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Operator: Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on Third Quarter 2025. [Operator Instructions] Please note that at our customers' request, this conference will be recorded. I'm now handing over to Florian Schraeder, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Florian Schraeder: Thank you so much, Smart Sarah, and a sincere welcome to everyone joining the Merck Q3 '25 Results Call. I'm Florian Schraeder, the Head of Investor Relations at Merck. I'm delighted to be here today with Belén Garijo, our Group CEO; and Helene von Roeder, our Group CFO. During the Q&A part of this call, we will also be joined by Kai Beckmann, CEO of Electronics and Deputy Chair of the Executive Board; Jean Charles Wirth, CEO of Life Science; and Danny Bar-Zohar, CEO of Healthcare. In the first few minutes, we will walk you through the key slides of our presentation. After that, we will be happy to take your questions. Now I will turn it over to Belen to get started. Belén Garijo López: Thank you, Florian. Good afternoon, and welcome, everybody, to our Q3 earnings call. I am now on Slide #5, starting with the highlights of this quarter. So as you have seen during the morning in Q3, we delivered solid organic growth across all 3 sectors. Organically, the group revenues increased by 5.2% and EBITDA pre went up by 8.8%. Life Science delivered the strongest organic sales growth at 6%, followed by our Healthcare and Electronics businesses, which both delivered solid organic growth of 5%. One key highlight of the quarter is the continuation of the strong performance of our Process Solutions business, which showed organic growth above 10% for the third consecutive quarter despite rising comparables. We saw a very strong order growth year-over-year and a book-to-bill ratio that is still comfortably above 1. In Science & Lab Solutions, we returned to organic growth, and that despite continued near-term headwinds. In Healthcare, organic growth was largely driven by the CM&E franchise, up 7% and solid N&I performance of 6%, driven by Mavenclad which reached double-digit growth in this quarter. Oncology showed moderate organic growth despite heavy competitive headwinds for Bavencio and rising competition for Erbitux in China from noncomparable biologics. Following the closing of the SpringWorks acquisition on July 1, this is the first quarter in which we are consolidating our rare disease franchise, which has contributed 4% portfolio growth for Healthcare and has performed well in line with our expectations. Moving into Electronics, we saw organic growth of 5%, driven by our semi-material business, and in this context, please note that Q3 includes 1 final month of Surface Solutions since we have now successfully divested as of July 31. Regarding full year 2025, we are now confirming and narrowing our absolute guidance ranges for net sales, EBITDA pre and EPS pre. We are maintaining the midpoints for net sales and EBITDA pre, while slightly increasing the midpoint for EPS pre. So turning to Slide 6 for an overview of our performance by business sector. Once again, organic sales growth in the third quarter was plus 5.2% and Life Science was the largest contributor with organic sales growth of almost 6%, driven once again by the stellar performance of Process Solutions. Healthcare grew 4.6% organically, driven by strong growth of our CM&E franchise alongside contribution from Mavenclad and Fertility, which has returned to growth, supported by Pergoveris. Electronics also showed the solid organic sales growth with Semi Materials up high single digits, while DS&S was down in the low teens range as was expected. Regarding our earnings, EBITDA pre amounted to EUR 1.69 billion, up plus 8.8% organically versus the same quarter of last year. The currencies had a negative effect across all sectors, while the portfolio effect was slightly positive driven by the contribution of SpringWorks. As flagged in our Q2 earnings call, EBITDA pre in Q3 was supported by the sale of a priority review voucher resulting in a gain of plus EUR 60 million in health care and legislative changes in South America, adding another EUR 59 million of income in [ CO ]. Our underlying EBITDA pre margin, excluding these 2 effects, was stable at around 29%, fully aligned with our expectation for the full year. And with this, let me hand it over to Helene for a more detailed review of our financials. Helene von Roeder: Thank you very much, Belen, and also a warm welcome from my side. And with that, I'm now on Slide 8, and we'll start with an overview of our key figures in the third quarter. Net sales increased by 1% to EUR 5.318 billion. Organic growth of EUR 273 million and a portfolio effect of EUR 34 million were largely offset by FX headwinds of minus EUR 256 million. EBITDA pre was up by 3.1% to EUR 1.669 billion with a margin of 31.4%, and that is up 70 basis points year-on-year. The group margin benefited from the sale of a priority review voucher and legislative changes in Latin America, which together contributed EUR 119 million supporting the margin by 220 basis points. EPS pre increased slightly by 0.9% to EUR 2.32 per share. The gains resulting from the aforementioned priority review voucher and legislative changes have supported EPS pre growth and overcompensate the higher interest related to the SpringWorks acquisition. Our operating cash flow increased moderately by 4.1% to EUR 1.518 billion. Net financial debt rose 29.8% to EUR 9.228 billion (sic) [ minus EUR 9.228 billion ], primarily reflecting financing for the SpringWorks acquisition via a U.S. dollar bond issuance. Our return to the U.S. dollar bond market after 10 years was highly successful and further diversified our fixed income investor base. We were over 4x oversubscribed and that enabled us around 25 basis points of pricing tension underlining the strong confidence from fixed income investors. Let me also briefly comment on our reported results. And with that, I'm now on Slide 9. EBIT was up by 11.3% year-on-year. The financial results declined significantly from minus EUR 54 million to minus EUR 99 million, and that is primarily due to higher interest costs from the U.S. dollar bond related to the SpringWorks acquisition. The year-to-date effective tax rate was 21.2%, and that is within our guidance range and reflects normal quarterly fluctuations throughout the year. Turning to EPS. Reported EPS was EUR 2.07, which is up 11.3% year-on-year and is on par with our EBIT growth. With that, let's move to the business sector review, and I'm beginning with Life Science on Slide 10. Life Science grew organically by plus 5.9% in Q3. Growth accelerated versus prior quarters with Process Solutions maintaining its momentum and Science & Lab Solutions returning to growth. As projected, Process Solutions continued its strong momentum with organic sales up by 10.3%. That is the third consecutive quarter of low teens growth despite increasing comps. Order intake remained strong in Q3 and the book-to-bill ratio stayed comfortably above 1. To further strengthen our Process Solutions downstream offering, we announced on October 15, the acquisition of JSR's Chromatography business. This adds advanced protein A chromatography capabilities, enhancing our ability to offer more efficient, scalable protein purification solutions that support accelerated biopharmaceutical production. Turning to Science & Lab Solutions. Sales grew by 2.5% organically despite continued headwinds from U.S. policy changes weighing on academic and government lab spending and still challenging market conditions in China. While the U.S. government shutdown had no impact in Q3, we do expect some effects to materialize in Q4. Life Science Services reported organic sales growth of 5.2% against the low comp, driven by our CDMO business, and that is notably bioconjugation for ADCs. As noted at our recent Capital Markets Day, Life Science intends to gradually increase R&D investment towards roughly 5% of sales over the midterm. And the R&D increase in Q3 is absolutely in line with this goal. EBITDA pre increased by 6.1% organically, with the margin up by 20 basis points year-over-year, reflecting operational leverage. I'm now on Slide 11 with an overview of the Healthcare business sector's performance. Healthcare delivered solid organic sales growth of 4.6% in Q3, about 1% of the growth resulted from a pull-in from Q4. For the first time this year, we consolidated our rare disease franchise contributing a plus 4 percentage point portfolio effect well in line with expectations. CM&E was once again the largest contributor of Healthcare's organic growth, delivering 7% organic growth with all therapeutic areas contributing. Fertility sales were up 2% organically, mainly driven by very strong growth of Pergoveris, up 37%. Meanwhile, we announced on October 15, a voluntary agreement with the U.S. government to accelerate the U.S. review time lines for Pergoveris and access to our IVF therapies via trumprx.gov. Our oncology franchise delivered 3% organic sales growth as Erbitux sales rose by 10.3%. Erbitux' performance was driven by strong growth in Latin America and Europe, more than offsetting tougher competition for noncomparable biologics in China where sales declined in the low teens. Our N&I business grew by 5.6% organically in Q3. Mavenclad delivered stellar organic growth of 20.4% supported by continued strong commercial execution. I want to briefly comment on the recent decision by the Court of Appeals for the Federal Circuit, which has affirmed the conclusion by the U.S. Patent Office that our 2 Mavenclad dosing regimen patents are invalid. We are disappointed by the ruling and intend to file a petition for rehearing or rehearing en banc. Belen will comment on implications later. Regarding our pipeline, longer-term results from Part 2 of the Phase III pimicotinib study were presented at ESMO, showing increasing ORR over time and ongoing improvements in key secondary endpoints. We intend to launch pimicotinib in 2026 in TGCT. On R&D spend, as mentioned in our Q2 earnings call and the Capital Markets Day, we are increasing our R&D ratio in H2. The key drivers are project ramp-up costs and a small effect from the SpringWorks acquisition. Our Q3 ratio of 20.9% is in line with our midterm ambition of around 20%. Overall, EBITDA pre amounted to EUR 818 million in Q3, which represents a margin of 37%. Please keep in mind that this includes the EUR 60 million gain from a sale of a priority review voucher and only a modest dilution from SpringWorks. Furthermore, please note that the margin in Healthcare tends to be lower in Q4 due to seasonality. Let us move to electronics on Slide 12. Organically, sales increased by 4.8% in Q3. Semiconductor Solutions sales were up in the high single-digit percentages organically overcompensating lower DS&S sales. In Semi Materials, AI and advanced nodes continue to drive growth. In addition, we see demand from mature nodes in Asia, where we have been able to gain market share with new qualifications. On business, the quarter was in line with our expectations. As we communicated in Q2, we expect a very muted year 2025. Considering the usual back-end loaded seasonality of DS&S, we're calling out Q4 '25 as the bottom. We're more constructive on the outlook for 3D NAND driven by [ eSSDs ]. This is consistent with the view Kai and his team shared at the Capital Market Day '25. Our Optronics business achieved moderate organic growth of 2.9%. Resilience in our offerings for liquid crystal and OLED drove organic growth complemented by a strong portfolio contribution from UnitySC. The EBITDA pre margin went up by 150 basis points year-on-year to 27%, mainly driven by the accretion from the divestment of Surface Solutions. We see gradual improvement of Electronics margins from here onwards. Before handing back to Belen, let me also briefly comment on our balance sheet and cash flow statement. Now as you can see on Slide 13, our balance sheet decreased by EUR 700 million compared with the end of December '24. Taking a closer look on the asset side. Cash and cash equivalents increased quarter-over-quarter, reflecting the U.S. dollar bond issuance and receipt of proceeds from the divestment of Surface Solutions. Inventories were stable, while receivables rose by EUR 300 million, following a quarter of strong focus on cash collection efforts. Intangible assets increased slightly by EUR 100 million due to goodwill created by the SpringWorks acquisition, partially offset by negative FX. Property, plant and equipment decreased slightly by EUR 200 million, which is mainly due to FX translational differences. And lastly, other assets were down by EUR 700 million, mainly due to the divestment of Surface Solutions and revaluation effects. On the liability side, financial debt increased by EUR 1.8 billion with the issuance of the U.S. dollar bonds. Pension provisions were slightly down, driven by actuarial gains. Payables decreased by EUR 100 million as we saw declines in current payables across all 3 sectors. And net equity decreased by EUR 1 billion as the increase in retained earnings was more than offset by FX differences, primarily reflecting a weakening U.S. dollar. In summary, our equity ratio declined from 58% at the end of December '24 to 57% at the end of Q3. Turning to cash flow on Slide 14. Operating cash flow increased to EUR 1.518 billion in Q3 '25, up from EUR 1.456 billion (sic) [ EUR 1.458 billion ] in Q3 of last year. Profit after tax rose driven primarily by the gain of the sale of a priority review voucher and changes in local legislation in Latin America. The EUR 166 million year-over-year delta in other assets and liabilities reflect variable compensation and tax adjustment. Other operating activities decreased by EUR 181 million year-over-year in Q3 '25, largely due to the neutralization of gains from the PRV voucher and the Surface Solutions divestment. Net cash used in investing activity reflects the SpringWorks acquisitions and the Surface Solutions divestment. CapEx on PPE was EUR 63 million lower, in line with the updated full year guidance of EUR 1.5 billion to EUR 1.7 billion, down from previously EUR 1.6 billion to EUR 1.8 billion. The change in financing cash flow is explained by the proceeds from the U.S. dollar bond issuance. Lastly, consistent with my comments at the Capital Markets Day, within CDMO, we are actively reviewing our mRNA and viral vector activities with potential financial implications in the next quarters. And with that, let me hand back to Belen for the outlook. Belén Garijo López: Thank you very much, Helene. Let's now move into taking a closer look at our full year guidance on Slide 16 before we open for Q&A. As you may have seen in the press release, we have sharpened our group sales guidance to a range of EUR 20.8 million to EUR 21.4 billion with an unchanged midpoint at EUR 21.1 billion. FX remains a strong headwind and has been refined to minus 5% to minus 3% from the earlier minus 5% to minus 2%. Our organic net sales growth guidance is now set at around 3%, staying within the previously communicated range. Turning to EBITDA pre, we have also kept the midpoint at EUR 6.1 billion and narrowed the absolute range to between EUR 6 billion and EUR 6.2 billion. Organic sales growth has been narrowed from previously plus 4% to plus 8% to now plus 5% to plus 7%. For EBITDA pre, we anticipate an FX between minus 6% and minus 4%, adjusted from the previous minus 6% to minus 3% and we have raised the midpoint of our EPS pre guidance by EUR 0.05, now guiding a range of EUR 8.20 to EUR 8.60. For some additional color, let's take a look at Slide 17. Consistent with our group-wide approach, we are narrowing our organic sales growth guidance to plus 4% to plus 5%, while reaffirming the midpoint at 4.5% for the full year. We're also maintaining the midpoint at 5% for EBITDA pre and narrowed the guidance to a corridor of plus 4% to plus 6%. In Healthcare, we anticipate organic sales growth of around 3% at the lower end of our previously communicated guidance range of plus 3% to plus 5%. This reflects the underlying year-to-date trends and some uncertainty for Q4 related to the recent Mavenclad news Helene referred to earlier. For organic EBITDA pre, the guidance has been updated to plus 9% to plus 11%, consistent with the adjustment to sales and within the corridor communicated in August. As portfolio effect, we now expect the SpringWorks to contribute EUR 180 million in sales, up from EUR 170 million previously guided and EBITDA pre of between 0 and minus EUR 20 million, which is significantly better than the prior minus EUR 70 million to minus EUR 90 million communicated before. For Electronics, we forecast organic sales development between minus 3% to minus 1%, tightened from the prior range of minus 5% to minus 1%. Organic EBITDA pre for electronics is now expected to be between minus 11% to minus 7%, compared to the earlier guidance of minus 15% to minus 7%. Now turning to 2026 in which, I am sure, you are expecting a bit more transparency. We recently provided you at our Capital Markets Day with an early indication of group sales and margin for 2026. You may now be wondering about the potential impact of the recent Mavenclad news regarding the upcoming loss of exclusivity in the U.S. To no surprise, this will impact the 2026 sales and earnings projections for Healthcare. To what extent it's going to be influenced by the phasing of U.S. generic launches and our ability to drive volume also outside of the U.S. and Danny can provide further information later during Q&A. Hence, we will closely monitor the developments in these respects means U.S. generic launches, an update due in Q4 with the full year guidance. In any case, you should assume for your modeling that Healthcare margins should remain north of 30%. Coming to the group, first of all, we see our early 2026 indication for the group during the Capital Markets Day for sales within the range we provided, trending to the lower end. When it comes to group margins, you can ensure that we stay laser focused to mitigate the potential impact of the Mavenclad erosion in the U.S. While acknowledging state cost mitigation measures, you could assume for 2026 a margin of around 28%. As mentioned, more to come at Q4 earnings when we will provide a full year guidance to all of you. And with that, Florian, over to you to lead us through the Q&A session for today. Florian Schraeder: Thank you, Belen and Helene, for leading us through the slides. Actually, there's one small amendment to what we have set and is on group level, the organic EBITDA growth, which has been narrowed from previously quarter 8 to now 5% to 7%, not the organic sales growth. With that, Sarah, I'm very happy to hand over to you to manage the Q&A part of the call. Operator: [Operator Instructions] Your first question today is from Matthew Weston from UBS. Matthew Weston: Two questions, if I can, please, both on pharma and on the guidance for 2025. Belen, you called out the SpringWorks change in guidance where we've seen a very sharp turnaround in profitability of what you expect from inorganic this year. I'd love to understand what's changed in your assessment of SpringWorks? Have you reduced costs? Have you had more revenue leverage? Because it looks like a very dramatic change in assumption. And then the second question is around the offset to that within guidance, which is a downgrade to the organic Healthcare growth. I'd love to understand if that's also associated with an assumption of Mavenclad U.S. generics entering on the 22nd of November, as you previously flagged in the release around the patent board decision? Or is it another part of the business which is performing less well? Belén Garijo López: Thank you, Matthew. Let me invite Danny to address the 2 questions for Healthcare. Danny Bar-Zohar: Thanks, Belen. Hello Matthew, thank you for the questions. So I'll address first the SpringWorks question around the margins for Q3. So it is rather technical. We have taken a conservative approach when we provided the first guidance. As you remember, the first guidance was provided several weeks only after closing. So we took a rather conservative approach for that in terms of cost. Now moving forward, as you could see, we have upgraded the guidance on the portfolio from EUR 170 million to EUR 180 million. So there is a gain there. And so we do expect sequential sales growth in Q4 for the SpringWorks Therapeutics compounds. We do expect an EBITDA pre loss in Q4, which will be a bit above Q3 due to the phasing of investments. But overall, you're absolutely right, most of the assumptions were conservative when it comes to the cost of SpringWorks marketing and sales and a little bit on R&D. When it comes to the EBITDA pre at the group level -- sorry, at the Healthcare level. So what did we communicate? We communicated an update to the top line of around 3% growth, instead of of the 3% to 5%. What are the drivers for that? First and foremost, as Belen said, when we look at the 9 months year-to-date, we see the trends on Erbitux. We see the trends on Gonal-f on Bavencio. Only this would bring us to the, I would say, the lower half of the previous guidance. Add to that, that in Q3 for Healthcare, the 4.6% growth is approximately 1% overstated. There is a pull-in from Q4. That's the second component. And then goes to the last one, which is the uncertainty regarding the effect of Mavenclad in Q4, and I'm sure that we will get questions around that later. So the guidance for the EBITDA for Healthcare, we upgraded it slightly and what it reflects are actually the downside on the updated sales, the 3% -- around 3% instead of 3.5%, the updated headwinds on FX. And on the upside, the pull-up of the portfolio effect when it comes to the SpringWorks. I hope that it gives you the bigger picture. Matthew Weston: Danny, perfect. If I could add one very quick follow-up. Can you tell us where the 1 percentage point to pull-in from 4Q was in terms of the product breakdown? Which drug should we look at? Danny Bar-Zohar: Yes. Thank you. That's a good one. In terms of regions, it was mainly in Middle East, Africa due to the tensions in the Middle East or the fluctuating tensions in the Middle East they -- there was a tendency to play safe and to stock a little bit ahead of time. So we are talking about mainly the CM&E and a little bit of Erbitux. Operator: The next question is from Richard Vosser, JPMorgan. Richard Vosser: One follow-up just on Mavenclad. Danny, I think Belen was saying, you would give some more color maybe about Mavenclad and the assumptions for '26 in terms of the growth, the generics coming in, et cetera, into the U.S. and growth ex U.S. Maybe you could give us some of that color, that would be great. And then secondly, on Electronics. it seems that Surface Solutions, as I think we all know, was a lower-margin business. So that should enhance the margins going forward. But also there's been the widening of growth, a little bit elements beyond maybe in Semi Materials outside of just traditional AI. So perhaps you could talk about the implications for growth -- for the gross margin of that and the margins going forward in the Electronics business. Danny Bar-Zohar: Okay. Richard, thank you for the Mavenclad question, and I think that, yes, it is appropriate to provide more color. So let's step one step -- let's take one step backwards. This quarter, sales of EUR 304 million, exceptional growth of 20%, and this 20% growth is driven pretty much equally between North America and Europe. Very strong commercial execution. Now when it comes to what's next, how should we think about it? First of all, Europe, which is approximately 1/3 of the revenue should continue growing in 2026. So this one is clear. When it comes to the U.S., we are definitely not in a position to speculate here. Technically, there is one single company with a tentative FDA approval for a generic version of Mavenclad and the earliest possible conversion of it to a full approval is the 22nd of November. Now the FDA guidance states that it generally assesses a request for a conversion from tentative approval to a final approval within 3 months. So we don't have the full clarity on where it is going to land. So the -- when it comes to 2026, so this is a little bit of premature. Why? Because the time of entry of a generic is still unknown. We can think about something about early 2026, and we don't know about other generics. There is no other generic that has an FDA tentative approval, but we know about other generics. It's in the public domain. We have a petition prepared for filing and also generics are generics and the game and the price play is not always expected. So obviously, what we told you at the Capital Markets Day when it comes to the top line, as Belen said, will need to be adapted and when it comes to the [ staged ] cost mitigation that Belen mentioned, so this is a U.S. play only, and it will depend a lot on the timing and on the phasing of who comes after the first generic. When the first generic is there, we can continue playing, and we should continue investing moderately. What's good in the U.S. is that once we see the dynamics, we can act very rapidly, so we will modulate the cost appropriately. Just one sentence to add. With this, repeating what Belen said, all of this negative impact on the top line that we expect for Healthcare in 2025. The costs will be managed and the margins will be managed to be north of 30%. Kai Beckmann: Second attempt. Richard, I'm taking the Semi question on the margin. Let me provide a bit more color on this one. So we made steady progress on the EBITDA margin in Q3 with 27% now and we've put the exceptional items that you have seen in Q2 '25 behind us. Still we aren't where we want to be in Electronics. The margins should be higher, but the biggest missing piece is the acceleration in volumes and our midterm target to the mid- to high-single-digit organic sales growth. So in Q3, we see support from the first 2 months where Surface is deconsolidated. On an annualized basis, we expect 100 basis points of margin accretion from the Surface Solutions divestment. We also see the continued benefit of operational leverage in Semi Materials and positive mix for materials for applications that serve AI and advanced nodes. And we did get some support from the release of some provisions in Q3 '25 as well. And it's worth remembering that biggest driver of lower margins are the investments we make in capacity for our local-for-local strategy, investments like the new Taiwan site are helping us to mitigate tariff operationally as well as gaining share via new qualifications. What we anticipate is exiting the year with margins in the high 20s with the guidance implying 26% to 27% EBITDA pre margin. So clearly, we have still work to do, but it's a clear sign of focus, Richard. Operator: We'll now take the next question. And this is from Shyam Kotadia from Goldman Sachs. Shyam Kotadia: I have one on the SpringWorks assets. So on a quarter-over-quarter basis, it appears Ogsiveo sales were broadly flat. So given your portfolio effect guide for Healthcare assumes EUR 180 million and you achieved EUR 85 million in 3Q, it implies EUR 95 million of sales for 4Q. I imagine the majority of this EUR 10 million uplift in 4Q may come from Gomekli, given its earlier in the launch and the recent growth momentum. So this would again imply Ogsiveo being relatively flat in 4Q. So I just wanted to, therefore, check what's driving this flat quarter-on-quarter revenue assumption for Ogsiveo? And are you anticipating a growth uplift there? That's the first question. And then Second question on SLS. So there was some positive phasing dynamics I saw in the release in the chemistry subdivision. So how much of that supported the low single-digit organic growth this quarter? And given it was a phasing impact, how should we think about 4Q for SLS? And also if you could quantify the potential impact from the government shutdown, that would be great. Danny Bar-Zohar: So regarding Ogsiveo, I'll give a little bit more color. So in the third quarter, sales came in at EUR 62 million, which is 38% up year-over-year, which is practically the strongest quarter since launch and the drug was launched exactly 2 years ago. So it's not a very fresh launch. We continue to see robust underlying demand with new patient adds and refills and also low discontinuations. Ogsiveo is the standard of care holding more than 70% share of first-line systemic new patient starts. So this is very significant for us. Why are we confident with Ogsiveo? We saw a drop in surgery rate from 70% prior to launch to 50% already 18 months after the launch in the U.S. We see a very high level of satisfaction amongst both patients and prescribers, 90% prescribers have the intent to prescribe again. The drug is in the NCCN guidelines, high level of refills above 90%, real-world data that suggests a very positive feedback from both physicians and patients. Long-term efficacy and safety data we published a couple of weeks ago, that indicates clear increase in response rates over time, sustained improvement in quality of life and a very consistent safety profile. So we are definitely, definitely excited about that. What we need to do is to continue to drive leadership as first-line systemic treatment of choice, continue to grow the systemic treatment market for desmoid tumors through physician and patient education. And then when it comes to the flattening that you suggested, we are changing practice here. And this is the first in disease in this indication, in this severe indication. And in some cases, you need to, I would say, do a lot of education in terms of mobilizing patients. As I indicated on the Capital Markets Day with Ogsiveo, we are moving now. And I guess that SpringWorks has moved into this phase just between signature and closing to the second phase of the launch. This is the phase where the bolus of patients waiting at the center of excellence for the first drug ever are already treated. And now the task on us is to mobilize those patients under, what we call, active surveillance into therapy and increase the number of new patients, increase the funnel. So I'm referring back to two other things that I said when we announced the deal. One, expect volatility. Second, we'll need to deepen penetration in the U.S. The potential of more than 20,000 diagnosed patients in the U.S. only is huge, and the vast majority are sort of stuck with symptoms, but no decision how to treat these, and these are the patients that we need to get. So we have this -- and this is exactly what I meant when I said at the closing depending on our efforts in the U.S. Now specifically, when it comes to Q3, chronic disease, we do see summer seasonality. And if one splits that 2 months, you clearly see the seasonality there. When it comes to Q4, you saw that overall, we topped the SpringWorks guidance a bit. It's for both compounds. We will not provide additional split. But I would not expect the dynamics also that you might have observed between Q3 and Q4 last year, which was, as communicated by SpringWorks, a result of increased stocking in anticipation for a price increase. So we will consciously control this. We will continue to see broadly consecutive growth, and we are super excited with the recent launch in Germany. We launched 3.5, 4 weeks ago, and I spoke with a commercial lead there. And I'm very, very content about the progress of both Ogsiveo and Gomekli. You're absolutely right about Gomekli, fantastic launch as it looks right now in the U.S., EUR 23 million, 73% growth quarter-over-quarter. Both adult and pediatric population, we feel very confident with this product. Jean Wirth: And Shyam, let me comment on SLS overall. So first of all, talking about Q3. Yes, we returned to positive organic growth in Q3 despite changing environment. When you peel the onion, biomonitoring from a portfolio point of view was a strong driver. Same is true for Chemistry and Lab Water as well. From a region point of view, Europe was the key driver. Now I would like to share also the fact that a few months ago, we launched an initiative around customer focus. What I mean and what we mean by customer focus. We have concentrated on enhancing our supply chain in SLS, particularly regarding inventory management and fill rates in order to improve the customer experience. And yes, we saw a nice and important benefit on chemistry, but this is a onetime effect. Moving forward, we are seeing some kind of sequential stabilization in academia, government and hospital, but the market remains volatile. And I will give you 2 concrete examples. One is China, where we continue to see China as a muted market linked to geopolitical situation, local competition and so forth. And the second key driver I would like to highlight looking forward or going forward is the U.S. government shutdown that caused some kind of uncertainty within the market, especially for academic government hospital customer segments. And we saw, let's say, a slowdown of our order intake per week in U.S. over the last few weeks. Good news is the shutdown should be now behind us, but it's true that it has impacted the first weeks of Q4. Operator: The next question is from Charles Pitman-King, Barclays. Charles Pitman: Just a first question please on the kind of thinking about the Fertility business. Just thinking about the kind of [indiscernible] performance in the quarter versus consensus a little bit weaker, but also just thinking a little bit more broadly next year, now that you've signed your MFN agreement with the U.S. administration to improve access to your Fertility business, what sort of dilution should we really be expecting to be reflected in FY '26? Or do you expect that to be offset by volume rises due to the improved access? And just wondering if you can confirm this is expected to eliminate the rest of your portfolio tariff risk as a result of the agreement, just given that happened about a couple of hours after the end of your CMD? And then just a second question. I'm not sure I have missed it earlier, apologize I had to join late. But can you just talk a little bit more -- can you just confirm what the driver of the lower dilution seen from the SpringWorks acquisition was for the third quarter and why you're now only expecting EUR 10 million for the year? Is it just the better-than-expected sales seen for Ogsiveo and Gomekli you were just referencing? Danny Bar-Zohar: Yes. Thanks. I'll take that. I'll start from the second one because it has the potential to be shorter. So the driver -- the key driver of the lower dilution of SpringWorks in Q3, we moved it from a midpoint of minus 70 to a midpoint of minus 10 is mainly a very conservative approach that we took just a few weeks after we closed the deal in terms of commercial and R&D spend. So we are releasing a little bit of this conservative approach when it comes to spend, some of it will phase to Q4, but overall that's the key reason for this lower dilution. I hope that it helps. So when it comes to Fertility, the third quarter was at EUR 360 million as a franchise, 2% up organically. And we pretty much anticipated that. It's the first quarter this year that returns to growth. The previous 2 ones were flattish to minus low single digit. By region, yes, a double-digit decline in North America due to mainly almost exclusively Gonal-f price erosion as we flagged in the last couple of quarters. And this decline in North America was more than offset by growth across all other regions. First, Europe, then Asia Pacific, Middle East, Latin America. When it comes to the brands, high single-digit decline in Gonal-f and this is driven, as we said, in North America by negative price effects and in the U.S. and in China as it has been the situation in the last 2 quarters. I would call them still temporary market softness in China in a rather competitive environment with local biologics and local hMGs. But these were largely offset by double-digit growth, 36%, 37 almost percent growth of Pergoveris across all regions, and it's a very differentiated profile that this drug offers and all other fertility products grew moderately. So this is what we have in terms of the status quo. Now for 2026, we are anticipating low single-digit growth as near-term headwinds, Gonal-f price erosion and also a little bit of the muted market growth in China will be more than offset by the continued strong growth of Pergoveris. We expect the launch of Pergoveris in China in the first half of 2026, which is very important for us. And as you mentioned, we are working towards a launch of Pergoveris in the U.S. in the second half of 2026 under the Commissioner's National Priority Review Voucher Program. Now this is, I would say, a breaking news immediately after the Capital Markets Day with the private public deal that we have with the White House and we intend to file Pergoveris to the U.S. FDA in the next couple of weeks after the shutdown is over. And we hope to have, I would say, if approved, with a broad label, a significant upside in the U.S. and globally. Now in the midterm, I expect Fertility to grow, as we said at the Capital Markets Day mid-single digits. And the key growth drivers for Fertility are, first of all, a growing market fueled by the increased need for IVF combined with improving access in many areas, Asia Pacific and Europe and also reimbursement and market share gains of Pergoveris and we also intend to launch Pergoveris Pen to replace the vial in several markets. So this is likely to give us an additional boost. There are risks, further penetration by biosimilars, and most of the risks are on Gonal-f in China and in Europe, but we are very confident with this forecast. When it comes to the tariffs. So the second part of this agreement with the White House, the first part was on [ DTC ] for Gonal-f and for Pergoveris. The second part was a letter of intent with the Ministry of Commerce, where the aim actually once we finalize this conversation is to exclude a pharmaceutical product and ingredients from the Section 232 tariffs. So we are in negotiations with a very good intent in order to relief us from the pharmaceutical tariffs moving forward. Operator: Now I'll take the next question. This is from Peter Verdult, BNP Paribas Exane. Peter Verdult: Danny, just can we come back to Fertility, just in the context of how much of a medium to long-term underappreciated value driver is the deal that you've done with the U.S. So I heard all the comments you made with respect to the previous question, but could you perhaps be helpful in baseline for us as we exit 2025, the run rate of Pergoveris. And I think most people on the call would think that Fertility might be a sort of mid-single-digit growth franchise. So I don't want you to repeat all the dynamics that you've just said. But I do want to ask, when you think about that government deal and the volume opportunity, and the fact that you're not yet in China and Japan with Pergoveris. Do you, as a management team, think about Fertility as a mid-single-digit growth? Or do you start to think about upside to that. So baseline on Pergoveris and the medium- to long-term outlook for Fertility. Danny Bar-Zohar: Thank you, Peter, for this question, and I will clarify, you're absolutely right. So what we expect for the full year this year for Fertility is flattish organic sales growth. You saw the effects -- the very muted effects in the first 2 quarters, returning to growth, getting our heads above the water in the next couple of quarters. So this is what you should expect for this year. Now for Gonal-f, I would say expect the pressure. We broadly think that it's going to be stable midterm outlook for Gonal-f. On one hand, we see the drivers that I mentioned before. On the other hand, we'll see the biosimilars, the price pressure and also to some extent, some extent, partial cannibalization by Pergoveris. Now when it comes to the U.S. deal, you need to think about it like this. There are 2 channels where we commercialize Gonal-f. There is the private channel, which is a cash-paying channel, and there is managed care through PBM, okay? The deal with the White House relates to the private one. So this discount or rebate that we are providing around 83% brings, generally speaking, the price to the private channel at the same range that is currently on the public one. So I would continue given that we are still -- we still have contracts with managed care channels, I do expect continued erosion in the next year and then eventually in outer years, not in 2026, we will start seeing, I would say, a stabilization. But this should be largely offset by Pergoveris, which is, in my opinion, and not just in my opinion, key opinion leaders, patients, a huge innovation in each and every market that we have Pergoveris. Both Pergoveris and Gonal-f are doing better. So this makes us very excited about the potential of this drug. And of course, we confirm the mid-single digit for Fertility in general. I don't think that we are at the stage to change it either up or down. We need to see how it [indiscernible]. Operator: And the next question is from Oliver Metzger, ODDO BHF. Oliver Metzger: So the first one is on Healthcare. It's more about the strategic nature. So the recent news regarding Mavenclad and the loss of exclusivity, how has this, say, earlier happening or changed your view on the MS business as a whole? Second question, in your qualitative comments on SLS, you described some higher demand coming from early biotech. Do you consider this as a sustainable turn to be better? Or would you rate this still as a quarterly volatility. Danny Bar-Zohar: So regarding Mavenclad loss of exclusivity and the impact on the multiple sclerosis franchise. So as I said before, the loss of exclusivity, yes, it came 10 months, 11 months earlier than expected in the U.S. In Europe, the end of regulatory exclusivity is in August 2027. And after that, we have SPCs per country. So the situation in Europe is well known, and we expect Europe or ex U.S. to continue to grow when it comes to Mavenclad. Now in the U.S., as I said at the beginning and as was mentioned a couple of times, we will need to manage this decline properly, and we have all the plans and all the capabilities to do that and to respond as fast as possible. Now longer term in multiple sclerosis, you know exactly what is the situation of our pipeline when it comes to multiple sclerosis. We don't have additional products in this field. So what we are going to do, and I mentioned that at the Capital Markets Day when it comes to Mavenclad, it just came a little bit earlier. We will manage the Mavenclad decline for cash, which means having a profitable decline. I hope that it gives you more color on that. Jean Wirth: Jean-Charles speaking. So to answer to your question related to SLS, we confirm that we are seeing some positive green shoots from pharma company impacted Science & Lab Solution moving forward. However, I want to repeat what I said about China. We have seen some quite muted demand in China on short term. Nevertheless, China remains a very important strategic pillar for Life Science in general. And a few weeks ago, in this context, we announced a new go-to-market transformation. We are making good progress. We just nominated 24 hours ago, the new head of of China. And again, it highlights the fact that China for us remains very, very important. And last but not least, I also would like to repeat again that we are seeing some impact coming from the U.S. shutdown on our academic customer in North America. Operator: We'll now take the next question. And this is from Florent Cespedes, Bernstein. Florent Cespedes: Two quick ones, please. First on pharma for Danny on the pipeline, could you maybe share with us which are the key milestones that we should anticipate for 2026 in terms of clinical trial readouts? And my second question for Kai. Electronics, DS&S, why do you anticipate stabilization in 2026 for this business? Danny Bar-Zohar: Florent, thanks. I'll take the first one. Key milestones. First, you should expect initiations, Phase III trial initiations for precemtabart tocentecan, the ADC, in colorectal cancer third line. As I mentioned and also David mentioned at the Capital Markets Day, we are in active discussions when it comes to partnering because of the size of -- potential size of this program also in the second line and the first line. You should expect data release in 2026, initial data release from the pan tumor trial. For that compound, we are testing it in pancreatic, in gastric and in lung cancer in a basket study. So that's for [ Pareto ] you should expect enpatoran entering Phase III trial in lupus rash. We completed the interactions with the regulators, very fruitful interactions. And these are the big ticket items, the myasthenia gravis with cladribine is enrolling patients, the Phase III, and of course, super important. It's not a trial. It's a drug in registration. We are expecting the launch of pimicotinib in China and also in the United States. In China, it's currently under review. In the U.S., it's going to be submitted in the next few days. We had the shutdown thing, but it's going to be released. We are going to also to get into a decision -- data-based decision on the PARP1 selective. Kai Beckmann: Florent, let me take the DS&S question. So let me take it from where we started in Q2 with our messaging. In Q2 '25, we envisioned a drop of sales of EUR 200 million to EUR 300 million. That was the organic sales downside that we have mentioned in Q2. Now that we are 3 months further, we can confirm that slightly more than EUR 200 million, which was our optimistic case. So that's where we are ranging. So the downside is largely projects and related equipment, and we have seasonality in the large capital equipment and protect business and a lot of revenue here is booked at the year-end. You can see that since we bought Versum, Q4 was often seasonally the highest sales quarter of the year. And as we have seen now EUR 100 million downside in the first 9 months of the year, that means counterseasonal downside now of another EUR 100 million in Q4 '25 to get to the slightly more than EUR 200 million, I just mentioned. So we are calling Q4 '24 now as the bottom for DS&S and that's why when you do the math on the Electronics guidance, expect Q4 '24, it's our lowest sales quarter of the year. And if you take the guidance, midpoint down around 7% organically and around EUR 200 million down considering the divestment of Surface as well. So that's the bridge for Electronics and specifically for DS&S. And looking at our order pipeline and a very low base of projects, we expect stabilization for 2026. Operator: The last question today is from Simon Baker from Rothschild. Simon Baker: Two, if I may, please. Firstly, going back to Pergoveris in the U.S. Danny, you said you will be filing in the next couple of weeks now that shutdown has been resolved. Given the 1- to 2-month review period of these national priority vouchers, can you explain what else needs to be done in order to get to a second half rather than the first half launch in the U.S.? And then a question on SpringWorks and just in terms of phasing of the integration costs, it looks like more was taken in Q3 than we were perhaps expecting. So I just wonder if you could give us some idea of the phasing and cadence of SpringWorks related costs on acquisition and integration. Danny Bar-Zohar: Thanks. So when it comes to Pergoveris, so this, I call it, an exercise with the Commissioner's National Priority Review Voucher is new to us and is also new to the FDA. So on that, we are in -- despite even the shutdown, we are in active discussions with that particular division, and we are preparing the file. So we have what we need to do when it comes to preparation of the file. The file needs to be prepared based on data that was submitted to the EU regulators. As you know, there were no trials in the United States on Pergoveris, and there is work that needs to be done on that regard. And then we need to get this reviewed. It's up to 60 days, it's, I would say, one of the -- it's a leading assumption by the FDA, but we need to see how it goes because still the drug was not tested in the United States. But I also want to make sure that we have the right label for this drug and prepare for this launch. So yes, theoretically, you can see that at the very end of H1 2026, we'll update you as we go because we are relatively early in this process. When it comes to SpringWorks integration, we actually have a positive update on integration and transaction costs, which we now expect at approximately EUR 250 million in total versus the EUR 260 million that we communicated previously, EUR 300 million originally. And in detail, we confirm our assumption for the integration cost of EUR 200 million and have slightly lowered our assumption for the transaction costs to around EUR 50 million, the previous assumption was at EUR 60 million, due to some lower legal costs. I hope that gives more clarity. Operator: I will now hand the conference back to Florian Schraeder for closing comments. Florian Schraeder: Thank you, Sarah, and thank you, everyone, for your continued interest in Merck. With this, we closed the Merck Q3 '25 results call, and we look forward to meeting many of you in our upcoming roadshows. Thank you, and goodbye. Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.
