performance for Q3. So iCasino in the U.S. is really humming, and we're well positioned to capitalize on that. Jordan Bender: Great. And I do just want to follow up on BetCity here for a second. Is that going to be a complete roll-off all at once? Or is it going to happen over time? And then the earnings impact being minimal, is that a gross impact? Or is that net of any mitigation that you might do throughout the year? Robert Bressler: It definitely would be net of mitigation. Like the opportunity for us to either redeploy resources or optimize resources will be present with a customer like that rolling off. In terms of them actually migrating off, we're still working with [ Entain ] to solidify that plan. And as mentioned, this will be something that most likely will occur in the first half of the year. We're exploring opportunities and ways to make sure that, that process happens extremely smooth and is beneficial for both sides. Operator: Your next question comes from the line of Gianluca Tucci of Haywood Securities. Gianluca Tucci: First question, could you perhaps walk us through a couple of the growth drivers in the U.S. and Brazilian markets? And how are you thinking about these markets as we enter a new year? Robert Bressler: Thanks for the question. So in terms of Brazil, we continually get more and more market share from an aggregation point of view. So we're quite happy with the level of coverage we've been able to achieve in Brazil. Our strategy has always been the aggregation is a lead into pushing our proprietary and exclusive content and benefiting from relationships we have such as the partnership with RapidPlay. So we see our opportunity into the future is to increase our concentration of revenue coming from more margin-accretive products in Brazil. So we're very -- we're quite happy with the growth we've seen, well into the 80% range year-over-year. Our focus will be now getting a better share of that revenue coming from more margin-accretive products. And again, I think we're well placed for that. We have good relationships with operators. We're feeding a good distribution network, and we have a good relationship or partnership with a studio that's based in that region and can deliver titles that should be quite well received into that market. Gianluca Tucci: Okay. And perhaps one final queue from us here. Congrats on the BMO facility and getting that over the finish line. On the balance sheet, are you comfortable how it stands today? And -- or are there more things coming from a balance sheet optimization, I guess, perspective, Robbie? Robert Bressler: Yes. Thank you. And yes, we are happy to have gotten that facility over the line. It provides us with much less lower cost of borrowing and gives us good liquidity for our needs. I do think there's opportunity, as we mentioned, to optimize and become more efficient with our cost structure, which we're actively looking at and believe there's much more to come on that. So in terms of strengthening our liquidity, I think that's going to come from improved margins and better cash flow off of our operations. Operator: Your next question comes from the line of Michael Shelton with [ FRC ]. Michael Shelton: I was wondering if you guys could tell me what's keeping Bragg from earning a regular and consistent operating income. And then secondly, what do you expect the stock price to be in 3 years? And what type of systems and strategies and structures are you going to put in place in order to achieve that number? Robert Bressler: Thanks for the question. I'll start with the operating income portion. I assume you mean from an IFRS perspective, we do have a fairly significant development costs that gets amortized. There also is some purchase price amortization that's occurring from our acquisitions that we've done. Things like brand and other have a bit of a tail. So we do have a lot of amortization and depreciation that puts us in a loss position. I think we're getting better and better. And I think what we look at from our performance and how we gauge our performance is looking at our adjusted EBITDA less our CapEx. And that's very key for us to make sure that we are actually generating cash from our operations. So we're focused on that, and we are positive on that this quarter. We think that ratio can continue to improve. And we think at full efficiency, we could be 30% to 50% in terms of having that cash conversion ratio occur. In terms of future-looking stock price, I can't comment on that. We're focused on operating as strong as we can, providing the best results that we can, optimizing our structure, producing solid cash flow and margin improvements. And we are confident that with the path that we're on, we're going to increase value for shareholders. Operator: There are no further questions at this time. And with that, I will turn the call back over to Robbie Bressler, CFO, for closing remarks. Please go ahead. Robert Bressler: Thank you, and thank you, everyone, for joining the call today. We look forward to updating you on our progress as it continues. Appreciate everyone's support, and have a great day. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning, and welcome to Marpai Third Quarter 2025 Earnings Webcast. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the conference over to Steve Johnson, Chief Financial Officer. Please go ahead. Steve Johnson: Thank you. Good morning, and thank you for joining us for the Marpai Third Quarter 2025 Earnings Release Webcast. With me this morning is Damien Lamendola, Director and CEO of Marpai; and Dallas Scrip, President and Chief Operating Officer of Marpai. Before we begin, I'd like to draw your attention to the forward-looking statements included in this presentation. Damien, the floor is yours. Damien Lamendola: Thank you, Steve. Employers have 2 basic options when considering the health benefits for their employees. Fully funded with a traditional insurance company are self-funded where the employer takes on the funding responsibilities for their health insurance benefits. Given the continued high rate of health care inflation, many more companies are choosing to self-fund their benefit programs and use a third-party administrator. Generally, just by moving to a self-funded plan, it reduces overall cost by 10% or more. As more and more employers are quickly moving over to self-funded plans, the demand for TPA services has been increasing significantly. I'll turn it over to Dallas now, who, as Steve said, is our President and Chief Operating Officer. Dallas Scrip: Thank you, Damien. Marpai has a national footprint, allowing us to serve employers with multistate locations with ease, which many of our regional competitors really struggle to do. Marpai also offers significant cost savings programs and our relaunch of MarpaiRx will be a game changer for us. As a leading independent TPA, we put our clients first with a robust arsenal of services, Marpai assists with benefit plan design and aggressively negotiates on behalf of our clients to help manage their ever-rising costs. The TPA industry has a massive total addressable market of over $150 billion, and it's poised to grow 123% by 2031, according to the recent research published by the Insight Partners. The primary reasons for the growth, rising health care costs, growing employer-sponsored health plans, technology advances and further expansion of TPA offerings. I'll now hand it over to Steve to cover the third quarter results. Steve Johnson: Thank you, Dallas. Net revenues were $4 million for the 3 months ended September 30, 2025, which was $3 million or approximately 42% lower than the third quarter last year. Our operating expenses were $3.9 million or $1.2 million or a 24% improvement over last year third quarter. Operating loss was $3.5 million in the third quarter of 2025, $0.1 million or 2% improvement over the third quarter last year. Our net loss was $3 million for the quarter or $0.1 million, 2% improvement over the third quarter in 2024. And our basic and diluted loss per share was $0.20 for the 3 months ended September 30, 2025, an improvement of $0.10 per share from the third quarter last year. So we continue on our year-over-year progress and one of the things we wanted to highlight was our cash and capital planning. Our disciplined focus on efficiency has allowed us to substantially reduce the company's cash burn, leaving us with $450,000 in unrestricted cash on hand at the end of Q3. As we recently announced, we completed a $3.9 million private investment in public equity or PIPE transaction. This successful capital raise, we believe, delivers the financial strength needed to fully fund the final stages of our high-growth turnaround plan. We strategically partnered with long-term focused family office investors and committed insiders, a clear vote of confidence in Marpai's future potential. Looking ahead, we are driving new efficiencies by consolidating our claims processing into a single cutting-edge operating system. This key infrastructure upgrade is expected to unlock significant additional cost savings in our technology and infrastructure expense, further accelerating our path to profitability and fueling our next phase of growth. I will now hand it over to Dallas to discuss operations and sales developments. Dallas Scrip: Thank you, Steve. First of all, I want to say that I'm very excited to be part of the Marpai team. I joined back at the start of the third quarter, and we continue to make improvements and progress on a daily basis. We've shifted our operational emphasis towards retention and new business with clarity, alignment and focus. It's a client-centric approach that's led by metrics and KPIs. We believe in the continuous improvement mindset, adjusting processes and increasing self-service for 24/7 coverage and speed. As part of this initiative, I am pleased to report that the company will complete its rollout of the Empara client experience tool in Q4. As you may be aware, 80% of new business for health benefit plans follow the calendar year. So we are right in the midst of our busiest 2026 sales cycle. Currently, we have high double-digit new client deals already booked for January 1. This represents a substantial increase in our base business, and we believe there's much more to come before the end of the year. As an aside, the company does not report employee e-lives data for competitive reasons. One key highlight I can share is that our MarpaiRx program has been a differentiating factor in our ability to win new business. And I have previously led 2 other TPAs and MarpaiRx is a game changer for us. Now I'll turn it back over to Damien to share some final thoughts. Damien Lamendola: Thanks, Dallas. As Marpai's CEO, Director and largest shareholder, I continue to invest in Marpai, including $1.7 million in Q3 because I believe strongly in what we're building, smarter health care with better patient outcomes at significantly lower cost and a rapidly scalable platform that's disrupting a $5.5 trillion a year U.S. health care market. My personal commitment, both financial and operational, reflects my deep growing confidence in our experienced leadership team, our rapidly improving technology and our ability to quickly execute on a hypergrowth strategy that leads to an unmatched sustainable profitability. Our mission is not to develop a cheaper health care program. It is to show a more efficient U.S. health care system with healthier patients, allowing us to care for more Americans. Previously, I founded a $1 billion health care business 10 years ago. Marpai has already shown much, much greater significant potential. I am very proud of our team and organization. We've asked a lot from our employees, and they have delivered. We haven't forgotten that our members matter. As Dallas just outlined, through disciplined focus, we have stabilized our operations, fortified our financial foundation and effectively earning us the right to look forward. The entire organization is now aligned and energized having successfully navigated complexity, and we are strategically positioned to pivot from recovery to an aggressive sustainable growth phase. Our focus is squarely on leveraging our renewed efficiencies capture market share and deliver exceptional long-term value. At this time, I'll turn it back to the operator to open the line for questions. Operator: [Operator Instructions] It seems like there are no questions that came through. I will now turn the call over back to Steve Johnson for any closing remarks. Please go ahead, sir. Steve Johnson: Well, thank you. And again, thanks for joining us. For those of you who may have questions that weren't able to get through or on the line, please feel free to reach out to our Investor Relations website or to e-mail me with the contact information is available there for you at steve.johnson@marpaihealth.com. Again, thank you for your support and look forward to the next earnings call after the end of the year. Bye-bye. Operator: Thank you. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to Element Fleet Management's Third quarter 2025 Financial and Operating Results Conference Call. [Operator Instructions] And you are reminded that this call is being recorded. [Operator Instructions] Element wishes to caution listeners that today's information contains forward-looking statements, the assumptions on which they are based and the material risks and uncertainties that could cause them to differ are outlined in the company's year-end and most recent MD&A and annual information form. Although management believes that the expectations expressed in the statements are reasonable, actual results could differ materially. The company also reminds listeners that today's call references certain non-GAAP and supplemental financial measures. Management measures performance on a reported and adjusted basis and considers both to be useful in providing readers with a better understanding of how it assesses results. A reconciliation of these non-GAAP financial measures to IFRS measures can be found at the company's most recent MD&A. I would now like to turn the call over to Laura Dottori-Attanasio, Chief Executive Officer. Please go ahead. Laura Dottori-Attanasio: Good morning, everyone, and thank you for joining us. Q3 was another strong quarter for Element with double-digit net revenue growth year-over-year and record financial performance across key metrics. This outcome underscores the ongoing success of our strategy and the commitment of our team to deliver meaningful outcomes for our clients and shareholders. We deepened relationships with existing clients and won new mandates across all regions, adding 38 new clients in the third quarter and expanding share of wallet with 278 new service enrollments. As more clients turn to Element to unlock efficiencies, our strategic advisory services team delivered by identifying $349 million in fleet cost savings opportunities this quarter, 46% of which were actioned demonstrating the tangible value that strengthens client loyalty. We continue to accelerate our digital transformation and deliver a more connected client experience. Earlier this year, we launched a new Element mobile app, simplifying fleet operations and enhancing the driver experience. Pilot feedback has been extremely positive, and we're preparing for a broader rollout in the coming months. Our new digital ordering platform is also progressing well marking an important step in automating key client processes. Since establishing Element Mobility, our division focused on next-gen fleet solutions, we've advanced partnerships that showcase our technology leadership. For example, we announced a new partnership with InDrive, one of the world's fastest-growing ride-hailing companies to help optimize their fleet operations globally. This collaboration demonstrates how Element's digital capabilities and partnerships are shaping the future of intelligent mobility. Additionally, our technology platform, Autofleet earned industry recognition as Fleet Management Solution of the Year in the 2025 AutoTech Breakthrough Awards, a well-deserved honor highlighting our team's innovation and impact. We passed the 1-year milestone of our Dublin leasing center that was launched in August of 2024, and the results have been strong. By streamlining processes and automation, we've achieved greater efficiency and scalability in our leasing operations, enhancing the client experience and contributing to strong net financing revenue in recent quarters. This is a clear example of how our strategic initiatives like Dublin and Autofleet are driving financial benefits and service improvements. In summary, we made exciting progress on the digital front, improving client experience and financial performance, all thanks to the dedication and collective effort of our global Element team. Our third quarter achievements put us on solid footing to close out 2025 with continued strength. And with that, I'll now turn the call over to Heath to cover our financial results. Heath Valkenburg: Thank you, Laura, and good morning, everyone. Q3 marked another quarter of strong performance for Element and highlights the solid progress we've made on our strategic priorities in 2025. Notably, in the quarter, we delivered double-digit growth in net revenue, adjusted operating income, earnings per share and free cash flow per share and once again produced record results in each of these important metrics. With that, let's turn to our Q3 financials, which I'll speak to on an adjusted basis. Net revenue reached $306 million, up 10% from last year, supported by strong contributions across all revenue categories. Services revenue was up 6% year-over-year, reaching $156 million. This growth is attributable to higher utilization from new and existing clients and solid growth in all of our geographies. Net financing revenue grew 12% year-over-year to $130 million due to the combination of higher net earning assets in the U.S. and Mexico and the solid performance of our leasing portfolio. Results were further bolstered by funding efficiencies in the quarter, which absorbed a higher cost associated with our preferred share redemptions and Autofleet acquisition. Continuing the momentum that has been demonstrated in 2025, our core NFR yield, which excludes gain on sale, expanded to 4.85% in Q3, up a further 8 basis points quarter-over-quarter and 41 basis points year-over-year, highlighting the strong execution of our leasing business and funding initiatives. We syndicated $632 million of assets this quarter, down 37% from last year. Despite the reduction in volume, syndication revenue totaled $20 million, an increase of 20% year-over-year. Our syndication yield of 3.2%, expanded more than 150 basis points versus last year, a reflection of the demand for our syndication products, favorable mix and the benefits from the reinstatement of 100% bonus depreciation in July. We originated $1.7 billion of assets in the quarter, in line with the results from Q3 2024. The sequential dip in originations reflects normal seasonality tied to OEM retooling ahead of a new model year production in the U.S. and Canada. Importantly, originations in Mexico were at a record level of $342 million in the quarter, a clear reflection of the strength of our franchise in the country. Our momentum in vehicles under management resumed in Q3 with VUM increasing 1% quarter-over-quarter and 2% year-over-year, led by growth in service-only category. This increase is expected to further support services revenue in the coming quarters. As Laura mentioned, new client acquisitions in the quarter were steady to last year, reflecting stable underlying demand that we expect will translate into higher order volumes ahead. Adjusted operating expenses remained well contained at $129 million, flat quarter-over-quarter and up 9% year-over-year or 6% excluding Autofleet. The year-over-year increase reflects continued investment into our business to advance our intelligent mobility ecosystem, enhance digital capabilities and maintain our leadership position in the industry. This resulted in an adjusted operating margin of 58% and earnings per share of $0.33, with these key metrics expanding by 30 basis points and 14% year-over-year, respectively. We remain focused on driving internal efficiencies and sustaining positive operating leverage as our business continues to scale. In Q3, we generated an adjusted return on equity of 18.8%, up from 16.9% in 2024, demonstrating the continued progress of our capital-light strategy. With respect to capital management, we returned $61 million to shareholders through dividends and share repurchases during Q3. Year-to-date, we have repurchased 4.1 million common shares, representing $87 million of capital deployed. Looking ahead, we intend to renew our normal course issuer bid in 2026 reaffirming our commitment to returning capital to shareholders. These actions were underpinned by continued strong free cash flow generation with adjusted free cash flow per share of $0.42, up a robust 17% year-over-year. Our ability to consistently generate growing free cash flow continues to support our reinvestment into the business and the ability to deliver meaningful return of capital to shareholders. As of September 30, our debt-to-capital ratio stood at 75.7%, well within our target range of 73% to 77%. In summary, we delivered strong financial results this quarter, consisting of robust revenue growth, positive operating leverage and record profitability. We are entering Q4 with positive momentum and a clear line of sight to finish 2025 at or above the high end of our guidance ranges in all metrics with the exception of originations as was communicated last quarter. We look forward to providing our 2026 financial guidance and dividend outlook alongside our Q4 results release in February. Thank you. Operator, we are now ready to take questions. Operator: [Operator Instructions] And your first question comes from Stephen Boland with Raymond James. Stephen Boland: I've said this a couple of times. I guess to know Jeff Kwan, people move up the list here a little bit. So just the first question is, Laura, you usually pretty good about giving new client wins. You mentioned in the -- I think you said in the deck, the conversions of self-administered fleets. I'm just wondering if you can give a little more detail. Laura Dottori-Attanasio: Yes, absolutely, Steve. Thanks. As I mentioned, this quarter, we did see some great commercial traction once again with 38 new clients and share of wallet, we had 270 new enrollments. We continue to go after the various segments that are in the self-managed space and winning market share. And I'd say, once again, this quarter, it's pretty evenly mixed where we're winning market share. So it's about 50-50 again this quarter from winning market share and self-managed fleet. So we're feeling good about not just what we've won, but the opportunities that are before us as well. Stephen Boland: Okay. Great. And the second question is really on syndications. A great return on the yield. I'm just curious about how you managed the syndication volumes this quarter. I mean in the first half, you talked about deferring for the bonus depreciation to kick in. So could more have been done this quarter? I mean are you managing the amount that you're doing right now? And should we expect a similar yield in Q4 and maybe volumes? Heath Valkenburg: Yes. Steve. So we -- our approach to syndication remains unchanged. Primarily, we use syndication as a tool to manage our balance sheet. And with our debt-to-capital metric coming in at 75.7%, which is well right in the middle of our targeted range, we've syndicated enough to manage our balance sheet. And then what we do is we look to focus on optimizing economic value. And you can see that with an increase in the yields in the assets that we hold on book with the core yield being up 8% this quarter. And then also, as you said, really strong syndication yields on the assets that we have syndicated. In terms of what's driven this -- the higher yield, the demand for our product is still very, very strong and the return of the bonus depreciation coming in clearly gave us an uptick on the yield, which we expect will continue on. And then there was also some product mix benefit that we had in the quarter. Operator: And your next question comes from Jaeme Gloyn with National Bank Financial. Jaeme Gloyn: Yes. Good results on the net financing revenue yield. Just wanted to get maybe some of your perspectives on the sustainability. Can it continue to tick higher from here? Or this is, I think, almost, if not the all-time high for this net interest margin effectively. Just trying to get a sense as to where that could potentially go with some of the moving parts. Heath Valkenburg: Jaeme. So you're correct in that the net financing revenue we delivered for the quarter was a record and the yield is -- or on the core yield is a record. Excluding the impact of any gain on sale, we do see that there is further increase that we can drive through that number. The leasing business that we set up to maximize our returns continue to perform well. And then on the financing side of things, we continue to see opportunity for us to decrease our cost of funding as we continue to mature our platform. And then the Mexico business that grew strongly in the quarter had some strong yield as well, which drove that up. So really pleased with the result. And we expect that there is more to do on that line. Jaeme Gloyn: Okay. Great. And then in terms of the order backlog shrinking this quarter, your commentary in the press release suggesting that you have pretty high confidence and client momentum coming back. What are some of the underlying, I don't know, metrics or drivers or conversations you're having that gives you that confidence that we'll see order volumes pick up in the upcoming quarters? And is it -- is that sort of timing like a 2026 event? Or are you already seeing that flowing through today? Heath Valkenburg: Yes. So in terms of the client order backlog, the reduction in Q3 is cyclical. So we always see a reduction in Q3 with strong originations higher than orders. And that's with the OEM model changeover. So we always see a drop in the auto volume during that period in Q3, and then it does pick up in Q4. In terms of why we're confident of that to continue to expand, it's the comments from Laura at the top in terms of the new client wins. We saw VUM return to growth this quarter with a 1% increase in the quarter, 2% increase year-over-year. And the -- those things will combine to drive higher orders or set that are to pick up in Q4. Operator: [Operator Instructions] Your next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe I could start with just Autofleet. Anything you can quantify around the potential impact here of that InDrive win, either revenue or just would you expect this to build over time? And then maybe just commentary Autofleet broadly, are there some tangible sort of revenue contributions coming in from that acquisition now that you're -- you have that in the business more than 1 year? Laura Dottori-Attanasio: Sure, Graham. Happy to take that one. So I won't comment specifically on revenue per client, which we wouldn't normally do that. But it is, I'd say, a great sign for us. I mean, from where I said, it's like a proof point of how Element Mobility that we talked about last quarter is really going to allow us to, I'm going to say, broaden our scope beyond traditional fleet management. And so this will help strengthen us as a global leader in intelligent fleet management. So from where I said it's going to help amplify, I'm going to say, our digital moat. So that is good with InDrive, we expect to see more of these types of things with Element Mobility or Autofleet. And for Autofleet, it's been just a little over a year now that we acquired the team. It really has been a home run for us. Not only did we pick up, honestly, phenomenal team and a great tech platform. We are going to be able to drive things, and we've seen it. So for Element, we have been able to really move forward with more speed, more cost efficiency. So it's been great as it relates to decreasing our cost of technological digitization, automation advancement. So that's a positive. And then for Autofleet on its own. It's doing really well, not only with win like InDrive but others that it is profitable on its own. And so we are very happy with where we're at and feeling very confident about where we can go together. Graham Ryding: Okay. Great. And then maybe I could pivot to just the Services revenue growth. You flagged that higher utilization in the quarter was driving some growth, but it seemed like growth from sort of VUM and penetration on the services side is not there right now. So maybe what do you see the business needs to do to sort of get that back to double digits like you were previously? Heath Valkenburg: Yes, Graham. So the first thing I'd say is on a year-to-date basis, excluding FX and one-off items, revenue is up 10%. So we are still driving double-digit growth. Specifically for Q3, while we saw an uptick in the VUM, a lot of those vehicles are actually onboarded in September. So the revenue they contribute for Q3 was relatively modest. And we expect that those vehicles that we onboarded will see an uptick in Q4 as long as -- as well as rather additional VUM we expect to bring in Q4. So last quarter, I raised 1 large client win that we had that represents approximately 1% of VUM growth. That's actually not in our Q3 numbers. So we'll likely see that come into Q4. So 1% VUM growth in Q3, minimal impact to service revenue, but we'll see that come through in Q4, plus additional clients that we're onboarding in Q4 will set ourselves up to continue to grow our service revenue. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Laura Dottori-Attanasio for closing remarks. Laura Dottori-Attanasio: Thank you, operator, and thanks, everyone, for joining us today. Looking ahead, our strategic priorities remain clear. So that's to provide exceptional value to our clients, advance our digital leadership and deliver sustainable growth for our shareholders, all while we stay true to our purpose and to our values. And so I really want to take this time to thank our global team members for their commitment and to thank our shareholders, our analysts and our stakeholders for your continued support. We look forward to speaking with you again on our next quarterly call in February. Operator: This brings today's conference call to a close. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Welcome to Surgical Science Q3 Report 2025 Presentation. [Operator Instructions] Now I will hand over to the speakers, CEO, Tom Englund; and CFO, Anna Ahlberg. Please go ahead. Tom Englund: Welcome to this earnings call for Surgical Science for Q3 2025. My name is Tom Englund, CEO. And with me today, I have our CFO, Anna Ahlberg. Quarter 3 was a clear step in the right direction for Surgical Science. Total sales of SEK 264 million was an all-time high for the company, and this result was despite the negative impact on sales from currencies of 5 percentage points. The group grew by 14% compared to the same quarter last year and by 19% adjusted for currency effects. Adjusted EBIT amounted to SEK 33 million and was negatively impacted by restructuring costs of SEK 2 million. Adjusted for these costs, profitability was 13%. Since around 6 months back, we have initiated a set of activities to improve our profitability, primarily focused on our hardware and software simulator business, that is not the robotics or development business. And we're now happy to see that these activities are beginning to have an effect, and we expect further improvements in the quarters to come. Speaking about educational products, this business unit stabilized during the quarter from the weak revenue of the previous quarter. We saw a growth of 8% compared to the same quarter in 2024 and 26% compared to the previous quarter. We saw good demand and customer activity in several regions during the quarter, with Europe showing the strongest growth at 46%. The entire ultrasound simulation segment, which became a strategic focus area in connection with the acquisition of Intelligent Ultrasound, also developed positively with high customer demand in all markets except for the U.K. In the U.K., we continue to see problems and sluggishness in the allocation of funds from the National Health Service, NHS, which is a key source of funding for our products, and this had a strong negative impact on sales in this market. The Americas grew by 9%, which was lower than our expectations and as in previous quarters, due to extended sales cycles in a tougher budgetary climate for hospitals. Sales in the U.S. for comparable units, that is when we exclude Intelligent ultrasound, decreased. Our sales team in the U.S. report signs that the market is becoming more active, and this is also visible in the number of quotes we send out and how much leads we generate inbound and external events. Still, for quarter 3, sales in the U.S. was a disappointment. During the quarter, we saw 2 prominent associations launch training programs that include certification based on simulators from surgical science. Together with the American Society for Gastrointestinal Endoscopy, ASGE, we launched a plan for training and certification in diagnostic Endoscopy or so-called EUS curriculum, which is based on our GI Mentor simulator. For the first time ever, trainees can earn an ASGE certificate of completion directly through the simulator, marking a major step towards standardization of certification. And this is important since it elevates simulation from a training tool to a recognized certification platform. In addition, our robotics Mentor robotic surgery simulator now includes the GSA curriculum from the European Academy of Gynecology Surgery's recognized framework for training in robotic surgery. AGS and Surgical Science have together developed a robotic psychomotor skills curriculum and test where all exercises have been validated and benchmarked scientifically. These 2 collaborations are important steps in our work to make simulation a widely used and recognized tool in both the training, but also the certification of physicians and health care personnel. The result for Surgical Science will be an increased overall demand for our products required for certification and also that our customers will find it easier to obtain budgetary approval for these products. Very exciting developments. Switching over to industry OEM. Industry OEM performed well during the quarter with sales increasing by 20%. Development revenue increased by 131% compared with the same quarter in 2024. And the business area saw a strong inflow of new development projects, both in medical device simulation and robotics. In the medical device simulation area, we secured what is potentially the largest single deal in the company's history in this segment during the quarter for one of the world's largest medical device companies. The contract spans over 4 years. The first phase will be a development project, including sales of a first batch of simulators for the customers' training and sales activities. And then further simulators will be ordered in the coming years. We initiated the project as well as recognized development revenue from the project during the quarter. Simulation is rapidly becoming a critical tool for these customers in their sales, marketing and customer trading activities. In addition to this, we signed another large order with the same customer during the quarter, which proves our ability to sell multiple broad projects to the same customer and cements our preferred supplier status with the customer. In the robotics product area, our RobotiX Express has been very well received in the market. RobotiX Express is a simulator for surgeons to become proficient in the robotic surgery. The demand for training robotic surgery is very, very strong and is expected to increase further in the coming years as hospitals increasingly switch to this type of minimally invasive surgery. Our ability to offer a solution to this training challenge faced both by hospitals as well as by the robotics companies will enable more surgeons to be trained more effectively in this field. Due to the length of the sales cycles, we expect significant revenue impact from RobotiX Express to start during quarter 1 of 2026. License revenue for the third quarter amounted to SEK 66 million, which is a slight increase compared with the same period in the preceding year despite the stronger Swedish krona. Intuitive, Surgical Science's biggest customer reported 19% procedure growth for the da Vinci system in the third quarter and the installed base grew by 13%, primarily driven by the new da Vinci 5 platform. In the U.S., we continue to see a decline in simulation subscribers on older generation da Vinci systems due to them being replaced with a new platform. For the second quarter in a row, our revenue from new robotic manufacturers remained at a low level. However, at the beginning of the fourth quarter of 2025, we are once again seeing stronger sales to these other robotic manufacturers. Overall, we note that several of our customers in robotic surgery are approaching commercial launches, which is expected to lead to an increase in license revenue in the coming quarters and years. Now regarding profitability. Our gross margin amounted to 65%, which is down from the 69% last year. One of the reasons for the decline is the very strong simulator sales in relation to license revenue, which thus accounted for a lower share of total sales than in the corresponding period last year. Other reasons are currency effects and also the inclusion of Intelligent ultrasound into the financial with a different margin and loss-making at the time of acquisition and Surgical Science. As I stated in the beginning, for several quarters now, we have been pursuing a number of initiatives to improve profitability within educational products. Our goal is to significantly improve profitability in this area, which will in turn impact group profitability very positively. We saw during the quarter that these initiatives started to have an effect despite the headwinds that we see from currency effects. And over the coming quarters and in 2026, I expect continued positive results, thanks to this plan. Anna Ahlberg: So continuing to look at the numbers a bit more in detail for the quarter then we had sales of SEK 264 million. That was up 14% and SEK 19 million then came from Intelligent Ultrasound or IU. And all IU sales are attributable to the educational products business area. And when we look at product groups, it's within the ultrasound product group. In local currencies, as Tom mentioned, sales was up 19%. And starting from last quarter, we now see a negative effect from currencies on our overall sales with our approximately 80% of revenues in U.S. dollars. We are doing some things to try and mitigate this, except from raising prices. We also now quote more countries in euros instead of in U.S. dollars, for example. Going out of Q2, we had an unusually high backlog or order stock for simulators, where the difference between ingoing and outgoing order stock was approximately SEK 30 million, and this was relatively evenly distributed between the 2 business areas. Most of these orders were shipped during the third quarter, and there is no significant difference between the opening and closing order book, excluding this item then after the third quarter. Looking at the business areas, the split in revenues was 53% for educational products and 47% for industry OEM, where educational products was up 8%, however, down 6% if we exclude IU revenues. And as Tom said, U.K. sales here are weak and well below expectations. The Asia region declined by 5% compared with the same quarter last year. Sales in China, they were stronger than in both the first and second quarters, but in line with the comparison period, while sales declined in India, if we look at the comparison period. Sales in Europe then remained strong despite weak sales in the U.K. and increased by 46%, where we saw for the quarter, strong sales in countries such as the Czech Republic, Poland and Portugal. And then the North and South America region increased by 9% compared with the corresponding quarter last year. However, then sales decreased for comparable units, and this is mainly attributable to the U.S. In the quarter, Brazil was a country that delivered strong sales. And yes, as we've said all through the year, then the U.S. market has been tough, a lot of leads and discussions, but the deals have taken longer to close. And for the quarter, we had costs for tariffs and customs duties, approximately SEK 2 million. These we have for this quarter been able to pass on to the customers. Industry OEM then up 20%. We saw all revenue streams increasing, and we also saw very high activity level. And as Tom mentioned, several good deals that potentially can be very large for us. For the first 9 months of the year then, this means that sales were SEK 724 million, an increase of 14% or 20% in local currencies. And IU is included with SEK 59 million, and that means that sales increased by 5% for comparable units. Educational Products up 17% or down 1% if we exclude IU. And again, Europe is the region that continues to show the strongest development and has done so throughout the year. Industry OEM, up 12% for the year-to-date, where license revenues are up 7%. And if we then move on to our revenue streams and continue with license revenues. They were then 25% of total revenues for the quarter compared to 28% last year. As mentioned, many times before, and as Tom talked about, this is lumpy for new entrants. Many of our customers are still in early phase and they purchase their licenses in batches and then that can then cause a timing effect between when the license is purchased and when it's used. So, for the quarter, as also in Q2, this part of the license sales was unusually low. However, at the start of Q4, we have seen better sales to these players. And then when it comes to Intuitive, we had the same effect as in Q2 that we saw a decline when it comes to renewals of subscriptions facing low with the older generations. However, for this quarter, this was offset by higher revenues from DV5 if we compare to Q2. Simulator sales as a whole was up 14% compared to Q3 2024, and this was the second strongest quarter ever for this revenue stream. Both areas increased, however, as we saw not if we exclude IU sales, but Indu was really strong. And also here, we've said before that this is more lumpy than for sales within Indu since it's usually tied to larger projects where development is also involved. And development revenues were up a lot also for this quarter, partly due to the project we have for a Ministry of Defense in the Southeast Asian country, but not at all entirely. Development revenues were good also for other customers. The Southeast Asian project then it's for 18 months and SEK 52 million, USD 0.9 million was recognized in Q3, and we estimate approximately the same amount for Q4 on this order. And we continue to see stable service revenues. Moving on to costs and the EBIT margin for this quarter. As Tom mentioned, our gross margin was 65% versus 69% in Q3 last year. And we had several factors influencing the fact that the margin was lower. License revenues then being a lower share of total sales and also currency effects. They had a negative impact of approximately 1.5 percentage points where the lower U.S. dollar exchange rate has not had an impact on costs yet. Part of our COGS is, of course, also in U.S. dollars, but these inputs were purchased previously and then at a higher exchange rate. The proportion of direct sales also impacts the gross margin, and it was lower within educational products and then mainly -- that is mainly then the U.S. And we talked about Intelligent Ultrasound and that they have a lower gross margin on those products. On the positive side, we see that our price increases that we've done are starting to show effect. Regarding OpEx, sales costs were 21% of sales. And for the quarter, that includes some restructuring costs, approximately SEK 1.5 million. That is then attributable to further reductions in the sales force in the U.S. as a consequence of the acquisition of IU. Admin costs were 8% of sales. And during the quarter, we completed the merge of former IU's U.S. subsidiary with one of Surgical Sciences U.S. subsidiaries, and that resulted in some slightly higher legal costs and tax consultancy fees. R&D costs, 21% of sales, where we activated SEK 7 million, a bit lower than the same period last year. And as you know, the costs on this line vary depending on how much development revenue there is for the quarter as salaries for the portion of development department staff who have worked on these projects that generate development revenue, they are transferred to cost of goods sold. And that means that more was transferred also in this quarter since development revenues were high. Going back to IU. When we acquired IU, we said that we estimated rationalizations and cost savings to between GBP 1.5 million and GBP 2 million on an annual basis. And as of Q3 and on an annual basis, we have made cost savings of approximately GBP 2.5 million in relation to the cost structure that existed in the company at the time of the takeover. And that is then mainly in the form of reduced costs related to the company's previous stock market listing and staff reductions, mainly in respect of sales personnel. For the quarter, cost savings of approximately SEK 6 million are included. And as mentioned before, then restructuring costs of SEK 1.5 million related to further personnel reductions are also included. Still, because of lower sales than expected, primarily in the U.S. -- in the U.K., as discussed before for IU, the operating result for IU was a loss of SEK 11 million. So of course, when we look at the comparison numbers after that, we have made an acquisition in February of this year of IU within the ultrasound sector. That was a loss-making company, and we have made -- taken several measures then as discussed on the cost side, still making loss, but we believe a lot in the ultrasound sector, and we see a lot of positive signs from this sector. It was also an acquisition that we were able to make at 0.5x sales. Other operating income and costs that mainly consists of costs for the company's option programs as well as the revaluation of operating assets and liabilities in foreign currencies. And for the quarter, we had a negative impact on results of SEK 7.2 million attributable to this revaluation. It was slightly negative also in the corresponding period in 2024. But as you might remember, it was -- there was a large negative due to this in Q2. So, following this, our operating profit for the third quarter, excluding the restructuring costs, was SEK 27 million or an operating margin of 11%. Organization-wise, we were 328 people going out of the quarter, 1% more than going out of Q2. With the IU acquisition, we added 48 people, and then we had a number of redundancies. We continue to employ above all software developers. However, we are also working intensely with efficiency improving projects and employ with caution and cost consciousness. And you can see the split between our sites down to the right. Adjusted EBIT, EBIT exclusive of amortization and surplus values related to acquisitions. That was for the quarter 13% compared to 22% last year. And for the first 9 months, it was 10% compared to 20% last year. Finance net, as most of you know, we have no loan financing. So net financial items for the quarter was primarily interest income on bank deposits. It was also revaluation of internal loan liabilities to subsidiaries and impacted by IFRS 16. Then our tax expense for the quarter was SEK 10 million and net profit was SEK 20 million. That means that the effective tax rate was high. The largest reason for this is that there's a larger portion of loss-making entities within the group, including Intelligent Ultrasound this year, and that then increases the relative effect of tax costs. In addition to that, we had some items that were in relation to 2024 fiscal year in the U.S. and some minimum taxes that were also paid. And as mentioned then, net result for the quarter was SEK 20 million. Looking at the cash flow, negative SEK 4 million from operating activities and from working capital negative of SEK 45 million. That is primarily because of higher accounts receivables, and that is primarily -- that is due to higher sales. We do not see any increased risk in our accounts receivable stock. Inventories decreased slightly. Cash flow from investing activities and financing activities is nothing to mention here for the quarter. And that meant that cash for the end of period September 30 ended at SEK 597 million. Tom Englund: Thank you, Anna. So, to summarize, we see continued rapid development of our company in a dynamic market where we can see positive signals, both in our external work with our customers and in our internal efforts to create a stronger, more efficient and profitable company. The strategic review that began before the summer is in its final stages. The strategy, which will lay the foundation for Surgical Sciences continued growth journey will be presented during our Capital Markets Day on December 8. If you're interested in attending in person or digitally, please sign up. Information on how you can do this can be found on our website in the Investors section. Our new strategy seeks to continue growing the company, both in segments where Surgical Science has traditionally been strong, but also in new adjacent segments with low penetration of simulation. In these areas, we have identified that our technology and expertise can create significant customer value. And the results from these efforts will be a company with several more revenue streams and a company which addresses a significantly larger market than today. And we're looking forward to presenting our strategy in more detail within short. And with that, I would like to open the floor for questions. Operator: [Operator Instructions] The next question comes from Simon Larsson from Danske Bank. Simon Larsson: Filling in for Victor today. So, Tom, you mentioned several regulatory announcements were made during Q3 in the robotics space. Should we expect any impact from these approvals already here in Q4, thinking license sales specifically? I know you stated that sort of it will impact in the coming quarters and years, but specifically Q4? Or what's the timeline here? Tom Englund: Yes, we will see an impact from these other robotics customers also already in quarter 4 of this year, yes. This is also what we stated in the CEO letter in the quarterly report. Simon Larsson: My second question then relates to cost. Given that you're tracking quite a bit below your adjusted EBIT margin target for next year and cost, of course, increased quite a bit also here in Q3. If you could give any more color on how you expect to sort of develop cost here from this point also in the context of you saying that you're implementing cost reduction initiatives. Should we expect cost maybe even to decline sequentially from this point? Or yes, how should we think about modeling cost ahead? Tom Englund: I mean, first of all, profitability is one of the key focus areas for us as a company right now. And we are -- as you said and as I said as well earlier, we are doing a lot of different activities to improve both the gross margin and ensure that we grow costs cautiously and look for efficiencies in our cost base. So, there is a lot of activities such as price increases that Anna mentioned, different types of policies in place to ensure that we can have as high revenue as possible in our educational products business unit as well as different COGS reduction activities that we're doing that will drive an improved gross margin on educational products. And then when it comes to the acquisition that we did with Intelligent Ultrasound, as Anna mentioned, that has had a significant impact on the profitability. But as Anna also said, we believe a lot in the ultrasound simulation space, and we are a much, much stronger company now with an added product portfolio and added competence from Intelligent Ultrasound than we were before the acquisition. And we have added a loss-making company to the financials. So, of Surgical Science. And then we have taken out approximately GBP 2.5 million on an annualized basis. The idea is then to continue to grow the ultrasound business up with good gross margins and then that this will then generate profitability also both as a stand-alone and together with Surgical Science then, of course. So, it's a strong focus for us is the conclusion. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: You provided some granularity on Intuitive sales in Q2 and its contribution for the quarter. And I was wondering if you could provide some more color on this in Q3 as well as we have seen that the DV5 is increasingly its portion of the instruments sold for Intuitive as well as higher replacement sales as they report it. So just trying to also get some type of sense on when the replacement is starting to become a positive rather than a hampering factor short-term. Tom Englund: First of all, I think that it's important when you look at the robotics market to have this long-term perspective. And to just first, I want to emphasize how inherently attractive this market is because we see such a strong uptake, generally speaking, for robotic surgery. And you can see it in the numbers on procedural growth, for example, communicated by Intuitive. And you can also see it in the strong news from other players that are launching or are planning to launch new robotic systems in the market. So, I think it's an inherently attractive market segment to be in. Having said so, it will take some time until you see kind of the full potential in this market as many of the new entrants have been delayed in their efforts to come out with products in the market, but it's coming slowly. And then to your question about Intuitive and the DV5, it's great to see, first of all, that DV5 seems to be such a resounding success for Intuitive, right? And now also they have managed to get to a production level where they don't have -- where they can produce a lot of systems, which means that their volumes are ramping up, as you could see in the quarter 3 report of Intuitive. And that, of course, will drive the demand for training on these devices. And then as you rightly said, Ulrik, and what we also pointed out in the quarter 2 report, there is this kind of churn effect that we see now in the migration between old devices, DV4 or da Vinci X and Xi and the new da Vinci 5 platforms as some of the customers actually replace the systems when they are buying a new DV5. But it's not all customers who are replacing or trading in the systems. Some customers are also adding the DV5 to their fleet of robots and the DV4 will still stay. And of those customers, some of them will continue to use simulation on the old system and some will terminate it because they feel that the old system can be used clinically instead for as a training tool. So, you have many different kind of scenarios. And then to your question, sorry for the lengthy background, to your question, how will this all play out in kind of the switch in the growth between DV5 and DV4 it's very difficult for us to actually judge that because of these different scenarios or different ways that this can play out. But we feel happy about the fact that DV5 is successful in the market, and we see this kind of strong growth in installed base in general. And you also might remember that DV4, the older generation systems will still also be sold in some markets alongside the DV5. So, there could also be a simulation subscription sales towards all those new units that are going in. So that's the dynamics that we have to deal with and that affect kind of the simulation sales and the subscription renewals as well for Surgical Science. Ulrik Trattner: And just a follow-up on that with Medtronic now really sort of close on approaching FDA approval for urology indication and hernia indication as well as clinical progress on the gynecology indications. So, they look to have products on the market in the U.S. by early '26. Do you believe the lumpiness in your dynamic of reporting sales for licenses will gradually come down? Or will that increase? How should we view that? Tom Englund: Yes. I think it's a good question. And over time, it will gradually come down the lumpiness, of course, since more players are coming out with robots and those players are customers of ours buying licenses from ours. So yes. But I mean, you can't sort of look at that, I think, from within the next 1 or 2 quarters, but rather long-term, that's like within the next 1 to 2 years. So yes, then the lumpiness will come down. Ulrik Trattner: And my second question would relate to Intelligent Ultrasound. And obviously, sort of sales has been below your expectation and thus sort of EBIT contribution has been well below. And like looking at Q3, I guess you didn't expect it to start the year to have a contribution of above sort of around SEK 11 million in the quarter. So just how should we look at this short-term, given the disruption in NHS, the disruption in the U.S. Is it going to be loss-making for the foreseeable future? And will you be able to meet your financial guidance low end on the margins if Intelligent Ultrasound continues to be loss-making? Tom Englund: Yes. As I said earlier, we believe a lot in Intelligent Ultrasound, and we believe a lot in the ultrasound simulation market. And we feel super happy about the contribution of Intelligent Ultrasound's product portfolio into the product portfolio of Surgical Science. And we can already now see in the number of quotes and the sales in many regions of the world that it's going in the right direction. Then NHS is a problem for our sales in the U.K., both for Intelligent Ultrasound, but also generally for Surgical Science. And the budgetary problems that we have in the U.K. have led to dismal sales for both Surgical Science and Intelligent Ultrasound. So that's kind of one of the most important contributing factors to why sales is low. We actually see quite decent uptick in sales in other parts of the world of the ultrasound portfolio. So, we have a good product portfolio, and it will become even better going forward, which means that we can work towards becoming the world leader in ultrasound simulation. Then what we have done is, as I mentioned, we have taken out costs to make sure that we can minimize the losses as much as possible. But we definitely want to sell ourselves out of this situation. We think that we have a lot of assets, both in the team in Intelligent Ultrasound as well as in the products. So that's the plan. It's going slower, primarily driven by NHS, but we feel that we are acting as swiftly and as forcefully as we can with both costs and revenue. Do you want to add anything, Anna? Anna Ahlberg: No. Tom Englund: I hope that answers your question. Ulrik Trattner: Yes, just a clarification. Would you still be able to expect to reach your lower end margin guidance for '26 if Intelligent Ultrasound remains loss-making? Tom Englund: I don't want to comment on that right now. Sorry. Anna, do you want to. Anna Ahlberg: No. I mean, as you said, Tom, we are working and we are also -- remember, when we do our acquisitions, we do full integration. So pretty quickly, it becomes sort of -- it's an overall question and of course, increasing sales, as you said, Tom, both for Intelligent Ultrasound products and also for the rest of the product line. And then we are taking many different measures to improve profitability. This is one of them, definitely, but there are others as well. Tom Englund: I think that you can think about it that we are creating a much stronger company through the acquisition of Intelligent Ultrasound. And long-term, this will be a very, very good addition to the Surgical Science family. And despite the disappointing short-term sales results, we have not changed our positive view on the long-term attractiveness of the ultrasound simulation market and the positive contribution of Intelligent Ultrasound into Surgical Science. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: I have 2 questions, please. I'm curious about what you describe as potentially the largest single deal in the company's history within medical device simulation. Could you please elaborate on the potential deal size here? Tom Englund: No, we can't unfortunately. Hi, Christian. No, unfortunately, we can't elaborate due to commitments towards the customer, we can't elaborate on the deal size here. We have to let it be at potentially the largest deal. But what I can say, which is similar to what I've said previous quarters is that within the industry and within the medical device companies now, we see simulation rapidly becoming a critical tool for med device companies to present and showcase their products towards prospective customers as well as existing customers and users because it allows them to do these presentations or trainings in a safe and very efficient manner. And that's why we see kind of this increasing customer activity generally and the inflow of development projects within industry in the quarter. And this was a trend that went on just now not in this quarter only, but also in the previous quarters, right? And I think this big order now is a testament to this that we are becoming more of like a preferred supplier with some of these med device companies when it comes to providing simulation in a broad array of product areas for them. These are big companies, and they have divisions, and these divisions have subdivisions, and we are now actively going deeper and deeper into these companies. And as they are also big companies, this means that when they adopt a specific technology like simulation for their sales force and marketing efforts, for example, that means that the demand of a simulator can be quite high. And that's hence then the big deal size that this becomes. So, it's a development revenue and it's an initial purchase of some simulators. And then gradually, as this product rolls out globally, we see a very big potential for high volumes towards these customers and for this specific product that we're speaking about. Christian Lee: And my second question, simulator sales declined by almost 9% year-on-year if we adjust for the delayed deliveries pushed from the second quarter. Beyond the negative currency effects, was this mainly due to challenging comparables? And how should we think about the outlook given that you will face even tougher comparables in the fourth quarter? Anna Ahlberg: Yes. I mean, yes, as you know, we don't give guidance. But we -- as Tom said also, we see a lot of activity. We see that some markets, takes longer time. We see it's been tough in the U.K. We talked about the U.S., which is -- and we see some very strong markets like the Europe -- like in Europe, several markets there. So, we continue -- and it's also a bit different, of course, between the different product lines there where we see -- we talked about ultrasound. We have other product lines that we see a lot of activity within. So yes, we don't -- we see a lot of activities and still a lot of positives for the IU product business area, even though some markets are a bit tougher. Tom Englund: I mean we feel that the toughness primarily comes from these shortages of budgets, budget unavailability and primarily in the U.S., as we have said, right? There is a lot of things that you can do anyway to try and maximize sales given the tougher market climate. You can work on different sales activities; you can work on different marketing activities and so on. And we are doing all of those. And rest assured that we are having an extremely high pace out there in the market. And we have a good feeling and there's a very high amount of quotes going out and customer dialogues that we see. The other thing that you can do, of course, is to launch new products because new products usually can get budgets faster in a challenging market climate. So that's also why we're quite excited about the volume ramp-up now of RobotiX Express because RobotiX Express is such a product that can be added on top of the simulator sales that we already see. And that can then, of course, be a revenue contributor. And that product is targeted both towards educational products as well as for industry OEM. So, we have high hopes for this product line once we start selling it more actively here. Anna Ahlberg: And I just mentioned very briefly, but price increases is, of course, something that we continue to work with, and we see that, that has a positive effect and that we can actually take out higher prices and also has to do with how we package our products and hardware in relation to software, et cetera. So, these are all things where we work very actively. When we talk about RobotiX -- sorry, Christian, did you have another question? I don't remember if you already had 2. Christian Lee: I had 2 already. So, I'll get back to the queue. Anna Ahlberg: Okay. Thanks, because we also had a written question around RobotiX Express now that we're talking about it. Tom Englund: Yes. What is the average length of the sales cycle for the RobotiX Express product line? And what is the company doing to shorten it, so potential customers can better understand the benefits of integrating said products to improve the medical staff's curriculums? Great question. So, the sales cycle length depends a little bit on the type of customer that we engage with. We have both educational product customers or hospitals and SIM centers that are buying the RobotiX Express, and then we have the med device companies. So, when we look at the hospitals and SIM centers, you could say that in general, the sales -- average sales cycle for a hospital and SIM center is anything between 6 months to 2 years, depending on region and depending on type of institution. And this is applicable both for our existing simulators as well as for robotics simulators. What we are doing with RobotiX Express, though, is that we're marketing it at a more attractive price point because we believe that this is a product that could be sold in volume because we see a very high demand for training for surgical robotics surgeons. And this means within a more attractive price point, that means also that sales cycle could come down and be shorter than what they are for other simulators. And then when it comes to industry OEM customers, for example, robotic surgery companies that are buying the RobotiX Express platform and putting their software, simulation software onto it and then using it in their training efforts, there, of course, the sales cycle will be longer because they would need to perhaps do some hardware modifications as well as software development for the platform. So that could be perhaps around a year or something like that from the initial discussion until we engage with the customer. But of course, once we have come over that first hurdle, then it will be more like of a transactional sale since they have standardized on our platform, so to say. Anna Ahlberg: Let's see. Did we have any more questions signed up. I don't think so. We have some written questions. I think we talked about the license -- there are some questions on the license revenue side. I think we talked about those. There is one also, when we will transition to a fully subscription-based revenue model, when that will be completed? And that is the case for 2025, that it is fully subscription-based for Intuitive. I'm not sure if the question is related to that or to all. But for Intuitive, yes, it is. Regarding pricing, there's a question DV5 over DV4, we cannot -- never comment on prices for our customers. What we've said is that prices have been set for a period with the MOU with Intuitive, where the prices will go down over time. Tom Englund: Yes. And then we have a question regarding forward visibility we don't comment on. Anna Ahlberg: We will again also invite you all to the Capital Markets Day on December 8. So, I hope to see you all there. But I think with that -- Tom Englund: If there's no more questions. Anna Ahlberg: With that, I think we -- Tom Englund: Yes. But thank you all for your attendance and for the interest in our company. And yes, have a great day. Bye-bye. Anna Ahlberg: Thank you. Bye-bye.