Operator: You all sites on hold. We appreciate your patience, and please continue to stand by. All sites on hold. We appreciate your patience, and please continue to stand by. Sites on hold. We appreciate your patience, and please continue to stand by. Good day, everyone, and welcome to today's BioAtla, Inc. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you may have the opportunity to ask questions during the question and answer session. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Julie Miller with LifeSci Advisors. Please go ahead. Julie Miller: Thank you, operator, and good afternoon, everyone. With me today on the phone from BioAtla, Inc. are Dr. Jay M. Short, Chairman, CEO, and Co-founder; Dr. Eric L. Sievers, Chief Medical Officer; Sheri Lydick, Chief Commercial Officer; and Richard A. Waldron, Chief Financial Officer. Earlier this afternoon, BioAtla, Inc. released financial results and a business update for the quarter ended 09/30/2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements, including, but not limited to, statements regarding BioAtla, Inc.'s business plans and prospects, potential selective licensing, collaborations, and other strategic partnerships. The potential for our clinical trials to be registrational results, conduct progress, timing of our research and development programs and clinical trials, expectations with respect to enrollment and dosing in our clinical trials, the anticipated clinical benefits, safety, efficacy, and market potential of our product candidates, plans and expectations regarding future data updates, clinical trials, regulatory meetings, and regulatory submissions. The potential regulatory approval path for our product candidates, expectations about the sufficiency of our cash and cash equivalents, and expected R&D and G&A expenses. These statements are based on current expectations and are subject to various risks and uncertainties that can cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in our filings made with the SEC, including the most recent quarterly report on Form 10-Q and other subsequent filings. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of today, 11/13/2025. And BioAtla, Inc. disclaims any obligation to update or revise such statements to reflect new information, future events, or circumstances except as required by law. With that, I'd like to turn the call over to Jay M. Short. Jay? Jay M. Short: Thank you, Julie. And thanks to everyone for joining us for our third quarter 2025 BioAtla, Inc. earnings call. First and foremost, it is important to update that we are in advanced stages to finalize a strategic transaction with a potential partner by year-end. Further, in September, I'm pleased to report that we achieved FDA alignment on the phase three OSV registrational trial design including dosing regimen, comparator arm, and approval endpoints for the treatment of second-line plus oropharyngeal squamous cell carcinoma or OPSCC. OPSCC represents a sizable and steadily growing patient population poorly served by EGFR inhibitors and other standard of care regimens. Importantly, this randomized phase three trial will evaluate dual primary endpoints of overall response rate and overall survival. And this dual endpoint design provides the opportunity for achieving accelerated approval followed by full approval. We are currently preparing for initiation of the OSV phase three study and remain on track to advance this program. We also recently presented compelling data with programs, including our dual CAB EpCAM TCE or BA 3182, and MACV. Which further validates the potential of our CAB platform to deliver differentiated therapies for patients with difficult-to-treat cancers. In a few moments, Eric will provide an overview of these data. I'm also pleased to share that we achieved a development milestone under our license agreement with Context Therapeutics. Related to the dual CAB Nectin 4 TCE program. This milestone not only provides non-dilutive capital but also further validates the underlying biology and its impact on improving the therapeutic index of our CAB T cell engager platform. We continue to be encouraged overall by our CAB T cell engager results, including this milestone achievement as well as the promising interim data from BA 3182 recently presented at ESMO. Finally, our MEKV program continues to distinguish itself with the potential for increasing overall survival compared with approved treatments in soft tissue sarcoma recently presented at SITC. These overall survival data are analogous to the prolonged overall survival data we observed in mutant KRAS non-small cell lung cancer patients. With that, I would now like to turn the call over to Sheri Lydick to provide an overview of the substantial market opportunity for OSFI our CAB ROR2 ADC. Sheri? Sheri Lydick: Thank you, Jay, and good afternoon, everyone. OSFI has demonstrated compelling clinical activity in heavily pretreated patients with HPV-positive OPSCC, a population with a poor prognosis. OPSCC is a steadily growing indication primarily driven by prior HPV infection. Up to 80% of OPSCC cases in the US are caused by HPV. And by 2030, OPSCC is projected to become the most common subtype of head and neck cancer in the US. The unmet need is significant in current standards of care, EGFR inhibitors, provide minimal benefit in this setting. This epidemiology underscores the urgency of advancing new therapies. From a commercial perspective, the opportunity is significant. We estimate worldwide peak sales of OSFI to be approximately $800 million in second-line and later, OPS alone. The total worldwide OPSCC market is projected to reach $3 billion by 2032. And when you consider the broader HPV-positive solid tumor market, including cervical cancer, the value exceeds $7 billion globally. We continue preparations for enabling initiation of the phase three study with the goal of advancing the study with a strategic partner early next year. With that, I would now like to turn the call over to Eric L. Sievers for additional clinical and program updates. Eric? Eric L. Sievers: Thank you, Sheri. Phase three trial preparations for OSFI continue as we achieved alignment on the phase three registrational trial design with the potential for accelerated approval followed by full approval with its dual endpoint design. Importantly, OSV offers a differentiated profile in HPV-positive OPSCC. As overexpression of the ROR2, a target of the ADC, is driven by oncoproteins associated with HPV infection forming a cancer axis that is associated with poor prognosis and resistance to chemo and immunotherapies. We have seen OSV's potential with our strong phase two data in late-line patients demonstrating an overall response rate of 45% and a median overall survival of 11.6 months compared to the historical response rates of only 0% to 3.4%, and median overall survival of only 4.4 months with standard therapies. Beyond OSV, we continue to make exciting progress with our dual CAB EpCAM T cell engager, EpCAM is broadly expressed across adenocarcinomas of the colon, stomach, pancreas, biliary tract, lung, breast, prostate, and thyroid, making it a compelling bispecific T cell engager target. However, EpCAM is also broadly expressed on healthy epithelial tissues. And this broad expression is associated with on-target off-tumor toxicities when targeted by traditional antibodies. We believe we have a notable advantage with our dual CAB EpCAM T cell engager. As it is designed to selectively bind within the acidic tumor microenvironment and eliminate on-target off-tumor toxicity. We recently presented preliminary data from our phase one trial with our dual CAB EpCAM T cell engager in advanced adenocarcinomas at the annual 2025 European Society for Medical Oncology Congress. Overall, data indicate that the safety profile is manageable. In addition, we are continuing to see encouraging preliminary signs of tumor reductions across a broad range of indications. And notable prolonged tumor control. With a confirmed partial response at the 0.6 milligram dose. This responding patient with intrahepatic cholangiocarcinoma, a particularly challenging cancer of the biliary tract, remains on treatment without progression now for more than six months. We also remain encouraged by the performance of mecobotamab vedotin, or MEKV. Data from our phase two trial of MEKV alone and in combination with nivolumab in patients with treatment-refractory soft tissue sarcomas, were recently presented at the Society for Immunotherapy of Cancer Annual Meeting. Data from 44 evaluable patients with leiomyosarcoma, liposarcoma, and undifferentiated pleomorphic sarcoma showed median overall survival of 21.5 months compared to median overall survivals of only 11.5 to 13.6 months reported for approved agents in similar advanced soft tissue sarcoma populations. Further, these overall survival observations are directionally consistent with prior experience in mutated KRAS non-small cell lung cancer from our other ongoing phase two trial of MEKV and support its potential utility as a treatment for solid tumors. The safety profile of MEKV as a monotherapy and in combination with an anti-PD-1 antibody was manageable and is consistent with conditional binding of the axil target restricted to the tumor microenvironment. No new safety signals were identified. I shall now hand it over to Richard A. Waldron to review the third quarter 2025 financials. Rick? Richard A. Waldron: Thank you, Eric. As of 09/30/2025, we had $8.3 million in cash and cash equivalents. In October 2025, Context Therapeutics triggered a $2 million milestone payment to us under the license agreement for the dual CAB Nectin 4 TCE. The payment was received recently and reflects continued progress and validation of BioAtla, Inc.'s differentiated T cell engager platform. Of note, our third quarter cash and cash equivalents do not include this payment or any R&D funding from the collaboration. For the third quarter ended 09/30/2025, we reported a net loss of $15.8 million compared to a net loss of $10.6 million in the same quarter of 2024, which included $11 million in collaboration revenue from our license with Context Therapeutics. The increase in net loss was primarily due to the collaboration revenue recorded in 2024 and a $2.1 million non-cash loss on warrant liability recorded in 2025 related to warrants issued in the December 2024 financing offset by decreases in R&D and G&A expense. Research and development or R&D expenses were $9.5 million for the quarter ended 09/30/2025, compared to $16.4 million for the same quarter in 2024. The $6.9 million decrease was primarily driven by reduced program development costs due to prioritization of clinical programs, lower headcount-related expenses following the workforce announced in March 2025, and lower non-cash stock-based compensation. We continue to expect R&D expenses to decline through the remainder of 2025 as we continue to concentrate resources on our prioritized programs. General and administrative or G&A expenses were $4.2 million for the quarter ended 09/30/2025 compared to $5.9 million for the same quarter in 2024. The $1.7 million decrease was primarily attributable to reduced personnel costs related to the workforce reduction in March 2025 and lower stock-based compensation expense. And now back to Jay. Jay M. Short: Thank you, Rick, and thank you all for joining us today. As we look ahead, BioAtla, Inc. is entering an exciting phase. Now with FDA alignment on our phase three trial design for OPSCC, we are poised to begin enrolling our registrational phase three trial early next year. This program not only addresses a critical unmet need in oncology, but also represents a substantial commercial opportunity. In addition, we believe our dual CAB EpCAM TCE program represents one of the broadest pan-cancer opportunities since PD-1, with the potential to treat over one million adenocarcinoma cancer patients per year in high unmet need areas. Not surprisingly, the potential of this program is attracting numerous early discussions with both investors and potential future partners. We expect the key clinical trial readout in 2026. Finally, we remain focused on our prioritized programs for delivering meaningful therapies to patients and value to shareholders. We appreciate your support and look forward to sharing further updates in the exciting months ahead. With that, we will turn it back to the operator to take your questions. Operator: You may withdraw yourself from the queue at any time by pressing star 2. Star and 1. Once again, that is star and 1. We'll take our first question from Arthur Hayes with CU. Line is open. Arthur Hayes: Hey. Good afternoon, Jay and team. Thanks for taking my question. So maybe for Eric, for the ROR2 program, the phase three study design-wise, could you give us more color around what's the patient number side by the agency to getting an accelerated approval readout there? And also, for the control arm, is there any stratification according to different treatments that the patient is going to receive? Eric L. Sievers: Thank you, Arthur. So your first question is about what would be the number of patients for an accelerated approval? And I want to refer everyone to slide 42 on our corporate deck where we discuss the phase two meeting key outcomes. And here we talk about the pivotal trial design, where for full approval we're looking at approximately 300 patients that are prospectively randomized and stratified. And for accelerated approval, it would be an interim analysis roughly about the time of the full enrollment of patients. But obviously, that look would be much earlier. And then your second question is about stratification factors for the two arms. And we haven't disclosed that, but there we P16 would be one of them, and then it would have to do with local regional disease. Yes or no? And, again, stratification factors are to ensure that there's equal distribution of patients based on important prognostic factors across the two arms. Arthur Hayes: Thanks, Eric. And maybe for the 3182, could you tell us a little bit more, like, what kind of data we can expect here for next year? The readout-wise? Eric L. Sievers: Sure. So as you know from the ESMO dataset, we presented 35 patients all receiving subcutaneous dosing and then a pretty fulsome accounting of the patients and their experience on slide 23, which is the swimmer's plot showing the confirmed partial response and where we are in the dose escalation. For the next data output, we would anticipate it would be in the first half of next year, and we would be reporting pretty comprehensively on the additional dose and schedule evaluations that we'll be doing over the course of the next few months. To try to provide a really fulsome accounting of the experience altogether. Jay, did you want to add anything? Jay M. Short: No. I think that captures it, Eric. Don't really have anything to add on that. But I think, you know, certainly, I think we'll be able to meet the timeline of being in the first half. Arthur Hayes: Okay. Awesome. Thanks. Thanks, Jay, and congrats on the progress. Operator: Yeah. Thank you, Arthur. Once more for your questions, that is star and 1. We'll pause just a moment. And it does appear that there are no further questions at this time. I would now like to turn the call back to Jay M. Short for any additional or closing remarks. Jay M. Short: I just like to say I think it's a very exciting time for the company, and we're very much looking forward to the key readouts that are just around the corner. So thank you for your continued support and for listening today. Bye-bye. Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful rest of your day.
Lluc Sas: Good morning, and welcome to Sabadell's results presentation for the third quarter and first 9 months of 2025. Today, we are joined by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow a similar structure to previous quarters. Our CEO will start by sharing strategic priorities and then discuss the key developments of the quarter. Next, our CFO will provide a detailed review of financial performance and the balance sheet before our CEO concludes with closing remarks. Finally, we will open the floor for a live Q&A session to address your questions. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc. Good morning, everyone. Before sharing the results of the third quarter, I will start my presentation today with a reflection on Sabadell's evolution since '21 as well as the prospects for the upcoming years. In Slide 4, in early '21, we launched a strategic plan focused on transforming each one of our businesses through specific levers for each one. This transformation would support the financial turnaround of the group. Since then, we have executed the strategy in a decisive and accelerated manner. We have talked about this many times. I won't elaborate into the details now. As a result of our transformation, a solid financial turnaround has been delivered. Return on tangible equity has jumped from 0% in 2020 to the current double-digit figures, which are above our cost of capital. By the way, our transformation process and financial turnaround has not been affected by the hostile takeover bid, and we have been dealing, which we have been dealing with over the last 1.5 years. In July 25, we presented our new strategic plan. An important milestone is the sale of TSB at very attractive multiples, which crystallizes the value created since we acquired TSB in 2015. The sale was signed with Santander and approved by our shareholders last August, and we expect the closing early next year. The new strategic plan is focused on growth and shareholder remuneration as Sabadell has not reached its potential. In terms of profitability, we expect return on tangible equity to keep growing and reach 16% by 2027. We reaffirm all the objectives of the strategic plans in terms of return on tangible equity, growth and shareholder remuneration. On Slide 5, we have a quick reminder of the key elements that underpin our equity story. First, Spain. Following the sale of TSB, the vast majority of our businesses is now in Spain, one of the fastest-growing economies in Europe. Second, growth. Our approach is clear: prudent market share gains while preserving asset quality and pricing. Third, execution. We have a solid track record of delivering results since 2021. We are confident we will deliver on our current targets. And fourth, shareholder remuneration. We have a proved and strong ability to generate capital while growing our lending book. We will leverage on this to offer an attractive shareholder remuneration in the upcoming years. In Slide 6, we are reminding the financial guidance for 2027, which we announced in July and we confirm today. To summarize, our return on tangible equity for '27 is 16%. We also announced cumulative shareholder remuneration between '25 and '27 and we expect it to amount to EUR 6.3 billion. And in September, we actually improved our expectations on shareholder remuneration from this EUR 6.3 billion to EUR 6.45 billion. In Slide 7, we provide more color on shareholder remuneration. The expected EUR 6.45 billion includes recurring distribution based on a 60% payout ratio. This is executed through two interim cash dividends per year plus one final cash dividend. On top of the 60% payout, we are planning to distribute excess capital above the 13% core Tier 1 threshold. Finally, we will distribute the extraordinary dividend from the sale of TSB once the deal is closed. As you can read in the bottom right-hand slide -- of the slide, we reaffirm that yearly cash dividends per share in '25, '26 and '27 will be higher than cash dividends per share paid in 2024, which was EUR 0.2044. And now let's move to the third quarter results highlights. In Slide 9, the key messages of the quarter. Third quarter results are on track to meet 2025 guidance. Our recurrent return on tangible equity, that is excluding one-offs, and extraordinary items stood at 14.1%. Core Tier 1 reached 13.7%. We kept generating capital in the quarter and in line with our strategy. I will later elaborate on this. Commercial activity continued to accelerate, both performing loans and customer funds grew by around 8%, excluding TSB. Core revenues remained in line with expectations. NII is on track to meet the EUR 3.6 billion target for 2025. Fees grew by 3.7% year-on-year. Asset quality continues to improve. Total cost of risk stands at 37 basis points, decreasing by 18 basis points year-on-year. Finally, we are pleased to confirm a second interim cash dividend of EUR 0.07 per share payable on December 29. Let me remind you that 2025 shareholder distribution amounts to a total of EUR 1.45 billion. On Slide 10, we turn to volumes. One more quarter, we delivered strong growth, both in loans and customer funds. Performing loans ex-TSB grew by 1.2% quarter-on-quarter, even with expected third quarter seasonality. On a year-on-year basis, loans ex-TSB grew by above 8%. On the right-hand side of the slide, total customer funds ex-TSB grew by 1.5% in the quarter and by 7.8% year-on-year. This is mainly driven by off-balance sheet funds, which grew by more than 15% year-on-year. Regarding TSB, volumes in euros were impacted by sterling depreciation, but remained fairly stable at constant FX, both quarter-on-quarter and year-on-year. All in all, at constant FX, group performing loans grew by 5.9% and customer funds increased by 6.4%. If we move to slide origination, and we talk now about loan origination in Spain, let me start with new mortgages. Origination in the first 9 months of the year increased by 26% compared to 24. Mortgage origination in Q3 decreased by 12% quarter-on-quarter, driven by seasonality. Our volumes of new mortgage origination remain reasonable. Our new lending market share is in line with our stock market share. Furthermore, we keep managing risk-adjusted return on capital rigorously for new mortgages to make sure growth is delivered in a profitable manner. Moving to new customer consumer loans. We continue to perform well, growing origination by 19% in the first 9 months of the year versus previous year. In new loans and credit facilities to SMEs and corporates, there was the expected quarterly seasonality. Year-on-year, evolution has been broadly stable. Finally, Third quarter origination of working capital finance declined slightly compared to Q2. However, it increased 3% year-on-year. Yearly cumulative origination in SMEs and corporates remains broadly stable compared to '24. All in all, current levels of new lending in all products allow for growth of the loan book. On Slide 12, performance of Payment systems remains strong. On the first 9 months, cards turnover increased by 6% and point-of-sale turnover rose by 2%. We can see a slower growth in point-of-sale turnover. Taking into account our already strong market share in this business, we are now focused on pricing and profitability. This approach has resulted in a reduction of certain exposures with very low margins, but we have increased total fees coming from this business. In the bottom half of the slide, you can see the evolution of savings and investment products. They grew by EUR 4.8 billion in the year, driven by an increase of EUR 6.8 billion in off-balance sheet products. On Slide 13, we show the breakdown of performing loan book ex-TSB across segments and geographies. In Spain, our performing loans were up by 0.9% quarter-on-quarter and by 7.6% year-on-year. All segments and products keep growing. The stock of mortgages grew by 5.6% year-on-year, consumer loans by 19% and SMEs and corporates grew by 6.2%. International operations were equally strong with performing loans by -- up by 11% year-on-year. In sum, performing loans ex-TSB grew by 8.1%. In Slide 14, I will elaborate on our strategy to enhance capital generation while growing loan book. I think this is a crucial element of our strategy, which we have shared before. We keep growing our book significantly, yes. But on the left-hand side of the slide, you can see that the probabilities of default of new lending originated in '25 are much lower than those of new lending originated in previous years. These are the result of our approach to credit growth, as we explained in the presentation of our strategic plan in July. In the last few years, we have been working very significantly on improving our risk models and processes. We have done this on a portfolio-by-portfolio basis. Once the risk origination capabilities of a given portfolio were improved, we fostered lending growth in that particular portfolio. Furthermore, the quality of the risk we are granting after improving our models and processes is much better as we are able to skew new lending towards lower-risk segments in each portfolio. On the right-hand side of the slide, you can see a simplification of the implications of our strategy. In each portfolio, we might be obtaining lower loan yields, but at a lower cost of risk as the resilience of our franchise improves and we generate more capital. As a matter of fact, we have already generated a very handsome figure of 176 basis points of capital year-to-date. This is fully in line with guidance that we shared in our Capital Markets Day of 175 basis points per year. And this is for the first 9 months of the year, the 176 basis points. Let's turn now on Slide 15 for the U.K. business. As expected, volumes remained broadly stable in the quarter. Net profit of TSB reached GBP 59 million in the quarter, which translates into almost GBP 200 million in the year. That brings its contribution to Sabadell to EUR 242 million year-to-date, up by 44% year-on-year. Stand-alone return on tangible equity was 13.8% despite having a high solvency that remained strong with a core Tier 1 of 16.3%. Finally, the TNAV increased by GBP 104 million between April and September. This will be included in the final proceeds coming from the sale of TSB to Santander, ensuring TSB continues to contribute to Sabadell until the transaction closes. On Slide 16, we can see a summary of our Q3 results. Net profit ex TSB amounted to more than EUR 1.1 billion in the first 9 months of the year. Net profit of the group reached almost EUR 1.4 billion. This implies a recurring return on tangible equity of 14.1%. This level of profitability allows us to grow our loan book while accruing a 60% dividend payout and still generate capital. We have already, as I said before, generated 176 basis points of capital year-to-date. And indeed, this is a high capacity to generate capital and it is a key factor supporting our high shareholder remuneration. And with this, I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance. Sergio Palavecino: Thank you, Cesar, and good morning, everyone. Let me start by showing the detailed P&L for the quarter and for the first 9 months of the year. As always, we have prepared the full group P&L as well as the P&L ex TSB, which will be the relevant perimeter going forward once we close the TSB sale. The performance of the different lines of the P&L is aligned with our year-end guidance, and we will review them in a minute. Whilst we are on this slide and before going into the detail of each of the lines, I'd like to point out that on the trading income line, this quarter, we recorded an extraordinary gross expense of EUR 23 million. This reflects mainly two items, minus EUR 8 million one-off related to liability management and minus EUR 15 million related to FX hedging on the entire proceeds from the sale of TSB, which will be quarterly incurred until the transaction is closed. We will now go through the different P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 19, I'd like to highlight that the net interest income is broadly stable this quarter and future growth will be primarily driven by volumes. Excluding TSB, NII closed at EUR 899 million in Q3, reflecting a marginal quarter-on-quarter decline of 0.8%. Now let's look at the top right-hand side of the slide to understand the drivers behind this quarterly evolution. Moving from left to right. Customer NII had a negative impact of minus EUR 5 million. Within this, the customer margin decreased by EUR 24 million, mainly due to lower loan yield. However, quarterly average volumes of both loans and deposits had a very positive impact in the quarter, contributing EUR 8 million and EUR 12 million positively, respectively. The FX effect was marginally negative, subtracting EUR 1 million due to the depreciation of the U.S. dollar. The excess liquidity and other items had a combined impact of EUR 19 million adverse. This reflects the combination of reduced excess liquidity used to finance volume growth invested at a lower ECB deposit facility rate. Wholesale funding costs contributed positively with EUR 14 million, supported by lower funding needs, the maturity of early amortization of expensive instruments and the benefits of the floating rate hedges. And finally, one additional business day in the quarter had a marginally positive impact of EUR 3 million. Overall, we can see that the positive contributions from larger volumes and lower wholesale funding costs helped to offset the drag from lower customer margins and reduced liquidity contribution. TSB added EUR 303 million, in line with Q2 as the higher contribution from the structural hedge was fully offset by the depreciation of the sterling. All in all, we are on track to meet our 2025 NII ex TSB guidance of EUR 3.6 billion. Let's now move on to the fees on the next slide. For Sabadell, excluding TSB, the quarter saw a decrease of 4%. This was mainly due to the usual seasonality in the quarter, particularly in credit risk as well as service banking fees, which were lower during the summer season. However, year-on-year performance remains positive with fees growing by 3.7%. This growth reflects strong contributions from asset management and insurance products, which continue to support fee income. Based on this going forward, we confirm that we remain on track to meet our guidance of mid-single-digit fee growth in 2025, excluding TSB. Now moving on to costs on Slide 21. Total group costs remained contained, reflecting disciplined cost control and supported by depreciation of the British pound. On a year-on-year basis, costs remained broadly stable, increasing by just 0.5% year-on-year. In this context, we confirm again our guidance of low single-digit growth in cost, excluding TSB. On the next slide, we cover cost of risk and provisions. The cost of risk continues to evolve in line with our year-end targets or even better, reflecting prudent credit risk management. Looking at the bridge on the top right-hand side of the slide from left to right, we booked EUR 88 million of loan loss provisions, excluding TSB, during the quarter, which leads to a credit cost of risk of 21 basis points in the year. Next, a positive of EUR 5 million in provisions driven by foreclosed asset provision releases, along with capital gains on real estate assets. NPA management costs and other provisions, mainly related to litigation and other asset impairments in line with the usual run rate. Finally, TSB provisions contributed EUR 16 million this quarter. All in all, total provisions equate to a cost of risk of 37 basis points when excluding TSB. And looking ahead, we expect the total cost of risk, again, excluding TSB, to remain in line with our full year guidance or a touch better. Slide 24 provides a closer look at nonperforming loans, which continued to improve both quarter-on-quarter and year-on-year. The NPL ratio for the ex TSB perimeter declined further to 2.75%, representing a quarter-on-quarter reduction of 6 basis points and a year-on-year reduction of 96 basis points. Meanwhile, the coverage ratio remained broadly stable during the quarter and increased by 5% points over the year, reaching almost 70%. This once again confirms that our cost of risk is improving, but not at the expense of our coverage ratio. Looking at the exposures and coverage level by stage on the right-hand side, we can see that Stage 2 and Stage 3 exposures at ex-TSB level decreased by circa EUR 1.8 billion and EUR 1 billion, respectively, over the last 12 months, which I believe are remarkable figures. Moving on to the next slide. We can see that the stock of foreclosed assets continued to decline quarter-on-quarter, quarter after quarter. This is virtually a runoff portfolio with very limited entries and sales over the last 12 months of 20% of the stock at an average premium of 11%. Total NPAs, which include both NPLs and foreclosed assets, decreased by 19% year-on-year. To sum up, over the past 12 months, we have seen a strong improvement across all the 3 pillars of asset quality. Firstly, NPAs are down by around 20%. Secondly, the coverage ratio has improved by 4 percentage points. And all this has been done provisioning less. Turning now to liquidity and credit ratings. All indicators show that we ended the quarter with a very solid liquidity position, as you can see from this slide, with the loan-to-deposit ratio ex TSB showing a slight increase to 94%. Moving on to the credit ratings. Moody's upgraded Banco Sabadell's long-term rating to Baa1. This upgrade reflects the bank's improved solvency supported by the continued enhancement of both asset quality and profitability compared to past performance. Also, Fitch affirmed our long-term rating at BBB+, giving it a stable outlook once the hostile takeover bid is over. On the next slide, we present our current MREL position. We are comfortably meeting our MREL requirements in terms of both risk-weighted assets and leverage ratio exposure. In addition, we have built a solid management buffer across all requirements, which is our funding plan needs and will help to reduce wholesale funding costs in the coming quarters. For the last quarter -- sorry, in the last quarter, we issued one senior nonpreferred and one SRT transaction. And for this fourth quarter, the last one of the year, we expect one more SRT transaction to take place. Turning now to capital. At the end of September, our CET1 ratio reached 13.74%, reflecting an increase of 18 basis points during this quarter. Looking more closely at the quarterly evolution, we recorded 49 basis points of capital generation per dividend accrual. This includes 60 basis points from organic CET1 generation after deducting AT1 coupons. Zero impact from fair value reserve adjustments, minus 11 basis points from risk-weighted assets growth. Then the accrual of a 60% dividend payout represents an impact of minus 31 basis points. Now looking at the right-hand side of the slide, in terms of available capital to meet the announced shareholder remuneration, we already have EUR 3.7 billion of accrued and unpaid dividends plus excess capital above the 13% CET1 ratio on a pro forma basis. This means after the sale of TSB. This capital has already been generated. Now let's talk about the expected distributions on the next slide. We expect to distribute EUR 3.6 billion in the next 6 months, which is equivalent to more than 20% of our current market cap. This amount is the result of a second interim dividend of EUR 350 million already agreed by the Board, and that is EUR 0.07 per share in cash, which will be paid on December 29. This will be followed by the final dividend plus the excess capital of 13% CET1 to be paid after the Annual General Meeting. The estimated amount is around EUR 750 million and its composition, which may combine a cash dividend and a share buyback still needs to be defined by the Board of Directors. Finally, the extraordinary cash dividend of EUR 2.5 billion that will be paid on the last day of the month following the closing of the TSB sale. As we have seen in the previous slide, the capital required for this remuneration has already been generated. I will now conclude my part of the presentation by highlighting our shareholder value creation and the impact of TSB sale on Sabadell's multiple -- current valuation multiples. Sabadell continues to deliver strong value creation for its shareholders. This is reflected in a 17% year-on-year growth in tangible book value per share plus the dividends distributed over the last 12 months. And finally, given the importance of the extraordinary dividend related to the sale of TSV, let me share one aspect about the valuation. When we look at the 2027 consensus estimates, the Sabadell perimeter obviously already excludes TSB. Therefore, in order to accurately compare that figure with the current market cap, this extraordinary dividend for the sale of TSB must be adjusted for. So when adjusting for the EUR 2.5 billion extraordinary dividend, the market cap is EUR 14.5 billion. This adjustment obviously does affect the valuation metrics, particularly price to earnings ratio. When using the adjusted market cap as of November 11, Sabadell's P/E is below 9x and compares to an average of more than 10x for Spanish peers. And with this, I'll hand over to Cesar, who will conclude today's presentation. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. To conclude, I would like to review our financial targets ex TSB for '25. We are on track to delivering these yearly targets. Starting with NII, we have delivered EUR 2.7 billion in the first 9 months of '25. So we are well positioned to achieve the full year target of EUR 3.6 billion. Fees and commissions have grown by 3.7% year-on-year consistent with our mid-single-digit expectations. On the cost side, total expenses remained under tight control. We are well within the low single-digit range. Risk metrics remain robust with total cost of risk at 37 basis points, in line with our guidance and close to -- that is close to 40 basis points. In summary, all P&L lines, ex TSB, are on track to meet the year-end guidance and we remain confident in delivering a group return on tangible equity of 14.5% by year-end. Finally, let me highlight that shareholder remuneration is projected at EUR 145 billion for 2025. reflecting an improved outlook. And with this, I will hand over to Lluc for Q&A. Lluc Sas: Perfect. Thank you, Cesar. We will now begin the Q&A session. As we have a limited amount of time, I would kindly ask you to limit the number of questions to no more than 2. Operator, could you open the line for the first question, please? Operator: First question is coming from Maks Mishyn from JB Capital. Please go ahead. Maksym Mishyn: Thank you very much for the presentation and taking our questions. Two questions for me. The first one is on cost. Could you confirm if all the costs related to the tender offer have been booked already? Or is there anything else left for the first quarter? And if so, in what line? And then on medium-term growth, do you expect the strong trend to continue in 2026 if the loan book grows faster than the mid-single digits you have put in the plant, can this have any implications for the capital distribution? Cesar Gonzalez-Bueno Wittgenstein: Okay. The cost related to the tender offer have all been booked provisioned and paid or paid, except the new that will come on Q4, which is related to the shares to be granted to employees. And as you know, it's 300 shares per employee. And this will come as extraordinary in Q4. All the rest are already taken care of. In terms of the medium-term growth, I think we remain exactly on the guidance that we give -- that we gave and therefore, for sure, no implication, and we see no risk in terms of our capital distribution versus the guidance. Anything to add? Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: My first one is on NII. I would like to refer to Slide 19 of your presentation. So here, the quarterly bridge of NII, I see that new volumes are contributing with EUR 20 million NII in the quarter, loans and deposits. But then there is the column liquidity, which are negative of EUR 19 billion, so most largely offsetting the new volume growth. So it seems to me that redeploying liquidity positions out of the ECB or elsewhere is not accretive to the group with the new volumes. So I wonder how can you reassure us that you are not chasing volumes at the expense of pricing? So that's my first question. And my second question is regarding NII also. So you are targeting NII of EUR 3.6 billion in '25 and EUR 3.9 billion in '27. So that was based on mid-single-digit growth in volumes, but you are growing high single digit in Tier 1. However, the guidance for '25 probably anticipate flattish NII again in Q4. So what shall we expect going forward? If you can share with us some color for NII in '26 that you can share with us at this point? Do you think that there is upside risk to your '27 guidance, assuming you keep on growing mid-single digit for the remaining of the plan? Or do you see margin headwinds. Cesar Gonzalez-Bueno Wittgenstein: Okay. Let me start. I will give you some color, but certainly, Sergio will complete the explanation. I think you're spot on. I think Slide 19, which reflects that there is a EUR 19 million negative in liquidity and others. This is mainly driven by the fact that although we have grown significantly in customer liabilities, the deposits part and is lower than the growth of the asset part. And this is very clearly explained by a very simple reason. We are -- we have been below and we will continue probably being slightly below our expectations for new customer acquisition on all fronts, because of the result of the hostile takeover. We have delivered approximately 75% of our target in terms of growth of new customers and volumes on the -- on-balance sheet deposits and liabilities, which is below our target. If I look at it at face value, what is quite extraordinary is that we did the 75%, given the uncertainty and the difficulty for new customers to join the bank in such a period. But this going forward should improve, and we should again rebalance the growth of our on-balance sheet growth of deposits with the growth of assets. And therefore, that would affect positively that EUR 19 million that you're seeing there. I think I'll leave it at that and pass it on to Sergio. Sergio Palavecino: Yes. Thank you, Cesar. Paco, I think you need also to take into account that the liquidity part is affected by rates as still looking at the third quarter, rates at the ECB were invested at a lower rate than in the second quarter. So that does affect. Then on that part of the breakdown is also the others, which includes some hedges related to the fixed income -- sorry, to the fixed rate mortgages that have been brought to floating because the amount of fixed rate mortgages that we have is a lot and part of them are hedged. So the rates part is also affecting that component. So going forward, we -- as rates stabilize, we will expect not an adverse -- not so big adverse contribution from that portion. And then the volume component to be present during 2026. So we expect NII to start growing during 2026. With this, we will basically reconfirming our expectation that this year, we will end that NII at EUR 3.6 billion. NII will start growing during 2026. And for 2027, our estimate is that this EUR 3.9 billion that comes with -- after mid-single-digit growth of both loans and customer funds. Related to your mention of high [ yield ] on the loan book, that's at the end of the -- that's at the very end of the period, which typically has a peak in terms of loan demand. When you look at the average volumes for the loan book, we are rather on the mid-single digit that we expected. So far on volumes, I think things are progressing in line with our expectations. And if anything, we're lagging a bit in customer acquisition, as Cesar described, which, for sure, I'm sure that the hostile tender offer affected a little bit in that part of the business. Now luckily, the hostile tender offer is over, so we don't have that going forward. Cesar Gonzalez-Bueno Wittgenstein: Although we will have it for the beginning of the next quarter because, of course, the tender offer ended mid-October. If I may make a general comment on the NII. And I think although we've said this many, many times, I think it's important to repeat it, because it's at the core of our strategy. First, the NII is in line with our guidance. And the improvement of the credit quality of new lending, of course, partially dilutes also loan yields. We are growing with lower yields but with better credit quality. And this is a strategy. Because it means lower cost of risk and higher capital generation and it furthermore makes the franchise significantly more resilient. So when you look at line per line, sometimes it's difficult not to realize this underlying shift in strategy, which I think is very positive and at the core of our endeavors. Sergio Palavecino: Yes. So I think that answers also, Paco your comment that if we make sure that growth is not done at the expense of margins. And that's not the case, Cesar explained that we focus on returns, and we have a very strong discipline of allocating all cost, cost of risk and capital to all the lending. So we will only grow as long as it makes sense to do it. Operator: Next question is coming from Alvaro Serrano from Morgan Stanley. Alvaro de Tejada: The kind of follow-ups from the previous questions on loan spreads. So we've seen in the press and it looks like some of your competitors repricing mortgages up and repricing loans up last few weeks. Are you -- can you comment on what you're doing on new production? Do you recognize those comments? And I know you're also repricing up. And related to that, Seth, you mentioned that contrary to some of your competitors, you do hedge and you do swap those mortgages. Can you give us a feel of what the spread is post once the mortgage are swapped, what the spread is at the moment? . And I guess sort of related to that, in your 2027 NII target 3.9, what spread on loans, does that have factored in, what should we think about on the loan spread when we put everything in, where should it stabilize? I realize in the short term. Obviously, there's some repricing to lower Euribor still going on. But once during 2026, where do you think the loan spread can stabilize? Cesar Gonzalez-Bueno Wittgenstein: I'll take just the first part of the mortgage question. I think we are following very closely all the comments also from our competitors and following the market. And it's very clear that we are growing in mortgages at our market share. And that means that, of course, the market is competitive, has always been. But what has transformed dramatically the way we look at mortgages is that we are now fully rail rock-based. The average rate rock of new mortgages is around 20%. And that means that we price correctly, but we also include -- it's based on the segmentation approach, and we are aiming and attracting high-value clients. And the pricing includes and the RaRoC, the impact of cross-selling. That is, if a mortgage offer discounts when customers are also purchasing other products that increase their overall contribution. What has changed also is that before that was only set at the time of the issuance of the mortgage. Now that is a condition. So for example, if there's an insurance attached to a mortgage, it has an improved pricing. But if that insurance is canceled, then the price is automatically adjusted as per agreement with the client. So I think it is very clear we are all focusing very carefully. The market is growing. There's a lot of demand for mortgages, but we are all focusing on and certainly, we are on not increasing our market share on this segment growing with -- and that is our strategy, and that's what we have executed and measuring very carefully what is the value generation. Sergio Palavecino: Yes. And Alvaro to your question related mortgages and its ALM related mortgage, the origination of mortgages is fixed rate in the vast majority, more than 80% of our origination is coming in fixed. And it's been the case now for, I think, the last maybe 7 or 8 years. So the book is definitely turning very much on to the fixed rate. That is also combined with the fact that in the last quarters, the origination volumes are higher. So it's a pretty good amount of fixed rate loans. So yes, we do swap of that part connected with our ALM policy. We're swapping between 30% to 50% of the new entrants. And after swap, it depends on the different portfolios, but the final spread after swapping stays at 30 to 50 basis points. But please take into account that all the business we do, we do with customers. So the mortgage profitability is assigned in connection with other products that the customers take. So we make sure that the RaRoC all in all, makes full sense. Alvaro de Tejada: And as for the total loan book, where do you think the spread could stabilize consistent with that EUR 3.9 billion? Sergio Palavecino: Yes. The spread for the asset -- the loan yield currently in the ex TSB perimeter is at 3.68%. So when compared to ECB or Euribor, it means that in average spread is at above 150 basis points. We think that, that kind of spring is sustainable over time. So when I see maybe a little bit of additional reduction, maybe but then the mix and the rates we think that spread is sustainable over time. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: Can you hear me? . Cesar Gonzalez-Bueno Wittgenstein: Yes. Borja Ramirez Segura: I have to two. Firstly, on the capital distribution. I would like to ask if you could provide more details on the cash dividend growth. if that applies every year, the EPS will be higher year-over-year. And also, I think your capital distribution target does not include the potential capital from the payments JV. So that could be upside to your target? And then my second question would be on the NII, I would like to ask if the customer NII has bottomed in Q3. And also, I think you have a competitive advantage compared to domestic peers because I think you still have tailwinds from lower cost of hostile funding to come. I think you quoted EUR 200 million of upside after 2027. I'm not sure that, that's in consensus. Cesar Gonzalez-Bueno Wittgenstein: Okay. In terms of the capital distribution, I think that what we are guiding and we are guiding with confidence is that the cash dividend per share and that includes also numerator and denominator. So the number of shares will be higher in '25, '26 and '27 or equal than the one of '24. and that is what that's how we are guiding. And of course, it does not include Nexi. Sergio Palavecino: Precisely, exactly. And regarding your question on NII, I think the third quarter might be the bottom or sort of a valley as we expect the last quarter of this year to have similar levels of NII. And then as mentioned before, we expect NII to start growing in 2026. When you discussed the -- when you mentioned Borja, the wholesale funding savings that we expect, and we touched on them in our Capital Markets Day, we were comparing, I think, 2027 to 2024, there were meaningful expenses. But that was a combination of 2 things. The lower -- maybe 3 lower rates, lower spreads in the market for us in connection with our ratings. That's clear. That's structural. That's a strength going forward for sure. But there's another component, which is that the sale of TSB is going to reduce our wholesale funding needs. But that is connected to some income that we get in the ex-TSB ALCO book because in the ex-TSB ALCO book in the asset side, we also have the MREL from TSB. So I think it's not fully that sort of benefit that goes into NII, because it will be somewhat offset by the MREL bonds in the ex-TSB ALCO book. Cesar Gonzalez-Bueno Wittgenstein: That will be sold to Santander. Operator: Next question is coming from Carlos Peixoto from CaixaBank. Carlos Peixoto: A couple of questions from my side as well. There was a small decline in the... Cesar Gonzalez-Bueno Wittgenstein: Carlos, sorry to interrupt you, but could you -- Yes, much better. Thank you. Carlos Peixoto: So as I was saying, there was a 3% to 4% decline in deposits and overall balance sheet customer funds in the first Q stand-alone in -- excluding TSP. I just wondering whether you see that mainly related with the impact that you mentioned before or whether there's something else that explains this decline? And then on trading gains, well, you have the Tier 2 impact in the quarter and the hedge cost, still underlying trading would actually be slightly negative. I was just wondering whether you see this as being the trend for upcoming quarters in trading as well. And then sorry, just to overstep, but if I may, just on other provisions, if you could also give us a on how sustainable these levels are? Should we look at this adjusted by the EUR 5 million that I believe it was EUR 5 million from a recovery write-back in terms of provisions. If you adjust for that, should we see there more or less a recurrent level of provisions or just your outlook on this? Cesar Gonzalez-Bueno Wittgenstein: I'm going to try to answer the first question, but I'm not 100% sure. I understood that fully. So if I missed the answer, please come back. I think you were referring to customer funds growing less than our asset side and if that was perturable over time. And I think that what we already tried to explain is that, that difference in growth between assets and liabilities on balance sheet from clients, it's mainly due to a weaker acquisition of new customers versus our expectations due mainly to the tender offer. Therefore, we expect that to be reverted over time and to come back to our original plans with the new ones that would not happen fully during Q4, because the transaction ended at mid-October. I don't know if that was your first question, and if I answered it to your satisfaction. Carlos Peixoto: Well, actually was between June and September, you had a decline in overall stock of deposits, but I guess... Cesar Gonzalez-Bueno Wittgenstein: Deposits, you mean. Carlos, or just are you... Carlos Peixoto: Overall stock of deposits. Cesar Gonzalez-Bueno Wittgenstein: Term deposit. Carlos Peixoto: Excluding TSB. Sergio Palavecino: Term deposits. Cesar Gonzalez-Bueno Wittgenstein: Yes, yes, the EUR 2.5 billion, yes, that is a mix, and that's a shift. If you see the growth in the slide, I think it's more than EUR 5 billion growth, excluding capital appreciation on mutual funds. I think we have always pursued a greater growth in our mutual fund strategy in our off balance sheet. And part of that is cannibalization so that minus 2.5 of term deposits is also a significant shift towards mutual funds. And that's overall, what yields the growth of close to circa of 8% year-on-year on our overall funds from customers, both on balance sheet and off balance sheet. And it is the mix of the on balance sheet that I was explaining previously that has had some impact on our NII together with all the other elements that we already commented. Sergio Palavecino: Yes. Despite that -- let me also highlight the very -- the remarkable growth in the off-balance sheet products growing at a very nice double digits. So very successful, I think, part of the business. And then Carlos, your other questions, the second one was related to trading. In the trading line, the way we see things are, of course, it's probably the most volatile line. However, if we were to say a recurrent path, could maybe be between EUR 5 million to EUR 10 million per quarter. And as we have explained, we are hedging the entire proceeds coming from the sale of TSB, and that is going to have a cost of EUR 15 million every quarter during this process. And this is up to, as in our expectation, the first quarter of next year included. So those are the numbers, and we will be, I think, in that range. And regarding provisions, yes, we think that this is sustainable. This is in line with our longer-term expectations that we shared with you in the Capital Markets Day. We guided to also 40 basis points cost of risk in 2027. When we look at all the portfolios are doing a little bit better than expected, that's why we are actually below 40 basis points of cost of risk this year. And I think it's important to take that in connection with the important transformation that Cesar has described it, where we focus all the organization in originating better quality portfolios that might have not such a big spread, but it comes with lower cost of risk. And at the end of the day, we are seeing that the capital generation is actually higher. So quite happy with the transformation and the story. Cesar Gonzalez-Bueno Wittgenstein: And at risk of becoming too repetitive. I think the probability of default reduction is very, very significant. It's around 50% the first 9 months of the year versus '23 new lending. That flows through the balance sheet over time because it's the new production that improves. But after that comes the book improvement overall, depending on the maturity, term maturity of every product, and then the models in which you calculate risk also are adjusted. It all takes time, but it is in the right path. But immediately, it is producing exactly as Sergio was saying the improvement in capital generation. Loan growth is not at the expense of credit quality. On the contrary, it is based on 3 pillars. The first is risk, the preapproved loans by limiting the probabilities of default, both on average and taking away the queues. The second one is pricing. And sometimes, it yields to lower NII, but it is with higher RaRoC considering everything. So the quality of the metrics has improved dramatically. And third, it also comes at the expense of processes. I think one thing that is undervalued usually in banking is that the way you conduct your processes in the sales have a significant impact in your growth or the rest being constant. It is what we call the funnel. The focus on funnels. There's now an obsession around funnels here. And that means that chatter is parable all the rest being constant, you can have with the same pricing or equivalent pricing, the same risk, you can have higher growth. These are the 3 pillars of growth, and we are focusing very much on the execution of the 3 of them. Operator: Next question is coming from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: So I've got one actually on the mortgage yield discussion. So if you can tell us on your standard mortgages, if you on how much yield you're adding on cross-selling? And how is that broken down between different products. And then the second one, if you can remind us the breakdown of your Miami book, and if you're seeing any deterioration based on, I mean, the developments on private credit, U.S. credit quality in general. Cesar Gonzalez-Bueno Wittgenstein: Unfortunately, I don't think we are able to respond to the first question. I don't think we have that breakdown or that we are sharing that breakdown. And it's changing game continuously, and we would show you averages, but that would also not mean a lot, because it's based on every mortgage one by one and the pricing is based on a RaRoC product. It basically only includes the RaRoC the elements that are contractual. On top of that, you have an additional tailwind, which comes with higher liabilities, higher payrolls and a number of things. But that's as much as we can share. And on the breakdown on Miami. . Sergio Palavecino: No deterioration at all in our Miami book, is not in the activities that might be more affected, but we are seeing no deterioration at all. It's a very high-credit quality book. Operator: Next question is coming from [indiscernible] from Autonomous. Unknown Analyst: The first one is on the Nexi deal. If you could provide any update on the negotiations with Nexi, if this is still a priority by management? And when shall we expect any news on this? And then my second question is on the customer spread. So on the loan side, you commented that 150 basis points is sort of sustainable. Now I wanted to ask you about the deposit spread ex-TSB, -- where do you see this landing once repricing stabilizes? And just one final clarification on the CET1. You mentioned that there should be another SRT in Q4. If you could provide any expected basis points impact from that? And if you also expect any operational risk inflation in the last quarter? Cesar Gonzalez-Bueno Wittgenstein: Okay. On the Nexi deal, I think both sides have been very, very clear that has been a very long time lapse and the market has changed significantly since the prior agreement. So what we have engaged is that on first that there is more ongoing obligation. And second, we are both engaged in continuing exploring if there's a way to come to a new agreement or not. We haven't given us each other a fixed date or we haven't given each other fixed commitment. We just have mutually agreed approach to continue to exploring opportunities. Certainly, if that happens, it will be in probably very different terms and scopes than the original one. And we'll see how this evolves in the following months. Sergio Palavecino: Yes. And regarding customer spread, we are now not expecting major movements as mentioned before, maybe some basis points less in customer yield, but also some basis points less in customer funds, in the cost of customer funds. And overall, customer spread that should get stable or very close to these levels and very soon. And then relating to your last question on... Cesar Gonzalez-Bueno Wittgenstein: On a general view on the capital solution for Q4 and certainly, you can be much more explicit on the SRT. But I think for capital evolution in Q4, you should expect, as you know, we have shown already that we have covered already more than covered our commitments for the year in the first 3 quarters. But nevertheless, we expect a positive contribution to capital in Q4, although it will be more moderate than the one that we have seen in the previous quarters. And the headwinds are seasonality of the quarter because we should expect volume growth and also an impact on operational risk, maybe around 7 basis points or something of the sort. But the tailwinds will be the retained earnings and certainly the SRT now 230. Sergio Palavecino: No, I think you answered perfectly. I think the -- it's going to be in all the moving parts of the last quarter, which typically is not the strongest in capital generation, but still we expect some capital generation, because you're spot on Luis with the risk-weighted asset inflation coming from operational risk in the quarter, but the SRT will offset this. SRT benefit in the quarter will probably around 8 basis points, 8% to 7%, so offsetting that risk-weighted asset inflation and the conclusion is what Cesar said, that we expect another quarter of capital generation, probably not as strong as this one, but some of that. Operator: Next question is coming from Hugo Da Cruz from KBW. Hugo Moniz Marques Da Cruz: I just wanted to ask, so the TSB dividend, the one-off dividend I think you have a slide where you say that so far already generating $2.65 billion, and the target for the dividend is EUR 2.5 billion. So if you end up generating more capital than the dividend that's been promised so far. Will we get that with a one-off dividend? Or would it be later in the year with as you kind of excess capital. Cesar Gonzalez-Bueno Wittgenstein: That's one of those -- sorry, that's one of those mysterious questions because it is for the Board to decide. At this point in time, what we are just saying is that we have already replenished in terms of capital generation to fulfill 100% and even a little bit more of our commitments to the market. What the decisions of the Board will be in the future remains to be seen, and it's for their capabilities to address that in due course. Lluc Sas: Yes. I think we've -- a couple of analysts have just raised their hands. So operator, if we could include them in the list. So let's jump to the next question. Operator: Next question is coming from [ Tetra Romero ] from [indiscernible]. Cesar Gonzalez-Bueno Wittgenstein: Can you hear us? Please check that you are not on mute. If not, we can jump to the next analyst. Unknown Analyst: Can you hear me now? Cesar Gonzalez-Bueno Wittgenstein: Yes, yes. Yes, we can. Unknown Analyst: So my question is related to the last 1 on the dividend related to TSB. I was just wondering, you were mentioning that TNAV has already improved by EUR 100 million. You were targeting around EUR 200 million for the period up to April. So if this progressing according to better than planned and could this represent upside risk to your distribution? And also wanted to know if the timing of the closing of the transaction is on track for April? And then my second question is regarding the SRT that you were mentioning that it's going to be 8 to 7 basis points, where is the cost of that SRT showing up? Is that NII, is that included in your guidance? Sergio Palavecino: The TNAF, as you have seen, has increased by EUR 104 million. And as we guided for roughly EUR 200 million increase of TNAF in 1 year. So it is progressing absolutely in line with our expectation. That TNAF is basically the increase in the book value coming from the net income in the period, and that is flowing into the group results, where the extraordinary dividend is connected with the capital gain and the risk-weighted assets release, which is basically the sort of picture that we had when we cut off as of March 31. So the TNAF is not affecting the capital release, the -- and therefore, the extraordinary dividend is well connected with that. And then for your second question regarding the SRT cost. SRT are done in 2 different ways, synthetic on cash. In the third quarter, we closed a cash transaction. There was a securitization of consumer loans, auto, in particular, auto. So those -- that transaction is SRT and that is a cash bond, so that is going through NII. The synthetic SRT transactions, the cost is going into the fee line, because it's a fee that we pay for the guarantee. So it's going into the fee. And all of that is taken -- is considered in the guidance. Lluc Sas: Okay. So we can now jump to the final question. So operator, please? Operator: Last question is coming from Fernando Gil from Intesa Sanpaolo. Fernando Gil de Santivañes d´Ornellas: So my question is regarding the asset management business and the Amundi deal. Can you just remind us of the main terms of a deal, I think it was 2020 to 2013 -- sorry, '30, so has there been any voluntary breakup clause from Sabadell? And if so, what are the cost to notice periods and some details that you can share, please? . Cesar Gonzalez-Bueno Wittgenstein: Fernando, yes, it was a 10-year agreement for distribution in 2020 where we sold our asset management company to Amundi. That period, therefore, ends in 2030. And we're very pleased with the agreement. We're very happy. The business is done. It's working very well. So there is nothing that we can add at this moment on this. It's going well. Lluc Sas: Perfect. So that concludes our presentation today. Thank you, Cesar and Sergio. As always, the Investor Relations team remains available for any additional questions or follow-ups. Thank you, everyone, for participating and for joining us this morning. Have a nice day. Cesar Gonzalez-Bueno Wittgenstein: Have a nice day. Sergio Palavecino: Thank you.
Operator: Good afternoon. I will be your conference call operator today. Please note that today's call is being recorded, and all participants other than management are in listen-only mode. There will be a Q&A session following the management's presentation. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead. Valter Pinto: Thank you, operator. Good afternoon, everyone, and welcome to RenovoRx's Third Quarter 2025 Conference Call. I'm joined today by members of our leadership team, Dr. Ramtin Agah, Chairman, Founder, and Chief Medical Officer; Shaun Bagai, Chief Executive Officer; Lisa Gentry, Chief Clinical Officer; Ronald Kocak, VP Controller and Principal Accounting Officer. Before we begin, I'd like to remind everyone that statements made during today's call contain or may contain forward-looking statements covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and applicable federal securities laws. These statements, including statements regarding RenovoRx's clinical and commercial plans, strategies, and estimates of performance, are based on management's current plans and assumptions, and actual results may differ materially. Please refer to our filings with the SEC, including our Form 10-Q for 2025 and our most recent Form 10-K for a detailed discussion of the risks and uncertainties facing RenovoRx. With that, I'd like to turn the call over to our Chairman, Founder, and Chief Medical Officer, Dr. Ramtin Agah. Ramtin Agah: Thank you, Valter, and good afternoon, everyone. This quarter marks another important step forward in RenovoRx's fourteen-year journey transforming a bold concept into a new therapeutic option that is now reaching patients across the country. Our preparatory transarterial microperfusion therapy platform, or TAMP, is designed for targeted therapeutic drug delivery across the arterial wall near the tumor site to bait the target tumor. By localizing and targeting delivery of therapeutic agents beyond the peripheral vascular system, TAMP is designed to optimize drug concentration where it's needed. This targeted approach is designed to minimize systemic exposure and toxicities related to chemotherapy and address the longstanding challenge in cancer care of poor blood supply to tumor sites. We believe that TAMP represents a significant advancement in the way cancer treatment can be approached. For decades, pancreatic cancer treatment has revolved around three pillars: surgery, radiation, and chemotherapy. We're proud to be introducing TAMP as the fourth option for patients diagnosed with solid tumors. What began as an ideal tested in controlled clinical trials is now translating into real-world impact. Several times a week, a patient somewhere in the U.S. is being treated with our TAMP technology, and that is deeply meaningful to our team. The early signs of clinical adoption are promising. We're seeing interest and adoption from academic medical centers, NCI-designated cancer centers, and large community hospitals. Importantly, physicians who have used TAMP enabled by RenovoRx are treating additional patients, validating the utility and safety of our technology. We are also expanding engagement across including interventional radiology, surgical oncology, medical and radiation oncology, reflecting the truly multidisciplinary nature of our platform. To support this effort across multiple specialty lines, we have launched our TAMP workshop series in an online peer-to-peer forum. We're also proud to be expanding our scientific advisory board with world-renowned physicians who believe in the potential of our technology. Our mission is to integrate our approach to therapeutic drug delivery into the standard of care and ultimately improve patient outcomes by offering a more targeted and tolerable treatment path. With that, I turn it over to our CEO, Shaun Bagai, to share some details on our commercial and clinical progress. Shaun Bagai: Thank you, Ramtin. Building on our clinical progress, we are also seeing strong commercial momentum for RenovoCath as a standalone medical device. Year-to-date revenue through the end of Q3 was approximately $900,000, putting us on track to finish out the year strong as we continue to build a lean, cost-efficient sales and marketing foundation that will enable meaningful revenue acceleration in 2026 and beyond. It's important to remember that we've achieved our RenovoCath sales results with a lean team and within our budget with a relatively small capital outlay. While our goal is to grow from the base we've established, our plan is to remain and maintain our philosophy of prudent capital deployment. Since organically launching commercial sales less than a year ago, and without a dedicated sales and marketing team, we've expanded from five centers approved to purchase RenovoCath at the start of 2025 to 14 leading cancer centers now approved to purchase. Five of these centers have already used the device in patients and made repeat orders, demonstrating both demand and customer satisfaction. In addition to the 14 centers now approved to purchase RenovoCath, we have delivered product quotes to 10 additional leading centers across the nation, bringing the total to 24 centers that have formally requested quotes for RenovoCath. In addition, we have engaged with dozens of physicians at various medical conferences and in their institutions who have expressed commercial interest in utilizing RenovoCath for their patients. We continue to nurture and build on this interest that will drive commercial success going forward. Physician feedback continues to underscore what we view are the benefits of the targeted drug delivery that can be achieved with TAMP, including reducing systemic chemotherapy toxicity and improving patient quality of life. With our small team, we've now established a diverse network of clinical institutions using and interested in TAMP enabled by RenovoCath spanning through the United States. This network represents not only leading academic institutions and NCI-designated cancer centers but also high-volume community hospitals, giving us the confidence and the potential for deep market penetration of our technology. Our focus remains on strategic, data-driven expansion, ensuring each new center is well supported through onboarding, training, and case follow-up. We are also seeing growing physician-to-physician advocacy, one of the strongest indicators of adoption in interventional oncology. To support and expand our commercial efforts, in August, we announced the hiring of Phil Stockton as Senior Director of Sales and Market Development. Phil brings more than twenty-five years of med tech leadership to the team, including a decade focused on interventional oncology. His expertise has been invaluable as we broaden our footprint across the U.S. while maintaining a lean operating structure. In alignment with our existing budget and to respond to growing demand, we have added two additional regional sales managers and plan to add a marketing director to drive physician engagement. It's also been a year of intense learning for us based on our experience in the field, and we've gathered valuable data on metrics like customer preferences and sales cycles. We plan on applying these learnings into 2026. We are pleased to report that we are seeing repeat use and expansion of interest among a growing number of approved centers and increasing market awareness and interest across oncology disciplines. As we refine and grow our efforts with a small but dedicated sales and marketing team, we continue to expand our revenues to grow during 2026 and beyond. Taken together, we are encouraged by our early adoption curve and believe our commercial growth strategy positions us for long-term success. Our vision is for RenovoCath to address a large unmet need in oncology. We continue to estimate that the initial PQS market opportunity of RenovoCath as a standalone device is approximately $400 million annually and ultimately a several billion dollar opportunity as we expand into other tumor types. Importantly, as mentioned, we continue to operate with fiscal discipline, positioning RenovoRx for long-term growth as we scale our commercial foundation and prepare for broader adoption. As of 09/30/2025, RenovoRx had over $10 million in cash and cash equivalents. Through the first nine months of 2025, RenovoCath sales totaled approximately $900,000, which we expect will increase over time and reduce our burn rate. Based on our current plans, our cash on hand is expected to fund both the RenovoCath commercial scale-up and continued progress of our Phase III TIGER PACT trial, as well as other activities into 2026. Of course, any increase in sales momentum beyond our current expectations could extend this timeline. As we continue to make progress commercially, and as each day we get closer and closer to our Phase III data readout, we have multiple potential opportunities to strengthen our balance sheet as needed even further, including but not limited to debt and/or equity financing, as well as our current ongoing licensing and partnership discussions. I feel it's important to note that the three-year anniversary of our shelf registration statement is expiring next week, and we will be refreshing this following. Additionally, we will be establishing an at-the-market offering. All of these financing options should provide our company with the best flexibility as we continue to drive shareholder value. In conclusion, we are excited about where we stand today as a company, progressing our Phase III clinical trial and post-market registry study while growing our RenovoCath sales efforts as we bring our novel technology to more and more doctors and patients. Ramtin spoke of a fourteen-year journey with our commercial sales efforts for RenovoCath, and with the end of our Phase III trial around the corner, we are seeing light at the end of the tunnel. We are all as enthusiastic about our future as we've ever been. We are truly grateful to our investors and other stakeholders, including our early adopter centers and physicians who continue to believe in our mission of helping make our vision a reality. With that, I'll hand the call over to our Chief Clinical Officer, Lisa Gentry, to provide more detail on our clinical programs. Lisa Gentry: Thank you, Shaun. The primary goal of our clinical research and scientific programs is to continue to strengthen the evidence base supporting our TAMP platform. Our new post-marketing registry study that we launched in July is progressing well, generating real-world data on the safety and effectiveness of RenovoCath across a range of solid tumors. We are pleased to have initiated the first patient procedure at the University of Vermont Cancer Center in September and to have Baptist Health Miami Cancer Institute and the University of Pittsburgh Medical Center joining as additional study sites. This capital-efficient multicenter study will generate critical evidence on the long-term safety and performance of RenovoCath across solid tumors. Importantly, our registry study also advances our future clinical strategy by generating meaningful data that will open the door for how best RenovoCath may be leveraged in additional high unmet need oncology indications beyond locally advanced pancreatic cancer. In addition, we continue to advance investigator-initiated trials in borderline resectable and oligometastatic pancreatic cancer. These studies are designed to be cost-neutral to the company while providing meaningful data that may further broaden the application of our TAMP therapy platform. Together, these initiatives reflect how RenovoRx is building a robust body of evidence to integrate our technology into the treatment continuum not only as an alternative but as the new fourth option that may enhance the current standard of care. Finally, our Phase III TIGER PACT trial continues to progress with enrollment expected to be completed in early 2026 and final data anticipated in 2027. Last quarter, we reported that the Data Monitoring Committee completed their review of our second preplanned interim analysis and recommended that we continue the study. We believe the DMC's recommendation is an expression of confidence in the potential for a positive outcome in the trial overall. The second interim review of data reinforces that the trial should proceed as planned to the final analysis as we seek to potential the safety and superiority of interarterial gemcitabine delivered via RenovoCath with the treatment of locally advanced pancreatic cancer as compared to IV chemotherapy, the current standard of care. TIGER PACT remains the cornerstone of our clinical development program, validating our mechanism of action and safety profile through rigorous long-term evaluation. In closing, I would like to share that we are proud to have recently strengthened our scientific advisory board to now include recognized surgeon and pancreatic cancer expert Dr. Timothy Donahue and internationally renowned interventional oncologist Dr. Thierry De Baere. Dr. Donahue is Director of UCLA's Aggie Hirschberg Center for Pancreatic Diseases and Chief of the Division of Surgical Oncology at the David Geffen School of Medicine. He is also the Gary Shandling Chair in Pancreatic Surgery. Professor De Baere is Head of Interventional Radiology at both the Gustave Roussy Cancer Center and the University of Paris-Saclay in France. With that, I'll hand the call over to our Controller and Principal Accounting Officer, Ronald Kocak, to review our financials for the quarter. Ronald Kocak: Thank you, Lisa. For the third quarter ended 09/30/2025, RenovoRx reported revenues of approximately $266,000, driven by both new customer orders and repeat purchases of RenovoCath, resulting in a total of approximately $900,000 of revenues through the first nine months of 2025. This early in commercial launch, we're not surprised by relatively minor fluctuations in sales given that our commercialization efforts are so new, have been handled by limited staff, and a handful of patients receiving treatment via RenovoCath can move the needle in product orders. We firmly believe that our efforts to date set the stage for revenue growth going forward. Research and development expenses were $1.7 million, reflecting our continued investment in TIGER PACT and support for investigator-initiated and registry studies. Selling, general, and administrative expenses were $1.7 million, reflecting stable operating expenses while we add targeted commercial capabilities. We ended the quarter with over $10 million in cash and cash equivalents. Based on our current operating plan, we believe this cash is sufficient to fund our ongoing commercial efforts and the completion of enrollment in TIGER PACT. As of September 30, 2025, common shares outstanding were approximately 36.6 million. Operator: With that, I will now turn the call back to the operator for Q&A. Thank you. Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on the telephone keypad. You may press star and 2 to queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Operator: Thank you. Our first question comes from Ed Woo with Ascendiant Capital. Please go ahead. Ed Woo: Yeah. Congratulations on all your progress. I know you guys have your hands full, you know, commercializing in the U.S. But have you thought, you know, given the positive reception, of maybe going international? Shaun Bagai: Yeah. Thank you for the question. Always great to talk to you. So we've looked at it in the past, and the favorable reimbursement and the large interest in the U.S. has determined that we'll focus on the U.S. for now. There's obviously a pancreatic cancer and other solid tumors that could be treated potentially effectively with our technology. So something we'll explore in the future. By keeping a close eye on capital burn and the large potential market that right at our fingertips, it makes sense to 100% focus in the U.S. today. Ed Woo: Great. And a little bit about your, you know, supply chain. How quickly would you be able to ramp it up if it turns out that, you know, expectations are even faster than you expect? Shaun Bagai: It's actually a great partnership we formed with our contract manufacturer. We announced a stronger collaboration almost a year ago. And they've already begun ramping. We've already reduced our COGS and increased our margins. And the great thing about the way we've built this device is RenovoCath actually has over a two-year shelf life. So we're already building stores up with high margins where we can supply what we anticipate the demand to be. And it is a larger operation. We can turnkey and ramp even quicker if we need to. So we've got a good collaboration and good supply chain so far. Ed Woo: Is that supply chain, is it manufactured in the U.S.? Shaun Bagai: Thanks for asking that question. It's something that comes up quite often. Yes. Our contract manufacturer is based outside of Chicago in the U.S. And largely, pretty much all the components used to build the are also sourced from the U.S. So we've been relatively insulated from the global macro issues in terms of supply chain so far. Ed Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Shaun Bagai: Thank you, Ed. Operator: Thank you. Our next question comes from Charles Wallace with HCW. Please go ahead. Charles Wallace: Hi. Thanks for taking my question. This is Charles on for RK. So for my first question, can you talk briefly about any fruits you're seeing from the hiring of the new senior director of sales? And then, looking ahead, do you hope to, when you're kind of building out the commercial effort, do you hope to increase the number of approved centers or do you hope to focus more on going deeper into the approved centers to get more repeat orders? Shaun Bagai: Yeah. Thanks for the question, Charles. It's a very focused deep effort, and we're starting to increase the breadth with the addition of the new hires. So with the addition of the senior salesperson, he's both player-coach. So he's out there selling and also helping build out the strategy. It's important to note that with a new technology like this, that we're first to market in a brand new space. And we've learned the multitude of steps that need to be done to get physicians from first engagement to patients really shorten time from initial contact to first patient treatment. And I have begun to see the fruits of his labor in that regard and from the two new hires he's put on board as well. The good news is that after six to nine months of being in the market, we're not seeing headwinds in our strategy. And we're creating already meaningful market adoption and some revenue with just a small commercial team driving into 2026. So we do anticipate increasing the breadth and the footprint as well. Currently, I've mentioned that we've got five active centers treating patients and multiple patients with multiple catheter orders. And in total, 24 hospitals have requested formal quotes for the device, and I'd say dozens on the tails of that that have expressed interest that not my small focus team can go and drive through to get those first patients in. So getting this team in place and learning the strategy very carefully with our burn over the last several months, we're really gearing up to be ready to drive this into the end of the year and then towards a lot of growth for next year and then beyond. Charles Wallace: Great. Guess to follow-up on what you just said, could you maybe provide a timeline that's typical for these hospitals that requested approval to the actual approval? Shaun Bagai: Yeah. So the sales cycle is actually quite wide. And we've seen anything from several weeks to a couple of months to several months beyond that. And I do believe that'll get shortened with constant contact with more local. We did hire a couple more regional territory managers to help drive that forward. As far as going deep, taking low-hanging fruit where we can get approvals, get on the shelf, and we do have multispecialty engagement sooner. We can shorten that timeline to within a handful of months. And what's great about looking into 2026 is we do have a very strong pipeline already. And it's really been a matter of resources to have reps be able to service those physicians and get this through the approval process onto the shelf and getting to that first patient. So the timeline is where we sit right now with, as I mentioned, 24 requests. Another few dozen behind out of interest, we can start to see those leak under fruition in the several months ahead of us. Charles Wallace: Great. And then sorry if I missed it, just maybe on the clinical side. Did you provide the patient numbers for how many have enrolled and how many events have occurred in the study for TIGER PACT? Shaun Bagai: So we did at the '2 announcing ninety-five patients randomized and sixty-one events by the '2. Now we've updated guidance that we do anticipate final enrollment to be early next year and final data in 2027. Again, as a reminder, we need to randomize a total of one hundred fourteen patients and the eighty-six deaths will trigger the final analysis. Charles Wallace: Okay. Thanks for taking my questions, and great. Shaun Bagai: Thank you. Thanks, Charles. Operator: Thank you. Ladies and gentlemen, a reminder to all the participants if you would like to ask a question, please press star and one on the telephone keypad. Thank you. As there are no further questions, I would now like to hand the conference over to Shaun Bagai for closing remarks. Thank you. Shaun Bagai: Thank you, everyone, for calling in and those listening to the recording afterwards. We're very excited with the progress we've made. As mentioned, we see the light at the end of the tunnel. We're seeing physicians and patients really seeing the opportunity to benefit from our technology here. And I appreciate you joining in and a lot of exciting things to come in the very near future. Ramtin Agah: Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, and welcome to the Sera Prognostics Conference Call to review third quarter fiscal year 2025 results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Jennifer Zibuda, Sera's Head of Investor Relations for a few introductory comments. Sera, (sic) [ Jennifer ], please go ahead. Jennifer Zibuda: Thank you, operator. Good afternoon, everyone. Welcome to Sera Prognostics Third Quarter Fiscal Year 2025 Earnings Conference Call. At the close of market today, Sera Prognostics released its financial results for the quarter ended September 30, 2025. Presenting for the company today will be Evguenia Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sera.com. This call can be heard live via webcast at sera.com and a recording will be archived in the Investors section of our website. Please note some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. I will now turn the call over to Zhenya. Evguenia Lindgardt: Thank you, Jennifer, and good afternoon, everyone. Building on the momentum from our PRIME study and ongoing commercialization efforts in the third quarter of 2025 marked continued progress in our transition towards PreTRM Test adoption. We advanced our geographically focused strategy. In these regions, we are executing an integrated approach to achieving payer coverage, physician education and patient awareness. We've continued to build visibility through key industry events and data presentations. Earlier this week, we presented health economics data at the International Society for Pharmacoeconomics and Outcomes Research, or ISPOR, Europe Conference. In October, Dr. Brian Iriye delivered a compelling presentation of PRIME study outcomes at the Inaugural Renaissance Conference, the 3 ages of the women-- titled Dismantling the Preterm Barrier: Biomarker-guided Bundled Care to Improve Neonatal Outcomes. Links to both the poster and the presentation are now available in our press release issued today. We remain on track to publish the full results of our PRIME study in a peer-reviewed journal by the end of the year. We're very far along through the process of preparing a publication and we look forward to sharing it with all stakeholders. What you can expect from us is a press release upon acceptance for publication followed by an investor and analyst event with our principal investigators to discuss the strong primary outcomes we shared earlier this year as well as some new and compelling data points from the study, demonstrating the efficacy of the PreTRM Test. Following PRIME, we plan to maintain a steady cadence of data publications and presentations focused on key topics, including health economic benefits, subpopulation analysis, for example, first-time moms versus other moms and Medicaid expected cost savings associated with Sera PreTRM Test. These data subsets will build on the robust evidence base, already established by our PRIME and AVERT clinical studies. Together, they will not only reinforce the clinical and economic value of preterm, but also help support its adoption into standard prenatal care. Let's now shift to our commercial strategy and progress. And for those newer to our story, I'll start with a quick overview. Our sales and marketing efforts are concentrated in select regions where we see strong alignment across several factors, headway with payer and Medicaid program discussions, support from influential local opinion leaders, engagement from early adopter institutions and presence of PRIME study sites. By focusing on areas where these elements converge, we are creating conditions for meaningful clinical uptake of the PreTRM Test. We've made real strides with Medicaid plan pilot programs, and our inaugural pilot in Nevada is actively enrolling patients. We're engaging payers in our first wave of 6 started states, collectively representing a strong commercial opportunity, covering approximately 33% of U.S. births and 35% of Medicaid births annually. Beyond this first wave, we've initiated outreach to the next year of target states, expanding our footprint of states in discussion to 13 in total. We're also in discussions with organizations with regional and national reach across multiple lines of business. These early signals of market engagement give us confidence that we are well positioned to drive meaningful coverage and adoption in our target states and