Operator: Good day, and thank you for standing by. Welcome to Better Collective Q3 2025 Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Better Collective VP, Investor Relations and Communications, Mikkel Munch Jacobsgaard. Please go ahead. Mikkel Jacobsgaard: Thank you very much, and good morning, and welcome to Better Collective's Q3 webcast. My name is, as you just heard, Mikkel Munch Jacobsgaard, and I'm the Vice President of IR and Corporate Communications here at Better Collective. I'm joined today by our Co-Founder and Co-CEO, Jesper Sogaard; and CFO, Flemming Pedersen, who will provide today's business update in connection with our Q3 report that was disclosed yesterday. Please follow me to the next slide. We ask you to pay attention to this slide where we display our disclaimer regarding any forward-looking statements in today's webcast. Please turn to the next slide as I hand over the word to Jesper for the third quarter highlights. Jesper Søgaard: Thanks a lot, Mikkel. Good morning, all, and thank you for joining today's webcast. Let's dive into the Q3 highlights, and please follow me to the next slide. Overall, we are happy to show good underlying growth in Q3 when normalizing for the sports win margin. During especially September, the Sportsbook saw player-friendly results, which dampened revenue and earnings by EUR 10 million when comparing to the same period last year. Group revenue reached EUR 78 million and EBITDA came in at EUR 21 million. I'm very satisfied with this performance despite the low sports win margin, which is an external factor we cannot control and also that normalizes over time. In Brazil, we continue to see good activity levels in line with recent quarters with revenue above our expectations. Although the market remains affected by the ongoing regulatory transition, dampening our ability to send new customers to our partners. In North America, revenue share more than doubled compared to last year, further strengthening our base of recurring revenue in the region. Our new KPI, the value of deposits reached EUR 726 million, up 2% year-over-year. Considering the continued regulatory transition in Brazil, this stable development is a strong achievement and confirms the solid quality of our underlying player databases. On the cost side, group costs continued to trend down, reflecting the successful execution of our cost efficiency programs. Finally, we maintain our financial guidance for the year and continue our share buyback, which we announced with the Q2 report. Please turn to the next slide. On this slide, you can see the main factors influencing our revenue performance in the third quarter. First, the sports win margin reached a record low in Q3, impacting revenue negatively by EUR 10 million. Secondly, the ongoing regulatory transition in Brazil continued to weigh on performance, contributing with EUR 4 million negative impact, although this is better than expected. Thirdly, we had an FX headwind of EUR 2 million. On the positive side, the North American revenue share doubled, showing EUR 4 million of growth. Furthermore, we saw underlying growth in the business of EUR 9 million. This was particularly within Paid Media, Sports Media and our talent-led media. Altogether, this brought us to a Q3 revenue of EUR 78 million. Please turn to the next slide where we look at the development in EBITDA. EBITDA was largely flat with key components being the revenue-related effects just discussed accounted for a EUR 3 million negative impact, where the sports win margin had full negative effect. Last year's cost reductions included temporary one-off items such as variable pay reversals, which created a EUR 6 million positive effect last year. We also continued to invest in growth, particularly within Paid Media, where higher activity levels led to EUR 2 million in additional costs. Lastly, our cost efficiency program launched in October last year delivered EUR 8 million in cost reductions. Altogether, this brought us to a Q3 EBITDA of EUR 21 million. Please turn to the next slide. Following Q3, our 2025 and 2027 financial targets remain unchanged and are shown here. We remain confident in delivering on our 2025 guidance with Q4 expected to be our largest quarter of the year, consistent with prior years. The quarter will be supported by a higher top line in the busy sports season and continued cost discipline as demonstrated in Q3. Please turn to the next slide. In September, we reached one of the most defining milestones in Better Collective's history with the launch of Playbook, our new AI-powered betting solution. Playbook marks the beginning of a new chapter for Better Collective as we expand beyond customer acquisition to also include user retention and long-term engagement. This is a vision my co-founder, Christian and I have shared since founding the company to empower fans with smarter, more personal and more intuitive ways to engage with sports and betting. By using AI to understand intent and context at scale, Playbook transform fan engagement into real-time data-driven experiences. This allows fans to seamlessly make bets directly from the communities and platforms where they already spend time, whether that's on X, in messaging apps or across our own media brands. Our partnership with X in the U.S. positions us exactly where sports conversations naturally happen, giving us access to unmatched scale, data and first-party insights. Within just a few weeks, Playbook has already generated millions of bets placed and shown exponential growth, clearly validating both the product and the vision behind it. Ultimately, for me, Playbook represents the next evolution of Better Collective, transforming how we connect with fans, deepening engagement and creating lasting value for users, partners and shareholders alike. Since launching Playbook in September, we have seen exceptional and rapidly accelerating growth. This measures when a user is directed to a sportsbook after choosing a bet slip suggestion. Very encouragingly, almost all of these clicks result in bets being placed, which clearly demonstrates the strong user intent and conversion rates of the product innovation. We are very pleased that only a few weeks after launch, Playbook has already generated millions of bets placed with our partners, a very encouraging start for what we see as a long-term growth driver for Better Collective. Please turn to the next slide and let Flemming take us through the financial performance for the quarter. Flemming Pedersen: Thank you, Jesper, and good morning to you all. Please follow me to the next slide as we dive into the financials. As Jesper mentioned earlier, the result ended in a 4% revenue decline to EUR 78 million. However, when we normalize the sports win margin impact, which hits both revenue and EBITDA, the picture changes and on a normalized basis, we would have seen organic growth. As Jesper mentioned, we do see fluctuating sports win margins from time to time, and it is something we cannot influence and it is just dependent on sports results, which in this quarter and in September, in particular, have been in players' favor. Let's turn to the next slide. A key strategic focus for us continues to be the expansion of our recurring revenue base, which provides a solid and predictable foundation for the business and represents significant unrealized value over time. Year-over-year, recurring revenue declined by around 5% to EUR 50 million. This was primarily driven by the lower revenue share, reflecting the unfavorable sports win margin in the quarter as well as the ongoing regulatory transition in Brazil, where the market was reset by 1st of January following the new market regulation. Importantly, we continue to send new customers on revenue share agreements. In this quarter, the ratio was more than 80% of NDCs sent to partners operating on revenue share terms. A significant portion of this revenue is still unrecognized and will materialize over time, further strengthening our long-term earnings potential. In the last 12 months, we have generated EUR 160 million in revenue share income. Please turn to the next slide. Continuing on recurring revenue, let's take a look at our North American revenue share development. Back in Q3 2022, we began shifting our U.S. business model towards revenue share agreements, gradually moving away from CPA agreements to the extent possible. During 2023, parts of our revenue share agreements included upfront components, which temporarily boosted our reported revenue share income to levels similar to what we are seeing today. However, that structure is now almost fully transitioned to pure-play revenue share. Today, the revenue share we generate in the U.S. mainly comes from pure-play revenue share and only a small degree upfront payments. This entails a significant improvement in the quality of earnings as it means that the revenue we recognize is fully recurring and directly tied to player performance over time, providing more stability, predictability and long-term earnings potential. Due to the nature of the U.S. market where players are often incentivized by large bonuses, it has taken quite some time to get here. But we knew this when we started, and now we are seeing the returns coming. As you can see on this slide, revenue share income in North America doubled compared to last year. We expect this steady buildup to continue, further strengthening the foundation for our recurring revenue base. Please follow me to the next slide. Let me then turn the focus to our cost base. Our cost base reached its peak in mid-2024 at EUR 70 million per quarter. In Q3 2025, costs were 18% lower compared to that peak, now standing at EUR 57 million. This reflects a leaner and more efficient operating structure that positions us well to the future growth. We have communicated a lot about this in previous quarters. And while we are still focused on optimizing the business, we feel that we are in a good place now with the right organizational structure in place for the coming years. Included in the costs during the past quarters are also investments in new business initiatives such as the growth investments in paid media, the development and launch of Playbook as well as a number of new other initiatives. Please turn to the next slide. EBITDA before special items was largely flat year-over-year, resulting in a margin of 27%. However, when we normalize for record low sports win margin, the underlying performance is strong and the result of the business ability to drive new business across platforms and the disciplined cost management. As a reminder, a negative sports win margin impacts both revenue and EBITDA with equal impact. Please turn to the next slide. Take a look at our free cash flow development. Starting from Q3 year-over-year, EBITDA before special items of EUR 65 million. We saw a positive change in net working capital of EUR 7 million. Net financial expenses and tax payments each amounted to EUR 13 million, so EUR 26 million in total. In addition, we had EUR 14 million in other investments where the major part is related to our media partnerships. Altogether, this brings us to a free cash flow of EUR 32 million year-over-year, fully in line with our expectations and supporting our full year free cash flow guidance of EUR 55 million to EUR 75 million. Not shown on this slide, but worth mentioning is that our operational cash flow before special items was very strong, ending in a cash conversion of 168%, which reflects a healthy underlying cash generation from our core business. Lastly, regarding financing, in September, we entered into a new 3-year committed bank facility of EUR 319 million with an additional EUR 80 million accordion option. This facility strengthens our financial flexibility and supports our ability to execute on strategic priorities. We are very happy with this strong backing from our main banks. Please turn to the next slide. Over the past year, we have seen a decline in NDCs largely driven by the slow dropdown in Brazil, where welcome bonuses remain prohibited. However, as we mentioned in our previous webcast, while NDCs continue to be an important metric, the value of deposits provides a more meaningful view of the actual performance of our revenue share databases. As shown on this slide, the value of deposits has continued to grow consistently over time, underlining the health and quality of our recurring revenue base. Even more important to highlight, the value of deposits grew year-over-year, which is a solid achievement considering the ongoing regulatory transition in Brazil. A key driver of growth in the U.S. market characterized by significant higher player values compared to other markets as well as the Brazilian growth in past years. Please turn to the next slide and I hand the word back to Jesper for the key takeaways of today. Jesper Søgaard: Thank you, Flemming. And please turn to the next page. Before we close, let me summarize the key takeaways from the third quarter. Group revenue came in at EUR 78 million and EBITDA at EUR 21 million, both impacted by the record low sports win margin. Despite that, the underlying business showed solid growth across core markets and businesses. Brazil remained active, though still affected by the ongoing regulatory transition, while North America revenue share more than doubled compared to last year, further strengthening our recurring revenue base. Our new KPI, the value of deposits reached EUR 726 million, up 2% year-over-year, confirming both the quality and stability of our player database. Group costs continue to trend down, reflecting the ongoing execution of our cost efficiency program. During the quarter, we launched Playbook, which is a significant milestone for our company. Finally, we maintain our financial guidance for the year and initiated a new EUR 20 million share buyback program, bringing the total share buyback programs launched this year to EUR 40 million. All in all, we are entering the final quarter of 2025 with a leaner structure, a stronger recurring base and positive momentum heading into 2026. Thank you for your attention. Let's move on to the Q&A. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Hjalmar Ahlberg from Redeye. Hjalmar Ahlberg: Maybe to start a few questions on the Playbook product there. What do you see in terms of operator feedback this far and maybe some comments on how they potentially can pay for this product in terms of the retention you provide? Jesper Søgaard: Well, thanks, Hjalmar. First off, we -- I think what really matters and where this start is that there's great user adoption, like we are really pleased with how the sports betters are utilizing this product and basically are able to place bets more conveniently. And then on our partner side, we are seeing good feedback. And basically, I'm pleased with how they also engage with this product. I think when you consider the current sort of quality of Playbook is that it makes it super convenient to place a fairly complex bet, say you want to put on a bet on a single game with many different parts of that single game parlay. That's very cumbersome to actually place within a sportsbook app, and especially if you have seen on X, where we have partnered, some experts sharing their bet slip with, let's say, 10 different picks, it will take you a lot of time to place that, so we really create convenience about placing that particular bet. And for the sportsbooks, these single-game parlays or multi-game parlays are quite attractive due to the margin profile of such tickets. Obviously, they have higher odds and basically are more like a lottery ticket, but that also leads to an attractive margin profile for the sportsbooks. And we really facilitate a higher number of such bets flowing through to the sportsbooks, so it's -- it has been well received. And yes, we are well aligned with the sportsbooks on this product. Hjalmar Ahlberg: I'm just curious about this product. I mean, how long have you been working on the development of the product? And also, interesting to hear if you have any -- I mean, in terms of product development, are you looking to do more in terms of products that are focused on retention compared to acquisition? Jesper Søgaard: Yes. So, this is actually a product evolution, which started with our quick slip integrations that we did and then basically applying AI as the big unlock here, which allows for that context recognition and matching on the sportsbook side. And no doubt, we are really excited about this product, and I'm so impressed by our product organization who've done a great, great job of delivering this product in a short period of time, ready for the start of the NFL. And we'll continue to invest in this product and develop it, and ultimately, it's about creating convenience for the sports punters and help them place the bets they want to place, but also in the future, place the kind of bets they probably had not considered and could be inspired by our product. So, we're investing a lot into this product and definitely see still a lot to be done in developing the full vision of Playbook. Hjalmar Ahlberg: And also on North America... Flemming Pedersen: No, I think just to be fair, you also asked the question to monetizing, Hjalmar. And I think you can say -- we actually you can say went slow in the beginning, but we have been surprisingly -- positively surprised, I would say, about both the adoption, but also the partner engagement. So, we are already seeing, you can say, that product monetizing. Still, it's in the early phase, of course. And as Jesper said, it's focused on user adoption. But I can say, from my chair, we are quite pleased with that already. Hjalmar Ahlberg: Sounds good. And also, good to see some really strong revenue share income in North America. I just wanted to hear if you can maybe elaborate a bit. I mean if you compare North America, if I understand it correctly compared to Europe, it's maybe not always the same length or lifetime permission contract. How do you think that will evolve over time? I mean, do you think that will -- I guess it is still a long time before that make an impact. But yes, if you can comment anything how we should view that compared to Europe, for example, if you understand my question. Flemming Pedersen: Yes. I think for revenue share in the U.S., as I also mentioned, it has taken us a long time where we have been sort of not seeing a lot of revenue from all our investments we have made in revenue -- sending revenue share players, if you like. Because of the nature of the market where bonuses are so big in comparison to other markets, so it takes a long time before the player becomes profitable. But now we are seeing that, you can say, coming into the positive territory, and of course, that's very pleasing to see and also the player values that we have we assessed in the beginning, we are also happy with what we are seeing eventually. Hjalmar Ahlberg: Got it. And a final question, just on the costs there. I mean you see continued good progress on cost savings. And it also looked like the staff cost was down quite a bit compared to Q2 this year sequentially and also the number of employees, Is that something temporary in Q3? Or is it more like costs that will remain even going into Q4? Flemming Pedersen: Yes, I think it is, you can say, a reflection of the cost efficiency program we have been running. So, I think that's just, you can say, the new base basically. Operator: We will take our next question. Your next question comes from the line of Edward James from Cantor Fitzgerald. Edward James: Great. It's just primarily on guidance, and I'd be interested if you could just unpack what is baked into both the low end and the high end of guidance for fiscal 2025, both on revenue and for EBITDA margins and just to understand that bridge because obviously, the guidance is unchanged, but it leaves quite a wide range of outcomes for the single quarter of Q4. So, any comments there would be appreciated. Flemming Pedersen: Yes. Flemming here. You can say the guidance will basically be that we perform as expected in what is our biggest quarter by seasonality. If you look at the Q4 last year, it's sort of more or less in line with that with some bit of growth. So, we are pretty confident on that. Of course, there is also, you can say, to the higher end, sports win fluctuations. Now we have seen a very low sports win margin in September. So, you can say within that range, there's, of course, also the win margin fluctuations. So, I think that's the comments I can make to that. Operator: [Operator Instructions] Your next question comes from the line of Poul Jessen from Danske Bank. Poul Jessen: Yes. I have 2 questions. Coming back to the Playbook, could you put a little more color on how it works if a client go on to accept a suggestion for multi-bet and that is then placed at non-par at a sportsbook where you have no agreement, it's still put on. But what is then your intention to showcase in the future that you will generate traffic and then make a deal? And then secondly, if he has no -- if he's not a registered player at a sportsbook then you will see revenue from those new players maybe in 2 years. Is that the way we should understand? Jesper Søgaard: Poul, thanks for the questions. Yes, so there are actually different monetization models in place. And like starting with the last one, we obviously have sort of the normal affiliate deals in place with our partners. So, if we send a new customer to them, that player is being tracked to us. And then we also have sort of more retention-based models, where it's based on volume, and where we can also make money from players that we have not sent in the past. But of course, there are different models in place, and we work with several sportsbooks on this. So, there are basically different models in place. But I think overall, we are quite pleased with sort of the ways we can monetize this product and also basically just gaining a lot of very attractive and interesting data insights on this particular audience. Poul Jessen: Okay. And the second question is about the prediction markets. That has been putting a lot of pressure on the betting companies during October and into November. So how do you look at it? Are you totally neutral, so you don't care if it's one or the other who wins that game? You're just happy that it will create more competition and therefore, improve your value. But are you having a partnership across the full space? That's question number one. And then the second is on Flutter yesterday, saying that they're going to launch prediction-based betting nationwide in December. Yes, if you could put some views on that. Jesper Søgaard: Yes. Yes, sure. I can do that, Poul. And I think it is, of course, a very big theme right now, the prediction markets, and clearly, a win-win for us. At a high level, prediction markets are gaining traction in the U.S. because they give a real-time view of what people actually think will happen, not what polls or headlines suggest. They let people express their expectations in a transparent way. And this isn't a new territory for us. I can say personally, I've been betting with Betfair for more than 20 years, and Betfair has been a customer of ours. So, we are very used to the European side of our business, to the prediction markets where you have betting exchanges. From a U.S. sports industry perspective, the growing attention around prediction markets underlines a very strong underlying demand for bet-type products. As these platforms become more visible, they can help push momentum for broader regulation of online sports betting in more states. And I have probably one particular state in mind, like California, being the single biggest opportunity in the U.S., and that would be very positive for the whole ecosystem, including us, if we were to see any progress there. And as I said, for Better Collective, this is clearly a win-win. We already work with the key players in prediction markets and monetize traffic in States where online sports betting is still not regulated. And if prediction markets help accelerate the regulation of online sports betting, we benefit from that as well. So, regardless of which way the market develops, we are in a strong strategic position to capture value on both sides. And also alluding to Flutter that you mentioned, they are also signaling increased spending related to this ecosystem. And I think books have been speaking to increased spending related to this ecosystem. And obviously, I do believe suppliers will benefit from that. Poul Jessen: And in the prediction part, is that revenue share as well? Jesper Søgaard: Well, in general, we have affiliate models in place, and the way we monetize this is not something we specifically comment on. Poul Jessen: And then the final one, just a clarification about the headwind of EUR 10 million in revenue share. Is it fair to assume that more or less all of that is coming from Europe and the rest of the world, as the U.S. was already very low last year? Flemming Pedersen: Yes. Flemming here. Thanks, Poul. It's basically on both sides of the Atlantic, if I can put it that way, that we have seen headwinds. And also, to be transparent, you can say on a normalized win margin, you can say we would have seen a EUR 7 million decline. So actually, we had some tailwind in the previous year's Q3. Hence, why the year-on-year comparison is a bit bigger. But yes, it was basically both in the U.S. and the rest of the world. Poul Jessen: But if you only had EUR 4 million in the U.S. last year, then there is a limit on how much you could lose over. Flemming Pedersen: Yes. But you can say it is growing, and more and more partners are coming into positive territory, hence, where we see the impact. You don't see the impact on a partner where you are in negative revenue share territory. So that's sort of the shift. But I think going forward, we will include the win margin comments. We have only done that when we have seen some sorts of exceptional moves. So, to put a bit more color on that. Operator: There seems to be no further questions from the phone lines. I would like to hand back for any webcast questions. Mikkel Jacobsgaard: We have a few online here. So, if we start with one here, I guess, for you, Jesper. What is the reason for the NDC trend? And last quarter, you reported a split for the NDCs in Brazil and the rest of the world. Why is that not shown this quarter? Jesper Søgaard: Yes. First off, like we don't intend to show that every quarter. But I think the main message from that was the impact of Brazil and no sign-up bonuses, and we are seeing a similar picture in Q3. And then obviously, also last year with Cap America and the Euros, also NDC drivers. So, I think more or less, it's as expected in Q3, what we are seeing from NDCs. Mikkel Jacobsgaard: Thank you. And then we are getting a few questions that I'll bundle into one in terms of what the expectations are for sports win margin heading into Q4, and what normally also happens when you have such a low sports win margin in one quarter? Flemming Pedersen: Yes, I can take that. Normally, we forecast sports win margin on a historical basis, and that's also the case for Q4. So, no extraordinary, you can say, in that for the full year forecast. Mikkel Jacobsgaard: Thank you. Then we have a bunch of questions related to the Playbook that I think have already been answered earlier on in the call in terms of monetization and partners and so on. So, I think we'll leave it at that. But we do have a question on the guidance as well. Also, I think that was also answered. I think Ed asked us that question from Cantor in terms of Q4 and what our guidance expectations were. Then there is a question related to prediction markets, more specifically in terms of new depositing customers, whether that's something that we're seeing already now, and at what levels? Jesper Søgaard: Yes, we can confirm that we are sending NDCs also to prediction markets. Mikkel Jacobsgaard: Then there's a question related to our NDCs and the mix between revenue share and CPA, and that was around 80% for this quarter. So, I'll take that one. There's also a question, I guess, for you, Flemming, related to cost savings. We are being congratulated on the work. And it seems like the question is about whether staff costs will stay where they are or if we have more expectations for those going forward? Any expectations for those? Flemming Pedersen: Yes. I think we have sort of also, in connection with Q2, stated that now we have sort of ended our cost efficiency program. So now we sort of see a normalized level of cost, and that is also what we have built into our future guidance. Mikkel Jacobsgaard: Thank you. Then we have a question, I guess, for you again, Jesper, turning back to prediction markets and whether we expect both to work with prediction market platforms and sportsbooks on, and to work with prediction markets. Jesper Søgaard: Yes. I think right now, it's quite clear that the entire market is being embraced by all participants, both in sports betting and also more on the financial side. And as I alluded to earlier in -- sorry, it’s a bit lengthy reply to Poul's question about prediction markets is that it's essentially a win-win for us as we can work with all of them. When you look at the audiences we have across our big brands in the U.S., this is like key audience for these products. And we also have a significant audience from all states in the U.S. on our platforms. Mikkel Jacobsgaard: Thank you. There are no further questions online. So, thank you very much for showing interest in Better Collective. Have a nice day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to JD Logistics Third Quarter 2025 Results Conference Call. [Operator Instructions] I'd like to turn the call to Mr. Sean, Head of IR team at JD Logistics. Sean Shibiao Zhang: Thank you, operator. Good day, ladies and gentlemen. Welcome to our third quarter 2025 results conference call. Joining us today are our Executive Director and CEO as well as the CFO. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and in this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will discuss certain non-IFRS financial measures for comparison purposes only. For a definition of the non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the third months ended September 30, 2025, issued earlier today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prepare. I would like to turn the call over to Mr. Hu Wei. Please go ahead, sir. Wei Hu: Thank you, Mr. I'm so happy to meet you here. This is the third quarter of the 2025 earnings call meeting. In the third quarter, with the effect of proactive macro policies, China's economy maintained a steady and progressive trend as a critical enabler of the national economic circle, modern Logistics continued to facilitate the efficient flow of production factors, strengthening the economy's resilience. During the quarter, JD Logistics continued to strengthen its capacities in service experience and delivery partners, consistently expanding product portfolio and solidify the service competitiveness, improving customer experience and satisfaction and achieving high-quality related revenue growth. In the third quarter of 2025, JDL achieved a total revenue of RMB 55.1 billion, an increase of 24.1% year-over-year in terms of profit. Our non-IFRS net profit was RMB 2.02 billion with a profit margin of 3.4%. We are committed to building our long-term capacity and competitiveness, making targeted investments in areas such as international business expansion and timeless capacity improvement to enhance our operational strength and lay the foundation for long-term business growth. Revenue from integrated supply chain ISC customers reached RMB 13.1 billion in the third quarter increased by 45.8% year-over-year with both internal and external ISC customers sustaining solid double-digit growth. This included RMB 8.9 billion in the revenue from external ISC customers. Leveraging our extensive network coverage, extensive warehousing operations and management experience and accumulated ISC capacities, we continued to strengthen our leading position in China supply chain market, achieving growth in both the number and average revenue per customer APR of our external ISC customers. We provide industry-specific ISC solutions and service products for customers in fast-moving consumer goods, home appliances, home furniture, safety, apparel, automotive and fresh products and other industries. In the face of the ever-changing business environment and market landscape, we remain focused on experience, cost and efficiency, enhancing our industry-specific service capacities. We delivered products and solutions tailored to customer-specific industry logistics and operational pain points, helping them improve operational efficiency, reduce operating costs and optimize customer experience. In home appliance industry, we continued to expand our ISC solutions end-to-end process coverage. By leveraging digital capacities to integrate end-to-end information flow, we enabled efficient coordination in all aspects of operations, helping brand customers reduce cost and enhance efficiency. For instance, in the third quarter of 2025, a cooperation with a well-known home appliance brand customer extended upstream to the process from the customers' factory to their warehouse. Through our consolidated distribution model, we optimized the transportation routes and efficiently reduced the transit frequency during inbound to warehouse transportation, helping the customer to reduce logistic costs. Meanwhile, we leveraged our digital supply chain system to provide destination warehouse with real-time visibility of in-transit information. This enables them to range uploading zones and allocate manpower in advance, significantly improving inbound efficiency and shortening order fulfillment time. Going forward, we will continue to deepen our presence in the ISC space, capitalizing on our advantages in digital technology, network coverage and operational management. We will replicate and scale the successful experience with this brand to more customers, committed to build the most efficient ISC solution through the entire process. The steady development of our ISC business is underpinned by our continuously improving network infrastructure. As of the end of September 2025, our warehouse network covered nearly all countries and districts in China, consisting of over 1,600 self-operated warehouses and over 2,000 third-party warehouse owner-operated cloud warehouses under our open warehouse platform. Our warehouse network has an aggregate gross floor area of more than 34 million square meters, including warehouse space managed through the open warehouse platform. We have enhanced the breadth of our coverage and enriched our service offerings through further expansion into lower-tier regions and continued optimization of our warehouse network. During this quarter, guided by our cooperational philosophy of placing products as close as possible to customers, reducing handling frequency and minimizing fulfillment distance, we accelerated warehouse network development and verification of the service capacities in lower-tier cities since official commencement of JDL's Kafka warehouse in April 2025, both local customer experiences and local efficiency have improved significantly in the third quarter. The warehouse contributions to our operational efficiencies continue to grow, supported by our ongoing enhancements in warehousing operating efficiency and regional distribution capacities. Core areas now enjoying a 2-1-1 time delivery service, while surrounding remote areas have achieved steady next-day delivery. This quickly improved local customers' shopping experience, widespread positive feedback meanwhile, we strengthened our capacities in bulking item logistics building, JDL, delivery installation, assembly return, while steadily strengthening our leadership in China's ISC market while also expanding our overseas footprint, leveraging years of accumulated warehousing operation expertise and world-leading ISC capacities. As we replicate and scale these capacities in overseas market, we are providing more Chinese brands, overseas customers and for e-commerce platforms with high-quality efficient and comprehensive ISC services. Based on long-term in-depth cooperation with auto customers in China's auto spare parts supply chain sectors and the strategic advantages of our overseas warehouse in the Middle East. In the third quarter, a leading new NGB brand chose to further strategic partners with us to jointly expand into the Eastern market. we planned and now operated a spare parts warehouse in Dubai's Jebel Ali Free Zone, providing end-to-end logistics services from container acceptance, customer clearance, quality inspection and other processing to packaging and outbound logistics. This shortened customer spare parts distribution circle, improved inventory turnover efficiency and strengthened the aftersale network across Middle East, South Africa. At present, JDL has established multiple overseas warehouses in the Middle East and continue to enhance its automation and digital operation capacities, delivering global ISC solutions for several other companies and enabling them to achieve a more efficient and sustainable growth in international markets. As part of our overseas warehouse expansion, we accelerated our global smart supply chain network. and actively expand our overseas warehouse footprint bycelerating progress towards our goal of doubling the gross area of our overseas warehouse by the end of 2025, a target we're fully confident in achieving. In Q3, our revenue from other customers, including express and freight delivery services reached RMB 24.9 billion with a 5.1% year-over-year growth, we have consistently adhered to the high core development strategy, focus on expansion of the high-value businesses while enhancing timeless service capacity and product diversity, laying a solid foundation for the long-term sustainable growth of our business. In our express delivery sector, we continue to enhance our delivery timeless capacity and product competitiveness with a focus on expanding our high-turn, high-value, services. For instance, we expanded our high-tensile delivery capacity, which previously centered on categories such as lychee and hairy crab into high-value scenarios into production zones. This expansion has effectively improved the service quality and delivery efficiency, driving the growth of high timeliest delivery business. Additionally, we continue to strengthen our cooperation and penetration with leading brand merchants on mainstream platforms. For instance, in the third quarter, we started multiple channel cooperation with several well-known sportswear brands, achieving a notable increase in business share, while driving revenue growth in our high delivery services, we also helped the brand customers gain greater platform traffic through high-quality logistics services, creating value for our customers. In the last mile fulfillment process, we continue to optimize our service models and strengthen operational capacities. Recently, we acquired wholly owned subsidiaries of JD Group specializing in local on-demand delivery, which has already established a mature operating system in the sector and demonstrated the strong commercial potential and growth prospects. Looking ahead, we expect the integration of this business to further enrich JDL's product portfolio, complement our last-mile delivery network and enhance fulfillment graphic operational efficiency and overall user experience. Through our business development process, we have adhered to our core value first. JDL remains dedicated to offering premium services such as delivery, on-demand pickup and delivery and return exchange continuously enhancing the quality of our express delivery services. With such professional and reliable services, we have earned a trust and preference of our customers and consumers as well as recognition from national authorities. In August 2025, in the Logistics 2025 report released by the globally authority brand valuation consultancy, Brand Finance, JDL was rated as the strongest Logistics brand 2025 worldwide. Our ranking in the most valuable logistics brands listed in year-over-year, demonstrating our strong international competitiveness and brand influence. Regarding the freight delivery business, with the consolidation with Teton Logistics and [ King Freight, ] we ranked among the top tier in China in terms of cargo volume and revenue share of freight delivery services. We've now established a freight delivery product portfolio covering various timeliest levels and diversified service scenarios, allowing us to precisely match our customers' differentiated needs regarding timeliest requirements, service standards and other aspects. In terms of air freight, we continue to expand our international cargo route network. In the third quarter, we launched a new all type of fly route direct in Shenzhen Bao International Airport to Singapore, Chongqing Airport, further strengthening our air transportation connectivity with the Asia Pacific region. We constantly prioritize technical innovation through ongoing investment in automation equipment, AI and other applications. We have deeply integrated digital intelligent technologies into every stage of the logistics value chain, driving the comprehensive application of AI plus robots across end-to-end logistics chain, including warehousing, storing transportation and delivery. We recently self-developed series robots of [ W pack, ] which are highly suited to our operational scenarios. For example, in the warehouse operations, we are accelerating the deployment of the [ 2 line intelligent ] warehouse solution with both the number of deployed devices and the cities covered increasing further this quarter. And in addition, we have deployed [indiscernible] shadow for bulky item storage and boost to person scenarios, the [indiscernible] intelligent robotic arm and automatic towards for order picking, storing and packaging as well as f drone and dual unmanned vehicle for collections between industrial parks and delivery stations by continuously expanding automation coverage across both processes and logistic value chain we will enhance operational efficiency and provide customers with reliable high-performance supply chain support. Going forward, we will continue to promote the adoption of automation equipment and AI test driving efficiency upgrades across our end-to-end logistics value chain that will support middle and long-term profitability. Meanwhile, we will remain committed to promoting the tech upgrading of the industry, bringing efficient supply chain services to more regions worldwide, and we will improving the social value. Thank you. And we have just announced a new announcement. For my personal reasons, I will take new positions under JD Group. I will no longer be the CEO for the next session. Over the last few years, I collaborated and grow together with JDL, making contribution to customers and consumers. I worked with JDL team for years. I feel so happy and I'm so moved. I want to express my gratitude to the stakeholders and all the Board members. And next, Mr. Wang Zhenhui will take the role as the CEO. Mr. Wang has been working with different companies as well as public companies for years, and he has the business insight as well as the business vision. Mr. Wang has a very solid foundation experiences in the logistics sector. I believe that with his guidance and with his wisdom, JDL will further make contributions to stakeholders and Board members. I'm going to welcome Mr. Wang to say a few words. Zhenhui Wang: Thank you, Mr. Hu Wei, Dear investors, dear analysts, good to see you. My name is Wang Zhenhui. I'm so happy and honored to take this chance, and I will soon take the job as the CEO of JDL. I want to thank Mr. Hu Wei for your contribution. In the upcoming days and months and years, I will lead the team centrally on the cost efficiency and the core competitiveness, making new progress, not only for the company, but also for the but also for the entire side. Now let's welcome Mr. Wu Hao to give you the overview of the financial performance. Hao Wu: Thank you, Mr. Hu. Thank you, Mr. Wang. Hello, this is Wu Hao, the CFO of JDL. I'm pleased to present JDL's financial performance of the third quarter 2025. In the third quarter of 2025, China's macro economy remained stable with continued improvement, demonstrating strong resilience and vitality. Supported by our ever strengthening products and service capacities, JDL achieved accelerated revenue growth by continuously improving timeless and customer experience and further enriching our solution and product portfolio. In the third quarter of 2025, our revenue reached RMB 55.08 billion with a year-over-year of 24.1%. In terms of the profitability, IFRS profit was RMB 1.96 billion, non-IFRS profit with a margin of 3.2%. Non-IFRS profit was RMB 2.02 billion with a margin of 3.7%. Since the beginning, this year, we continue to make strategic investments to strengthen our long-term industrial competitiveness and actively expand business growth opportunities, further solidify our market competitiveness strength. Current investment phase remains consistent with our operational plan. Looking ahead, as business volume increases entering the peak season, we expect economies of scale and improved resource utilization to support profitability improvement. Let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 13.13 billion in the third quarter with year-over-year increase of 45.8% among them. ISC revenue from JD Group amounted to RMB 21.20 billion, up 65.8% year-over-year, mainly due to the incremental revenue generated by our full-time riders participating in JD Food delivery as well as from the growth in the JD Retail. Revenue from external ISC customers was RMB 8.93 billion, up 13.5% year-over-year. The number of external ISC customers amounted to around 67,000, up 12.7% year-over-year, continuing the trend of double-digit growth over several consecutive quarters. While serving more customers, we also deepened and broadened our engagement with existing customers. In the third quarter, our average revenue per customer for external ISC reached RMB 134,000, up 0.7% year-over-year, extending the year-over-year growth from the previous quarter. This growth was primarily driven by our extensive comprehensive warehouse network and mature operational capacity. By continuously upgrading our supply chain products and services, including extending the service supply chain, broadening geographic coverage and deepening omnichannel integration online and offline, we strengthened partnerships with leading customers industries such as apparel, FMCG and auto, helping them improve market competitiveness while optimizing operational costs and efficiency. In the third quarter of 2025, our revenue from other customers, primarily including express and freight delivery services was RMB 24.95 billion, up by 21% year-over-year. For express delivery services, we continue to alleviate customer experience satisfaction focused on the expansion of high-value segments. In the freight sector, we ranked among the top tier in China in terms of cargo volume and revenue scale, supported by our diverse freight delivery services that cover multiple timeliest levels and service scenarios. Moving on to cost and profitability. In the third quarter, our gross profit margin was 9.1%. We continue strengthening our capacities in key strategic areas, including enhancing delivery, improving customer experiences and expanding our international business to drive JDL's long-term high [indiscernible] growth. Next, let's turn to the major parts of the cost and revenue. First, employee benefit expenses were RMB 21.82 billion in the third quarter, up 49.8% year-over-year. This was primarily due to the addition of full-time food delivery riders compared with the same period of last year as well as the year-over-year increase in the number of operational employees in the delivery and warehouse operations. The number of operational employees grew from approximately 640,000 at the end of the third quarter last year to 440,000 at the end of the third quarter of last year. while remaining relatively stable quarter-over-quarter since the beginning of this year, we've added our own employees to key operational processes such as last-mile delivery and warehousing aimed at upgrading our product and services and alleviating customer experience. The key indicators such as on-time delivery rate and customer satisfaction improved. In the third quarter, employee benefit expenses accounted for 39.6% of total revenue, up 6.8%. Second, our outsourcing cost was RMB 16.97 billion in the third quarter, up 13% year-over-year. Our outsourcing costs accounted for 13.8% of total revenue. With a year-over-year decrease of 3.0 percentage points, we optimized outsourcing costs, which are primarily transportation related by applying algorithm-based transportation deployment systems and optimizing the structure of transportation resources, such as increasing the proportion of the self-owned vehicles. Third, our total rental cost was RMB 3.20 billion in the third quarter, up 2.5% year-over-year. We continue to promote site integration and optimize network structure, improving the utilization efficiency in our sites. Our total rental cost accounted for 5.8% of total revenue in the third quarter, down by 1.2 percentage points. Apart from the major costs mentioned above, our ongoing business expansion has resulted in improved economies of scale, driving down our depreciation and amortization costs as a percentage of total revenue by 0.2%. Meanwhile, due to the growth of services such as nation and maintenance, other costs as a percentage of total revenue increased by 0.3 percentage points. In terms of expenses, our operating expenses in the quarter were RMB 3.70 billion, up 15.9% year-over-year, accounting for 6.7% of total revenue with a year-over-year decrease of 0.4 percentage points. This improvement was driven by our consistent enhancement in refined management and cost control capacity. Among them, sales and marketing expenses increased by 13.5% year-over-year to RMB 1.58 billion, accounting for 2.9% of total revenue, down 0.3 percentage points year-over-year. Sales and marketing expenses accounted for 4.7% of revenue for external customers, up 0.3 percentage points. We maintained monetary investments in sales and marketing personnel to drive business growth. In the third quarter, our R&D expenses were RMB 1.06 billion, up 15.9% year-over-year and accounting for 1.9% of total revenue, down 0.1 percentage points. We have allocated our R&D resources to strengthen our end-to-end automation, digital and intelligent capacities. including ongoing operation of AI algorithms and automated equipment in diverse logistics process. For example, we consistently upgrading our large language model, power digital intelligent solutions, improving the coverage of warehouse equipment and scaling up the regular operation of online delivery vehicles to drive further cost savings and efficiency improvements in diverse logistics scenarios, including planning, warehousing, storing, transportation, delivery and customer service. Our general and administrative expenses were RMB 1.02 billion, up 23.6% year-over-year, accounting for 19% of total revenue, remaining largely flat year-over-year. In terms of profit, please also consider our non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA excludes items that we believe are not indicative of our core operating performance to help investors and other users of financial information better understand and evaluate our core operating results. In the third quarter of 2025, our non-IFRS profit was RMB 2.02 billion, down 21.5% year-over-year. Non-IFRS profit margin was 3.7%. Non-IFRS EBITDA for the third quarter was RMB 5.32 billion, a decrease of 7.1% year-over-year with a non-IFRS EBITDA margin of 9.7%. We also continue to monitor our cash reserves and cash flow to maintain a healthy capital position to support business development and meet our operational needs. In the third quarter, excluding lease related payments, we recorded a free cash flow of RMB 0.59 billion, consisting of operating cash flow of RMB 4.71 billion and capital expenditure of RMB 1.95 billion, primarily for investment in automation equipment and self-owned vehicles. We continue to improve operational efficiency and capacity through efficient resource allocation. Before we wrap up, I would like to express my heartfelt thanks to our shareholders for their enduring support and the trust in the JD Logistics. Looking ahead, we remain committed to balance improvement with stable profitability and high-quality growth. We will continue to cultivate our ISC solutions, enrich our product portfolio, optimize customer experience and further strengthen core competitive barriers to promote healthy and sustainable business growth. Meanwhile, we will sustain our investment in automation as well as digital and intelligence technologies optimized network structure, innovate operational models and deepen refined management. We aim to improve the efficiency of the entire logistics process, achieve long-term and sustainable structural cost reductions and create greater value for our shareholders. Thank you. That concludes my prepared remarks. Now let's begin the Q&A session. Sean Shibiao Zhang: Thank you, Mr. Wu Hao. This concludes our prepared remarks. We'd like now to open the call to your questions. Operator, we are going to start the Q&A session, and we are going to receive the questions only in Mandarin. Now let's get into the Q&A session. Operator: [Operator Instructions] [indiscernible] please raise your question. Unknown Analyst: I have 2 questions. In view of the automation, the 5-year automation plan, I want to listen to your comments on the capital investment efficiency and the cost. This is the first question. The next is a full-time rider. We have the full-time riders, and we have outsourced the riders. I want to check with you about the orders. How many orders are you accepting per day? You are not the largest operator. How could you use up the network to make innovation to be the top operator of the food delivery? Unknown Executive: Thank you, [indiscernible], for the question. Over the last few years, JDL has accumulated a lot of the automation technologies and experiences. Most of the automation equipment are well used at a large scale and they are easy to use, they are user-friendly ever since 2025 in more than 20 provinces and cities, and we have already prepared our auto robots. In terms of the unmanned vehicles, we began applications in Guangdong, Jiangsu, Beijing, around 20 cities and provinces, thousands of the unmanned vehicles were put into place for the purpose of docking, collection and pickup. In the future, for the AI Super Brain together with launch robots, they will be deeply integrated to ensure the full chain of sorting, transportation and delivery. In terms of investments, automation and robots. And the outcomes will be collected. According to outcomes, we will promote the large-scale application of the robot in the long run. We will manage the cost, and we will find a balance between investment and return because that is the basis for the long-term optimization. So have some confidence in us by investing into automation sector, we are going to further improve our long-term and middle-term revenue. For specific investment pace, I will follow different industry, different category. We will check the real-life data. We will update our investments and our CapEx plan will be updated as well. It will be very close to our drop that we will go and check what happens, and we will gradually upgrade our investment year-by-year. With more technologies being invested, I believe that it will cut down the logistic cost for the entire society, driving the primary growth for the company. Question 2 is about the full-time riders. Around June, JDL made the announcement to hire full-time delivery. In Q3, we saw a very positive growing momentum. the revenue was boosted. The full-time driver team was quite stable, very consistent with us. This is a big advantage. We have a standardized training system. We have a refined operations, and we're improving the promised delivery. We are improving the timeless as well as the user experience. We made the announcement and we are going to integrate our driving forces. We are going to cover the full-time scenarios, especially for the last-mile delivery services. We're improving and boosting the capacity dramatically. In terms of utilizing the resources, in the long term, I believe there's a lot of robust complementary movements. During the e-commerce festival, the Photon riders could help us to make up the logistics gap. On the other way around, the man could also work together with the delivery man to meet up the requirements from the food delivery. Now the 2 teams are highly complementary, and we could have them work together in 10 of the core cities, the mutual supplementary efforts were made to boost up orders. I want to make a quick notice, the introduction of the Photon riders could improve our service delivery capacities to our customers, we are not only providing food services, but for other products, we are providing services to some luxury brands and 3C products. For instance, we could help them to deliver the luxury goods or 3C products as quickly as possible. That is how we are going to enrich our matrix of the delivery, and that is one of the core capacities for us in the future. By providing or improving the services to ensure timely delivery, we can get into the intra-city faster delivery services. Operator: Next question from Citibank, [indiscernible]. Unknown Analyst: I have a question about the overseas market. You're expanding your footprint. I want to listen to your opinion about your plans and about the implementations of the overseas market. Unknown Executive: Thank you for the question. For the overseas market, the international business is about capacity building. We want to have an entire global network by the end of 2025. The growth area will be doubled by the end. the floor areas for one site, and we want to improve the terminal to terminal capacities, such as the routes, such as cross-border timeliness as well as the speed to clear the customs. We want to make the entire journey more smooth. A, we want to reduce the cost of compliance for our customers, the automation capacities, the efficiency will be boosted all for the purpose of reducing the cost, and we want to expand the network of delivery. Those are the progresses. Still, I believe international market, overseas market are on capacity building because capacity will drive for long-term growth, we will meet up the requirements of the customers. carry out the accurate investment, optimizing our network operation and the localized delivery capacities. In the long term, we do more we scale it up the mature supply chain will be duplicated in overseas market while staying different, such as the health product integrated service, we will also build up the network in overseas market. All in all, we want to offer long-term sustainable value. Operator: Next one. [indiscernible] from Jefferies. Unknown Analyst: My question is about the number of ISC customers and ARPA. Can you share with us more about which segment is your core sector because you want to dive into the value creation and you also focus on numbers of the customers. And I'd like to invite you to share with us the capacity and human resource. Unknown Executive: Thank you, Jefferies -- thank you, Thomas from Jeffrey, the question. Over the last few years, in the ISC customer number and ARPA, we have our -- we have the room for improvement, of course. The numbers and ARPA are 2 important topics. For one thing, we have to improve the numbers and we have to offer them the best products. We can cover more clients. Some of the customers are not using the ISC services. So that is one direction. We will hedge for that in terms of ARPA. We have some key accounts. We also have some small accounts to store the improvement. For the key accounts, we have the PM, the project manager, the account manager to go deeper to find more opportunities. Generally speaking, I believe I can -- we can continue the existing path to further improve the profits, the numbers and the ARPA. Yes, of course, you are going to see fluctuations in the ARPA due to the seasonal reasons or due to the natural transition from a single client to ISC client. But in the long run, I believe the numbers will be further optimized. In 2026, still I'm not in the right time to make the forecast. I believe that in 2026, the revenue will further be optimized. I also wish that starting from Q4 of last year, the investment has begun to yield results. And in the long run, more results can be seen. Thank you. Operator: Due to time constraint, that concludes today's Q&A session. At this time, I will now turn the conference back to Madam Sean Zhang for additional or closing remarks. Sean Shibiao Zhang: Thank you again once again for joining us today. If you have more questions or further questions, please contact our IR team directly. Thank you.
Delphine Cassidy: Good morning, everyone, and welcome to Orica's 2025 Full Year Results. I'm Delphine Cassidy, Chief Communications Officer; and I'm delighted to have you with us today. In the room with me is Sanjeev Gandhi, our Managing Director and CEO; and James Crough, known as Jamie, our CFO. Both Jamie and Sanjeev will be presenting shortly. We thank you for your support and value your participation and interest in Orica. As per normal, there's ample time for questions after both Jamie and Sanjeev present. So feel free to queue up, and we'll address your questions as soon as possible. I can confirm that the materials that we'll be covering today have been lodged with the ASX and can be found on the ASX and Orica websites. Before we start, can I ask you to have a look at the disclaimer on Slide 2. Thank you. And with that, I hand it over to Sanjeev. Sanjeev Kumar Gandhi: Thank you, Delphine. Good morning, everyone, and thank you all for joining the call today. I'll start very quickly with Page 3, which is just a very brief recap of who we are: The world's leading mining and infrastructure solutions company. Let me start with our #1 priority, safety, on Slide #5. I am extremely pleased to report that this year, we've had 0 fatalities across our operations, and our serious injury case rate has fallen to 0.093, the lowest ever on record for Orica. This outcome reflects our focus on safety leadership wherever we operate. We have empowered our people to speak up and stop work whenever they identify risks. While we celebrate this amazing improvement, we remain absolutely vigilant. Safety is nonnegotiable given the environment that we operate in. We are continuing our targeted safety programs, for example, focusing on preventing vehicle and equipment collisions to ensure every Orica employee and contractor goes home safe. I'm also pleased to note that we recorded 0 significant environmental incidents in FY 2025, underscoring our commitment to operating responsibly in every community where we work. Turning now to sustainability on Slide 6. There is a small typo, and I'd like you to correct that, which is under the Scope 3 column in the second last line, the word phase is missing, so it should read as reduction pathways as part of the next phase of decarbonization. I'm sorry about that. Our commitment to decarbonization is delivering measurable results. We have significantly cut our greenhouse gas emissions and have already eliminated 1 million tonnes of CO2 equivalence at our Kooragang Island site alone through new abatement technology. Overall, our gross Scope 1 and 2 emissions are now 51% below 2019 levels, well ahead of schedule, and we are firmly on track to meet our interim target of a 45% net reduction by 2030. This puts us in a strong position as we work our way towards our ambitions of net zero emissions by 2050. During the year, we completed the first full year of tertiary abatement at Yarwun and commenced sourcing renewable electricity in Australia and in Canada, lifting our renewable power coverage to 22%. Renewable electricity procurement in Australia and Canada is currently supporting our goal of achieving 100% renewable electricity by 2040. We continue to explore emerging low-carbon technologies from renewable hydrogen to alternative raw materials to carbon capture and utilization. These efforts demonstrate that our focus on sustainability is not only the right thing to do for the planet, but it's also supporting efficiency and innovation in our business. Turning now to our financial results for FY 2025 on Slide 7. Financial performance in FY '25 has been outstanding. Double-digit profit growth, strong free cash flow and value generation for shareholders, all while strengthening our balance sheet. This gives us a great platform to build on for the future. Let me walk you through the highlights. Our EBIT rose 23% to $992 million year-on-year. This is the highest earnings we have achieved in the last 13 years. This reflects the strength of our strategy, the resilience of our business model and the outstanding execution of our global teams. Net profit before significant items increased 32% to $541 million, and earnings per share rose by 29% to $1.118. This represents the value we are delivering to shareholders through disciplined growth and operational excellence. Notably, we've seen earnings growth across all 3 of our core segments and across all of our regions. Blasting Solutions, digital solutions and specialty mining chemicals have contributed to the strong earnings growth. This demonstrates the strength and resilience of our diversified portfolio and the success of our Beyond Blasting strategy. Our cash generation remains robust with net operating cash flow up 18% to $949 million. Leverage ratio is now at 1.39x. Return on net assets has improved to 13.8%, reflecting our continued focus on capital efficiency, asset utilization and profitability. The growth in earnings has translated into higher returns for shareholders, enabling the Board to declare an increased final dividend for FY 2025, bringing our full year dividend well within our targeted range of 40% to 70% payout ratio. We are pleased to share our success with investors in this way. In addition, our on-market buyback of up to $400 million is nearly complete, and the Board has approved an increase of the buyback by a further $100 million to a total of $500 million to be completed by March next year. This capital management initiative, our first ever share buyback in more than a decade, reflects our confidence in Orica's future and our commitment to maximizing shareholder value. Jamie will talk more on the financial performance shortly. Looking at the earnings across our segments and our regions. Earnings were up across all regions and all business segments. Starting with Australia, Pacific and Asia. APA delivered EBIT of $658 million, up 23% on the prior year in an environment with significant weather events in Australia and also in Asia. In Blasting Solutions growth was driven by higher demand for value-added products and services, which improved our product mix and margins. We benefited from successful contract renewals and wins and increased manufacturing output due to the nonrepeat of the major turnaround at Kooragang Island in the prior year. These gains more than offset some softness in demand in some areas, for example, lower thermal coal volumes in Indonesia. We also realized a one-off $15 million benefit from selling carbon credits generated by our abatement projects in Australia. In Digital Solutions, robust fundamentals in gold and copper fueled greater uptake of our Axis mining intelligence products, and we saw significant customer adoption of OREPro and OREPro 3D for blast modeling. In Mining Chemicals, strong gold demand drove record sodium cyanide sales supported by new customer wins and our ability to reliably supply customers through our global network of assets. Moving to North America. North America reported EBIT of $212 million, up 15% year-on-year. Our technology leadership and focus on future-facing commodities like copper and gold has provided a strong platform for growth in this region. Demand for our premium blasting products remained strong, and adoption of our patented WebGen wireless blasting system, accelerated, driving growth in the region. These positives helped offset external headwinds, including reduced demand from the U.S. thermal coal sector and a subdued quarry and construction market in the United States. We continue to maintain disciplined cost control in our business. In Digital Solutions, North America saw an uplift in demand for blast measurement tools like FRAGTrack and for in-situ geotechnical monitoring instruments. In Mining Chemicals, we successfully completed major safety upgrades at the Winnemucca cyanide plant in Nevada, which will support higher production going forward. The integration of the Cyanco acquisition in North America is substantially complete, and we are already unlocking customer synergies between explosives and the cyanide business. In EMEA, which is Europe, Middle East and Africa, EBIT delivery was $101 million, which is up 18% on prior year. This strong result was underpinned by increased demand for advanced solutions in underground mining as well as a pickup in construction and mining activity in key markets across this region. Leveraging our global experience, we achieved deeper penetration in important emerging markets across Africa and Central Asia. At the same time, we maintained a firm focus on commercial discipline and strategic portfolio optimization, which improved the quality of our earnings. In Digital Solutions, EMEA's earnings benefited from new contracts in major growth regions, and several new partnerships were executed for environmental monitoring solutions. We also saw a growing uptake of OREPro and OREPro 3D software and continued growth in GroundProbe radar deployments and services across the region. In Mining Chemicals, better customer mix and the use of our multi supply sources boosted cyanide margins, and we expanded our emulsifier products into new emerging markets. Finally, to LatAm. Latin America's EBIT was $90 million, up 4% on the prior year. This was a good outcome given the challenges in this region. We achieved rapid customer adoption of new blasting technology, notably increased use of WebGen wireless blasts and 4D tailored explosives. While the competitive dynamics remains challenging in this region, good progress has been made on securing new business and new contract wins. The Latin American team have also implemented portfolio adjustments and operational improvements aimed at managing costs and the ongoing supply challenges. In Digital Solutions, Latin America saw a very strong uptake of our RHINO monitoring technology and continued growth in GroundProbe and Axis product sales. We are leveraging the Terra Insights acquisition synergies to accelerate adoption of our Geosolutions products. In Mining Chemicals, we successfully expanded into new high-growth mining regions in Latin America and benefited from customer synergies between Orica and Cyanco, which are driving higher market penetration for our cyanide and blasting offerings. We also ramped up our Cyantific technical services in the region, providing added value to our gold mining customers. Moving to a segment view, starting on Slide #9. Starting with Blasting Solutions. Across all our regions, the core explosives and blasting services business performed exceptionally well. EBIT for Blasting Solutions was $868 million, up 15% year-on-year. We achieved margin expansion by shifting further towards higher-value premium products and by deploying more of our patented LP and the non-repeat of last year's ammonia shutdown at Kooragang Island contributed to the earnings uplift. Moving to Digital Solutions on Slide #10. The Digital Solutions segment is rapidly scaling up and has firmly established itself as a key growth engine for Orica. EBIT from Digital Solutions was $92 million, up 32% versus prior year. This step-up in growth reflects accelerating customer adoption of our digital products and the integration of the recent acquisitions. All parts of the digital portfolio contributed strongly. In Orebody Intelligence, improved exploration activity drove higher demand for our Axis analyzers and sensors, we are also advancing a strong pipeline of new products for release in 2026 focused on gold and copper exploration and production. In Blast Design and Execution, recurring software and sensor subscriptions are growing steadily, supported by robust gold prices that encourage mining customers to invest in or precision tools like OREPro and OREPro 3D. In Geosolutions, cross-selling is driving growth with many blasting customers also adopting our monitoring systems. GroundProbe's recurring monitoring services revenue continues to increase. Terra Insights, which we acquired last year, delivered earnings ahead of its investment case. Cross-selling opportunities are being realized, for example, by offering monitoring solutions to our blasting customers. The combination of growing revenue streams and high customer retention demonstrates Orica's delivery of technology-focused growth, reinforcing our position as a leader in digital mining solutions and clear demonstration of growing beyond blasting. Turning now to Slide 11, which demonstrates how Orica is driving growth by expanding not only our addressable market, but also deepening our market penetration in the digital space. We continue to see robust fundamentals in the digital space. Exploration activity is accelerating, and the mining industry's rapid digitization is driving demand for advanced instrumentation and integrated digital solutions, areas where Orica is setting the pace. Orica's innovation and R&D are not just responding to market needs, they are actively creating new markets. By bringing innovative solutions to the mining sector, we are expanding offerings to our customers, and in turn, growing the total addressable market itself. Our total addressable market has expanded at a 39% compounded annual growth rate since 2023, driven by both organic innovation and the successful integration of strategic acquisitions, Axis and Terra Insights. Digital Solutions revenue has grown even faster at a 30% compounded average growth rate after adjusting for the timing of the acquisitions. The years following the Axis and Terra Insights acquisition have delivered clear synergy benefits, accelerating both our TAM and the revenue growth. As shown on the previous slide, the high proportion of recurring revenue and low churn demonstrates the value and stickiness of our offerings and the strength of our customer relationships. Moving on to Specialty Mining Chemicals on Slide #12. EBIT was $101 million, up 47% on the prior year. Robust gold market fundamentals with gold prices and demand hitting all-time highs have driven significant demand for sodium cyanide and our services. We achieved strong sales volume, supported by new customer wins and by leveraging Orica's unrivaled global manufacturing and distribution network to ensure reliable supply. Our integration of Cyanco, which we acquired in 2024, has progressed very well, and we are beginning to realize the synergy benefits across the blasting and the cyanide businesses. During the year, and as previously disclosed, we completed planned safety upgrades at the liquid cyanide facility at the Winnemucca plant on plan. Similar safety upgrades are being completed on the solid cyanide facility in October. We expect full production at Winnemucca from FY 2027 onwards, and we expect to start up the Winnemucca site with full production from the end of next week. Our Yarwun and Alvin cyanide plants ran at record rates. And despite undertaking major safety and maintenance upgrades at our Winnemucca plant, our global supply chain allowed us to meet customer needs without any interruptions. We have continued to expand our emulsifier product portfolio, increasing exposure to copper and iron ore markets and entering into new regions and growing our revenue streams. We've launched the new OptiOre range of mineral processing reagents targeting future-facing commodities like copper and critical minerals. Our scientific technical services offering for gold processing has seen steady uptake, providing extra value to customers beyond the chemical itself. In summary, our Specialty Mining Chemicals business today is the world's largest mining-focused sodium cyanide producer with an integrated sodium cyanide production network of approximately 240,000 tonnes annually. This, along with the positive outlook and demand for gold, underpins the continued growth forecast in the medium term. I will now hand over to Jamie to talk about our financial performance in detail. James Crough: Thank you, Sanjeev. Good morning, everyone, and thank you again for joining us today. I'll move to the key financial metrics shown on Slide #14. As Sanjeev mentioned earlier, the continued successful execution of our strategy is reflected in our financial performance. Whilst top line sales revenue grew by 6% to $8.1 billion this year, our earnings before interest and tax rose to $992 million, an increase of 23% compared to the prior year. I'll provide more details on this in the next slide. Net profit after tax, pre individually significant items, increased by 32% to $541 million. As previously disclosed at the half year and our business update in September, significant items totaling $379 million after tax have been recognized this year, primarily relating to impairment and restructuring of our Latin America blasting business, in addition to litigation costs. Of the total significant items, approximately $235 million is noncash in nature, mainly relating to the Latin America impairment. After inclusion of these significant items, statutory net profit after tax finished at $162 million for the year. Net operating cash flow finished at $949 million, an increase of 18% versus the prior year, reflecting continued strong cash generation across the business in addition to disciplined working capital management. Return on net assets improved to 13.8%, an increase from 12.8% in the prior year. Our strong performance in 2025 has enabled us to deliver continued improvement in EPS, pre-significant items, to $1.118 per share, an increase of $0.254 per share or 29% from last financial year. A key highlight of our results throughout 2025 is the strong alignment between improved earnings, stronger cash generation and importantly, maximizing total shareholder returns over time in line with our refreshed capital management framework. Turning now to Slide #15. We shared our refreshed capital management framework in March this year, and the framework is designed to provide clarity and transparency in how we think about deploying capital across the business and through the cycle. We've applied the framework consistently throughout this year and the quality of our earnings demonstrates a number of proof points. These include continued strong operating cash flow, efficient working capital management, disciplined capital expenditure and investment, and importantly, we have safeguarded the strength of our balance sheet and, as a result, delivered increased returns to shareholders. A clear example is our successful on-market share buyback. In March, we announced an on-market buyback of up to $400 million to take place over the following 12 months. I'm pleased to share that this initial program is substantially complete with $399 million of shares repurchased to date, representing 4.1% of issued capital. Given our robust position, the Orica Board has approved an increase of up to an additional $100 million to the existing on-market buyback for a total program of up to $500 million. The buyback is expected to be fully completed by March 2026. Over the coming slides, I'll talk to you the key aspects of our 2025 results in more detail, which highlight the continued successful application of our capital management framework. Turning now to the EBIT bridge on Slide #16, where you can see that we've delivered improved earnings across all reporting segments. Starting with Blasting Solutions. Volume mix and margin increased by $81 million from the prior year, inclusive of $15 million of proceeds from the sale of carbon credits recognized in the first half. This was driven by continued strong demand for our higher-margin premium products and technology solutions, a positive recontracting cycle and continued commercial discipline. Growth in volume mix and margin slowed in the second half due to lower sales volumes in Indonesia and the U.S. due to reduced thermal coal demand. Margin growth from our blasting solutions technology product range increased by 46% in 2025 on top of the 55% increase delivered in 2024 with strong continued demand for the safety, efficiency, environmental and cost benefits delivered to customers through our WebGen wireless blasting, 4D and Fortis specialty emulsion ranges. In the Digital Solutions segment, earnings increased 32% to $92 million, an increase of $23 million from the prior year. Growth was underpinned by strong customer uptake of our digital platforms and sensor technology and acceleration in global exploration activity, particularly in the gold and copper segments and increasing recurring revenue. We also benefited from the full year contribution of the Terra Insights acquisition, continuing to realize the benefits of cross-selling opportunities across the Geosolutions portfolio with the integration of GroundProbe and Terra essentially complete. Our FRAGTrack, OREPro and OREPro 3D products continue to attract significant customer demand, together with our Axis Mining Technology business, acquired at the bottom of the cycle, well positioned to support existing business and new contract wins, in line with strong metals exploration activity. In the Specialty Mining Chemicals segment, earnings increased by $32 million to $101 million, an increase of 47% from the prior year. This growth reflects the full year contribution from the Cyanco acquisition, a critical investment supporting continued strong demand for sodium cyanide amidst sustained high gold prices, together with new contract wins in both the cyanide and emulsifier product ranges. Pleasingly, our recent acquisitions have created opportunities to further bundle digital monitoring and optimization services with cyanide supply. As Sanjeev mentioned earlier, Cyantific and OptiOre provide opportunities to expand revenue streams and importantly, grow the segment beyond cyanide. Across our blasting solutions and specialty mining chemicals manufacturing assets, we've also delivered improved performance versus the prior year. Earnings increased by $36 million primarily attributable to the non-repeated costs incurred from the 6-yearly Kooragang Island ammonia plant turnaround conducted in the first half of 2024. Pleasingly, the strong production performance at our Yarwun cyanide facility continued throughout the second half, which is important as we progress through critical safety upgrades at our Cyanco-Winnemucca production facility. Maintaining uninterrupted supply to our customers and having the flexibility to adapt supply points across our chemical supply chain reinforces Orica's position as the world leader in the mining-focused production of sodium cyanide. And finally, global support costs are lower than the prior year, primarily due to the classification of litigation costs as a significant item in 2025, some small property sales and ongoing disciplined cost management. In summary, our earnings growth has been broad-based, supported by increased contributions from every segment with a continued focus on execution and commercial discipline. Consistent with our capital management framework, this demonstrates our objective of resilient through-cycle performance and pleasingly, this has continued into the start of the new financial year. Turning now to trade working capital on Slide #17. Encouragingly, the improvements that we've focused on over the past 18 months have been maintained this financial year. Total trade working capital cycle days on a 12-month rolling basis are in line with the prior year. Days sales outstanding remained consistent at 46 days, reflecting our sustained commercial discipline as sales revenue grew by $482 million or 6% during the year. Days inventory held increased by 2 days, seen as a prudent measure given significant geopolitical uncertainty, particularly in the U.S. and raw material shortages occurring through 2025. Importantly, we've been able to fully offset this through a 2-day improvement in rolling days payable, closing at 51 days and moving us closer to top quartile total trade working capital performance, relative to industry benchmarks. Absolute trade working capital finished at $620 million. Foreign exchange had a $30 million unfavorable impact, partly offset by $14 million in efficiency improvements with ending trade working capital to sales finishing the financial year at 7.6%, improving from 7.9% at September last year. This disciplined working capital results supported the increase in net operating cash flow and remains a key focus area for the organization. Turning now to Slide #18. Total capital expenditure for 2025 was $460 million, broadly in line with the prior year. Of this, $286 million was allocated to sustenance capital expenditure. This included successful completion of turnaround events at our Carseland and Kooragang Island sites in the first half and the Winnemucca and Alvin facilities in the second half. We continue to invest in our mining services downstream business, including enhancements to our mobile delivery systems fleet in growing markets to support increased sales of specialist emulsions such as 4D together with investments in our cyanide barge fleet to support increased sales. Allocation to growth capital expenditure was slightly higher this year with $172 million invested in line with our strategy of supporting growth in the Digital Solutions segment, capacity expansions and efficiency improvements in our continuous manufacturing plants and further development of technology-focused blasting solutions. Growth capital expenditure is closely managed in line with the capital management framework where investment must achieve hurdle rates significantly above our pretax weighted average cost of capital as evidenced in our growing margins this financial year. Sustainability-related capital expenditure was $2 million following completion of key projects such as tertiary catalyst abatement across our nitric acid plants. We expect 2026 capital expenditure to remain broadly in line with the prior year. Moving now to Slide 19 on the balance sheet and liquidity. We continue to strengthen our balance sheet during the year with a number of key funding initiatives successfully executed. During the year, we refinanced or extended $461 million of existing committed bank debt facilities and added a new $90 million debt facility. In July, we also announced the successful issuance of USD 390 million in the long-term notes in the U.S. private placement market. Now as an indicator of how Orica's balance sheet is viewed externally, investor demand for the notes were strong, with a total order book of circa USD 4 billion, and this resulted in funding at favorable pricing. As a result, at 30 September, the average tenor of drawn debt was 5.5 years, an increase from 4.7 years at the end of September 2024. Net debt ended at $1.9 billion, excluding lease liabilities, an increase of $304 million from the prior year. This increase was driven by cash outflows, including $630 million of on-market share buybacks and dividends, together with $415 million of strategic capital investment. This was partly offset by our strong operating cash inflows. Consistent with our capital management framework, our leverage ratio is 1.39x EBITDA and sits comfortably within the lower half of our target range of 1.25 to 2x. We maintained a robust liquidity position. At year-end, we had $747 million in cash and $1.6 billion in undrawn committed facilities. And in December 2024, Standard & Poor's reaffirmed Orica's BBB stable investment-grade credit rating. In summary, our balance sheet is strong. It positions us well to weather external volatility, support continued delivery of our strategy and, ultimately, increased returns to shareholders. Turning now to the dividend slide on Page 20. Under our capital framework, we have maintained our target dividend payout range of 40% to 70% of underlying earnings. The Orica Board of Directors today have declared a final dividend of $0.32 per share, which brings the full year dividend to $0.57 per share, unfranked, representing a full year payout ratio of 50.2%. This represents a $0.10 per share or 21% increase on the 2024 full year dividend of $0.47 per share. This increase, together with the successful on-market share buyback, demonstrates our commitment to delivering enhanced returns to shareholders in a sustainable and disciplined manner, consistent with our capital management framework. In closing, Orica's outstanding financial performance and disciplined capital management have positioned us for sustainable and enduring growth and to maximize shareholder returns. Our resilience, strategy, talented global team and commitment to innovation, ensure we are well prepared for future opportunities and to drive continued success for all of our stakeholders. With that, I'll now hand back to Sanjeev. Sanjeev Kumar Gandhi: Thank you, Jamie. Moving now to Slide 22. Our strategy is driving growth and market leadership by delivering innovative solutions that create value for our customers. This approach has underpinned consistent performance improvement over the past 5 years and notably the strong performance in FY 2025, a 13-year high. The successful integration of acquisitions, the technologies we have deployed and the markets we've entered are all translating into strong results. Orica today is an exciting and innovative company with a resilient business model and continues to deliver shareholder value going forward. Moving to Slide 20 to Slide 23. We continue to increase our exposure to resilient commodities while reducing reliance on thermal coal. This shift ensures we are aligned with global trends and future-facing commodities, supporting both growth and sustainability. Our strategic priorities remain fully aligned with the growth drivers I've discussed, continue to grow our core blasting business, drive uptake of digital solutions and the recurring revenue they bring and expand our specialized offering in mining chemicals. Underpinning these priorities is an unrelenting focus on commercial discipline and quality of earnings, operational excellence and collaboration with our customers on new technologies. Turning to Slide 24, I will give you an update on our strategic scorecard. Orica remains firmly on track with our safety, sustainability and financial targets. We are maintaining a strong safety record and have achieved our 2026 net Scope 1 and Scope 2 emission reduction targets ahead of schedule with further reductions planned by 2030 and 2035. We are driving organic growth, accelerating technology adoption and expanding into high-growth markets and future-facing commodities. Our average 3-year RONA is tracking within the target range of 13% to 15%, and this has been increased to 13.5% to 15.5% for FY 2026 to 2028. We maintain a dividend payout ratio, and our annual capital expenditures aligned with strategic priorities. Turning now to the outlook for FY 2026 on Slide 25. We remain excited about Orica's future. The strong performance in 2025 has given us an excellent momentum entering the new year. Despite external uncertainties, our core markets and business fundamentals remain robust. We expect to continue growing EBIT across all 3 business segments in the year ahead. In Blasting Solutions, demand for premium products and advanced services is expected to stay strong, driven by increased customer penetration and ongoing technology adoption. Earnings growth will be supported by improved product mix, recontracting margin uplift and commercial discipline despite lower thermal coal demand in Indonesia and the U.S. and a planned turnaround at the Carseland plant in Canada. In Digital Solutions, we see continued strong earnings growth. Mining companies are increasingly embracing digitization, automation and productivity analytics. We plan to further use the adoption of our digital offering across our customer base and use AI to improve productivity outcomes. This, combined with recurring revenue streams and an expected further uptick in exploration activity, will drive earnings higher in this segment. In Specialty Mining Chemicals, the outlook is very encouraging. Gold prices remain elevated, and industry forecasts point to sustained strength in demand for gold and hence, sodium cyanide. With our integrated sodium cyanide production network, we are well placed to supply this demand and win additional contracts and anticipate further earnings growth from this segment. Beyond the segment outlook, we expect depreciation and amortization to be $520 million to $540 million, slightly higher, reflecting recent investments. Given the ongoing geopolitical challenges and external market volatility, we will increase our focus on cost management to protect and strengthen our business performance. Net finance cost, effective tax rate and capital expenditures should be broadly in line with FY 2025. The sale of our Stage 2 surplus land at Deer Park is on track to complete during 2026. We do expect ongoing litigation costs will be around $50 million to $60 million, as previously disclosed. As Jamie mentioned, the increased share buyback of up to $100 million is expected to be completed by March 2026. Following the recent incident at CF Industries Yazoo facility on the 5th of November, we received a notification on 10th of November from CF Industries claiming force majeure that will impact certain of its contractual obligations and indicating that it is presently unable to manufacture industrial ammonium nitrate. We are assessing the notice, and we will leverage our global manufacturing and supply network to minimize any potential impacts. Looking beyond 2026 on Slide #27. We are confident that Orica will deliver sustained profitable growth and accelerate value creation for shareholders. Some key drivers over the midterm in the next 3 to 5 years. In Blasting Solutions, we expect our core blasting business to deliver GDP plus earnings growth through the mining cycle. We expect to grow faster than the mining industry. This will be driven by increased penetration of our products and services, continued rollout of our advanced blasting technologies and further improvements in our margin mix. The fundamentals of our core market are strong. Commodities like gold, copper and critical minerals are in high demand, and customers are seeking productivity and sustainability improvements that our solutions provide. In Digital Solutions, we expect further acceleration in earnings growth moving from low double-digit percentages into the mid-teens EBIT growth. The mining industry's digital transformation is just beginning. And Orica, through our BlastIQ, OREPro, GroundProbe and Axis Technologies, is at the forefront of this trend. We have opportunities to grow our digital services in both our existing customer base and in new markets like civil tunneling and infrastructure. High recurring revenue and low churn will underpin this growth, making it a prominent earnings stream. In Specialty Mining Chemicals, we now expect earnings will grow from mid-single digit to high single-digit EBIT growth over the medium term, reflecting the strong fundamentals in gold and potentially increase demand in base metal processing. We will continue to be laser-focused on translating growth into improved returns. We are targeting to deliver a 3-year average RONA of 13.5% to 15.5% over the next 3 years, an upgrade from the previous 13% to 15% range. This will be driven by higher earnings and disciplined capital use. We will maintain a strong balance sheet with a leverage range of 1.25 to 2x EBITDA and continue our dividend policy of 40% to 70% payout ratio. In summary, the outlook for Orica is very positive. We have built considerable momentum in FY 2025, and we expect that momentum to continue into this financial year. Our markets, especially in commodities like gold, copper and critical minerals, are favorable. Our technology-led strategy is resonating with customers as demonstrated by the uptake rates. And our financial discipline provides a strong foundation. We are confident in our ability to continue delivering profitable growth across all segments and to create substantial value for our shareholders and customers in the years ahead. With that, I'll now open to Q&A. Operator: [Operator Instructions] First question comes from the line of William Park of Citi. William Park: Firstly, just with respect to the headwinds that you've called out in Indonesia and the U.S., could you be able to provide some quantitative color around the earnings impact that you've seen in FY '25 for your Blasting Solutions business and your expectation of those headwinds into '26, please? Sanjeev Kumar Gandhi: Yes. So I'll start with the U.S. We've seen -- William, we've seen a 10-year trend of coal extraction in the U.S. declining gradually. That has not changed. Now we do have the new U.S. government talking about bringing out more coal, and that might give us a bit of an uplift, but it's still early days. Now I'm not sure whether this is going to happen, but I can tell you structurally the challenge that the United States has today. There's a lot of investment going into data centers driven by AI. And as you all know, data centers need a lot of energy. Now the U.S. power grid is kind of maxed out at the moment. There's not been significant investments there, and they have shifted from coal-based power to gas-based power obviously because of the cost arbitrage because gas is still very competitive there. Now if there is the surge, this predicted surge in electricity consumption as these data centers come online, the grid does not have capacity to supply power. The only latent capacity that the U.S. grid has is coal-based power plants because they are not running at full loads today. Now if that comes true, then we will see an uptick in coal consumption. But I'm not -- I can't predict if that will happen and when that will happen, but that's a possibility. So in our forecast for 2026, we have expected and we have anticipated a continuous gradual decline in coal output in the Permian Basin in the United States, and that is reflected basically in our forecasts. Indonesia is interesting. Indonesia has been a relatively new trend. Since June of this year, we've seen a decline in exports of Indonesian coal into China and into India. And so it's been recent and it's been low -- I would say, around 10% decline in exports of coal from Indonesia overseas. And there are 2 reasons for this. One is obviously the coal pricing has corrected downwards. And the gap and the premium that customers pay power customers for the high-quality coal, so the low ash content, high low sulfur content, high calorific value coal versus the lower quality coal, which Indonesia offers has shrunk. And this means that the higher quality coal, which is mainly Hunter Valley coal, Mongolian coal has stronger demand. So there's been a bit of a shift from Indonesian coal to the Hunter Valley coal and to the Mongolian coal. Now this obviously benefits us because it's a shift from the Indonesian demand into Australia and Mongolia, where we are active. But that has been the first trend. The second trend is that there's been an increased coal output of Chinese coal. So as a result, we have seen this decline in Indonesian coal exports. And we've seen a similar trend in India. India has been increasing their own coal production where we are active as a mining services provider, but they have slightly reduced imports from Indonesia. Now whether this is a long-term trend, whether this is going to continue, it's hard to say because China issues, coal quotas once a year. So we'll have to wait till after Chinese New Year to see what the new coal quotas are, which are indicators of how much China will import in 2026, '27 onwards and what would be the impact of Indonesian coal. So that's all I can tell you at the moment. It's a very recent development. We are watching it closely. But obviously, we do have exposure to thermal coal in Indonesia because we are the largest mining services provider in that country. William Park: That's very clear. And then my second question relates to the force majeure that you've alluded to involving CF Industries. Can you just remind us, so the volume take-up on an annualized basis was around 800,000 tonnes from memory. Presumably, all of this is at risk. And can you just provide some color around some of the options that you have available to effectively replenish these volumes? And maybe some color around, I guess, the contracted price and spot price. Any color around that would be great. Sanjeev Kumar Gandhi: Yes. Thanks, Will. Look, it's a very recent development. It's just -- we received the force majeure letter 2 days back. So we are obviously looking through it and analyzing what it means to us. You're right, the contract has an obligation to offtake up to 800,000 tonnes, but our nominations depend on our market needs. And obviously, given in mind the coal decline and all of that, we have not nominated to the full extent. So the risk is not 800,000 tonnes, if it is a risk at all. So that's the first answer. The second answer is, obviously, we have our own global network. We've got the big manufacturing in Carseland. We've got all the other alternatives. So at the moment, we are busy mobilizing our global network. You have to remember, this is not the first supply disruption that Orica has faced in the last 5 years. We've gotten, unfortunately, pretty good at managing supply disruption. So the team is busy working and we have lined up supply, and we don't foresee any immediate disruptions of supply to our customers. We need to wait and see what the supplier tells us in terms of duration. So once we know that, we'll have more information and then we'll have more planning. But again, just to keep in mind, we've got this notice just 2 days back. So it's very early days now. And our focus today is, first, to ensure that our customers don't get disrupted, which we are planning to do with our internal network and obviously through sourcing options. William Park: And just the last one around the trend, I guess, with respect to exploration that you're seeing and I guess the acceleration in momentum, particularly in Axis that you've alluded to. Could you provide some comment around some of the observations that you're having with respect to the exploration levels across the regions that you're operating and how Axis is sort of performing in the first 1.5 months in FY '26. Sanjeev Kumar Gandhi: Thanks, William. I mean, look, you know the exploration market value, you've been following us. We've been telling the market now for the last 18 months that we've seen an uptick in exploration after a nearly 4-year decline in exploration activity. So we've seen some record lows in exploration and with the juniors not investing capital and all the other challenges. On the other hand, demand continues to grow. So we're falling short on supply. So it was inevitable that exploration would pick up. We first saw this in gold. We've seen this now for the last 18 months, extremely strong pull in exploration activity in gold. We now start to see this in copper. This is obviously going to go forward into critical minerals and rare earths. So we continue to see a strong uptick in the exploration pipeline. We are a global player today. We've scaled up Axis globally. We operate in all parts of the world with the major drillers everywhere in the world. So we are at the front line and seeing what the pipeline is, and it looks very, very promising. That's the first piece of good news. The second news is when we met in Sydney when we did our digital roadshow there, we did say that we are going to launch into production drilling. So we are on the verge of launching the first Axis products into the production drilling market, which is obviously another exciting entry -- market entry for us. This, by the way, will double the TAM that we have in the exploration market. So just another example of when we bring in new technologies, we acquire new businesses, we grow the TAM very, very strongly, and then we obviously increase our penetration and market share. So it's looking very promising. And obviously, the pricing reflects the need for more exploration and more mining to happen and follow. So let's put it this way, I'm very optimistic about the exploration market. Operator: Next, we have Brook Crawford from Barrenjoey. Brook Campbell-Crawford: Sanjeev, just a quick one on the outlook. Just note that you expect growth in blasting in FY '26. Just want to check if you expect GDP plus type growth levels in FY '26 in blasting, I guess, adjusting for the carbon credit benefit you had in FY '25, which would be similar to the midterm target. Sanjeev Kumar Gandhi: Yes. Thanks, Brook. So yes, that's the guidance that we are giving you that during -- through the mining cycle, over the midterm, we are expecting GDP-plus growth, which means growth faster than the mining industry because of increased penetration. I did call out that for next year, we have a major Carseland shut at the end of the financial year, and you know what this means. This is a big shut. So it's more than a month. And this is basically led by our own maintenance schedules, but also our supplier turning down the ammonia unit for their own maintenance. This -- as you can imagine, as it did in 2024 with Kooragang Island and ammonia has an impact, obviously, on the blasting business and then the non-repeat of the carbon credits. But despite all of that, we do expect blasting business globally will grow, and we will perform better than in 2025 for a couple of reasons. One is, obviously, we still have recontracting benefits coming through, not just from 2025 but also new contracts that we are winning as we speak. We've got further penetration and scale up of blasting technologies. So wireless 4D, everything else that goes around with it, specialized emulsions and all the other products and services that we have there. So that's another area where we continue to see growth in mix and margin. And then we obviously have also new wins in new regions, in new markets that we have entered now in the last 18 months, and that starts to scale up as we speak. So we'll also see some tailwind coming from that. So overall, the segment will be growing, the blasting segment, but there will be these 2 impacts. One is the one-off carbon credits that has to be taken out. And then we will have the Carseland shut, which, as you all know, has some impact on our earnings. Brook Campbell-Crawford: That's helpful. And just on the buyback, you have increased to $100 million. It just seem a little bit light. I mean, for context, I think you did more than $100 million in the month of September alone. So just want to check why perhaps it's a conservative increase in that program through to the end of March. Sanjeev Kumar Gandhi: Yes. Thanks, Brook. It's a good question. As you can imagine, we have discussed this intensively with the Board. Look, my view is this is the first buyback we have announced and successfully completed in more than a decade at Orica. It's all about building our credibility and we tell you what we'll do and then we do what we tell you, as I've been saying over the last 5 years. First of all, I'm very happy that we completed the first tranche. We were expecting to do this over 12 months. We finished it earlier. We purchased below VWAP. So that's all very, very positive. And we still have a few more months to go. So we thought the best thing to do was to just extend the buyback so that we still completed within the 12 months. And we did want to buy 5% of our equity and we ended up with 4.1% because the share price went up. So obviously, we still want to do that 5%. Now in the new year, once we are finished with all of that, you know we have a Board refresh. We will have a new Chair coming in. We are also thinking about a strategy refresh with the new Board. So we'll put all of that together. And once we finish the March milestone, then everything else is again on the table -- back to the table. I'll hand over to Jamie. He wanted to add a few things there. James Crough: Brook, it's Jamie here. So as Sanjeev said, we were targeting around 5% of market capitalization for this buyback. To date, we've bought back about 4.1%. And I think I said at the Investor Day in March that we were targeting this over the 12 months. So we've been quite successful in terms of volume and cost. So the weighted average purchase price has been around $20.15, and you can see we've been trading about 12% above that recently. And given the time frame that we've got until March of next year, another $100 million would get us up to about 5%. And I quite like the March timing for a few reasons. So we delivered the net operating cash flow to our results in September. We release our results in November. We do our strategic planning cycle in February. So we look at what does the business look like for the next 2, 5, 10 years? What are the growth options that we have in front of us? How do we deploy capital to support that? What delivers the greatest return to shareholders? So I like the March timing. So we'll complete the balance of the $100 million, and then we'll come back next March and talk about what the focus is for the business then. Brook Campbell-Crawford: And just really a quick one on the blasting in term growth. I just want to confirm, are you talking nominal or real GDP growth? Sanjeev Kumar Gandhi: Nominal, Brook, just to make things easier for everybody. Operator: Next question comes from Mark Wilson from RBC. Mark Wilson: Sanjeev and Jamie. just a couple of quick comments about the CF Industries' force majeure, and I realize it is early days. Just with your contractual arrangements, should this be a prolonged shutdown? And you do have to take on additional freight and sourcing costs. Would you be able to recover those from other customers offering CF Industries or insurance? Sanjeev Kumar Gandhi: Yes. I cannot comment on CF. We've got the legal team looking at this force majeure announcement. So -- and it's an old contract, a complex contract. So we look through all of that. But yes, we will do everything we can to ensure that this does not come back and hurt us in terms of earnings and margins. There will be increased costs if you have to source for a longer period of time, we don't know. So we have -- our supplier has to tell us how long they are out and when will the supply restart, and we have a valid legal contract in play for the next 6 years. So it's obviously a discussion we'll have with them. Their clear focus right now is to look at the safety of the operations, and then there will be an investigation and all the other stuff that happens around the regulation. So it's still very, very early days. But as I said, we have covered supply. At the moment, we are fine. And the most -- more important data point is how long is the outage so that we can start preparing for all kinds of eventualities, including passing on costs and managing costs and everything else that gets related with this kind of disruption. Mark Wilson: Okay. That's great. And then just on the cash flow, good improvement there, particularly on the trade working capital side. Just wondering how much more progress you think you can make. And I did notice there was a reasonable increase in non-trade working capital. Can you just touch upon that? James Crough: Yes. Thanks for the question, Mark. We focus very heavily on working capital and have done a number of years now. We've done some benchmarking work on where we sit in the industry. So we've looked at as many companies in the blasting business or the agricultural space or the chemical space to sort of benchmark each part of our working capital. I think on the receivables side, if you look over the last 5 years, the region has done a great job renegotiating terms as contracts have come up for renegotiation, which is the best way to improve DSO. So I think in terms of benchmarking, we're probably in the top half in that space. There's more that we can do there. On the inventory side, it's interesting. We're quite hard on ourselves in the way that we manage inventory in the business. Comparatively, we're in the top quartile. If you look at our DIH, it's relatively strong, particularly if you look at inventory to sales. In our benchmarking work, we were top 2 in that space. But our issue was really around DPO. And comparatively, we were very much in the bottom 25%. I don't think that we were leveraging our buying power as well as we could have. So this year, the supply chain team has done a great job. We've renegotiated around $400 million of supply agreements. Around $250 million of those were below 30 days, they're now above 30 days. And around $150 million were between 30 to 60 days, which are now on greater than 60-day terms. So that supported the increase in DPO. But that remains our area where I think there's the most room for improvement. But we are very, very conscious of the conversion of EBITDA to cash, given we are a very working capital-intensive business. And the increase in non-trade working capital was basically due to restructuring costs, which have since been paid. Operator: Next, we have John Purtell from Macquarie. John Purtell: Just had a couple of questions, please. Just the first one, obviously, you've upped your medium-term EBIT growth targets for mining chems and digital. And I know you've alluded to some of the factors, Sanjeev, here. But obviously, the gold price moves around. So just be interested in what are the factors outside of the gold price that are giving you the confidence to up those targets? Sanjeev Kumar Gandhi: Yes. Thanks, John. So I'll touch briefly on digital, and then I'll go back to chemicals, which is a very special macro that plays out there. Digital, it's just a matter of us getting comfortable with our recent acquisition, Terra Insights. So the acquisition is complete. The business has delivered above acquisition business case. So we just get more comfortable with it. You know it was a new technology. This was the part of the sensing and monitoring piece in the value chains, both in civil and in mining that we were not active in. We were only active in monitoring through GroundProbe. So we have significantly expanded -- doubled basically our offering in that industry. So the first year was all about integrating, taking control of the business and getting comfortable with the technology. Now we feel comfortable. We see the runway. And that is why we've said instead of the low double digit, we'd like to grow this thing, the digital business and earnings in mid-teens. And this also then goes back to Axis. Axis has been with us a couple of years. We have invested capital. We have scaled the business up. Today, we are a global player with a significant market share, a clear #2 in the exploration space. And then as I said earlier, we are entering into production drilling. That's going to double our TAM, and we are starting from 0 market share. So we're going to go there and increase our growth. So -- and then obviously, our core blasting technology business, it's all about optimizing blast outcomes, fragmentation and less waste and all of the other stuff that we do there, which is very, very successful and appreciated. So digital business will grow. Earnings will grow harder to mid-teens, as we have said. Chemicals is interesting because it's not directly connected -- our business is not directly connected with the gold price. It obviously helps -- our gold is at $4,000 an ounce. There is a structural issue in the gold industry. There's not been enough exploration. The ore that exists today, proven ore deposits is very, very dilute. So you're talking 1 gram, 2 grams per tonne of rock blasted. And the demand is there. So what this means is you're -- first of all, you need to explore more, which is what we have seen in the Axis business, so that's coming through. Secondly, you see marginal gold assets over the on the right of the cost curve. They become more competitive now with the pricing of gold. So they start to come back into production. That means more demand for us. Thirdly, because the ore is so diluted, you have to blast more to get that gold ore out and then you have to use more extraction chemicals to get the purity we want. So even if gold supply doesn't increase, you have to increase servicing of the gold industry to keep with your output. And that's a very interesting macro that plays to our favor because we do the digital part in Axis. We do the blasting for the gold customers and then we do the extraction using sodium cyanide. So that's the first macro that gives us confidence. The second one is that we are now nearly finished with the Winnemucca safety upgrade. So we had one major turnaround plan. We split it into 2 to straddle the financial year 2025 and this one. Because the demand was so strong, I did not want to shut the site down. So we kept some part of the site running to cater to customers. And we have got 3 lines there. So we shut the first line then the second line for the liquids. We finished with the safety upgrades. We will finish the solid safety upgrades by next week, then we'll have the plant up and running, and then we're going to test capacity. And we're going to max our production, and that's where the uptick will come. And that's why we said let's increase our earnings forecast from the middle single digits to the higher single digit earnings. And that's what gives us confidence to do that, John. John Purtell: And just a second question on the profit bridge slide there, the margin mix is obviously up $81 million for EBIT in blasting. I think you mentioned that, that includes the $15 million carbon credit benefit. So you've got a $66 million underlying there. So I think the broader question is, do you think you can maintain that level of improvement in '26? Or is that going to be difficult given some of the thermal coal regional weakness you've called out? Sanjeev Kumar Gandhi: John, our focus has always been mix and margin optimization, right? I've told the market several times, our volumes don't really drive our earnings. So it's all about scaling up our blasting technologies. The WebGen has got a lot of runway to go, right? And we have now gone open cut in WebGen. So we started with underground the first couple of years. We have launched the second version. We are now looking at even the next iteration of WebGen, which is very, very exciting. So this thing has a long, long way to go. And our biggest success has been our new emulsion, the variable density emulsion, where we are able to basically control energy intensity within a hole and to provide the outcomes that the customers need. And now we're bringing it together. So now we are selling solutions, including WebGen and 4D together. And the upselling potential there because of the value proposition is huge. And this is going to drive continuously our earnings. And we are launching new products. We are launching new emulsions for cold climates. We are now launching new products for the underground sector. We are going hard into the metals industry. And as you know, the macros and mining are -- it's going deeper. It's going underground into more difficult geographies. And we are so strongly placed with our global footprint to cater to new demand coming everywhere in the world. That's why mix and margin will continue to drive this. And then on top of that, the digital business is all mix and margin right? There is no volume there. It's all about services, recurring revenue, SaaS. So that's continuing to grow. And then the specialty mining chemicals expectation is that volumes will grow and margins will also grow. So yes, pretty confident. The only call out, as I said earlier on the call, is 2026. We've got the Carseland shut down, and you have to pull out the $15 million from the carbon credit that was a one-off. Operator: Next, we have Scott Ryall from Rimor Equity Research. Scott Ryall: Sanjeev, I just want to follow up on your carbon credits comments just then, you still get carbon credit issued under the scheme that you've agreed with government, right? Sanjeev Kumar Gandhi: Yes, Scott, that's a good question. Look, we are generating the highest -- one of the highest quality -- I should temper that. One of the highest quality carbon credits in Australia. We've started on this journey even before the safeguard mechanism existed. So we obviously have got a head start over the other 214 heavy emitters in Australia who are under the carbon credit regime. At the moment, we are banking them, right? And that's why you see the difference. If you look at our sustainability results, you see a difference between gross and net emissions, which is significant. And that difference is basically the carbon credits that we are generating every day at Kooragang Island and Yarwun, but which we are not monetizing or we are not surrendering. So we are banking them at the moment. And we'll continue to do that until 2029 when the safeguard mechanism kicks in, which is basically a 5% reduction year-on-year. And at that point of time, we will be well under any kind of penalties, right? And then -- but what we are doing is we are banking these carbon credits for future because at a period of time, as our production grows, our emissions will -- we continue to mitigate them. But at some point in time, we are going to be caught by the safeguard mechanism credit, and that's when we are going to start to utilize those carbon credits. So my expectation is in the foreseeable future, we do not expect to pay any kind of penalties under the safeguard mechanism. Now if you have excess carbon credits and if the market is very strong and if a good customer or a partner comes to us and says, can you help us out, at the right price, we are willing to sell them. But our base strategy is that we would like to bank them because we don't need to sell them today. And we can bank them and keep them in our inventory. And at the right time, we can either monetize or use them to offset our emissions in the future. Scott Ryall: Right. Perfect. And then just if I can touch on the CF Industries issues again. You've given color, I guess, that it's all very recent. If I look at the facility in question, just -- it does just shy of 600,000 tonnes of ammonia, which, if that was all channels to ammonium nitrate, would be over 2 million tonnes. And you've said you're up to 800,000, but obviously less than that. Do you have a sense of how this puts the U.S. or the North American market more broadly than just your supply of ammonium nitrate? And I guess what I'm looking at is, you made a good comment that during COVID, you managed your supply chain pretty well as a global player. Do you have regional players who are highly exposed for this incident as well? Sanjeev Kumar Gandhi: So I mean, look, I don't think the numbers you quoted are correct, but you should check up the website to see what the right numbers are because I think these are published numbers. They are a big fertilizer player. They are not really an explosive player. We are the biggest explosives customer. So a lot of the excess capacity that they might have in their system mainly goes to the fertilizers industry. It doesn't really go into the explosives industry. If you look at the U.S. supply and demand for nitrogen, the U.S. market is long, and it will remain long because, obviously, the ag business is a seasonal business. And because of the coal decline over the last 10 years, we've seen length coming in the U.S. market. So the market was never short or tight. It's been long. And we have to see now what the tenure of the shut is and when can they get these assets up and running. And then we have to decide what -- if at all, there's a longer-term impact. But again, it's really, Scott, early days. I can't really tell you more than that. Scott Ryall: Okay. So you're more -- you're more focused on your internal ability to service your own customers' needs as opposed to the competitive advantage that may give you from being a global player? Sanjeev Kumar Gandhi: Absolutely. Because we don't produce in the U.S., so right, we are kind of agnostic to what happens to other people, and especially the fertilizers industry because we don't play in that industry. Operator: Next, we have Nathan Reilly from UBS. Nathan Reilly: Sanjeev, just with your East Coast gas supply, previously, you've indicated that you've recontracted, I think, out to 2031. Can I just confirm, is that you're fully contracted out to that period now. Can you also maybe sort of talk through the cost impact doesn't feel like it's that material going forward? Sanjeev Kumar Gandhi: You're touching a nerve here, Nathan. No, no. We are fully contracted until 2031 on the East Coast, both at Yarwun and at Kooragang Island. These are not easy negotiations. But we've got leverage because we are big. I think we are one of the largest consumers of natural gas in New South Wales. So we've got some leverage. I'm not happy because I have to pay more. But as you said very rightly, we have smart ways of managing that and mitigating that through internal efficiency measures and then also through pass-throughs. So I don't expect any kind of material impact on the -- on our margins in the -- on the East Coast of Australia. But this whole gas discussion is now really coming to a head. I think both gas suppliers and gas consumers like ourselves, we have come to the realization something has to give. The equation has to be more equitable. The government is working. We have submitted our own submissions to them and our own imports and facts and figures, and everything is in black and white. In this country, gas has quadrupled in the last 12 years, gas price, right? So we used to have average gas prices of $4 today, the market talks about $18, $19. So that's just ridiculous. It's not sustainable. So I'm now hoping and waiting for the government to come up with some kind of reservation policy, first step, on the East Coast because getting more supply in, that ship has sailed, right? It will take 3 to 5 years to get in more supply. So the first thing to do is use the Western Australia model, have reservation for genuine users like Orica. And then the second step to get in more supply, and then also look at the pricing so that everybody has an equitable stake in this industry. So that's where I'm hoping, Nathan, and we'll watch what the government does. Nathan Reilly: Okay. Very clear. And finally, just on your legal fees. I think you've guided that you're expecting that to be -- will be a significant item, but $50 million to $60 million, I think, in '26, but that's on top of the expenses you incurred in '25. It seems like it's an awfully big number. Can you just give us a breakdown in terms of what's -- obviously, there is CF arbitration issue in there, but just give us an idea of what else is hitting that number? Sanjeev Kumar Gandhi: Yes. So this is ongoing. We've had legal fees since 2020, 2021. We always had legal fees. Given the nature of our business, we are global, there's always some kind of contract issue with the supplier, with the customer, some IP issues. Last year, we spent some money on a significant IP issue in Australia, and we came out winners there. So that was money well spent. We are going to continue to invest in protecting IP and defending our IP also in 2026. There's a bit of that. There's a few legacy issues about some acquisitions and divestments made in the past, where we are tackling some of these either claims from our side or claims on the other side that we are defending. And then obviously, we've got the ongoing litigation. So it's a mix of everything, but it's in a similar ballpark as to what we had in 2025, and we will have them in '25 -- in this new financial year. Post that, we will see what happens in terms of the ongoing litigations and then we'll have -- we'll take a call. Operator: Next, we have Daniel Kang from CLSA. Daniel Kang: Sanjeev and Jamie, just have a few questions, which I might just ask all at once. So firstly, just on your upgraded medium-term EBIT forecast for Digital Solutions and Specialty Mining Chemicals. Can you just help us with your medium-term margin expectations? Secondly, given the strength of gold markets, just wondering if you can provide some color on sodium cyanide pricing trends. Is there scope to improve pricing terms on your customer contracts? And just finally, your Digital Solutions slide on Slide 11, I think. Great to see TAM has grown by 39% CAGR, but it seems like revenue has lagged that at 30%. So theoretically, it does imply some share loss. Can you just talk about market share trends? Sanjeev Kumar Gandhi: Thanks, Dan. It's the other way around. The day you acquire a business, the TAM comes into your accessible market and then you grow your market share. So if you look at the timing of the acquisition, we have grown faster than the market. And now the fact that the market has grown faster is because the full TAM is accessible to us with our new products and solutions, which are now integrated. And now we have the potential to increase our penetration by increasing our market share. So it's the other way around, not the way you put it, but it's the other way around because you first get the TAM and then you get the growth and the earnings out of it. So that's an upside that we'll do better. And then I mentioned in Axis, we were doing only exploration. So the TAM included just the exploration. Now we are launching this year into production. So the TAM has doubled, but our sales are still 0 because the product is being launched now. So as we grow into the production market, you'll see our sales revenue catch up. So that just tells you there's more upside. It's not a loss -- share loss. It's basically us starting into a new market and then bringing in new products and solutions and growing our share in that market. In terms of margins and pricing in sodium cyanide. Pricing is not that relevant. It's a commodity. It's the margin that we make out of it, and that's what we do here is play our supply network. So we've got 3 manufacturing sites in 2 continents, and we've got 4 distribution centers globally on top of that. So it's all about landing the product at the lowest landed cost to our customers, which basically gives us the best netback. And there's nobody else in the world who can do this because there is nobody else with multiple locations and supply chain facilities that we do -- we have. So that's where the upside is. So there are situations where sodium cyanide price might come down because the byproducts producer might ship a consignment through a distributor and dump it somewhere, but that does not decide margin. The margin is decided by how you optimize delivery and supply chain and handling of the product, which, as you can imagine, is a very difficult product to manage. So it's not directly relevant, the pricing mechanism. It's an input. It's a factor of input. So there's natural gas in it. There is a sodium hydroxide in there, and there's a bit of ammonia that goes into conversion. And obviously, the cost of these ingredients is very different in different parts of the world. So it's more a margin game and a netback game in this business. It's not so much a pricing game there. Operator: Next, we have from Ramoun Lazar from Jefferies. Ramoun Lazar: Sanjeev and Jamie, just one for me just around the capital position. Obviously, you've got Deer Park that you're expecting to monetize at some point in '26. I'm just trying to understand how you're thinking about capital deployment. Is there anything in the M&A space or in the portfolio that you think you need to add -- to continue to add to the strategy of growing beyond blasting? Or should we think about those surplus funds coming back to shareholders via buybacks? James Crough: Yes. Thanks for the question, Ramoun. Just your question on Deer Park. So we look at all of our land portfolio and whether it's surplus to need. So just in Deer Park, in particular, so the market engagement, so far, has been very positive. I think we're approaching conclusion of discussions with all interested parties. I think we'll know more by around March of next year who the most likely successful party will be. In terms of funds from that, I think it's going to be Q4 next year. The challenge will be, is it Q4 of our financial year or Q4 of the calendar year. So I'll know more about that in March of next year. We're also looking at the land that we have at Botany. Now first and foremost, our priority here is our environmental and community commitments and remediation. That's the primacy and the thing we focus on there most. As we work through the individual lots through remediation milestones, there may be opportunities to divest parcels as we move through remediation. That probably won't be until 2027. And obviously, if you look at the location of the land, it's in a very favorable spot. So you can imagine that, that would be well valued, but that will be probably 2027. What do we do with those funds? It really comes back to the capital management framework, right? So if we've got surplus balance sheet capacity, we will look at what options we have to deploy. If it's M&A, it has to be enduring investment consistent with the strategy. It has to deliver the requisite return above pretax WACC to be accretive to shareholders and accretive to EPS. We look at things all the time. We probably look at 50 things a year, most years we do none. Last year, we did 3 or 2. If there's no way to deploy that capital in terms of M&A that's consistent with strategy and EPS accretive and enduring, then we'll look to return it to shareholders. That's exactly the reason why we spent so much time on the capital management framework this year. Ramoun Lazar: Yes, understood. I guess what I was trying to ask is, is there anything in the portfolio that you think is missing that you could look at potentially adding to via M&A or that you can, I guess, develop internally? James Crough: Yes. It's a good question. So we're obviously the market leader in terms of the provision of sodium cyanide into the gold industry. If you look at the energy transition, right now, we don't have a chemical offering in the copper space. Now we won't get into sulfuric acid or hydrochloric acid, they're very much commoditized, but some of the specialist chemicals in the purification process, we will potentially have a look at. I don't expect that to be significant M&A. They're probably smaller bolt-on acquisitions at this stage. So we're actively looking at that. We may do something in that space next year, maybe not, but there's no significant M&A that we're looking at as we sit here today in that space. I don't know, Sanjeev, if you want to add to that? Sanjeev Kumar Gandhi: No, Ramoun, I don't think there's anything else missing in our portfolio. So what we are trying to do at the moment with specialty mining chemicals, given the business is so successful and we understand chemistry -- we were a chemical company or we are a chemical company -- is look at offerings beyond gold, so replicate the same model, do digital blasting and extraction in other commodities. So copper is an obvious target. We're also looking at rare earths and critical minerals because there is also a lot of processing that goes into that. And for processing, you need to handle hazardous difficult chemistry, reagents, flocculants, floaters, extractors. And this is specialized chemistry. This is basically, I would say, a black box chemistry where you sell small ingredients at very high margin, very high pricing, and it's all about value delivery in terms of optimizing extraction. So that's the area that we really would like to grow into because we don't own the chemistry there. The chemistry is available in the market, we know who has it, we have been engaging with quite a few people. But whether we make a deal or not, time will tell. It has to be at the right value for us. And if it is not, then we'll continue with the capital management framework here. In Digital, we don't need anything else. We are investing in AI, but it's all homegrown AI. We are developing our own agents. We are developing our own AI tools to leverage our sensors, our data, our software and the cloud that we have put into place to monetize more value out of that. So that's more organic growth. I don't expect unless something falls into our lap at the right valuation that we'll buy anything in digital. Operator: Our last question comes from Lee Power from JPMorgan. Lee Power: Sanjeev, just on Slide 10, where you chat about churn rates that have come down. Is there something specific going on with the type of contracts up for renewal? Or something else going on around how you're approaching pricing or your competitors approaching pricing that might explain the change in churn rate? Sanjeev Kumar Gandhi: Yes. So the churn rate has improved, which is a positive that tells you that -- so the churn rate basically means the percentage of businesses that we are losing, and that's come down, which is great. And this tells you that our offerings are getting better, the business is getting stickier, and customers are seeing value. So they are -- so we are obviously winning new business with new customers. What is really exciting is we win a lot of business in digital at our competitors' blasting sites, which is a lot of fun, as you can imagine. But we are also able to retain business and then expand businesses because digital business is fast moving. We come up with a new offering every, whatever, 6, 8, 9, 10 weeks. And it's all about putting stuff together and then adapting the solution to your particular ore body or your particular mining method or your particular commodity and then coming up with a new solution. So churn rate going down is very, very positive, and this means the business is getting stickier, and customers are loving what we are able to offer. Lee Power: Yes. I guess I was coming from like the other side, often like churn rate and price go somewhat in opposite direction. So I was trying to work out if there's something else where maybe the rest of the industry has kind of started pushing price as well and that's starting to show through in churn rates. Sanjeev Kumar Gandhi: We use the same philosophy as we do with blasting. We are here price leaders. We are the market leader in the digital space globally. So we are the one who set pricing and benchmarks. We are not a price taker. And we have not yet seen a reason to compete for share on pricing because our products are just superior and better. Lee Power: That's a good sign. And then sorry, just to go back to Brook's question around Blasting Solutions. Is your point that -- you've obviously got the medium-term targets, you're going to grow, but you -- given the Carseland shut, you might be below that medium-term target you've set. Is that what I should take out of your answer to Brook's question? Or if I'm mistaken, what should I be taking out of that? Sanjeev Kumar Gandhi: I did not hear you very clearly because I lost you for a minute there. Would you repeat that and summarize it, the question? Lee Power: Yes, sorry. So I was asking just a follow-up on Brook's question around Blasting Solutions and the '26 guide. There's obviously a lot of moving parts. You said there is going to be growth. I'm just trying to work out is, do those moving parts end up that your growth rate will be positive and yet below the GDP plus EBIT growth target you have in the medium term? Or is it going to be at or above that rate? Sanjeev Kumar Gandhi: Look, we'll try and grow earnings as hard as possible. I'm just trying to remind everybody of the one-offs, which is the 15 million carbon credit and the Carseland shut, right? So always keep that in account when you factor in earnings growth in blasting for 2026. Going forward, obviously, because these things will not recur in '27 onwards, then we will go back to a more normal cadence. Why am I calling out Carseland? Because this is as significant an event as we had Kooragang Island in 2024 where the whole site was down for a very extended period of time. And that's why I'm calling that out specifically. So yes, obviously, that will have more of an impact in 2026, and then it will wash out in 2027. So again, that is just something to keep in mind. Otherwise, we are committed to the forecast we've given you, which is GDP plus. Operator: Thank you for all the questions. That concludes our Q&A session. I will now turn the conference back to Delphine. Delphine Cassidy: Thank you all for joining us today. If there are further questions, please feel free to reach out to me. And we look forward to meeting you over the next couple of weeks. Thank you, and have a good afternoon.
Nina Grieg: Good morning, and welcome to Grieg Seafood's third quarter presentation. My name is Nina Willumsen Grieg, and I am the CEO of Grieg Seafood. Together with me for presenting today is also our CFO, Magnus Johannesen. Our agenda today is quite standard. I will start by presenting operations and some details, and Magnus will follow an update on financial review and capital allocation. Summing up, I will restate a little bit what we said last time on our strategy going forward. So starting with the highlights of the quarter. I am pleased to report that we have received full regulatory clearance for both U.S. and Norway. That was important for us. The progress in -- process in Canada is progressing, and we remain confident in closing the transaction during Q4. This will allow us to going into 2026, focusing on our core Norwegian operations and strengthening our financial position. Harvest volume for the quarter was almost 7,000 tonnes for continued operations. Due to lower market prices and higher costs, the operational EBIT for our farming activities was NOK 3.2 per kilo and close to 0 for the group. Operationally, Q3 has seen strong Freshwater results, but the environment at sea has been challenging as for many others. However, by taking out our nonperforming fish groups at higher cost this quarter, we were able to ensure a maximum MAB into Q4 and keep our guidance for the year at 30,000 tons. I will get back to the details on this. This quarter has also been a lot about setting up the structure for the new Grieg Seafood and getting started on cost reductions. As we emphasized last quarter, we are moving forward with a clear direction. We will go from global to regional and from growth to profitability. Our goal is simple: operational excellence. And we have made significant progress this quarter even before closing of the transaction. We have defined a new operating model with operational capabilities centered in Rogaland. We have reduced or postponed NOK 110 million in 2025 CapEx and made significant headquarter cost cuts -- cost cuts, sorry. Cost discipline remains a top priority. The main change we have done is the reduction of 55% of our staff across sales and shared service functions. It has been a tough task and a tough quarter for us, having to say goodbye to talented and valued colleagues. But today, we have a rightsized and highly capable team ready to deliver. Deep diving into operations and the quarterly performance all our Freshwater facilities, including our joint ventures and delivered solid production. At sea, however, this quarter has been challenging, as I mentioned, with high water temperature and sea lice pressure. As a result, some pens have had increased mortality and lower growth, and we decided to change our harvest plan to take them out. I am of the strong belief that success in fish farming is flexibility and robustness in our plants. Incidents will happen, but the higher average weight from post-smolt improves our risk profile and flexibility. The nonperforming fish we harvested was put to see as late as this year in March but was already at an average weight of 2.8 kilos. So while it's still small, it was ready for harvesting. Having this flexibility to harvest, our actions ensured optimal MAB utilization for Q4 as well as fish welfare. As a result, the farming cost for the quarter was high at NOK 70.4 per kilo, mainly due to this harvesting of small fish and also write-downs of biomass in general. We expect farming costs to decrease in Q4, but it will still be somewhat above our long-term target of NOK 60. So summing up, the key figures for this quarter, our cost level is not satisfying, but due to our high contract share, we are still profitable in Rogaland, with an operational EBIT of NOK 21.7 million. Post-Smolt is increasingly becoming the strategy for Norwegian salmon farmers, whether in closed containment or on land. However, few have advanced as far as we have in Rogaland. Our post-smolt is gradually increasing in average size, and we are seeing real economies of scale as both Tytlandsvik and Årdal Aqua are putting large smolt to sea. Årdal is expected to increase fish sizing significantly in Q4, with one batch already above 2.6 kilos. The post-smolt we put to sea now is significantly higher than any of our peers. The distribution of smolt size has shifted dramatically over the last few years, as you can see on the middle chart, with more than 50% being above 1 kilo. Our main objective for 2025 have been to minimize the lower-sized groups. And this year only our Broodstock smolt is below 500 grams. Finding the right sized smolt for each site is a key part of our production planning. And the benefits are clear, and we have presented them many times. We are seeing improved survival rates, reduced sea lice treatments and less time in sea per generation. This means that we can utilize our best farming sites more efficiently, and it is changing how we plan and how we optimize and how we harvest. Turning to the opposite side of our value chain with some comments on sales and processing with high price volatility and changing consumer trends, maximizing the value of our fish is a key success factor. So even with lower volumes, we will retain an internal sales team as we see several positive effects. While we are not focused on building brands, our packing station and sales team have a good standing within strong markets, and we have consistently outperformed the price benchmark. We also as we have tried to illustrate in the right chart here, we also see the value of strong collaboration between our farming and sales team. While difficult to achieve, we strive to plan harvest timing, responding to price changes from week to week. Value-added processing will also be part of increasing the value of our fish. The new facility at Gardermoen will ramp up through next year towards 10,000 tonne capacity, 8,500 tonnes next year, utilizing both internal and external raw material. We are actively seeking partners for external fish. Constructions will be finalized in December, and we expect production to begin in early January with organization and training already underway. And with that, I give the word to Magnus and finance. Magnus Johannesen: Thank you very much, Nina, and good morning, everyone. My name is Magnus Johannesen. I'm the CFO of Grieg Seafood. As last quarter, these financial numbers have been prepared in accordance with IFRS 5, which means that we are splitting between discontinued and continued operations in our financial reporting. This makes the figures somewhat difficult to interpret when going through slide by slide, but I will make sure that we try to stay on the right path. Starting with profit and loss for the continued operations. We see a decline in our sales revenues due to lower prices and lower average weights in combination with the lower volumes due to advanced harvesting. This is, however, offset by our very high share of contracts as well as very high superior share of the fish that we did harvest. All in all, we did come in with an operational EBIT of negative NOK 1 million, corresponding to a EBIT NOK 0.2 per kilo. However, it's important to note that this is heavily influenced by transitional cost increases coming from the changes that we are in. Hence, we do expect this to come down significantly moving forward quarter-by-quarter. There's also some tax effects from the transaction that we are now doing. We have reversed a deferred tax benefit as we no longer see the Canadian loans being in a loss position. This is the reason why we have an increased cost in our taxes this quarter. Moving on to cash flow. This is prepared for the continued and discontinued operations. Starting with the operational cash flow. We see net cash flow from operations coming in at negative NOK 304 million. It's driven -- it's positively contributing that we have a positive EBITDA of NOK 101 million. But at the same time, we have a significant biomass buildup in all regions, including the discontinued and continued. Moving to investment activities. The net cash flow for investment activities is negative NOK 168 million. However, out of this NOK 130 million is relating to the continued financing of constructing the postman facility in Finmark. And this shows how much we need to do until closing despite being a locked-box transaction. To compensate, we have a positive contribution from our net cash flow from financing activities of NOK 340 million. This is due to the continued financing, both for operational losses but also the CapEx commitments that we have in our divested regions. Isolating the discontinued operations, we have a net change in cash and cash equivalents of negative NOK 437 million, if were only looking at Finmark and Canada. Moving then to net interest-bearing debt, which is prepared for the continued operations but have elements from a discontinued operations within the bridge. I will try to walk through those numbers. So we started with the continued operations having a net interest-bearing debt level of approximately NOK 3.7 billion. However, going through the quarter, we still have to finance the discontinued operations, both in terms of operations but also in terms of investments. As such, we have an increase of net interest-bearing debt of a bit above NOK 700 million. But out of this, almost NOK 400 million is directly attributed to financing of ADAMSELV, Finmark operations as well as the Canadian operations. This shows how much pressure we still have on our liquidity and net debt levels from the discontinued regions but it's still a box transaction, and we do expect some of this to be repaid at closing. Focusing then on capital allocation. We wanted to clarify the numbers that we communicated that we prioritized dividend last quarter. As such, we have a preliminary estimate of NOK 4 billion in dividend distribution to our shareholders following the closing of annual accounts next year. As such, this is both through the 2 important elements. Grieg Seafood will have a very strong liquidity position despite this dividend. But we do have to ensure that we do have to comply with the equity ratio constructions as we start new Grieg Seafood. As such, we are focusing on 2 key aspects: we are still optimizing and reviewing our balance sheet. And as part of this, we are in the final phase of negotiating a new bank syndicate backed by Nordea and SEB. This will provide sufficient liquidity, sufficient financial partners as well as a very strong margin. As part of this exercise, we are optimizing our balance sheet as we move forward. And hence, we are -- we have every intention to redeem the hybrid bond either through a tender offer or through replacement capital. Secondly, we are focusing on liquidity. We need to make sure that Grieg Seafood going forward have sufficient liquidity to be a strong player in the aquaculture industry. We stand firm on our estimate of our operational liquidity buffer of NOK 250 million, but we have yet to determine the amount of liquidity needed to account for other risk. But we have intention to comply with paying further dividend as we move along in line with our dividend policy. And with that, I will give back the word to Nina to go through the future building blocks. Nina Grieg: Thank you, Magnus. One slide to sum it up. I will restate our strategic building blocks because they are becoming important for us. Strengthening, prioritizing and future proofing our operations. To strengthen Rogaland and enhance profitability is our main focus going into 2026. As we have started, we will do this through post-smolt development, MAB optimization, aligning our cost base with a new scale and ensuring a strong sales performance. This will form the basis for any new future development. Going along, we will consider potential growth opportunities. However, future investments will focus on projects that truly strengthen Rogaland, prioritizing the regional synergies that we can see there, not just increasing volume. And as our third building block, we will look into how we will position Grieg Seafood for the future. We are seeing a lot of regulatory uncertainties in our industry at the moment and our ambitions and plans remain flexible, but we are -- we will establish a structured process to expand the use of new technology also at sea. The Q3 results have not met our expectations. However, looking at the underlying fundamentals of our production, the organizational changes we have implemented and a positive market outlook for 2026, I am optimistic ahead to next year. Thank you. And I can open for questions. Henrik Knutsen: Henrik Knutsen, Pareto Securities. You have quite a lot more biomass on your balance sheet. You're going to harvest out less volumes year-over-year in Q4. And still, you're only guiding 1,000 tonnes of growth into 2026. Is that conservative? Or should we think that you have a very tilt towards the first half of the year in 2026 in terms of harvest profile? Nina Grieg: I think we -- for now, we stick with our -- what we have said, and we will get back with an updated trading update, but I think it is a -- I at least believe in that prognosis that we have set. So call it realistic. Magnus Johannesen: On the harvest profile. Nina Grieg: It's always naturally is good towards second half, of course, but we have a lot of big fish at sea. Herman Dahl: Herman Dahl, can you say something about the size you're harvesting out in Q4 and compared to more challenging sites you've taken out in Q3? Nina Grieg: Do you have the average size for Q4? I don't have that on the back of my head. But as I said, we -- of course, since we changed our harvest plan, we kept bigger fish, so some increase from this quarter. Herman Dahl: And one more, if I may. The price achievement in Q3 was very good. What should we think about price achievement going into Q4 with regards to contract, particularly? Magnus Johannesen: We still have a very strong contract position also in Q4, similar to the contract position we have had in Q3. Christian Nordby: Christian Nordby, Arctic Securities. In terms of the hybrid bond, you talk about the tender offer or replacement capital. Can you elaborate what you mean by replacement capital? Magnus Johannesen: Yes. So in accordance with the term sheet of our bond, we can replace the hybrid with subordinate capital to the hybrid and pay out the hybrid at [indiscernible] But we do -- we are important for us to maintain a good dialogue with the hybrid owners. So we will both see -- we have a dialogue with them in terms of a tender offer. And if a tender offer is not successful, we do have progressing discussions on our replacement capital facility. Unknown Analyst: [indiscernible]. Could you say something about the health of the fish groups expected to be harvested into 2026 and how that could compare to your long-term target of NOK 60 per kilo? Nina Grieg: We are done harvesting out the challenging groups early and end up Q3, early Q4. So the health now is good. Of course, we don't know what will happen with downwards and winter wounds this year, but I'm positive with the trend we saw last year. So all in all, it looks much better now than it did during Q3. Tore Andreas Tonseth: Tore Andreas Tonseth, SB1 Markets. A follow-up first on the question. You state that you see a normalization of the cost in Q4, so that means that you're looking at around NOK 60 in Q1? Nina Grieg: We don't guide specifically on that level, but towards our... Magnus Johannesen: We -- so the cost for the full year is expected to slightly above NOK 60, around NOK 62.5 and that gives you the estimate for Q4 as well. Nina Grieg: He asked for Q1. Magnus Johannesen: Q1, that will be a very strong quarter. Tore Andreas Tonseth: And also a follow-up with the locked-box, you are allowed to have a minus NOK 100 million EBITDA. The locked-box ended in October. So what's the -- are you within that? Magnus Johannesen: We are well within that yes. I would say, basically, it's -- there's no impact as of 30th September in terms of the EBITDA losses -- excess losses. Maybe open questions from the web. Unknown Executive: There are currently no questions from the web. Magnus Johannesen: Good. With no other questions, thank you very much for coming. Nina Grieg: Thank you. Have a nice day.