beyond. Our commercialization strategy is anchored in getting coverage first. It is built on a 2-pronged approach. First, targeting state engagement across first and second wave states, for example, Nevada, Texas and Massachusetts that have shown interest, face high preterm births and have leveraged tools to adopt innovative programs and prenatal care. Second, payer-driven adoption through pilots and alignment to value-based care programs. By engaging state and payer leadership and connecting to the efforts of local institutions driving improvement in prenatal and maternal care quality outcomes, we're building a local flywheel of adoption that aims to accelerate provider buy-in and lays the groundwork for broader coverage. With Medicaid financing over 40% to 3.6 million U.S. births annually, the opportunity to drive meaningful cost savings and improve outcomes is substantial. We believe the PreTRM Test offers a differentiated, data-driven solution for states seeking to reduce neonatal complications and manage Medicaid expenditures more efficiently. Our health economics data shows potential in-year savings from PreTRM Test screening of low-risk pregnancies. The path from initial state Medicaid director engagement to a state coverage decision takes time. Initially, we anticipate a cycle of about 24 months or more driven by the nature of prenatal testing and claims data availability. For example, the blood draw occurs between weeks 18 and 20 of pregnancy and followed by 4 to 5 months until delivery of babies and another 3 months or so for claims data to become available for analysis. Once the data is reviewed, we present the pilot results to the Medicaid plan and other state stakeholders to inform coverage decisions. As additional pilots launch, we will use the resulting data to demonstrate feasibility and build a strong business case for statewide coverage. Our commercialization strategy in the immediate term will focus on the target geography adoption wave by wave until guideline inclusion. Success of these efforts depends on achieving coverage in Medicaid and commercial plans, value-based care arrangements and activating physician adoption and advocacy. Engagement with clinical leaders and alignment on target populations will be critical to securing guideline inclusion and accelerating adoption. Post guidelines, we scale nationally with a field sales force aiming for broader payer coverage and expand national awareness building through traditional marketing channels. Although guideline inclusion is a longer-term milestone, our focused efforts, both in evidence generation, KOL engagement, targeted state coverage and physician adoption are all needed to support it. Ultimately, the strategy positions us to drive meaningful revenue growth while improving outcomes from mothers and babies nationwide in helping address health care utilization trends, including rising costs associated with rising NICU admission rates and longer hospital stays surrounding maternal and neonatal care. To provide clear visibility into our accelerating commercial execution, even at this early stage, we will begin sharing some key traction indicators such as Medicaid pilot momentum, including a number of live pilots, enrollment completion milestones and expanding pipeline of states in discussions that will serve as tangible markers of progress as we build towards sustainable revenue growth. We're gaining meaningful traction across the payer landscape. We're actively engaging with 10 payers across 13 states, a diverse mix, both national and regional, Medicaid and commercial, who are focused on offering a competitive health care benefits while managing rising costs. Our strategy targets forward-thinking organizations with strong member bases in key states where our sales reps are positioned well to maximize pull-through. We're also prioritizing institutions with value-based payment models, aligning incentives for providers and payers in preventing preterm birth complications. PRIME and AVERT data strongly support value-based approach and can accelerate preterm uptake where positive outcomes translate into payer, provider and patient success. To recap our commercial progress, momentum is building. Our first Medicaid pilot is now live. We are in active dialogue with all 6 of our initial target states, and we've already begun engagement with the next wave of states, setting the stage for broader adoption and impact. To support our fundamental, clinical and commercial efforts, we've made high-impact leadership appointments to the Sera team. As announced in October, Dr. Tiffany Inglis was appointed Chief Medical Officer, an accomplished OB/GYN with over 20 years of experience, including a decade in clinical practice and recent leadership at Elevance Health and Carelon Health. Dr. Inglis excels at driving women's health initiatives, payer coverage and cost-effective outcomes. She will spearhead our medical affairs and strategy to accelerate PreTRM Test adoption and establish it as a standard of care for preterm birth risk. In preparation for broader adoption of the PreTRM Test in our target states and beyond, we appointed Marisol Urbano as the Head of Commercial Operations. With 20 years of health care experience and a proven track record in diagnostics, her leadership will be instrumental in accelerating customer onboarding and supporting clinical integration, key enablers of commercial traction during this foundational growth period. Complementing this leadership, we have successfully completed the hiring of sales representatives across all 6 of our target states and are well positioned to expand market access and preterm utilization. Lastly, beyond our progress in the United States, we continue to explore Europe in a region that fully appreciates the pressing gap in preterm birth risk screening. We remain engaged in productive discussions with European regulatory bodies and are on track to submit our dossiers in early 2026. In closing, we've made significant strides in laying a strong foundation for adoption and reimbursement, setting the stage for future growth. Looking ahead, we're optimistic about the flywheel effect on these initiatives, which we believe will drive meaningful adoption and contribute to better maternal and neonatal outcomes. With that, I'll turn it over to Austin, our CFO, for a review of our financial results. Austin? Austin Aerts: Thanks, Zhenya, and good afternoon, everyone. I'll provide an overview of our financial performance for the third quarter of 2025 and our balance sheet position. Net revenue for the third quarter was $16,000 compared to $29,000 in the same period last year. During the quarter, we received a $100,000 prepayment from the first Medicaid pilot in Nevada, which increased our deferred revenue balance as of September 30, 2025. Total operating expenses for the quarter were $9.0 million compared to $8.9 million in the third quarter of 2024. Research and development expenses were $3.3 million, down from $3.5 million for the third quarter of 2024, primarily due to lower clinical study costs following the completion of the pivotal PRIME study and as the company shifts towards commercialization. Selling, general and administrative expenses were $5.7 million, up from $5.4 million for the prior year period, a modest increase as we carefully invest in targeted commercial activities and strategic headcount additions, while building market awareness in preparation for the publication of PRIME study data. Our net loss for the quarter was $7.8 million, down from $7.9 million in the third quarter of 2024 as we continued our focus on managing our capital resources ahead of revenue expansion in the future. As of September 30, 2025, we had cash, cash equivalents and available-for-sale securities of approximately $102.4 million. We are encouraged by the commercial momentum that Zhenya discussed, including our first Medicaid pilot program in Nevada. We are diligently working to translate our foundational progress into tangible outcomes and significant growth opportunities. In the meantime, we continue to manage our capital prudently, prioritizing high ROI opportunities to support commercialization, while maintaining a strong balance sheet to fuel our growth strategy. Operator, we can now open the line for questions. Operator: [Operator Instructions] And your first question comes from the line of Dan Brennan from TD Cowen. Daniel Brennan: Great. Maybe just on the Medicaid pilots, Nevada, you've got 6 other states behind it or 5 other states behind it. I know at the Q2 call, you discussed 2 to 4 pilots signed up kind of -- I don't know what the time frame was, but it was kind of in the near term. So do you feel like progress is going on track? Do you feel ahead of plan, behind plan in terms of getting Nevada signed up? And when do you think you'd have -- get the 4 or get to the 6 pilots signed up? Evguenia Lindgardt: Dan, thank you so much for the question. We are very much on track. One is launched in recruiting, another one is in contracting. And so that gets us to 2. And we believe a couple more shortly. In active discussions with the payers in other states. So with that, the fact that we've expanded to the next wave of states tells you that we're very much on track on getting a foot in the door in each of the states and going beyond because we feel we have good traction even in the first wave of the states. So we'll definitely continue communicating progress once the pilots are up and running. Obviously, while we're in contracting, we're going to probably not communicate what the states and the payers are. But once we are underway with their permission, we'll share it with all of you. Daniel Brennan: And how big are the pilots? So Nevada, you said $100,000 prepayments. Just how do we think about? I know the criticality is to get it established, you can eventually get state Medicaid coverage. But just speak to during the pilot phase, like what's the economics? Like what are you getting paid to run these tests? How big is the Nevada program? Just any color around that? Evguenia Lindgardt: Sure. The trade-off here, Dan, are how fast we want results. So the fewer patients in the pilot, the faster the decision on coverage, which, of course, would be best to driving outcomes for moms and babies sooner. The drive to have a bigger pilot, of course, is powering the pilot to show great results. because, again, we are looking at reasonably rare events of significant preterm birth that we want to ameliorate. So from that perspective, the typical size of a pilot would probably be a few hundred patients. However, I will tell you, as we're engaging with plans and state Medicaid directors, we're not only suggesting that we pilot, but we are in active discussions with some value-based health care arrangements and contracts where we can show what the test can do when screening the moms in the state with achieving quality metrics and putting some dollars at risk as opposed to setting up a similar conversation in context of a pilot. So it's hard to tell you specifically because each state has a slightly -- or each payer has a slightly different arrangement and size and scale of the program. Some payers and states are looking for a state-wide contract that is value-based. So obviously, that would be many thousands of patients as opposed to a few hundred. Does that help? Daniel Brennan: Okay. And -- okay. And are you collecting like full price when you -- even though it's small, like hundreds of thousands are you collecting the full preterm birth price or it's a discount? Or just how does that work? Evguenia Lindgardt: So again, the specifics, I won't get into. But we are very happy with the price realization in these early engagements with payers and state Medicaids. We don't know how that will evolve when we get to full scale coverage for the state, but we're optimistic about what we've seen to date. Daniel Brennan: Got it. And then just in terms of PRIME, so timing-wise, you guys still feel confident it will come before year-end. So we've got, whatever, 8 weeks -- excuse me, like 6 weeks left. So you think it will come before then? So maybe just any more color on the confidence there if it slips a little bit, I guess, no big deal. But then, b, just remind us of the additional data we're going to get and what's going to be impactful that will come out in the publication that we didn't see so far? Evguenia Lindgardt: Yes. No, Dan, we are -- I know we've been talking about any day now for the last few quarters, but it truly is super close now, and we are confident it is coming in the coming weeks, ideally before the end of the year. And in terms of specific data, of course, it would be impossible to highlight the data before the publication itself. But what I can promise is as soon as the publication is out, we'll have an in-depth event to go over all of the new insights. I will highlight that the insights are coming from engagement with the reviewers. And as you know, we've talked about a series of publications coming out of mining an incredibly rich data set that comes out from PRIME. So we pulled forward some of the insights that were coming in future publications because of the requests of the reviewers to add that to the publication. So look forward to sharing that. But unfortunately, I can't highlight those until publication date. Daniel Brennan: Got it. And maybe one more. Just in terms of the path forward, $100 million in cash, you have these pilot studies in the background and then the PRIME study and then obviously, guidelines. But as we think about the next 1, 2, 3 years, getting PRIME out, getting the pathway to guideline inclusion, whatever you need to do there and then simultaneously, like you said, with these pilot studies. But on the guideline, you said in the past, I think, typical cadence is what, 24 to 48 months post publication. Is that still your best guess right now such that if the publication, let's say, comes out in the next month, the end of '25, are we thinking more like end of '27? End of '29 is when guidelines could occur? And then I guess the focus between then and now would just be these pilot studies? Evguenia Lindgardt: Okay. So a couple of questions on that one. Yes, we are -- that is still 24 to 36 months, still a pretty good guesstimate, I would say. We are -- we've developed an engine to mine the data and add real-world evidence to our portfolio that certainly is going to be the best thing we can do to influence and create literature for review for the guidelines to be updated with the new tools that are available to clinicians. So that is a critical work stream for us, and we're hoping that will be a truly a steady stream of data. In addition to mining PRIME data, of course, we talked about a real-world evidence, which should see its first publication next year as well as the data that's coming out of engagement with the plans and the states. Until the guidelines, I do think the key focus is this geographic focus in driving density of adoption in specific states. Given our first target states represents over 1/3 of births in the United States, that's not small volume at all. That is plenty of work to get done and volume to drive. I don't want to just zero-in and call it pilot engagement. Not at all. It's going to be much broader than that, including policy -- positive policy coverage achievement across plans and value-based care contract arrangements and just driving physician adoption institution by institution in some of the multi-hospital systems and women's health clinics. So a lot more to come on that, but please don't just focus on the pilots. Pilots is one tool in our toolkit. But indeed, it's going to be a geography-focused effort. And post guidelines, we're going to move to a nationwide commercialization. Operator: [Operator Instructions] And your next question comes from the line of Andrew Brackmann from William Blair. Margarate Boeye: This is Maggie Boeye on for Andrew today. Maybe first, just to start, can you walk through just once you have the PRIME publication in your hands, what your plans are there? And how you think about organizational readiness at this point once the PRIME publication comes hopefully before year-end? Evguenia Lindgardt: Thank you so much, Maggie. Organizational readiness, we've been preparing for quite a few quarters for PRIME to come out. So what we've done is prepared the dialogue that can commence once the data is out, specifically policy review by payers. As you can imagine, without a peer-reviewed publication, engagement is on the pilot basis and early engagement. However, once we have the publication, the formal processes of review can commence within the payer institutions. So number one priority, as we mentioned, is getting coverage and reimbursement. So that's the first thing that organization will drive upon publication. Second, of course, is dissemination of information with clinicians, education awareness building. What you can anticipate is presence at conferences, ECOG district conferences, seminars, CME events. We really want to get the data out to as many physicians and opinion leaders as possible. In parallel, of course, we are engaging with opinion leaders on the new data that is coming out of the PRIME that will shape new publications coming out of the data. Our field force is going to use as a third key thrust, the PRIME publication to make sure that in all of our target states, we are driving physician adoption with the major institutions and hospitals who've been engaging with us under CDA around the data to go ahead and drive education with all of their clinicians with the publication in hand. So we feel the organization is very much ready with all of the appointments we've made this year with our Chief Commercial Officer, Lee Anderson; with our Chief Medical Officer, Dr. Tiffany Inglis. A lot of roles within the commercial organization and hiring our sales force, we are in great shape to press go on our plan post publication. Margarate Boeye: And then maybe just one, just on the commercial team. How should we be thinking about that build out as we get into 2026 once the PRIME publication is out there? And then just with that, how should we think about your SG&A expense in 2026? Evguenia Lindgardt: Great question. I'll start with the commercial team size and then Austin, if you want to talk through the SG&A question, that would be great. So Maggie, what we're aiming to do as we expand the engagement with states and the payers and have the initial coverage established, we plan to expand the sales force to drive the pull-through in those geographies. So each of the waves is about 4 to 6 states, so we've staffed the first wave of 6 states. You can anticipate that we will bring new sales reps and medical science liaisons to the next wave of states as traction in those geographies is achieved. So we'll continue following our philosophy of investing behind the wins to put field personnel in place to drive engagement on the ground with physicians, with practices, with office managers and opinion leaders. So Austin, do you want to talk through on the parameters of our SG&A change anticipated in 2026? Austin Aerts: Sure. Maggie, thanks for the question. We're aiming next year to keep expenses relatively similar to the way they are this year, while also shifting a lot of our capital allocation certainly towards sales and marketing activities. So we do expect to see a relatively significant increase on the sales and marketing line, while overall expenses stay relatively flat. Evguenia Lindgardt: Thank you so much, Maggie. We are excited to reallocate capital to commercialization from our main evidence-generating activities over the last couple of years. Operator: There are no further questions at this time. Ms. Lindgardt, please proceed with closing remarks. Evguenia Lindgardt: Thank you so much. Before we close the call, I just want to emphasize the strong foundation we've built this quarter with advancing the evidence generation, accelerating commercial execution and strengthening our leadership team. With the first Medicaid pilot live and active engagement across 13 states and key hires in place, we're really well positioned to drive adoption of the test and delivering meaningful impact in maternal and neonatal outcomes. Looking ahead, we remain focused on disseminating PRIME results, expanding payer coverage and working towards guideline inclusion. Thank you all so much for the continued support as we work towards transforming prenatal care and creating long-term value for patients, providers and shareholders. Over to you, operator, to close the call. Operator: Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good day, and welcome to the Bionano Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelly Gura from Investor Relations. Please go ahead. Kelly Gura: Thank you, Didi, and good afternoon, everyone. Welcome to the Bionano Third Quarter 2025 Financial Results Conference Call. Leading the call today is Dr. Erik Holmlin, CEO and Principal Financial Officer of Bionano, and he is joined by Mark Adamchak, Bionano's Vice President of Accounting and Principal Accounting Officer. After market closed today, Bionano issued a press release announcing its financial results for the third quarter of 2025. A copy of the release can be found on the Investor Relations page of the company's website. Certain statements made during this conference call may be forward-looking statements. Actual results may differ materially from such statements due to several factors and risks, some of which are identified in Bionano's press release and Bionano's reports filed with the SEC. These forward-looking statements are based on information available to Bionano today, November 13, 2025, and the company assumes no obligation to update statements as circumstances change. During our call, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release and slide deck. An audio recording and webcast replay for today's conference call will also be available online on the company's Investor Relations page. With that, I will turn the call over to Erik. Robert Holmlin: Thank you, Kelly, and good afternoon, everyone. I'm excited to update you all on the third quarter results and key highlights, as well as provide an update on our expectations for the remainder of the year. At Bionano, our focus is on transforming pathology, which is the medical discipline that investigates disease, including its causes, developments and effects. This transformation is from pathology's analog past to a digital future. Our digital pathology solutions include optical genome mapping systems, the Ionic system for nucleic acid isolation and our VIA software. These solutions address significant unmet needs in cytogenetics and molecular pathology through simplification of workflows. Over the last year, we have taken decisive steps to transform our business model away from one based in aggressively growing the installed base toward a model that's driving utilization of our solutions within a subset of our existing OGM and VIA software user base, we call this subset of users our routine users. These routine users are characterized by having an established flow of samples coming into their labs. And therefore, we believe they can generate significant consumables and software revenues and will drive most of our revenue growth in the near-term. To succeed with this strategy, we're executing against 4 strategic pillars. First, we're focused on supporting and sustaining our installed base of routine OGM and VIA software users. Second, we are aiming to drive utilization through the adoption of software across the routine users of OGM. And that way, we can facilitate their menu expansion. Third, we're building support needed for optical genome mapping reimbursement and inclusion in medical society guidelines, recommendations and different schedules for reimbursement. Fourth, we intend to improve profitability and scalability with lower costs and higher volumes. We believe our performance in the third quarter and year-to-date validates that focusing on these routine users is restoring growth in our core business. At a high level, this quarter, we achieved solid gross margins, remain disciplined with our operating expenses and increased the utilization from these routine users. It's increasingly evident that optical genome mapping solutions are providing valuable insights to our customers and that these customers are expanding their utilization. Taking a closer look at this performance, total revenue for the third quarter of 2025 was $7.4 million, reflecting an increase of 21% compared to the third quarter of 2024. When adjusting for a write-down of $0.5 million in revenues from discontinued clinical services in 2024, core revenues increased by 12% year-over-year in Q3 2025. We sold an all-time record 8,390 flow cells in the third quarter of 2025, which reflects a 7% increase compared to the same period last year. And we're pleased with the strong growth in flow cells again this quarter. It reflects increased utilization within this routine use customer group. Non-GAAP gross margin for the third quarter of 2025 was 46%, which was significantly higher than the 26% non-GAAP gross margin reported for the third quarter of 2024. Third quarter 2025 non-GAAP operating expense was $9.7 million, which is a 40% reduction compared to the $16.1 million in operating -- non-GAAP operating expense in the third quarter of 2024. We installed 7 new systems and brought 1 back for a net increase of 3 to 384 for the installed base as of the end of the third quarter of 2025. And year-to-date through September 30, 2025, we have installed 23 new systems. We ended the quarter with $31.8 million in cash, cash equivalents and available-for-sale securities, of which $10.3 million was subject to certain restrictions. In September, we completed a $10 million public offering of common stock, bolstering our balance sheet and extending our cash runway into the third quarter of 2026 and potentially longer depending on the execution of our growth and cost savings initiatives. Now taking a closer look at our first pillar, which is supporting the utilization across our routine user base who repeatedly purchase and use consumables and software at higher rates. Overall, flow cells grew to 7% -- grew 7% in the quarter compared to last year, achieving this new record. After removing the flow cells that were sold to new customers since the third quarter of 2024 and those sold in this quarter, flow cells sold to the remaining existing customers grew by 6% on a year-over-year basis. Flow cell purchases by existing customers in the first 9 months of 2025 compared to the same customers a year ago grew by 7%. Our year-to-date performance suggests that our strategy of focusing on driving utilization within this routine user base is working and customers are using our product at higher volumes. Now when looking at the revenue contributions from consumables and software together, these sales grew 15% on a year-over-year basis in the third quarter and 10% year-over-year for the first 9 months of 2025. As a percentage of the total product mix, consumables and software represented 72% in the third quarter of 2025 and 76% in the first 9 months of this year, whereas in 2024, it represented 76% in the third quarter, but just 62% in the first 9 months of 2024. So this shift in product mix is also a result of our change in strategy. Beyond supporting our OGM users, we're also making good progress with our second pillar of integrating VIA into customer workflows and upgrading our software and software and compute platforms to make analysis of OGM, microarray and next-generation sequencing data easier, faster and more accurate. Last quarter, we announced that upgrades were released in a first wave and that we are pleased to remain on track for the full commercial release of this software in the coming months. Now moving down the P&L to discuss our pillar of improving profitability and scalability. We have made steady progress in reducing our non-GAAP operating expenses over the last few years, and we have remained disciplined with this approach throughout this year. In the third quarter, our non-GAAP operating expense was $9.7 million, and that represents a 40% year-over-year reduction. Turning to gross margin. Cost reduction along with improvements to our product manufacturing costs and volumes have enabled expansion from 22% on the non-GAAP core gross margin in the first quarter of 2023 to 46% non-GAAP gross margin this quarter. While we expect to see continued margin expansion over time, we believe that the levels that we have seen in the last few quarters is representative of where we will be in the near-term. With the shift in product mix towards consumables and software, we see a benefit to gross margin as well. Importantly, these adjustments and improvements in cost and margin are strong indicators that we are meaningfully improving the financial profile of Bionano. Now lastly, turning to our final emphasis on building the support needed for OGM reimbursement, where we believe a growing number of publications illustrate the utility of OGM in cytogenetics and clinical research, as well as the number of clinical research genomes published. Taken together, we see these as positive leading indicators of future adoption of optical genome mapping. In the third quarter of 2025, there were 97 new publications demonstrating the value of optical genome mapping, and this represents a 10% growth over the same period the year before. And the OGM community has now published on a cumulative basis, nearly 11,500 clinical research genomes. These publications provide the support for new customers to adopt, existing customers to expand their applications and third parties to support OGM in reimbursement and consideration for medical society recommendations and guidelines. Now looking closer at some of the key studies presented and presentations over the last few months. First, we had a strong presence at the ASHG Annual Meeting in Boston last month, where there were 9 studies presented, including oral presentations and posters that demonstrated both growing interest in key -- in existing geographies for optical genome mapping as well as in new regions, and we were impressed to see a strong contribution from Japan. We're excited to see this interest in optical genome mapping continue to grow on a global basis. Second, a new publication from the MD Anderson Cancer Center at the University of Texas, which was recently published, shows how optical genome mapping can overcome key limitations of targeted RNA-Seq for cytogenetic investigation in acute leukemias. This paper represented the first benchmark comparison of optical genome mapping directly to RNA-Seq in cancer. It supports our overall digital pathology strategy by tying OGM to methods that are commonly used in molecular pathology and represents an important expansion outside of cytogenetics for us. Third, multiple studies highlighting the OGM utility for analysis of cancer -- of the cancer biomarker chromoanagenesis were published in a book addition of molecular methods in -- sorry, methods in molecular biology. Chromoanagenesis refers to a catastrophic genomic event frequently associated with complex karyotypes and extensive clonal heterogeneity, treatment resistance, poor prognosis, and it includes events such as chromothripsis, chromoplexy and chromoanasynthesis, all of which play significant roles in cancer development and are hard to sort out using existing tools in cytogenetics. Optical genome mapping provides a genome-wide view of structural variations at high resolution, which enables precise identification and characterization of the genome variation underpinning this chromoanagenesis. The 4 chapters published in this series highlight the use of optical genome mapping and the expansion into new cancer types for OGM such as multiple myeloma and chronic lymphocytic leukemia, or CLL, as well as the proliferation of novel workflows such as something new called DAM-assisted fluorescent tagging of chromatin accessibility, which is a hybrid method for highly detailed spatial analysis of chromatin assemblies. And so, this is one of the first times that we're seeing optical genome mapping being integrated into spatial analysis. Now on our last call, we shared that the editorial board of the American Medical Association established a second Category I CPT code for optical genome mapping. This one in the evaluation of constitutional genetic disorders. And that represented another incredible milestone for the OGM community. I'm pleased to share that in mid-September, CMS posted the preliminary payment determination for this CPT code, which is based on a crosswalk to a previously established OGM code priced at $1,263.53. Pricing at this level, which is higher than what microarray codes are priced at is consistent with the needs of laboratories today seeking to move forward from the legacy methods. We believe this CPT code builds on the evidence that OGM can outperform these legacy methods across a number of applications and may pave the way for more routine use of OGM across oncology and clinical genetic research communities globally. So to wrap up, I would like to provide our outlook for the remainder of the year. We are reiterating our full year 2025 revenue guidance of $26 million to $30 million. We expect the fourth quarter of 2025 revenues to be in the range of $7.5 million to $7.9 million. And given that we've reached 23 new OGM system installations in the first 9 months of this year, we now expect to exceed the prior range of 20 to 25 systems, likely surpassing the high end of that. So with that, Didi, please go ahead and open the line for questions. Operator: [Operator Instructions] And our first question comes from Yi Chen of H.C. Wainwright. Yi Chen: My first question is with respect to increasing utilization of routine use customers, can you talk about what is the potential peak level of utilization for these routine use customers? And how soon do you expect to have these customers achieve the peak level based on the current trend? Robert Holmlin: Yes. It's -- I think it's a key question, and important topic. Thank you, Yi, for joining the call and for the question. What we feel confident about, first of all, is that, in general, the labs are not sample limited. So they have an abundance of samples. Those samples are distributed across multiple different indications. And so, the sort of process of expanding utilization involves the laboratories developing and validating an assay for 1 application and then running that for a while and then beginning to grow the menu by developing an assay for another research indication and so on and so forth. That's really the primary mechanism of growth. And what we see across the user landscape is that, the average utilization across these routine users that are running on a regular basis is about 4 samples per week. But at the highest end of the spectrum, it's as high as 40 samples per week. And so, our view is that, a reasonable target for us to shoot for is maybe the midpoint between the 4 and the 40, so getting up to in the low-20s on average across all of the routine users. And so, that's what we're going to try to make happen. Yi Chen: Got it. And with respect to the Japanese market, can you tell us how many -- what is the current installed base in Japan? How do you think the market could ramp up in comparison to the U.S. market? Robert Holmlin: Yes. So we have really only 1 system installed in Japan, and it's at a laboratory of a service provider. And so, different academic customers, industrial customers can send samples to this laboratory, have them processed and get data. And so, that's what's going on. And what we see is that, the interest in Japan has evolved over time. So initially, when this services lab first got going, they were primarily focused on nonhuman applications actually. And now in the last couple of years, that has changed. And so, the evolution is much more consistent with what we see in other areas, work in genetic diseases, leukemias and lymphomas. And so, we would expect that market to evolve similar to what we see in the U.S. for those applications. I think that there's also a significant opportunity in Japan around cell and gene therapy development. And so, we're seeing some of these pharma companies begin to access this service provider. And so, there's tremendous potential in Japan. I do think for the types of clinical research applications that we're doing in other regions such as hematologic malignancies and constitutional genetic diseases that it will take some time. They're going to want to build up a kind of war chest of local data in support of optical genome mapping, but that's ongoing. I think that the pharma can accelerate. And so, we're paying attention to all of these, and we're quite happy to see some presentations or posters actually at ASHG last month. Yi Chen: Got it. And with respect to operating expenses, do you expect it to remain relatively stable going forward? Robert Holmlin: Yes. Yes. I think this is the range that we're intending to be in. We're in the process of putting together our detailed operating plan for next year. And we see some areas where we might like to invest. But I think that our overall intention is to keep things as flat as we possibly can, except where opportunities justify it. Operator: I show no further questions at this time. I'd like to turn it back to Erik Holmlin for closing remarks. Robert Holmlin: Great. Very good, Didi. Thank you, and thank you to everybody who joined the call, and we look forward to updating you on our full year results next year. Thank you very much. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome to the Nuvve Holdings Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. On today's call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve. Earlier today, Nuvve issued a press release announcing its Q3 '25. Following prepared remarks, we will open up the call for questions. Before we begin, I would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Nuvve's best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in Nuvve's filings with the SEC and in the earnings release issued today which are available on our website. Nuvve undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances. With that, I would like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory? Gregory Poilasne: Thank you, and good afternoon to everyone here today. Welcome to our Q3 '25 results call. In our last call, I shared with you that we were finalizing the restructuring of the organization. Now that our structure is in place, we have been able to shift our focus to stationary battery deployment. And over the last few days, we have made a few exciting announcements. First, in Europe and more specifically in Denmark, we are in the process of developing 3 2-megawatt battery projects. These battery projects represent about $10 million of CapEx with the forecasted internal rate of return greater than 25%. Once the development is well underway, we will be working with financing partners interested in investing in the project. Once the installation, interconnection and commissioning are done, which is planned for late 2026, we will start generating recurring revenue for the life of the batteries, most likely 10 to 12 years. Our experience over the last 9 years has shown potential revenues ranging between $400 and $600 per kilowatt year or potential annual revenue generation of $2.4 million to $3.6 million for the combination of the 3 batteries. These 3 battery projects are also strategically positioned as they are next to different type of fleets, which will convert into electric vehicles over the next few years and for which we will be able to provide optimal energy costs. Then yesterday, we announced that our Japanese subsidiary has concluded an agreement -- an aggregation agreement targeting existing stationary energy storage in order to manage 2-megawatt battery with an energy capacity of 8.2 megawatt hour installed in Tainai City in Niigata Prefecture with a targeted operation date in the first half of 2026. The expected value on a per kilowatt year basis in Japan is similar or greater than the value in Denmark. The expansion of the use of our platform for stationary batteries is working well and is going to help us accelerate our revenue growth over the next 18 months. Based on the growth for stationary batteries, we are seeing, we expect the number of battery project opportunities in Europe and Japan to accelerate, and we anticipate the same trend in the United States including territories covered by our Nuvve New Mexico subsidiary. The growth of the load on the electric system due to heat pumps and data centers is going to create a very large pool of energy. Energy storage is the only way we'll be able to keep the cost of energy equitable. We believe Nuvve's platform can provide an optimum return on investment for battery projects, especially when speed and aggregation can bring more value. In general, our subsidiary-base structure is working well, bringing more accountability across the organization. Fundraising is underway, and we shall be in a position to share more about our capitalization plan soon. NASDAQ gave us until December 31 to fix our bid price and shareholder equity efficiencies. And we are very confident we'll be able to address these efficiencies following that time line, and we have already received a shareholder approval for the reverse stock split. Some update on our crypto strategy now. Though we have not announced a full-scale move into the crypto space, we still see the convergence of energy, artificial intelligence and crypto at the core of our platform deployment. We had announced a potential purchase of Hype Token. We still have not purchased such acquisitions as we are still analyzing our best opportunity for integration of the blockchain into our platform. Indeed, multiple parameters have to be considered, including technical, economic, regulatory and operational, especially cybersecurity and smart contract capabilities. Looking closer into the quarter, the hardware revenue is more in line with our expectation, and we see a potential strong Q4. But for that, I will let David take you through the details of our financials. David? David Robson: Thanks, Gregory. I will start with a recap of third quarter 2025 results. In the third quarter, we generated total revenues of $1.6 million compared to $1.9 million in the third quarter of 2024. The decrease was primarily driven by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project versus the same period last year. Similarly, year-to-date through September 30, 2025, total revenues were $2.8 million, which compares to $3.5 million for the prior year period. The year-over-year decrease in revenues is also driven by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project this year versus last year. Margins on products, services and grant revenues were 52% for the third quarter of 2025 compared to 52.1% for the year-ago period. Year-to-date margins through September 30, 2025, were 46.8% compared with 42% for the year ago period. Our gross margins year-to-date have increased 480 basis points due to higher profitability on our service revenues. As a reminder, margins can be lumpy from quarter-to-quarter depending on the mix. DC charger gross margins at standard pricing generally range from 15% to 25%, while AC charger gross margins are approximately 50%, but in dollar terms are a small fraction of the revenue of the DC charger. Grid service revenue margins are generally 30% while software and engineering service margins are as high as 100%. Operating costs, excluding cost of sales, was $5.9 million for the third quarter of 2025 compared to $15 million for the second quarter of 2025 and $2.8 million for the third quarter of 2024. Operating costs were elevated last quarter due to nonrecurring grants of $8.2 million paid to consultants we engaged to support our digital asset strategy. Cash operating expenses, excluding cost of sales, stock compensation, depreciation and amortization expense was $5.4 million in the third quarter of 2025 versus $5.7 million in the second quarter of 2025 versus $2.2 million in the third quarter of 2024. This represents an increase of $3.2 million in expenses over the same quarter last year. Other income was $0.4 million in the third quarter of 2025 compared to $0.2 million in the third quarter of 2024. Both periods benefited from noncash gains from the change in the fair value of warrants or debt offset by interest expense. Net loss attributed to Nuvve common stockholders increased in the third quarter of 2025 to $4.5 million from a net loss of $1.6 million in Q3 of 2024. The increase was primarily a result of higher operating expenses previously mentioned. Now turning to our balance sheet. We had approximately $0.9 million in cash as of September 30, 2025, excluding $0.3 million in restricted cash, which represents a decrease of $0.8 million from last quarter. The decrease was a result of $3.4 million used in operating activities and the repayment of debt of $2.3 million, offset by proceeds from common stock offerings. Turning to the quarter. Inventories were flat at $4.3 million at September 30, 2025 compared to the second quarter of 2025. During the quarter, accounts receivable increased by $0.8 million to $1.1 million at September 30, 2025 compared to the second quarter of 2025 due to higher shipments of DC chargers this quarter compared with last quarter. Accounts payable at the end of the third quarter of 2025 was $2.9 million, an increase of $1.5 million compared to the second quarter of 2025 of $1.4 million. Accrued expenses at the end of the third quarter of 2025 was $5.7 million, an increase of $0.1 million compared to the second quarter of 2025 of $5.6 million. Now turning to our megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is a metric we use to quantify the aggregated amount of electrical capacity from the deployment of our V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in light-duty fleet deployments in Europe. In addition to stationary battery, currently, these chargers and batteries are located throughout the United States and Europe. Megawatts under management in the third quarter increased 3.1% over the second quarter of 2025 to 26.4 megawatts from 25.6 megawatts and a 9.6% decrease compared to the third quarter of 2024. In terms of its composition, 0.2 megawatts were from stationary batteries and 26.4 megawatts were from EV chargers. The year-over-year decline is primarily related to the decommissioning of batteries under management due to site requirements. Megawatts under management from EV chargers increased to 25.4 in the third quarter of 2025, an increase of 0.7% over the first quarter of 2025. We continue to expect further growth in our megawatts under management in 2025 as we continue to commission our backlog of customer orders we have earned. In addition, to new business we anticipate winning which we have visibility to in our pipeline for both EV chargers and stationary batteries. Now turning to our backlog. On September 30, our hardware and service backlog decreased to $19 million, a decrease of $0.1 million from $19.1 million reported at June 30, 2025. As we look out to the next several quarters, we expect to see more developments on our New Mexico contract and projects we are working on in Japan. We also anticipate improvements in our cash burn resulting from the benefits of lower operating costs compared with last year. That concludes my portion of the prepared remarks. Gregory, back to you to conclude. Gregory Poilasne: Thank you, David. In summary, we are very excited about our direction towards stationary storage. We expect a few more wins in the next few weeks and we'll share them as they become available and those agreements are signed and finalized. These battery deployments will come in addition to the charging station business that David just described. Thank you very much for listening to us today. Operator: [Operator Instructions] Showing no questions. This will conclude our question-and-answer session. I would like to hand the conference back over to Gregory Poilasne for any closing remarks. Gregory Poilasne: I would like to thank everybody who was listening to us today, and we are looking forward to sharing more with you about our progress over the next few weeks. Thank you very much. Bye-bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Zealand Pharma Interim Report Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, [ Adam Langer ], Investor Relations of Zealand Pharma. Please go ahead. Unknown Executive: Thank you, operator, and thank you to everyone for joining us today to discuss Zealand Pharma's results for the first 9 months of 2025. You can find the related company announcement on our website at zealandpharma.com. As described on Slide 2, we caution listeners that during this call, we will be making forward-looking statements that are subject to risks and uncertainties. Turning to Slide 3 and today's agenda. With me today are the following members of Zealand Pharma's management team; Adam Steensberg, President and Chief Executive Officer; Henriette Wennicke, Chief Financial Officer; and David Kendall, Chief Medical Officer. All speakers will be available for the subsequent Q&A session. Moving to Slide 4. I will now turn the call over to Adam Steensberg, President and CEO. Adam Steensberg: Thank you, Adam, and welcome, everyone. The third quarter of 2025 has been a quarter of strong execution and continued momentum in our partnership with Roche. We achieved a key milestone in the petrelintide Phase II ZUPREME-1 trial in people with overweight and obesity, which put us well on track to report 42-week top line data in the first half of 2026. We are also rapidly approaching data from several Phase III trials with survodutide in obesity, starting with top line results from this 76-week SYNCHRONIZE-1 trial in the first half of 2026. Meanwhile, we are gearing up to outline our path towards becoming a generational biotech company at our Capital Markets Day next month. Moving to Slide 5. 