Operator: Thank you for standing by, and welcome to the Xero Limited 2026 Interim Results Conference Call. I am joined by Xero's Chief Executive Officer, Sukhinder Singh Cassidy; and Chief Financial Officer, Claire Bramley. [Operator Instructions] I would now like to hand the call over to Sukhinder Singh Cassidy, Chief Executive Officer of Xero. Please go ahead. Sukhinder Cassidy: Good morning from Sydney, Australia. Thank you for joining our investor briefing today covering Xero's financial and operating results for the half year ending September 30, 2025. I'm Sukhinder Singh Cassidy and I'm with Claire Bramley, our CFO. Our first agenda item is the summary of Xero's performance for the half year. I'll then pass to Claire to cover our financial results in more detail before I finish with strategic priorities and Xero's outlook. After that, we'll move to Q&A. So moving to a summary of our results on Slide 5. We are very pleased with our H1 fiscal '26-year results, which clearly demonstrates our sustained revenue momentum and execution against our strategy. We continue to achieve strong revenue growth across our 3x3 portfolio. This, along with another meaningful increase in profitability, enabled us to again deliver above the Rule of 40, demonstrating strong cash generation. I'm going to touch on the key metrics here, and Claire will cover them in detail later in the presentation. Operating revenue grew 20% year-on-year to reach $1.194 billion or 18% in constant currency. This strong growth comes despite a tough prior period comparison. Adjusted EBITDA was $351 million or up 12% year-over-year. Finally, our solid operating results and strong cash generation resulted in a Rule of 40 outcome of 44.5%, an increase of 0.6 percentage points year-over-year. I'll now spend a few minutes outlining the regional contributions to revenue growth. We saw each of our largest markets, Australia, the U.K. and the U.S., make a strong contribution. ANZ remains a core component of our portfolio and continues to deliver robust quality growth off a large base. You can see the sustained performance reflected in our results. We delivered 17% revenue growth year-over-year. This was the result of continued subscriber and ARPU expansion with subscribers up 7% and ARPU growing 12% year-over-year. Australia continues to drive strong revenue growth, up 19%. Subscribers were up 9% year-over-year. Australia is making good progress in a highly penetrated market, continuing to add new features to support ARPU expansion while delivering solid subscriber growth off an already large base. Its GTM playbook is evolving to progress new customer mix. But as we've said before, moving the back book of existing customers is a longer-term opportunity. New Zealand delivered quality growth in what is our most deeply penetrated market. Revenue grew by 8%, with net subscribers up 4% year-over-year. This is a positive result and ahead of economic growth in this mature market. Overall, the performance of ANZ reflects the strength of our core market relationships and our ability to drive growth through strong execution and a focus on customer value. Turning our focus now to the International segment, which covers the U.K., North America and our Rest of World markets. I want to note that this segment is fundamental to our future scale and is executing strongly against our strategic priorities. International revenue grew by 24% year-over-year. Looking at the individual markets. In the U.K., we delivered a robust performance with 25% revenue growth. Subscriber growth remained strong at 13%. We saw early indications of tailwinds related to HMRC's regulatory changes flowing through. We anticipate the majority of the market benefit will come over the next few periods. We are excited as this will support subscriber growth, but we would remind you that there is a negative impact on ARPU as smaller businesses adopt our lower-priced compliance offerings. North America continues its momentum, delivering 21% revenue growth despite the headwind of no revenue from Xerocon this half. Adjusting for this, growth was 26%, a great result. Subscribers grew 15%, a good outcome in what is typically a seasonally weaker half. I will talk about our Melio acquisition shortly, but keep in mind that the deal immediately provides a step change in the scale of our U.S. business and we're really excited about its ability to accelerate growth in the U.S. Finally, our Rest of World markets grew revenue by 22% with subscriber growth of 11%. In summary, strong execution in the International segment is building a solid foundation for sustainable, high-quality growth in these markets. This slide brings the key financial outcomes together, showing how we are successfully balancing growth and profitability, while delivering above Rule of 40 outcomes. We're consistently delivering EBITDA and free cash flow growth, which is contributing to strong cash flow generation. The free cash flow margin reached 26.9%, which you can see on the middle chart. Adding this to revenue growth, where we use the 18% constant currency metric, resulted in our Rule of 40 outcomes increasing another percentage point to reach 45%. We are very pleased with this result, which demonstrates our ability to deliver sustained revenue growth supported by disciplined investment to grow profitability while at the same time adding value for our customers. Before I hand to Claire, I want to briefly acknowledge the completion of the Melio acquisition in October. We're incredibly excited to bring our 2 businesses together, and I'll discuss this in more detail later in the presentation. Now I'll hand over to Claire to walk us through the financial results. Claire Bramley: Thank you, Sukhinder, and good morning, everyone. It's a pleasure to be here to present our financial results for the first half of fiscal '26. We have delivered another strong half. As Sukhinder said, our results show sustained revenue momentum across our portfolio of businesses and the effective execution of our strategy, allowing us to deliver another above Rule of 40 outcome of 44.5%. Starting with revenue. We have a large recurring revenue base spread across a global portfolio, which enables us to consistently deliver strong top line growth. Despite the tougher prior period comparison, we maintained strong revenue growth this half of 20% year-over-year. Subscriber growth was 10% to reach just shy of 4.6 million subscribers at the end of the period. ARPU growth was 15% on a reported basis, noting that our ARPU disclosures are based on the end-of-period foreign exchange rates. On a constant currency basis, ARPU growth was 8%. The continued balanced growth in both subscribers and ARPU drives our AMRR, which I'll talk about on the next slide. AMRR reached $2.7 billion. This represents a 26% year-over-year growth or 19% in constant currency. AMRR, like ARPU is calculated using end-of-period foreign exchange rates. The AMRR exit rate sets a strong foundation for growth. The short-term discounts and hedging are excluded from this number and will impact how this translates into full year '26 revenue. We saw both impact our revenue growth in the first half relative to AMRR growth. We are continuing to deliver very healthy gross profit, with gross profit margins of 88.5%. The slight reduction year-over-year reflects our continued investment in our customer experience. Now let's look more closely at the drivers of our 10% ARPU growth in the first half, which you can see on Slide 12. Price changes reflect amortization of the significant value we have added to Xero from new features and capability improvements. Price increases typically happen in the first half of the year by our Australia, New Zealand and U.K. regions. So we expect pricing to contribute more significantly to ARPU during this period. The specific price changes across our plans reflect a more strategic and segmented approach. This is evidenced by our decision to hold prices flat on all lower end Ignite plans in each of these markets. Moving to product mix. We are seeing positive results from our go-to-market strategy with new customer mix incrementally improving in the U.K. and the U.S. as our targeted sales motions become embedded. In Australia, there have been some headwinds as we added payroll back into our lower tier plans. This has seen some customer shift towards these plans. While overall, we have made progress on our new customer mix, as Sukhinder mentioned, back book progress remains an opportunity in the longer term. Across all regions, we are continuing to evolve our direct go-to-market channel to support our focus on mix. We are successfully targeting higher-value customers through applying short-term promotional discounts and deepening our lead generation through avenues such as partnership and affiliate marketing. Finally, platform revenue growth continued to drive ARPU expansion, largely due to strong payments progress. So let's turn to that. It is worth reminding you the payments contribution in the first half was entirely from our existing accounts receivable offering as the Melio acquisition did not complete until October. We continue to see excellent momentum with payments revenue growing 40% year-on-year, mainly from continued strong TPV growth of 35%. This revenue have been generated across our 3x3 and reinforces our confidence in the value of providing integrated payments and accounting to SMBs. Employees paid through Xero Payroll increased 5% year-on-year. This lower growth rate reflects the deep penetration and large existing customer base we have in Australia. We are looking forward to the opportunity to start driving payroll penetration in new untapped markets, such as in the U.S., where our embedded offering with Gusto goes live in December. Now let's look at customer retention. MRR churn was 1.09%. This remains below our long-term pre-pandemic average of 1.15%. The slight increase from the last half, in part reflects our decision to incrementally allocate investment to the direct channel as well as target growth in our International segment. As we've noted before, while these segments have structurally higher churn, they also typically attract higher ARPU customers, which aligns with our strategy to optimize the total value of each subscriber. Our focus on the value of a subscriber is shown in our LTV, which expanded to $19.56 billion with LTV per subscriber increasing to $4,261. With regards to our acquisition metrics, customer acquisition cost per gross add was $757, with a healthy and efficient payback of 15.2 months. The increase in CAC aligned with our strategic focus on attracting higher value subscribers to drive mix rather than just focusing on volume. We are investing in data-driven tools and building our internal capabilities across digital performance marketing to drive our direct channel. We are also continuing to leverage our partner-facing teams to better support our accounting and bookkeeping customers. This resulted in an LTV to CAC ratio of 5.6, slightly down from the prior period, driven mainly by the ANZ region, which remains at an industry-leading ratio of 10.7. Let's move to our operating expenses. The OpEx ratio, excluding acquisition costs, was 72.8% in the half. We have revised our fiscal '26 outlook and now expect the full year ratio to be around 70.5%. Within this, we've added Melio, adjusted for currency and importantly, realized some efficiency benefits while continuing to fund investments for growth. Our capital allocation framework remains disciplined and returns based, which in turn aims to deliver improvements in efficiency, as you can see through our revenue per FTE, which increased 16% year-on-year. As we realize this efficiency, we are able to decide the proportion that we reinvest in line with opportunities we see and our Rule of X approach. Now let's turn to the key investment areas for the half. Sales and marketing costs were 31.7% of revenue, a reduction of 0.3 percentage points year-on-year. This reflects disciplined investment in digital performance marketing as we continue to strengthen our internal capabilities. Product design and development costs grew 18% year-on-year, equal to 28.2% of revenue. Gross product spend, which includes capitalized costs grew 24%, equal to 34.6% of revenue. This reflects our continued focus on product velocity, including hiring domain experts to support our new AI capabilities. Our capitalization rate was higher at 47.4%. This was driven by more developer time being spent on releasing new products and features, many of which we announced at Xerocon Brisbane. General and administration costs were 12.9% of revenue, an increase of 2.4 percentage points. As we flagged at our fiscal '25 results, this increase was expected and is primarily due to higher executive personnel costs associated with the accounting treatment of option and sign-on equity grants announced last year. The majority of these noncash costs are not expected to recur in fiscal '27. Moving down to the bottom line. Our sustained revenue growth and disciplined capital allocation delivered an adjusted EBITDA of $351 million for the half, a 12% increase year-on-year. Our adjusted EBITDA margin was 29.4%, down 2 percentage points, driven by the nonrecurring G&A expenses and investment in sales and marketing previously mentioned. Adjusted EBITDA, excluding total share-based payments, improved by 0.8 percentage points to 38.8%, demonstrating the continued positive operating leverage in the business. Our profitability and discipline translated into strong free cash flow. We generated $321 million of free cash flow in the half. This represents a free cash flow margin of 26.9%, a significant step up from 21% in H1 of fiscal '25. The high-quality recurring nature of our business continues to deliver very strong cash realization from customers. Our payments to suppliers and employees grew only by 10%. This lower cash outflow relative to OpEx growth was partly due to the timing of some vendor payments as well as the higher proportion of noncash share-based payments. We saw a $25 million increase in net interest received, reflecting the higher cash balances held prior to completion of the Melio acquisition. This benefit is temporary as we have now completed the transaction. Finally, there was a limited impact from tax payments in H1 as we depleted prior year tax prepayments. We will enter a more normal New Zealand corporate tax payment rhythm in the coming periods, which will impact future cash tax payments. It's worth keeping these factors in mind as we head into the second half. Our strong cash generation further strengthens the balance sheet. We ended the half with a net cash position of $3.2 billion, supported by the net funds raised for the Melio acquisition. Following the completion of the Melio acquisition, our pro forma balance sheet shows a net debt position of approximately $0.5 billion with a pro forma net debt-to-EBITDA of approximately 0.9x. This reflects our commitment to maintaining a strong balance sheet while also creating a clear pathway of meaningful deleveraging. It also ensures we retain flexibility to continue pursuing our build, partner and buy approach to capabilities. It is important to note that the shift to a net debt position will increase interest costs and reduce interest received in the second half of fiscal '26. This change in our balance sheet position will create a headwind to our Rule of 40 performance in the second half of the fiscal year compared to the first half. With regard to the completion of the Melio acquisition, Slide 21 outlines the consolidated go-forward business showing Melio included on a pro forma basis for the first half of fiscal '26 compared to the same period last year. The disclosure here is intended to help with the understanding of the combined business on a like-for-like basis. We won't be providing separate performance metrics for Melio going forward. Its revenue contribution will form part of the new U.S. region, of which you can find more details in the appendix. In the first half of fiscal '26, underlying Melio revenue growth reached 68%, driven by the addition of around 7,000 new customers since the second half of fiscal '25 and by an increased usage per customer. Together, they delivered an 18% lift in underlying TPV. This strong growth will support the scaling of our U.S. business, as shown in pro forma revenue growth of 53% year-over-year. Turning to profitability. Pro forma EBITDA reflects Melio's current scale and maturity. I'll walk through a few of the key drivers of this result and why we remain confident in the scale opportunity and the returns it can generate over time. Melio's gross margin has been broadly consistent with fiscal '25. That's mainly due to the timing of product-led syndication additions. We are clear on the drivers to expand margin going forward through leveraging scale, syndication, payment mix and subscription growth. Operating expense growth reflected a planned investment in sales and marketing to support this growth opportunity. We expect to see scale benefits come through as Melio continues its rapid growth. There are also 2 future considerations not included in the pro forma that I want to call out. First, it doesn't reflect the shift to a net debt position or the noncash amortization of acquired intangibles we highlighted at completion. Second, the accounting treatment of Melio's management earnout and incentive plans will add about $10 million in operating expenses in the second half of fiscal '26, which isn't reflected here. The pro forma Rule of 40 came in at 39.8%, a really solid outcome. While it does face some headwinds from the shift to net debt, we remain very confident in our ability to deliver against fiscal '28 Rule of 40 and revenue growth aspirations. To close, the first half has been another strong period of execution for Xero. We're delivering high-quality revenue growth, strong cash generation and remain well positioned to keep investing with a disciplined Rule of X framework to capture the significant opportunity ahead. Thank you for your time. I'll now hand back to Sukhinder. Sukhinder Cassidy: Thanks, Claire. I'll now talk to our FY '25 to '27 strategy and update you on a few recent news we've made. As you know, our vision and purpose are constant at Xero. Successfully delivering against these is key to achieving our aspiration, which I'll cover in a few moments. Our winning on purpose strategy, which you saw us lay on Investor Day in February 2024, has 4 key pillars: win the 3x3; build a winning GTM playbook for Xero's next chapter; win the future, which is about focus best on innovation; and lastly, unleash Xero and Xeros to Win. These 4 pillars are underpinned by our disciplined capital allocation framework for investment. This tightly aligns with our strategy, our Rule of 40 aspirations and our build, partner or buy approach to pursue organic or inorganic opportunities. We're making great progress executing against our strategy with focus and purpose to deliver tangible value for our customers. We've made a number of moves in the last 6 months, which we highlight on Slide 24. There are 3 key moves here that I want to spend some time on. Firstly, we continued our strong product delivery momentum through working hard to build product ourselves, but also through partnerships and our acquisition of Melio, which I'll discuss shortly. We've made significant progress this half in delivering important product features to help customers across our 3 largest markets, Australia, the U.K. and the U.S., to complete the 3 most important jobs to be done, accounting, payroll and payments. A few of the key product highlights rolling out are Analytics Powered by Syft across U.S., U.K. and Australia as well as launching our new customer homepage currently in beta to give customers an insight rich view of their business performance. In addition, we're announcing today the beta launch of our embedded payroll solution through our partnership with Gusto to provide U.S. payroll capabilities. Secondly, we implemented a series of changes to strengthen our go-to-market playbook. Our core focus has been increasing the sophistication of our sales motion to improve mix. As Claire noted, we've made encouraging progress on this, especially in the front book, and we're intensifying our efforts on the back book for existing customers. Thirdly, we're allocating capital for long term as we look to win the future through strategic investments in AI and mobile. We're really excited about the next evolution of JAX, our AI financial superagent. I'll spend some more time on this in the next few slides, but I'll call out one key highlight, which is our decision to partner with OpenAI to bring search capabilities for financial information inside the Xero product. We also continue to improve the mobile onboarding process and make mobile payments easier by rolling out tap to pay and adding mobile bill upload and simple invoice template setup. And we're also enabling our people to move faster for customers and do the best work of their lives, so we can unleash Xero and Xeros to Win. We're empowering all Xeros with AI education and tools to automate repetitive tasks, increase internal efficiencies and drive better value for our customers. We now have over 70% of engineers using AI in their daily workflows and nearly 50% of customer support responses are drafted by AI. Alongside this, we continue to invest in our purpose and performance-based culture with improved employee development opportunities for all Xeros. So you can see our investment is disciplined and aligned to our strategy. Coming back to our investment in AI. On the next slide, I'll talk to this in a little more detail. As a leading global SaaS business that has long been powered by machine learning and traditional AI, Xero continues to see AI and generative AI specifically as a significant opportunity to innovate and invest, all with the goal of unlocking significant value for our customers. At Xerocon Brisbane in September, we were thrilled to announce the evolution of our AI financial superagent, JAX, Just Ask Xero. JAX is built on Xero's AI agentic platform, which orchestrates multiple specialized subagents across Xero. Our vision is simple, to reimagine financial management using AI to help small businesses and their advisers work smarter together. This vision is supported by 4 unique pillars. The first is reimagined experiences. We're leveraging AI to reimagine the Xero experience. The goal is to have JAX help our customers interact with Xero seamlessly across multiple touchpoints from xero.com and mobile to tools such as e-mail and messaging. We've already begun leveraging this strategy with the beta launch of our new homepage. It has JAX embedded in a customizable insight-rich design, quickly showing users what to focus on so they can take action sooner. The second pillar is automated actions and workflows. JAX is designed to save our customers' time by automating routine tasks and workflows such as invoice creation and automatic bank reconciliation. We launched the beta for automatic bank rec in October, which tackles one of the most common and time-consuming jobs on Xero. Users retain full visibility and control via the new reconciled page. This single view allows users to see and understand JAX's reasoning, easily make corrections and manage supporting documents. The third pillar is actionable insights. JAX unlocks advanced financial insight for our customers by combining data from their own business with information from connected apps. This also allows them to explore their data and dig deeper into their finances. JAX also brings them answers from beyond their business, incorporating real-time external data from across the web on topics like market trends, thanks to our collaboration with OpenAI. The fourth and perhaps most important pillar is to be a trusted partner. JAX is built on a foundation of security, privacy and decades of accounting expertise, offering a trusted partnership to our customers. Its accuracy is superior to AI, relies solely on large language models. This ensures greater reliability and confidence in the output. So to summarize, we told you at our last result, we have an ambitious AI agenda in FY '26, and you can see we're pursuing this and adding customer value at pace. We have strong confidence in the value of this technology. Our key focus for now is helping customers engage and realize that value. This will in turn further inform our approach to monetization. I'm excited to dive into the next steps for integrating Melio, but first, let's quickly recap the powerful rationale behind this acquisition. It's what fuels our confidence in the significant value creation opportunity ahead. First, there's a critical customer need in a large and growing market. SMBs and their ABs watch their accounting and payments together. It creates efficiencies, improves their cash flow and importantly, saves them time. And this is reflected in the significant TAM for U.S. SMB payments. Secondly, the combination is a powerful strategic fit for Xero. Acquiring Melio aligns with our 3x3 strategy and gives us a step function change in our U.S. product proposition, scale and monetization opportunity. Third, this is a best-in-class asset. Melio has a world-class team and platform. Many of you have already met Matan. The quality he and his team bring to Xero is significant, and this is demonstrated in the exceptional growth and strength of the Melio offering. Fourth, and most importantly, together, Xero and Melio is a compelling value creation story. These are 2 complementary platforms that can drive significant scale together. Melio's growth trajectory in U.S. penetration uplifts our scale in the U.S. business from day 1 with much improved unit economics and a larger and stickier ARPU. As this business continues to scale at pace and is powered by Xero's growth engine, we have strong confidence in meeting our aspirations and capturing a very attractive value creation opportunity, and we are moving quickly to accelerate growth and capture this value. We are very pleased to announce our first key integration milestone, the launch of Melio bill pay inside of Xero, which is now scheduled for December 2025. This will immediately enrich our U.S. offering, providing small businesses with a seamless and powerful bill payment solution directly within the Xero platform. It will give Xero customers access to Melio's payment functionality to help them save time and optimize cash flow, including multiple ways to pay and visibility on payment times. Our ability to move at pace on this integration is a testament to Melio's platform and the efforts of both the Xero and Melio teams to drive towards realizing the value of the acquisition. In addition to this, we're moving quickly to leverage Melio's GTM capability and reach to drive Melio's stand-alone growth and cross-sell opportunity to xero.com. I'd now like to move to our FY '26 outlook. As Claire said, we have lowered our OpEx guidance and now expect total operating expenses as a percentage of revenue to be around 70.5% in FY '26. As we have previously explained, there were some nonrecurring elements in this, and we expect the ratio to be lower in H2 than H1. This ratio now includes Melio but excludes the impact of transaction costs. Incorporating Melio provided a small benefit with other drivers, including improved efficiencies contributing the majority of the reduction. Of course, in addition to this, we continue to pursue our aspirations which we updated when we announced the Melio acquisition. We expect the combined business to significantly accelerate U.S. revenue growth and give us the opportunity to more than double Xero's FY '25 group revenue base in FY '28, and this is before synergies. And we continue to anchor on our Rule of 40 aspirations and deliver a balance of both growth and profitability at the group level. This revenue growth outcome is anticipated to support the achievement of greater than Rule of 40 outcomes for the group in FY '28 with the dilutive impact in the interim as we continue to invest in Melio and as business scales. Our operations are strong and they are credible, and we're really excited about achieving these. I'd now like to wrap up. There are 3 key themes from today's presentation, sustained strong revenue growth across our 3x3 portfolio, continuing to deliver a greater than Rule of 40 outcome with strong cash generation and the successful execution of our strategy, securing key wins across our 3 core priorities. This momentum is consistently enhancing the value we deliver to our customers as we continue our journey to become a world-class SaaS leader. Before I conclude, I would like to acknowledge our teams around the world. And I really want to thank them again for their hard work as we continue to do all we can to support our customers and partners. That concludes our presentation. I'll now pass over to the moderator for your questions. Operator: [Operator Instructions] The first question today comes from Eric Choi from Barrenjoey. Eric Choi: Could I just do 2. Sorry, it sounds a bit of a long-winded one, but just the share price is down today, and I think it's because there's an implied accounting EBIT downgrade versus consensus. Just wanted to expect at an operational EBITDA hit and actually maybe an even top line upgrade. And so if you just bear with me on the logic, like if I look at your revenues and AMRR of the base business, it actually implies second half revenue growth is accelerating versus the first half, which consensus didn't have. And then Melio grew 68% on an underlying basis, and so market growth of Melio was below this as well. So revenues are clearly ahead. And then on cost, and if we just take accounting D&A out of it for a second, you've actually lowered your core cost to sales, which offsets growth in the kind of Melio's gross margins holding flat. So at that EBITDA level, it actually doesn't need to move much. But then at this accounting EBIT level, which incorporates D&A, sell side, including myself we're kind at bad modeling amortization and purchase price amortization and all these other things. So just that D&A ends up being high and therefore, you've got an accounting EBIT business. So I guess the overall question is, operationally, it's actually doing in line to better, but you've just got this accounting EBIT miss. Is that right? Claire Bramley: Eric, this is Claire. So yes, thanks for your question and laying that rule out. I think the first thing I would say is we're really pleased with the strong execution that we've seen in H1. And to your point, really strong top line growth coming from the Xero standalone business and then a lot of momentum as we move into the second half. So you're absolutely right. You can use that AMRR as a kind of foundation for that momentum that we see as we exit the first half, and then that really strong Melio growth that we reported, put those together for the second half. We're really excited about the growth opportunity, not just for the second half but also in the medium to longer term. So I think that's really important to note, and gives us a lot of opportunity. From a cost standpoint, yes, I'll just double-click into the reduction in the OpEx ratio guidance that I gave. I just want to know, we have included Melio into that, but Melio does have a very limited impact. And also from a CapEx standpoint, we were anticipating in H1 that the CapEx rate would be higher. That is always aligned when we do like a Xerocon event. We published, as Sukhinder suggested, in our prepared remarks, we've been publishing a lot of new product features and great product velocity. So that was factored into our overall original outlook for OpEx. So as you think about that reduction, that's actually coming -- little is coming from Melio. None of that improvement is coming from capitalization, and it's actually coming from other areas, the key factor being operational efficiencies but also revenue. So this should be a strong improvement from an overall EBITDA. I'd stand to your point, in terms of rolling through that D&A. But I think it is really important that we are anticipating those capitalization rate to reduce in H2 and so that this improvement that we're seeing is really coming from underlying operational efficiencies, some currency and very limited impact from Melio. Eric Choi: Can I just do a quick follow-up, and I realize you never go into exact numbers, but just to kind of say future variance, just a rough framework for how we should all think about FY '27. I guess if you use your cost to sales guidance for FY '26, it's pretty easy to get to an EBIT number. And if you add some D&A back, you're kind of in the $740 million to $750 million EBITDA range for FY '26. And then you've told us that $45 million comp impact falls out next year. And then obviously, you get operating leverage on any revenue growth that you deliver as well. I mean it seems like a fairly obvious question, but FY '27 EBITDA would still have to be in the 800s. Just high level, have I missed anything there? Claire Bramley: No. I think as you think about the EBITDA, clearly, as you said, I'm not going to be giving an outlook statement for fiscal '27. But I think what I would do is kind of double down on the fact that we are continuously focused on that overall acceleration of revenue growth and remaining high revenue growth, and we see a huge opportunity with Melio. If you add that into the fact that we are continually focused on efficiency, you've seen great, I think, historical track record in the last couple of years of Xero, reducing its overall OpEx ratio. And then I've done that, again, adjustments today with lower OpEx ratio. And I think the advantage of that is that we're investing. We're continuing to invest in profitable growth, but also doing it in a very efficient way. And I think if you think about scale, you think about the excellent gross margin, I mean, we're above 88% on Xero underlying gross margin and you think about that OpEx efficiency ratio moving forward, a lot of good indications in terms of the opportunity ahead. Operator: The next question comes from Bob Chen from JPMorgan. Bob Chen: Just a quick one on the churn. Obviously, it's ticked up a bit. And I think your comments earlier is that, that has been driven by that focus on business edition. I mean when we think about subscriber growth from here because of that shift towards focusing on business edition, you get that sort of high change, could we naturally expect your incremental subscribe from you just to be a little bit lower, but with better ARPU outcomes? Sukhinder Cassidy: Thanks for the question, Bob. It's Sukhinder. So a couple of things. First of all, I think that, as we've noted, churn is still below historic pre-pandemic levels, and we feel good about kind of where churn sits overall. I think a couple of factors are obviously driving that, that are ones to think about. While we don't break out the difference between the direct channel and the partner channel, we have said that direct is really performing. And that and the nature of that channel is that it does have higher churn. Performance marketing will bring more to the top of the funnel and more will churn out. In that, historically, our partner channel has lower churn and direct as we allocate to it, has higher ARPU, higher lifetime value, but also churn. So there's a mathematical reality. So that's the way I would think about it. I also just think we continue to feel very good about our overall balance on quality of subscribers and quantity of subscribers. If you note, that is a very explicit shift that we made in the strategy on Investor Day. It was coupled with our long idle removal. And it really speaks to, like we're always going to be keeping an eye on the quality of the sub and obviously, continue to want to build share and look at overall absolute subscriber numbers. So I'd say we feel very good about the overall trend, where churn level sits and recognizing that the direct channel will drive both a higher LTV customer but also higher churn mathematically. Bob Chen: Great. And just a quick follow-up to that. We've obviously seen ARPU increase significantly over the last few years. Has that also played into that sort of churn number as well? Sukhinder Cassidy: In what regard? I mean I think the business edition is, again, driven disproportionately by our direct channel, and that already has a higher ARPU. So again, I'd say it's a mathematical outcome more than anything else. But I think when we talk about churn, it's not really about ARPU. It's about having a big performance funnel where you're inviting a lot of prospects into the product. And then you will see an increase when you do that, have that do paid motion for direct customers, you tend to see higher churn in the first 90 days as an example. As more people -- lookie-loo is not quite the right example, but they're really just trying the product. Like I said, I think it's more a function of that than ARPU specifically. Operator: The next question comes from Garry Sherriff from Royal Bank of Canada. Garry Sherriff: Just focusing on North America. The revenue missed market estimates, and it sounds like it's mainly Canada being weak and also cycling Xerocon revenue. I mean is there anything else we're missing there in North America? I mean was discounting higher than usual? Or is it just pretty much all Xerocon revenue that you're cycling? Sukhinder Cassidy: Sure. I think there are 3 things. First of all, you are right, if you back out Xerocon, the underlying growth you feel very good about and then if you back out Canada, you get to something north of 33% -- about 33% growth in the U.S. And so I think it's a function of Xerocon. Canada remains subdued. I think we continue to say that. Now you will have seen in this -- and in the last 30 days, there's been an announcement that open banking may finally be coming to Canada. We await that as a good positive, maybe momentum driver in the market. But to date, I'd say the move to cloud has been really suffering from lack of open banking. And the other piece is, remember, H1 is seasonally a weaker half for the business, for the North America business, given when taxes get filed. So I would note that we felt particularly good given it's a weaker seasonal half. And when you look at that U.S. growth, it's, as I said, back out Xerocon, U.S. alone is about 30%. Garry Sherriff: Got it. Okay. And just a final one on Melio. Just wanted to clarify the numbers that you've reported. Does that include the Intuit subs that are to be exited? I just wanted to try and understand whether that was the case? And if so or if they're still in there, can you maybe just remind us how many need to be exited and when that's expected? Because I'm just trying to get an organic like-for-like growth for Melio. Maybe you already reported. I'm just not clear myself. Claire Bramley: Yes, no worries, Garry. I would point you to the disclosures in our Investor Relations. We have given it to you on an underlying basis. So as you look at that kind of the new pro forma numbers we've given for H1 of '26, you can see that, that on an underlying basis, that is increasing. So we have adjusted for the -- for that kind of syndication partner exiting. And I think even on that underlying basis, you can see some really strong growth, both year-over-year and half -- over half both in the number of customers, in the TPV per customers, in the take rate. And I think we also mentioned that underlying revenue growth of 68% is clearly really, really strong. Operator: The next question comes from Kane Hannan from Goldman Sachs. Kane Hannan: One simple one. Just the comment in there around the combined business significantly accelerating U.S. revenue growth. Is that relative to the 49% pro forma number that you've done? Or is it more the 33% Xero stand-alone U.S. growth that you did in half? Claire Bramley: Yes. I think if you look at the additional disclosures because you now see U.S. broken out separately and you see that in our appendix slide. So like you can see that the Melio growth in the first half is more than double our fixed Xero growth. And from a scale and volume standpoint, it's actually 4x. So yes, that kind of more than doubled you can see that just as we've disclosed those pro forma numbers in H1. And all of our announcement came for -- to make a finer point on it. When we said significantly accelerate, remember, we were comparing to Xero stand-alone at the point of announcement, right? So... Kane Hannan: Yes, that's helpful. And then just the comments on Melio's GP margin sort of being flat. They're calling out the drivers extension being firmly in place. I mean does that mean you should be thinking about margin expansion in the second half? Also what are we waiting for, looking for, for that GP margin to start to tick up if the drivers are in place? Claire Bramley: Yes, I think there's multiple things to think about when you think about gross margin for Melio. You've got the benefit of scale and the additional margin dollars that come through. And clearly, when you've got a growth rate at 68%, there's a big opportunity there. And then there would be areas with regards to the margin expansion. We are anticipating in the kind of short term, there to be a little bit of noise on the rate. But what we're pointing to is that we really do see those opportunities to expand both from a volume scale standpoint and a margin expansion over the medium to longer term, which gives us that confidence in hitting the aspirations that we laid out and getting above the Rule of 40 on a combined business in fiscal '28. Sukhinder Cassidy: Yes. One other thing, Kane, I think, to Claire point, remember that there is margin take rates, and we talked about in this half, Melio having higher take rate products, improve like mix type of payments. So obviously, payment mix on melio.com is driver. Let's also remember though that a lot of GP driver is syndication. And syndication, this is where Claire says there will be noise. When partners come online, your syndication line also has a gross profit and attractive gross profit. So part of it is what you do on melio.com. Part of it is the puts and takes of partners deploying. And remember, Melio does not entirely control when partners deploy. This is why we have a lot of confidence over the medium term and the guidance -- not the guidance, the aspiration that we gave for '28, but I would remind you that partner syndication timing is not entirely Melio's control. So this could create noise within a quarter or a half, certainly. Operator: The next question comes from Roger Samuel from Jefferies. Roger Samuel: I've got 2 questions. First one, just on ANZ. I understand that you to invest more into the direct channel, but the LTV to CAC ratio is coming down. I mean 10.7x is still a very good number, but it's coming off 14. And do you think that it's becoming harder to attract new subscribers into the base? And where do you expect the LTV to CAC ratio to land? Sukhinder Cassidy: Sure. Well, first of all, I think, Roger, you hit the key point. 10.7 is still a very attractive number. And I think it's fair to say when you're in a market that's very saturated, where you have high brand awareness, on a marginal basis, the next customer may be more expensive than last one. On an absolute basis, it's still attractive to go get them. And that's exactly what you see in our numbers. So we always need to make a call. Unlike look, on a marginal basis, would we rather pay this for the next customer, not get it, and our choice continues to be, we're going to be very mathematical. And if there is another subscriber to go get on an absolute basis, we're going to go after it, and we continue to see that opportunity. Now over time, I'm not going to give you an LTV number today. But as you know, we've also included that over time, we see the to further penetrate this market with more mix. We also see the opportunity to drive more attach of payments and other products. We just announced BGL and Workpapers. So we're going to continue to also drive I'd say, more penetration of different products for ABs and SBs through this business that over time, we hope continues to accrete to LTV. Roger Samuel: Okay. And maybe a follow-up question on Melio. So if I back out Xero stand-alone looks like Melio incurred losses of about $56 million in the first half '26 on a pro forma basis, that's lower than minus 60% in the PCP. So I suppose the question is, when do you expect Melio to be breakeven? I mean if you look at the guidance which is yet to reach a Rule of 40, you're pretty close to that Rule of 40 already as a combined business, plus or minus the adjustments to interest expense and earn-outs. So yes, just wondering when you can expect Melio to -- Melio business to be breakeven? Claire Bramley: Yes, I'll take that. So first of all, to your point, we did have a great combined Rule of 40 result in the first half. But as I mentioned in my prepared remarks, there are some future impacts that will negatively impact that as we move forward. However, we -- I think all of these numbers just give us that confidence in the profit opportunity that we see ahead in the Xero and Melio combined business. I think we're not going to give an exact date in the sense of when does Melio become profitable. I think we're months into owning them. We are extremely happy with the performance that they had in H1. The integration of the business into Xero, whether it's the getting that go-to-market, those go-to-market opportunities running, whether it's the product announcements and the Melio on Xero coming out in December, there's so much progress being made, which just gives us that extra confidence to deliver on those aspirations. And I think I'd come back to the fact that we are very optimistic about the opportunity from a profitability standpoint that we get from both the scale but also that margin expansion, but it's over time. Operator: The next question comes from Rohan Sundram from MST Financial. Rohan Sundram: One for me. On the operating environment, how are you seeing the state of demand from SMBs at the moment? And how would you compare it to 6 months ago and whether there's been any changes or improvement? Sukhinder Cassidy: Thank you for the question. First of all, I'd say we see continued good demand, strong demand for the Xero product. And I think when we look out to indicators like XSBI, which as you know is our data set, we just published Australia and New Zealand results as well as -- and what we saw in both markets as well as the U.K. is Australia showing nice signs of recovery, New Zealand showing some signs of recovery, U.K. holding steady. And then in the U.S., we haven't published our next generation of XSBI yet, but we look to the NFIB Optimism Index, which stays at sort of all-time highs despite, I would say, that optimism index also showing a lot of uncertainty. So from what we can tell on the macro, there is some signs that Australia and New Zealand sentiment is getting better among SBs when we look at their real-time sales data in XSBI. U.S. optimism remains strong despite uncertainty and, as I said, U.K. holding steady. Operator: The next question comes from Nick Basile from CLSA. Nicholas Basile: Just a first question on Melio. I just want to clarify, I think one of the points Sukhinder made around integration. Can you talk to, I guess, what your expectations were on that. I think you mentioned bill pay was coming in December. Was that 2025 or next year? And then just in general, how you're thinking about Melio's performance in recent months relative to your longer-term targets to double revenue? I guess just one confirmation that you feel that the business is on track to help support that goal? Sukhinder Cassidy: Sure. Well, first of all, we feel very good about the integration. As you can imagine, I would say, the integration of Melio bill pay into Xero actually gives us more functionality than we currently have with the partner that we're exiting, and it was done faster than anticipated. So I would say we feel really good about the integration. And I think that's a testament actually to Melio's platform. It is very easily integratable. And obviously, our teams started planning for this summer. So I think that we're really happy to get out a richer product functionality in both workflows and bill pay into the Xero product this soon. So that's December of this year, less than 30 days away. Number 2, I think when we look at Melio, what we've said is Melio performed in H1 in line with our expectations. And so we're really pleased about that. Claire Bramley: Yes. I think I'll just double down on our confidence in meeting those longer-term aspirations. I think the performance that we've seen in the first half and the momentum that we've got going in the second half and beyond just gives us even more confidence in being able to be more than double our fiscal '25 revenue in fiscal '28, excluding synergies and back above the Rule of 40 by fiscal '28. Nicholas Basile: Yes. No, that's very clear. I think from my perspective, December 2025 sounds like you're ahead of schedule. That's why I got that clarification. The second question. On operating leverage in the core business kind of if you think about it, whilst we still can, excluding Melio. The guidance feels like the ability to provide lower OpEx to sales, as you called out, is being driven by some degree of operating leverage or cost efficiencies in the core business. Can you just help unpack that in a little bit more detail? And again, as that '26 guidance kind of relates to the '28 sort of 3-year glide path to maintaining Rule of 40 whilst you're embedding Melio, which is currently loss-making? Claire Bramley: Yes, absolutely. So that 70.5% new OpEx ratio is incorporating Melio. I'll just remind people that Melio does have a slightly different P&L to our Xero core business in the sense of the margin and the OpEx ratios are slightly different. So there's a slight benefit but it is limited from incorporating Melio into that 70.5%. The key factor I would highlight of that reduction is those operational efficiencies. And it was good to be able to drop those benefits through to the bottom line. And I think it's something that I -- we're really focused on here at Xero, and you've seen it in our historical trends is continuing to drive operational efficiencies at the same time as we're investing back into growth. And I think you can see that in our H1 results and the momentum as we go into H2, strong revenue performance, strong operational efficiencies at the same time as continued investment. And that's a philosophy now we're executing against that, and we'll continue to focus on that as we move forward. Nicholas Basile: And sorry to make you clarify, but just when we're talking about operational efficiencies, should we be thinking more about product development side, sales and marketing or sort of equal mix of both or G&A? What sort of buckets are we seeing that benefit from? Sukhinder Cassidy: Sure. So I think there are 2 things, this is Sukhinder, driving the operational efficiency. First of all, I think while it will show through in all those ratios. Number 1, I'd say headcount discipline, speaking frankly, like just being clear on the allocation of capital when we sort of -- when we think about fixed costs, our fixed cost base, we want to be clear that like when we add to our fixed cost base, that we believe it's adding in places that drive revenue leverage, right? So if we're going to add FTEs to product, we want to know that there's a clear line of return to building products that will -- that customers will value. So I'd say it's about being very kind of, I'd say, while we are -- we'll continue to grow our cost base, it's the allocation of our fixed cost dollars to the things that drive real value for customers. That is like a very clear way that we think about driving increases in our cost base. Number 2 is, it's very, very early days for AI internally, but I would say we are encouraging productivity usage by our employees to really get more work done through all of these tools and capabilities. And so I'd say we're really pleased, if you look at some of the numbers we reported. I would say Xero's adoption of AI, whether that's in P&T or sales and marketing, where they're creating more assets using AI or the average Xero who's using things like Gemini, and I'd say, improve their mastery of their work and save time. I'd say that is like -- it'd be hard to put a percentage on it, but I'd say that's another operational efficiency push we have here. And all those things drive through, we think, improved revenue per FTE, right? So that is a core metric that we use as a guide internally for like how are we creating operating leverage. So we want to come -- always come back to like what's the use of those efficiencies. For us, it's the ability to reinvest in the highest revenue growth opportunities and customer value opportunities. But that's sort of where the efficiencies are coming from, if you like that way. Operator: The next question comes from Siraj Ahmed from Citigroup. Siraj Ahmed: Can you hear me okay? Sukhinder Cassidy: Yes, we can hear you fine. Claire Bramley: Yes, yes. Siraj Ahmed: First one on Melio. Sukhinder, just to comment on [Technical Difficulty] something that's slowing there from that whole rollout of CashFlow Central? And the second part on Melio, I mean, can you give us a view on annualized revenue at the end of the half, just to look at second half revenue and whether some of the CashFlow Central revenues is coming through in the second half, right? Sukhinder Cassidy: So Siraj, you broke up for quite a while there. I think you were asking about CashFlow Central and Fiserv rollout. Is that correct? Siraj Ahmed: Yes. So just -- sorry, my network is not great. Just in terms of -- you sort of said syndicate partners are not within your control, just wondering whether something slowed with Fiserv [Technical Difficulty]? Sukhinder Cassidy: Because you're breaking up again, I'm going to take my best guess at answering this question. And obviously, we can follow up offline if we don't get it right here. I would say that we are -- we continue to be very excited about CashFlow Central and Fiserv, and so are they. I think if you look at even their own commentary on the importance of this product, it is in their encouragement of their own customers to roll out and adopt, it's quite strong. All I noted is its timing, right? On any partnership, it's always about the timing of those rollouts. So that was my point more on short-term noise. When somebody said, well, what are we waiting for? You could be waiting for a partner to deploy when it comes to within a half or within a quarter. That was my only commentary. But I think we continue to feel very excited about CashFlow Central, so does Fiserv, and I think they see it as a very important part of their stack. Operator: The next question comes from Paul Mason from Evans & Partners. Paul Mason: I had maybe a follow-on to Siraj's question there. Just are you able to provide any color on sort of how many banks Fiserv has been able to convert across so far was my follow-up. And then I was hoping you guys could comment a bit on thoughts around AI monetization, whether you've sort of settled on potentially using tiering or add-on or just embedding it in the core price over time as to how you monetize, that would be great. Sukhinder Cassidy: Got it. Why don't I start with the AI question and we'll come back to the other. So I think on AI, I think what we've noted is we are not monetizing AI this year explicitly. I think we think the pricing model is still early. We're seeing others take a combination of approaches. Some are doing consumption-based, some are doing tiered. I don't think we have landed, Paul, yet on what model we will use this year. For us, it's all about rolling out those key features like auto bank rec and getting utilization. But I don't think we have landed on a model yet. I think we'll have to find, I think, the cornerstone between simplicity and also the opportunity to make sure that the model of pricing reflects the value delivered, and this is going to be the balance. So right now, I think on Fiserv, Fiserv has talked publicly. So I think what we can talk about is what they've talked about with 96 partners signed up since 2023 and 20 implementations underway. So those are Fiserv's own numbers, and that's all we're allowed to disclose. Operator: The next question comes from Andrew Gillies from Macquarie. Andrew Gillies: Can you hear me? Sukhinder Cassidy: Yes, we can hear you. Andrew Gillies: I was just hoping you could expand on the commentary on improving mix, particularly in the back book. You mentioned some traction on the front book. And I think in the deck, there was some commentary around more sophisticated sales motions. Like what are the opportunities there in the back book? And how can you address those? Sukhinder Cassidy: Sure. Great question. So I think as we noted when we were at Investor Day, I don't know, about 18 months ago, the first thing we needed to do, and I think we've made good progress there, is get our sales teams to also be incented to drive value, not just volume. And the first moves have really been about improving the mix between PE and BE, business edition, in the front book, and we feel quite good about those. I think that the sales teams have made noticeable inroads. I think you can see it read through even in ARPU. You can see some mix shift in ARPU. And I think that -- and that's both a combination of our direct business as well as movements in the front book on the partner channel. I think the back book is a longer move because you've got only 4.5 million customers now. And so even if you move an increment to them, to move the entire ARPU stack is quite hard. And what you're really doing is learning new motions, and you're learning new motions with new features. So when we say it's more complex, we're giving our sales teams training on Syft. Syft just rolled out in all of our products. So now our sales teams are learning the different Syft features available at different levels of plans. And a reminder, then you need to go to your back book and figure out which of their customer cohorts are even eligible for the right candidate. So you're now looking at a combination -- I mean these are very specific motions, right, about sales teams knowing the products, but also cohorting your back book to even identify who's eligible for upgrade. So this is why we say it's a set of sophisticated motions. It's both data, it's orchestration, it's sales education, it's sales incentives. These are the kind -- and that's just on Syft, then you think about payments. In the U.S., you think about Melio. So when we say sophisticated motions in back book, we mean it's often a combination of segmentation, orchestration, digital marketing, physical marketing, sales training, sales education, sales incentives. Now you get hopefully, a picture of why we say the back book is a set of more sophisticated motions and orchestrations that unlocks over time. So I don't think you're going to see some dramatic one-half shift in ARPU, it's going to look more like steady motion and unlocking cohorts of customers who are eligible and the right targets for some of these products. Andrew Gillies: Perfect. And then just a quick follow-up to that. I mean we've spoken about improving back book mix. But if I think about the significance of the Melio launch in December, you've got the Gusto beta going live soon. It seems like delivery is coming forward. The extent of churn to reduce as you get complementary software products being sold to the same customer. Like have you done any internal modeling on like the impacts to LTV or how you should think about the economics and how maybe we should start thinking about that? Sukhinder Cassidy: We've done the modeling, yes. I think we -- this is what gives us comfort in providing the overall aspiration. If you recall, and I think you hit the nail on the head, when we think about Gusto plus payments plus accounting together in one stack, a, you have the opportunity to play from an ARPU. And in the U.S., which actually has the smallest back book, right, just by virtue of its size, you're playing as much to win the next customer as sell through the back book. And so yes, I mean, our ability and confidence to give the aspiration statements we did was built on revenue synergies in both better front book acquisition with more to play for on ARPU plus Melio stand-alone business, plus some penetration of the back book. But as we said before, in the U.S. specifically, it's probably far more of a front book opportunity just given the size of the back book is not that big. Operator: The next question comes from Lucy Huang from UBS. Lucy Huang: I've got 2 questions. Sorry, another one on Melio. You guys mentioned that Melio bill pay will be available from December 2025. And I think Andrew just mentioned Gusto integration is on the way as well with the beta version. How should we think about -- is there going to be a change in go-to-market strategy with Melio in the U.S. come end of this year? Should we think there'll be a bit more brand marketing to sell that there is extra functionality? Or are you still going to focus on performance marketing in the short term? Sukhinder Cassidy: Sure. Well, first job, as you noted, is get that bill pay product and Gusto product out and we noted Gusto's beta. So our first job is like get customers on the product, make sure they're happy with it. That is the job of this year. As we think about the go-to-market motion, I think we have optionality on brands, but let's also just talk before we talk about the optionality on brand to talk about the integration of our GTM teams. One of the things we're excited about is we do have more sophisticated GTM motions than the Melio team. We have a bigger team. And I think part of the improvement in performance is our ability to obviously performance market, not just xero.com but also melio.com, improve the performance marketing there, and bring our muscles there. We have a very good performance marketing team, which alongside theirs, we think, can improve even exposure of performance marketing to their brand. Number 2, we've got our AB sales force also able to introduce Xero plus Melio, but also Melio. If the customer only wants Melio, that is another synergy opportunity. So I'd note, first and foremost, the integration opportunities in performance marketing and in the AB channel are not to be overlooked. Those are first yield opportunities. And then I think if you've looked at the OpEx guidance for this year, we're happy that we're able to realize more efficiency in the core because it gives us the optionality to think about what to do on brand, right? We talked a lot about that, hey, we'd like to be able to reinvest to growth areas. We've talked about brand being an opportunity for '27 that we're looking at. And I think if you put those 2 together, we're excited. Lucy Huang: And then just one last one for me. I think you mentioned -- made a comment around having to include payroll into Australia into the lower end plans, and we saw a bit of spinning down from customers. Just wondering whether that is going to change? Or how are you thinking about product mix being a bigger driver of ARPU growth moving forward? Or should we see product mix being a more slower and steady contribution over the next few years compared to, say, the last 2? Sukhinder Cassidy: Yes, it's a great question. So first of all, I think you were right to note the very deliberate decision to reinclude payroll and our lower plans. That was really a reflection of us taking in customer feedback and basically saying, okay, let's make sure we're doing what's right for the customer. So we reversed that decision. So that would have led this year, obviously, to a bit of pressure on ARPU in Australia as more people then went back to those plans. So that's kind of a short-term effect. I think the way to think about ARPU long term in Australia is, I'd say, very steady as she goes, when it comes to improving front book attach. But remember, Australia has a big back book. So this is a place where it will be very much those sophisticated motions we talked about across both Syft and payments in Australia, leading to sort of consistent, kind of steady ARPU improvement. And then, of course, every year, what we decide to do on price is a big factor in ARPU in any given year. This year, we made a very deliberate choice. In addition to adding payroll back, this year, we did not take up the price on our bottom-most SKUs in Australia. So that's pretty notable in this year's ARPU, right, for Australia. It did not include a price rise on the bottom 2 SKUs. Lucy Huang: Yes. And so in terms of ARPU growth in Australia for this year without the bottom plan price rises, like where would the growth come from? Sukhinder Cassidy: Yes, we did make -- as we said, ARPU is a factor of a mix of items in any given market. This year, ARPU would be a mix of the plans that did get price rises in Australia, front book and back book, any mix improvements. It would be a function of payments attach. Remember, we have a big invoicing business. where we are attaching payments also to invoice volume. And that business grew last year -- this year, it grew 30%. I don't have the numbers handy. Somebody remind me what it grew. It is more like... Claire Bramley: 35%. Sukhinder Cassidy: 35%, sorry, guys. I was just grappling with the numbers in the deck, among all the numbers we have. So remember, we also have payments attach of our invoicing payments in that number. So those are all the contributors that are -- and then we have currency effect, obviously, at the group level, also creating some ARPU movement. Operator: The next question comes from Sriharsh Singh from Bank of America. Sriharsh Singh: I've got 2 questions. One, can we -- just following up on Xero and Melio integration time lines. And wondering how long would it take you to integrate the Xero accounting solution into CashFlow Central product suite? And do you need a full integration on that to realize the real full benefits of cross-sell and syndication network? And just on that time line, I'm wondering if the CashFlow Central integration could happen faster than the Syft Analytics integration, which you've just done and rolled out? And second question, the latest round of pricing increases was really interesting. You kept pricing flat for the lower-end subscription plans. However, the higher-end plans have gone up by 11% to 15% in Australia at least. So should we expect more of that? And what do you need to grow with the higher-end customers? Do you need some M&A there? Or do you think you have a product which can allow you to grow with the top of the funnel customers? Sukhinder Cassidy: Okay. I think there were 3 questions in there. So let me take them in hand. First of all, I want to take the Melio integration question. You might have noted in the half that Xero announced its first embedded accounting deal with Bluevine in the U.S. This is the first time we are embedding our accounting stack in someone else. And we talked on the Melio announcement about the opportunity to also, if appropriate, embed Xero in the Melio stack. Now keep in mind, that was, we said, upside to the plan. We didn't say that. We said that's something we're going to do, but we didn't factor into our numbers because we needed to figure out which of Melio's customers would want embedded accounting. Some of them might just want bill pay. Some of them might be happy to do a referral deal and some of them might want to have accounting in their stack. So we always talked about that as experimental and upside, and that's the same way we've talked about the Bluevine deal that we just announced. We're really excited to get it out and see what it does. But I would say we factored it into our financials. So that's -- I'd say, we'll see where that goes, and we're excited to innovate and try. Number 2, on Australia, as you said, you noted that we were more granular in our pricing moves. I think you can expect us to be more granular. At any point in time when we do pricing, I think we have moved in the last several years from like a one-size-fits-all price rise to very much by segment, by market, looking at the features we've launched our competitive placement in market, and we like that. I mean I think the customer deserves that granularity. So we made granular decisions and I think we feel like we always want to be looking at kind of a positioning range of different segments and SKUs in market against the alternatives and for the value we've delivered. And that leads to Point 3, which I think is about you noted that we did a double-digit price rise on our higher end. Look, when you look at the value we deliver at Xero compared to the size of that customer and willingness to pay and the type of features and delivery, I mean, think about the fact that we have now multiple levels of Syft functionality across our plans. I mean these are products that if you were to buy them stand-alone, would be expensive in their own right, a lot of the functionality that we're now incorporating into our higher-end plans. So I think willingness to pay always factors into how we price as well as the product feature delivery, which I think leads to your last point B, is there more to do in the higher end? Yes. I think there certainly is. We see customers who are on our top SKUs, and we have relatively low penetration of our top SKUs even in a place like Australia with a lot of room to deliver more features and functionality. They ask us for things like transaction limits or permissions or multi-entity reporting. By the way, multi-entity reporting is in within Syft, multi-entity consolidation. There's a long list of features that I think are still opportunities for Xero to go drive higher penetration in -- of those top higher-end customers and our higher-end SKUs. Operator: Thank you. That does conclude the Q&A session. I'll hand the conference back to Sukhinder for closing remarks. Sukhinder Cassidy: Of course. Thank you again to everyone who joined today's call. We appreciate the time and the support and of course, look forward to connecting again soon. Operator: Thank you for joining the Xero Limited 2026 Interim Results Conference Call. If you have any further questions, please contact the Xero Investor Relations team. If you are a media representative, please reach out to the Xero's Corporate Communications team.