2 years ago, we laid out our vision to become a key player in the management of obesity through innovation that address one of the greatest health care challenges of our time. Central to this vision was developing an alternative to GLP-1 therapies and to end the weight loss Olympics by focusing on the most important unmet medical need, a therapy that patients can and will accept to stay on. What excites me today is that Zealand and Roche has the potential to lead in the next class of drugs for weight management. We are very confident in the profile of the petrelintide as a potential best-in-class amylin analog, supported by the clinical data to date and the last robust Phase II program currently underway. We are rapidly approaching Phase II data with petrelintide and Phase III obesity data with survodutide alongside an impressive Phase III MASH program that is well underway. I look forward to this next catalyst-rich chapter and to sharing more from these programs at our upcoming Capital Markets Day, where we will also discuss our intensified early-stage efforts to build a generational biotech company. Let's turn to Slide 6. 6 months have passed since we kicked off our alliance with Roche. And I'm highly encouraged by the energy and commitment we have seen from both sides of the partnership. The agreement with Roche is more than just a deal. It's a shared commitment to redefine the future of weight management and to establish leadership in what could become the next foundational class of therapies. Last month, Zealand Pharma had the pleasure of welcoming Teresa Graham, CEO of Roche Pharmaceuticals to our offices for an engaging fireside chat about exactly this. I was also pleased to see Roche at their Pharma Day in September, conveyed to you their strong commitment to become a top 3 player in obesity. This is the reason why through a highly competitive partnership process, we identified Roche as the ideal partner for Zealand Pharma and petrelintide. Turning to Slide 7. Survodutide is licensed to Boehringer Ingelheim, a leading family-owned biopharmaceutical company with a strong legacy in cardiovascular, renal and metabolic diseases and a global presence across more than 130 markets. We're excited to see Boehringer Ingelheim potentially becoming the next major pharma company to enter the obesity market with a truly differentiated GLP-1-based therapy co-invented with Zealand Pharma. We were also highly encouraged by their strong presence at ObesityWeek in Atlanta last week. This leads me to Slide 8. The scale and complexity of obesity make it a distinct and complex disease area in which we identify different segments. In the prescriber-driven segment, a key motivation for prescription is focused on comorbidity risk reduction, improving health outcomes and relative weight loss. We believe survodutide has the potential to be uniquely positioned within this segment. The largest segment, however, is patient-driven. A significant focus here is personal weight loss goals and how individuals achieve them with potential to deliver the weight loss that the vast majority of people with overweight and obesity desire, combined with an acceptable tolerability profile and an excellent patient experience, we believe petrelintide is ideally positioned to lead in such a segment. I'm highly encouraged by the potential of both of our leading obesity programs, which holds potential to redefine the near-term future of weight management in key segments. And with that, let's move to Slide 9 as I turn over the call to our Chief Medical Officer, David Kendall, to discuss our R&D pipeline. David? David Kendall: Thank you, Adam. Today, I'll focus my remarks on the continued advancement of our 2 leading programs, petrelintide and survodutide. Before doing so, I would like to begin by providing a brief update on our 2 late-stage rare disease programs and dapiglutide, our GLP-1/GLP-2 receptor dual agonist program. For dasiglucagon in congenital hyperinsulinism, our third-party manufacturers facility has not yet received the anticipated classification upgrade. And as shared previously, we have implemented a supply contingency plan, including the qualification of an alternative supplier to ensure we can bring this important therapy to patients in need as quickly as possible. For glepaglutide, our GLP-2 receptor agonist in development for the treatment of short bowel syndrome and intestinal failure, the Phase III EASE-5 trial remains on track to initiate before the end of the year with the purpose of supporting regulatory submission in the U.S. We remain encouraged and excited by the clinical profile of glepaglutide as a potential best-in-class long-acting treatment for patients living with short bowel syndrome and intestinal failure and look forward to confirming the positive findings of the previously completed EASE-1 trial. We have made the decision to pause the current development of dapiglutide. This decision is a result of a disciplined portfolio review and prioritization, seeking to focus our obesity portfolio investment on programs with the greatest potential for clinical differentiation and those offering the greatest potential for long-term impact for patients living with overweight, obesity and related comorbidities. Although dapiglutide has demonstrated the potential for a competitive weight loss profile based on the results of clinical trials completed to date, the GLP-1-based therapeutic space has become increasingly crowded, requiring even greater and clinically meaningful differentiation for assets which would be launched in the 2030s and beyond. While there is compelling scientific rationale for GLP-1/GLP-2 dual agonism to modulate low-grade inflammation more effectively than GLP-1 alone, the clinical requirements needed to demonstrate this differentiation in a dedicated obesity-related comorbidity would be long, complex and expensive. We have significant opportunities in both the amylin and incretin-based therapeutic space with our leading programs, including petrelintide, the fixed-dose combination of petrelintide and Roche's GLP-1/GIP dual agonist, CT-388 and survodutide as well as an early stage pipeline that includes novel mechanisms targeting obesity and inflammation with the ultimate goal of restoring and maintaining metabolic health. Please turn to Slide 10 and beginning with petrelintide. Our strong confidence in petrelintide is grounded in its overall efficacy, safety and tolerability profile. While amylin-based therapeutics can deliver clinically meaningful weight loss, we are not seeking to deliver the highest possible weight loss with petrelintide, but rather seek to target the weight loss that the vast majority of people with overweight and obesity desire and to do so with an excellent patient experience. We remain fully confident in the potential of petrelintide to deliver 15% to 20% weight loss in Phase III clinical trial and also remain highly confident in petrelintide's consistent clinical efficacy, safety and tolerability, underscoring its unique value proposition and the potential to become the leading amylin-based treatment and a foundational therapy for weight management. I'm extremely pleased with the strong execution in advancing the petrelintide clinical program at full speed. In late September, we reached a key milestone in the large Phase II ZUPREME-1 trial, which evaluates the efficacy and safety of petrelintide in people with overweight or obesity without type 2 diabetes, with the last randomized participant having now completed the 28-week primary endpoint visit. Additionally, earlier in the month, we completed participant enrollment in the Phase II ZUPREME-2 trial, which evaluates the efficacy and safety of petrelintide in people with overweight or obesity and coexisting type 2 diabetes. These achievements put us well on track to report 42-week top line results in the first half of 2026, report top line results from the ZUPREME-2 trial in the second half of 2026 and to initiate the Phase III program with petrelintide monotherapy also in the second half of 2026, together with our partner, Roche. Let's move to Slide 11. We also look forward to exploring the potential of petrelintide as a backbone for future combination therapies, unlocking its full value potential. Petrelintide/CT-388 is the first combination product under our alliance with Roche. This program will target individuals who seek even greater weight loss and/or improved glycemic control while optimizing the dose of each component. We anticipate that use of higher doses of petrelintide and optimized doses of the incretin-based therapy CT-388, a potential best-in-class GLP-1/GIP receptor dual agonist, can provide both robust efficacy while maintaining excellent tolerability. Zealand and Roche remain on track to initiate the Phase II trial with petrelintide/CT-388 combination in the first half of 2026. Now turning to Slide 12 and survodutide, a potential best-in-class glucagon/GLP-1 receptor dual agonist in late-stage development for the treatment of obesity and MASH. The Phase III SYNCHRONIZE program of survodutide in obesity consists of 6 clinical trials, all of which are expected to complete in 2026. In the Phase II obesity trial, survodutide demonstrated the potential to deliver highly competitive weight loss with doses of up to 4.8 milligrams. Notably, the Phase III trials are evaluating a higher maximum maintenance dose of 6 milligrams. This leads me to Slide 13. Following the last participant's last visit in the 76-week SYNCHRONIZE-1 trial, which evaluates the efficacy and safety of survodutide in people with overweight or obesity but without type 2 diabetes, we are rapidly approaching top line results from this trial in the first half of 2026. At the Obesity Society Annual Meeting in Atlanta last week, Dr. Carel Le Roux presented the baseline characteristics of participants in this trial, which are also shown on this slide. We are very pleased that Dr. Le Roux has agreed to join us at our upcoming Capital Markets Day next month, where he will share more insights on the potential of survodutide to represent the next frontier in the management of obesity and MASH. Now turning to Slide 14. We remain exceedingly optimistic and are very excited about the ongoing Phase III program with survodutide in people with metabolic dysfunction associated steatohepatitis or MASH, a serious obesity-related comorbidity with significant unmet medical need. Shown in this slide is an indirect cross-trial assessment of the registrational clinical trials for the 2 approved therapies in the U.S. for MASH today. The thyroid hormone receptor beta agonist, resmetirom and the GLP-1 receptor agonist, semaglutide. In the Phase II trial with survodutide in people with MASH and liver fibrosis, 38.6% of adults with moderate to advanced [ scarring ] achieved a placebo-adjusted biopsy-confirmed improvement in fibrosis without worsening of MASH after 48 weeks of treatment. We believe this represents the most compelling and strongest clinical data set to date on the critical endpoint of improvement in liver fibrosis. With these groundbreaking Phase II data and a comprehensive ambitious Phase III program now underway, the so-called LIVERAGE program, which includes 2 large trials, 1 in people with moderate to advanced fibrosis, F2 and F3 and 1 in people with cirrhosis, F4. We believe survodutide has the potential to become the therapy of choice in this large and growing market segment, offering a much-needed treatment option for people living with MASH and obesity. With that, thank you very much for your attention. I would now like to turn the call over to our Chief Financial Officer, Henriette Wennicke, who will review our financial results for the first 9 months of 2025. Henriette? Henriette Wennicke: Thanks, David, and hello, everyone. Let's turn to Slide 15 and the income statement. Revenue for the first 9 months of 2025 was DKK 9.1 billion, driven primarily by the initial upfront payment received under our collaboration and license agreement with Roche. Of the DKK 9.2 billion in upfront payment received in the second quarter, DKK 124 million was deferred as of September 30 as it relates to the progression and completion of the Phase II trial with petrelintide. Net operating expenses totaled DKK 1.5 billion for the first 9 months of 2025, with 73% of that amount dedicated to research and development. R&D expenses were mainly driven by the ongoing development of petrelintide, including the large Phase II trials and preparation for Phase III. Net financial items amounted to negative DKK 62 million for the period, primarily reflecting exchange rate adjustments related to the U.S. dollar deposits and currency devaluation. This was partly offset by interest income from investments in marketable securities. Moving to Slide 16 and the financial position. As of September 30, 2025, our cash position totaled DKK 16.2 billion, a significant increase from the DKK 9 billion at the beginning of the year. This increase was, of course, driven by the initial upfront payment of DKK 9.2 billion from Roche, partly offset by operating expenses during the period and the purchase of treasury shares to support Zealand Pharma's long-term incentive programs. I would like to remind everyone that in addition to this very solid financial position, we are entitled to receive a total of USD 250 million in anniversary payments over the next 2 years under the Roche collaboration as well as potential development milestones of up to USD 1.2 billion. As I stated in our last quarterly earnings call, I am very pleased with our capital preparedness. We are fully able to honor all obligations under the comprehensive Roche collaboration for petrelintide, while at the same time, accelerating investments in our early-stage pipeline to build the next wave of innovation. Finally, let's turn to Slide 17 and the outlook for the year. Net operating expenses for the year are now expected to be between DKK 2 billion and DKK 2.3 billion, excluding other operating items. The financial guidance has been narrowed from the DKK 2 billion to DKK 2.5 billion, reflecting the decision to pause the development of dapiglutide, previously planned to advance into Phase IIb development in 2025. This decision, as David also mentioned, reflects our active portfolio management and our sharp focus on investing in assets with the highest potential for clinical differentiation, commercial impact and long-term value creation. And with that, I will move to Slide 18 and turn the call back to Adam for concluding remarks. Adam Steensberg: Thank you, Henriette. We are now at the cusp of the most catalyst-rich period in Zealand Pharma's history. In just the first half of 2026, we expect to see Phase III enabling data for petrelintide, Phase III data for survodutide and Phase I data for what could become one pillar in the next wave of innovation from Zealand Pharma, our highly potent and specific Kv1.3 ion channel blocker. Moving to Slide 19. I can only encourage you to join us at our Capital Markets Day on December 11, where we will set the stage for the rapidly approaching data readouts. We will also share more about our ambitious research strategy, which builds on Zealand Pharma's unique expertise in peptide R&D and our strong foundation to lead the next wave of innovation in obesity and related diseases and to continue our journey towards becoming a generational biotech company. I'm excited that we will be joined by Jonathan Roth, a pioneer in amylin-leptin biology as well as Carel Le Roux and Louis Aronne, recognized thought leaders in the field of obesity. They will join us on stage to share their valuable insights. I will now turn over the call to the operator, and we'll be happy to address your questions. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Kirsty Ross-Stewart from BNP Paribas. Kirsty Ross-Stewart: So 2 on petrelintide, please. So with the eloralintide trial now published, I think interested to hear your thoughts on kind of the differences in the setup of the 2 trials in terms of baseline characteristics, titration, doses being explored and how your -- or how you would encourage us to look at your own dataset in the context of Lilly's data to kind of make a fair comparison there? And then also, David, you highlighted in your opening remarks that you're not targeting the highest possible weight loss with petrelintide, which seem quite in contrast to what Lilly have tried to do with their eloralintide trial. I think there are some people that have sympathy with that message, but maybe you could argue as well that there's still some way to go to convince the market of the validity or the strength of that message. So I guess my question is, can you provide some feedback from your discussions with regulators or takeaways from market research with physicians and patients that may help to convince this move away from, as you call it, the weight loss Olympics. Adam Steensberg: Thanks for your question. And then maybe I can start and then hand over to David. We were extremely encouraged to see the eloralintide data last week, which we really see building on what we already saw with petrelintide last year. Remember, Novo demonstrated that petrelintide can deliver 12% weight loss and we consider with a 2.4-milligram dose, which we consider a very low dose. And it really, you can say, underscores the potential that we have been communicating all the time around the amylin class that with amylins, we have the potential to actually develop a new class of medicines that will provide patients with likely a 15% to 20% weight loss and thus a true alternative to the GLP-1s. And very importantly, we expect this weight loss to be a more pleasant weight loss experience with significant less side effects, but also the nature in which the patients would reduce their food intake, we think would be superior in the amylin class in the sense of feeling full faster versus having loss of appetite. So we are extremely pleased, and you can say it actually increases our excitement around the upcoming Phase II data with petrelintide and our efforts to prepare for the Phase III trial conduct, really underscoring what we have been moving towards for a very long time. And David, maybe you want to touch a little bit upon important trials and design specifics there. David Kendall: Yes. Thanks, Kirsty. And trial design specifics, I'll reiterate what Adam said. I think 15% to 20% weight loss when we came forth with petrelintide's potential to achieve this. I think at first, there were actually some skeptics that looked at this and said that can't be possibly achieved. We've seen early [ Cagri ] data. But I think the data we saw recently from another compound in this class clearly demonstrate that GLP-1-like weight loss percentages are achievable. And we think, as Adam referred to, that higher milligram dose exposure, higher bioavailability and the excellent tolerability profile we've seen to date with petrelintide up to 9 milligrams once weekly can certainly hit that sweet spot. You also mentioned what does the market seek. One simply needs to do some math. If somebody weighs 150 kilos, a 30-kilogram weight loss for 65 pounds of weight reduction is substantial. And I think 5 years ago, the world would have thought that's unachievable with what we've seen to date, including with [ liraglutide ]. So both in speaking with clinicians and in speaking with the vast majority of patients who seek weight management therapy, that's 10% to 20% weight loss figure comes up repeatedly. They may not say 10% to 20%, but they will give you a number -- a desired number of pounds or an end target weight that generally reflects that. I think some of the data from GGG high-dose GLP-1-based therapies, which we believe suffer from challenges with tolerability can get you to the 20-plus percent range, but that serves a vast minority of the patient seeking this. And finally, to your question about the baseline characteristics, just recall that with petrelintide Phase Ib predominantly male participants, predominantly or a leaner mean population with a BMI just under 30 kilograms per meter squared. Both of those factors, we believe, could have significantly muted the response we saw in Phase Ib. We will have a much more balanced gender distribution in Phase II, a much higher baseline BMI as we reported in last quarter's call. And the likely contribution of predominantly female, very high BMI population, I think, is well worth considering it may amplify the observed results rather than mute as a predominantly male and leaner population. I think it's also important to read the details of both diet and exercise instruction in the trial. We achieved our results in Phase Ib with limited to no other intervention. So I encourage you and others to look at the full construct of all of these trials before jumping to just top line numbers. So I'll stop there. Operator: We will take our next question. Your next question comes from the line of Hakon Hemme Jørgensen from Danske Bank. Hakon Hemme Jørgensen: Hakon Hemme, Danske Bank. Also a question regarding petrelintide study design. The [ eloralintide ] data from last week demonstrated that patients did not experience weight loss -- a weight loss plateau like we see with the GLP-1 treatments, likely due to the restoration of leptin sensitivity by amylin. So how does this influence your consideration on the trial duration for petrelintide in Phase III? And how do you see the trade-off between potentially achieving greater weight loss with a longer study compared to bringing petrelintide to the market sooner? Adam Steensberg: Thanks for that question. We're going -- I'll let David answer. David Kendall: Thank you, Hakon. I think 2 very important observations. The absence of plateau, which I think was readily evident both in our short Phase Ib studies with petrelintide, but certainly offers that potential where longer exposure, some of it required for regulatory review and approval out to beyond 68 to 72 weeks will allow us to assess whether this is a continued effect. And I think importantly, speaking back to the mechanisms that Adam discussed a satiety or fullness where one feels full faster and stops prospective food intake as opposed to a food aversive signal that hit suddenly and may be consistent at least in theory, could contribute to a continued gradual weight loss over longer periods of time. So in both our own visual extrapolations and I think now looking at the elora high-dose data, noting that the higher doses were perhaps less well tolerated than the 3-milligram dose, you see not only progressive weight loss, but GLP-1-like effects, something we've been talking about for most of the past 2 or 3 years. So I think it will be important to observe what we pull out of our 42-week Phase I trial. And then the design for the longer Phase III trials will directly answer your question, but would expect the potential for progressive weight loss out beyond 1 year of treatment. Operator: We will take our next question. Your next question comes from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Sorry, sticking with the elora data from last week. So in light of that data, do you have any updated thoughts on the importance of the receptor activity that has previously been discussed? And you mentioned that you're confident it will still be best-in-class. I just wanted to know what drives that confidence given the data we've seen so far for elora. Then secondly, just following up on the trial design. Just to confirm, this trial will have no lifestyle interventions, is that correct? And then secondly, related to the trial, did you specify to have a balanced sex ratio in the trial? Or is that just happenstance? And then on dapiglutide and the decision there, I just wonder, you're obviously not short of cash. So kind of what was the thought process in terms of stopping this study? Was there any discussion with Roche about this? I appreciate you're not partnered, but did you discuss it with Roche? And also, any thoughts on potential combination with petrelintide down the line? And what studies would be need to be done in order to enable that? Adam Steensberg: Thank you for the questions. I will start with the first one on the pause on dapi. I think it's very evident and it will be even more so at the Capital Markets Day that we have what we believe really a leading opportunity in the GLP-1 space with survodutide, which [indiscernible], which do not only have a huge potential for weight loss, but actually also addressing liver health and in particular, MASH and potentially other organ damages by activating lipolysis. So it actually has a strong profile towards managing comorbidities of obesity. And now with the Roche partnership, we also, as you know, got shared economics on the combination product with CT-388, their GLP-1/GIP, meaning that's going to be the combination opportunity we are going to focus on. And thus, that became less relevant for combinations with amylin. What we have been exploring over the summer was addressing segments of the obese patients, which were suffering from specific comorbidities. And in doing those in-depth evaluations, it's very clear that it will require, as David also said, very large investments and long commitments before getting to understand the full potential for differentiation. And if you then consider the GLP-1 marketplace in 5, 6 years from now, you will see that it's a very crowded place. And we came to the conclusion that the level of clinical differentiation we would have to show by coming that late into a GLP-1 market was not worth the efforts, in particular not because we have such a rich early pipeline and fantastic ideas, which you will hear more about that we want to invest in and apply our capital. So we basically believe we can apply our capital better in those early programs. So I would say it's a very, you can say, considered decision and one which allows us to invest even more in our early-stage pipeline as we mature the company towards a generational biotech. When thinking about the upcoming data for petrelintide, we remain and we are even more confident in the potential to deliver the 15% to 20% weight loss, which we know will address by far the vast majority of the weight loss that patients are desired. And as I said before, the data that came out last week underscores the potential that we also saw with cagrilintide last year. Remember, cagrilintide was only 2.4 milligram, which is a very low dose compared to where we take petrelintide today. And so the confidence in the best-in-class potential comes from -- when we look at the consistency of the data we have seen across our early-stage clinical trial readout, the balance between efficacy and tolerability has been outstanding in our minds and then the potential to dose high and continue into the longer-term study that we are soon to report gives us that confidence in the Phase II study that we will report ZUPREME-1. We have applied diet and exercise, and we do have a gender balance of around 50-50 as opposed to the 80% females that were reported in the study last week. But again, that has been done from a very firm development perspective that you want to have exposures in those gender to make the best possible decisions for your Phase III design. You actually introduce a lot of risk by having very few of one gender because you don't get to learn about your molecule in those genders if you skew too much in Phase II. David Kendall: And Lucy, I'll take the question about the receptor biology and receptor differentiation. I think [ Thomas Lutz ] said it quite well in his introductory talk saying there's still quite a bit to understand elora based on data reported by Lilly has about a 12-fold higher affinity for the amylin receptors than calcitonin. But I think it's important to note that the proposed or the hypothesized improvement in tolerability was clearly not demonstrated. There was significant nausea, I think, up to 64% in one of the treatment groups at relatively moderate doses. Similarly, if one looks in the appendix, there's not just a transient, but a small decrease in serum calcium, which is also indicative of some calcitonin effect. So our own conclusions are that with balanced agonism as we have seen with petrelintide, we have seen one of the best, if not the best, tolerability and safety profile and that it does not sacrifice tolerability, particularly around GI side effects. I think the other comments that Thomas Lutz made, which is all of this receptor biology work and knockout activity in animal really requires confirmation in clinical testing. And to our end with a predominantly female, higher BMI population treated with high doses, there was no substantial difference, I think, based on the author's conclusions in tolerability versus historic GLP-1 programs. And we would at least posit that some of the changes, including the drop in serum calcium indicates some and perhaps significant calcitonin receptor activity in clinical treatment. So we will continue to explore how these may differ. But I think as Thomas Lutz concluded, the answers will come from the clinical trials. Operator: We will take our next question. The next question comes from the line of Andy Hsieh from William Blair. Tsan-Yu Hsieh: So it's about the patient experience that you comment frequently about. So in the context of co-formulation with CT-388, I'm curious about your take on how important it is to harmonize the number of step-ups between, let's say, petrelintide and CT-388 in the titration step, especially given the tolerability profile, incretins will likely need a more prolonged titration period. So that's question number one. Question number 2 has to do with another adverse event profile that was raised during the conference, which is fatigue. Based on our KOL discussions, I think this is probably one of the overlooked adverse events affecting patients' quality of life. That number appeared to be numerically higher than what we've seen. So I'm just curious about your take on this and also what you've seen with petrelintide clinical trial experience. Adam Steensberg: Thanks for the question. Maybe I can just start and hand over to you again, David. I think as we have also said all the time, it is about time to move beyond the weight loss Olympics, not only because it's not what patients are looking for, but it's also a clear observation on our end at least. And I would also say maybe you see that in some of these dataset, if you go too aggressive with very potent biology as we have today, especially in the start, you might actually introduce situations you're not looking for. And our observation, and you will also see that in earlier study data from several [ amylin ], you don't want to push this too much in the start. Could that be driving some of the fatigue that you're seeing? Maybe if you have a, let's say, 4% weight loss over 1 week, that's probably not that, that could be a fluid that you lose and how would that make the patients behave. So recognizing that we work with extremely potent biology, as David also mentioned before, who would have thought that you could achieve a 20% weight loss with a pharmacological intervention just a few years back. And here we are, but you have to be careful and otherwise, you may see things you don't like. So that is a key observation. When we look at our studies, we have not seen it in our programs thus far, signs of fatigue. So -- but again, let's see, we, as you know, apply actually titration throughout our entire phase of all cohorts in our Phase II study, something that was -- has not always been done with other programs. So -- and so far, we have not seen it. On the titration steps, before handing over to you, David, I also just want to mention, I mean, what we have seen thus far is that amylin actually deliver weight loss even at the initial doses. And it's, of course, clear that ultimately, when we titrate together with the GLP-1, it will be the GLP-1 that determines how to titrate because those are the ones that really need titration from a GI tolerability approach. David? David Kendall: Yes, I'll reemphasize that, Andy, and harmonizing those, I think, gives us the opportunity, as I said, to find what is the most applicable dose escalation scheme for petrelintide to get to what we hope is maximal dose with very good tolerability. As Adam said, we've seen less fatigue than in our placebo-treated subjects in the Phase I trial and very limited GI tolerability issues, that would allow you to either simplify the addition of very low dose incretin-based therapy. So it would further slowdown to get to not a maximal dose as is often done in Phase III trials or Phase III to see the maximum weight loss. But an optimized dose, let's say, dose 3 of the 388 compound and dose 5 of the petrelintide compound is what the alignment looks like. We would base that on the petrelintide dose escalation scheme monthly as what we're testing in Phase II and Phase III. So the question is then how do you formulate a fixed-dose combo to get to the optimize, not maximal dose of 388. So this is not simple math. I think we have our manufacturing team on edge for the types of combinations that are possible. But this work is well underway, and I think will allow us to do exactly what we set out to do, which is to find a very effective therapy that optimizes tolerability while still leveraging the efficacy of both components. Operator: We will take our next question. Your next question comes from the line of Kerry Holford from Berenberg. Kerry Holford: Mine is more bigger picture with regard to the market and your expectations here. So clearly, since the last update, we've had Lilly Trump deal. We now have clarity on pricing in the U.S. [indiscernible] cash pay in the Medicare channel. So I would just be interested to hear how that deal and the details that we have so far may be impacting yours and Roche's forecast and the opportunity for your next-gen obesity pipeline assets? Will it essentially now be more difficult for you to unlock the value and deliver strong returns in this market? Just your thoughts from that big picture perspective. Adam Steensberg: Thank you for that question. And we will -- actually at our Capital Markets Day in December 11, address our considerations about the current market dynamics in more detail. But maybe just to share a few considerations. I think it's a very dynamic market right now. We have already seen that a very large part of the uptake has been in the direct-to-consumer space where prices have been lower than the list prices. And we've also seen rebating in this space when it comes to the commercial channel. So it's actually a blessing to be where we are right now where we can learn from these dynamics and then design our programs and go-to-market strategy together with Roche according to those dynamics and how we think they will play out in the future. That allows us to actually define the future instead of just trying to tap into something that work. On the value opportunity, I think the key single most important parameter to unlock the value in this market and actually truly address the obesity pandemic, that is to develop therapies that patients will stay on and thus increase the volume of patients who get to these therapies. It's a huge problem that in today's market, many patients would use the GLP-1-based offerings as a little bit of an [ event-based ] therapy with the majority of patients being off therapy within a year. And a lot of that has to do with side effects we know from IQVIA data. So we focus to unlock the value of this market and to change -- to get excitement into this space again, I truly believe is by making sure you develop therapies that people can stay on and thus, you will see the volumes go up. And then the pricing part that people like to discuss so much is less of an issue as long as people stay on therapy. It's only an issue if you only stay on therapy for 1 to 3 months, and then you need to go out and find a new patient to capture that value you lose by the patient stop taking it. So we actually like the clarity that we see more and more clarity. We understand that it's still a very dynamic market. We would expect to see a significant number of changes in the coming years. And together with Roche, we would build our go-to-market models accordingly. Operator: We will take our next question, and the question comes from the line of Prakhar Agrawal from Cantor Fitzgerald. Prakhar Agrawal: Congrats on the quarter. So I had a few. Maybe firstly, going back to receptor biology. [indiscernible] is having elora as a more selective amylin, especially on amylin 1 receptor and seems to be balanced on amylin 3 and calcitonin. So maybe if you could talk about whether potently targeting amylin 1 versus amylin 3 receptor has any clinical implications in obesity and beyond. And if you can remind us about petrelintide's activity on amylin 1 versus 3 receptors? And secondly, on the trial for Phase IIb ZUPREME-1, if can you talk about how the discontinuation rates are trending as it has been an issue with some of the recent trials? And when you disclose the data next year, whether you will disclose both efficacy and treatment regimen demand when the data disclosed? Adam Steensberg: I'll start and hand over to you, David. And we do expect to disclose the top line efficacy data from both estimates, I would expect, including the relevant safety observations when we disclose the data. On the receptor profile, if you look into preclinical data, I remind you that both we and Novo had a firm effort for many, many years and came out with balanced profiles towards these receptors. And as David just alluded to, probably quite a few of the molecules we're looking at right now have some receptor activation on all 3. We have one which is quite similar, we believe, to the one that petrelintide has. Ultimately, we need, as David also said, to see clinical data. When we look at the early clinical exposure for which we have -- actually have among the different amylin molecules, that is where we see -- get a lot of confidence in our approach if you start to compare, let's say, the single ascending dose studies across the different molecules where we have data now available and published both from us, but also the competing programs. And if you then account for female to male, BMI and other aspects. But the single ascending dose data, probably some of the more honest datasets here where there's less bias, that gives us a lot of confidence and the robustness of our observations where we have not seen some side effects in one study and then others in another one, the first one disappearing, we have a very robust dataset, which suggests that we have a profile of a drug that has found the right balance between efficacy and safety tolerability. So -- and we will review more of this at our Capital Markets Day, which will answer probably in more detail some of these questions. And David, I don't know if you have more to... David Kendall: Thanks, Prakhar. And I think as you and we are learning this receptor biology, when it's assessed in vitro, looking at receptor occupancy and activation doesn't necessarily provide the entire clinical picture. And as Adam said, cagri and petrelintide are clearly balanced receptor agonists activate all 3 receptors in our hands with equal potency. [ The Gubra now AbbVie ] asset is similar in our hands, slightly greater predilection for the amylin than the calcitonin receptor. And the Lilly molecule, eloralintide while touted to be amylin more specific, it clearly had GI tolerability issues associated with it, something that calcitonin receptor dialing back has been touted to improve, but hasn't been demonstrated clinically to demonstrate. I think the other point that Adam makes that's critically important is regardless of this, how does the clinical safety and tolerability and efficacy profile lineup using the elora data as an example. There were in the early phase trials, an increase in the number of headaches, whereas with petrelintide, we've seen less headache than with placebo. The newly reported adverse effect of bradycardia, bradyarrhythmia and syncope reported in the elora trial is unique amongst this class to my knowledge. I have no idea if that's related to receptor biology or other mechanisms. Again, the clean profile and the balanced agonism of both cagrilintide now through Phase III and our Phase Ib data and beyond for petrelintide give us great confidence that, that is not only an acceptable receptor profile, it is an incredibly effective and well-tolerated profile. Operator: We will take our next question. Your next question comes from the line of Yihan Li from Barclays. Yihan Li: Yihan Li from Barclays. So we have 2. So the first one is the petrelintide Phase III timing. So it seems like you have already completed the end of Phase II meeting with the FDA. So just curious if you could walk us through what remains before initiating the Phase III monotherapy trial, which is now planned in the second half of next year, especially given your competitor, Eli Lilly, actually, they moved very fast for the Phase III will start by year-end. And the second question actually is on eloralintide, the MASH data. So again, like they showed 60% to 70% of the MASH reduction from [indiscernible] and also the other 30% from the [indiscernible]. However, an interesting thing is that it doesn't seem to have a continued decline in the lean MASH from the week 24 to week 48. So suggesting the lean MASH loss could potentially stabilize after 24 weeks. I'm just like curious, does this suggest maybe amylin-based therapy could inherently preserve lean MASH better over time? Like any thoughts will be appreciated because I'm just thinking like amylin could be used as a post GLP-1. So just curious what your thoughts there. Adam Steensberg: Thank you for that question. And I can reassure you that we are moving as fast as possible forward to Phase III initiation with petrelintide. Right now, our expectation would be second half of next year and as we have communicated today, we have reached the primary endpoint of the study. And we are, of course, also anticipating a meeting with FDA as fast as possible once these data has been analyzed and progressing as fast as possible. So -- and top line data will be available first half next year. So it's a shared commitment from Roche and us to accelerate as much as possible to get these treatments to patients ultimately and help achieve their health goals. So this is progressing with a high sense of urgency, but the Phase III start is set for second half next year. I think we need to actually wait for our Phase II data with petrelintide before we will comment more on the balance between muscle and fat preservation. Remember, we use MRI as an assessment of body composition, which is a much more precise mechanism than the [ DEXA ] scans that have been utilized by other companies. We, as everyone know, have seen extremely strong preclinical evidence for muscle preservation with the amylin class, and we need to now see human evidence before addressing this more, and we think we will get some, at least high-quality data from our Phase II study, which will be able to address this in more detail. Operator: We will take our next question. Your next question comes from the line of Theodora Rowe Beadle from GS. Theodora Beadle: Thank you very for taking my questions based on dapiglutide, if that's okay. So firstly, why did you take the decision now to pause the development of the dapiglutide rather than further exploring the potential anti-inflammatory benefits? Has there been some data generated internally, for example, that could drive that decision? And then secondly, could there be developments elsewhere in the space that change your thinking on dapiglutide? So specifically thinking about if Novo show a benefit in Alzheimer's in the evoke trial? Adam Steensberg: Thank you for that question. And as we have indicated today, we have decided to pause the program because we do recognize that it's a very attractive profile, both with the clinical profile we have seen thus far and also its potential to lower inflammation even further than the existing GLP-1s. We actually think it's probably the most differentiated GLP-1 containing mid-stage development candidate. The decision has been reached now partly, as I explained, due to the fact that we have CT-388 where we can -- as we will combine with amylin, also, of course, very much because we see now -- we see survodutide approaching, but then also just realizing that the investments needed to show the clinical differentiation and then the need for clinical -- the amount of clinical differentiation you would have to demonstrate if you launch a GLP-1-based therapy in the [ '30s ], it's a very, very high bar to pass due to the competitiveness within the GLP-1 class of medicines. And that's coming back to why we are so excited about the amylin class because it's an alternative. And if you think about how you manage chronic therapies, normally, if you cannot achieve your goal with one class, then you move on to the next. And if you need more, then you start to combine. So -- and if you then -- and we'll talk much more about that at our Capital Markets Day, consider the rich pipeline we have of early-stage assets, we have really taken a view that there's significant higher value creation opportunities by investing in these next opportunities for which we have some -- we consider at least very good ideas for how to drive the next wave of innovation and differentiation in this space. So for us, it was not, as you can imagine, an easy decision since the molecule actually looks very strong, but we also think we have so much exciting opportunities in our pipeline that the money are actually more wisely spent there. Operator: We will take our next question. Your next question comes from the line of [indiscernible] from UBS. Unknown Analyst: Just on survodutide. So you'll probably cover this more at your CMD, but in terms of the Phase III readout in the first half of next year, where do you expect tolerability will likely land considering that in the Phase II data we've seen so far, there's a pretty high level of GI toxicity? Adam Steensberg: Thank you for that question. And we, of course, soon will have the data. And please also remember that the Phase II study design, if you compare the safety or tolerability profile with the Phase II studies of -- of some of the marketed products, you will actually see a quite similar profile of tolerability. So we, of course, what we expect with survodutide is a comparable tolerability profile to the existing molecules and also a comparable weight loss. The true opportunity for differentiation is the activation of lipolysis with glucagon and thus providing better liver health as we saw with the MASH program. Also remember that Boehringer is actually pursuing higher doses in the Phase II than what they -- in the Phase III than what they did in Phase II. And that gives us a lot of confidence that by using -- applying the right titration being flexible around how you titrate as you have to be with GLP-1 allows them to go much higher. They have already tested that higher dose in the MASH population in Phase II, which is applied in the Phase III program for obesity. So we have a lot of confidence that the profile will come across as a very strong and effective GLP-1-based therapy with a tolerability profile that is comparable to what's on the market today and a clear edge towards their health. Operator: We will take our final question, and your final question comes from the line of Mohit Bansal from Wells Fargo. Mohit Bansal: So a couple of questions from my side. First of all, so given that with CagriSema, we saw a little bit of tolerability when you combine GLP-1 with amylin. And I fully appreciate the sentiment that combining GLP-1 and amylin could be interesting. But at the same time, do you -- given that amylin does have some GI tolerability issues, and it could compound with the GLP-1. So do you think the better use of amylin could be more of an immunotherapy versus a combo therapy, maybe in post-GLP setting or maybe as a monotherapy in the frontline setting? So that's first question. And second question is, we saw with eloralintide that, I mean, Phase I was -- tolerability was better versus Phase II, we saw a little bit higher GI issues. So in that context, I mean, what do you expect with petrelintide in terms of tolerability in Phase II trial as you see data in more patients? Adam Steensberg: Thank you for your question. And we definitely see amylins in particular, petrelintide having the potential to become a foundational and first-line therapy, a first choice therapy. I think what many have not really thought deeply about today is that, and we've -- yes, I think we all recognize that GLP-1 for many patients are difficult to tolerate. Many patients accept these therapies today because there's no alternative. What will the conversation be if there is a more tolerable approach to weight loss? Then you don't talk about will you tolerate it, then you will start to have a conversation, will you accept the tolerability profile of a GLP-1 if you can actually experience a more pleasant weight loss on a different modality. I think that's what we have to think about now. So that -- and that's what excites us and why we believe we have the potential to drive first choice and foundation therapy. So we definitely see, as we have said all the time, the biggest opportunity for monotherapy as an alternative and a first choice treatment for obese individuals who want to lose weight and importantly, maintain that weight loss because that is the key to unlock the value of this market is to make patients stay on therapy so they don't regain weight, and it's also the key then to achieve the health benefit. If people don't stay on therapy and they regain weight, they will not achieve the health benefit. There's also significant potential for combination therapy, but that would be for the most [indiscernible] patients living, for instance, with type 2 diabetes. As David also alluded to before, we have a different approach to the combination where we want to max out, if you will, on the amylin component, which we consider the more tolerable part of the combination and then just add a teaspoon of the GLP-1 component. And thus, we expect to have a more tolerable approach to that combination that maybe has been seen with other approaches to combination. So again, on the expectation for our Phase II study, we have -- as you can hear, we have a high level of excitement and high expectations for the profile that we will see with our upcoming 42-week data with petrelintide. Thank you. Operator: This concludes today's question-and-answer session. I will now hand back for closing remarks. Adam Steensberg: Thank you all for attending and for your questions. We look forward to future announcements and updates and to connecting in the coming weeks and months. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to the Flux Power Holdings, Inc.'s Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. A reminder, this conference call is being recorded today, November 13, 2025. I would now like to turn the conference over to Joel Achramowicz of Shelton Group Investor Relations. Joel, thank you, and over to you. Good afternoon, and welcome to Flux Power Holdings, Inc.'s Fiscal First Quarter 2026 Earnings Conference Call. I'm Joel Achramowicz, managing director of Shelton Group, Flux Power Holdings, Inc.'s investor relations firm. Joel Achramowicz: Joining me on the call today are Krishna Vanka, Flux Power Holdings, Inc.'s CEO, and Kevin Royal, Chief Financial Officer. Now before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-Ks. They can be found in the investor relations section of Flux Power Holdings, Inc.'s website at www.fluxpower.com. For those of you unable to listen to the entire call at this time, a replay will be available via webcast on the company's website. And now it's my great pleasure to turn the call over to Flux Power Holdings, Inc.'s CEO, Krishna Vanka. Krishna? Please go ahead. Krishna Vanka: Thank you, and welcome, everyone, to our Q1 2026 conference call. As we announced in our press release earlier today, revenue in the quarter reflected a temporary pause in the customer orders. This was mainly due to the uncertainty surrounding the tariff situation during the quarter, and also due to the near-term caution regarding the macroeconomic situation. With the uncertainty that tariffs had on pricing, customers held back on placing orders until there was more clarity. This dynamic also temporarily impacted our gross margins during the quarter. Lately, however, we have begun to see order rebound in our second fiscal quarter, and this is highlighted by multimillion-dollar orders from top material handling customers totaling $2.4 million. In addition to these repeat orders, we also recently secured a large order with another major airline for ground service equipment. With this new customer, we now supply to eight major North American airlines, and this represents a doubling of our airline customer base compared to last year. As I have shared with you on the prior earnings calls, the leadership here has established five strategic initiatives to guide our execution and performance. As a reminder, these initiatives include profitable growth, operational efficiencies, solution selling, building the right products, and integrating value-added software across our battery portfolio to generate recurring revenue streams. Let me provide you with an update on these initiatives. During the quarter, we made additional progress on the operational efficiencies. We achieved this by implementing another limited workforce reduction. Since my arrival, we have reduced our headcount cost by a total of 20% while maintaining consistent production levels. In October, we were also pleased to receive confirmation that we retained our listing on the NASDAQ Capital Markets. So this is now behind us. We remain committed to maintaining the integrity of our listing for broad access to our common stock. I'm also thrilled to announce that we have completed two capital raises totaling $13.8 million in proceeds, net of underwriters discount fees and expenses. These funds will be efficiently used for working capital needs and to accelerate our product development roadmap. We believe this product acceleration will create more opportunities and ultimately lead to better margins. We are excited that we recently received UL EE listing across our entire material handling portfolio of products. This will also open new market segments representing around a billion dollars in total addressable market, and these new market segments include chemical, agriculture processing, oil and gas, and pharma industries. During the quarter, we also achieved UL 1973 listing for our 80-volt intelligent batteries. This marks our first globally recognized certification for a mobile battery energy storage system best in the GSE industry and also unlocks new opportunities in AGVs and AMRs. Overall, these key safety standards provide assurance to customers that our products are reliable and safe. Our batteries were also certified recently by a world-leading multinational industrial equipment OEM for use in their new lift truck models. This showcases our commitment to working closely with OEMs and our partners as we continue to build the right products and solutions to meet our customers' needs. Another key initiative is to expand our software offerings to improve recurring revenue. During the quarter, we graduated our SkyMS 2.0 SaaS platform and converted a major airline from beta testing to a paying customer. We now have multiple paying customers on this software platform and continue to receive strong interest. We also started working on adding new AI-driven operational features to SkyMS that you'll hear about on future calls. It is our goal that every battery shipped be cloud-connected, and we are working hard towards this goal. With that, let me now hand the call over to our CFO, Kevin Royal, to discuss our first quarter financial results in more detail. Kevin? Please go ahead. Kevin Royal: Good afternoon, everyone. Revenue for 2026 was $13.2 million compared to $16.1 million in the same quarter last year. As Krishna outlined earlier, the decrease in revenue was driven mainly due to a pause in customer orders as a result of the tariff uncertainty and macroeconomic concerns. Gross margin in the first quarter was 28.6%, compared to 32.4% in the prior year period. The decrease in gross margin resulted mainly from lower sales combined with a shift in mix to our lower energy capacity products, which have lower gross margins. Operating expenses in 2026 were $5.9 million compared to $6.4 million in 2025. The decrease in operating expenses reflects the benefits of our cost reduction initiatives, including rightsizing the workforce to match current operating levels. The net loss for the first quarter was $2.6 million or $0.15 per share compared to a net loss of $1.7 million or $0.10 per share in 2025. Excluding costs associated with stock-based compensation, first quarter non-GAAP net loss was $2.4 million or $0.14 per share compared to a non-GAAP net loss of $1.1 million or $0.06 per share in the prior year period. Adjusted EBITDA for the first quarter was negative $1.7 million compared to negative $400,000 in the same quarter a year ago. Reflecting the lower revenue and margins in the quarter. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $1.6 million compared to $600,000 a year ago and $1.3 million in the prior quarter. Subsequent to quarter end, as Krishna highlighted earlier, we raised $9.2 million in proceeds net of fees and underwriters discount from the secondary offering of common stock. And we also raised $4.6 million in proceeds net of fees from a private placement of prefunded warrants and common stock warrants. Proceeds will primarily be used for working capital and to accelerate the redesign of our product portfolio in order to lower costs and improve gross profits. I will now turn the call back over to Krishna for his final remarks. And then we will open it up for questions. Krishna? Thank you, Kevin. Krishna Vanka: In closing, despite the challenges we faced during the quarter, I'm really proud of the progress we have made. This includes streamlining our cost structure, completing the capital raises that we need to support our business, regaining compliance with Nasdaq listing requirements, accelerating our product roadmaps, receiving key certifications with UL, and an important OEM, delivering SkyMS 2.0 with paying customers. With these actions and the new leadership in place, we are well-positioned to achieve profitable growth in the coming quarters. With that, let's open the call to questions. Operator? Operator: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. We will pause for a moment as the callers join the queue. We have the first question on the line of Rob Brown from Lake Street Capital Markets. Please go ahead. Rob Brown: Hey, Krishna. First question on the order trends sort of post-quarter. You talked about some recovery in orders, I guess, and you've announced some bigger orders. But how are the order trends coming through? And are you seeing that strength to continue into the end of the fourth quarter? Krishna Vanka: Yeah. So while we are seeing some evidence of a rebound, you know, we highlighted $2.4 million in orders for the material handling industry as well as a significant airline order. We really are still seeing some headwinds, which we continue to attribute to recent tariffs as well as some impact in the quarter from the government shutdown. However, we are seeing more promising trends in the second half of the year. And in particular, seeing some strengthening in our third fiscal quarter, which is 2026. Rob Brown: Great. And then in the ground support equipment market, you've had good progress there in terms of adding customers and expanding penetration in the customers. How is that market sort of looking from an investment standpoint on their part in terms of rolling out product and what sort of further penetration can you get there? Krishna Vanka: Yeah. They continue to adopt the clean energy solutions in the GSE. So I'm not seeing any pushback from the overall goal and how the airlines are thinking about going lithium, so that trend is very supportive. It was really this short-term tariff that paused some of the progress. But as Kevin mentioned, early next year, calendar-wise, we'll start seeing more activity. As you noticed, we doubled the airlines we now serve. And some of the airlines are just getting started, like the first order, literally, in the case, as I mentioned on the call. So we look forward to them taking more and more orders as they start deploying lithium. Rob Brown: Great. Thank you. I'll turn it over. Operator: Thank you. Participants who wish to ask a question may press star 1 on their telephone keypad. As there are no further questions, I would like to hand the conference back over to Mr. Krishna Vanka for closing remarks. Krishna Vanka: Sure. Thank you again for joining us on the call today. We look forward to reporting our continued progress throughout the quarter and on our next earnings call in mid-February. Operator, you may now disconnect. Operator: Thank you. This brings us to a close to today's conference. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Precigen Third Quarter 2025 Financial Results and Business Updates Conference Call. At this time, all lines are in listen-only mode. We will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Steven Harasym. Please go ahead. Steven Harasym: Thank you, operator. And thank you to all those joining us for our third quarter 2025 update call. Joining me today are Helen Sabzevari, our President and CEO; Phil Tennant, our Chief Commercial Officer; Rutul Shah, our Chief Operating Officer; and Harry Thomasian, our CFO. Before we begin our prepared remarks, I remind everyone that we will be making certain forward-looking statements. These statements are based on our current expectations and beliefs. We encourage you to review the slide in this presentation and in our SEC filings, which include risks and uncertainties that could cause actual results to differ materially from today's forward-looking statements. With that, I will now turn the call over to Helen. Helen? Helen Sabzevari: Thank you, Steven. And thank you to all those joining us for our third quarterly update call. The approval of Papcemias in August marked a monumental turning point for all those impacted by recurrent respiratory papillomatosis or RRP. Patients, families, physicians, and the RRP foundation alike. We would like to welcome you to the new era of RRP treatment with Papcemias poised to become the standard of care. Papcemias is the first and only available treatment for adults with RRP, and it represents the best data, and that's by a wide margin, ever generated in adults with RRP. Why is Papcemias a groundbreaking therapy? Let's look at the facts. First, Papcemias addresses the underlying root cause of RRP by generating an immune response against HPV 6 and 11 infected papilloma cells. Secondly, Papcemias has demonstrated transformative clinical benefit. What do I mean by that? Fifty-one percent of patients achieved complete response requiring no surgery for twelve months post-treatment, with the durability shown in fifteen of eighteen complete responders remaining surgery-free at a median duration of three years without any additional treatment. Also, overall, eighty-six percent of our patients had a reduction in their surgical burden after Papcemias treatment. Papcemias has a very favorable safety profile with nothing greater than grade two TRAs, which are similar to those of all receiving a flu vaccine, for instance. Also, the ease of administration of Papcemias. It's given as a subcutaneous administration that can be administered at any clinic or any of the physician's offices. Furthermore, Papcemias is not associated with a painful device necessary for administration. Let me be very clear here. We have treated the most severe RRP patients and demonstrated unmatched complete response rate, which has been durable with an excellent safety profile. Based on the RRP pathology, it is easy to extrapolate Papcemias results to a less severe patient population, which has been reflected in FDA's review and subsequent grant of a broad label for all adult RRP patients irrespective of the severity of their disease. In contrast, it is very difficult to extrapolate the results achieved in a less severe patient population to a more severe RRP population, as is the case with the competitor. I would like to emphasize that Papcemias pivotal study is the first and to date the only clinical trial in RRP conducted with this robust prospectively defined statistical primary endpoint. Papcemias clinical data not only beat the highest statistical bar set for the pivotal study, using the most robust clinical efficacy endpoints ever evaluated in RRP, it furthermore demonstrated the strongest data shown to date for RRP. In summary, Papcemias was granted full approval by the FDA with a broad label of adult RRP that does not include restriction on a number of prior surgeries. This is a testament to the transformative clinical data that include unmatched efficacy and strong ongoing durable responses. From a pivotal study with a prospectively defined statistical primary efficacy endpoint of complete response rate. In addition, due to the mechanism of action of Papcemias, there is an opportunity for redosing of Papcemias. And with full approval, we have significantly raised the bar for clinical data for any competitor to enter the adult RRP space in the future. This approval also marks a pivotal transition for Precigen, propelling the company into a commercial estate. Delivering this transformative therapy to market with exceptional speed and agility is a remarkable achievement. In the short time since approval, we have made great strides toward recognizing the robust commercial opportunity and building the strong foundation for Papcemias to be the newest standard of care treatment. As always, our dialogue with the FDA continues to be very productive, including the completion of a successful post-approval meeting. We are currently working toward the initiation of Papcemias clinical trial for the pediatric RRP population. In addition, we have initiated our efforts for geographic expansion of Papcemias. With that in mind, I'm pleased to announce that we have submitted a marketing authorization application with the EMA. I will now turn the call over to our Chief Commercial Officer, Phil Tennant, to walk us through our commercial development. Phil Tennant: Thank you, Helen. And I am delighted to share with you all today the exciting progress we are making with the launch of Papcemias. We've achieved a lot in a relatively short space of time. As a reminder, the approval in mid-August was the trigger to bring the full sales team of 18 key account managers on, who were hired, onboarded, and deployed in September. In the few weeks since full team deployment, we have made great progress towards our goal of quickly establishing Papcemias as the new standard of care for adults with RRP. So let me highlight the key achievements to date. Firstly, the drug is available and has started shipping to prescribers in the US for the treatment of all adults with RRP. Our field team has now engaged with 90% of our target institutions, which cover a significant portion of the 27,000 adult patients with RRP. These engagements are focused on supporting and expediting the formulary inclusion process, and we have been very impressed by the enthusiasm of the HCPs in accelerating that process. We have already seen multiple formulary approvals nationally. We're also working with HCPs in those to enroll patients who are waiting for treatment. So then, we have over 100 patients registered in our Precigen patient services hub, and a significantly larger number also being processed through institutions' own patient services teams. In line with our expectations, there is clearly pent-up demand that these hospital systems are now processing for treatment with Papcemias. Pleasingly, it's not just the large academic sites or IDNs that are expressing an interest in Papcemias. We also make good progress with a number of community practices to expedite product uptake, including some of the supergroups affiliated with ENT, oncology networks around the country. This clearly reinforces what we heard in our market research ahead of launch, and we're now seeing in practice. There is a strong preference for Papcemias due to its efficacy, durability, safety, and mode of administration. The drug can be shipped anywhere, as well as stored and forwarded easily. No device needed, no training on device needed, just a simple subcutaneous injection. And as Helen said, no need for painful electroporation. Payer coverage is advancing rapidly. As of last week, over 80 million lives are covered, and a number of other policy updates are expected to be announced in the near future. Importantly, Papcemias is also covered through Medicare and Medicaid. Suffice it to say, we're extremely pleased with this momentum, which is in line with our expectations. Finally, we're seeing strong support from physicians, whether from a large institution or community practice. Again reflective of the speed at which our teams have engaged with our target customers. We continue to see strong support and efficacy from the RRP Foundation. We have published important new data regarding the significant burden of RRP, both at the individual level and to the healthcare system, including the data released this week at the IS4 meeting in Europe. These data, coupled with the impressive and evolving durability profile of Papcemias, are helping to propel us forward as we look to establish a new treatment paradigm. In summary, we are extremely pleased with the progress being made. The market is embracing Papcemias as expected, and we also expect to further build on this momentum throughout the rest of Q4 and into Q1 2026. I look forward to continuing to share further progress across key indicators of success as we complete Q4 and move into the new year. I will now turn the call over to our Chief Operating Officer, Rutul Shah, to give a brief update on manufacturing. Rutul? Rutul Shah: Thank you, Phil. Good afternoon, everyone. I'm excited to share Papcemias manufacturing operations updates today. As part of our strategic commitment to long-term value creation, we have made significant investments to help control over our cGMP manufacturing operations. We operate a dedicated in-house cGMP facility for commercial Papcemias drug substance manufacturing. Our facility has been fully operational and a successful pre-approval inspection by the FDA, and has been manufacturing Papcemias drug substance since prior to approval. With significant in-house expertise in the production of adenoviral vectors, we are executing on our operational plan to supply Papcemias to both current and anticipated future demand. I'd like to take the opportunity today to briefly address those participating in this call. Before touching on the quarter, I want to thank our long-term shareholders for providing us the support necessary through the development and ultimate approval of Papcemias. It has been less than five years for this drug to go from the lab to approval, and we could not have achieved this momentous feat without your support. In addition, I'd like to say that I am proud to be part of the team that has provided patients with the first and only therapy targeting the root cause of RRP. Turning to our quarterly financial statements. Specifically starting with our balance sheet. At September 30, 2025, we had $123.6 million in cash, cash equivalents, and investments following our recent drawdown of the first tranche of our credit facility, which was entered into during the quarter. We expect this balance plus our projected revenues from Papcemias to fund our operations to cash breakeven, which includes continuing Papcemias launch costs and further development of our pipeline. I want to pause and repeat this point. We expect that our cash and investment balance plus expected projected revenues from Papcemias to fund our operations to cash breakeven. We remain confident in Precigen's financial future as we continue to execute on our upcoming milestones. Additionally, on the balance sheet, we ended the quarter with approximately $3 million in inventory, which represents the manufacturing costs that we have incurred subsequent to the approval of Papcemias. Costs incurred in manufacturing the product prior to the approval have been expensed as part of our R&D expenses. Lastly, during the quarter, all of our preferred shares were converted into common shares, providing us a simplified capital structure going forward. In regard to our statement of operations, the one item to note within our operating expenses is the increase to our SG&A costs of approximately $14 million in the quarter ended September 30, 2025, versus the same quarter in the prior period. The majority of this increase was driven by increased commercialization spending related to the Papcemias launch, and to a lesser extent, employee-related costs, most of which is attributable to the accounting for share-based awards. Additionally, our net loss attributable to common shareholders for the quarter ended September 30, 2025, includes two large accounting-related non-cash items, a change in the warrant liability and a deemed dividend related to the conversion of our preferred shares. Those two items combined represent $0.95 per share of the $1.06 per share loss attributable to common shareholders. We do not expect these two items to recur in future periods. For more information on our financial statements, I refer you to today's press release and our 10-Q, which was filed with the SEC after market closed this afternoon. I do want to provide certain guidance relating to our gross to net revenue adjustment. We anticipate that this adjustment will be in the high teens to low 20%, which is consistent with peers in our industry. Lastly, it has been quite a year at Precigen. As we prepared for the approval of Papcemias, we made a number of infrastructure investments, including the implementation of a new ERP system this past year. With these investments, we have positioned Precigen with appropriate systems, personnel, and controls to manage the various processes of a commercial company. With that, I'd like to turn it over to the operator for Q&A. Operator? Operator: Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. If you would like to withdraw from the polling process, please press star then the number two. If you are using a speakerphone, please lift your handset before pressing any keys. One moment while we prepare the Q&A roster. Your first question comes from the line of Jason Butler from Citizens. Please go ahead. Jason Butler: Hi, thanks for taking the questions and congrats on the launch. I'm wondering if you can give us any color on whether any patients have received reimbursement approvals yet or whether any patients have been dosed with the first dose of Papcemias. And then the follow-up is how should we think about the cadence of the pull-through from patients that are now registered in the hub to getting reimbursed drug. Thank you. Phil Tennant: Thank you, Jason. And I think for the first question, I would refer to our Chief Commercial Officer, Phil. Phil? Phil Tennant: Sure. Hi, Jason. Yes, still here. Good to speak to you. So, as we mentioned, we've started shipping Papcemias to institutions basically for patients who are being scheduled for treatment as we speak. And as I mentioned, we've got payer coverage coming through thick and fast. So those two things are coming together and we're not going to go into details about specific patients being dosed at the moment. But I think in Q4, we'll see that come through and we'll be when we report our Q4 earnings, we'll be able to talk specifically to numbers of dosed and of course the earnings and the revenues that go along with that. Oh, the second question regarding patients in the hub. Again, you know, they're sitting there now ready for benefit verification and prior authorization. So and we're also seeing a whole load of those patients who are not necessarily in our hub, but are going through the institution's own patient services systems. So you know, that pull-through will be institution by institution, but we expect that to be starting to pick up the pace as we go through Q4 as these come together, both on the institution side, and the payer side. But we're very pleased with the number of patients that we're seeing coming into the top of the funnel ready to be activated and treated. Jason Butler: Can I just squeeze in a quick clarification point there? So do you expect the majority of patients that go into one of the hubs to actually become to pull through into receiving drug? Phil Tennant: That would be our expectation. Yes. Helen Sabzevari: And Jason, maybe I can add on. These patients, both the ones that are being registered at the Papcemias hub or at the centers that they have their own registration hub, basically they are various adult RRP patients, that through their physicians have been identified for the treatment and will be joining to receive. So that's very exciting. And I think prior to approval of Papcemias, our analysis had shown that there will be a large patient population. And as you have seen it, the estimate is 27,000 in the United States. And it's really important to say that we are seeing that kind of a demand coming through from the various centers. And just to reinforce, Jason, a lot of these centers, they prefer to use their own expertise and systems and patient services initially. Now obviously if they want to explore copay support or free drug support where for appropriate patients they would need to ultimately come into our hub. So we've, as you said, sort of got these two hub components that are coexisting at the moment, both of which suggest that the pent-up demand that we identified is absolutely there. Operator: Your next question comes from the line of Swayampakula Ramakanth from H.C. Wainwright. Please go ahead. Swayampakula Ramakanth: Thank you, and congratulations everybody, everyone on the team there. It's a great moment, and it's a time to take order for you guys. Excellent. So for my one question, I want to check with Harry regarding the statement saying that you are funded to cash flow breakeven. Which is obviously a significant statement you're making. What sort of assumptions are you taking into this, you know, in terms of either revenue or patient penetration, how did how how should you know, rethink to to get there? Harry Thomasian: Yeah. Okay. Good to good to talk to you, and appreciate the question. I would say at this point, we're not guiding on revenue. So it's kind of difficult to say you know, when or or how we get to cash flow breakeven. But I think we're willing to state that by the 2026, we'll be cash flow break even. Operator: Your next question comes from the line of Michael Dufour from Evercore ISI. Please go ahead. Michael Dufour: Hi, guys. Thanks so much for taking my question. Question and huge congrats on all progress here. Number one, just given the obvious pent-up demand and bolus of patients that are expected to go on therapy soon, could you give us any color as to how long that bolus may last just considering the reimbursement hurdles that any new therapy encounters during the first year? And I have a follow-up. Phil Tennant: Well, do. We look at analogs of rare diseases and the uptake where you do have pent-up demand. So we think that's going to last for quite a while. The 27,000 adult patients that we've identified are already there in the system. Obviously some more severe than others. Some see the healthcare protection practitioner more often than others. But those are the patients that are actually there in the treatment and then you would have the incident population on top of that. So I think this bolus of patients is going to be there for quite a while to come. Helen Sabzevari: And Michael, maybe I can also further add. The importance of broad labels which covers basically all adult RRP, which means anyone who is also going to be diagnosed immediately or they had for instance, one surgery. And it will be continuously added to this hubs for the treatment, and it's very clear, at least from what we are seeing from the patients' enthusiasm as well as the physicians. That based on the data that has been published from Hopkins prior, that basically patients by fifth surgery, they have irreversible damages to their either trachea or vocal cords. Clearly now the patients, early as their diagnosis, they will be joining. So the pent-up demand, obviously, all of the severe patients, but also now all of the patients. That have been diagnosed or undergoing diagnosis they are basically eligible to receive their Papcemias, and their physician, actually this is the important. And as for instance, if you look at our press release today, Dr. Best, which is one of the renowned physicians for the treatment of RRP in the world, he refers to Papcemias as nothing short of remarkable data for these patients' treatment of adult RRP, and then also positioning it. It's poised to become a standard of care, which then covers all that population. I think that's very important. Michael Dufour: Excellent. Thank you for that, Helen. And just my quick follow-up is, just for modeling purposes, how should we think about subsequent cycles of therapy and would payers even allow subsequent cycles beyond the first four doses? Helen Sabzevari: Yeah. I think this is an excellent question. First of all, it's very important. And this was one of the interesting concepts that FDA has encouraged. Very much for the redosing of the Papcemias and for the expansion of that. And the reason has been based on the safety obviously, the efficacy and the durability of a response results that we have seen. And at the moment, of course, in the label, it's at the discretion of the physician. In order to redose. So if they feel that the needs to be redosed, they can prescribe to that. And of course, as we are moving forward, we are further generating further data on redosing of the patients. So I think there is huge expansion from that side. And one of the other things that we have mentioned is that our partial responders as I mentioned, eighty-six percent of our patients they reduce their number of surgeries. And it's very, very important, and that was part of the discussions along for our BLA that clearly they will benefit, it seems, from the redosing because their immune system is being enhanced to address the root cause of this disease, which is HPV 6 and 11. And I think this is one of the areas that we are also expanding besides our pediatric clinical trials. It's further generation of the data on the dosing of the patients. Redosing of the patients, I should say, which is initiated in the next year. Phil Tennant: And I would just add from a payer perspective, the one characteristic of the drug that really stands out for them and will support us in any redosing conversations is the durability. You know, so we started off with the one year from our clinical registrational studies. We then get the two-year follow-up in our label. We've just published our three-year data. All of this is very important data. For the payers and obviously we share that with them, build that into our value proposition so that we can support the concept of redosing. Operator: Your last question is from the line of Brian Cheng from JPMorgan. Please go ahead. Brian Cheng: And congrats on your progress here. I just wanna clarify how you record Papcemias revenue on your financial statements. Do you recognize revenue following each injection or at the end of the four injections? And I have a follow-up. Thank you. Harry Thomasian: Hey, Brian. This is Harry. Thanks for the question. Yeah, we recognize revenue when title transfers to either shipping through a specialty pharmacy or directly to the IDN or the community hospital, and we recognize revenue upon receipt by those entities. So we don't wait until the injection occurs. Which generally is going to be within a day of it being received. Brian Cheng: And as we think about the registered patient population within your patient hub and also the institutional patient hub, I'm curious if you can help us think about, you know, the size and the trajectory of the registered patients. And then is it safe to assume that all of the all these registered patients will will get Papcemias? Within a defined period of time. Phil Tennant: Yeah. I mean, look. Our hub and the hubs that we are understanding are being set up and implemented at the institutions. They are recruiting patients rapidly. There's a lot of momentum there and we would expect to continue obviously with the bolus of patients that we know is out there. They'll be worked through as we said earlier, you know, patients are there for a reason because they've been identified for treatment with Papcemias. And so we would expect the vast majority of those to ultimately then make it on to Papcemias. The period of time is difficult to pin down, but there's a high sense of urgency that we have picked up in our interactions with the physician community whether it's at the IDNs, but actually also at the community level. With physicians approaching us and wanting to expedite access at the community level. So I do think there will be an expedited uptake from the initial pool of patients that we're seeing, but that will continue for quite a while. Helen Sabzevari: And maybe, Brian, I can add really to what Phil said. I think what we are seeing, especially with the broad label, that now we are going to be treating the patients that as early as having one surgery or actually just being diagnosed. And they have to go through the surgery, plus all the other severe patient population that exist there, and they are being scheduled by their physicians. And as we have already knew prior to the approval, but clearly have been seeing it post-approval as well from the physician. Physicians do not want to do these surgeries. And they are trying to prevent having these surgeries as soon as possible for these patients. Because they know that with every surgery there is basically closer to that damage line of five surgeries that causes irreversible damage for these patients. So I think collectively, when you're at all of that, there is a continuous patient addition. And with the understanding that, of course, these patients not only are identified and they will be getting a treatment, and they are enrolling as we speak and actually the prescription is ongoing. Operator: There are no further questions at this time. So I'll turn the call over back to Helen Sabzevari for closing comments. Please go ahead. Helen Sabzevari: Thank you to all those participating in the call today. As you can see, times are very exciting for us at Precigen and for the RRP community as a whole. We look forward to providing you with further updates as our launch progresses. In closing, I would like to leave you with words from a Papcemias patient who is one of the complete responders from the clinical study. The sound of hope living with RRP the last twenty-four years has been the sound of my own voice. When I have it. It's being heard even when this virus is trying to destroy my vocal cords. RRP not only took away my voice physically but also emotionally. So hope for me has been the moment I've been able to speak and others been able to hear me. Power of voices is camaraderie and advocacy. Being part of a community that refuses to be silenced, when my voice is weak, others are standing beside me and if needed speaking up for me. Today, hope sounds different. It's a physician telling their longtime RRP patient you don't need another surgery. There's something new. Today the sound of hope is Papcemias. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Good day. And welcome to the Xos, Inc. Third Quarter 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance, after today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note that today's event is being recorded. Please go ahead. I would now like to send the conference over to David Zlotchew, General Counsel. Thank you, everyone, for joining us today. Hosting the call with me are Xos' Chief Executive Officer, Dakota Semler, Xos' Chief Operating Officer, Giordano Sordoni, and Xos' Chief Financial Officer, Liana Pogosyan. Today, after the close of regular trading, Xos issued its third quarter 2025 earnings press release and filed its quarterly report on Form 10-Q for the periods ended September 30, 2025. As you listen to today's conference call, we encourage you to have our press release and quarterly report in front of you, including our financial results, as well as commentary on the quarter and nine months ended 09/30/2025. Management's statements today reflect management's views as of today, 11/13/2025 only, and will include forward-looking statements, including statements regarding our fiscal year 2025 management's expectations for future financial and operational performance, and other statements regarding our plans, prospects, and goals. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially, including, but not limited to, Xos' ability to access capital when needed, continue as a going concern, Xos' ability to implement business plans and identify and realize additional opportunities and potential supply chain disruptions, including as a result of changes to or uncertainty around trade policies and tariffs, is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10 and subsequent filings. We undertake no obligation to update forward-looking statements except as required by law. You should not put undue reliance on forward-looking statements. Further, today's presentation includes references to non-GAAP financial measures and performance metrics. Additional information about these non-GAAP measures, including reconciliations of historical non-GAAP measures to comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available in the Investor Relations section of our website at www.exostrucks.com/investor-overview. With that, I now turn it over to our CEO, Dakota. Dakota Semler: Good afternoon, everyone. At Xos, we are building something that did not exist before and doing it under constraints that might break most companies. And yet, quarter after quarter, we've shown that discipline when paired with conviction scales. It creates momentum. It compounds. And in Q3 2025, that momentum was unmistakable. This quarter, we shipped 130 vehicles generating $16,500,000 in revenue. We actually shipped 140 vehicles, including 10 strip chassis already on their way to upfitters for a major customer program. That revenue will be recognized in the coming quarters. But the signal is clear. Demand is real, customers are returning, and scale is growing. Much of this volume went to UPS and FedEx ISPs. Organizations that do not forgive unreliability, that do not tolerate downtime, and that absolutely do not adopt new technologies unless they believe in your engineering and your ability to deliver at scale. Their confidence in us is earned, not inherited. We continued fulfilling the largest single order in our company's history, a 200-plus unit order program. We believe this is the shape of the future for Xos. Deeper relationships, larger programs, repeatable volume. Our GAAP gross margin was 15.3%. This margin reflects a complex reality, a diverse mix of customers, long-term structured pricing with national accounts, and, yes, tariffs that were not contemplated when some of these large programs were originally priced. These large fleet agreements may compress margins in the near term, but they're the foundation of a durable industrial business. They create the volume and the credibility needed to expand margins in the future. And while we shipped the highest units in our history, we also drove our lowest operating loss since the business went public, to $7,000,000. That did not happen by accident. It happened because we questioned every expense, every process, and every outdated assumption about how vehicle OEMs should operate. This quarter represents the ninth consecutive quarter of positive non-GAAP gross margins. Many companies talk about discipline. We have lived inside it, and it shows. We've also strengthened our liquidity while continuing to invest in the opportunities that are expanding around us. I want to personally acknowledge the Alger Mae Automotive Company whose support of Xos has been unwavering. They have seen our progress up close, and they've seen the technology, the execution, and the market shift towards reliability and total cost of ownership. Together, we amended the repayment structure of the convertible note, moving from a single August 2025 maturity to quarterly installments from November 2025 through February 2028. This is not just a restructuring. It's a strategic alignment. It allows us to operate from a position of focus rather than constraint. Interest accrued to the original maturity was paid in common stock in August 2025, making Algerme our largest shareholder. A strong signal of their conviction in our long-term trajectory. We will continue to pursue capital strategies, equity, debt, or hybrid structures that allow us to scale responsibly and capture the opportunity in front of us. Even as the step in continues to drive substantial revenue, our strategy has never been limited to a single product. We are deliberately expanding into higher margin, lower concentration categories, including powertrains and energy infrastructure. This quarter, that strategy became real. We delivered 18 powertrain systems to Bluebird Corporation this quarter, and since quarter end, we've received nearly 80 additional powertrain orders. School districts are electrifying faster than anyone expected, and our technology, which is modular, reliable, and highly serviceable, is becoming the backbone they trust. And speaking of school districts, we are actively selling into that market right now. Gio and I are in Austin this week for the Bluebird annual dealer meeting, demonstrating firsthand why Xos powertrains outperform on reliability, serviceability, and total cost of ownership. Our presence here is already opening doors, and we expect this engagement to translate into significant commercial opportunities over the next one to three years as we expand our pipeline in the massive school bus market. And then there's the Xos Hub. Grid constraints are not a theory. They are the single largest friction point in North American fleet electrification. The hub addresses this head-on. It's not a prototype. It's deployed. It's working, and its impact is expanding far beyond transportation. In Q3, deployments and demonstrations accelerated, and interest in the hub broadened meaningfully. We also showcased the hub at RE plus, the largest renewable energy conference in North America, where it drew significant attention from utilities, energy developers, and industrial users looking for mobile power, resilience, and peak shaving solutions. The response confirmed what we already knew. The hub addresses a problem that almost no one else in the market is addressing effectively. We're now preparing the 2026 hub update, which will deliver greater power resilience, energy cost optimization, and advanced load balancing capabilities. This isn't just a charging product. It's a mobile energy platform capable of serving industrial users who require temporary power, peak shaving, and resilience in environments where grid and infrastructure is either delayed or nonexistent. This dramatically widens our total addressable market and it positions Xos as an energy systems company, not just an electric truck company. All in, Q3 2025 was a milestone quarter. We achieved record deliveries, maintained revenue momentum, substantially improved operating performance, and further validated that our cost discipline and product strategy cannot only maintain operations, but accelerate it. As we look ahead, the opportunities in front of us are expanding, not contracting. Order sizes are increasing as customers experience the real-world cost advantages of our trucks and our charging solutions. And our product pipeline, including the upgraded hub, and our foray into power resiliency solutions, aligns with secular markets that will grow regardless of political cycles, incentives, or noise. I believe we are experiencing what durable industry companies go through in their formative years, pressure, discipline, breakthroughs, and the unmistakable feeling that the work is beginning to gain traction. With that, I'll turn it over to Gio to walk through the operational highlights of the quarter. Giordano Sordoni: Thanks, Dakota, and good afternoon, everyone. Q3 was another quarter of steady execution, disciplined operations, and forward momentum as we continue to deliver for customers and position Xos for sustained long-term growth. Our Tennessee plant remained the cornerstone of our success this quarter, running efficiently and producing at a consistent cadence for our major fleet customers. We continue delivering on our UPS order, demonstrating our ability to maintain quality at scale for one of the world's largest and most demanding fleet operators. With a small, highly capable production team, we achieved rates of three chassis per day, underscoring our ability to efficiently scale into higher volumes. Our engineering, supply chain, and production teams also responded quickly to customer requests during the quarter, designing and deploying product improvements that enhance reliability, serviceability, and customer satisfaction across our chassis line. Production of our innovative mobile charging system, the Xos Hub, also continued in Q3. The hub remains one of our most differentiated offerings in the market, providing fleets a fast, flexible, and cost-effective way to deploy electric vehicles without waiting for fixed infrastructure. The hub allows these fleets to speed up the time it takes to deploy fast charging, skipping lengthy permitting, utility power upgrades, and construction processes. Customers are now using the hub across a broad range of segments and unique charging use cases, including electric trucks, school buses, light-duty electric vehicles, and even autonomous vehicle fleets. The hub engineering team has been hard at work developing new variants aimed at further expanding the product's addressable market and enabling new use cases. Q3 also marked the expansion of our powertrain production capabilities, as we advanced new powertrain variants for the Blue Bird School Bus Company. These efforts further validate the versatility and maturity of the Xos powertrain platform and strengthen our position as a trusted electrification partner for vehicle manufacturers seeking proven and road-tested solutions. As we close out the year, our focus has shifted towards setting the stage for 2026. Across our trucks, powertrains, and hubs, we're preparing for continued growth that we expect will bring higher volumes and a broader customer base. In Tennessee, we've begun expanding the hub and powertrain assembly areas within our factory in anticipation of 2026 demand. These improvements will allow us to scale efficiently without production increases without significant increases in capital expenditure, while maintaining flexibility across product lines. Q3 reinforced what makes Xos unique: reliable execution, engineering innovation, operational discipline. We continue delivering for our major customers like UPS, built new hubs, advanced powertrain programs with OEM partners, and invested in the foundation to support our next phase of growth. As we look ahead, our team is focused on finishing the year strong and carrying this momentum into 2026, where we see significant opportunities across all three pillars of our business: trucks, powertrains, and charging infrastructure. With that, I'll hand it over to Liana for financial review. Liana Pogosyan: Thank you, Gio. Third quarter 2025 revenue was $6,500,000 on 130 units, down from $18,400,000 on 135 units last quarter and $15,800,000 on 94 units a year ago, reflecting strong execution of our delivery plan and major shipments to customers like UPS, Bluebird, and FedEx ISPs. While we recognized revenue for 130 units this quarter, as Dakota mentioned, we actually shipped a total of 140 units. For 2025, revenues totaled $40,800,000 on 294 units compared to $40,500,000 on 246 units in the same period last year. We delivered more units year over year, reflecting strong demand, so the shift in product mix driven largely by our strip chassis product and powertrains resulted in a lower average selling price and a modest decline in total revenue. GAAP gross margin was 15.3% in the third quarter compared to 8.8% in the second quarter this year and 18.1% in 2024. The sequential increase was mainly driven by changes in product mix discussed earlier, including more powertrain units sold, which generally have a higher margin than strip chassis and step vans. In addition, we had a higher ASP from the sale of UPS strip chassis this quarter due to a negotiated rate to include the impact of tariffs. Non-GAAP gross margin was 16% this quarter, up from 1.4% in Q2, mainly because inventory-specific reserves increased this quarter, are added back in the non-GAAP number. This marks our ninth consecutive quarter of positive non-GAAP gross margin. For 2025, non-GAAP gross margin was 9.3% compared to 16.6% in the same period last year. We remain confident in our ability to improve margins over time as we scale production and execute on cost reduction initiatives. Turning to expenses. Operating expenses were $9,500,000 in the third quarter, up $800,000 or 9% from the second quarter this year and down $3,000,000 or 24% from 2024. For 2025, operating expenses totaled $28,700,000, a $10,300,000 or 26% improvement from $39,000,000 in the same period last year. These sustained reductions demonstrate the structural impact of our prior cost-cutting actions and reinforce our disciplined approach to managing the business. Operating loss for the quarter hit a record low since going public at $7,000,000, down from $7,100,000 in the second quarter this year and down from $9,700,000 in 2024. Non-GAAP operating loss since the business went public also hit a record low at $4,800,000 compared to $6,900,000 in the second quarter this year and $6,600,000 in 2024. For 2025, operating loss was $23,300,000, improving from $31,300,000 in the same period last year. While non-GAAP operating loss also improved to $19,700,000 from $25,700,000 in the period last year. Moving to the balance sheet. We ended the quarter with $14,100,000 in cash and cash equivalents, up from $8,800,000 at the end of last quarter. Our improvement in liquidity this quarter was boosted by three main factors. First, successful launch of our ATM program, which generated $2,400,000 in net cash proceeds this quarter. Second, strategic inventory management. Inventory declined to $25,200,000 from $31,000,000 last quarter, driven by strong unit sales outpacing production as we move more units from existing inventory, reflecting our ongoing inventory management to support upcoming deliveries. Third, accounts receivable came down to $15,400,000 at the end of the quarter from $21,000,000 at the end of June. We had very strong collections this quarter, about $18,700,000 from customers as well as Stategram program administrators. While our UPS delivery carries longer payment terms, which increased new receivables in the quarter, we feel well-positioned for continued solid collections going into next quarter. Our focus this quarter has been on execution, financial discipline, and strengthening the foundation for sustained growth. During the quarter, we took strategic actions to strengthen our balance sheet and extend our financial runway. We amended our $20,000,000 convertible note, extending principal payments quarterly starting in Q4 2025 through early 2028 to enhance liquidity and provide greater flexibility. We also reached an agreement to terminate our Mesa facility lease that we acquired as part of the EMV acquisition during the first quarter of 2024, which is expected to generate approximately $20,700,000 in cash savings through 2033. Although we're no longer responsible for rent on the Mesa facility, the termination agreement does require us to make 18 monthly payments totaling about $2,800,000. As part of the termination, we also recognize a $9,400,000 gain in non-operating income along with other required GAAP adjustments such as the removal of the related operating lease liabilities. We continue to actively manage our liquidity position and are exploring additional opportunities to further enhance it. Together, these actions demonstrate our disciplined approach to capital management and our ongoing commitment to positioning Xos for long-term stability and growth. Beyond the balance sheet actions, we continue to execute well operationally. We generated positive free cash flow of $3,100,000 in the third quarter, marking the third time we've been free cash flow positive since going public. This is down slightly from $4,600,000 in the second quarter but is a major improvement from negative $11,700,000 we reported a year ago. That progress reflects strong deliveries and continued discipline in managing working capital. Finally, turning to guidance, we are reaffirming our full-year 2025 guidance for revenue and unit deliveries and previously revised non-GAAP operating loss guidance. Revenue between $50,200,000 and $65,800,000, non-GAAP operating loss between $24,400,000 to $26,900,000, and unit deliveries between 320 and 420 units. With that, I'll turn the call back over to Dakota. Dakota Semler: Thank you, Liana. Stepping into 2026, momentum behind Xos is unmistakable. Our priorities are clear: accelerate growth, reinforce liquidity, and continue expanding margins with precision and discipline. Over the last twelve months, we've shown that a company can be both lean and innovative, that you can run efficiently without sacrificing the strength or competitiveness of your product portfolio. We built a deep and diversified sales pipeline even while navigating global supply chain disruptions that caught much of the industry off guard. Our ability to adapt quickly to absorb unexpected shocks, and to keep delivering for customers is one of our defining capabilities. And customers notice. In a marketplace that changes by the week, resilience and reliability are currency, and they're becoming core reasons fleets are choosing Xos as a long-term partner. As we move toward what we expect to be our largest and most transformative year, our confidence is only growing. We believe we're positioned to confront challenges head-on and to continue building the most durable, dependable business in our sector. With that, I'll hand it back over to the operator for questions. Operator: Thank you. We will now begin the question and answer session. If your question has already been addressed and you'd like to remove yourself from the queue, please press star then 2. At this time, we'll pause momentarily to assemble our roster. And today's first question comes from Craig Irwin with ROTH Capital. Please go ahead. Craig Irwin: It's Andrew on for Craig. Congrats on the continued progress, and thanks for taking my questions. First one for me is on the hub. I mean, the use case for fleets is pretty obvious. But I think we're seeing increased activity here in the autonomous vehicle space. And you guys have talked about increasing demand for uses such as backup power applications. So how should we think of the opportunity for the hub platform now? Dakota Semler: Yeah. Andrew, thanks for the question. With the hub opportunity, I think there will continue to be in the realm of double-digit growth in the next year for that EV charging segment, which is supported by a lot of our fleet customers. But also customers beyond the customers of Xos trucks. So one of our larger customers that we've talked about is Waymo, the self-driving car company. They've been continuing to grow their purchases with us. We also have several utilities and state transportation agencies like Caltrans who bought quite a few units. So we continue to see that market growing at a very stable clip. But our power resiliency and backup power functions are going to be launched next year, and that's another opportunity that we believe far exceeds the growth potential of the EV charging market. As you may know, the power cost in the US and Alaska five years have risen anywhere from 20-50% depending upon where you are in the States and what utility you're in. And that incremental cost is borne by consumers and borne by businesses. And while a lot of that market has been addressed by the consumer market has been by residential energy storage, there hasn't been a large influx of commercial and industrial buildings adopting energy storage. So we view significant opportunities in that market to participate in wholesale power markets, to do demand response programs, and to ultimately help businesses with reducing their total energy cost. So that's really where our focus on growth is going to be for the hub in the years to come. We haven't provided specific guidance around how we're quantifying that growth and volume, but we expect it will follow similar trajectories to the launch of the hub charging system and also continue to be a higher margin product, that's really more of a unique product in a segment that hasn't been widely addressed by other suppliers in the space. Craig Irwin: Great. Well, seems like an exciting opportunity, and thanks for the details. Second one for me here is on your chassis deliveries to Blue Bird. It seems like they're accelerating. You guys said, I believe, eighty more orders following quarter end. You touched on it in the prior remarks, but can you just talk about customer feedback, what you're seeing, and what's kind of driving this accelerated growth? Dakota Semler: Yeah. Absolutely. It's been an exciting partnership with them, and we've continued to build this over the last couple of years, and it's finally starting to take hold. We've delivered those first 20 or so units, and they're actually operating with a customer up in the Northeast right now. And one of the exciting things for us is that Blue Bird has been selling electric vehicles for many years now, working with other powertrain providers. And their powertrain options, I would say, are more limited than what we can provide. So one of the first projects we helped them bring to market was a shorter wheelbase powertrain configuration that hadn't been an option before for some of these short wheelbase school buses that are used in city environments. And so we packaged that first powertrain on with them over a year ago, went through the full durability and validation process. And now that's in market with customers. And if there's anything we've learned this week from being at the Bluebird dealer meeting in Austin, it's that there's a lot of interest in that product beyond the initial launch customer. So we mentioned that we've got those additional follow-on orders subsequent to the quarter close. And we are actively working on additional variants with increased capacity and range that will ultimately start marketing to the Bluebird dealer body as well as many of their national accounts. What's really exciting about that is there's a significant growth opportunity in school bus. We're still seeing high rates of electrification. Bluebird being the leading alternative powertrain provider in the school bus industry, and we are going to be their first LFP battery option and powertrain option. Which will, I think, significantly help with their customers in adopting these just because, again, it's going to increase the reliability and the resiliency of these battery packs. School bus fleets, which obviously, reliability and durability and longevity for their fleet, is top of mind. It's probably one of the single most important evaluating criteria when they're making a determination of which partner they work with. So we expect that to continue to grow into 2026 pretty substantially, and hopefully, we'll be able to talk about that more by next quarter and give a little bit more detail on those orders beyond the additional 80. Craig Irwin: Great. Well, I appreciate the color. And last one for me. If I may. You guys had another solid quarter of unit deliveries. I believe you're at 294 for the year. You reiterated your guide of 320 to 420 for the year. Can you just talk about the puts and takes reaching kind of the high and low end of the guide there? Dakota Semler: Yeah. As we've talked about in the past, we always have seasonal and that's attributed to the industries that we serve. Delays in delivering through Q4. We work with the largest parcel delivery companies in the world. And many of them, meaning, once the Thanksgiving holiday starts, are operating during their peak season in Q4. Their network volumes can often double, and they're dealing with a lot of other additional growth and package volume than they normally do. So it's generally a lighter quarter from our key customers in Q4. So we expect a little bit of that impact to hit us in Q4. We still expect to remain within that guidance range. But there'll be other deliveries in Q4, such as powertrain deliveries and some other customers and hub deliveries, that will continue to round out the year. And then we expect that to continue to grow back in Q1 and Q2 of next year. Craig Irwin: Great. Well, appreciate the color, congrats on strong results. Operator: Thank you. Our next question comes from Ted Jackson at Northland Securities. Please go ahead. Ted Jackson: Thank you very much. And I will echo congratulations on a quarter. It went well across the board. Dakota Semler: Thanks, Todd. Ted Jackson: Let's start with tariffs, Dakota. You know what I mean? So one of the comments that you made in your prepared remarks was that you were able to do some renegotiation with UPS with regards to tariffs. I guess the first question around tariffs is, have you been able to price adjust that across your product offering at this point? Or is there still some impact that's that will come to bear as we roll through going forward? Dakota Semler: Yeah. I'm happy to start, and I'll pass it over to Gio to follow on. But I think we're taking a multistep approach to insulate ourselves from the volatility that we've experienced this year from tariff regime changes and uncertainty in the tariff environment. The first of which is focusing on reshoring or getting as much domestic content as possible to make sure that we don't face this kind of volatility in the years to come. The second is working with our suppliers and sharing in that cost and helping us to realize better cost improvements or accelerated cost-down efforts that they understand, obviously, will help them grow their sales pipeline with us. But sharing in some of that exposure has been, I think, the second most important decision. And then the third and last area is just, again, an effort to work with our customers not to just increase prices to them, to give them clarity around the tariff changes that have impacted us. And then figure out how we share in that tariff exposure. And we want to build long-term durable relationships with our customers. These aren't fly-by-night customers. They're some of the most sophisticated fleets in the world. And so our efforts are not just to pass everything along to them, but to demonstrate to them that we're willing to work together to share in that cost exposure while still trying to reduce the acquisition cost of our vehicles for them so they can be competitive from a total cost of ownership standpoint. And ultimately get these vehicles to near price parity with diesel vehicles. I'll let Gio add a little bit more context too. Giordano Sordoni: Yeah. I think Dakota hit the nail on the head. It's really been it our supply chain team busy with tariff changes starting earlier in the year. We've seen some continued at least talk of changes. So we are keeping our options open, working with our supply base, establishing backup supply in critical parts where needed. And it's really on the cost front been an open conversation, and there's been willingness to share in some of the cost increases between ourselves, our suppliers, and our customers. And we're doing everything we can to make sure we can guarantee supply going forward without blowing up costs. Ted Jackson: Okay. Next question. First, to verify so you shipped 18 powertrains to Blue Bird during the third quarter? And then you had 80 orders since that time. Dakota Semler: Yeah. Approximately. We've I think it closer to exactly 75 incremental orders. But, yeah, we've had substantial follow-on since we made those other deliveries. Ted Jackson: And then if you did 18 powertrains, did you have any hubs went out during the quarter? Liana Pogosyan: Yeah. It'll be in the queue as well. Ted Jackson: If you don't have it in front of you, it's not that big of a deal. So then then I and then so Liana Pogosyan: Yeah. We actually we did have an incremental hub. While we don't disclose the breakout between powertrain and hubs, we did have hubs deliveries as well this quarter. Ted Jackson: So usually, actually, you do break it out in the queue. Anyway so then you with the 75 new powertrains, those will will those be get are those the bulk of those will will ship? Ship in 2026? Dakota Semler: That's correct. Yeah. Ted Jackson: So then it's been when I think about that, like, so how this growing? Fat you know, fast. Powertrains is growing fast. You're bringing the cost of tariffs more in line. So, you know, you so if you go forward, you're gonna have a mix shift towards your higher product margin products in '26 along with you know, less of a drag on tariffs. What can we think about when we I mean, if it's more of a general concept, but what kind of margin improvement do you think you could get you know, in '26 vis a vis '25 with all those those, you know, tailwinds, if you would. Dakota Semler: Yeah. Well, we haven't provided specific guidance around next year. I think when we look at the margin profile of our core truck products, it's really variable depending upon our customer profile, and that can be you know, as low as the low teens to kind of the mid 20% gross margin range. Based upon product configuration specifications, customer pricing, you know, bulk purchases, things of that nature. When we look at our other product lines, like the powertrain and the hub business, those are generally, I would say, in the kind of 15 to 35% range with the hub representing that higher end of that range, and the powertrain configuration representing kind of the lower to the middle portion of that range. So you're right in assuming that the margin mix will shift towards the higher end of our margin spectrum. And that's something that as we work with our partners and our customers, I think we can continue to mitigate and minimize the exposure and disruption from tariffs to further improve that in a way that benefits both of us and hopefully improves margin on our powertrain kits as well as on their end-user products that they're selling to their customers. Ted Jackson: But, I mean, is it fair to just conceptually that, you know, the chances are that you'll have, you know, a noticeable improvement with regards to your margins. In '26 versus '25 because of how the mix is of your business is changing. Dakota Semler: Yeah. I think that's a very fair assumption. Ted Jackson: Okay. And then can I can I touch over on the lease So you're you have a $2,800,000 that you're gonna be paying over the next eighteen months? Is that what you said? Dakota Semler: That's correct. Ted Jackson: Yeah. So then so so basically then it's like what is it like? You know, you know, 450 a quarter, 470 a quarter, and then you'll be done in you know, like, you know, you know, as you exit 26 for the most part, you know, in the twenty seven. And then if that is then you know, and then with regards to working capital, you know, you've made tremendous progress with regards to, you know, your working capital in the last couple of quarters. Can we expect to see continued improvement on that as we go into in the fourth quarter and then beyond? Dakota Semler: Yeah. That's a deliberate part of our focus. I have to beg Gio to make any payments and to release any payments that are going out to our vendors. But, no, in all honesty, I think it's a team effort across the company to focus on how we can manage cash flow, how we can improve receivables collection. And we've had some very supportive customers that have been willing to work with us on the terms that we offer them and ensuring that they're adhering to those terms and paying in a more timely manner. And one of the most significant drivers of this is that increased product mix away from trucks and direct sales of trucks will reflect lower, you know, proportion of those sales being driven by incentives. And so that'll shorten our receivables time dramatically if we don't have to collect from those incentive agencies or government agencies. Ted Jackson: And so so then we so we we should expect to see, you know, you know, just generally speaking as we go forward, an improvement in DSOs and I mean, I tend to look at inventory on a day's basis too, but in a continued improvement there, relative to what you know, the progress that you've made and the second and the third quarter, we'll see even more improvement kind as we march forward over the next several quarters. Dakota Semler: That's fine. Ted Jackson: And then my my last point is is is kind of a question and kind of more just asking for some commentary. you know, You know, there was a, it was I just saw it in the journal today, so the timing was just kind of capital is perfect. But one of your peers, Harbinger, did a raise of I don't know, it was like a $150,160,000,000 dollars with FedEx. And I still need it and and you know, and then FedEx is like, they say that, you know, FedEx is basically gonna take a lot of their product and they're spewing it out that they're gonna ship 3,000 units. Next. Year. I mean, you know, like, how do you think about that? Does that give you an kind of pause as it relates to your relationship with FedEx? Or you know, you also could look at it, the fact that they're able to raise that kind of money that, it says it's a it's also an option. So you don't say, hey. Yeah. A vote. If you would, of of confidence in your end markets and the that you yourself face. I mean, having a little discussion about that. Yeah. Dakota Semler: Think from, I'll I'll kinda segment the question, but I think from a capital markets standpoint, it's an incredible validation and proof point that there's still interest from investors in investing into the transportation business and into commercial electric vehicles, which we see as a very positive indicator because in the last couple of years, it has been different in what we saw from the fundraising environment in the preceding few years. And so I think that's a great indicator for our industry as a whole. And for our ongoing access to capital. Secondly, I think pertaining to the commercial opportunity that exists, you know, we view FedEx as a critical customer of ours, and I a key customer, and we want to continue to work with them. We've built an incredible relationship with the Express team in Memphis and also the former ground team in Pittsburgh. It is now a part of FedEx corporate and I think that relationship will continue to extend actually messaged them and congratulated them this morning on the announcement. And I think we see them as a strategic partner. And one thing I'll I'll mention, which I think is really important relevant is these large parcel delivery companies and large fleets they don't sole source. With any of their products and any of their technology in their fleets, they're always gonna have generally two to three, sometimes even four primary suppliers they work with to maintain some competitive tension, to make sure they don't have too much exposure to a single company. And we see another company in this space as a validation that the industry is still growing, there's still opportunity, and there's still really strong customers, are willing to make investments and grow in this segment. I think, you know, for us, FedEx is one of many customers that we have, but we're still excited very excited about working with them and continuing to work with them. And to this point, it's not referred to as FedEx Ground anymore, but for their contractor business, we are the largest electric vehicle vendor with more electric vehicles than anybody deployed across their network. And so I think we expect that trend to continue, and we'll keep working with the contractors as well as with their fleet management, their centralized fleet management for their corporate-owned fleet. So I think it actually bodes well for the industry and for us as a company. Ted Jackson: Great. So, again, congrats on the quarter. You I mean, literally, you just you just moved the ball. You know, move as my my wife says, you moved the chains. And you did it on every front in your business. So congrats. Dakota Semler: Thank you, Ted. Appreciate you calling in. Operator: Thank you. And that concludes our question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Operator: Excuse me, ladies and gentlemen, please remain on the line. Your conference call will begin in approximately five minutes. Please remain on the line. Your conference call will begin in approximately five minutes. Good afternoon. Welcome to WidePoint's Third Quarter 2025 Earnings Conference Call. My name is Kelly, and I will be your operator for today's call. Joining us for today's presentation are WidePoint's President and CEO, Jin Kang, Chief Revenue Officer, Jason Holloway, and Chief Financial Officer, Robert George. Following their remarks, we will open up the call for questions from WidePoint's publishing analysts and major investors. For additional information, please contact WidePoint's investor relations team at wyy@gateway-group.com. Before we begin the call, I would like to provide WidePoint's Safe Harbor statement that includes cautions regarding forward-looking statements made during this call. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of WidePoint Corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-Q filed with the Securities and Exchange Commission. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.widepoint.com. Now I'd like to turn the call over to WidePoint's President and CEO, Mr. Jin Kang. Jin Kang: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review WidePoint's financial results for the third quarter ended September 30, 2025. The progress we have recently experienced is a direct result of the strategic foundation built over the last few quarters, setting WidePoint up for sustainable growth and offering a glimpse into the margin accretive contract opportunities currently in our pipeline. While the past two quarters did not meet our expectations, largely due to opportunities shifting to the right, we took important steps to stabilize our cost structure while maintaining staffing levels and continuing to invest in our business. These actions have positioned WidePoint for a strong finish to 2025 and enable us to capitalize on delayed pipeline opportunities throughout 2026. Revenues for the third quarter were $36.1 million, which was a modest 4% increase from last year. More importantly, we saw an encouraging turnaround in our adjusted EBITDA and free cash flow results. For the quarter, adjusted EBITDA was $344,000 and free cash flow was $324,000, representing not only our thirty-third consecutive quarter of positive EBITDA and eighth consecutive quarter of positive free cash flow, but also an 88,260% sequential increase respectively. We can confidently say we are back on the same growth trajectory we experienced throughout 2024. With many opportunities on the horizon, and 2026, we remain confident in carrying this upward trajectory into Q4. Bob will have additional details on our financial performance in his prepared remarks. Now on to some operational highlights for the quarter. As we have continued to emphasize, WidePoint's FedRAMP authorized ITMS platform unlocks opportunities that were previously out of reach. We stand apart as the only SaaS managed mobility platform with this status, positioning WidePoint as true pioneers and setting WidePoint clearly ahead of our competitors, who simply cannot match or compete with our capabilities, accreditations, and certifications. Our recent margin accretive multiyear software as a service contract to deliver our FedRAMP authorized ITMS platform to one of the big three mobile telecommunication carriers in The United States serves as a strong validation of this advantage. As we have previewed in our last earnings call, this contract requires WidePoint's ITMS platform to serve as a system of record for 2 to 2.5 million devices across government telecom operations. We estimate that this single contract alone will generate $40 to $45 million in margin accretive SaaS revenue over the initial three-year term. WidePoint's ITMS platform will serve over 50 government clients and further establish us as the premier SaaS FedRAMP authorized solution provider. This single contract validates our early investment in the FedRAMP process and highlights the advantage of being an early adopter. FedRAMP opens the door to large-scale margin accretive opportunities, enhances our access to major companies pursuing FedRAMP authorized solutions, and supports our anticipated growth trajectory. And as mentioned previously, FedRAMP in process is a minimum requirement for the upcoming DHS CWMS 3.0 contract. We strongly believe that FedRAMP authorized status will receive a higher rating during the evaluation phase of the CWMS 3.0 recompete. That said, I am pleased to announce that last Thursday afternoon, the final DHS CWMS 3.0 RFP was released. After reviewing the announcement, we found that the requirements are materially the same from the draft RFP that was released a few months earlier. The schedule announced in the final RFP states that the proposals are due by December 17, 2025. We anticipate that a decision on the winner will be announced thirty days from the proposal due date and contract awarded. Accounting for a potential protest of thirty to sixty days, we are optimistically targeting an award by late Q1 or early Q2 2026. We also recently received an extension to our CWMS 2.0 contract, a six-month extension consisting of a two-month base period and four one-month options. We also have existing contract and task orders in place through November 2026 at a minimum under the current CWMS 2.0 contract. This includes the recent task order with the US Customs and Border Protection, of which the ceiling of the task order exceeds $27.5 million. Revenue recognition for this task order began at the start of Q4, which will provide additional support for our year-end results and reinforce the growth momentum seen in Q3. As we have continued to communicate over the past year, and particularly after reviewing the final RFP, we are even more confident we possess all required certifications, meet every criterion, and with our proven track record, as a two-time incumbent delivering exceptional results to the DHS, WidePoint is well-positioned as a prime contractor to secure this upcoming opportunity. We have invested significant time and resources into the preparation and we look forward to capitalizing on this investment and securing this contract for the third consecutive time. For a quick update on Spiral 4, we have secured eight task orders year to date and four awards in the third quarter alone. We want to reiterate while we are competing with some of the largest players in the industry, WidePoint stands out as the only provider under the Spiral 4 contract to provide multi-carrier and carrier-independent solutions. The flexibility WidePoint offers is a value-added differentiator that is beginning to show in our pipeline. We are currently pursuing several opportunities that are larger in scale than our existing wins. While we are still in the early stages of the potential ten-year contract, we remain bullish in our ability to capture our fair share of the $2.7 billion ceiling. WidePoint being awarded eight contracts at this early stage while competing with some of the largest players in the industry is a strong proof point of what the future may hold for us and shows that we can punch above our weight class. We are showcasing that we have the capabilities required to compete alongside the six other companies under Spiral 4. And we believe that FedRAMP will emerge as a meaningful differentiator under this contract vehicle. And we remain bullish and opportunistic in our ability to capture additional awards for the next decade. Jason will expand on this topic shortly. But to provide an update on our device as a service, or DaaS solution, we are continuing to invest in the logistical large-scale opportunities and position the organization for future growth. Our pipeline remains strong, and we remain confident that the opportunities originally expected this year that were delayed will materialize in the coming year. Shifting to Census 2030, the latest request for information was issued in August 2025, and we have since submitted our response. From our perspective, the timing of activities mirrors that of Census 2020, and activities are already underway. We anticipate a very similar scope of work and support requirements for the 2030 activities and continue to align closely with CDW as we progress. While we are still several years away from any significant developments, we are strategically positioning ourselves for success now. At this time, WidePoint has no immediate material impact from the government shutdown. However, with the government operating at reduced staffing levels, we may see a slowdown in activities if the shutdown persists. Additionally, the execution of several opportunities in our pipeline has been delayed. However, we remain confident in our ability to secure these deals after the shutdown and any associated lag. Bob will highlight later in the call, but our current cash balance is more than sufficient to sustain operations, even if the government shutdown extends longer than anticipated. We are confident that the first half of the year was an outlier and we expect adjusted EBITDA and free cash flow growth demonstrated in this quarter to extend into Q4 and 2026. Overall, we remain optimistic for the remainder of the year. The steps we have already taken throughout, combined with opportunities delayed from earlier this year, position us well for sustainable growth in 2026 and upcoming opportunities. Jason? Jason Holloway: Thanks, Jin, and good afternoon, everyone. Beginning in the fourth quarter of last year, we increased staffing and invested in the business in anticipation of robust opportunities within our pipeline. Although these opportunities have slightly shifted to the right, we made the strategic decision to maintain and continue those investments as we believe these capabilities will support and sustain our long-term growth. Our sales pipeline remains strong, and we were able to begin realizing it through our recent contract with a major and leading US telecommunications carrier. The estimated 2 to 2.5 million devices we expect to manage under this contract highlight the strategic value of ITIM FedRAMP authorized status and positions WidePoint as a leader in a market where competitors struggle to meet such rigorous demands. Although we cannot name the customer, the carrier's decision reinforces our agility and capability to satisfy the stringent security and compliance standards of federal government clients. This contract represents only a glimpse of the margin accretive SaaS revenue opportunities that we are actively pursuing with our FedRAMP authorized ITMS. While officially securing these opportunities requires patience, even landing a single award can meaningfully enhance our financial position and specifically our bottom line results. We are pleased to finally showcase a glimpse of the margin accretive opportunities ahead and I look forward to executing and delivering results. Shifting to DaaS, we are continuing to invest in supporting our DaaS solution and recently completed the implementation of our initial DaaS win with our federal health agency partner. As we've mentioned previously, the majority of DaaS opportunities are commercial clients, and we continue to advance discussions with leading firms across industries such as manufacturing, healthcare, financial services, and public IT sectors. Many of the opportunities in our pipeline are with Fortune 100 companies that typically manage large fleets of devices. We are currently awaiting award decisions from several of these organizations and remain optimistic about beginning these opportunities in 2026 to further propel our growth. While we cannot disclose the potential range of devices to be managed, the predictability of the DaaS business model allows us to forecast the material impact of these opportunities. In fact, we believe securing even one of the opportunities in our pipeline could produce meaningful results, particularly given the scale of device fleets managed by these Fortune 100-sized companies. We are also aligned with our strategic partner CDW and are in discussions on the final terms and conditions to support our partner. We stand ready to support the upcoming LA 28 Olympic and Paralympics if called upon. This event is estimated to involve approximately 95,000 to 135,000 athletes and support personnel and a similar number of devices to be managed. We will be providing our ITMS platform to help secure, manage, and provide visibility into the devices that will be utilized during this historic event. Our platform will be delivered using a SaaS model. Shifting to Mobile Anchor, we have a premier federal government systems integrator in our Mobile Anchor pipeline and are in the process of implementing a project for a major defense contractor for their derived ID certification program. We remain optimistic about the future of Mobile Anchor and plan to continue innovating the product to further generate market interest and drive demand. We're focused on the right opportunities and investing in initiatives that lay the foundation for long-term sustainable growth. This past quarter was only the tip of the iceberg, and we're excited to build on this momentum as we close out the year and head into 2026. I will now pass the call over to Bob for our third quarter financial overview. Bob? Robert George: Thanks, Jason, and thanks to everyone for joining us today. Before I review our financial results, I'd like to briefly address our previously disclosed revenue guidance. As we assess WidePoint's 2025 performance to date, and the timing of several key opportunities, we now expect full-year revenue to be slightly below our previously issued guidance range, primarily reflecting delays in certain contracts and the impact of the first half results. Additionally, we are revising our full-year adjusted EBITDA and free cash flow. We expect results to be positive but below our previous guidance, primarily due to the shift in timing of key opportunities. To be clear, while our results may come in modestly below our prior expectations, this is a matter of timing, not demand. We're deliberately using 2025 as a stepping stone into 2026, investing into key parts of the business to unlock sustained growth in the years ahead. We are already seeing our financial results return to the growth trajectory we left off in 2024, with notable sequential improvements to our EBITDA and free cash flow performance this quarter. We look forward to closing the fourth quarter