József Váradi: Welcome to this event. So this is reporting the first half results of fiscal '26. Could we move to the next slide, please? So I would say that we start seeing some sunshine and certainly good decisions for the future waiting to see the impacts coming through. So with regard to the sunshine, I think what the first half results demonstrate is that under circumstances when we are near efficient, actually, the business produces very strong results in terms of operating KPIs, in terms of financial output. We are still not fully efficient given the groundings of aircraft, some of the inherent inefficiencies in the system, but we did a lot better than in previous years. As a result, you can see a significant increase on capacity, passengers, revenue and profit. In terms of decisions made, we're seeing that we have affected the major challenges of the business for a structural reset. We have communicated the closing of Wizz Air Abu Dhabi that effectively has been happening. It is pretty much a done deal. Then we communicated that we would be seeking a reset with regard to the aircraft delivery stream with Airbus, that deal is now in place. It has been decided, and I think it's a good deal. It is appropriate to addressing a number of things. One is the deliverable growth rate of the business, taking some risks out of the profile of the setting, reducing the growth rate to around 10% to 12%. And let's not forget that 10% to 12% still makes Wizz Air the fastest-growing airline in Europe and which we are proud of. But it is a more manageable magnitude of growth than previously set. And very importantly, it takes into account the cycle of the Pratt & Whitney groundings and ungroundings because that created a significant hiccup to the fleet count of the airline, which we had to reset. Also, we addressed the XLR exposure. That program is descaled very significantly, I would even say that exited to a large extent, and now this is narrowed to the U.K. AOC. So the XLR is seen as a Wizz Air U.K. initiative no longer as a corporate initiative for the airline. Also, we have made commitments on aircraft finance. This is one of the significant differences to our competitors, and you will start seeing a more balanced way of financing our aircraft delivery program going forward. Now with regard to growth, I think this is important, and you have a prime interest in that. We are looking at capacity growth of around 10% to 12% to be delivered through the recovery of the GTF engines, the new aircraft delivery streams and the way we are managing capacity. Now what it really means is that we will still have some short-term challenges in front of us arising from capacity because effectively, the choice we have on hand is either being fully efficient and fully deployed capacity, but that would create an excessive growth rate, which would become highly dilutive to revenue production or carry on some inefficiencies on the fleet, but set the growth in accordance with what actually we can deliver. We opted for the second. So you're going to be seeing a moderated growth level from here on, but it will take a little time to suck up the inefficiency created. We have been shifting a lot of focus in terms of markets. We have been talking about this to Central and Eastern Europe. If you look at Central and Eastern Europe, it is now kind of bearing fruits in terms of market share. We are expecting our market share to be around 29% going into the first half of calendar '26. This is up from 25%. Of course, we have been adding significant capacity by opening new operating bases and also enhancing our incumbent footprint. With all this, we are expecting a stabilized, more resilient revenue production and a longer-term lower cost production of the business and also the strengthening of the balance sheet. Maybe with that kickoff, I would hand it over to Ian, and I will take it back after that. Ian Malin: Thank you, Jozsef. Next slide, please. Right. So in terms of H1, I would say that pleased with the outcome. And so we don't want to dwell on it too long, but at least we're here to report on it, so I'll talk about it, but then we want to make sure we look forward into H2 and beyond that. So revenue, up 9%, nominal off of 8.9% ASK growth. RASK was roughly flat year-on-year, EUR 0.0498. So a strong RASK production, flat load factor. So that was -- and yield was up around 0.9%. So ultimately, I think a good top line number, helped also by fuel. Fuel was down 2.1% despite the 8.9% volume increase, benefiting from the fuel efficiency and the fuel price and the impact of our hedging. EBITDA was nicely up 19% with a 29% EBITDA margin and operating profit was up 25% with a 13% EBIT margin. So across the board, I think a strong result. We did see some things below the line that eroded some of the net profit, even though we still generated a positive year-on-year net profit production. And none of this was unexpected. So we have the tax charge with regards to the deferred tax asset that we created last year and the unwind that happens as the aircraft start delivering into that entity in Malta, which we restructured and set up last year. Ultimately, I think where we're looking at is a satisfying result. And as Joe says, as we continue to build operational performance and operational resilience into the business, you can start to see the benefits of those flow through into the P&L. These are structural. These are things that we've invested a lot of time and effort into. And so last summer was a rather disruptive summer, and that's where you see the benefit coming into this year. You'll see less of that benefit in Q3 and Q4 just because we had better performance. But we can expect, as we're continuing to grow that operational performance to deliver a more robust cost position and ultimately, a more beneficial revenue environment because you'll start to deliver operational performance, which drives better revenue quality. So we're excited about the structural changes and the resilience coming into the business. So into the winter and into the cost base, if you could just go to the next slide, please, we will see transitional inefficiencies. Now on the cost side, I would say we're pleased with the results. The cost picture really improved in Q2. And you can see that, that was driven by fuel. So fuel was a tailwind there. The disruption costs, as I mentioned, the operational efficiencies generated roughly EUR 29 million of savings in terms of disruption costs. So that was helpful. We also managed to shed some of the structural wet lease costs. So we were down EUR 76 million in terms of wet lease costs. Still have -- we still do incur wet leases, but these are not structural. These are one-offs. And actually embedded within those wet leases is also some of the short-term engine leasing that we do in order to make sure that we can operate the fleet efficiently and reliably to be able to support that better on-time performance and the avoidance of disruption costs. We also managed to deliver strong results even with lower sale-leaseback volumes. You can see that we actually were EUR 27.5 million short on sale-leaseback gains year-on-year. So had we had that, that would have been an even better picture. So those were the tailwinds. We continue to see elements of cost creep through the business. And like I said, none of this is a surprise. So there's nothing new based upon what we were expecting at the full year when we said that this year was going to be a challenging cost year. This is just simply the translation of some of our actions into the results, which will then wash through and move on going forward. So you can see that, for example, airport and on-route are up. Actually, handling came down, but where the biggest pressure came from was on on-route, where we saw an increase in the tariffs year-on-year. And for example, places like Germany on recharges were up 29% year-on-year. So those really hard to unwind some of those. Maintenance is an area that we see a lot of cost pressure. But as we explained at the full year, there's a number of things happening there. So we are seeing the retirement of ceos now in that period. We think there were 9 ceos that went back. And so as you put those into return conditions, you have to incur incremental costs, not normal operating costs. And so you see some of that flow through. You also are seeing pressure in terms of the vendor base. So component support contracts are increasing. And so some of that is inflationary coming through the cost line. There is an element of Abu Dhabi wind-up costs coming through the entire cost structure. In terms of Abu Dhabi costs, we remain comfortable that there won't be an adverse impact on the full year to winding up Abu Dhabi. So while you will see cost increases across all the cost lines associated with the wind up, the benefit of not operating Abu Dhabi from September onwards will offset that so that it should be at least breakeven, if not maybe slightly better, but we'll know that when the entire business is wrapped up. We thank the team for all their efforts in terms of that operation as well as what's happening to shut that down. Distribution was up slightly, but that was consistent with the Q1 results in that we have a return to growth. And so as you do push more volume through the business, you are incurring more costs associated with that. And so that was expected. And like I said, there are -- there's a bunch of cost increases happening in the others line associated with the return to growth. So there's things like crew training, crew accommodation, recruitment, things like that. Abu Dhabi costs flow through that to some extent as well. And there was also a reduction, if not even an elimination in some limited cargo revenue that we had in prior year that we didn't have this year. So that's what explains the others line within the other cost and income line. I will ask to go to the next slide. Just quickly touching on Q2. So again, operating margin of 21.5%, 35% higher year-on-year. We saw less benefit on FX in the quarter versus prior year due to the now continued ramp-up of our overall lease liability hedging profile and risk management profile. And we saw a very strong disruption cost reduction, again. So most of that disruption improvement came through in the second quarter, and that's despite some of the challenges we have in Q2, such as the suspension of Israel operations, which resumed in August. We also had the overfly challenges around Iran, and then we had actually a lot of volatility around Abu Dhabi as we worked to come to the end of that operation at the end of August, early September, beginning of September. There were some tapering off of the operations there, and that caused some additional disruption and costs. So notwithstanding all those things, a very strong Q2 and something that we're proud of, but we're not going to rest there. So in terms of where we're going, we have obviously some guidance numbers that Joe will share at the end. And that puts us in a position where I think we're comfortable with where consensus is currently. And so we do expect there to be a higher cost position in Q3 and Q4. Like I said, nothing that's a surprise. And that's driven by a number of factors. If you look at things like the maintenance line, we're going to see older aircraft costing more to maintain. There's going to be continued retirement of ceos in that period, which drive the costs up. Depreciation is going to see some pressure because in H2, we should be 35 more neos this year versus last year H2, and that translates to roughly 20% fleet growth, whereby in that period, we should only be growing around 10% in terms of ASKs. And so our nominal depreciation will grow faster than our volume growth, and that is why you'll start to see some pressure on that. We also have in the second half a distortion when it comes to the year-on-year comparable in maintenance. In fiscal year '25, we had a one-off maintenance accrual release, which was rather material, close to EUR 80 million, and we're not going to see that again. And so that's why you see some of the cost pressure flowing through. But Joe will comment on why that is necessary and why the actions that we take and the costs that come with those actions set us up for not just the performance that we're delivering next year, but also the overall reprofiling of the business. I'll ask to go to the next slide, please. In terms of cash flow, I would say, consistent at the end of the day, consistent with what we've been seeing. So we ended the year right -- sorry, ended the half around EUR 2 billion in cash. And that puts us in a strong position going into the winter. We managed to generate a reduction in net leverage ratio, so down from 4 to 3.6. We maintain our target of 30% to 35% liquidity, actually made it to go up, which is good. And that's also in anticipation of our January bond repayment, which we plan on at this point, treating the same way we have the previous repayment. We are pleased with the Airbus developments and that comes with pros and cons. Obviously, as you defer aircraft, you generate fewer sale leaseback gains, but you also generate fewer lease liabilities as you defer CapEx, which means that, that should be benign in terms of leverage at the end of the day, but it also releases -- has a benefit of releasing PDP obligations as we now no longer need to fund the development of those aircraft. And as I'm sure some of you have noticed, we've managed to sell a few aircraft as part of a deal with one of our related party airlines, and that also takes further pressure off the CapEx side of things. But overall, nothing to be -- nothing jumping out in terms of this chart. And as we move into Christmas period into the Easter into March, we'll see that unfunded liability line start to build again as we've seen in prior periods. And so we're comfortable with the liquidity position of the company. We -- I will note that we rolled over our ETS facility. We had a EUR 279 million facility that rolled over like we did in the prior year. And due to the changing prices of the emissions credits, we were able to slightly upsize that. Next slide, please, and I'll hand the floor back over to Joe. József Váradi: Okay. Thank you. Well, this is, I guess, a very important chart that kind of gives you a picture on fleet growth and this translation into capacity growth. So you recall that we are having 334 aircraft on hand to be delivered, originally set for a stream ending in 2030. Now this is extended to 2033. So effectively, that affects a 91 aircraft reduction in the original delivery period and put that across into the extended period. Of the 91, 3 aircraft are sold outright and 88 are deferred into '31, '33 deliveries. Now what it does is it creates a more predictable picture for future growth. In terms of volume of growth, we are targeting around 10% to 12% annual growth. This is taking into account some of the issues of recent experience that given the -- some of the inefficiencies associated with the Pratt & Whitney groundings. We want to make sure that we are derisking the profile of the business, not only in terms of market footprint, but also in terms of challenges arising from growth. And we think that the 10% to 12% growth is a more derisked profile for the company than 15% originally targeted. And taking into account the Pratt & Whitney GTF cycle of grounding and ungrounding, you appreciate that the new fleet delivery program has to take that kind of a recovery cycle into account and recovery cost into account. So if you look at it in nominal terms, effectively short term, we don't take new aircraft deliveries representing 10% to 12% growth. It's a lot less than that because we are taking into account the recovery of the current grounded aircraft engines. We think that this is a fairly well outlined model mathematically to program the growth or deprogram the growth against a lower risk profile of execution. I'm very pleased with that. And it was a long negotiation. So you can imagine that this is very thorough, not only in terms of setting or resetting the delivery stream, but also in terms of protecting the commercial terms of the deal. Again, just for recalling it, this deal was actually put in place in 2017 in Dubai under very different supply chain circumstances, very different commercial and financial needs of the OEM. And obviously, that gives continuously a structural benefit for Wizz Air versus the rest of the market. But we're seeing that now it is not going to become a burden when it comes to executing the aircraft order. In 2029, effectively, we are becoming an all-neo operator. That's good because by the time, I think you should be reasonably expecting technological maturity coming through. By the time the GTF advantage will be delivered. I mean that's a significant technological step-up and an industrial step-up on durability and reliability on the engines. And the other important issue here is the XLR program, which is now taken down -- rescaled and allotted to Wizz Air U.K. no longer to the European AOCs. Next slide, please. So decisions have been made, are being made and now we are expecting the impacts coming through. So the critical decisions, as I said before, the closure of Abu Dhabi. You heard from Ian that we expect that decision to be executed against a fairly benign financial platform. So we are not expecting any adverse impact in the current financial year. As a result of that and as of the next financial year, we are expecting significant upsides coming through. Just discussed the Airbus order reset, again, this is very important for longer-term predictability of the business and also discussed the XLR program, which we effectively exited other than Wizz U.K. Now there are next to this ongoing work streams. Network improvement, churning the network for profit. That's probably the most important ongoing priority of the company. We are shifting capacity into Central and Eastern Europe against high brand awareness, against a very solid financial performance and against a backdrop of disproportionately higher GDP growth in that region relative to Western Europe. And we are already seeing some of the early results by opening new bases, deploying more aircraft, how quickly the market is picking up on Wizz Air. We are optimizing the technological platform. Maybe it's a small equation we have been discussing, but I think you should understand that when we are talking about the GTF or any new technology is the same for the CFM LEAP. There is a trade-off. And the trade-off is you get fuel burn benefit from heat in the core of the engine. So basically, the way fuel burn benefits are derived is through the higher temperature in the core of the engine. What it means is that higher temperature is more sensitive to durability of the core engine of the whole engine. So that may result in more maintenance costs. So this trade between fuel burn versus maintenance. So it's not like that you just get fuel burn as a gift. And of course, there is another element of technology improvement and that comes from the capital cost. It is simply more expensive than previous technologies. So please just understand this trade because when you look at ex-fuel cost and fuel cost, you're going to be seeing that, okay, we are delivering a lot of improvements on fuel cost, but not as much on ex-fuel cost. But there is a trade here. So what you see coming through the fuel cost, you're going to get some of it as a penalty on non-fuel cost. So you really have to look at the 2 combined. I mean, of course, we do the breakdown and we act on the breakdown. But intellectually, I think you need to integrate those 2 if you want to fully capture that. But we're seeing that the technological benefit is important because once the GTF is matured, the industry has no doubt that this is going to become the best engine available in the marketplace. It is kind of painful at the moment going through this cycle, but we are hopeful that one day, actually, we're going to be pacing the day when we decided to offer this engine. And unparking the aircraft, that's a critical priority for the company. We have been discussing this. We are targeting to on ground the entire fleet by the end of '27. We are working with Pratt & Whitney. We have an understanding. We have a deal with that regard that covers induction slots that covers spare engine purchases and that covers OEMs capacity in terms of parts and in terms of shops and engineering to support that recovery program. And this is aligned at the highest level at the company, not even at Pratt & Whitney level, but at Raytheon level over there. So a lot of ongoing issues happening, but I think all for the better. So next slide, please. I think Ian has started alluding to this that if you look at fiscal '26, it is almost like 2 halves for 1 year. So a somewhat shining first half and somewhat challenging second half. So in terms of capacity, we are looking at mid-single-digit seat capacity growth, somewhat less on ASK. You recall that we eliminated quite a number of long routes operated too hot and harsh. So that's why the ASK numbers are somewhat different from the seat numbers. So mid-single-digit capacity growth. This is in line with our ongoing growth ambitions of the company. Really, the option we had available to us here was we are growing 30% with efficiency in terms of unit cost. Or we are going 15% with efficiency for revenue, but with some compromise on unit cost. These were the 2 choices to make. And we opted for the second one because we think that we should be allotting capacity against demand in the marketplace as opposed to allotting capacity and trying to find demand for that capacity. But that will bear some kind of a challenge in terms of short-term cost to the unit cost to the business. Load factors, I think we are trending well on load factors. The performance is strengthening. We are expecting some upsides on load factors coming through. So with regard to RASK, again, I mean, we are too early into the winter to really make a firm position here, but we are expecting some pressure. I mean, 15% is still significant growth in the business. It's a lot ahead of the growth of other airlines. And this is the off-peak period, the kind of the weaker half of the financial year from a demand perspective. So we might be expecting some pressure on RASK capacity, although we are also seeing some good positive signs on that. So we shall see, but this is our kind of early indication. So how would that translate into CASK performance of the business? Obviously, fuel will continue to do well, given the current fuel price in the marketplace and given the transition to neo technology and the benefit of fuel burn coming through the GTF engines. Ex-fuel cost, will be temporary on the rise as a result of this kind of capacity inefficiency we carry in this period. But over time, this is going to be sucked up. If you look at fiscal '27 when we are taking down the new aircraft deliveries and contemplating some recoveries of GTF engines in that period, this kind of inefficiency is going to be sucked up. So all in, so it is a challenging first half -- sorry, second half, what we are into, although some of the good things, good decisions we carry through this period. And certainly, you're going to be seeing more benefits materializing in the next financial year. I think with that, I would turn it over to questions, please. Jaime Rowbotham: Jaime Rowbotham from Deutsche Bank. Two for me to kick off. Maybe first one for Jozsef. On-time performance was, I think, 60%-ish, up from 50%. So a good improvement, clearly helping your disruption costs, but that's still very low versus, I think, your pre-COVID standards and industry standards. So why is that? And where do you think you can get that to 1 year out, please? And then secondly, maybe for Ian, the situation you find yourself in, as you described on the cash flow bridge, saw the net CapEx positive EUR 190 million in H1. Now you've got the Airbus deal done. Is there more clarity you can give us on what the full-year equivalent of that number might look like? Or is it still very contingent on engine sale and leasebacks, et cetera? József Váradi: All right, maybe I'll start with on-time performance. So yes, it is a significant improvement. I think the difference is that we are just up against a very different supply chain context. ATC remains to be a challenge. It was less so this summer than in previous years. So we have to admit the progress what they have made, but that doesn't mean that they are virgin. So there are still lots of issues coming through ATC. Our performance relative to industry completion, we are the best airline in Europe. On-time performance, we are right in the middle of the pack. So is this good? Yes, relative to the industry's performance, I think it is good. Relative to our expectations and historical performance, we want to see improvement coming through. But I think we need to see more improvements coming through the supply chain as well. Now the issue what you have, and you probably appreciate this. So you are in the summer period when demand is almost unconstrained. The more compromises you make on your operating model, what compromises do you make? I mean you may compromise on sparing more capacity. So that will take down utilization. I mean you are running the airline at low utilization rate in the middle of the peak demand period. This is going to be defeating your financial performance. So you have to kind of strike the balance here and find that kind of a sweet spot that benefits your operating program against the revenue and demand upside of the business without really screwing it up completely operationally. And I think previous years in previous summers, we might have booked it overly for trying to get more commercial upsides from the business and on the mining operational resilience. So I think we put more efforts into the balance now that we're going to have commercial upside, but at the same time, we want to protect operational resilience as well. I mean that's how well we could have done, but we need to see some improvements in the supply chain, to be honest, to have significant upside here. But we are not underperforming versus the industry. Ian Malin: Thanks, Jamie. With regards to cash flow, so the Airbus news is new, right? We announced it this week. And we are in the process of trying to identify when the right time is to do a Capital Markets Day to walk you through the longer-term strategic direction on all these exciting topics, particularly with regards to aircraft financing, engine financing and things like that. As I mentioned earlier, we should be 35 A321neos in higher count this second half versus last second half. And then there's also going to be an element of engine sale leasebacks that happen in there. These are the contractual obligations that we have. So we're not doing anything above and beyond at this point other than upholding our contractual obligations. And so other than the 3 aircraft that were sold, I believe there's only 1 aircraft that was deferred out of fiscal year '26. So the Airbus impact is very limited to fiscal year '26 and in fact, fiscal year '27 because there's not much you can do. So that's why we're having to manage the capacity through, as Joe said, utilization and things like that, which come with its drawbacks, which we're very utilization focused. So we need to balance the revenue dilution with regards to the capacity, management. But in terms of the cash flow for the full year, so you will see cash flow benefits coming from the delivery of those aircraft. You will see cash flow benefits coming from the delivery of those engines because we still do a form of sale leaseback, whether it's an operating lease, where you get the upfront gains that go into the sale leaseback line or whether you do a JOLCO or a finance lease where you also do a sale leaseback where you don't get the same P&L impact. You get the cash benefit but a different P&L impact. Roughly 20% of our deliveries right now are being financed through a form of ownership like JOLCO or finance lease. That's effectively an ownership structure, even though there is a lease structure behind it. We plan on taking the next step, as we mentioned before, into looking at an acquisition-based -- more sort of conventional acquisition-based approach. We're running the numbers now based on the order book to optimize where we think the earnings profile we'll get to over the next -- over the rest of the decade, and that will then calculate how many incremental aircraft we need to buy, and then we'll look at the financing sources, whether it's a lease like a JOLCO or whether it's some sort of acquisition either with cash or some sort of other kinds of financing. That's part of the Capital Markets Day exercise. But what that will do and what these acquisitions do is take away sale leaseback gains, which are very chunky upfront and it will spread it out in line with the depreciation and interest costs you take over the life of the asset. And there's trade-offs to that. But ultimately, we've determined that over the long term, it is beneficial from a shareholder perspective, but it comes with a near-term impact, and that's what we're trying to balance is that we continue to do a bit of both to smooth out the earnings profile of the business ultimately towards something that's beneficial and giving a better shareholder return. Alexander Irving: Alex Irving from Bernstein. Two from me, please. First of all, on your revised CASK ex-guidance for the year. So full year results, you said up slightly. Now we're saying up mid-single digit. Can you help me understand how much of that is the mechanical impact of taking your expected capacity growth from 20% to 10%? And how much of that is, say, an underlying variance versus your prior expectations and planning? Second, you've launched a euro-based product recently. Is this sort of a no regret move that if it doesn't work, we can just sell the middle seat anyway? Or is there a real revenue opportunity that you're expecting to get from this? And if so, could you quantify that, please? Ian Malin: Sure. You want me to take the first one on the CASK? József Váradi: Yes, please. Ian Malin: So the answer is, as I said before, there's no surprises this year in terms of the CASK number. So it's really more a matter of the capacity impact, where we're basically growing half of what we expected. We had sized the business and budgeted the business for a bigger business and the business that involved Abu Dhabi and things like that, we've now changed it dramatically. But still trying to manage through these costs. And so there's nothing that's caused any sort of variation on that. We do need to maintain cost discipline, and that's our focus. But it goes -- as I mentioned earlier, there's distortions and all sorts of other things that are putting pressure on that. So there's no surprises on that front. József Váradi: So I think the middle seat is surely a revenue opportunity. I mean, at the moment, effectively, we don't get the middle seat occupied. So if you look at the numbers, it's almost like no one is paying for that. Now, we want people to pay for that. Harry Gowers: It's Harry Gowers from JPMorgan. First question, maybe just how to think about growth into next year in March 2027. I think you said or mentioned that obviously, the deferral of deliveries is quite back-end loaded. So how much you're expecting to grow next year? And anything you can say directionally on costs yet for March '27? Second question, with the Abu Dhabi exit, Vienna base closure as well, is this the end of quite major airport or market movements? Or do you have any more exits or big exits in the pipeline? And then last one, just on the medium-term growth. I mean, when you were negotiating down on the deliveries, how did you settle on like the 10% to 12% is the right number? So just kind of what's the thinking mathematically or strategically behind that? Why not 7% to 8%, for example? József Váradi: All right. So maybe I'll start with the last one, the 10% to 12%. So we always saw this business is structurally designed to deliver 15% growth at 15% margin. You remember that was sort of the model what we promoted. Now given all the issues and hiccups, we broke down on the delivery of the model, and we try to reinstate that model. But we're seeing that short term -- short-, medium-term, we need to ease the delivery of that model. So that's why we're seeing that addressing around 10% growth rate versus 15% is taking some of the risks out of the equation when it comes to capacity. Why not 7% or 8%? Because if you look at our focus markets, especially Central and Eastern Europe, Central Eastern Europe will demand more than that. So we have been modeling this. We have been looking at GDP growth expectations in the region and how that would translate over to airline demand and how we can translate it into our own capacity versus the competitive games we are into and our ambition to lead the market in -- continues to lead the market in Central East Europe. And we think that this is kind of the sweet spot. So the 10% to 12% is a bit of a sweet spot analysis from the perspective of demand in our core markets versus the deliverability of the program from an operational standpoint, how much financial distress we are putting on the system to ramp operations up against that target. With regard to Abu Dhabi, Vienna and others, I think the way I would see this is that while Abu Dhabi is a very structural decision, Vienna is less so. I think Vienna is seen as pretty much business as usual. Maybe the magnitude is reaching a bit higher than usually. But what happened in Austria, I mean, the Austrian government decided to put excessive taxes on the aviation system, effectively making Vienna prohibitive from a cost perspective for us certainly. But we are not the only guy acting. So clearly, this is not a Wizz Air issue. This is a bigger industry issue. But I would say that this is fairly exceptional in terms of magnitude. Now with regard to Vienna, I think what is easing the situation is the availability of Bratislava, which is pretty much next door. So this is kind of fairly easy. But churning the network for profit, I mean, that you should be expecting us to do on an ongoing basis. And of course, same thing goes for airport cost. So if an airport becomes excessively expensive, then we would be churning that capacity for lower cost execution. So I would say that these are ongoing priorities. But if you ask the question whether we have made the big decisions, I would say, yes, the rest would be pretty much refinement and business as usual. Do you want to take the growth? Ian Malin: Sure. So just on the growth side, right, like what we've done with the Airbus deal and what these other deals that we're looking at is give ourselves optionality at the end of the day. So we -- we're going to bring things down in the medium term, the 10% to 12%, but it doesn't mean that we're limited at 12%. We're still a growth stock. We're still a growth company. We're not afraid of growth. And we have 58 aircraft or so redelivering between fiscal year '27 and fiscal year '29. Most of those aircraft have extension options in them. And so if we see that there's more demand, we can exercise those extension options and capture that demand. So I want to make sure that we're not somehow thinking that we're constrained. We have optionality. That's what we've effectively negotiated for ourselves versus before we were committed to delivering -- deploying that growth. But in terms of fiscal year ' 27, I think it's still going to be a very challenging ASK and seat growth environment, closer to 20% still as we -- at least in the near term. And that's something that we're going to have to manage through in terms of the deployment of all that. It's -- it will probably end up having an impact on utilization. It will also force us to be more measured. But I think with the changes that we're doing around the network and the market share that we want to develop, it is, again, an investment. But I don't think it will have as adverse of an impact on costs as you might be thinking in terms of where you're going with this question. So looking at the cost side in fiscal year '27, we're not guiding. It's far too early to say. But I would say that the worst is behind us because we're still -- that growth will help us at the end of the day in terms of the costs. We think that the changes that we're making to the airport side, in particular, right, hard real changes will bring down the cost side of that. So I think that -- so looking at our cost structure, you'll see depreciation probably be the biggest benefit because we start to flush out some of these ceos if we don't extend them. And you're going to start to see -- you'll see maintenance still be one of the ones that see the most pressure because of the heightened activity associated with redelivering and the aging of the fleet. Everything else, I would not expect there to be any challenge in terms of bringing costs -- keeping costs flat or down, okay? So I think that overall, the cost creep is where we are now and you start to see improvement after that in fiscal year '27. József Váradi: I would just add one more perspective. I mean, none of our plans at the moment contemplate Ukraine. So Ukraine is kind of an outside chance for the business. If things turn in Ukraine, all of a sudden, discussion will be a change fairly fundamentally from our perspective. Because we would be looking at ourselves as a genuine kind of first mover to the Ukrainian market, and we would definitely go to market as a hometown airline for Ukraine. Don't forget that we were the largest non-Ukrainian airline in Ukraine prior to the Board with operating basis. So we would be looking at reinstating that presence. I mean, obviously, that would be through a transitionary period. But in terms of ambition, we would certainly go to Ukraine for market leadership. James Hollins: It's James Hollins from BNP Paribas. A couple of strategic ones, Jozsef. Maybe just run us through a bit more on the Western European strategy. Are we back to where we were when you listed 10 years ago? It's all about CEE? Obviously, Vienna was very specific on taxes. Or if it's easier, maybe sort of quantify how you're apportioning the 10% to 12% growth, how much is CEE, how much is Western Europe? Which leads us on to Abu Dhabi, which obviously you've closed as a base. Are you still going to fly quite a bit into Abu Dhabi? Was the demand actually there that you still see it as not a base, but somewhere you still want, so you still see enough demand? And then, Ian, I hate to be that person in the room, but maybe just help us on the other costs for the full year on sale and leasebacks and compensation, which we should be thinking about to get us or get you to around where consensus currently is? József Váradi: Okay. So with regard to CEE versus Western Europe, I mean, if I look at the picture today, what changed over 10 years is that we added Italy and London to our Central and Eastern European footprint. So it was more before. So we had Vienna, we had Abu Dhabi. You all understand the changes with that regard. But we are very upbeat on both London and Italy. As a matter of fact, looking into market shares next year, early next year, we're going to be the second airline in Italy. And that's quite an achievement given that we are a bit of a latecomer to the market. Nevertheless, if I take those 2 segments, we are still talking about like 70%-75% of the business being in Central and Eastern Europe, 25%-30% being in Western Europe. So with regard to focus, there is no change on focus. So focus will remain on Central and Eastern Europe. And you see that all these new base openings, adding aircraft on an ongoing basis to our key Central and Eastern European markets will just continue to fuel that strategy. And I don't think that you should be expecting much of a change with that regard. You may guide that we burned our fingers in Abu Dhabi, you're not going to do it again. Now with regard to flying to Abu Dhabi or the UAE, I think we maintain a few operations there. So where we think it makes commercial sense from a perspective of profitability, we continue to operate to Abu Dhabi. We continue to operate Dubai. We continue to operate Jeddah. That's a U.K. operation. We operate Marina in Saudi. So where it makes commercial sense, where we can make real money, we would continue to operate. But we are not planning on setting up basis or AOCs or anything like that. So I think we will remain somewhat opportunistic with that regard. Ian Malin: So in terms of H2 others performance, I would expect -- you could expect that to increase. So if we were at EUR 0.27 in unit cost benefit in this fiscal half, I would expect that to probably go up like 40%. So there's quite a lot of deliveries happening in that period. And until we inform you otherwise in terms of our financing strategy, our approach is to take advantage of the sale-leaseback market, we think that that's a very efficient way to translate the benefit of our purchase contract into shareholder return. And so there's no change there. That's simply part of how we approach this. Ruairi Cullinane: It's Ruairi Cullinane from RBC. Firstly, could you quantify the Abu Dhabi exit costs in the financial year? And secondly, it sounds like H2 RASK is perhaps resilient given the share of immature capacity and the capacity growth. Would you be able to talk about that at all, how that's performing across different markets or on new routes versus existing routes? Ian Malin: So I'll take the first one. On the exit costs, like I said, we don't expect there to be net a detriment in terms of exiting Abu Dhabi, both in terms of a P&L perspective, but also from a cash perspective due to the arrangements that we've concluded with the joint venture partner down there. But I can't specify exactly what those costs are or we're not in a position to. József Váradi: With regard to H2, RASK, I mean, we have been making a lot of new market investments in Central and Eastern Europe. I mean it still takes time to mature. It's a quicker and faster maturity curve than in Western Europe, let's say, but it still has to mature. So I think the RASK challenge in the current half of the financial year is mainly down to the maturity of new routes. But at the same time, you're going to take the benefit of that in next financial year. Andrew Lobbenberg: It's Andrew from Barclays. Can I ask around the fleet? Well done on getting down to 11 XLRs. That's a start. What do you do with [indiscernible] Europe, they're only with U.K., but I think you own with U.K., don't you? Then can I ask a question, I know you're not going to answer, but I'll ask anyway. What's going to be the financial impact of deferring the aircraft? What should we be thinking about the relation pricing? So how will that impact how we should be modeling the CapEx going forward? And then if I can be greedy and ask a third one, staying on fleet. You seem in a hurry to get rid of the ceos. But whilst you gave us a lot to the neos, the current fuel price, the maintenance burden against the fuel price makes ceos better aircraft than neos at this fuel price. And when you get rid of the ceo, you take a big penalty on the lease return costs. So why did you not go for more aggressive deferrals of new deliveries and keep hold of the ceos for longer? Ian Malin: I will point out, Joe, that Andrew did ask me the second question this morning directly, which I refused to answer. So just to... József Váradi: Okay. So you put the burden on me. All right. Okay. So let's go through this because I think these are all very important questions. I mean you probably -- I take the second question, which is going to be unanswered probably, but I just want to give perspective to that. You probably appreciate that when negotiations drag for 6 to 9 months, there is essentially one reason for that, and this is commercial. And what does commercial mean for aircraft procurement? This is pricing escalation, nothing more really. I mean that's the essence of the whole thing. So given that drag, that long-term settlement on that, you should be expecting that it is very favorable to Wizz Air. I cannot tell you more than that, but it is very favorable to Wizz Air. So I'm not sure I would be too much into CapEx with B2B that regard, just kind of take the linear line on what you are seeing at this point in time. So that's a good deal. So with regard to the XLRs, yes, I see the 11 is not going to be the final number, 11 is what we are taking deliveries of. But for a portion of that, we would be looking at market solutions. So we are not going to put 11 aircraft into Wizz Air U.K. It's going to be less than that. And we will see how we can kind of reconcile the gap with the market with that regard. But please don't ask more questions on this because I'm not going to be able to answer at this stage of the game because there are things happening in the background, but not yet at final closure. So there is still some kind of flexibility when it comes to the XLR matters. So ceo versus neo, that's a good question, Andrew. And I think the way to think about this, so that this is the way I think about this is that there is a distinct difference between the A320ceo and the A321ceo. So if you take the A321ceo versus the A321neo, given the current fuel price, you can argue that it's a wash. When you look at the economics of the 2 aircraft, it's pretty much a wash. So you have the fuel burn benefit on the neo, but that's offset by the higher capital cost and higher maintenance cost on the ceo. But this is something which can change. I mean, if fuel price comes down significantly, then the ceo start prevailing as an economic concept. If it goes back up again, then the neo becomes a better aircraft. But this is given the current maturity of the technology. The moment we get to advantage, we think the equation flips structurally. So there is no more debate on fuel price and who is better, which aircraft is better, ceo or neo, neo at that point will prevail. At the moment, you can argue that actually there is a way to compare the 2. And as we speak today, I would say that the economics of the 2 aircraft are pretty much the same. Now the A320ceo is a different animal. The A320ceo is 180 seats versus the 239 seats. So no way that we could come to the economics of the A321neo operation with an A320ceo. So if you take the redeliveries of aircraft, I think the right strategy for us is to preserve A321ceos as much as it makes sense, but still continue to get rid of the A320ceo. So we have no appetite for extending A320ceos. I think we will continue to evaluate the A321ceo versus the A321neo. So I don't know if that kind of gives you the answer, but I would definitely make a distinct difference within the ceo line between the A321 and the A320. Gerald Khoo: Gerald Khoo from Panmure Liberum. Can you talk a bit about how trading is going in the U.K.? Obviously, in base terms, you're losing at Gatwick. I think over the past 6-12 months, there have been some slots that have become available at those relatively slot-constrained airports. And I don't know whether it was an active decision on your part to not go for those slot opportunities or whether you lost out to new entrants. But what's your thoughts in terms of taking opportunities to put more aircraft into the London market, for example? József Váradi: Yes. Good question. And I think we have an increasingly nuanced view on how best to allocate capacity in London. So first of all, we remain very upbeat of the London market. We are very supportive of the growth and development of Wizz Air U.K. And Wizz Air U.K. is an ever-improving platform. So I mean we are seeing some very impressive financial improvements coming through the operation of the airline. So we remain highly committed and very supportive to the London market. Having said all of that, I think we have to look at differences between Luton and Gatwick. So the issues we are facing at Luton at the moment is capacity constrained structurally by passenger numbers. I mean that's a policy decision of the shareholders. And secondly, they have some short-term runway improvements that affect the short-term capacity we can put through the system in Luton. But I would say that in Luton, we are very interested in pretty much sucking up everything that becomes available. Gatwick, I think we have been overly focused on slots, as opposed to performance in the past. And we ended up operating also a slot portfolio that didn't make much sense from a commercial perspective. The slot portfolio became a burden as opposed to an opportunity on the business. Now certain parts of the slot portfolio are very favorable, not only operationally but also commercially. And we remain very committed to operate that portfolio. That's why we are rationalizing capacity allocation between the 2 airports. We focus on proper slots that translate into proper commercial opportunities at Gatwick, and we are pretty much sucking up everything at Luton, which becomes available. Conroy Gaynor: It's Conroy Gaynor from Bloomberg Intelligence. So I just want to touch on labor costs. Ian, you sort of alluded to the fact that maybe we shouldn't expect more cost creep in some of those type of items. And so the way I'm reading that is basically as you increase your capacity, you start to -- GTF issue starts to soften, there's some sort of productivity gain to be had that will offset things like wage inflation. Now -- but how do you -- given that there are so many moving parts, you're coming out of Abu Dhabi, putting capacity in different places, you're still going to have high capacity growth. How do you actually manage that transition and dynamic? József Váradi: Yes. So I think when it comes to labor cost, I would think of 2 fundamental issues. I would think of nominal inflationary pressure on pay. And I would think of productivity, how much productivity we are able to get out of the labor force what we have. Now if you look at the current situation, we are compromised on productivity. We are compromised because of the volatilities, the operational volatilities we are managing against the backdrop of the GTF groundings. I mean, simply, you cannot refine your model as such as we used to in the past that you really mathematically kind of figured out how to deliver the highest level of productivity against plannable foreseeable external factors. You are broken on that because we don't know how many engines we will have operationally available. So you have to have a slack. You have to have a slack with that regard. And also because you are losing engines and aircraft today, but you will recover tomorrow, you want to make sure that you actually have a crew, you have the pilot, also you have the cabin crew to operate that engine. So as a result of that, basically, our productivity has been somewhat dented versus where you would want to be ideally. Now with more predictability and more recovery of the GTF issues, the better we can plan on productivity and the more we can improve on productivity. So I think when it comes to labor cost, the improvements will come through productivity, not nominal inflationary resistance. Whatever the inflationary pressure is, whatever the market does, we have to do it. I mean we don't have a choice. I mean we pay according to market. If the market goes 3%, we go 3%. If the market goes 0%, we go 0%, if it's 10%, it's 10%. So we don't have much choice on that. But I think we have an opportunity to do better on productivity once we are putting more credibility and more predictability across the system when it comes to input issues like GTF and those sort of things. Operator: [Operator Instructions] The first question is from Jarrod Castle at UBS. Jarrod Castle: Three from me. Just want to get an idea, Jozsef, Ian, how you see capacity growth in the markets you're growing in over the next 2 to 3 years, if you exclude your capacity growth. So I guess, how do you see competition? Secondly, I don't think you answered it outright, but you've obviously sold 3 planes outright. It sounds like you might try sell some further 321 XLRs. But how many potentially could we see in terms of deliveries being recycled in outright sales? And then just lastly, on your net debt to EBITDA, nice to see the ratio falling. When do you think we could get back to 2x if you -- when you look at your kind of growth profile and budgeting? József Váradi: So with regard to the overall market growth and growth of competition, I think in Central and Eastern Europe, the fundamental question is not -- and I know that people like entertaining this tension in the market that to what extent do you think Wizz Air can grow in light of what the other guys are doing, et cetera. But that's not the question. The question is that you can assume reasonably that both of these carriers will continue to grow. But the question is what happens to the rest of the market. And you see very clear trends. So if you look at our market positions, as I said, now we are moving from 25% to 29% market share. The other guys are at 20%-21%. So basically, every second passenger flying in and out of Central and Eastern Europe is taking either us or the other guys, us more. And that number used to be like 30% a few years back. And I can tell you this number is going to be probably 60%, 70% in a few years down the line. So these 2 airlines will continue to take market shares in Central and Eastern Europe. And you're going to be seeing a lot of the incumbent national carriers or small-scale private carriers diminish in the marketplace. I think this is what you should be expecting. Will the overall market grow in Central and Eastern Europe? Definitely. I mean Central and Eastern Europe is a lot better place with that regard than Western Europe in terms of GDP development and standard of living is rising relatively higher in Central and Eastern Europe [indiscernible] economic convergence and standard conversions are taking place. And that will produce more discretionary spendings in those markets. So we think that is going to be increasing market demand, and that is going to be diminishing kind of small-scale competition in the marketplace. And I don't really care how much the other guy is growing because I think this is just going to affect more the rest of the marketplace. And to be honest that phenomenon has been the case over the last 10, 15 years. So there is nothing new here. You can go back to the history of Central and Eastern Europe. You can look at market share evolution. I mean this trend is not new. It's been happening and it's continued to unfold. So with regard to fleet, to what extent we would be pushing for more outright sales. I think I would consider this as a short-term phenomenon, not as a structural matter. So we don't have plans to sell the aircraft. I mean these aircraft are extremely well-priced aircraft, source of competitive advantage versus other airlines. We need to put that aircraft into work, and we need to make money on the aircraft by operating the aircraft, not by selling the aircraft. But as said, short term, we are under capacity pressure. So this is only a short-term phenomenon. And yes, I mean, you spotted that the XLR might be a candidate or some of the XLRs might be a candidate. And indeed, when we have news to spread, we will do that. But please don't look at outright aircraft dispossession as a strategy on a structural basis. This is only short term. Ian Malin: Yes. If I could just add to that. I mean, don't forget the inherent value of that order book and what it does for Wizz in terms of the company. That is something that we want to capture. We will capture. And we have different ways to translate that. And so that's not something that we want to impact. So that's still something that I think that the market doesn't quite properly give us credit for. In terms of your question, Jarrod, in terms of net debt, I'm not going to tell you when we're going to hit 2x. All I can tell you is that that's something that I'm extremely focused on. I think it's extremely good discipline in the business. We want to build a business that we want to work for, other people want to work for, you want to invest in. And to do so, we know that we need to bring the balance sheet into a certain condition. We see a path to get there. The #1 way to do so is to generate operating profits -- that will generate EBITDA. That will then help us offset the -- bring down the ratio, and that's our focus. So it's a target. It will be something that we talk about at the Capital Markets Day. It ties into our fleet plan. But ultimately, profitability is what will drive that ratio, and that's what we're focused on. Operator: The next question is from Stephen Furlong at Davy. Stephen Furlong: I was wondering, Jozsef, what's the North Star here? Would you think that FY '28 is the more normalized year? Or is it FY '29? And what would you see as the execution risks? I mean, is it the suppliers? Would you describe your relationship with your suppliers, meaning Airbus and particularly Pratt & Whitney, are they good now? I mean, obviously, the challenge of Pratt & Whitney has just been huge for the company. József Váradi: Look, I mean, it's a good question. I still think that the single biggest risk is around the supply chain, probably more around the OEM side than the immediate airline execution. I think they are improving. But at the same time, I mean, you kind of look at the bigger picture, you see that it is not only Pratt & Whitney customers that are out there with grounded aircraft, but CFM customers are also grounding aircraft. So this is not like one guy is broken and everyone else is doing great. Everyone is broken, if you want to put it that way. You can debate the magnitude of that, how bad is this guy versus the other one, but there are structural issues. I think there are structural issues with probably too quickly shortcutting technological developments. It was too much of a regulatory ease. So I'm pretty sure that the regulator will kind of toughen up with that regard. You can argue that the industrialization production have not been properly executed, and that will continue to pose risks to the operators, et cetera. So I don't think that this is going to turn any time quickly. I don't know how long this is going to take, but I personally -- what I would expect is that with the introduction of the advantage and kind of the rollout of that at industrial scale, probably we are still seeing a somewhat risky supply chain environment over the course of the next 2 to 3 years. And you recall when we started grounding at that time, everyone believed that all this powder metal issue is going to hit the industry for up to 18 months. Now this is more like a 5-year cycle. And now this is all compounded with kind of the childhood diseases coming through with premature technology. So this is going to take time. I think what it really means in the industry is that innovation will slow down. The investment cycle for OEMs will lengthen as a result of all these hiccups. I mean just look at how much money Pratt & Whitney has to spend on this recovery. I mean this is going to put burden on the recovery of the investment. So it will just extend that investment cycle. So I would say that long term, I'm confident that the supply chain is going to fix itself. OEMs will fix themselves. But short term, even I would say, maybe medium term, there are some risks associated with the operation of the OEMs. Operator: The next question is from Alex Paterson at Peel Hunt. Alexander Paterson: Two questions from me, please. Firstly, the GTF engine, what's your confidence that maintenance costs will be, what you think they will be? Have we actually had enough flying hours to establish, how these behave after the inspections? Is there a risk that actually it turns out to be a bit worse? And then just in terms of your RASK guidance for the second half, again, what's your degree of confidence that you can deploy the 35 deliveries, obviously, net of anything going back? And not -- because you're concentrating the deployments into Central Eastern Europe, Italy and London, is there a risk that actually you diluted a bit worse, a bit more than you're suggesting? József Váradi: Look, I mean, I will start with the second one first. All these aircraft have been deployed. So they are up for sale. Some of them have started operating. Some of them will start operating during the period. I think we, of course, still have uncertainty around how exactly revenue is going to play out. But I think we are fairly confident in what we are saying. So we are not optimistic in terms of the numbers or the perspective that we are presenting to you. Is there a potential upside to that? Maybe. But we're going to be on the kind of conservative realistic side of the equation. So I don't think you should be expecting a huge variability to our assumptions at this point in time. Ian Malin: If I could just also add to that, Alex. The number is not 35 deliveries in H2. That 35 is the year-on-year increase in number of neos at the end of Q4 this year versus Q4 last year. So just to make sure that it's that we're using the right data points. József Váradi: So with regard to the GTF, so the beauty, if there is such, in our case with regard to Pratt & Whitney is that we have a flight hour agreement. So effectively, we put the burden on Pratt & Whitney. Now of course, if there is no engine, there is no engine. So then you have to share the burden. But in terms of maintenance cost, the burden is on Pratt & Whitney. And that's a major difference between how CFM goes to market versus Pratt & Whitney goes to market. CFM doesn't stand behind the product. So basically, they say, look, we are 75% of the short-haul engine market, we have a very, very established market for purposes of engine maintenance, use the market for our own benefit. Pratt & Whitney is underwriting the performance of the engine. So effectively, we have outsourced the risks, the economic risk on engine maintenance. Now that sounds simple, and this is not as simple as that. But in essence, that's what it is. So if the maintenance costs on the engines turn to be higher than expected or assumed, the burden is going to be on Pratt & Whitney, not on us. But of course, we still need to have the engine available to us to operate and fly. Operator: And the final question is from Gabor Bukta at Concorde. Gabor Bukta: You may have heard that there are some rumors on the market that Lot may buy Smartwings, which has a significant exposure in the Czech Republic. And you may always see LOT as an efficient company like TAROM in Romania. And if such an acquisition were to happen, would you see any chance to increase your exposure in the Czech Republic? Or how would you look at this kind of transaction? József Váradi: I think it's a bad idea, but that's not my goal. Look, I mean, in my mind, LOT is an airline losing on the home ground and Smartwings have ever been losing in their homeland. So when you put those 2 together, I mean, what do you expect? I think the competitive environment in Poland is pretty tough for a national carrier. Maybe it's a little more benign in the Czech Republic that can change, especially given these dynamics. But look, I mean, this is really not our business. But I think strategically, probably both airlines will get weaker as a result of this because you are putting weaknesses together, not strengths together. All right. I think we are done. Well, ladies and gentlemen, thanks for coming. Thank you for your questions. I appreciate your interest. Thank you. Have a good day. Ian Malin: Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Q3, 2025 Earnings Conference Call. An audio recording of this webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. After our speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. More information, including factors that could cause actual results to differ from projected results appear in the section entitled Cautionary Statement Note Regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, November 13, 2025, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. Following the prepared remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin. Dietrich Pauls: Thank you all for joining us for our Q3 2025 earnings call. I am joined this morning by Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. We've continued to make meaningful progress across both our clinical programs since Q2, and I'm pleased to share our recent developments and upcoming milestones with you today. As most of you know, DM199 is our lead product candidate, is a recombinant form of the naturally occurring human tissue KLK1 protein. KLK1 enhances blood flow and vascular health by increasing levels of 3 key endothelium-derived vasodilating factors through activation of the bradykinin pathway. These are nitric oxide, prostacyclin and endothelum-derived hyperpolarizing factor. We believe that this mechanism is why DM199 is well suited to improve patient outcomes for preeclampsia, fetal growth restriction and acute ischemic stroke, indications associated with vascular pathology. Starting with the preeclampsia program. Meaningful progress has been made, since we announced the positive interim results in July from Part 1a of our investigator-sponsored Phase 2 trial being conducted in South Africa. We believe that these interim results validate the biological activity of DM199 and provide a strong basis for the expansion of this clinical study into the early onset preeclampsia and fetal growth restriction cohorts. Additionally, this data, which includes the confirmation that DM199 did not cross the placental barrier places DM199 in an unique position with respect to safety and reduced risk in this very vulnerable patient population. We're grateful for Professor Cluver and her team as their work helped us tremendously as we prepare for our planned upcoming U.S. trial. Just to briefly review the interim results Part 1a of the study was conducted in pregnant women with preeclampsia planned for delivery within 72 hours. We continue to believe that these interim results demonstrate that DM199 has the potential to be a first-in-class disease-modifying treatment option for preeclampsia. We based our assessment on 3 key factors: First, blood-pressure data from cohorts 6 through 9 demonstrated clear dose-dependent and statistically significant reductions in both systolic and diastolic blood pressure. Signaling DM199's potential to control maternal hypertension associated with preeclampsia. I would point out the importance of this, given the results of one of the more recent preeclampsia trials the PRESERVE-1 antithrombin study, in which approximately half of deliveries were initiated due to out-of-control hypertension. Suggesting that better control of blood pressure could have prolonged pregnancies in these patients. 2, improve placental perfusion. In Part 1a of our recent Phase 2 results, DM199 treatment produced a statistically significant reduction in the uterine artery pulsatility index, a doppler-based assessment of arterial resistance, suggesting improved uterine artery blood flow and enhanced placenta perfusion. And 3, we believe that these improvements were driven by improving endothelial function believe to be an on-target mechanistic response to DM199 therapy. By improving or restoring endothelial function (sic) [ dysfunction ], DM199 has the potential to reverse vascular injury caused by preeclampsia. Having the potential to control hypertension, improve endothelia dysfunction and improve placental perfusion, supports our belief in the potential for DM199 to be a first-in-class disease-modifying therapy for this life-threatening condition, which has no available treatment options. During the third quarter, Professor Cluver advanced and completed Cohort 10 of Part 1a, which dose participants at 2.5 micrograms per kg IV and 15 micrograms per kg subcutaneously and further initiated dosing in the expansion cohorts of an up to 12 additional patients at the expected therapeutic dose level. We anticipate completion of this expansion cohort in the first half of 2026. For Parts 1b and 2 protocol amendments are being implemented based on clinical learnings from Part 1a to refine the treatment regimen. Part 1b includes patients, who will be delivering within 72 hours. Part 2 will enroll women with early onset preeclampsia, who are cannabis for expected management or prolongation of pregnancy. Part 3, the fetal growth restriction cohort includes participants with fetal growth restriction, but who do not have preeclampsia, we anticipate screening to start in the coming weeks. We're also preparing to conduct a Phase II preeclampsia trial in the U.S. We completed an in-person pre-IND meeting with the FDA, where we believe we've had a productive meeting, and we look forward to providing an update after receiving the final meeting minutes. We anticipate the upcoming U.S. Phase 2 trial will be conducted in early onset preeclampsia patients. This treatment for this group is referred to as expected management, which is the preeclampsia patient population with the greatest unmet medical need. Turning to our stroke program. Let me ask Julie to provide an update. Julie Krop: Thanks, Rick, and good morning, everyone. We continue to make steady progress in operationalizing our Phase 2b/3 ReMEDy2 stroke trial. As the trial has progressed, it's become clear that current enrollment rates are lower than what we initially projected based on historical enrollment data. We believe this is primarily due to changes in stroke referral patterns driven by the adoption of technologies such as this AI and increases in the use of tele neurology. When patients present to smaller community hospitals and are not eligible for mechanical thrombectomy, they are currently more likely than in the past to remain at those hospitals rather than get transferred to the larger comprehensive stroke centers that typically serve as our research sites. As a result, our participating centers are now seeing fewer of our target patient population than they did 5 or more years ago. The team continues to develop and implement strategies to offset these challenges and support our clinical sites. Based on this information, we recently updated our ReMEDy2 enrollment forecast using actual enrollment rates from our current clinical trial sites in lieu of the historical rates we originally used. That said, there remains a lot of enthusiasm among the investigators, who are highly motivated to find additional treatment options for this high unmet medical need. We continue to make steady progress with enrollment. And as of today, are approaching 50% of our enrollment target for our interim futility analysis that includes a sample size reestimation. We now expect the interim analysis based on the first 200 patients to be completed in the second half of 2026. As a reminder, after reviewing safety data from the first 50 participants in the study, the independent Data Safety Monitoring Board reported no safety concerns and unanimously recommended that enrollment continue without modification. Dietrich Pauls: Thanks, Julie. I would like to now ask Scott to review the financial results for the quarter. Scott Kellen: Thanks, Rick, and good morning, everyone. As of September 30, 2025, our cash, cash equivalents and short-term investments were $55.3 million, this compared to $30 million as of June 30, 2025, and $44.1 million as of our prior year-end. Our current cash includes the net proceeds from our July private placement. We feel confident that our current cash position will fund our planned clinical studies and corporate operations into the second half of 2027. We used $21.3 million of net cash in operating activities for the 9 months ended September 30, 2025 compared to $15.6 million for the same period in 2024. This increase is primarily a result of the increase in net loss in the first 9 months of 2025 compared to the prior year period, partially offset by changes in operating assets and liabilities during the current year period. Our R&D expenses were $6.4 million and $17.9 million for the 3- and 9-month periods ending September 30, 2025. This was an increase from $5 million and $12.6 million for the same time periods in the prior year. Both increases were due primarily to cost increases resulting from the continued progress of the ReMEDy2 clinical trial including its global expansion, progress with the Phase 2 investigator-sponsored trial in preeclampsia and the expansion of our clinical team during the current and prior-year periods. These increases were partially offset by cost reductions related to manufacturing process development work performed and completed in the prior-year periods. Our general and administrative expenses were $2.6 million and $7.3 million for the 3- and 9-month periods ending September 30, 2025. These expenses increased compared to the same time period in 2024, which were $1.9 million and $5.7 million, respectively. The increases in both periods resulted primarily from increased noncash share-based compensation and increased personnel costs incurred in conjunction with expanding our team. Increases in investor relations, patents and professional fees also contributed to the increases in both periods. Overall, our net losses were $8.6 million and $24.0 million for the 3- and 9-month periods ending September 30, 2025. These are higher than the $6.3 million and $16.5 million reported during the same period in 2024. Now let me turn the call back over to Rick. Dietrich Pauls: Thank you, Scott. We'd like to now open the call for questions. Operator, if you could please introduce the first analyst. Operator: Your first question comes from Stacy Ku with TD Cowen. Stacy Ku: Congrats on the progress. So first, as we go a little bigger picture, maybe as we await the minutes from the pre-IND FDA meeting, can you talk about the work that you are doing with the preeclampsia KOL community and clinical trialists to increase awareness of what you've seen so far with the DM199 proof of concept. Specifically, when it comes to U.S. clinical development, maybe also talk about the key factors you're considering right now for trial sites. That's the first question. And then second, as it relates to the protocol amendments, maybe can you go into a little bit more detail what you are thinking maybe talk a little bit more about the doses and outcomes that you all are seeing so far. Just help us understand that piece. Dietrich Pauls: Sure. Great, Stacy. So starting off with the KOLs. So we've been doing quite extensive reach out with the KOLs really across the U.S. and also basically globally for that matter. And the feedback that we've been getting has been very encouraging. There hasn't been a drug in development for preeclampsia for a number of years. And I think, first off, the feedback we're getting is the fact that the drug is not crossing the placental barrier is just a very critical safety profile. And just to see that as very encouraging and immediate drops in blood pressure and the fact that we're seeing that very consistently amongst pretty much every patient. And then I think the upside is also encouraging, but still early is the signals of dilation of the intrauterine arteries. And so if this can consist into later-stage studies, I think, this is a clear sign of being disease-modifying. With regards to the protocol, changes that we're looking at. So first for the Part 1b, what we're looking at doing is IV only, in IV into delivery with the ability of the positions to adjust the dosing as needed. And it's almost to be able to dial in the blood pressure to where it needs to be ahead of delivery. And then for the Part 2, we're still working on some adjustments on that. Right now, we're looking at likely using Cohort 10 from the recently completed Part 1a of the study. In part -- in Cohort 10, we see very consistent and very clear drops in blood pressure as we've seen from cohort 6 to 9. Operator: The next question comes from Thomas Flaten with Lake Street Capital Markets. Thomas Flaten: Just a follow-up, Rick, on the Part 1b. You kind of wedged in this 12-patient expansion cohort from Part 1a, was that intended to kind of supplement what you had originally intended to do with Part 1b, where you were going to do basically a dose expansion cohort? I'm trying to understand the purpose about the 12-patient cohort given the changes you're contemplating for Part 1b? Dietrich Pauls: Yes, that's exactly it. So this cohort expansion we've done is at Cohort 10, so that's the highest dose we've gone to. And so I'd call this kind of additional work that would really replace what was previously planned for the Part 1b. And then when the Part 1b now will be IV only. Thomas Flaten: Got it. And then as you ramp-up towards a Phase 2 study here in the U.S., what is the trigger? What data are you waiting for from Dr. Cluver before you actually initiate the study here in the U.S. Is there anything in particular you're waiting for? Dietrich Pauls: No. We've been analyzing the data that we received up to date. We'll be continuing to dosing more patients before that study gets initiated and not just the efficacy and the safety data, but the PK data is also very important that we've been analyzing as well. So we feel we have the data that we need to proceed. But of course, if we get any additional data along the way, that could further help us to refine the -- that protocol is needed. And right now, the plan is for the -- that Phase 2 would be up to approximately 30 participants for the U.S. study. Operator: The next question comes from Chase Knickerbacher with Craig Hallum. Chase Knickerbocker: Maybe just first, Rick. Any more specifics you'd be willing to give on what you saw in Cohort 10 that kind of led to those additional 12 patients? And then that comment on potentially that being the dose we're going to take into Part 2, just any additional detail you'd be willing to give on what you've seen in the patients you've dosed in that cohort so far? Dietrich Pauls: Yes. I mean, I think what we're seeing, Chase is just very clear and immediate drop in blood pressure. Some of these patients in Cohort 10 and even in those that are in the cohort 6 to 9, these patients are all resistant hypertension. They've been on maximum tolerable alpha beta blockers, calcium channel blockers and they're refractory. They're not seeing any improvement. Some of these patients are coming in there on, they're on short-acting IV labetalol, and there's no change in blood pressure. And frankly, within minutes of getting DM199, blood pressure is coming down very, very rapidly. And so we're just really encouraged that pretty much every patient is seeing an immediate reduction in blood pressure. So it just gives us a lot of opening statement for this treatment. Chase Knickerbocker: And so you've seen an incremental dose response in that tenth cohort? And then just second, on stroke, if I can. I mean, can you just maybe walk us through Rick, kind of what your expectations for enrollment rate was and kind of where it sits today? And then if you could give us an update kind of where the site activation situation sits, including kind of OUS? Dietrich Pauls: Yes. As Julie had mentioned in the prepared remarks, the historical stroke enrollment rates we were looking at around 0.25 that we had previously using, and we're seeing a little less than this. And so we wanted to provide an update here revising the guidance. We currently have a little over 35 sites activated. We've got a number that are coming on board. We recently had regulatory clearance in the U.K. We believe we've got Europe coming on board as well here soon. And so I think it's important for us here now that in past instead of looking at historical rates, we're using specific rates that we're seeing at our current sites. So that gives us a little more comfort here in terms of the revised forecast today. Chase Knickerbocker: What is the enrollment rhetoric that you're assuming to get to the second half target at this point? Dietrich Pauls: We're not providing that at this point in time, Chase. Operator: The next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: Rick and team -- so as the progress is made towards the AIS interim analysis for reaching those target 200 patients, -- regarding the Modified Rankin Scale score, what would reflect the meaningful change there in your view at the time of the interim analysis? Dietrich Pauls: Sure. So we had initially the powering and really following what we saw in Phase 2. So in our Phase 2 trial, in the patients not pretreated with mechanical thrombectomy, there was a 15% absolute improvement in the MRS score of 0 to 1. And we also had made an adjustment to the protocol, excluding those with severe, severity stroke patients when they come in. And so when we exclude those patients, we saw a 19% -- but how the study is currently powered is that we see around that 15%, we'd be looking at 300 to 350 patients for the final sample size. Operator: This concludes the question-and-answer session. I'll turn the call to Rick for closing remarks. Dietrich Pauls: Great. Well, thank you all for joining us today. We greatly appreciate your interest in DiaMedica and hope you enjoy the rest of the day. This concludes our call. Thank you. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Michael Szucs: Good day, everyone. Welcome to Cebu Pacific's investor briefing for the third quarter of 2025. The third quarter results reflect a return to the pre-pandemic pattern of lean travel demand in the Philippines. Key factors influencing this year's performance include the earlier start of the school season, which moved from late July last year to mid-June this year, and the onset of the rainy season with frequent weather disturbances that typically dampen passenger traffic compared to the second quarter summer peak. We use this period to strategically manage capacity, moderating flights and seat growth while conducting scheduled maintenance activities. This disciplined approach ensures that as we enter the fourth quarter, our operations remain resilient and well prepared to capture stronger travel demand during the holiday season. For the third quarter, CEB posted revenue of PHP 24.3 billion, up 5% year-on-year. The earlier school opening contributed to softer domestic travel, offset by continued growth in international passenger volumes, keeping our load factor stable at 84%. Ancillary and cargo revenues continued to post double-digit growth, supported by wet lease revenues and an increase in wide-body capacity. This brought Cebu Pacific's 9-month revenue to PHP 87.6 billion, 18% higher year-on-year. We carried 20 million passengers, up 14%, allowing us to maintain a healthy 85% load factor with stronger passenger yields. Lower fuel prices, a stable peso and gains from spare engine compensation further helped improve our performance. Core income before tax more than doubled to PHP 2.9 billion, and net income rose 181% to PHP 9.5 billion. Meanwhile, fleet availability and global supply challenges persist. The number of aircraft on ground for Pratt & Whitney engine inspections continues to fluctuate and remains above anticipated levels. We continue to implement proactive measures to mitigate these headwinds, maintaining safe and reliable operations, strengthening supply chain coordination and enhancing the overall travel experience for our customers. We entered the fourth quarter with a clear strategy to capture peak holiday demand. And looking ahead, we remain confident that long-term demand for budget-friendly air travel will stay strong, supported by steady economic activity in the Philippines and across the ASEAN region. These strengths underpin our confidence in sustaining growth, enhancing profitability and delivering long-term shareholder value. With that, let me turn it over to Trina to discuss the financial results in more detail. Trina Asuncion: Thank you, Mike, and good day, everyone. As Mike mentioned, third quarter results reflect the leanest travel season for the Philippines, where CEB strategically aligns with demand by moderating capacity growth and scheduling maintenance activities. This year, on the back of 1% increase in seat capacity, CEB's total revenue grew 5% year-on-year to PHP 24.3 billion. Our seat load factor remained stable at 83.6%, while both ancillary and cargo businesses performed very well. Cebu Pacific carried over 6 million passengers during the third quarter, up 1% year-on-year. Passenger revenue was broadly stable year-on-year at PHP 15.4 billion as increase in passengers were offset by 1% decline in yields. This is a reflection of the longer lean season this year as July last year still contains school holidays, whereas this year, most academic calendar started as early as mid-June. Meanwhile, ancillary revenue rose 14% to PHP 7.2 billion, supported by 8% growth in international passengers as well as the wet lease agreement with flyadeal. Cargo volume grew to 53 million kilos, 8 million kilos or 18% more than last year, coupled with a 4% improvement in yield. This was driven by CEB's additional wide-body capacity, which captured the growing demand in this segment. With PHP 24.3 billion in revenue, EBITDA for the third quarter grew by 11% to PHP 4.8 billion, reflecting an improvement from a 19% to a 20% EBITDA margin despite the lean travel season as higher revenues and lower fuel prices more than offset increases in airport, crew and maintenance costs. However, higher depreciation and financing costs brought by the larger fleet and spare engine ratio resulted in an operating loss of PHP 122 million and pretax core loss of PHP 1.7 billion. Excluding fuel, cost per ASK increased 7% to PHP 2.14, but total CASK improved, declining 2% year-on-year to PHP 3.01. Peso-dollar exchange rate closed at PHP 58.20 at the end of the quarter, almost PHP 1.9 weaker per dollar versus previous quarter's close. This resulted in a ForEx loss of PHP 1.1 billion. This was more than offset by another PHP 1.2 billion in gain from one additional spare engine received from Pratt & Whitney as well as tax benefits recognized from higher realizable net operating loss carryover, or NOCO, following the additional income from the FOC engines. As a result, Cebu Pacific reported a net income of PHP 0.5 billion for the third quarter, a turnaround from the PHP 0.2 billion net loss recorded in the same period last year. For the first 9 months of 2025, Cebu Pacific's total revenue has reached PHP 87.6 billion, an 18% increase from same period last year. Passenger revenue rose 17% year-on-year to PHP 59.7 billion. This was driven by a 14% increase in total passengers carried, supporting a healthy 84.8% seat load factor, coupled with a 2% increase in average fares. We flew 20 million passengers year-to-date at an average fare of PHP 2,990 per passenger. Ancillary revenue grew 17% to PHP 22.8 billion, likewise driven by the growth in passengers plus ancillary yields, which improved by 10% to PHP 1,097 per passenger. Cargo revenues grew strongest, showing a 30% increase year-on-year to PHP 5.2 billion as we carried almost 154 million kilos, a 33% increase with only a 3% trade-off on cargo yield. With PHP 87.6 billion in revenue, EBITDA for the first 9 months of 2025 reached PHP 22.2 billion, up 26% year-over-year for a 25% EBITDA margin, which is up from last year's 24%. Operating expenses amounted to PHP 79.8 billion, 16% higher than same period last year, driven by 11% more flights and 18% more ASK. This translated to a cost per ASK of PHP 3.05 or 2% lower year-over-year. With this, CEBs operating income reached PHP 7.8 billion, 37% higher than same period last year for an improved operating margin of 9% versus 8% same period last year. The ongoing transition towards a bigger, more fuel-efficient neo aircraft allowed for better economics per seat, while lower fuel prices and a stable peso environment helped mitigate the impact of higher operations, maintenance and fleet-related expenses. Pretax core income reached PHP 2.9 billion, more than double same period last year. And with additional gains from the free of charge engines more than offsetting ForEx losses, Cebu Pacific's net income for the first 9 months of 2025 reached PHP 9.5 billion, well above the PHP 3.4 billion net income earned same period last year. Cebu Pacific ended the first 9 months of 2025 with total assets at PHP 241.3 billion, a PHP 3.1 billion increase since start of the year and total liabilities at PHP 225.2 billion, a PHP 3 billion decrease. With 2 aircraft delivered, CEB ended the quarter with a total fleet of 98 aircraft. Net debt ended at PHP 157.3 billion, a PHP 1.1 billion increase from start of the year, while total equity rose to PHP 16.1 billion, up PHP 6.1 billion. These resulted in an improved net debt-to-equity ratio of 9.8x as well as an improved net debt-to-EBITDA multiple of 5x. Retained earnings after considering year-to-date income, net of dividends declared ended at PHP 12 billion. That's a 123% or PHP 6.6 billion increase since the start of the year. Cebu Pacific maintains a stable cash position as we generated PHP 28.2 billion in cash income year-to-date. After cash outflows for working capital of PHP 11.8 billion and PHP 1 billion in net interest payments, cash flow from operations amounted to PHP 15.4 billion. Cash outflows per CapEx amounted to PHP 4.2 billion. This was more than offset by the PHP 7.6 billion in proceeds from sale of aircraft and engines, and a PHP 1.4 billion increase in other assets, mainly from refunds of security deposits. These resulted in a net cash inflow of PHP 4.8 billion from investing activities. Financing activities reported a net cash outflow of PHP 24.5 billion, reflecting debt and lease repayments as well as the PHP 2.8 billion dividend earmarked for payout to preferred shareholders. Overall, these movements resulted in a net cash outflow of PHP 4.1 billion, ending September with a cash balance of PHP 15.8 billion. This liquidity position underscores our ability to fund operations, meet obligations and support strategic initiatives while maintaining financial flexibility. I now turn you over to our President and Chief Commercial Officer, Xander, to share Cebu Pacific's commercial and operational highlights. Alexander Lao: Thank you, Trina, and good day, everyone. Our third quarter performance reflects the impact of a longer lean season this year. Unlike last year when schools opened towards the end of July, most institutions began classes as early as mid-June. This earlier start shortened the traditional travel window and dampened overall domestic traffic during the quarter. Even so, we carried over 6 million passengers, slightly up by 1% year-on-year. International passenger traffic remained healthy, growing 8% to 1.5 million and helped offset a 2% decline in domestic volumes, which reached 4.5 million. Overall, our system-wide seat load factor remained stable at 83.6%, reflecting disciplined capacity management despite softer seasonal demand. For the first 9 months of the year, we've carried 20 million passengers, up 14% from the same period last year. This aligns with our growth in seat capacity, showing that demand continues to absorb the additional capacity we've deployed. Domestic traffic rose 13% to 14.9 million, while international grew 18% to 5.1 million, keeping our year-to-date seat load factor steady at 85%. As Mike earlier mentioned, during the lean third quarter, we deliberately managed capacity, moderating flight and seat growth while carrying out scheduled maintenance. This approach positions us well to capture stronger travel demand in the fourth quarter while ensuring resilient operations. While the earlier school start brought a softer third quarter, it also sets up an upside for the fourth quarter with the return of the week-long semesteral break in late October, a period that did not exist under last year's school calendar. This provides added opportunities for leisure travel among families and contributes to a stronger outlook for the rest of the year. In anticipation of peak holiday travel, we have increased flight frequencies, deployed wide-bodied aircraft on key domestic and international routes and added capacity in December through a damp lease agreement with Bulgaria Air for 2 Airbus A320ceos. These initiatives strengthen our readiness to meet robust demand and deliver a strong finish to 2025. CEB continues to demonstrate the strength of its market leadership, reflecting a steady increase in market share across both domestic and international segments. In the domestic market, Cebu Pacific held its market share at 55.4% during the third quarter, despite the limited capacity growth. This is higher than the 54.1% recorded for full year 2024 and the pre-pandemic level of 52% in 2019. Its international market share for third quarter also remained resilient at 21.5%, up from 20.6% last year and 19.5% in 2019. These continued gains reinforce Cebu Pacific's position as the leading carrier in the Philippines, underscoring its strong network, scale and ability to capture demand as travel momentum continues to build. Despite various operational headwinds, our on-time performance, or OTP, improved to 74% from 69% in the previous quarter as aircraft movements normalized following the completion of taxiway repairs at the Manila airport. Customer sentiment also showed significant improvement. Our quarterly net promoter score, or NPS, rose to positive 40, the highest in the past 5 quarters, while net sentiment was positive 9 for the quarter from positive 3 last year. These gains reflect the positive response to our continued efforts to enhance the end-to-end travel experience from digital booking and payment upgrades to more reliable operations and improved service delivery. We view NPS as a key indicator of customer trust and loyalty, and we remain committed to building on this momentum by further improving reliability, convenience and overall customer experience across every touch point. With the third quarter behind us, we entered the fourth quarter with a stronger outlook versus last year. Revenue per available seat kilometer, or RASK, is currently tracking 5% higher year-on-year. This improvement is supported by strong consumer spending, resilient travel demand and disciplined capacity deployment, positioning Cebu Pacific to deliver higher profitability by the end of the year. I now turn you over to our Chief Financial Officer, Mark, to share some insights on our financial outlook. Mark Julius Cezar: Thank you, Xander. The underlying fundamentals of the Philippine economy remain generally favorable, outpacing many regional peers and demonstrating resilience and steady growth. Consensus forecasts point to GDP expansion in the mid-5% to 6% range for 2025, improving modestly in 2026, supported by robust domestic consumption, gradually easing inflation and looser monetary policy. Higher disposable income should continue to bolster demand for affordable air travel. As Trina mentioned earlier, Cebu Pacific incurred FX losses in the third quarter as the peso closed weaker at PHP 58.20 per USD. Following the Bangko Sentral ng Pilipinas rate cut in early October, dollar-peso 6-month forward exchange rates for Bloomberg remained within the PHP 58 to PHP 59 range. That said, exchange rates depend on a variety of external factors, including capital flows, shifts in interest rate differentials and global risk sentiment. So this stability remains plausible, but not guaranteed. On the fuel front, analysts expect easing in oil prices to continue with 6-month forward prices showing jet fuel below $80 by the first quarter of next year. This is driven by rising supply from non-OPEC producers, planned production increases and moderating global demand, although some upside risk remains should geopolitical tensions reemerge. Taken together, a stable currency, moderating fuel cost pressures and resilient domestic demand provide a supportive backdrop for cost management and profitability through the remainder of 2025 and into 2026. These fundamentals strengthen our ability to manage exposures, maintain operational discipline and sustain earnings momentum going forward. We maintain a favorable outlook for the remainder of the year as we are encouraged by solid 9-month operational and financial results, continued strong travel demand and stable economic environment. Growth remains healthy and Cebu Pacific's growth trajectory continues to outpace competitors in both domestic and most regional markets. Despite strong demand fundamentals, the primary constraint to growth remains on supply side challenges, specifically engine availability and parts supply. These factors pose near-term risk to capacity deployment and could limit revenue upside if delays persist. We are actively mitigating these risks through contingency measures, including wet leases and close coordination with OEMs, but the situation underscored the importance of disciplined cost management and operational flexibility as we navigate these headwinds. This fourth quarter, we expect to receive 5 aircraft deliveries as 3 narrow-bodies and 2 wide-bodies, replacing 3 exiting aircraft. This will bring our fleet to 100 aircraft by year-end with neo seat capacity increasing by at least 35% year-on-year, whereas seat capacity of older ceo aircraft will decrease by 18%. This reflects steady progress in optimizing our fleet and improving cost efficiency. Nonetheless, we continue to manage 12 aircraft on ground, still higher than anticipated. While we expect the situation to improve toward the fourth quarter peak season, we now project full year 2025 capacity growth in the range of 11% and 13%, slightly below our earlier guidance of 15% due to these fleet availability and AOG constraints. For 2026, we expect capacity to grow between 6% and 12%, depending on the pace of engine return to service and aircraft deliveries. Capital expenditure is projected at PHP 35 billion to PHP 40 billion, primarily for fleet renewal, placing 3 ceos and 3 ATRs with 6 new neo aircraft. This keeps our year-end fleet at around 100 while enabling seat growth through upgauging to higher capacity aircraft. Over the long term, our transition from Airbus ceo to A320 and A321neo aircraft remains a key strategic pillar. The neos deliver 15% to 20% lower fuel burn, greater seat density and overall lower cost per ASK, reinforcing Cebu Pacific's cost leadership and sustainability goals and ensuring we remain among the region's most efficient and competitive carriers. I'm happy to note that our ESG principles are firmly embedded across the organization, including within finance, where we view sustainability not as a cost, but as an opportunity fully aligned with our low-cost operating model. We are proud that Cebu Pacific was recognized with the Sustainable Aviation Lease Deal of the Year at the 2025 Airline Economics Sustainability Deals Awards in London, for sustainability-linked Japanese operating lease with call option or JOLCO that finance a new Airbus A321neo. This transaction ties financing costs to measurable emission reduction targets, creating strong alignment between our financial and sustainability objectives. In addition, CEB was named Low Cost Carrier of the Year by CAPA and Best Airline by Roots Asia alongside other ESG awards such as diversity and inclusion and sustainable transportation from ESG business awards in HR World Southeast Asia. These milestones in both our growth and ESG efforts affirm CEB's leadership, not only in the Philippines, but also in the global aviation industry poised to deliver long-term operational resilience, profitability and sustainable growth. Our ESG strategy goes beyond compliance. It's about creating sustainable value by proactively managing risks, improving efficiency and strengthening stakeholder trust. We will continue to embed these principles across the business, ensuring that every aircraft financing decision and operational initiative reinforces both our cost advantage and our commitment to a sustainable future. I will now turn you over back to Mike. Michael Szucs: Thanks, Mark. As we close the first 9 months of the year, I'm happy to note that Cebu Pacific delivered a strong year-to-date performance despite seasonal headwinds in the third quarter. This reflects the resilience of our business model, the strength of underlying travel demand and the discipline of our teams in managing cost and capacity amid an evolving operating environment. We effectively navigated a longer lean season brought by the earlier school opening while managing ongoing supply chain challenges affecting the global aviation industry. Even with these headwinds, we maintained healthy growth ahead of the market and are well positioned for a stronger fourth quarter, supported by the return of the semesteral break, delivery of more wide-body aircraft and the peak holiday travel. Our performance also validates the benefits of our early investment in a more efficient and sustainable fleet, which continues to enhance our growth and cost position, support our ESG goals and strengthen long-term profitability. While supply side and engine availability issues remain, Cebu Pacific remains financially sound, operationally resilient and strategically positioned to capture long-term opportunities in Philippines and regional aviation. We will continue to focus on affordability, efficiency and sustainability as we pursue our mission of enabling everyone to fly. Thank you, and we look forward to an even stronger finish to the year. Operator: Good afternoon, everyone, and thank you for joining us for Cebu Pacific's third quarter 2025 Q&A session. Joining us for today's Q&A session are our Chief Executive Officer, Mike Szucs; our President and Chief Commercial Officer, Xander Lao; our Chief Financial Officer, Mark Cezar; and our VP for Investor Relations, Trina Asuncion. As a reminder, this Q&A session is being recorded. [Operator Instructions] So first, we will be addressing the questions that were submitted in advance via in e-mail. Our first question. Could you share your latest assumptions for the number of aircraft on ground, or AOG, in the fourth quarter and for 2026 to 2027? In light of your demand outlook and the competitive environment, how should we think about the implications of lower capacity guidance for profitability? And does it pose a net earnings headwind? Or do you see offsetting upside through pricing and mix, i.e. higher average fares? I think this question is for you, Xander. Alexander Lao: Yes. Thanks, CJ. I think on AOGs, we entered the year really assuming 8 aircraft on the ground, I think which supported the seat growth guidance of greater than 20% on a year-on-year basis. And currently, we're managing around 12 to 14 AOGs, which is limiting our full year growth to approximately anywhere between 11% to 13%. And I think based on, I guess, more recent developments, it now looks to be closer to 10% to 12%. Aircraft availability remains the key limiter to capacity expansion and really by extension to our net income growth. Having said that, demand is robust. Our revenue still grew 5% in our weakest quarter. In fact, peak Christmas travel is looking to provide extra uplift to our travel demand. And we did mention earlier, RASK is actually tracking up around 5% higher on a year-on-year basis. And really to capture the strength, we are adding near-term capacity in December with a damp lease with Bulgaria Air for 2 A320ceos alongside some of the incremental frequencies given the upcoming wide-body deliveries. So I think all of these combined actions really are positioning us to finish the fourth quarter with really both year-on-year growth and improved margins. We do remain in close coordination with Pratt & Whitney, and we expect AOG issues to remain, but gradually improving through 2026 to 2027. And I think on that basis, we do see the potential for anywhere between 6% to 10% growth in 2026. And 2027, if anything, remain fluid. On a net debt basis, the capacity constraint is a headwind, but we do think that the resilient demand in the Philippines, disciplined revenue management as well as the mix and pricing, which will lead to higher average fares, are offsetting a meaningful portion of the impact. And clearly, as engines return and the aircraft reenter service, we do expect to scale efficiently and continue to lift margins back towards pre-pandemic levels. Back to you, CJ. Operator: Our next question. Could you provide guidance on your 2026 aircraft deliveries, CapEx and financing plans? Additionally, please discuss your debt and leverage outlook. What is your target steady-state net debt-to-EBITDA ratio? And given your outlook, when do you expect to achieve it? I think this question is for Mark, our CFO. Mark Julius Cezar: Quite a few topics to go through there. But first, to go through the fleet and CapEx outlook for 2026. So we expect 6 deliveries in 2026, that's 4 narrow-bodies and 2 wide, that would be replacing 6 exiting aircraft now. So with that, now we expect 2026 CapEx will be between PHP 30 billion and PHP 35 billion, which would be lower than this year, which we expect to be between PHP 35 billion and PHP 40 billion. And we would finance those aircraft with a combination of finance leases and [indiscernible] for narrowbodies and operating leases for the widebodies. On the net debt and leverage levels, so as Trina mentioned in her part of the presentation earlier, leverage stands at about 5x net debt to EBITDA versus about 2x pre-pandemic. I think it's worth noting that the current net debt levels reflect 2 key drivers. First would be the PHP 250 million convertible bond issued during the pandemic, which remains classified as debt until the conversion in 2027. And second is the impact of the accelerated investment since 2023 in both aircraft and engines. If you recall, CapEx in 2023 was close to PHP 60 billion, last year was PHP 64 billion. And it's begun to slow down. We're expecting between PHP 35 billion and PHP 40 billion for this year. So well over -- it's about PHP 150 billion of incremental CapEx that we added to the balance sheet over the past 3 years this year. And this was a deliberate strategy to offset the huge capacity constraints and to capture the strong demand and growth potential we saw in the Philippine market. And the success of this strategy, you can see, it manifests in our 9-month growth and profitability improvements. And -- but with that said, now we do have to address the path to deleveraging the balance sheet. And we see that the accelerated aircraft investments -- aircraft and engine investments are reaching its tail end. After this year, we would only have 2 more wide-body deliveries. And with that, we think we are reaching the height of our net debt levels. We expect net debt to decline as EBITDA ramps up and CapEx moderates. And we would expect additional uplift on growth and EBITDA also will come from aging aircraft as we bring in more 330s and 321s. And most importantly, ungrounding of the grounded neos. And I think going forward that we do expect EBITDA growth will outpace CapEx and net debt, and thus improving our ratios. And to be specific about targets, we are looking at a sub 3 net debt to EBITDA by 2028 with the potential to return to pre-pandemic levels thereafter. Over time, we do also aim to return to a 50-50 owned versus lease ratio on the fleet to reduce our financing costs and improve capital efficiency. So overall, we remain focused on balancing growth with financial resilience, ensuring that the fleet expansion is matched with prudent financing and long-term value creation. Next, CJ. Operator: Our next question will be on the competitive landscape. How do you feel about today's competitive landscape? AirAsia has finalized its restructuring and announced an aggressive narrow-body order, including for non-ASEAN hubs, while Philippine Airlines is expanding its long-haul fleet and refurbishing its older aircraft. How will you defend market share in yields? I think that Mike can answers this question. Michael Szucs: Okay. Very difficult to really know what's going on with AirAsia at a group level and indeed at a local level with Philippine AirAsia, right. They've just -- Philippine AirAsia isn't publicly listed, but they just published their accounts under the SEC requirements. They have to publish them once a year. And just to show the difficulty that Philippine AirAsia is in, they ended December 2024 with just PHP 42 million of cash and with an OpEx of about PHP 24 billion. So that equates to about one week of cash. So they're totally supported by the parent company for them to carry on. And of course, that all depends then on the PN17 resolution. And whilst I think probably the AirAsia Group is going to satisfy the PN17, I think the next challenge is then the level of equity that they've got to raise. But just when you look at the situation in Philippine AirAsia, they've got 24 billion of liabilities that sit outside of the group. So there's -- that's an awful lot of money that's got to be repaid at some point in time. So lots of challenges for Philippine AirAsia. And I honestly don't know where they go. They're talking about growth. They're talking about aircraft orders at the group level. I mean just in terms of growth, they're talking about growing in Cebu in the next week or so. They will launch some new routes. But as per our tracking, they're still at 14 aircraft as opposed to the 25 aircraft they have pre-pandemic. So honestly, difficult to predict. You'll have your own views on AirAsia overall. We will just carry on doing what we're doing and focusing on our own business. With regard to Philippine Airlines, as we've said before, we think they did a successful restructuring through COVID. We do think their business is different to ours. They will be very focused, I think, on long haul and their A350 1000 order, which will start delivering soon; will focus very much on that strategy. So I think their strategy is different to ours. We're principally a low-cost carrier in the short-haul market. They are a long-haul carrier that will focus on premium. And, of course, there will be some overlap because they will need feed from domestic and from short haul. But we don't think that their existence is something that is going to be massively challenging to us. For us, we want to focus on the enormous opportunity that sits here in the domestic and short-haul international primarily. As we've always said, it's about 115 million people in these -- in the Philippines. And so the domestic market is key. And then flying within 4 hours flight time in Manila is 2 billion people. So really, we're a low-cost carrier, delivering in short haul. Yes, a little bit of long haul, but really short haul, and that will be our focus. Operator: So for our next question would be on capital returns. With profitability and cash flows improving significantly, would you be reinstating dividends for common shareholders? Are there specific financial covenants or milestones that need to be achieved? Mark? Mark Julius Cezar: Sure. Look, CEB has a strong history of annual dividend declarations and payments prior to the pandemic, and this reflects our commitment to returning capital to shareholders. And I think this commitment was reaffirmed with the recent dividend payout of the preferred shareholders, which brought those obligations have to be. And now with the preferred dividends current, Cebu Pacific is now positioned to resume dividends to common shareholders or subject to availability of relate earnings for dividend distribution. And I think based on current outlook, barring significant economic downturns or unforeseen events, we think we can be in a position to declare and pay out the dividends to common shareholders with the release of the full year results by next year. Specifically, I'm sorry, the full year results in 2025. Operator: So we go to our questions from the chat box. Our first question will be from [ Ray from Abaco ]. So his question is, what led to the fluctuations in international market share for CEB, especially in relation with [ Boudh ]? Alexander Lao: Yes. Thanks, CJ. Let me take that. So maybe to state first, really market share is not a target for the company. Now having said that, we did see Philippine Airlines actually expand internationally in the third quarter. They did launch a couple of new routes expanded into North America as well. But at the same time, we also do match the capacity with -- in relation to the demand. So given that the third quarter is a relatively soft -- in fact, the softest quarter for the airline, we did decide to pull back some of the international flying. So that's really one of the reasons on why there was some market -- where there were some market share shifts rather in the third quarter. Operator: Our next question will be coming from Klyne Resullar from Regis Partners. So her question is actually 3. First question would be, how should I reconcile your EBIT loss in the third quarter with Philippine Airlines 43% EBIT improvement, given that your revenue was slightly stronger in the third quarter? The second question is, can you walk us through the reasoning for pursuing a damp lease with Bulgaria Air in the fourth quarter? Wouldn't this constrain your ability to respond to peak season demand? And the last question is, can you provide CapEx guidance for 2026 and funding plans, which I think Mark already mentioned? When do you expect gearing levels? Will you be able to repay dividends performance? Michael Szucs: Trina, do you want to go first? Trina Asuncion: Sure. On Philippine Airlines now, one of the things, yes, you're correct in that both of us had a single-digit growth for the third quarter, but it looks like their EBIT has grown significantly higher year-on-year in the third quarter. It is disclosed though in their financial statements that they had a onetime revenue of about PHP 1.8 billion from the recognition of what they think would expire from their Mabuhay Miles program, no. So it is a onetime ancillary revenue, which goes -- which basically has no cost component. So it will go straight down to their EBIT line. So having said that, this will bring down their year-on-year. So it will be a reduction in their year-on-year EBIT, but they will also have still a positive operating income, if you notice, no, minimal positive operating income. So other factors that they're ahead could probably be the long-haul segment still supporting them; that's one. And they could be benefiting more from the fuel price decline given the heavier fuel consumption that they carry. I think that's for the first question. Second question, I think... Michael Szucs: The second question was about wet leasing. I think, Klyne, you may have misunderstood that we were going to be dump leasing out our own capacity. What we're doing is bringing in additional capacity. So this is 2 A320ceos from Bulgaria Air. You may recall that we used Bulgaria Air, I think, about 1.5 years ago for a similar purpose, 2 A320ceos. This is very targeted. It's only 6 weeks. It's over the super peak period, and it's absolutely to give us additional capacity during the super peak. So it's actually to enhance our ability to make money during the peak period. Mark Julius Cezar: And third one, I think I answered, Klyne, but anyway just to reiterate, PHP 30 billion to PHP 35 billion CapEx for 2026. And we are hopeful that the full year financial results and financial position would allow for a declaration of dividends sometime in 2026. Operator: So we have John raising his hand. Jon Ogden from Eastern Value. Unknown Analyst: I've just got a couple of sort of more long-range ones for you. The first one is let's think about Ryanair. Now they were trading at about $1 or something per share back in, like, 2004, and now they're about $27. So of course, everybody knows Ryanair has been a tremendous success story. So what can we -- if we drill down, why did they succeed so well even though people often don't like them? And then what lessons can we draw if we look at ourselves in 20 years' time? I mean, will we be trading at PHP 500 instead of PHP 28 or something, I don't know? So I was just intrigued to sort of think about what's the same and what's different about Europe in 2003 versus Philippines in 2025? You have this big market share in domestic, a growing aviation market. So anyway, I'll leave you to... Michael Szucs: Shall I answer that one first, Jon, and then you can come back with your second one, right? So first of all, I think there's a lot of -- I mean, look, Ryanair has been the most successful airline in the world for the last 25 years, I think, and 205 million passengers in the last 12 months. So despite people apparently saying that they don't like them, there's 205 million passengers that have flown with them. And their service credentials are actually very good in terms of on-time performance. So a lot to admire about them, frankly, from pretty much every lens. And I would say that's almost a guide to us as well in terms of our own principles about where we're going. We are very clear about what our strategy is and who we are on a similar basis. Ryanair, despite the wonderful yields that exist in premium long haul across the Atlantic, is staying focused on short-haul travel. And we ourselves are quite categoric in saying, whilst there's a bit of long haul that we might do because we can use the 330s for that, we are absolutely focused on short-haul travel. We are convenient, affordable, safe, reliable bus service in the sky for people flying domestically in the Philippines, we're an archipelago and also regionally where within 4 hours is 2 billion people. And the only -- probably one of the differences we have is we face infrastructure constraints, which mean that we have a complicated fleet. We do not choose to have all the different aircraft types we have. It's just that some runways aren't long enough or strong enough for anything other than a turboprop and some runways aren't strong enough or long enough for an A321neo, which is why we have A320s as well. So we face complexities. And perhaps the other one is they're in a much freer regulatory environment when you look across the reason we are multi-regulators. But, look, I would say that Cebu Pacific, if it looks at who it would like to mirror or looks at where is a guide in terms of simplicity and purity of strategy, I would hold Ryanair up as that example. And their success has been that they've stuck to it. So in the same way, we will not get hyped up about the fact that premium long haul post-pandemic has been the most attractive segment to be in for airlines. At some point, that will -- there will be some correction to that. So we're not going to go chasing it now. We are going to stay doing what we did pre-pandemic. Back in 2019, we were producing metrics that were very much the top of the industry, and we're going to stay doing what we were doing then, just better. Unknown Analyst: That's very good answer, Mike. The other question is, another sort of strategic one is just if you can shed any light. There's obviously ongoing side with the airline -- sorry, airports in Manila and elsewhere, Clark and so on. And that's always an evolving situation. So how do you see that situation unfolding with also renovation in the NAIA, the Bulacan Airport, possibly Sangley Point, Clark, the railway. So there's obviously opportunity for more flights, but also possibly more competition and people like Ryan -- sorry, Lion Air might come in perhaps, and they seem to be very price insensitive and, anyway, so there's a lot of things there to sort of go out as well, but it'd be interesting to hear what you say. Michael Szucs: Well, again, let me take that one on. I mean, first of all, I think if you're looking at Manila and the existing airport and you're looking at Bulacan coming online potentially by towards the end of this decade. I mean some people say 2029, some say 2030. But anyway, maybe by the end of this decade, you'll see Bulacan coming on. I think, first of all, it's worth explaining that Manila has been spilling demand for as long as any of us can remember. So additional capacity overall will be welcomed. And I think the market can absolutely, absolutely take that in the Manila catchment that is only getting bigger and bigger. And that fed through very much to a part of our -- a large part of our fleet order. When Bulacan arrives, we won't be transferring fleet from the existing Manila airport. We will be introducing a new fleet in addition. And we want to be able to put a sizable footprint down there straight away to make sure we have a presence there, but also maintaining our place here in Manila. So Manila, we see very much as the Haneda of Tokyo and Bulacan more of the Narita of Tokyo. So Manila will still attract a premium. And if I look at Manila in terms of the airport changes that have taken place, it's undoubtedly the case that as an operating environment, it's improved and we expect to see further improvements. For sure, there's been an increase in operating costs for us. We've talked about that in the past in terms of the additional hit that we've taken this year in terms of cost versus last year. Now that's done. That's kind of been the adjustment and we're now living with that. What we can look forward to is the developments over the next 12 to 18 months when we see further rollout of the enhancements that NNIC is making and which will include terminal reallocations, we think, which will help us reduce things like taxi times, thus fuel burn, which will increase utilization as well. So there's a number of benefits that we think we can see that will flow through to our operations in Manila. And given that's the largest part of our operation, we think that will overall be beneficial. So in summary, we think operational improvements coming through in Manila will be enormously beneficial to us. And with regard to the recent increase in airport costs, we think that's done now and is now built into our underlying performance. Operator: Our next question will come from John Bugg from Bamboo Investment Partners. So his question is, is it accurate observation that the entire uplift in ancillary revenues was wet leases, i.e. the plus PHP 0.9 billion. And on Page 17, the right-hand graph, do you expect the average fare would increase month-on-month into November and December as we saw last year? Michael Szucs: Trina, the first question... Trina Asuncion: Sure, sure. On the ancillary revenue, no, no, that's not it. There -- while we were very satisfied with the performance of our short-term wet lease this third quarter, I think we guided that it's not big. It's 2 aircraft for just 2 months. So while we saw that it was high margin and it's countercyclical revenue opportunity, it did not take the whole PHP 900 million lift on ancillary revenue. But what it did do for us, and I think Mike mentioned it at the last call, is that we are now more confident that we can move this forward in greater scale in the future years. We know how to execute it and we know that it works. So while this year is just dipping our toes into the program or into the structure, next year we hope to do more. We hope to at least scale it to at least 6 aircraft maybe and possibly more in the coming years. This third quarter was a combination of that, plus there was also success on a lot of our other initiatives. The take-up of bundles is still successful. The plus 1, the chose your seat or GO Flexi seat or instead of GO Basic, that pickup of those bundles are still manifest in the third quarter and some pricing and some on the bags. That's I think it. Michael Szucs: I think the second half part of the question, go ahead, Xander. I think it was on the passenger fares, I think. Alexander Lao: Yes, let me have a look at the question. I think in terms of overall passenger fares, we are still seeing increases month -- on a year-on-year basis and actually pretty strong. We are looking at a really strong December in terms of our average fares. As we did mention, we are seeing pretty strong RASK improvements. So that is actually driven by pretty strong demand and actually pretty good average fares on a year-on-year basis. Operator: And our next question via chat is from John Ogden. Just a follow-up question. Can you explain the big increase in cargo revenue? And what was behind this in terms of what cargo and is it sustainable? And how about for 2026? Alexander Lao: Sure. Let me take that as well. I think what we had mentioned earlier was there was a, I think, an increase in wide-body aircraft. So clearly, cargo market loves the wide-body aircraft, loves all of the ULDs. And that has been a key component or a key driver for us in unlocking a lot more of the cargo revenue. In fact, it's a combination of both domestic cargo revenue where we're able to deploy the wide-body aircraft into places like Cebu and Davao, but also into markets that are doing transshipment. So, for example, we do bring some of the cargo from North Asia, and we do bring it to other markets like Middle East and Australia. So in reality, a lot of the cargo revenue growth has been driven by the wide-body growth. So for next year, given that we only have maybe 2 wide-body deliveries, we should still expect pretty good volumes in terms of our -- in terms of total cargo. But the key driver to that has really been the wide-body capacity that we brought in the last year or so. Operator: Our next question -- next 2 questions will be coming from Ronalyn Lalimo from Maybank. Can you give the color on the current visibility and strength of your forward bookings for the fourth quarter of this year and includes the first quarter of 2026? Are there notable trends by market or channel? And the second question is, what is the fair value of the 5 free-of-charge engines recognized as of the 9 months of this year? Can you please confirm that it's PHP 5.95 million? Alexander Lao: Sure. So let me take the -- thanks, CJ. Let me take the first question. We are seeing pretty strong first quarter forward bookings. It is, I guess, I would say, a mix. I think domestic remains pretty strong, pretty resilient. We are seeing long haul to be okay on a year-on-year basis. So having said that, the forward booking profile as a whole is doing pretty well. And it has been really driven primarily by the strong domestic market. Mark, do you want to take the second one? Mark Julius Cezar: Yes, that's confirmed. It's about PHP 6 million. Operator: Our next question will be from Alfred from FlightGlobal. You mentioned that the supply chain challenges continue to remain above anticipated levels. Do you have any numbers to share on what the actual versus anticipated levels are? Michael Szucs: Okay. I think we may have touched on it in the presentation. There was lots of data in there, so apologies if you didn't pick it out. But we probably were looking to average this year at about 8 aircraft AOG, and we've been in the 12 to 14 sort of. So it's been sort of probably on average 5 or 6 aircraft higher on AOGs through this year. And so that's been why we've undershot in terms of our growth targets. And of course, that brings challenges for us in terms of the manage. I mean we are currently carrying a surplus of pilots, which, of course, will grow into next year. But these are costs that we have to incur that sometimes people don't necessarily reconcile because they think it's just an aircraft on the ground, but we've actually recruited people to fly these aircraft. As I say, we've got growth next year as well, even when we look at the different scenarios and predictions coming out of Pratt & Whitney. And by the way, we do need to build in the potential supply chain issues from new aircraft deliveries. But factoring all of those in, we have a window now of growth of about 6% to 10% through next year. It sounds like quite a wide window. But when you have the variability that we currently have, then that's where we anticipate growth next year. And I guess just as predicting what might be another question is when do we see the Pratt & Whitney situation fully flushing itself out. I think the earliest would be as we currently sit here today, and it could change, but we're probably -- we've got a few scars from it now. So we're not massively -- we don't look at this with big optimistic lenses. We look at it with some realism. We think probably sometime in 2028 that things will be to the stage where we will be at 0 AOGs. And I think that ties in with something that Mark said earlier on when people are looking about our leverage ratios. Our leverage ratios are going to consistently come down in the coming years. And certainly, by the time we get to 2028, that's when we can free up these assets that are sitting on our balance sheet that have a cost that aren't generating any revenue because they don't have any engines. That's the time when we really see that we can get the kicker in our performance, and we'll be able to get to our financial leverage ratios similar to getting down to where they were pre-pandemic. Operator: Our next question will be coming from [ Daldon Modesto from Oak Drive Ventures ]. Based on results, passenger revenue was essentially flat year-on-year, while ancillary revenue grew double digits and became the primary driver of top line growth this quarter. Can you give more color on how much of this ancillary uplift is structural versus seasonal? And as passenger volumes were unchanged, how should we think about sustainability -- of the sustainability of ancillary growth going into 2026? Alexander Lao: Yes. Thanks, CJ. Let me take that one. So I think Trina mentioned earlier that we did some recent enhancements in terms of the bundles, in terms of the baggage products that we have offered. Now some of it is clearly sustainable. We do think -- now it probably won't be double digit year in, year out. But having said that, we do think there is a focus to grow ancillary revenue on a per passenger basis. Now part of that could be the network mix. We -- the ancillary revenue per pax is much higher on international than it is on domestic, for example. But we did also have improvements in terms of our booking fees, for example, we did have improvements in terms of the take-up on the bundles. We also put in additional onboard meal offerings. So we do think that some of these improvements have really driven up the ancillary revenue per pax. The teams have done a great job in really pushing that portion up. So that's clearly a focus of management to see how we can deliver more ancillary revenue passenger -- yield per passenger in the coming years. Operator: Our next question would be coming from Brendan Sobie. How did the flyadeal wet lease help offset the seasonally weak third quarter? And will we see more of this in the third quarter next year? Did it have a positive contribution to your bottom line? Michael Szucs: Okay. Let me take that. Yes, I think as Trina said, it did absolutely have a positive contribution. It was profitable, but small. It was small. It was only 2 aircraft. And the other thing was it was our first time looking at it. So we effectively over-resourced it because we wanted to make sure that we could deliver it well. We were dipping our toes finding out how to do it. Now, so 2 things will happen as we go into 2026 and in the years beyond. We now have a much better idea of what sort of level of resources need to go in, plus if we upscale as well, we get efficiencies of scale. So we would think next year, we would look to grow to at least 6 aircraft that we wet lease out during Q3. And then in years beyond, we think this could grow to sort of 10 to 12 because worth bearing in mind that our Q3 was very soft for us, Q3 is super peak season in North America, Europe and Saudi Arabia as well, in particular, is strong. And the other element that we need to think about is we've got an increasing fleet of A330s. So we talked about A320s. That has been our method of wet leasing, those 2 A320ceos we put into flyer deal earlier this year. We have the potential as well to utilize the A330s going forward. And that is going to give a much bigger capacity swing or capacity offset. So there's great potential there. Anyway, we anticipate into next year, we would be doing at least 6 as opposed to the 2. And then longer term, we would look to build this up even further. But it was profitable. They were very small this year because we wanted to make sure we could deliver it. As I say, we were learning the ropes dipping our toes. Operator: [Operator Instructions] Our next question will come from Kenneth Gutierrez from BBO. To clarify Mark's statement regarding the funding of 6 aircraft deliveries next year, no commercial loan will be considered? He mentioned that the financing of the 6 aircraft deliveries will be a combination of JOLCO and operating lease. Mark Julius Cezar: I may have just inadvertently missed that. But certainly, we are open to commercial loans, commercial debt to finance next year's deliveries, at least in our minds. Operator: Thanks, Mark. So far, we've gone through all of the questions in the chat box. If there are no more further questions, we'd like to conclude this briefing. Should you have further questions, feel free to send us an e-mail any time at the address shown on your screen. So thank you, and we hope to see you again on Cebu Pacific's next investor call. Michael Szucs: Thank you very much.
Operator: Welcome to BioArctic Q3 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Gunilla Osswald; CFO, Anders Martin-Lof; and colleagues. Please go ahead. Gunilla Osswald: Thank you. Good morning, and welcome to BioArctic's presentation for the third quarter of 2025. BioArctic is continuing a great way in our new era. With yet another quarter where we see more and more patients are getting access to Leqembi. And we are broadening our collaborations, utilizing our BrainTransporter technology and we are also broadening our portfolio with new projects and new modalities, and we will talk more about that in today's presentation. Next slide, please. BioArctic is listed at nasdaq.com large cap, and this is our disclaimer. Next slide, please. So I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Anders Martin-Lof; and our Chief R&D Officer, Johanna Fälting; and our Chief Commercial Officer, Anna-Kaija Gronblad. Next slide, please. So I will start our presentation today by giving some key highlights. We go to next slide, please. So before I come into this quarter and the presentation, I just want to give a high-level introduction to BioArctic, if we have any new listeners today. BioArctic is among the world's leading innovators in precision neurology, and we have 2 key platforms: the first one is about innovation and generation and development of highly selective antibodies targeting aggregated misfolded forms of toxic proteins. And examples here are -- for example, lecanemab, Leqembi and exidavnemab. The second one is when we are utilizing our BrainTransporter platform in innovative ways to deliver antibodies and different modalities to come better into the brain. In today's presentation, we will talk about both selective antibodies like Leqembi, exidavnemab and our new project for Huntington's disease with Huntington as well as our BrainTransporter Technology, which we have utilized now for all our internal targets, and we have also started to use it for external projects. And we now have 3 different partnerships utilizing the BrainTransporter technology, including the recently signed deal with Novartis. Next slide, please. During the second quarter this year, we held our first Capital Markets Day, and then we presented our ambitions for 2030. And I'm really pleased to say that we are already delivering on our ambitions. So if we start with the first one, Leqembi, to be an established treatment in Alzheimer's disease, I'm really happy to see how Leqembi's demand continues to grow. The second one is to have a balanced and broader pipeline with projects in all stages of development. And our pipeline is already broader and continue to increase and develop. The third one is additional successful global partnerships. And of course, we are very happy with the new collaboration with Novartis, and we have more positive discussions ongoing. The fourth one is our aim to be profitable and to have recurring dividends in the future. And we expect to be highly profitable this year, and these will come back to this. Next slide, please. As I said, we are already delivering on our ambitions. And now I will go through a bit about how. We start with Leqembi. And I think now we are really well on our way to get Leqembi established as a treatment for Alzheimer's disease, a disease-modifying treatment affecting the underlying disease. Thanks to our partner Eisai. They're great work with Leqembi. It's now approved in 51 countries around the world, with Canada being the latest one. The Iqlik, the subcutaneous auto-injector, like a subcutaneous pen was called Iqlik was approved for maintenance dosing in the U.S. during the quarter. And Eisai has already initiated a rolling submission for initiation dosing as well and launch has already started for maintenance dosing in the U.S. after the quarter. Next thing I want to say is about Europe, and there, the launch has been initiated in Germany and Austria. And we're really happy to see that Finland has got the first patients that have been treated in a private clinic. Of course, this is great news from us from a Nordic perspective since we are preparing for launch together with Eisai in the Nordic countries. And Anna-Kaija will come back and talk more about this. Then there has been several presentations on Leqembi during the period and after the period. And those have shown that long-term data over 4 years treatment show continued increasing benefits over time. And these are really reassuring to follow the real data coming for Leqembi when it's being used in clinical practice. And we have heard presentations, both from the U.S., Japan and China. And the data have shown that the benefit and the safety profile are at least in line with the Phase III results, which I think is great and encouraging. Subcutaneous administration data has also been started represented, and that supports this great further opportunity for patients, to, in a more easily way, get the injection, buy an auto injector and possible to do that at home in an easier way. Then I also want to mention that we -- of course, we follow with great interest the fantastic progress with the blood-based biomarkers. And the guidance was launched earlier -- or during the quarter about how to utilize the blood-based biomarkers and they can now be used both for confirmation and for charging, and we'll come back to that. If we then look at the second part of the pipeline, which is progressing really well and growing with new projects, I want to mention exidavnemab, our alpha-synuclein antibody currently in Phase IIa, with the second part of the study ongoing in both Parkinson's disease patients and in multiple systemic atrophy patients. And also really happy to be able to communicate that we are also now working on another misfolded protein target called Huntingtin for Huntington's disease. And here, we are working with antibodies, but we are also broadening it into other modalities, utilizing our BrainTransporter technology, and Johanna will talk more about this in today's call. The third one is to have additional successful global partnerships. And as I said, we are very happy about the new collaboration with Novartis regarding an undisclosed target for neurodegenerative diseases. And we will reengineer their antibody to include our BrainTransporter technology and enabling them a better penetration into the brain. I also want to mention the other BrainTransporter collaborations that we have so far is one with Eisai on BAN2802, where we're generating great data and BAN2803, which we are completing now the tech transfer to Bristol Myers Squibb. It's also great to see that we have continued strong interest for our projects and for our BrainTransporter technology for antibodies as well as for other modalities. The fourth part about the financials. We have strong financials, and we are highly profitable this year with increasing royalties as well as several milestones from Eisai and upfront payments from Bristol Myers Squibb and Novartis. Next slide, please. If we think about the Alzheimer's field, it's evolving in a very nice way, and I want to highlight 5 different areas. The first one is that we see that we are getting easier and easier diagnosis by blood-based biomarkers. And I think this is important in helping to build the market in an easier way and to help to get the right patients to come to specialists to get a treatment initiated. The first tests are now available as confirmatory for specialists as well as for triaging for primary care. If we then look at the second one, we see more and more data that shows that earlier initiation of treatment of Leqembi shows better effect. So when we are looking at the earlier patients in the Phase III Clarity AD open-label extension study, where now 48 months data are available. We see that the majority of aducanumab-related patients were stable or even improved after 48 months treatment. I think this is very encouraging. And I think it's also further supports the ongoing AHEAD 3-45 study in presymptomatic individuals with amyloid pathology, but yet without symptoms. The third one is also really important, and that is the data that are being presented show the importance with maintenance treatment to maintain the treatment and the benefit of continued treatment with Leqembi, even after the plaques are cleared in order to continue to clear the toxic protofibrils and that's possible due to the mechanism of action and the low immunogenicity that we see with Leqembi. The fourth one is about more convenient dosing with Leqembi Iqlik, the subcutaneous auto-injector. And I think this is a really important next step for Leqembi. And it's making dosing so much easier for the patients and care partners to handle the dosing at home. And we are also pleased to note that it was awarded as one of the top innovations for 2025 by Time Magazine. And the fifth one is that in the future, we expect to see more combination treatments for even better outcomes. And there is currently an ongoing study with lecanemab, and Eisai's tower antibody. And I think in the future, we will see more and more combination treatments. So to summarize, the key is to identify patients at an early stage. And here, we can use the blood-based biomarkers, and we can start Leqembi treatment early and continue treatment with convenient dosing with Leqembi Iqlik. So great progress in this field for Leqembi. Next slide, please. So now we come to the R&D update, and I hand over to our Chief R&D Officer, Johanna Fälting. Johanna Fälting: Thank you so much, Gunilla. Next slide, please. So as Gunilla mentioned, BioArctic is among the world's leading innovators in precision neurology, where we have 2 key platforms: the antibody platform with highly selective antibodies targeting aggregated forms of toxic proteins. And these are intended to treat severe neurodegenerative diseases with high unmet medical need, such as Leqembi in Alzheimer's disease, exidavnemab in synucleinopathies, Parkinson or MSA and also the TDP-43 project for ALS. BioArtic is also developing a BrainTransporter technology that facilitates the passage of antibodies and other drugs across the blood-brain barrier. And the aim with this platform is to improve the brain exposure and distribution of the drug and thereby allow for lower dosing, improved convenience, reduced manufacturing costs and potentially also better efficacy. And in addition now, we are also further developing our BrainTransporter technology and expanding this into new modalities other than antibodies, such as enzyme proteins and even genetic medicines. And the development of the platform that will enable us to address different diseases by tailoring the modality target combination with the highest potential clinical benefit. Next slide, please. So this is an overview of our R&D portfolio with the 2 platform antibodies and brain transporters and the cross program synergies. The portfolio is a combination of fully funded projects run in partnership with global pharmaceutical companies, innovative in-house projects and technology platforms with significant market and out-licensing potential. So far, our BrainTransporter platform has generated 3 collaborations with Eisai, BMS and Novartis and all of these collaborations are progressing really well. They are all with different targets. But importantly, the BrainTransporter technology is BioArctic's own proprietary and has the potential to generate more collaborations in the future. You will also note a new BrainTransporter project in the portfolio, the [HD-BT 4801] for Huntington's disease, and I will come back to this specific project later in the presentations. So to summarize, we are both advancing and broadening our R&D portfolio with new projects into new disease areas and with new collaborations. Next slide, please. So exidavnemab is an antibody that selectively targets the pathological alpha-synuclein aggregates while sparing the physiological monomers and exist is a Phase IIa study, testing the safety and tolerability of exidavnemab. In this study, we are also exploring a wide range of biomarkers, both biochemical and digital and we have a quite unique approach in including the right patients in the study with a smell test that is an early sign of Parkinson if you have an impaired smell and also a CSF seeding amplification test to really make sure that we have the correctly diagnosed patients with the alpha-synuclein pathology in the study. The high dose cohort is currently ongoing, both in Parkinson and multiple systemic atrophy and the results are expected mid-2026. So following this EXIST study, there are several potential possibilities for future development in different synucleinopathies such as Parkinson MSA and DLB, and we are currently preparing for the next stage of development. Next slide, please. So this is very exciting to me that we are now expanding our portfolio into a new neurodegenerative disease, the Huntington's disease. And this is an inherited progressive neurological neuropsychiatric disorder that is caused by impaired function and degradation of nerve cells in specific areas of the brain. Huntington's disease is caused by a toxic mutant Huntingtin protein in the brain and the mutation in this gene results in a buildup of toxic aggregated Huntingtin protein causing Huntington's disease. The disease onset is between 30 and 50 years old of age, and it's fatal within 10 to 30 years. Current treatments are only symptomatic and there is a large unmet medical need for better treatments. So next slide, please. Targeting the Huntingtin protein in the Huntington's disease is an excellent strategic fit into our portfolio at BioArctic and with our capabilities. So this project is built on BioArctic's extensive experience in developing antibodies against misfolded aggregated toxic proteins and also our BrainTransporter platform that will enable us to increase the brain delivery of the drug. In this project, several modalities is being explored in parallel, antibodies as well as genetic medicine approaches. And since this is a brain target we have, of course, also combined it with our BrainTransport technology. So we are excited that we now expand our portfolio with yet another neurodegenerative disease in addition to Alzheimer alpha-synucleinopathies ALS and Gaucher with the potential to bring hope for even more patients. Next slide, please. So with that, I will hand over to our Chief Commercial Officer, Anna-Kaija Gronblad for a commercial update. Anna-Kaija Gronblad: Thank you, Johanna, and you can go to the next slide, please. And I will go back to Leqembi again. And I'll start with the regulatory update for all of you. So since the last quarterly report, Leqembi IV has now been approved in 3 additional countries. That is in India, Australia and in end October also in Canada. So in total, Leqembi it can is approved in 51 countries and territories. And as of October, in addition to the U.S., the IV maintenance treatment, meaning once every 4 weeks is also approved in China, in Qatar, United Arab Emirates and India. So Anders will soon present the sales numbers. But in short, I would say that the Leqembi growth really continues steadily. So in Q3 versus Q2, when you adjust to the China's actual demand, the growth was 14%. And we have seen recent launches in Mexico and Saudi Arabia. And as of August and September, as Gunilla mentioned, Leqembi was launched also in the EU, in Austria and Germany, where patients have started treatment. So -- and what we hear is that within the first 2 months, it's around 350 centers were registered in the system for the controlled access program. And as educational activities is being rolled out in the 2 countries, registrations and prescriptions continue to increase at major specialist clinics. And finally, in the Nordics, of course, as Gunilla mentioned, there is a private clinic in Finland offering Leqembi treatment to patients willing to pay out of pocket and we know that a few patients have received treatment in October. So this is an important milestone for us in our ambition to also becoming a fully-fledged pharmaceutical company. So in the meantime, the price and reimbursement and the dialogue continues with all the Nordic countries, and we aim to launch gradually across -- throughout 2026. So next slide, please. So additionally, I would like to spend a few minutes again on the Leqembi Iqlik, the subcutaneous auto-injector, which was approved in the U.S. in August and launched as of early October. And as Alzheimer's disease is a progressive disease where neurodegeneration and cognitive decline continues even after plaque removal, it is important to offer both health care professionals and patients the possibility to choose between continuing on once-monthly infusions in the hospitals or to switch to once weekly at home injections after the 18-month treatment. So this obviously could be a benefit for the patient who might want to travel and feel less bound to the hospital but also to health care providers in reducing the resources related to the infusions. Reimbursement for the Iqlik is expected to be included on formulary in the beginning of 2027 but individuals can seek insurance coverage via the medical exception process, which is something that is quite common in the U.S. And Eisai staff is providing information on this process and nurse educators provide support on dosing and demonstration kits, et cetera. So this is truly a major step in the treatment of Alzheimer's disease patients. And recently, Leqembi Iqlik was selected by Time as one of the best inventions in the medical and health care category. In addition, Eisai has also rolling SBLA ongoing also for the weekly initiation treatment in the U.S. since September, which is planned to be completed in the last quarter of this year. So potential approval maybe in Q2 or Q3 next year. And finally, submissions for the subcutaneous weekly initiation treatment is also planned for Japan before the end of this year. Next slide, please. So moving on to my final slide. This is to highlight again the true advancements we are seeing with the Leqembi Iqlik and with the parallel development in the usage of diagnostic blood test. If you remember, U.S. clinical guidelines were presented at the AD/PD congress in July this summer, saying that blood-based biomarker test showing more than 90% sensitivity and specificity can be used for confirmatory diagnosis in patients with cognitive impairment. And the first blood-based confirmatory tests are available in several countries in U.S. and China, for instance. And Fujirebio's test, Lumipulse, for instance, has been granted IVD clearance and C2N is another company has submitted for regulatory filing in the U.S. for their confirmatory test. And meanwhile, Roche phospho-tau 181 blood test was granted IVD clearance from the FDA for use in the primary care test as a triage test. So more tests will be done. 350,000 tests are expected to be used in 2025. And the new CMS payment rate is coming up from January next year. And of course, as more patients are being tested, more patients will receive a diagnosis. So as we see it, these advancements will contribute significantly to the Leqembi growth going forward, especially in the U.S., China and Japan. So that's all for me. And with that, I will now hand over to our CFO, Anders Martin-Lof. Anders Martin-Lof: Thank you, Anna-Kaija. If you start to look at the Leqembi numbers, the global Q3 sales work came in at JPY 18 billion or roughly $121 million. And at first glance that looks quite negative since there was a 22% decrease from the second quarter of 2025, but that is all due to a large stockpiling effect in China in the second quarter. So Eisai calculated what the growth would have been from the second to the third quarter without the stockpiling effect and then the growth would have been 14%. We recorded a royalty of SEK 117.2 million. That's also then down from SEK 162.5 million in the second quarter. But we have also estimated what the royalty would have been without the stockpiling effect. And then we would have been around SEK 125 million in the second quarter and SEK 135 million in this quarter. So I think that's a better reflection of the actual development of the Leqembi sales in the world. Turning then to China. So actual recorded sales for JPY 0.2 billion or $0.6 million. So a 97% decrease from the second quarter. Basically, the clinics in China are receiving Leqembi from inventory right now in the third quarter. The actual demand was roughly $18 million, and that's a 10% increase from $16 million in the second quarter. But all in all, this means that there is still quite a significant inventory left in China. So we expect very low sales in China also during the fourth quarter, and that was reported by Eisai. Turning to the U.S. There, the sales are increasing well. They were up to JPY 10.2 billion or roughly $69 million, representing a 12% increase from the second quarter. And here, Eisai is really trying to leverage the developments that Anna-Kaija was talking about with the blood-based biomarkers that are now being used more and more and acceptance of Iqlik for maintenance therapy this year and for induction next year. But to really get the full effect of this, you have to target the primary care practitioners. So that is what they say it's doing now. They're targeting roughly 2,500 primary care practitioners. They're running very big educational programs and running large awareness campaigns straight to the patients. So they're really building momentum now to start to see an impact from Iqlik and blood-based biomarkers starting probably more from next year, but they're really starting to do the groundwork now. And here, you can say that they're mimicking Japan a little bit. Japan is the market that has come the furthest along in the demand expansion phase. Sales here were $42 million, representing a 13% increase from the second quarter. And here, they have really succeeded in setting up a good treatment chain where roughly 4,200 doctors are referring to 800 initial treatment centers, and there the patients stay for a while, and then they are moved over to follow-up facilities. So that's a system that has worked incredibly well, and that is what they're trying to achieve now in the U.S. as well. I think it's also really interesting to see that the disease awareness campaigns that they are running for mild cognitive impairment in Japan are significantly increasing the recognition rates because we all know that mild cognitive impairment, which is the earliest phase of the disease is really where you want to treat the patients with the disease-modifying therapy, you can have the most effect if you start as early as possible. But today, those patients aren't really diagnosed to a large extent. So these awareness campaigns can really start to build momentum for more patients getting the drug when they really should have it. And then as Anna-Kaija mentioned, the EU launch has been initiated in Austria and Germany. It's really exciting to see that, that is starting well. However, it will take some time before you see any significant impact in our royalties from EU, which is slightly slower market than the U.S. and Japan. If we then turn to the Leqembi Global sales forecast. They have a forecast of JPY 76.5 billion for their fiscal year 2025 for Leqembi. And if you look on the right-hand side of the graph, you see that they have already in the first 2 quarters of that fiscal year, achieved 48% of the forecast in the U.S. and 49% in Japan and already 83% in China. So all in all, if you also include the other countries, they have achieved roughly 52% of the overall annual forecast in the first 2 quarters of that period. And since they are growing, we have a very high confidence that they would reach the forecast for the year. So everything is looking really, really good for Leqembi, and it seems to reach their forecast with some margin. If we then turn to our own numbers, you see that the Q3 net revenues were SEK 133 million. And this quarter, that was mainly based on the recurring revenues with royalties of SEK 117 million and co-promotion revenues of SEK 5 million. So it's exciting to see that we're becoming more and more like a normal company with recurring revenues that make up a larger share of our revenue base. We also recorded some revenues from the new Novartis agreement. As you know, we got in a $30 million upfront when we started that collaboration. And now we recorded SEK 9 million out of that in the third quarter, and we will record the rest during the remainder of that collaboration. Looking at our operating expenses, they increased to SEK 150 million this quarter compared to SEK 95 million a year ago. And this time around, that was basically just normal cost. We have had large currency effects in the previous 2 quarters, but not this quarter. So the underlying operating costs were SEK 146 million. And that's slightly over than our recurring revenues. So we have operating costs that are SEK 24 million higher than our recurring revenues, but we are approaching a point where we will have recurring revenues that are larger than our operating expenses. So we are getting closer and closer to long-term profitability. If we then look at our cost for the remainder of the year, we expect them to keep increasing since we have a more mature project portfolio, and we have built up our commercial organization. I have previously stated that I expect our full year cost to be roughly 50% to 70% higher than the cost of last year. Now we think we will be in the lower range of that interval. So I would say roughly 50% to 60% higher than the cost of last year. And then on the right-hand side, you see that operating loss was SEK 29 million for the third quarter. We expect something similar in the fourth quarter. So the operating profit for the year should be well above SEK 1 billion. On the next slide, you see our net result on the left. It's then, of course, a lower loss or a bigger loss the operating loss, but -- and that's mainly explained by the accrued taxes of SEK 65 million that we also -- we have a positive financial net of SEK 8 million, so that ameliorate a little bit. And then the operating cash flow, you typically see one very big bar, and that's the payment of the $100 million upfront payment that we received from Bristol Mayer Squibb in the second quarter. The $30 million upfront payment, $30 million, I should say, from Novartis had not been received in the third quarter. It was received in October. So the bar you see on the left-hand side with our cash balance right now of SEK 1.9 billion does not include the Novartis payments. So our financial position will continue to be strengthened in the fourth quarter. So we are going to end the year with a very, very solid position. I think that was all for me. And now I hand back to Gunilla for some closing remarks. Gunilla Osswald: Thank you so much, Anders. So we are coming towards the end of today's presentation with some upcoming news flow and some closing remarks. So next slide, please. So we are now in the fourth quarter of 2025. And I think it's great to see that more and more patients are getting access to Leqembi around the globe. And also really pleased to see that we're also starting even if it's small. So we are starting in the Nordics. We see continued regulatory processes on lecanemab, with the Canada approval. And I think it's great to see the Iqlik being approved for maintenance dosing in the U.S. and our partner, Eisai are working hard to conclude the supplementary BLA filing for Leqembi Iqlik in the U.S. for initiation dose. And also to file in Japan for both initiation and maintenance dosing with Iqlik. We are, of course, looking forward to the next Alzheimer Congress its CTAD in San Diego in the beginning of December. And there, we note several presentations on lecanemab, including subcutaneous data and more real-world evidence data from, for example, U.S. registered. So this is something I'm really looking forward to. So I'll come to next slide. So the key takeaways from today's presentation is that BioArtic is now in our new era, and we see great progress both on Leqembi as well as the rest of our portfolio and the BrainTransporter technology. We have already started to deliver on our 2030 ambitions. Leqembi is well on track to become an established treatment for Alzheimer's disease. Sales continue to show increasing demand on a global level, further regulatory approvals, launches reassuring data from long-term treatment and real-world evidence. Our portfolio has increased, and we have initiated program for Huntington's disease with different modalities. Our brain -- or our business development efforts continue to deliver with a third BrainTransporter collaboration now having been initiated during the third quarter. And this was the first of its kind, and it shows that we are also expanding to becoming also a platform company. And the last point is that we have strong financials, as Anders described, with great cash flow with milestones and record royalties during this year, growing more than 180% year-on-year. So I think the future looks very bright for BioArtic and is bringing hope for many patients. Next slide, please. So by that, we say thank you so much for your attention, and we're happy to take some questions. Operator: [Operator Instructions] The next question comes from Joseph Hedden from Rx Securities. Joseph Hedden: Firstly, on the Leqembi Iqlik, do you have any visibility on when regulatory filings might be made in Europe or China or the strategy there is? And then secondly, it's great to see a Huntington project. Just on the BrainTransporter technology. I know that first program is an antibody and you've mentioned genetic medicines. Is BrainTransporter are capable of, for instance, using an AAV vector like, I mean, Huntington's, the uniQure therapy made a lot of noise recently. Does any significant modification need to happen with your current platform to be able to carry a vector such as AAV? Gunilla Osswald: Thank you so much, Joseph. Excellent questions. So I think the first question on Leqembi Iqlik in Europe and China, we cannot comment on that. I mean right now, we are really happy about the progress in the U.S. and Japan. And then we know our partner is doing everything they can to help as many patients as possible around the world. So we'll come back to that. Then your question with regard to Huntington's disease and where we are also really happy to see the BrainTransporter. So I didn't understand any specific question. Johanna Fälting: I think I can take the question. Gunilla Osswald: But if I just -- then I hand over to you, Johanna. And then for the BrainTransporter, I think it's really, really good to see that we can utilize that for several different modalities and definitely help to get different modalities better into the brain. And I think it's important to point out that BrainTransporter is not one thing, it's the platform with many different tailor-made ways to handle depending on if it's what kind of target and what kind of modality. So we have several different approaches that we utilize depending on if it's an extracellular target, intracellular target or what kind of modality we have. And then I hand over to Johanna, who understand the question I missed. Johanna Fälting: Thank you so much, Joseph, for that excellent question. And we are, of course, following the competitive landscape very well, and we understand and we have seen the uniQure data. I think it's excellent data. But that's a treatment that is not for everyone. It's a quite invasive treatment, and you actually need maybe a 15-hour surgery for one patient to administer that drug and you do it with intrathecal administration and injections in different sites in the brain right now. So our approach is a bit different, and I can't speak too much of it today before we have the patents in place and so -- but we have another approach, and we are not primarily targeting AAV with our BrainTransporter technology. Gunilla Osswald: I hope that responded to your question. Thank you, Johanna. Joseph Hedden: Yes. Operator: The next question comes from Suzanna Queckbörner from Handelsbanken. Suzanna Queckbörner: I'd like to ask a question regarding the Leqembi subcu. So listening to the Eisai conference call, there was talk about the Iqlik being listed in formularies only by 2027. There seems to be a medical exemption program, which would address something like 80% of patients. To me, it sounds like there's likely to be more paperwork associated with that, which sounded like it was going to be limited or access was going to be limited at least until 2027. Maybe you can just sort of explain that to me? And then also, how does that impact your competitive advantage versus Elli Lilly's remternetug, which is also expected to read out data in 2026 and they have the subcu formulation as well. Gunilla Osswald: Yes. So we start with your question on Iqlik and the process in the U.S. with the reimbursement agency or CMS is that it's certain times of the year that you need to submit in order to come into the next year. So that's the reason for why we expect Leqembi Iqlik to be on the formulary from January 2027. Right now, just as you said, Suzanna, there is a possibility to utilize the medical exemption program, where -- which I think many of these physicians are used to do for other treatments. And what we have understood from Eisai is that it's not overwhelming paperwork. It's a fairly easy process that can help the patients -- most patients to already be reimbursed right now. And I'll also go on the differentiation part a little bit and then hand over to Anna-Kaija. So I think, I mean, we see then the Iqlik has a really good differentiator versus competitors. And then we will follow with great interest when also remternetug comes with some efficacy data. We haven't seen much yet. So I think each compound has to show itself before we can comment too much. And we haven't seen much of it yet. So -- but I think meanwhile, we're really happy for Leqembi Iqlik, which all the data we have seen so far looks really, really promising. And more data is expected to be shown at CTAD. I don't know, Anna-Kaija, if you want to add something. Anna-Kaija Gronblad: No, not really. I think -- again, I think it's -- we haven't seen that much data on remternetug yet. So I think it's too early to say anything about it. But we, of course, understand that they also see the need of subcutaneous auto-injector because we think that this will be a key driver and for patients also being having an easier treatment. So we see -- so the need from the Elli Lilly as well. They see this as a competitive advantage. Suzanna Queckbörner: If I can have a follow-up question. Also, I saw that Takeda discontinued their alpha-synuclein antibody, which they reported to had Phase II results on. Maybe you can talk about the differentiation to your alpha-synuclein antibody. Gunilla Osswald: Yes. I think it's really important to understand that every antibody is different from each other. And we think that we have a clearly superior antibody, much more selective. The most selective antibody that we know for alpha-synuclein between the pathological forms and the physiological forms. So we have more than 100,000 fault electivity, which is a huge difference from competitors. And also, I think it's important to see the design of the clinical studies that we also think that we are designing better studies for the future. But I will hand over to Johanna. Johanna Fälting: Thank you, Gunilla. I totally agree, and thank you for the question. Of course, it's always sad when a clinical study that being sold to patient does not read out. But I think that we have a differentiated profile, both in terms of the selectivity for what we believe is the toxic species, the aggregated species and a very high affinity for those species. And we also have a superior human PK profile as compared to the AstraZeneca Takeda that recently read out. It was also fairly small, I would say, a Phase II clinical trial. And I think that we can have a clear differentiation versus both in terms of human PK study design and selectivity for the toxic species. Gunilla Osswald: So not much read over, I would say. Johanna Fälting: Absolutely not. Operator: The next question comes from Natalia Webster from RBC. Natalia Webster: Firstly, I was wondering on Eisai's full year Leqembi guidance to March. This is implying a slowdown in growth for Leqembi sales for calendar Q4 into Q1 '26. So just curious to hear if you think this is conservative, appreciating that there may be some further impact from the China inventory adjustment in Q4. And then my second question is on the European launch. I appreciate it's early days and it could take some time to see a more meaningful contribution here, but are you able to provide a bit more feedback on how this is progressing? And if you're counting any of the initial challenges that you saw in the U.S. around capacity or otherwise? And then finally, just on profit. You've maintained your long-term ambition for sustainable profitability. I was wondering if you're able to touch on any key considerations for cost phasing in 2026? And if you're able to confirm that you still expect to reach sustainable profitability from 2026 as well? Gunilla Osswald: So I think it's Anders, who should start this questions. Anders Martin-Lof: Right. So if you look at the Eisai's forecast, I think you're specifically asking whether they will reach for China. Well, all in all, they are already at 52% of the full year forecast after 2 quarters, 87% in China. I think it's correct that the Chinese sales will be very low in the next quarter as well. But then I think more or less the inventory should be used up, so they should have a strong first quarter of next year. So we remain very confident that they will reach their forecast for the full year, and so are they. That's what they communicated on their call. As for the profit for next year, we will not comment on our cost for next year until we finish the year. So you'll hear more about that in February when we communicate our year-end results. Gunilla Osswald: And then there was a question for Anna-Kaija. Anna-Kaija Gronblad: Yes, regarding the EU launches and what I can say is that, of course, I mean EU consists of 27 countries and all of these countries have their national market access processes on price and reimbursement. So I would say that after Germany and Austria, typically being the early launch countries, it takes quite some more time before each country has gone through this process. So I would say that we can be cautious when it comes to the sales coming from Europe next year. I think we are, let's say, infrastructural wise in a better situation than in the U.S.A. But still, I mean, this is a new treatment paradigm also that is being implemented. So each clinic has to really go through and have a checklist on what to have in place in order to start treatments on patients. So I think we should be kind of cautious and understanding of the changes that needs to be in place in the clinic. So it will be rolled out gradually throughout Europe next year. Gunilla Osswald: And I just want to remind also that we have said all the time that Europe is a small, small proportion out of the global sales especially, I mean, the coming 2 years, but also long term. It's really U.S., Japan, China and other parts of Asia and other parts of the world, that also contributes. Yes, a lot. Operator: The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: So yes, one first on the financials. So I just wondered how we should think about the Novartis upfront payment being recognized over 21 months. Will this be in a linear fashion? Or how should we think about the revenue contribution of that part going forward? Anders Martin-Lof: The short answer is, yes. Gunilla Osswald: Linear. Anders Martin-Lof: So yes, linear. It's very hard to -- we are delivering as we have communicated, we are working on the Novartis compound that we are modifying and we will deliver back to them. And that will take some time, and it's really hard to estimate how large share of that work has been done. So you typically do that in a linear fashion over the expected time course of the collaboration, so linear. Viktor Sundberg: Okay. And also I had a question on your competitive position or Eisai's competitive position versus Kisunla. Looking at the curve, it seems that they are accelerating sales, I guess, Eisai has done a lot of the groundwork already to prepare for that. But I just wonder on your discussions with Eisai, like why are some patients choosing Kisunla over Leqembi, or why some patients choosing Leqembi over Kisunla. What's your feedback here so far in the launch? Gunilla Osswald: Would you like to take it, Anna-Kaija? Anna-Kaija Gronblad: Yes. I mean, of course, we're still -- Leqembi still the #1 disease modifying treatment Alzheimer's in the U.S. as well. But as you say, I mean, of course, Kisunla is having some advantage to us being a front runner in establishing these kind of treatments on the market. So it's -- but what we can see is that at Eisai reports is that it's not kind of reducing the Leqembi market, but it's growing the kind of total market as such. Of course, I mean, there is a difference in the -- they have once monthly today, and we have twice monthly in the 18-month treatment phase, and then you can choose to go to once monthly or Iqlik. So of course, every patient is an individual and has to kind of decide what is -- what works best for that patient. So -- but otherwise, I think Leqembi is still showing a strong growth, so -- and driving, and so in total, it's growing the total market. Operator: The next question comes from Sebastiaan van der Schoot from Kempen. Sebastiaan van der Schoot: Congrats on the progress. Just one from our side. Could you maybe give some color on what would be your goal or non-go discussion decision for further development of the Parkinson's program. What type of signals do you want to see against placebo to push the development forward? And what could next steps for the program look like? Gunilla Osswald: Yes. So I will start and just say that exidavnemab, which is currently in a Phase IIa study. And the main task for this study is to look at safety tolerability and we have 2 doses. We have had first a lower dose where we have had a safety review that supported us to go into the higher dose part in exactly the way that we had planned and wanted. And then we have also broadened it not only for Parkinson's disease, but also for multiple systemic atrophy where we also have called orphan drug destination. So I think -- I mean, we are doing a lot of biomarkers, but that's really in order to prepare also for the next step for Phase IIb. So I think it's really important to see that the expectation here is really to look at safety tolerability for this program. And so far, what we have seen, it looks really good. So I think that's -- but the readout there will be just after summer next year is what we expect. The study is ongoing and still recruiting. So it's a little hard to say exactly when it happened, but the best estimate is a little bit after summer next year. And then there is a lot of opportunities for this asset. And as we have described before, it can be Parkinson's disease dementia, it can be Lewy body dementia. It can be different parts of Parkinson's disease. It can be MSA. So there's a lot of opportunities. And at the moment, we are evaluating different of those kind of indications and preparing for the next step. So I think this is a very interesting asset, very exciting with a lot of opportunities. I don't know if you want to add something, Johanna? Johanna Fälting: No, I have nothing to add to that. Just to say -- to echo what Gunilla said, this is a quite small study and a short study. So not too much should be expected in terms of biomarker readouts. It's a safety and tolerability study, it's 3 months, and that's a bit too short to see efficacy on biomarkers related to disease modification. Gunilla Osswald: That should be the next... Operator: [Operator Instructions] Oskar Bosson: So there doesn't seem to be any people in the phone queue right now, but we have some written questions that have been posted during the call, so I'll read them out loud. And then Gunilla can direct who should take the question, although I think the first one is maybe Anders one. But it's from Peter, who wonders looking forward when we start to record sales in -- for Leqembi in the Nordic countries, how are we going to report that going forward? Anders Martin-Lof: So in our profit and loss statement, you have our total revenues. And then in the notes, we will have our different revenue split up by line, and we already do actually. So the revenues from the Nordics won't be seen straight away. They are part of what is called co-promotion revenue, which is the reimbursement we get from Eisai for profit sharing. But over time, yes, I think we will comment on how things are going in the Nordics. I hope that answers the question. Oskar Bosson: And then a follow-up question from Peter as well regarding OpEx and the difference in OpEx if you compare Q1 and Q2, it's down in Q3, and he wonders what were the reasons for this and then going forward also what is the level that we can expect? Anything you can say there? Anders Martin-Lof: Right. No. So our costs are quite lumpy. So if you deduct the other operating expenses, which is mostly currencies. Yes, our costs were down a little bit in the third quarter, but we expect them to go up again in the fourth quarter, and then we'll see what happens next year. Especially what happens with -- after the EXIST trial, if we enter into significant clinical trials with exidavnemab, you should expect increasing R&D spending next year. But it's too early to tell exactly what that will look like. But of course, with the maturing R&D portfolio, you incur larger costs, which is a great thing for a company like ours. Oskar Bosson: Then we had a question from Frederic, but I think we answered that because it came from somebody else as well. And then Eric from Carnegie has a question regarding the EVOKE trials that are coming up soon in just the next couple of weeks. Expectations on results for the EVOKE trial where semaglutide is tested in early AD in EVOKE and EVOKE+. What's our thoughts on that if that study is positive and how that could potentially impact or not impact Leqembi. Gunilla? Gunilla Osswald: Yes. So I think I'm really looking forward to seeing the results, and it's quite imminent now. I think it's 2 well-designed clinical trials in Phase III. They did not have a proper Phase II. So it's very hard to say anything about what to expect here, I think. But if positive, then I think that it's a complement to Leqembi. I don't see this as a competitive treatment. I see it's a complementing treatment because it has a completely different mechanism of action and potentially then could help patients together with Leqembi. Oskar Bosson: Okay. Thank you. And I think the last one about the risk regarding China. You touched upon it, Anders, but maybe you want to clarify once again what we think about the stocking effect in China and how long that's going to last and when we can expect more new sales coming in, in China. Anders Martin-Lof: Yes. So the stockpile that was built up in Q2, I expect it to run out during the fourth quarter. So you should see an effect of that on the sales in the fourth quarter, but not beyond that, but that would be my estimate. Oskar Bosson: Yes. Thank you. Those were all questions in the queue. I don't believe, operator, that we have any more questions waiting in line either. And if so, I think that concludes today's call. Thank you so much for listening, and we'll see you back in a quarter from now. Thank you so much. Gunilla Osswald: Thank you. Have a good day.
Operator: Good morning, everyone, and welcome to the Medexus Pharmaceuticals Second Quarter 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Victoria Rutherford, Investor Relations. Victoria, the floor is yours. Victoria Rutherford: Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals Second Fiscal Quarter 2026 Earnings Call. On the call this morning are Ken d'Entremont, Chief Executive Officer; and Brendon Buschman, Chief Financial Officer. If you have any questions after the conference call or would like further information about the company, please contact Adelaide Capital at (480) 625-5772. I would like to remind everyone that this discussion will include forward-looking information as defined in Canadian securities laws that is based on certain assumptions that Medexus believes to be reasonable in the circumstances, but is subject to risks and uncertainties. Actual results may differ materially from historical results or results anticipated by the forward-looking information. In addition, this discussion will also include non-GAAP measures such as adjusted EBITDA, adjusted EBITDA margin and adjusted gross margin, which do not have any standardized meaning under the IFRS and therefore, may not be comparable to similar measures presented by other companies. For more information about forward-looking information and non-GAAP measures, including reconciliations, please refer to the company's MD&A, which along with the financial statements, is available on the company's website at www.medexus.com and on SEDAR+ at www.sedarplus.ca. As a reminder, Medexus reports on a March 31 fiscal year basis. Medexus reports financial results in U.S. dollars and all references are to U.S. dollars unless otherwise specified. I would now like to turn the call over to Ken d'Entremont. Kenneth d'Entremont: Thank you, Victoria, and thank you, everyone, for joining us on this call today. We are now over 8 months into the commercial launch of GRAFAPEX. We are extremely pleased with the progress achieved thus far and product performance to date has exceeded our prelaunch expectations, with October 2025, representing the strongest month of patient demand we have seen since launch. The $6 million we have invested in GRAFAPEX launch to date through September 30 is already having a significant impact. As of today, we have engaged with 83% of all 180 U.S. transplant centers, 29% of U.S. transplant centers have already ordered GRAFAPEX for procedures in their institutions and 69% of those 52 institutions have reordered. For the 6-month period ending September 30, we recognized product level net revenue from GRAFAPEX of $6.2 million. We still expect that GRAFAPEX will begin contributing positively to quarterly operating cash flows by fourth calendar quarter 2025, which is our fiscal Q3 '26, reinforcing its potential as a meaningful driver of long-term value. The initial adoption by major commercial payers and leading health care institutions has been highly encouraging and early indicators of patient level demand continue to validate the value proposition GRAFAPEX delivers. To that end, product level net revenue from GRAFAPEX in fiscal Q2 '26 totaled $3.1 million relative to $3 million of GRAFAPEX personnel and infrastructure investments. In fiscal Q3 '26, we expect that the underlying patient demand of GRAFAPEX will be approximately $3 million to $4 million. This compares to $2.2 million in fiscal Q1 '26 and $2.1 million in fiscal Q2. Considering the estimated 1 to 2 months of inventory on hand at our wholesaler at September 30, we anticipate patient demand in fiscal Q3 '26 will result in product level net revenue of GRAFAPEX of between $2.5 million and $3.5 million. Starting October 1, '25, eligible procedures under Medicare involving the use of GRAFAPEX are eligible for additional reimbursement through the NTAP program or New Technology Add-on Payment. As I have mentioned previously, this program is designed to provide temporary supplemental reimbursement to institutions that use designated new, higher-cost medical technologies, making it easier for hospitals to adopt products such as GRAFAPEX and thereby improving Medicare patient access to cutting-edge care. We believe that the NTAP program's objectives are being met here, and we expect that NTAP eligibility for GRAFAPEX has and will continue to adoption and utilization in our fiscal Q3 '26. Overall, our fiscal Q2 '26 results remain solid with positive operating income, adjusted EBITDA and operating cash flows. Our results reflect the continuation of portfolio dynamics we have discussed in the past quarters, coupled with continued growth momentum of GRAFAPEX, which we view as a continuing testament to our portfolio approach. Our fiscal Q2 '26 net revenue was $24.7 million, a decrease compared to $26.3 million for the same period last year. Our fiscal Q2 '26 adjusted EBITDA was $4.4 million, a decrease compared to $6 million for the same period last year, but our second consecutive fiscal quarter of adjusted EBITDA growth since the approval and launch of GRAFAPEX in fiscal Q4 '25. We produced a modest net loss of $0.3 million for the quarter, a decrease compared to positive $0.1 million for the same period last year, but we still produced positive operating income of $1.4 million in fiscal Q2 '26, a decrease compared to $1.6 million for the same period last year. But again, our second consecutive fiscal quarter of operating income growth since the approval and launch of GRAFAPEX. Turning to a few notes on our other products. In Canada, unit demand for Trecondyv grew by 69% over the trailing 12-month period ending September 30. In September 2025, Health Canada issued a notice of compliance in respect of generic version of treosulfan for injection in Canada. We intend to monitor for and evaluate the potential effects of this development for any future commercial launch of the now approved generic product. IXINITY unit demand in the United States decreased by 3% over the trailing 12-month period ending September 30, 2025. We continue to invest judiciously in our IXINITY manufacturing process improvement initiative, which has been ongoing for some years now. This initiative has resulted in a 30% decrease in product level cost of goods, comparing fiscal Q2 2026 to fiscal Q1 2021 being the first fiscal quarter following our acquisition of the product in February of 2020. This informs our choice to make modest further investments in this process, approximately $1.2 million of which we expect to pay in fiscal year '26. Rasuvo unit demand in the United States has decreased by 2% and Metoject unit demand in Canada decreased by 9% over the trailing 12-month period ending September 30, 2025. Regarding Rasuvo, during the last quarter, we learned that another product in the branded methotrexate auto-injector market had been withdrawn by its distributor. We expect increased unit demand for Rasuvo over time as inventory of the withdrawn product sells down and patients and health care professionals look for alternatives. Rupall continues to face generic competition in Canada following the loss of its regulatory exclusivity period in January 2025, and as a result, unit demand over the 3- and 6-month period ending September 30 decreased by 58% and 55% compared to the corresponding prior year periods. While the impact of generic erosion on product level net revenue appears to have slowed in fiscal Q1 '26, generic competition will continue to have an adverse impact on product level performance. We view this pattern as still typical of products in this later stage of product life cycle. In summary, we remain focused on delivering strong overall performance across our portfolio of products in both the United States and Canada, advancing GRAFAPEX in the United States and strategically positioning the company to capitalize on future revenue opportunities. I'll now turn the call over to Brendon, who will discuss our financial results in more detail. Brendon Bushman: Thank you, Ken. Our results for fiscal Q2 2026 were solid and continue to reflect the natural transitional changes of our evolving product portfolio. We are very pleased with the early performance of GRAFAPEX, which, as Ken mentioned, generated $3.1 million of product level net revenue in our fiscal Q2 '26 and is net of working capital changes expected to begin contributing positively to operating cash flows in the fourth calendar quarter 2025, which is our fiscal Q3 '26. Turning to the full quarterly results. Total net revenue for fiscal Q2 '26 was $24.7 million. This represents a decrease of $1.6 million compared to $26.3 million for the same period last year. The $1.6 million year-over-year net revenue decrease was attributable in part to reduced net sales of Rupall in Canada and the March 2025 return of Gleolan in the United States to the licensor. This was partially offset by product level net revenue from GRAFAPEX, among other factors. Gross profit was $13.8 million for fiscal Q2 '26 compared to $14.1 million for the same period last year. Gross margin was 55.7% for fiscal Q2 '26, which is an improvement on the 53.7% we achieved in the same period last year. We expect increasing product level net revenue from GRAFAPEX, together with the absence of product level net revenue from Gleolan post March 2025 to have a positive effect on the company level gross margin. These resulting changes to gross margin are expected to continue to emerge over fiscal year 2026. Selling, general and administrative expenses were $11.9 million for fiscal Q2 '26 compared to $9.7 million for the same period last year. The $2.2 million year-over-year increase in selling, general and administrative expenses was primarily due to the $3 million of GRAFAPEX personnel and infrastructure investments we incurred in fiscal Q2 '26. We expect these investments to stabilize at approximately $3 million to $4 million per quarter, although individual future quarters could deviate from this estimate. Adjusted EBITDA was $4.4 million for fiscal Q2 '26, a decrease of $1.6 million compared to $6 million for the same period last year. The decrease was primarily due to the effects of generic competition on product level net revenue of Rupall. Net loss was $0.3 million for fiscal Q2 '26, a decrease of $0.4 million compared to net income of $0.1 million for the same period last year. We continue to generate cash from our operating activities with quarterly operating cash flow of $3.3 million compared to $6.9 million for fiscal Q2 '25. Cash on hand of $9.4 million at September 30, 2025, compares to $24 million at March 31, 2025. The primary factor in this net decrease in cash is the company's aggregate payments of $16.6 million under our senior secured credit agreement, substantially reducing our outstanding principal amount. As of September 30, 2025, our net debt was $11.7 million, a decrease of $1.5 million compared to $13.2 million as at March 31, 2025. We are in the advanced stages of a process to refinance our credit agreement and have a high degree of confidence that we will be able to announce a long-term agreement well in advance of the current facility's maturity in March 2026. As always, there can be variability in quarter-to-quarter results and the operating environment also remains variable, but we look forward to continuing to build the company and its portfolio in the coming quarters and beyond. Operator, we will now open the call to analyst questions. Operator: [Operator Instructions] Our first question is coming from Andre Uddin of Research Capital. Andre Uddin: Just looking at Rasuvo, just wondering which branded methotrexate auto-injector was withdrawn from the market? And what market share did that product have? Kenneth d'Entremont: Yes. Thanks, Andre. So it was Otrexup. If you recall, there were just 2 of us in the market. We had an 80% share and they had the rest. Andre Uddin: Okay. And just in terms of looking at NTAP, can you discuss what -- in terms of influencing NTAP GRAFAPEX sales, like since October 1, about what percentage of patients have been treated under this program, do you think? Kenneth d'Entremont: Yes, it's a great question. We estimate that the Medicare, Medicaid portion of this market is some place between 20% and 30% of total market. So obviously, the NTAP designation has a significant impact on access for those patients because it basically closes the gap between us and the generic competitive product. So it gives them early access to cutting-edge technology. So we would expect that uptake will accelerate for that group of patients. Andre Uddin: Okay. And just one last question. In terms of your BD pipeline, how does it look at this point in time? And are you considering bringing in another product? Kenneth d'Entremont: Yes, great question. Obviously, we're laser-focused on executing on GRAFAPEX. That is the future of the company. That's where we're putting the majority of our effort. But we're always scouting for additional business development opportunities in the therapeutic areas where we participate so that we can leverage the infrastructure that we have. And so we're always looking. And obviously, when we find something attractive, we'll share that with shareholders. Operator: Our next question is coming from Michael Freeman of Raymond James. Michael Freeman: A few questions here. So I wonder if you could give us an update on GRAFAPEX's formulary inclusion, insurance coverage dynamics and any feedback you're getting on the doctor and patient experience using GRAFAPEX so far? Kenneth d'Entremont: Yes. Thanks, Michael. Great questions. So first, on the reimbursement front, I think we've described that we're ahead of expectations with the launch of the product. I mean we're reporting on 6 months in. We're now 8 months in, and the reimbursement situation has been very positive, both from the institutional level where P&T committees are including the product on their formularies, which gives the physicians access within the institution. And then commercial payers are putting positive recommendations in their plans where necessary to reimburse it. So we have not run into any significant issue with respect to getting access to the product. Obviously, it just takes time for institutions to go through the process of adding it to their formulary, and that's kind of what we're experiencing right now, but we're very pleased with where we are today. With respect to the second part of your question, which was feedback from clinicians, we've always known that this is a very important addition to their options for conditioning of patients undergoing transplant. Clinically, the evidence is very strong. And so we're seeing adoption in the places where we expected it. And so again, positive feedback, which emboldens our confidence that the drug is going to be a major part of transplant and we'll achieve that target that we've set, which is 100-plus by 5 years. Michael Freeman: All right. Great. Now on IXINITY, it looks like sales have been holding in quite well despite competition. I wonder what you would attribute the durability of this product to? Kenneth d'Entremont: Yes. Thanks for that. It's been a part of people's treatment for many years now. So we have a strong group of patients who are very comfortable and satisfied with the product, and they consistently use the product. And we've got a group of sales and marketing people in the field who are doing a great job at making sure those patients remain satisfied with the product. So I think it's a combination of both. Partially, it's the drug and it works really well. And we've got people who support it, who do a really good job. Operator: [Operator Instructions] And our next question is coming from Scott Henry of AGP. Scott Henry: Ken, for starters, I didn't quite hear you had given some guidance for fiscal Q3 GRAFAPEX. Could you just repeat that? It chopped up a little on my end. Kenneth d'Entremont: Revenue fiscal Q3, I think we said $2.5 million to $3.5 million. Brendon, do you have the number? Brendon Bushman: Yes. So we're also guiding to demand sales. So we've guided to $3.4 million in demand sales, and that compares to $2.1 million, I believe, for fiscal Q2. And in ex-factory, so that the wholesaler sales, we're guiding to $2.5 million to $3.5 million, which compares to $3.1 million in Q2. Scott Henry: And so the demand should be greater than the reported sales. Why would that be? I mean, typically, when a product is growing, the opposite is true. Could you give any color on that? Brendon Bushman: Yes, I can. Kenneth d'Entremont: Yes, go ahead. Go ahead, Brendon. Brendon Bushman: So we have -- for the last 2 quarters, we have seen that be the case as the wholesaler has just held on to inventory on hand. So they're sitting at between 1.5 to 2 months of inventory right now, which is very consistent with industry norms. But we can't really control how much inventory they will have on hand at any time. So that's kind of why we're -- and just as aside, because we have a single wholesaler model, we don't necessarily have the gives and takes that we would have for some of our other products. So that's why we're really focused on guiding towards demand sales as well and then trying to bridge that to that ex-factory sales. Scott Henry: Okay. And you mentioned October was the largest month. Can you comment on the demand run rate in October, if you annualized October, what sort of level we would be at? Kenneth d'Entremont: We're not really giving granularity down to that level. But clearly, with October coming in so strong, maybe partially due to reimbursement improvement, which started in the month, we don't know for sure. We will find out later. But yes, we're well on track to kind of what we've been guiding to and expecting on GRAFAPEX. Brendon, can you give a little more color maybe? Brendon Bushman: Yes. I mean, as far as the actual demand, what we can say is it's very much in line with supporting the $3 million to $4 million that we have guided to. And as Ken mentioned, it is the strongest month of demand that we've had yet. Scott Henry: Okay. Great. Yes. The launch has been very strong, in my opinion. One of the things -- I mean, I've seen a lot of launches over the last 20 years, every launch has its own curve, and with a product like this, how would you think about based on the early information you have, what kind of launch curve this would be? Obviously, it went way up in the beginning, but now would you expect gradual growth? Or do you think you might hit an inflection point and accelerating growth as reimbursement comes together? How -- my question is, based on what you've seen, how do you think we should think about this launch trajectory going forward based on the dynamics of this market? Kenneth d'Entremont: Yes, it's a great question, and this is a very unique situation because as we've discussed previously, this is a drug that there's a lot of information out there about it. It's been launched in many other territories before it hits the U.S., which is not usually the case. So what we have observed is as expected in the early going in the first few months, we got a lot of pediatric use. There's a very strong need for it in pediatrics, and then now we're starting to get access to the adults which will really drive that revenue growth going forward. So it's almost like this 2-phase sort of a launch where a real quick update in the very beginning, plateaus now as we're seeing reimbursement come in place for adults, it starts to accelerate again. And so that's kind of what we expect. As you know well, Scott, the first year typically is a year spent on trying to get reimbursement, and we've seen strong uptake even while that effort has been ongoing. So we feel good about it accelerating into next year. Scott Henry: Okay. Final question, just on the Canadian sales. They were at a very high level in the first half of fiscal 2025. You had some competitive issues there, which brought it down to a new level. Where we are right now, do you see this as kind of a base for growth going forward? Or just trying to get a sense if this -- if the Canadian business has kind of bottomed out and we should start to think about sequential growth going forward? Kenneth d'Entremont: There's a lot in that one. So obviously, we got a broad portfolio in Canada. So there's lots of ups and downs, Rupall being the major driver of that. We said in the comments that we see that erosion starting to slow. So we would hope that, that's the case. We expect some continued erosion on Rupall, but at a declining rate. So I guess that gets to your point about is it starting to trough, and that's possible. We've got other headwinds on Metoject, which showed some continued erosion, but again, at kind of a declining rate. So all these ups and downs, I think the Canadian business is flat to declining, continue for a few quarters and then trough. Operator: Our next question is coming from David Martin of Bloom Burton. Gireesh Seesankar: This is Gireesh on for Dave. Can you provide a bit more color on the ongoing Rasuvo sales dynamics? Have you seen any early signs of market share gain with the competitor leaving? And have prices sort of stabilized in terms of gross to net adjustment? Kenneth d'Entremont: Yes, great questions. So yes and yes. The -- we did see -- we are seeing increased unit volume uptake as a result of the competitor announcing they were withdrawing and then inventory starting to work down. So that is happening. And then yes, obviously, price kind of troughed, and we don't see any further declines. Gireesh Seesankar: And do you expect price to either increase going forward? Or would it be stable? Kenneth d'Entremont: Most of this business is under contract. So you wouldn't expect to see anything happen in the short term, but as contracts expire and then get renegotiated, that will be the point at which we'd start to see some movement. Operator: Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to the management team for any closing comments. Kenneth d'Entremont: I just want to thank everybody for joining us on the call today. We remain pleased with the business performance in this past quarter, which continues to underscore the strength and strategic value of our portfolio approach. This solid foundation Medexus -- positions Medexus well as we enter the next phase of growth, driven by continuing rollout of GRAFAPEX. We look forward to the opportunities that lie ahead in fiscal 2026 and beyond, and thank everybody for joining the call today. Operator: Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.
Operator: Good afternoon, everyone, and welcome to the POSaBIT Systems Corporation Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Oscar Dahl, Chief of Staff at POSaBIT Systems. Oscar, the floor is yours. Oscar Dahl: Thank you, operator. With me on this call are Ryan Hamlin, Chief Executive Officer; and Emily Egan, Senior Corporate Controller. I would like to begin the call by reading the safe harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report and subsequent filed reports as well as in other reports that the company files from time to time with SEDAR. Any forward-looking statements included in this call are made only at the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. The company will also be citing adjusted EBITDA, adjusted revenue and adjusted gross profit in today's discussion. Adjusted revenue, adjusted gross profit and adjusted EBITDA are non-IFRS measures used by management that do not have any prescribed meaning by IFRS and may not be comparable to similar measures presented by other companies. The company defines adjusted revenue as gross revenue minus license support revenue plus actual licensing cash received as part of POSaBIT's licensing deals. The company defines adjusted gross profit as adjusted revenue less company cost of goods sold. The company defines adjusted EBITDA as net income or loss generated for the period as reported before interest, taxes, depreciation and amortization and further adjusted to remove changes in fair values and expected credit losses, foreign exchange gains and/or losses and impairments. The company believes these non-IFRS measures are useful metrics to evaluate its core operating performance and uses these measures to provide shareholders and others with supplemental measures of its operating performance. The company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. We caution that adjusted revenue, adjusted gross profit and adjusted EBITDA are not substitutes for gross revenue, gross profit or profit loss, respectively. Now I would like to turn the call over to Ryan Hamlin, Chief Executive Officer. Ryan, please proceed. Ryan Hamlin: Thank you, Oscar, and welcome, everyone. As a reminder, all the numbers that we'll be talking about today in the call are in U.S. dollars. Q3 was another great quarter for POSaBIT. We continued our focus on growing recurring SaaS revenue, which provides more predictability quarter-over-quarter and derisks our overall business. We also grew our cash on hand by nearly $0.5 million this quarter, all while still paying down our accounts payable by 41%, which represented about $400,000 in aged payables. The team is executing on all cylinders, and our customers are very happy. We look forward to continued growth this year and the years to come. Now let's jump into a few of the key highlights in case you missed the press release that just came out. We had our first nearly $1 million adjusted EBITDA quarter in the history of the company, coming in around $970,000, a growth of over $150,000 in adjusted gross profit, which resulted in an 87% adjusted gross profit margin versus 77% last quarter in Q2, again, another record for POSaBIT. Our recurring SaaS revenues increased 22% in Q3 versus Q2. This demonstrates the focus and success we have had on growing our point-of-sale and our e-com menu business. And lastly, as I mentioned, cash on hand grew quarter-over-quarter by nearly $0.5 million, ending at over $1.2 million. And we still, as I mentioned, paid down our payables by $400,000. I said this on the past calls, and I'll say it again, if you hear anything on this call, the theme is this, POSaBIT is profitable, we are growing, and we're continuing to put more and more cash in the bank. Now I want to update you on a couple of other key points that happened this quarter. Our focus certainly remains on growth around our main recurring revenue product lines, our point-of-sale and our e-com business. Both of these businesses have been very healthy and continue to grow, not only in our home state of Washington, but continued steady growth in Oregon, New Mexico and now new markets on the East Coast. We are running the same playbook that got us to 90% of all retail transactions in Washington State going through the POSaBIT POS. We continue to see the trend where more and more retailers are looking to one company to provide the majority of their software needs. The point of sale is the engine and the hub for all retailers. We're pleased to see our POS base add the new POSaBIT e-com menu, the POSaBIT loyalty program, online order management and much more. While many retailers take advantage of all of POSaBIT's all-in-one solution, we also provide up to 60 different companies that have integrated with POSaBIT. This choice is one of the key reasons so many of our retailers like POSaBIT. Now I'm going to turn it over to Emily Egan, our Senior Corporate Controller, to dive a little bit deeper into our Q3 numbers. Emily? Emily Egan: Thank you, Ryan. I'm going to share a review of the 3 months ended September 30, 2025, as compared to the same time period last year, 2024. Q3 total revenue was $2.3 million, down from $3.8 million third quarter last year. The decline was entirely expected and relates to the relationship change of legacy payment processing revenues as discussed in more detail over the last quarters. Meanwhile, our point-of-sale and e-com menus, as Ryan explained, continue to grow steadily. Our customers are happy. This shift is exactly what we've been targeting, a business that is smaller on the top line but significantly more profitable. Gross profit came in at $1.9 million, representing an 81% gross margin, up dramatically from 43% same period last year. This margin expansion reflects the positive impact of our processor transition and continued growth in our recurring software revenue. On the expense side, we maintained our focus on cost discipline. Operating expenses were $2.3 million, down 33% from Q3 of last year. This was primarily driven by lower professional fees, lower overall employee costs and continued reduction in share-based comp. All of this translates to record profitability for the quarter. Adjusted EBITDA, again, was $970,000, our highest ever and a major milestone for POSaBIT. While we reported a small net loss of $596,000, that represents a 70% improvement over last year and reflects strong underlying operating leverage. From a balance sheet perspective, cash on hand, as Ryan said, increased to $1.2 million. That's up from just about $1 million at the end of the year and $800,000 from last quarter, plus we reduced our aged payables by over $800,000 year-to-date, further strengthening our financial position. And our debt balance remained stable at about $4.5 million. As Ryan pointed out, Q3 was a continuation of the momentum we've built this year, improving profitability, expanding margins and adding cash to the balance sheet each quarter. Way to go team POSaBIT. With that, I'll hand it back to Ryan to wrap up the call. Ryan Hamlin: Thanks, Emily. I just want to share a couple more final thoughts before we wrap the call up and answer some of the investor questions that were sent in to us. I think you're seeing a trend here. POSaBIT is financially healthy, and we are growing. Our products are winning in the market, and our customers are loving what we're doing for them. We're now in a position where we can actually start to make a few more investments to drive new revenue opportunities. As we head into 2026, you'll hear more from us on some very exciting new product offerings that will expand our target market and grow our revenue. While we will invest, we'll do so very carefully and fiscally responsible. I'm really looking forward to coming back in early 2026 and announcing some of these very exciting new opportunities our team has been working on for the last many months. There are more good things coming for POSaBIT in 2026 and beyond. One more thing on our future. I know I've said a version of this time and time again, but it bears repeating. POSaBIT is set up for tremendous future success. The cannabis industry is still relatively in its infancy. We look at our competition and can honestly say that we are incredibly well positioned for the years to come, especially compared to the rest of the cannabis industry. Cannabis will someday become federally legal, banking regulations for cannabis providers will soften. All that is inevitable. And once it does, we plan on making our shareholders very, very happy. With that in mind, as always, thank you for being a loyal shareholder of POSaBIT. The stock price clearly does not reflect the true value POSaBIT has. Unfortunately, the small markets like the CSE make it difficult with day traders and very much low volume. The Board is committed to finding a solution. In the meantime, we will stay focused. We will continue to execute, and we'll keep generating a profit. And we trust that someday investors will once again realize the full potential of what POSaBIT really is. So thank you for your time today. I'm going to turn it back over to Oscar, who is going to ask some of the investor questions that came in. Oscar Dahl: All right. First question, Ryan. I have faith that the company can survive somewhat intact over the coming couple of years that things will work out quite well. Can you address any liquidity issues over the next year or so? If I recall correctly, the licensing deal, which has been bringing in decent cash, is expiring soon if it hasn't already. Ryan Hamlin: Yes. Thanks for sending that question in. And I'll just address the licensing deal upfront because you're right, we have a licensing deal that we licensed our POS, and it's been a great deal for us. We still have about another full year of what I'll call the larger payments coming in. But I want to make sure everyone understands, and investors understand that even when those larger payments and the licensing deals slow down and stop, there is an ongoing residual to perpetuity on the number of active terminals. So cash will continue to be generated from that deal even after some of the larger payments go away. So #1, the licensing deal has more time and residuals will continue. The other point that I always like to talk about liquidity is just look at our cash. I mean we just put $400,000 of cash growth into the bank quarter-over-quarter. And if you look at the $400,000, we paid, technically, our cash grew $800,000, right? So we're growing our cash, which is great. And then last, debt is going down. We're paying off our debt. So the 3 variables that I think are most important for liquidity are, is the cash going to continue to come in? Yes. Is POSaBIT growing in new opportunities? Yes. Are we putting cash away? Yes. And is the debt going down? Yes. So from a liquidity standpoint, I feel great about where the company is. Oscar Dahl: Cool. All right. Second question, how do you see a meaningful and continued return to gross profit dollar growth? Ryan Hamlin: Yes. So obviously, they sent this question in before the investors saw that we actually did grow gross profit dollar growth quarter-over-quarter. In fact, we grew over $150,000. So we are putting meaningful growth in our gross profit dollars. Again, like I just referenced, cash is increasing, and debt is going down. The other really important point, and we highlighted it in the press release, is that our existing SaaS-based products, our POS and our e-com business grew 22% quarter-over-quarter. So we're becoming much more predictable because we have a continuous stream of MRR and ARR coming in versus some of the volatility years ago we had where it was primarily payments revenue based. So we've made that transition successfully and now I can actually say the majority of our revenue is now coming from our MRR -- our SaaS business. Oscar Dahl: All right. And the final question, why did you stop posting new stories about POSaBIT around 2023? I've shared my enthusiasm with friends recently. And when they look at POSaBIT, it looks like the company has done nothing for 2 years. Ryan Hamlin: Yes. Well, we have been doing a lot over the last couple of years. But what we haven't done as much is post a bunch of PR and IR. And if we look back over the years, we have literally spent tens of thousands of dollars, if not 6 digits on IR and PR work, and it just doesn't pay off right now. It's frustrating because we would love to see the direct results if there was a lot. We pour a lot of money into PR and IR, and we see it reflected in the stock price, but that just didn't happen. So while we got healthy in nature to the prior question about liquidity, we looked at every expense, and this is one of the expenses we just felt like the ROI wasn't there. So we cut it back. Now does that mean we're not going to do it ever again. No, we will. And we'll start to do a little bit more, particularly on the IR side, we're speaking at conferences and a few more things over the next probably 6 to 12 months. But again, the top line message here is we got to be smart with our cash, and we just didn't see the return throwing a bunch of money at PR and IR right now. So I think that's it for questions. So I can turn it back over to the operator. Operator: Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.
Operator: Good day and thank you for standing by. Welcome to the 3i Group plc Half Year Results Presentation Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand over to the Chief Executive of 3i Group plc Simon Borrows, to open the presentation. Please go ahead. Simon Borrows: Good morning. Welcome to 3i's interim results presentation. This was another good half for 3i. We delivered a total return of 13% and that gives us a net asset value per share at the end of September of GBP 28.57 compared to GBP 22.61 at the interims last year. That's after the payment of 42.5p per share second dividend and a 78p per share gain on foreign exchange translation. We ended the half with a gross investment return of 14% from private equity and 9% from infrastructure. Private equity delivered another good return with 98% of the portfolio by value, growing earnings in the 12 months to the end of June 2025. Action continued to deliver a very good performance, and we saw good growth from the broader consumer portfolio. We secured 2 good realizations in the first half as well as a significant capital restructuring and distribution from Action in October. Our private equity portfolio is defensively positioned, and is generally trading resiliently. The challenges we see for a limited number of assets are reflected in their valuations. We remain cautious about the general macro environment and continue to be careful in evaluating new investment opportunities. Earnings growth across our top 20 private equity portfolio has been good. Companies making up some 86% of the portfolio value have been growing earnings by more than 10% over the last 12 months. We have only 4, mostly smaller companies where earnings have declined over this period. We saw earnings momentum drive positive portfolio value moves in the half, and there were no notable write-downs in this period. Action has continued to expand and grow. In the first 9 months of the year, net sales were up 17.4% and operating EBITDA up 16.3% to GBP 1.563 billion. Like-for-like sales to the end of September were up 6.3%. Once again, the volume of transactions has been the prime driver of like-for-like growth across Actions estate. LTM operating profit at the end of P9 grew to EUR 2.3 billion. P10 was a challenging month. That's due in part to last year's very high like-for-like growth. And perhaps this year's unusually mild and very un-Christmasy weather. Net sales to the end of October stood at EUR 12.54 billion, year-to-date like-for-likes to the end of P10 were 5.7%, reflecting the high growth hurdle from last year and the continuing softening consumer environment in France, in particular, Upturn including last week, we've added 272 new stores. We're now on track to add approximately 380 new stores by the end of the year. That will be a 13% increase in store numbers over the calendar year. We now have 180 stores in Italy and 90 stores in Spain as well as 8 in Switzerland and 5 in Romania. These 2 new countries have started very well. We do believe Action's like-for-like sales of 5.7% are well ahead of many European retailers, a number of whom are experiencing negative nonfood like-for-likes. And that performance by action is very impressive when you set it against Actions cumulative 56% growth in like-for-likes. Over the previous 4 years, Action's low prices and mix of necessities and surprising products continues to attract a growing volume of transactions in all 14 countries where we operate. The French like-for-likes are positive to the end of P10, but they are some way below the rest of the group. France accounts for about 1/3 of like-for-like sales. That means that the non-French network is delivering like-for-likes of almost 8%. So France is a challenge, but we are well set for a big sales season to come with a strong Christmas assortment, good availability from the supply chain and some very competitive prices. 3i acquired a further 2.2% stake in Action in September from GIC. We settled that transaction by the issuance of 19.9 million shares and took our holding up to 60% of Action at the end of the first half. Action completed another financing in October, raising EUR 1.6 billion in the U.S. and European debt markets. Once again, demand for Actions debt was strong. Over 2/3 of that new debt was fixed at an all-in euro cost of under 4.6%, and pro forma leverage stood at 3x at the end of October. Action also took the opportunity to undertake EUR 3.1 billion of leverage-neutral repricing and extension of part of its current debt package, that delivered a further interest cost savings of EUR 14 million on top of the EUR 33 million we've achieved previously. We used GBP 755 million of our GBP 944 million distribution to increase our stake in Action further to 62.3%. That left us with net proceeds of GBP 189 million from the share redemption. And I'd like to end this section on Action by commenting on Action's March CMD guidance. Firstly, this year's store opening program is going well. And as I said a minute ago, we now expect to open approximately 380 new stores. That's an increase over the March guidance we gave you. It is also worth highlighting that trading from these new stores, which are not in the like-for-like numbers has been ahead of our expectations so far this year. On like-for-likes, while most countries in our store network are broadly in line or ahead of plan, the market in France, our largest store network is clearly challenging. We've seen a meaningful step down since the second week in September, which continued through P10. Food inflation is very challenging for those on low and average incomes, and the savings rate is at an all-time high in France, reflecting those with more cash having concerns with the political situation. So there is a risk that France pulls us below the 6.1% like-for-like guidance for the year. But frankly, it's too early to tell. On EBITDA margin, the sales mix is supportive. We've had good higher-margin category performance over the first 3 quarters and good trading from new stores. But the final outcome as with like-for-likes will be determined by trading in the last period given its very high level of sales and very high level of margin. Okay, I'd now like to move on to Royal Sanders, our second long-term hold asset. Royal Sanders is having another strong trading year. They've delivered good organic growth and excellent cash flow so far this year. Our private equity portfolio, ex Action and Royal Sanders was valued at GBP 4.7 billion at the end of September. The portfolio is invested in broadly equal parts across our 4 sectors. And as I said earlier, we're seeing good overall momentum in the private equity portfolio despite anemic growth in Europe and the challenges of the U.S. tariff policy. We certainly have more than our fair share of companies which are still able to grow in this tricky environment. And we secured 2 good realizations with healthy uplifts over their marks and returns well in excess of our 2x target. The Infra team is also producing a good performance with some excellent returns from their portfolio and a good level of fee income. On that note, I'll hand over to James who can fill you in on more detail. James Hatchley: Thank you, Simon, and good morning, everyone. Our total return on equity for the half year was 13%. Again, that demonstrates the ability embedded in our portfolio to deliver consistent compounding returns year after year. You can see the details here. The increase in NAV was principally driven by value growth of 250p per share. During the half, foreign exchange movements were positive, driven by the depreciation of the pound against the euro. That gave us a positive contribution of 78p the dividend payment in the half-reduced NAV by 43p. That meant we closed the half with an NAV per share of GBP 28.57. You can see the components of the 250p per share or GBP 2.5 billion of value growth here. As Simon said, Action continued its growth trajectory with the contribution of GBP 2.1 billion in the half. The PE performance increases of GBP 219 million, significantly outweighed the performance decreases of GBP 43 million. And that was despite a challenging macroeconomic background in many of our core markets. Royal Sanders and Audley were the standout contributors to the GBP 219 million increase. There were no material detractors in the half. As part of the valuation process, we took 4 multiples down, but the combined impact was relatively modest to GBP 24 million. The quoted investment portfolio had a good half. with a positive contribution of GBP 139 million. That came from the combination of increases in both the 3iN and Basic-Fit share prices. The uplift to imminent sale of GBP 25 million relates to the premium we received on the sale of MAIT. The portfolio ended the period with a value of GBP 29.3 billion. We continue to apply our valuation process consistently and markets have been broadly supportive over the period. So starting with Action, we continue to value Action on a post-discount multiple of 18.5x LTM run rate EBITDA of EUR 2.5 billion. As at 30th of September, that gave us an enterprise value for Action of EUR 46.9 billion. The value on the 3i balance sheet, which takes into account our increased shareholding level, as of 30th of September of 60% was GBP 21.5 billion. If we look back a year to September 2024, when Action was valued as an EV of EUR 38.2 billion and compare that EV to the outturn for the LTM run rate EBITDA this September, you arrive at a forward multiple of 15.1x. These are then the multiples we consider when comparing action to the peer group. These are the usual 2 charts we present this time covering the period from September 2024 to September 2025. Whilst there have been some movements within the peer group. We continue to see that the average multiple is stable. So we remain comfortable that Action with its strong operational KPIs should trade at a premium to the average. The other important point to note is that there have been 2 third-party trades in Action's equity since our last year-end, one in September with GIC and one in October with a broader group of LPs. In that second case, there were both buyers and sellers among the LP group. Both transactions were completed at valuations corresponding to the -- to Actions June NAV, which reflected the 18.5% multiple we use today. Let's now have a look at the valuation multiples of the rest of the portfolio compared to the peer sets. This chart shows the valuation multiples for our PE assets in dark blue and the average of the multiples from the relevant valuation peer sets in light blue. The red arrows highlight assets for which the multiple was actually reduced in the half. In each case, these decreases reflect company or market-specific factors in combination with an assessment of proximity to exit. The weighted average multiple ex-Action is 13.1x, which for a portfolio aiming to double value over a 4- to 6-year time period, we think is fair. During the period, we secured the sale of MPM and MAIT, those transactions reinforce the integrity of our valuation policy. We gave the detail behind these transactions at the recent CMD presentation, so I won't go over that again. It is, however, worth noting that both assets were sold at good premiums that opening book values. In MPM case has commanded an 18% premium and to MAIT a 34% premium. Whilst this has been a consistent feature of nearly all 3i exits over time, I think it is particularly impressive when you consider that these transactions were executed against what remains a alleging environment for exits. So turning back to the business line performance for the half year. Our private equity portfolio generated a gross investment return of 14% for the half. The gross investment return was GBP 3.2 billion. Of that GBP 3.2 billion, GBP 805 million was the positive impact of FX. The cash realization of GBP 391 million was mainly from the sale of MPM. Investment of GBP 732 million included our purchase of an additional 2.2% of Action in the period. The overall PE portfolio value ended the period at GBP 27.1 billion. In terms of the leverage position, we show that on the next slide. As of 30th of September, there was very little change from the position of the full year. For completeness, I've added a couple of extra bars setting out the pro forma leverage position, including the action refinancing, which took place in October. The maturity profile continues to be very well managed. I'd also like to remind you of our overall approach to leverage across the portfolio. Our debt team covered this in detail a couple of years ago in the PE CMD in September 2023. We favor a prudent approach to leverage assessed on a company-by-company basis. Action remains one of the largest names in the syndicated leveraged loan market in Europe, and today, Action now has a meaningful presence in the low market in the U.S. Its debt is well syndicated with over 150 leveraged loan investors. For the PE portfolio, ex Action, we value a diverse mix of lender types, but we're always focused on simple senior-only financing structures with over 2/3 of overall lending provided by relationship banks. Just to be clear, today, we have no external subordinated debt or unitranche lending in the portfolio. So on to Infrastructure. It was a better result for the Infrastructure segment in the period. That improvement was largely driven by the performance of the 3iN share price, which increased by 14% over the period. The underlying 3iN Infrastructure portfolio as a whole is doing well, and TCR is a standout performer. Despite some continued weakness in the freight market, Scandlines also continued to deliver a robust performance. Including Scandlines, our infrastructure portfolio is valued at GBP 2.2 billion, and it produces a very useful cash income contribution, as you can see on the next slide. Overall cash income totaled GBP 87 million, and we ended the period with a small GBP 12 million cash operating loss. Our expectation remains for a cash operating profit for the year. So now let's take a look at the balance sheet. The group's approach remains one of conservative capital management with net debt of GBP 772 million and gearing of 3%. We remain well within our trend lines. A slightly larger RCF gives us liquidity of over GBP 1.6 billion at the end of the period. As of 11th of November 2025, the group's cash balance was GBP 777 million. Before we leave the balance sheet completely, I thought I'd give you a quick update on the net exposure by currency and the hedging position. In the 6 months to September 2025, we experienced a currency tailwind of GBP 802 million. That principally reflects the 4% depreciation of sterling against the euro during the period. Hedging has reduced this gain by GBP 31 million, resulting in a net gain after hedging of GBP 771 million in the half. That GBP 771 million compares to a net currency loss of GBP 466 million in the same period last year. As you know, sterling has continued to weaken. And you can see the updated sensitivities net of our hedging program at the bottom of the slide in the banner. So finally, let's turn to the dividend. Here, you can see our dividend policy. In line with that policy, we will pay our first FY '26 dividend of 36.5p per share in early January. That 36.5p per share, is half of last year's full year dividend total. Now before we get into Q&A, I will hand back to Simon. Simon Borrows: Thank you, James. As I said right at the start, this was another good first half for 3i, and we're expecting a second half of more good progress. Action and Royal Sanders are 2 long-term hold investments are both trading well, and they remain focused on their long-term growth plans. Actions expansion is ahead of plan this year and most retailers I know would give their eyeteeth for 5.7% like-for-likes in these markets. Let me put the very recent like-for-like numbers in some perspective on this next slide. We've seen very strong like-for-like over the last 4 years. This is a compounding measure and results like that are bound to moderate as Action store base grows. Nonetheless, we remain convinced a strong retailer should be capable of compounding like-for-likes at 5% over time in a low inflation environment. But as you can see here, the like-for-like performance has been completely eclipsed by new store growth at Action. In fact, we estimate the net store growth will amount to 13% this year. This is the largest driver of Action's growth and is likely to remain that way for many years to come. While like-for-likes are a good measure of the health or pulse of a retailer, are you winning share? The ability to roll out a format unchanged across multiple countries is the holy grail of retail. And that's the real power of the Action format who successfully opened in 14 countries to date. Ultimately, the ability to do that supports decades of substantial growth as ALDI, Lidl and IKEA have demonstrated over the last 50 years. So when we model Action's development over time, we use these basic assumptions. 10% store growth per year, 5% like-for-likes, high free cash conversion and a nudge to the EBITDA margin every so often. These 4 elements are all you need to confirm the enormous potential of Action. Action's extraordinary growth over the last 5 years has been a key contributor to 3i's compounding returns. And we are confident that Action will continue to support strong returns for 3i as a result of its customer focus, white space potential and remarkable store payback periods. With that, we will now close the presentation, and we'll open the lines for questions. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Manjari Dhar from RBC. Manjari Dhar: I just have 3, all on Action, if I may. My first question is just on the seasonal performance. I suppose, given the softer seasonal start you've seen I just wondered about how you're thinking about the ability to sell through seasonal ranges for the remainder of this period and how you feel about the likelihood that Action might have to clear some of that product at lower margins later on? And then my second and third question are both on France. So I just wondered if you could give some color on margin mix by country and maybe how the French margins compared to group average? And then finally, I just wondered, given the challenging backdrop of France and the fact that France is such a significant part of Action's sales exposure, does that change the way that the Action thinks about distribution of future store openings near term or sort of do you think that maybe you might shift those openings away from France now? Simon Borrows: Thanks, Manjari. I think on the seasonal performance, I mean it when I say it's simply too early to tell. We really can't tell how much people are holding back from these more seasonal Christmas categories because they've literally got no money or because it's the weather or because it's something else. But these -- you often get Christmases where trading can be pretty back-end loaded. So we need to wait and see, frankly. In terms of seasonal write-downs, we have a very modest history of this. We've got a great set of products for Christmas, and I would be surprised if it means anything significant in terms of seasonal write-downs. . In terms of the France margin mix, it sort of reflects a lot of features. There is a good level of FMCG purchasing that goes on in France, which takes the margin in one particular direction. But we have some of our -- many of our biggest, highest volume stores in France, which trade at very strong margins given the sales leverage and sales densities those stores achieve. And they're almost unmatched anywhere else. But we do see more of those sorts of store contributions cropping up in some other urban centers in other countries, as well as in the Swiss stores, which are very much ahead of that. So it's a curious mix, France, but the margin is still a very healthy margin in terms of store EBITDAs, et cetera. In terms of the store expansion, we were still set on opening 1,200 stores in France. It's a remarkable business for us, and we believe it will continue to be so. we are still, in our view, taking share even at the current like-for-like level. And we've been voted France's favorite retailer for the last 3 years on the trot, so the customers clearly like us. Operator: We will now take the next question from the line of Haley Tam from UBS. Haley Tam: Could I ask one on Action or a couple of Action, please? So to start with, just to clarify on the like-for-like slowdown in October, which was clearly focused in France. Can we just confirm whether like-for-like was negative in France in October and perhaps help us to understand what the particular challenge was for you in France? Because I think we've heard from some other retailers that consumer confidence and political uncertainty clearly had an impact on higher value spend, but there's been more resilience in staples. So just trying to understand why your experiences differed. Second question, just in terms of the increased stake in Action, which is now 62% approximately. Could you give us any update on the split of the remaining 38% in terms of what portion might be LPs versus other GPs and how long on average or the spread of duration of investment that there is in the other 38%. And then if I can just ask a final question actually. In terms of very clear comments you've given about 2025 on Slide 13. Thank you. And Simon as well, thank you for your longer-term comments towards the end of the call. I just want to clarify, again, then, therefore, there is no change in your medium-term ambitions for Action. Simon Borrows: Thanks, Haley. Let me talk about our French like-for-likes in October. They were indeed negative, and that's why the group was at a low single-digit positive number. As I said, they are about 1/3 of the like-for-like sales basket of stores. I think the 2 previous P10s in France have both been 13% and 13%. So these were very significant sales levels to be on top of and unlike previous October, we saw very little buying of the seasonal products focused on Christmas. So they had really quite a lean year, and that's made all the difference. We haven't seen as big a difference in other categories. But that's where we really saw the difference. And having seen lighter baskets at certain periods of the month prepay checks and things like that in prior months, as we've talked about before, we saw lighter baskets in all weeks in France. So that was another defining moment. And we've seen that since the second week in September. So they are the reasons for that, I would say. Our knowledge is that some of the domestic discounters have got very significant negative like-for-likes throughout the year. and some of the supermarkets despite food inflation have negative like-for-likes as well. So we don't think this is necessarily at odds with what's going on in the rest of the market. In terms of the stake, so the other 38%, broadly speaking, 13% is held by Hellman & Friedman and the balance by the LPs with some smaller stakes held by management. And then the last question was our ambition, et cetera. There's no change to the ambition at all. The white space ambition is as big as it's ever been and is only likely to get bigger over time, the more we see how strongly the stores are received in new markets. Operator: Our next question comes from the line of Gregory Simpson from BNP Paribas. Gregory Simpson: Again, a few questions on Action from my side. Firstly, on the 380 new store target, can you give some color about how this is mixing by country, Spain, Italy versus Eastern Europe? Second question is on gross margin. It was just over 40% last year. How has that trended this year? And can you give some color on what you're seeing in the supply chain in terms of pricing from China and outlook into next year? And then finally, just any update on Action U.S. thought process, time line? Simon Borrows: Thanks, Gregory. The 380 new store target, I -- the country which is having the most new stores opened is Italy, there's a good number of new stores in Southern Europe generally. There are a good number opening in Poland, in Germany and in France, so it's the usual crowd. It's the 5 big markets and then there's a consistent number of other stores occurring in the smaller markets as well. But the big opening number, along with our new DC is in Italy this year, which is trading very strongly indeed. Gross margin is slightly above 40.0%, it's slightly higher than that because we have actually had very good category sales in the higher-margin categories this year. So that has moved that across a bit. In terms of pricing from China, we've bought very well this year, in particular, relative to previous years, but that stock is going to be coming into the stores next year rather than this year. And we've got nothing to add to Action in U.S., but I know management is going to speak about that at the CMD in March. Operator: We will now take the next question from the line of Andrew Lowe from Citi. Andrew Lowe: Just stepping away from France. It's been about 3 months, I think, since Lidl opened its non-food, sort of Home & Living store, sort of test concept in South Germany. I wondered if you could talk a little bit about that and sort of what you've seen in terms of any change of consumer behavior around those stores and just what you think they may be doing there, trying to defend against you guys. And then the sort of second question is just a clarification. I know that you said that we need to wait until March to hear more on the U.S. But could you just clarify, do you have any employees in the U.S. at the moment? That would be great. Simon Borrows: Sure. Thanks, Andrew. I mean on the Lidl store, we're obviously aware it's opened. We've visited it. It is reflecting much of the private label categories, if you like, it is only 1 store. We obviously have over 600 in Germany. So I don't know whether they're going to continue to roll it out. It's really not clear to us. So I can't really add any great insights to it. But I don't think it raises any major issues for us at the moment. I'm pretty sure that we have employees in the U.S. carrying out our research. As you know, we're doing a research project there. And we're sort of -- we're dipping into various pools of capability when we assess the market. So there will be a range of people that are working on that project. Andrew Lowe: Great. That's really helpful. And then just maybe on that latter point, just to clarify. So there are sort of employees rather than like consultants that you might be using? Simon Borrows: Yes. But whether they've got their house there at the moment or anything like that, I don't have that detail, Andrew, but we certainly have people on the ground consistently doing some work on the market, as we would in any new market. . Operator: Our next question comes from the line of Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: I just have one more on France. Obviously, France has gone through political unrest in the past. And maybe 2018 or 2019, is a nice parallel with the yellow vest movement. So I was just wondering if you could share what's the like-for-like sales growth for Action was like during that period? Is the current political situation worse or not quite as bad as that? And the second part is how long does it usually take for your like-for-like sales to improve when the political situation stabilizes? Simon Borrows: Jeremy. We certainly had difficulties during the yellow vest periods. And in some ways, logistically, it was more of a challenge because we had a number of our DCs barricaded and we were not able to supply stores. So in individual regions, we saw a very material drop off in sales as a result of that set of disturbances that lasted for several months. So -- and we saw a little bit of that in September with some of the general strikes that were called. I would say this is slightly different. This is clearly a -- we're seeing a ratchet up of a problem that's been in France for some time. We talked about this going back some months, which is people there are very highly taxed at all levels, and they don't have much spending money. And it is affecting a large part of the population. And when you put high food inflation into that mix and high services inflation and various other things. I think it is leading to people being careful. Now how quickly that's turned around because of a different government or a different leader? Who knows. But it's still a very big market for us. We sort of represent the market now with 900 stores, and we believe it will come back. We've seen this sort of thing before. We had similar instance of this in the late teens where we had some very low like-for-like periods. So it's nothing that you don't encounter from time to time in retail, and we'll just grind our way through it, and I'm sure we'll come out a bit at some point. But when that will be, I'm not sure. Operator: Our next question comes from the line of Christopher Brown from JPMorgan. Christopher Brown: Yes, just a couple of quick questions. So in France, just wondering whether the new stores there that you've opened over the last 12 months or so, were they faring any better in terms of like-for-likes? Simon Borrows: Yes. As we said, the general category of store openings has been very positive. I don't -- we've opened about, I would say, getting on for 40 stores in France to date. I don't have the detail of that. I've only seen the aggregated numbers, Chris. Christopher Brown: Okay. And just moving on away from Action on to realizations. I mean a lot of your private equity competitors are talking up the sort of realization environment. And clearly, you've had a couple of really good realizations. Can you say a little bit more about what might be in the pipeline on realization front over the next 12 months or so? Simon Borrows: Yes. I mean, we would certainly expect to be bringing some other companies to the market on sort of 12-month time scale. I think in terms of the broader environment, I don't know which markets people are talking out. But it has still been a generally very quiet and bitty period for realizations, particularly in Europe. There have been some mega deals done in various places, which maybe skew some of the statistics. But in general, it's pretty subdued. I think the banks are receiving more mandates towards the end of this year for stuff to happen next year, and some of them have received stuff from us. So there is going to be a pickup I would expect, but I think it's much more about next year than about this year in reality. Operator: Thank you. We have no further questions on the line. So I will now hand over to Silvia Santoro, 3i Group Investor Relations Director to address any questions submitted online via the webcast page. Silvia Santoro: And first of all, there's a question on a clarification on France. Could any of the weakness be attributable to maturity? And can you evidence that perhaps with performance in other mature markets? Simon Borrows: The best comparison to make is with the Netherlands, where the store estate really dates back to the early 1990s. And we're seeing very good like-for-likes there this year in line with -- broadly in line with the group average, I would suggest. So we don't believe age is the issue. We believe it's to do with the macro in France. Silvia Santoro: And another question is what needs to happen over the next few months for you to hit your like-for-like guidance? And how would that compare to prior years? Simon Borrows: I haven't done the detailed math. But if we were around budget or slightly better, we'd be pretty much in line with guidance. So we're not looking at anything truly exceptional, but there does need to be a focus on some Christmas purchasing in France, in particular, to turn this around. Silvia Santoro: The next question is, can we extrapolate the improved store growth for March 2026 into March 2027, i.e., can you grow store openings by another 30 stores to open 410 stores. I think they mean probably calendar year '26. Simon Borrows: I think I don't want to steal anyone else's thunder, but the intention is obviously to open more stores next year on top of this year's number. And that doesn't sound completely crazy to me, but I'll leave that for the management to talk about. Silvia Santoro: Can you provide any update on the trading seen so far in November? Simon Borrows: We don't have -- we're not giving out that update. P10 is pretty, pretty darn recent. So we're not going to go further than we've gone already. Silvia Santoro: Can you expand on the traction you are seeing in Switzerland and Romania? Simon Borrows: Yes. I mean in Switzerland, where we now have 8 stores, we're seeing very high sales per store. So it looks very encouraging and perhaps reflects how expensive that market is and how attractive Actions prices are in that market? And in Romania, likewise, we now have a couple of stores and people have been buying way ahead of our expectations in those stores. Silvia Santoro: How much more of Action is there to buy? And over what time period might you be able to buy it? Simon Borrows: Well, we don't own 38%, so that might be one number out there. But we only get opportunities now and then to buy more equity we have an ongoing appetite to do that, and we have the resources to do that. So we will take advantage of it. But it's very hard to predict when others will want or will need to realize their position in Action. Silvia Santoro: Are you taking any specific measure in France to improve like-for-like or do you think it's entirely macro related and nothing needs to be done? Simon Borrows: I think we're making sure that the availability is very good that the whole supply chain is working in a very slick manner, and we are rechecking all our pricing to make sure they're as sharp and as competitive as possible. So we're doing all the things that you would expect as we move into our biggest sales season of the year. And it's really the next 6 or 7 weeks, which really makes the outcome or not in that market given the year we've had to date. Silvia Santoro: What gives you conviction in the 5% like-for-like in the medium term? Can you give color in terms of the different levers, example, basket size, frequency, geographies, et cetera? Simon Borrows: We've studied other great retailers and some of those retailers that sit above us in the valuation charts have decade runs of like-for-likes, which are in excess of 5%. So we've made a study of that, and we feel confident that we can emulate what those people have achieved over a very long-time scales. Silvia Santoro: Can you share some color on the EBITDA multiple at which the additional action shares were published -- were purchased from GIC and other LPs? Simon Borrows: As James said, it was purchased at the June valuation. Silvia Santoro: Please, can you talk about how you think about allocating capital to Action versus investing in existing portfolio or new assets? Simon Borrows: We are not short of capital. So we look at new investments and we look at investments into situations where we already have an ownership position and Action is one of those positions. They always have the benefit of us having a deep and real understanding of the performance under our ownership. So they are pretty straightforward judgments to make. And as I said before, we see very long-term compounding coming out of Action, and that is a particular attraction that you find particularly difficult to find. So that is always near the top of our priority list. Silvia Santoro: On the U.S., could you give a general comment on how you view the competitive landscape, especially against stores like Walmart, Amazon, Costco, that are very entrenched and dynamic? Simon Borrows: I mean it's a very competitive place. It has, by comparison with France, at the moment, it has very high levels of disposable income. So shopping dollars are much, much bigger. There are all sorts of formats there, but there are no formats quite like Action, interestingly enough, Dollar stores are quite distinct from Action. Costco is obviously very distinct from Action. Walmart is very distinct from Action. So there are some very strong businesses there. There are some less strong businesses there, but there's actually nothing there that's quite like Action. Silvia Santoro: You have spoken to your relative performance versus strange supermarkets. The Carrefour traded broadly in line with your recent like-for-like performance in France. Should we now think about the French business trading in line with the market from here? Simon Borrows: I don't think we trade like supermarkets. I think supermarkets have been beneficiaries of inflation. Broadly, our store is slightly cheaper this year overall than it was previously. So we don't really benefit from inflation in that way, and we have some much higher margin categories than many of the food categories in our stores. So I would expect us to be able to trade above the supermarkets, but I'm not sure when this persistent food inflation is really going to come to an end. I guess people have to eat first, and that's something that's affecting the French market. Silvia Santoro: There don't seem to be any further questions from the webcast. Operator, back to you. Operator: There are no further questions on the telephone line. Please continue. Simon Borrows: Okay. Well, let me just wrap up. We appreciate the interest, and we appreciate all the questions. Thank you for joining today. Have a good day. . Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to KP Tissue's Third Quarter 2025 Results Conference Call. Today's call is being recorded for replay. [Operator Instructions] I will now turn the call over to Doris Grbic, Director of Investor Relations. You may begin your conference. Doris Grbic: Thank you, operator. Good morning, everyone, and thank you for joining us to review Kruger Products Third Quarter 2025 Financial Results. With me this morning is Dino Bianco, the CEO of KP Tissue and Kruger Products; and Michael Keays, the CFO of KP Tissue and Kruger Products. Today's discussion will include certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to known and unknown risks and uncertainties. A list of risk factors can be found in our public filings. In addition, today's discussion will include certain non-GAAP financial measures. The reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our MD&A. The press release reporting our Q3 2025 results was published this morning and will be available on our website at kptissueinc.com. The financial statements and MD&A will also be posted on our website and on SEDAR+. The investor presentation to accompany today's discussion can be found in the Investor Relations section of our website. I will now turn the call over to our CEO, Dino Bianco. Dino? Dino Bianco: Thank you, Doris. Good morning, everyone, and thank you for joining us for our third quarter earnings call for fiscal 2025. We accelerated profitable growth in the third quarter of 2025, highlighted by strong adjusted EBITDA of $85.7 million on revenue of $561.1 million. We are particularly pleased with consumer share gains in the paper towel and facial tissue categories, which grew over a 52-week period despite a highly competitive market. In terms of our Away-From-Home division or Kruger Pro, as we call it now, sales and profitability increased by both year-over-year and sequentially, bolstered by consumer brands like Scotties and Chashmere selling well in the commercial market. Looking ahead, we are on our way to delivering a third consecutive year of strong financial results. In addition, we have significantly deleveraged our balance sheet to prepare for the next phase of investment. Now let's take a look at our quarterly numbers on Slide 6. Revenue growth of nearly 8% in the third quarter of 2025 was driven by higher sales volume in our consumer business, favorable selling prices across both Consumer and AFH segments and a positive foreign exchange impact. Revenue in Canada rose 6.8% in the third quarter, while U.S. sales grew 8.8% year-over-year. In terms of profitability, adjusted EBITDA increased 30.4% year-over-year to reach $85.7 million. The significant improvement in adjusted EBITDA can be attributed to higher sales volume, favorable selling prices, lower pulp prices and reduced freight costs. These factors were partially offset by a number of items, including higher manufacturing overhead costs which Michael will provide more details on in his review. On Slide 7, average pulp prices in Canadian dollars decreased single digits in the third quarter of 2025 from the previous quarter, while year-over-year average prices were both and NBSK and BEK declined 2.6% and 18.4%, respectively. Heading into the upcoming year, industry analysts do expect pulp prices to trend upwards. Let's move on to our operations on Slide 8. To increase tissue capacity and accelerate the growth of our business, we are proud to announce the construction of a new state-of-the-art tissue plant in the Western United States to better serve our fast-growing U.S. business with ultra-premium tissue products. The new facility equipped with the most modern TAD paper machine and related converting lines will have annual production capacity of approximately 75,000 metric tons and the startup is scheduled for 2028. Location, project scope and financing details will be announced at a later date. The new facility, along with our Memphis plant and 9 existing Canadian plants gives us a strong network to service our growing North American business. Looking at our current operations. Overall, our network production rates exceeded our targets for the third quarter. In Memphis, we are seeing positive benefits from our renewed asset strategy focused on producing premium products. Converting manufacturing results in Memphis improved sequentially, while our new multipurpose converting line is on track for startup in the second quarter of 2026. We expect to deliver an improved cost structure in 2026 following the closure of our old legacy equipment last quarter. Finally, our Sherbrooke Expansion assets continued to perform above expectations. Turning to brand support on Slide 9. We sustained our Made in Canada positioning in Q3 2025, supported by widespread in-store promotions across our portfolio. During the third quarter, we also continued equity building campaigns behind Chashmere, Purex, SpongeTowels, Scotties and Bonterra to strengthen our brand presence in their respective categories. In addition, we pursued targeted expansion and support behind our premium product portfolio, including Scotties Ultra Soft, Chashmere and Purex Ultra and UltraLuxe, as well as SpongeTowels pro and premium. We also launched our 22nd annual Chashmere collection in support of breast cancer awareness, prevention and treatment programs inspired by this year's theme of Tapestry of the North, 16 of the top Canadian designers showcased garments made entirely of Chashmere, Canada's leading bathroom tissue at a galley evening and fundraiser in Toronto on September 16. The annual campaign has raised over $5 million for the breast cancer cost since 2004 through the Canadian Cancer Society and the Quebec Breast Cancer Foundation. Turning to Slide 10. The data presented is taken from Nielsen and shows Kruger Products branded market share in Canada over a 52-week period ending September 6, 2025. The figures reflect strong growth for Kruger products in the paper towel category compared to the same period last year as SpongeTowels increased share on the strength of heightened brand support. In terms of facial tissue, our market-leading Scotties brand also enjoyed solid share gains driven by innovations in the premium product segment. For bathroom tissue, our share declined slightly over the same period due to higher pricing taken in our Canadian Consumer segment in the fourth quarter of last year. Looking at our Away-From-Home segment, on Slide 11, sales volume increased both year-over-year and sequentially in the third quarter of 2025. Similarly, revenue and profitability improved in the third quarter highlighted by a robust 11.2% adjusted EBITDA margin. As mentioned earlier, these strong financial results were supported by consumer brands like Scotties and Chashmere selling well in the commercial market, along with growing Made in Canada segment among distribution partners and end users. The expanded in-sourcing of our own paper also contributed to enhanced profitability and converting efficiency. And finally, we introduced Titan Wipers and Cloths to our AFH portfolio in the third quarter to meet the evolving needs of customers seeking high performance and reliability for the most demanding cleaning jobs. With a bold, new name and look, Titan reflects Kruger Pro's vision of being a trusted partner to our customers. Equally important, this new product line enables Kruger Pro to increase its share in the rapidly growing commercial Wiper and Cloth market. With that, I will now turn the call over to Michael. Michael Keays: Thank you, Dino, and good morning, everyone. Please turn to Slide 12 for a summary of our financial performance for the third quarter of 2025. As Dino mentioned, we generated an adjusted EBITDA of $85.7 million on sales of $561.1 million in the quarter, representing a strong year-over-year EBITDA growth of over 30%. Net income totaled $14.6 million in the third quarter of 2025 compared to $18 million in the third quarter of 2024. The year-over-year decrease is due to an FX loss variation of $12.2 million, greater income tax expense of $4.4 million higher depreciation of $4.1 million as well as an increased interest and other finance costs of $3.5 million. These items were all partially offset by the higher adjusted EBITDA of $20 million. In our quarterly segmented view on Slide 13, revenue from our consumer business grew 9.1% year-over-year to $468.3 million. This increase comes from higher sales volume, both in Canada and the U.S., favorable selling prices and a positive FX impact on U.S. dollar sales. In our Away-From-Home segment, revenue improved 1% year-over-year to $92.8 million in the third quarter. This increase was mainly due to slightly higher sales volume in Canada and a favorable FX impact. The consumer adjusted EBITDA in the third quarter totaled $78.2 million compared to $62.4 million in Q3 2024 with a margin of 16.7%, representing an improvement of 2 points over the same period last year. On a sequential basis, consumer adjusted EBITDA increased by $9 million from Q2 2025. For our Away-From-Home business, adjusted EBITDA amounted to $10.4 million in the third quarter compared to $6.6 million in Q3 2024, with a margin increasing by 4 points year-over-year to 11.2%. On a sequential basis, AFH adjusted EBITDA grew $1.4 million from Q2 2025 the year-over-year and sequential increase are partially driven by the expected benefit of in-sourcing our paper supply post Sherbrooke paper machine start-up. Moving on to Slide 14. We show a consolidated revenue for Q3 2025, which improved 7.7% year-over-year to $561.1 million. The increase was mainly driven by higher consumer sales volume, favorable selling prices and a positive FX impact. On a geographic basis, Revenue in Canada rose $19.1 million or 6.8% year-over-year, while U.S. revenue continued to grow at a strong rate, increasing $20.9 million or 8.8%. On Slide 15, we provide details of our year-over-year profitability. The adjusted EBITDA increased by $20 million to $85.7 million, resulting in a margin of 15.3% compared to 12.6% for the same period last year. The year-over-year increase was driven by higher sales volumes and selling prices, lower pulp prices and reduced freight costs. These items were partially offset by higher manufacturing overhead costs, elevated warehousing costs and increased SG&A expenses. Let's turn to Slide 16, where we compare Q3 revenue to Q2. Revenue grew $25 million sequentially or 4.7%, primarily due to higher U.S. sales volume and increased selling prices. Geographically, revenue in Canada improved by $1.7 million or 0.6%, while the U.S. increased by $23.3 million or 9.9%. On Slide 17, the adjusted EBITDA in the third quarter increased sequentially by $13.2 million or 18.2%, driven by higher sales volume, lower pulp prices, increased selling prices and a reduced manufacturing freight and warehousing expenses. These factors were partially offset by higher manufacturing overhead costs and increased marketing expenses. The adjusted EBITDA margin reached 15.3% in the third quarter compared to 13.5% in Q2 2025. Now turning to our balance sheet and financial position on Slide 18. Our cash position improved to $149.1 million at the end of the third quarter from $85.3 million at the end of Q2 2025. The increase was primarily due to higher adjusted EBITDA and a decrease in working capital. Long-term debt stood at $1.083.5 billion, a decrease of $42 million sequentially, reducing net debt by $87.9 million. That brought our leverage ratio to 3.4x compared to 4.0x in Q2 2025, demonstrating our continued commitment to strengthening our balance sheet. To conclude my section, we will review the capital expenditures on Slide 19. Our CapEx expenses for Q3 2025 totaled $16.2 million and we have narrowed our CapEx range to be between $70 million and $80 million for 2025, including some spending related to the new Memphis converting line announced in July. For 2026, our CapEx is expected to be in the range of $70 million to $90 million, which includes some of the strategic growth CapEx. Thank you for joining us this morning, and I'll now turn the call back to Dino. Dino Bianco: Thank you, Michael. Please refer to Slide 20 for a quick update on our sustainability efforts. I am pleased to report that our Bonterra brand was recently named the most sustainable brand in Canada in 2025 by Kantar BrandZ, a leading marketing data and analytics company. Bonterra, our environmentally focused product family was praised for embedding sustainability across every aspect of its operations from product development and manufacturing to materials packaging and partnerships. We are very proud of this recognition. Now please turn to Slide 21 for my closing comments. We are preparing for the launch of a new state-of-the-art TAD tissue plant in 2028 to better serve our fast-growing U.S. business. We will continue managing our margins amid volatile economic conditions. We are investing in our operations to increase efficiency and support growing capacity. We intend to continue to build our share across our portfolio on a long-term basis. Our Away-From-Home business will increasingly benefit from internally sourced paper and deliver sustainable profit, and we are actively developing our organizational capabilities to strengthen our adaptability and resilience. Finally, let's turn to our outlook for the fourth quarter of 2025. We expect adjusted EBITDA to be in the range of Q3 2025. We will now be happy to take your questions. Operator: [Operator Instructions] Your first question comes from Hamir Patel with CIBC. Hamir Patel: Congrats on the strong quarter. Some of the recent project announcements in the industry have had capital costs in the sort of USD 0.5 billion range. Is that a reasonable estimate to think for your project before any incentives? Dino Bianco: Yes. What I would say, Hamir, is we're working through the final elements. There's always some differences between project scope, but I think you've had -- there's been a couple of announcements. I think using them as a guide is probably a good place to start. We'll finalize the full cost when we announce more details early in the new year. Hamir Patel: Okay. Great. And I mean, if we took 40% of maybe that $0.5 billion proxy, that would suggest maybe a $200 million equity component. Would you consider issuing additional shares to finance the project and improve the public float? Dino Bianco: Yes. I'm not going to comment on your math. That was your math, so I'm not going to comment on that. But I would say the -- our position will be that we feel we can support the equity infusion through our current resources. I don't think... Hamir Patel: Yes. No, I realize you probably wouldn't need to tap it. I just thought to improve the float could be an opportunity. On the market share, it looks like some pretty impressive gains in towels. Do you see any additional runway there to grow market share in Canada? Dino Bianco: Yes. I think we've always said it's an area where we have the most opportunity. We're #1 share in bath and #1 in facial. I think ultimately, the consumer is going to choose who's the #1 share is. I think we're doing the right things with our business in terms of our quality, our segmentation, our in-store presence, distribution, our communication that we're doing. I think Made in Canada positioning is a strong one, and we continue to support that, given I think consumers are very anxious to buy Canadian made products. So I think all -- that whole bundle, and it's a long-term play, as I say, we're not here to just rent share for a short period of time, we want to build it long term foundationally and make sure we're offering the right product at the right value for our consumers. So yes, I do see a good runway in the towel category. Operator: Your next question comes from Kasia Kopytek with TD Cowen. Kasia Trzaski Kopytek: It's Kasia. Can you all hear me okay? Dino Bianco: Yes. Kasia Trzaski Kopytek: Perfect. Let's start with Sherbrooke. Can you talk about operating rates there and how they might compare to your broader network? And then also how the Sherbrooke sales program is ramping as well? Dino Bianco: You cut a little bit, Kasia. I heard Sherbrooke operating rates. I'm not going to give you exact numbers, but I would say Sherbrooke definitely one of the strongest operating rates in our network, and we believe based on what we're seeing from external data, definitely top-tier performer in North American tissue. So very pleased, and that's resulting in increased output capacity. And we believe -- we know that there's a strong profit being generated from that site. Kasia Trzaski Kopytek: Got you. And then I also just asked on the sales program? Sorry about cutting out. Dino Bianco: I'm sorry, the sales program? Can you repeat Kasia, sorry, you're... Kasia Trzaski Kopytek: Yes. Sorry, is this better? Dino Bianco: Go ahead, try one more time. Just speaks softly, maybe we can hear better. Kasia Trzaski Kopytek: Okay. Sorry about that. Is this better? Dino Bianco: Yes. Kasia Trzaski Kopytek: Perfect. Yes, just wondering about how the actual sales program for the output from Sherbrooke is going as well? Dino Bianco: Yes, very good. I mean we are selling everything we make. I mean, so the more that site makes, the more we sell, I think the market and our business is growing very well. You can see the numbers, obviously, and Sherbrooke been a big part of supplying that. It does supply Canada and the U.S. So it's -- and it does supply multiple categories. So very pleased with the results and very pleased with the work the team is doing there to continue to drive great output. Kasia Trzaski Kopytek: And then on -- just on the results this quarter, are you able to parse between how much the higher selling prices quarter-over-quarter were due to mix versus market price increase initiatives? Dino Bianco: Well, maybe Michael will give you some color. But the market price, we took pricing last year. And so when you're comparing quarter-over-quarter, the pricing last year took effect in Q4. So we're lapping Q3 last year, which is prepricing. So that's why we talk about the benefit of the price increase. We've not taken any additional pricing since that time. I don't know if we'll give specific details, maybe I'll look over to Mike to see if there's anything else he wants to add to that. Michael Keays: Yes. Thanks, Dino. For sure, the year-over-year comparison, which show a larger portion of that selling pricing coming from the pure change or announcement on the selling price itself that we did in the fall last year. In terms of the sequential change, that would more driven by mix and a bit less by the actual selling price change. Dino Bianco: We're selling a lot more premium product. Obviously, I just talked about Sherbrooke and that is a TAD facility. And I talked about our brands really pushing the premium side of the business. So you're seeing an improved mix through just the improved premium segment as part of our portfolio. Kasia Trzaski Kopytek: Right. Yes, that all makes sense. So I just wanted to confirm, relative to Q2 that the actual market price hikes would have been -- had a minimal impact. So it sounds like that's the case. And just on AFH, strong results quarter, obviously. And the margin is in line with what you had previously guided to as being attainable for that business, once benefits of the paper insourcing come through, which they are now. Any thought to revising the margin range higher for the future in terms of what you think that business can do? Dino Bianco: Well, I've always said, I think, low teens, and we've now crossed the 10% threshold. I think it does have the opportunity. I want to make sure I see sustained performance. Obviously, there's a bit of a watch out in the short term around what's going on in the Away-From-Home market in general in the economy and consumers. So we're watching that. We think we're well positioned. We have a very diversified portfolio across Canada and the United States. So I think I'm not going to make an announcement that's going to give guidance of a different margin structure. I'm very pleased with where we are. I've said we should be low teens. And right now, we're there. So our goal right now is to keep it, keep it delivering it across not only sales but our cost structure and our margins. Kasia Trzaski Kopytek: Makes sense. And final one for me on Memphis. There's been improvements there. Can you put any numbers around how meaningful that might be for 2026 results? Dino Bianco: No. We won't give that kind of guidance. But I certainly think the momentum that we're going to build in 2025, and we will give Q1 guidance later in February. But I think the momentum we're building is going to carry forward. I mean we're not a onetime deliver of profit. As you can see, the foundations that we're building with respect to our business, our portfolio, our cost structure are building our share. I think all are working very well, and those are sustainable in my mind, and we should continue to drive momentum. Of course, the economy and cost inputs are always a wildcard, but we feel very good about the momentum we are driving. And we should continue that into 2026, and we will provide that guidance at the right time. Obviously, for 2025 in the fourth quarter, we feel very confident because we could see that one near in and feel good about our guidance being in the range of Q3. Operator: [Operator Instructions] Your next question comes from Zach Evershed with National Bank. Zachary Evershed: Congrats on the quarter. So a few here on the next TAD project. So feel free to pass if you guys don't want to provide that level of detail yet. But we do note that construction costs have spiked over the last few years. Do you think it's likely that the return economics on the project will be lower than your first 2? Dino Bianco: That is not what our data is showing us right now. So obviously, it's still early, but I would say that we are in the range of what we believe we need to be. And even with the escalated costs, we feel we have a model here and the market situation with our growth in the premium segment, we believe we'll have a good operating plant, latest equipment and technology, likely a simplified portfolio, an improved freight structure, having said the Western United States, and we believe that will deliver similar margins. Zachary Evershed: Good color. And then thinking about your financing split to debt, what are the guardrails that you're looking at to limit your use of debt, either leverage or interest coverage ratios? Dino Bianco: Yes. We're working through that. I don't think we're going to give you a specific number. But I guess the 4 things that we're looking at, first of all, we have a proven track record of successfully completing large-scale projects. Notably, we just talked about Sherbrooke and then the Sherbrooke Expansion Project. So 2 large projects and both have exceeded the ramp-up curve. I think the other piece is we believe in a strong position right now to pursue this project. We have a cash balance of almost $150 million, and we have strong cash flow generation, a lot of it driven by those new projects that I just talked about. We also have recently completed an update with DBRS, and we've given them the details of the project and including the financing parameters and expected financial profile. And lastly, of course, we've been working on this project for a long time, and we are now ready and I think maintaining the sound financial profile and strong market access remains priorities for the company and for the Board, including any volatility during the period, making sure that we can manage that. So I think we're in a really good position I don't think we're going to give you any specific metrics as it relates to ratios at this point. So I think when we finalize the project scope early in the new year, but I don't know, Michael, if there's any further guidance that we want to provide. Michael Keays: No. I mean you covered that we have a current strong financial position. That position and cash available on hand today is in a much better position than the period of 2022 and 2023 that we went through a few years ago. The performance of our last 8 quarters over '24 and '25 has demonstrated that we have that strong cash flow generation. So we feel we're in a very, very strong position to be able to proceed with this project at this point in time. Zachary Evershed: I appreciate that. And then just one last one. As Hamir mentioned, there are a number of new machine announcements that will be coming online over the next few years after almost a drought in major additions. Can you speak to your thinking around your competitors' geographic positioning and time lines and how that may affect your ramp-up in 2028? Dino Bianco: Well, obviously, we've made the announcement knowing those announcements. We still long-term projections continue to show a need for ultra premium in the North American market. So despite those announcements, the market continues to grow and will continue to grow. So we have made this announcement knowing that the market will require this capacity. Obviously, the Western U.S. is going to be a strong position for us, given what we believe a lot of our customers are growing and opening new outlets in west of the Mississippi. So I think we'll be very well positioned from a service point of view for our customers. The other benefit being that the addition of this new facility, it will create benefit and synergy to Memphis and Sherbrooke, so our new network now, kind of this triangle between Memphis Sherbrooke and the new facility, this TAD triangle if you will, will help us really get more efficient and produce the right product in the right place for the customers. So all that, I think, just supports the need and the location that we chose. Operator: There are no further questions at this time. I will now turn the call over to Dino Bianco for closing remarks. Dino Bianco: Great. Thank you all for joining us on the call today. We look forward to speaking with you again in the release of our fourth quarter results for 2025. Thank you, and have an amazing day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.