on a strong note and carrying that momentum into 2026. That said, I'm pleased to share the details of our financial results for the third quarter and the nine months ended September 30, 2025. Total revenues for the quarter were $36.1 million, an increase of $1.5 million or 4% from the $34.6 million in the same period last year. Our nine-month revenues were $108.2 million, an increase of $3.3 million from the $104.9 million reported in the same period last year. Now I'll provide a further breakdown of our third quarter and nine months revenues. Our carrier services revenue for the quarter was $20.4 million, a slight decrease compared to $22.4 million reported in the same period last year. This is a result of variations in the total number of lines managed in Q3 for one of our DHS customers. Though our carrier services revenue for the nine-month period was $65 million, an increase of $2.8 million compared to the same period last year. Our managed services fees for the quarter were $10.1 million, an increase of $1.6 million compared with the same period in 2024. For the nine-month period, our managed services fees were $28.6 million, an increase of $2.2 million from the same period last year. The increase was primarily due to a new federal end customer that began in September 2024. Billable services fees for the quarter were $1.3 million compared to $1.7 million in the same period last year. The decrease was primarily due to a slightly lower number of billable positions in the third quarter. Although, for the nine-month period, billable services fees were $4.4 million, an increase of $249,000 from the same period last year, reflecting more billable positions in the first half of the year. Reselling and other services in the third quarter were $4.3 million, an increase of $2.3 million from the same period last year. For the nine-month period, reselling and other services were $10.3 million compared with $12.2 million in the same period last year. This quarter reflects the impact of the change in our revenue recognition for SaaS type reselling agreements. Certain sales that were recognized at delivery last year are now being recognized ratably over the contract period. As a result, Q3 shows a modest benefit while the year-to-date comparison appears lower simply because last year's revenue was more front-loaded. Importantly, this change does not affect total annual revenue, only the quarterly timing of when reported. Gross profit for the third quarter was $5.3 million or 15% of revenues compared to $4.7 million or 14% of revenues in the same period in 2024. Gross profit for the nine-month period was $15.2 million, or 14% of revenues, compared to $14.3 million or 14% of revenues in 2024. The gross profit percentage, excluding carrier services, was 34% in the third quarter compared to 38% in the same period last year. The decrease was partially due to slightly higher labor costs as we bolster our customer delivery capabilities and relatively more reselling revenues, which carry lower margins. Importantly, for the nine-month period, gross profit percentage excluding carrier services, increased to 35% compared to 33% in the same period last year. The increase was due to a combination of increased managed services fees and lower reselling revenues for the nine-month period compared to last year. Our gross profit percentage will vary period to period based on our revenue mix. Sales and marketing expenses in the third quarter were $700,000 or 2% of revenues compared with $500,000 or 2% of revenues in the same period last year. Sales and marketing expenses for the nine-month period were $2 million or 2% of revenues compared to $1.7 million and 2% of revenues in the same period last year. The increase reflects increased sales and marketing activities in 2025. We expect to see further dollar increases here as we continue to invest in sales and marketing efforts, though we expect sales and marketing to be lower as a percentage of revenues in the future. General administrative expenses in the third quarter were $4.8 million or 13% of revenues compared with $4.4 million and 13% of revenues in the same period last year. General and administrative expenses in the nine-month period were $14.5 million, or 13% of revenues compared with $13.3 million and 13% of revenue in the same period last year. The dollar increase primarily relates to general inflationary pressures, additional headcount, and associated costs, which were partially offset by less share-based compensation expense. We expect general and administrative expenses to increase in dollar terms as our business grows, but to remain constant or lower as a percentage of revenues. As a result of the previously discussed items, net loss for the third quarter was $559,000 or a loss of $0.06 per share, compared with a net loss of $425,000 or a loss of $0.04 per share for the same period last year. Net loss for the nine-month period was $1.9 million or a loss of $0.20 per share compared with a net loss of $1.6 million or a loss of $0.17 per share for the same period last year. Adjusted EBITDA for the third quarter was $344,000 compared with $574,000 in the same period last year. Free cash flow for the third quarter was $324,000 compared with $511,000 in the same period last year. This represents our thirty-third consecutive quarter of positive adjusted EBITDA and eighth consecutive quarter of positive free cash flow. More notably, third quarter adjusted EBITDA and free cash flow experienced an 88,260% increase respectively compared to last quarter's results. With the robust pipeline, Jin and Jason mentioned earlier, we remain confident in carrying this growth trajectory and momentum into 2026. Additionally, with our recent telecommunications carrier contract award, valued at approximately $40 to $45 million in SaaS revenue over three years, we estimate that that revenue will begin to be recognized in 2026. We anticipate continuing this upward trend in our bottom line adjusted EBITDA and free cash flow and beyond. Additional opportunities such as CWMS 3.0 and DaaS, while not yet materialized, are progressing in the right direction, and we believe these initiatives will help us maintain this growth trajectory in future quarters. We ended the quarter with a strong federal contract backlog of approximately $269 million, providing solid revenue visibility for the coming year. The majority of this backlog represents recurring work with long-standing government customers. Moving to the balance sheet, we ended the quarter with $12.1 million in cash compared to $6.8 million at the end of the second quarter, with no bank debt. In anticipation of the government shutdown, we also strategically maintained a strong cash position at quarter-end in case the shutdown extends longer than expected. As a reminder, we also have additional liquidity available with a revolving line of credit with $4 million of potential borrowing capacity, although we do not anticipate having to rely on that facility. This completes my financial summary. For a more detailed analysis of our financial results, please refer to our Form 10-Q which was filed prior to this call. With that, I'll turn the call back over to Jin. Jin Kang: Thank you, Bob and Jason. Our optimism for the future stems from the pipeline of deals that is currently in the works and a steady increase as a percentage of revenue of our managed services and SaaS revenues. While we cannot share specific details into our pipeline yet, we were pleased to be able to close our recent SaaS contract with one of the big three US mobile telecommunications carriers and showcase exactly the types of opportunities that we have coming up. As we stated at the end of 2024, WidePoint continues to pursue margin accretive contracts that contribute meaningfully to our bottom line results. New opportunities through our FedRAMP authorized ITMS platform, our DaaS program, Spiral 4, and upcoming CWMS 3.0, among others, are avenues where we aim to capture these types of contracts that will serve as a catalyst to propel WidePoint into the next phase of growth. That concludes our prepared remarks. And we will now take questions from our analysts and major shareholders. Operator, will you please open the call for questions? Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, please hold just a few moments while we poll for any questions. Your first question is coming from Barry Sine with Litchfield Hills Research. Please pose your question. Your line is live. Barry Sine: Hey. Good afternoon, gentlemen. Can you hear me okay? Jin Kang: Yes, Barry. Good afternoon. Great to hear from you as always. Barry Sine: So huge news on this $40 to $45 million contract during the quarter. And, yeah, we'll see what additional information I can, we can get from you. You did provide some incremental information. It'll be about over three years, and start about the middle of next year. And, Bob gave the backlog. I think it was $269 million. How much of that 45 is in the $269 million? And did I, yeah, did I get those data points right in terms of the timing? Jin Kang: You are correct, Barry. To answer the last question first, how much of that $45 million is in the backlog? The $269 million only includes our federal government. This $45 million would add to that. We are looking at being fully implemented probably starting in the third quarter of next year. You know, but the schedule is still in flux. And so, you know, we're still having conversations with our customer. And, you know, some of the customers think that the implementation of the solution and fully migrating all of their data into our system is going to be, you know, sometimes even later than that. And some of the folks want it earlier. So we're just taking an average to say that it's going to be in the third quarter. Barry Sine: Okay. That makes sense. And then you're obviously not at liberty to name the customer there's three major US wireless carriers, AT&T, Verizon, and T-Mobile, so it's presumably one of those. How are you doing with the other two? And would this preclude you from selling the solution to the other two? Jin Kang: The answer is no. We do not have an exclusivity with this carrier. And if you look in the FedRAMP marketplace, you will not find any one of the big three telecom mobile carriers here in The US in that marketplace. It's just what we're surmising is that they're going to get the same pressure from their federal government customers to manage their data using a FedRAMP authorized platform. So we don't have any direct, you know, we're not having direct conversations with the other two yet. But, you know, we're hopeful that we can start that conversation. And, and and it this this agreement that we have currently does not exclude us from having those conversations and licensing or slash you know, white labeling our platform as a service to the other two carriers. Barry Sine: Okay. Well, that's great news. And then, my other question, in terms of the cash balance, you ended the quarter with $12.1 million and you've got huge government backlog, and I didn't realize the 40 to 45 is not even in that, so that's even bigger. CWMS is looking good. I can't believe they issued the RFP during the shutdown. You've got Spiral 4 contracts coming in and, you know, other potential contracts plus the census and the Olympics. So it looks like you got almost too much cash. How so my question is, how is how does the M&A market look? Are you building the cash for acquisitions? Are you seeing anything? Are there opportunities out there? Do the valuations look okay? Jin Kang: Yeah. I mean, we are looking around. In terms of our cash position, we went on a very aggressive treasury management to ensure that we, you know, retain cash and preserve cash. To process all of our vendor invoices and and and and so we waited for the very last moment to pay our invoices and and the the increases some of the increases in the cash position. Was timing of invoices. In in terms of, you know, our cash balance being sufficient to, you know, run operations, I we believe that we have plenty of cash and you know, sufficient networking capital to, you know, weather any type of, you know, slowdown in federal government as slowdown in invoices. We are continuing to add cash to our balance sheet, and we're gonna continue to do that. We want to make sure that we fortify our balance sheet. But at the same time, we are looking around for potential opportunities and we are quietly looking around for acquisition targets. We haven't run across any, you know, thing, you know, material opportunities out there. So we're quietly looking. I think the the multiples and the valuations are still pretty high. And so we're patient, and we have plenty of runway. And, we're we're going to continue to generate cash and build our balance sheet. Barry Sine: Okay. Those are my questions. Thank you, gentlemen. Jin Kang: Great. Thank you, Barry. Operator: Your next question is coming from Casey Ryan with West Park Capital. Please pose your question. Your line is live. Casey Ryan: Thank you. Hello, team. Jason Holloway: Hey. Pretty good quarter. I guess Casey Ryan: Hey. Thanks. Hi. I guess I was expecting expecting a little more turbulence from the government shutdown, but seems like you guys knew what to expect and what to do to navigate that. So that's impressive, I would say. Jin Kang: Yeah. I mean, we've been we've been through this rodeo many times. Since the current management team has been in place. I mean, government was shut down at least three or four times. And and all through all of that, you know, we're considered essential services. So, you know, and and I'm, you know, had obligated funds. So so we're, you know, used to dealing with this thing and we'll continue to do so. But now the government is open, hopefully, they'll, you know, there won't be too much of a lag in them coming back to work. Casey Ryan: Right. Right. Which will be great. So setting aside the government opportunities, on the commercial side, yeah, I'm curious about the, the mobile opportunity that that you referenced is exciting as a proof point. I'm just curious about kind of implementation time and deployment time and sort of how long it takes until that gets up and running? More importantly, I'm asking about does that prove you know, serve serve as a proof point and a selling point to other potential customers? Once that's live and going. Jin Kang: Yeah. So so so the answer is it you know, the length of the implementation usually involves, customer input. We are in the process of implementing one of the larger systems integrators here in the DC area, federal government contractor, and that's going well. And and and I'll have, you know, Jason tell you, you know, more about it. But I will tell you that, you know, a lot of the implementation and the the the the time it takes to do that is dependent on customers' participation because it it involves, you know, the entire organization, not only their IT, but also their human resources. For, you know, those, personally personal person identifiable verification. Right? And so, Jason, if you wanna add some color to that, Jason Holloway: Sure. Hi, Casey. So normal normal implementation time is sixty days. With the government shutdown, that did happen. Obviously, that delayed it a little bit, but that's okay because they're already a client. You know, we won the award. And as Jin said, these folks, they need to be present because of Mobile Anchor. We are taking, all of their existing data then we're deriving it onto their mobile devices. So, typically, you're looking at about sixty days for that kind of activity. But, you know, we we'll be able to, to catch up now that everything is, you know, back open. Casey Ryan: But it's not gonna slow anything down. Jin Kang: Right. So so so at some point before the end of the year, Jason Holloway: Oh, yeah. For sure. And so for WidePoint as an organization, you can start to say, hey. Look. We've we've stood somebody up, and they're on it, and it's great. Which I think is important. Other question is, when Mobile Anchor is being put in, does it need to interface with any other security systems? And and I'm asking out of ignorance. But but identity management systems or, you know, other type things or is it separate from those and doesn't need to sort of interface with with those types of things? Jason Holloway: No. The great the great news is is that Mobile Anchor doesn't doesn't rely on anything else because we are the tip of the spear in terms of cybersecurity. We we are literally at the top of the food chain. We don't need to integrate with, you know, with anything. So we take those certificates that are on their current smart card credential, and then we can issue a a net new certificate already using those existing credentials, and we put it directly onto the device itself. So we yeah. So we don't require anything else. Jin Kang: Yeah. So just Casey, just one one clarification on that is is that you know, we issue our our digital certificates and identity certificates and we don't rely on any system for that. What the what what good about it is is is that all of the current systems, the Microsoft Active Directory, and the Unix, you know, lightweight directory applications. They all accept the digital certificates that we issue. And so, you know, while we don't have, we're relying on any these systems, but there are these systems that are consumers of our identity certificates can ingest and accept those certificates as their security token. So so that's a huge plus for us as opposed to us going out and building all of the infrastructure all of the infrastructure is there. Casey Ryan: Yeah. Well, thank you for that because that that was sort of the direction I was was going was was was well, no. No. I mean I mean, once you're saying that you guys don't rely on actually, it would make sense that other infrastructure or security systems would maybe start to rely on you and come to you to sort of ingest your data to sort of to sort of improve what they're offering, basically. Jin Kang: Correct. Correct. Casey Ryan: Okay. Terrific. And then help me understand what the opportunity is with the Olympics again. I feel, underinformed about how big and and what the opportunity might look like. And, you know, if you guys have been involved in in Olympics before in some previous version. Jason Holloway: We have not been involved in the Olympics prior. We do have significant past performance with CDW. I really cannot offer too much additional color regarding the Olympics because that's something that is still, you know, very much that's that's currently happening. So we just need to be careful about what we say. What we can tell you is is that, you know, and and we said this on the previous call, is that CD that CDW, you know, is is the official provider for those services. And we do work with CDW. So that's, yeah, that's that's kinda where we're at right now. Okay. And, Jin, you got anything to add? Jin Kang: Yeah. You know, it's it's this is the the DaaS device a service opportunity. And CDW is a premier provider of that service, and they rely on our platform. So they'll be using our FedRAMP authorized ITMS platform to manage all of these devices that they'll be utilizing for the Olympics. And so we're estimating somewhere between 95 to 135,000 athletes and devices. And it does it's not a one for one, you know, one athlete to one device. And so this opportunity could be larger. But it is very similar to what we did for our Census 2020. And so we know that our solutions can scale. And, you know, we've we've been teamed with CDW and they're a great partner. And we look forward to, you know, supporting them on this LA 28 Olympics and Paralympics. Which they are a an official supporter of. Casey Ryan: Now. Right. Okay. Alright. Terrific. And then last question, I guess. You know, it sounded like you were saying sales and marketing maybe has ticked up a little bit but wouldn't continue. And I was curious about that because it's it's you know, again, I guess, coming to this kind of as a newer following analyst, you know, I would think that that that that the commercial opportunities might incent you or sort of drive you to spend more in sales and marketing as you sort of you know, pursue those greenfield opportunities. Robert George: Yeah. Hey, Casey. This is Bob George. Hey, Bob. I'll clarify that comment. We expect that the dollar amounts of sales and marketing will go up. It's just a matter of as a percent of revenue, it'll be constant. Relatively constant to where it is. So it takes percent times what our, you know, next year's revenue. That that's a lot of dollars in sales and marketing. Casey Ryan: Okay. Got it. Got it. Thank you for the clarification. Well, thank you for the question. Hey, Jason. Did you wanna say Jin Kang: Okay. Okay. Oh. I think I think, you know, Bob hit that pretty pretty accurate. Okay? Okay. Well, listen. You know, for all this reputation about shutdowns and people exposed to federal, I thought it was a really great quarter. And I appreciate you taking my questions. Thank you. Jin Kang: Great. Thank you, Casey. Operator: At this time, this does conclude our question and answer session. If your question was not taken, please contact WidePoint's IR team at wyy@Gateway-GRP.com. I'd now like to turn the call back over to Mr. Jin Kang for his closing remarks. Jin Kang: Thank you, operator. We appreciate everyone taking the time to join us today. As the operator mentioned, if there were any questions we did not address today, please contact our IR team. You can find their full contact information at the bottom of today's earnings release. Thank you again, and have a great evening. Operator: Thank you for joining us today for WidePoint's third quarter 2025 conference call. You may now disconnect.
Operator: Thank you for standing by. And welcome to TMC the metals company Inc.'s Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Craig Shesky, CFO. Please go ahead. Craig Shesky: Thank you very much. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Additionally, please note that the company's actual results may differ materially from those anticipated and except as required by law, undertake no obligation to update any forward-looking statement. Our remarks today may also include non-GAAP financial measures, including with respect to free cash flows, and additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide deck being used with this call. As always, you are welcome to follow along with our slide deck, or if joining by phone, you can access it at any time at investors.metals.co. And I'll now turn the conference call over to our Chairman and CEO, Gerard Barron. Gerard Barron: Thanks, Craig, and thanks to everyone for joining this call today. I also like to start our quarterly calls with a small bit of reflection. After so much news this year, it's hard to believe that it's just over seven months since we announced our pivot to The United States. And since then, we have seen President Trump's executive order to support this industry. We've launched three applications with NOAA including the first-ever application for a commercial recovery permit. We've seen new investment flow in from Korea Zinc, the Hess family, and even more investment from our partner, Allseas. And as outlined during our strategy day in August, we have published two SEC-compliant technical reports showing a total resource value of more than $23 billion. All the while, progress with our new regulator, NOAA, has continued, and the tailwinds for critical minerals from both public and private capital providers have only become more clear. And yet, I'm sure many of you are chomping at the bit for more news. And I don't blame you. Yes, we've been relatively quiet in our messaging over the last couple of months, but please don't take that as a sign that things are slow around here. Quite the contrary. And beneath the calm surface, our feet are pedaling faster than ever. And I'm very eager to share more color when the time is right. But let me summarize where we are right now. We continue to feel confident that our US pivot will lead to a commercial recovery permit in 2027. Our regular with NOAA and the US government are productive, and we believe that the directives in April's executive order will be delivered upon including the recent reports of NOAA's streamlined application review process sent to the White House. And given our robust cash position, I can assure you that we have no need anytime soon to tap the public capital markets. We're in an excellent liquidity and capital position with approximately $165 million of liquidity today, inclusive of our recent warrant exercises and over $50 million of potential additional proceeds from in-the-money warrants. This does not factor in the potential $48 million proceeds from the Korea Zinc warrants at a $7 strike price nor the Select business combination warrants at $11.50. Nor the warrants held by our sponsoring stakes. We see a pathway for more than $400 million of incoming cash from warrant exercise. Certainly, we and our partners have plenty of work to do as we prepare for commercial production targeted for 2027. And we have a strategy in place to ensure we can do so in a shareholder-friendly fashion. But let's start today by highlighting the problem that we're looking to solve for The United States and remind ourselves why this remains such a critical resource. Today, America is critically dependent on foreign sources for the very metals that it once dominated in the late nineteenth through to the mid-twentieth centuries. For manganese, cobalt, and nickel, America now imports roughly 100%. Even copper is nearly half imported. And just this month, copper joined the other three metals on the critical mineral list published by the US Geological Survey. So this is a major strategic risk. We're not just talking about metals. We're talking about national security, energy independence, and industrial resilience. A resource of 1 billion tons of nodules can fundamentally transform The United States, offering not just mineral independence, but strategic dominance in three metals. Based on today's level of American consumption, it could supply 300 years of manganese and 200 years of cobalt and almost a century of nickel. And through public-private partnerships, the administration is clearly taking steps to solve vulnerabilities in rare earths and lithium. Base metals, and beyond. Major financial institutions are also following suit. And we believe that for nickel, cobalt, and manganese in particular, our nodule resource provides the most scalable and economically viable solution for our reindustrialization in The US. And it's clear that The US sees seafloor resources as a key part of a broader solution. Just last week, the United States and Japan announced a landmark partnership to develop rare earth minerals from seafloor muds around, Minamitori Island. A framework signed during President Trump's recent visit to Tokyo. And Japan will now begin preparations to test the feasibility of listing rare earth muds as early as January 2026. With larger scale test mining anticipated one year later. Separately, we're also pleased to announce that Allseas' Hidden Gem vessel will play a key part in Japanese nodule collection trials, alongside the University of Tokyo. The Hidden Gem will head to Japan's exclusive economic zone near Minamitori Island to conduct new nodule collection pilot in early January 2027. And this represents the perfect opportunity to test our own technical readiness and some of the planned upgrades to the mining equipment while also helping the Japanese advance their own industry. Together with Allseas, we also see this as a very good commercial opportunity whilst we await the NOAA permits to be issued. So the US government shutdown slowed progress on NOAA's review of our applications over the course of several weeks. But with the government returning to work, our applications will once again continue to systematically move through NOAA's regulatory process. In fact, NOAA confirmed to us earlier today that they are back at work and again focused on these applications. And as a reminder, NOAA has confirmed that both the exploration applications were fully compliant and our exploration applications are currently in the certification stage which involves an interagency review of the applications. Following certification, an environmental impact statement or EIS is expected to be prepared under NEPA, and a public comment period will be provided. And following the public comment period, NOAA will determine whether to issue the requested licenses and permit, and if so, under what terms and conditions. In July 2025, NOAA issued proposed amendments to its regulations on the DISHRA. And the proposed regulation introduces a new consolidated application procedure, allowing applicants to submit a single application for both an exploration license and a commercial recovery permit. And these changes are intended to modernize and streamline the permitting process under DSHMRA's implementing regulations. The public comment period closed on September 5, 2025. And on October 29, it was reported that NOAA had sent the proposed regulations to the White House for approval. Over the past week, our and environmental teams attended the underwater mineral conference in Florida. And during this event, former long-time ISA secretary general gave a tremendous speech, which provided some important context on The US seabed mining rate regulations. Bottom line, in his eyes, The US has been legally consistent for decades and NOAA regulations from the 1980s actually formed the basis for the ISA exploration regulations. And, of course, this is firmly in line with the conclusions of TMC our council, and the United States government DISCHFARA and the NOAA implemented implementing regulations are clear effective, sophisticated, and enforceable. Next week, Craig will be presenting at the benchmark Week Conference in LA, and Michael Lodge and a representative from the US Department of Interior regarding seafloor resources. He'll also be meeting with automakers battery makers, and investors as our path to production has never been more clear. On that note, I'll turn it over to Craig to walk through some project updates and the financials. Over to you, Craig. Craig Shesky: Thanks, Gerard. So before getting into the economics and financials, it's worthwhile to take a step back and recognize the myriad world's first that this company has already achieved. Alongside our partners. TMC the metals company Inc. has now produced the first SEC and Canadian compliant resource statements the first PFS for a nodule project, and the first reserves for a nodule project. We've achieved the first production of most of the metal products that we intend to produce, with significant flexibility based on market conditions and customer needs. We built on decades of environmental research, pioneered originally by our regulator, NOAA, including the largest deep-sea dataset ever produced. In 2022, we and our partner, Allseas, achieved the first integrated pilot mining test since the 1970 lifting over 3,000 tons of nodules to the surface. Of course, we're building on the work of many pioneering US companies, back in the 1970s. So nearly fifty years ago, when this industry first took shape, US companies tested a range of technologies to collect nodules. These early pioneers understood the challenges, given the technology available at the time, their decisions were very sensible. Lacking today's advanced buoyancy systems, engineers feared heavy tracked vehicles might get bogged down in soft sediment. The Ocean Minerals Company, therefore, developed an Archimedes group of propelled miner that relied on deep-sea sediment sinkage for traction. Its rotating collector head with hooked teeth gathered nodules effectively, but without the height adjustment, it ingested excess sediment and struggled on some uneven terrain. Inside, crushing nodules for proved very problematic. As sediment and fines repeatedly clogged the mechanism. With only a nascent understanding of the pelagic communities, sediment-laden water was discharged at the surface, into the ocean's most biologically productive zone. Fast forward fifty years, and we can see clear benefits of partnering with a company that made its name pioneering the development of offshore oil and gas. With over 250 engineers working on the project, Allseas based engineering decisions on decades worth of environmental data. Resulting in a system designed from the seafloor up to deliver minimize, excuse me, to minimize impact also delivering maximum pickup efficiency. And that principle is evident in five key innovations. Our Kawanda nozzles, our Kowanda nozzles refined through modern modeling and real-time height adjustment dramatically reduce sediment intake. Inside the vehicle, differential flow and countercurrent washing clear nearly all sediment from the nodules while advanced rear diffusers keep the sediment plume localized, and predictable. Where early pioneers struggled to keep collectors from sinking, our challenge was the opposite. Advanced buoyancy allows our collector to move gently across the seafloor Resource. From bench-scale lab testing of single-digit kilo samples, to commercial-scale processing on 2,000-ton batches on existing plant lines, we now know that we can take our nodules from seafloor, to high-value products in various formats to support a variety of industries. And recently, we delivered another industry first, the successful conversion of nodule-derived manganese silicate into battery-grade manganese sulfate. This is a very important milestone for two reasons. First, it demonstrates that our nodule resource can produce three key metals in sulfate form. Nickel, cobalt, and now manganese, using a conventional hydrometallurgical route. Second, with this achievement, TMC USA now has a clear pathway to produce every feedstock required for precursor cathode active materials or PCAM. Including for the manganese-rich chemistries that major US automakers are moving toward in their next-generation EV platforms. This work was done using nodule-derived manganese silicate refined, at Kingston Process Metallurgy's operating facility in Ontario. Further validating the flow sheet we've designed and the scalability of our partner's technology. And importantly, this now extends our track record of nodule-derived firsts. Nickel sulfate, cobalt sulfate, manganese sulfate, reinforcing that the resource is real, the chemistry works, and the technical risks continue to come down. Now this hard-won portfolio of innovation means that TMC is the world leader in nodule project development, and it leaves us in the pole position to kick start an entire industrial ecosystem around this resource. Our extensive investment in scientific research gives us the most comprehensive deep-sea dataset ever compiled. Making this data available to NOAA, enable updates to the programmatic environmental impact statement has not been refreshed since 1980, and will materially reduce the burden every other US company that might operate in the clearing and clipperdin zone. On the processing front, our proven flow sheet opens the door to take clearing clippered enzyme nodules, and turn them into high-value products. And this means real offtake potential and optionality for future American refining capacity as laid out in our prefeasibility study. In collection technology, our scale positions us to accelerate a broader domestic supply chain from riser systems and dewatering units to subsea equipment and discrete nodule pickers. Operationally, we see clear opportunities to share vessels, assets, and methodology with other players. And finally, in survey technology, we're already working with USAUV, ROV, buoy, and subsea battery developers. And we've committed to NOAA that our offshore campaigns can support third-party tech testing. This is how you build a new industry by creating an ecosystem not just a single project. And as many of you know, our strategy day in New York talks quite a bit about this first project, our prefeasibility study and initial assessments, which had two documents including sign off from qualified persons, showing a combined project net present value of $23.6 billion while also showing a clear capital-efficient path to first production. And, the PFS also included a world first reserves for a nonprofit. Just a quick reminder on the geographical areas that each study covers. The PFS covers the area known as an OED, here seen on the slide in dark blue. And the initial assessment covers everything else. But keep in mind that neither study covers the additional ground that we've applied for under The US law, where we now have priority right. Just a quick reminder of some of the economics we expect to generate almost $600 per dry ton of nodules during steady-state production, defined as our average production from 2031 through 2043. Overall, the revenue mix is expected to be very similar to what we shared with the market over the last several years. 45% of revenue from nickel products, 28% from manganese, 17% from copper, and 9% cobalt being the smallest source of revenue. With our steady-state revenue per dry ton of nearly $600 and OpEx per ton of about $340, we arrive at our EBITDA margin per ton expected to be about 43%, or $250 per dry ton during the steady-state years between 2031 and 2043. So, again, adding up the NPV of the $18.1 billion for the initial assessment, $5.5 billion for the PFS, we arrive at a total estimated resource NPV of $23.6 billion, and over the life of both projects on an undiscounted basis, revenue of approximately $369 billion EBITDA in excess of $200 billion a position in the first quartile of the cost curve. And yet, despite the quality and size of the resource, we remain undervalued in our opinion compared to peer developers, explorers, and significantly undervalued compared to producers. On the left side of this page, this will be familiar to some of you who attended our strategy day and listened to our last quarterly call. We'll provide a TMC valuation example illustrative purposes only. Using a slight premium to the upper end of the nickel developer and explorer valuations, applied to our PFS NPV and then adding in the average of nickel developer and explorer valuations for the initial assessment, we can see a path a total illustrative market value based on comps of approximately $10 billion or over $20 a share. So from there, you can see on the right side of the page what a nickel or copper producer trade at as a multiple of NAV showing the potential for multiple expansion. As our path to production approaches and begins. So on to the financial results for the quarter. In 2025, TMC reported a net loss of $184.5 million or 46¢ per share compared to a net loss of $20.5 million or 6¢ per share for the same period in 2024. The net loss for the third quarter included exploration and evaluation expenses, of $9.6 million versus $11.8 million in Q3 2024. G and a expenses of 45.7, versus $8.1 million in Q3 2024. Other items of $129.2 million. Exploration and evaluation expenses decreased by $2.2 million in 2025 compared to the same period in 2024, General and administration expenses increased by $37.6 million in 2025 compared to 2024, mainly due to an increase in share-based compensation of $35 million as a result of amortization of the fair value of retention grants, restricted stock units, and options granted to directors and consultants in the third quarter. And an increase of $2 million in professional and consulting fees primarily relating to the company pursuing our US regulatory route. Other significant items impacting the net loss in the quarter and the most significant is the change in the fair value of the royalty liability, plus Tonga warrant costs and the change in the fair value and, gain on dilution of our investment. In the LCR transaction. So a bit of additional context on those valuations. Following the company's filing of our PFS on the Noridi project in August 2025, the fair value of the royalty liability for Nori Area D was valued at $130 million as at September 30, using an income approach While for NORI Areas A To C, a market approach was used resulting in a fair value of $15 million. The resulting royalty liability fair value of Nori Areas A through D totals $145 million, and therefore, an increase of $131 million in 2025 is a nonoperating noncash expense. The Tonga warrant cost of $5 million represents the fair value of warrants issued to the Tonga Sea Bend Minerals Authority as part of a revised sponsorship agreement. The change in the fair value of warrant liability resulted from a decrease in the price of the company's shares the price of our public warrants during 2025. The free cash flow for 2025 was negative $11.5 million compared to negative $5.9 million in 2024 primarily due to higher environmental, personnel, and corporate payments. This was partially offset by interest earned on a higher cash balance in 2025, and higher payments to campaign eight vendors made in the comparative period. Free cash flow is a non-GAAP measure, and I would encourage you to look at the appendix for that non-GAAP reconciliation table. We believe, as Gerard stated, that our cash on hand is more than sufficient to meet our working capital and CapEx requirements for at least the next twelve months from today. And our accounts payable and accrued liability balance at September 30 was $46.8 million, which includes $32.9 million owed to Allseas for various services provided. The majority of which be settled in equity at TMC's election. So operator, we now like to open up the call for Q&A. Operator: Yes, sir. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. Once again, that's 11 on your telephone. To ask a question. Please stand by while we compile. The Q&A roster. First question, comes from the line of Dmitry Silversteyn of Water Tower Research. Your line is open, Dmitry. Dmitry Silversteyn: Good afternoon, gentlemen. Thank you for taking my call. I just want to clarify one thing. I think I missed this when Gerard was talking about potential incoming cash if all of the warrants are exercised. Can you repeat what that number was? Craig Shesky: Yeah. Well, I'll leave you, Craig. Yeah. So the total potential proceeds, excluding, you know, some that were exercised over the course of Q3 and in October, total potential additional proceeds would be over $432 million. The majority of which would be $11.50 strike pipe price public and private warrants from the SOAC Deep Green business combination, and those have an expiration date of September 2026. There's also some nuance, Dmitry, because there are certain warrants and, you know, there's half a dozen categories outstanding. Certain warrants where they may have cashless exercise. But overall, there's a very significant potential inflow of cash at what we would view to be interesting exercise prices. So point being, we do have a very strong liquidity position today at $165 million. There's over $50 million of warrants proceeds that could come from in-the-money warrants and then quite a bit more beyond that. Dmitry Silversteyn: Understood. Thank you for that clarity. And then I was excited to hear you guys are sending Hidden Gem off to Japan. Understanding international relationships and helping out with diplomacy is this a pro bono work for you, or are you going to be getting paid for the exploration that you helped the Japanese do? Gerard Barron: Certainly not pro bono. And, but Allseas, we didn't step in the middle of that. Allseas will have a direct contract with the foundation that is funding that program. TMC will get some financial benefit out of that as well. But, but, yeah, certainly not pro bono. Dmitry Silversteyn: Understood, Gerard. And then final question. You mentioned that the NOAA is adjusting, it's streamlining its regulation process. And combining exploration and commercial exploitation licenses. How exactly would that work? In other words, does gaining an exploration license basically you have to have a commercial project in place. I mean, why would you combine those two and how would that work in your case specifically? Gerard Barron: Well, that's today, if you read the regulations, you have to have an exploration license before they'll consider a commercial recovery permit. That's impractical in our case, because we are slightly unique case. In fact, I'd say we're the only company in the world who has a already prepared commercial recovery permit application with all of the substantiating data. And so, you know, that meant that from a NOAA perspective, like, we've already got an exploration license. It's straight away. with the ISA. So we'd like you to start work on the commercial recovery And they're like, yeah. We want to start work on that as well, but we do need to change the regs to allow for that. And so, so it's a little bit of a tidy up. Because it was never anticipated when they put these regs in place in '80 that an applicant would have already done that work. So, you know, they're just making making good with the current circumstances. It's a very good opportunity for us. Dmitry Silversteyn: Understood, Gerard. Thank you. All the questions I have for now. Gerard Barron: Thank you, Dmitry. Operator: Thank you. Again, to ask a question, please press 11. On your telephone. Again, that's 11 to ask a question. Craig Shesky: I think in the meantime, we'll take one from the webcast. From, Jacob Sekelsky. Will the exploration permit be granted at the same time as the production permit? If not, when is the exploration permit anticipated to be approved? Without getting into specific dates, I think it's worth noting that implicit in our Q4 2027 production start time be granted this permit, the commercial recovery permit, is no longer the critical path given that, you know, TMC and Allseas agree that there is sufficient regulatory certainty provided by The US process that you know, we can get ourselves ready to go on the Hidden Gem vessel in even begin sooner ordering some longer lead time items. So while there is a possibility, of the streamlined and consolidated exploration license and commercial recovery permit process accelerating the potential grant of both even if this path were to be sequential first exploration license, then commercial recovery permit, that is all still consistent. With the Q4 2027 production start date. So we'll provide, more data as we continue down the NOAA path, but again, as noted, it was very heartening to see that they were working during the shutdown. On the consolidated process and now back at their desks full time. Operator: Thank you. As I show no further I would now like to turn the conference back to Gerard Barron for closing remarks. Sir? Gerard Barron: You know what, Latif, we might take another couple. Oh, okay. If you populated the So if others have questions, feel free to drop it in the chat. There is a question about why do we call it mining. Instead of the, more palatable word harvesting. Duly noted, John Allman, you know, sometimes we refer to it as collection. As opposed to mining, but you know, we feel very confident that the terminology here you know, when people actually look at what's being done on the seafloor, certainly very different than traditional land-based mining. So we'll take that on board. We also see a question from, James Selke. The PFS explains an approach of processing MAT products through Capital Light at existing facilities in the Eastern Hemisphere. But, it also assumes that by year 10 of production, we are bringing some refining capacity to The United States. So, Gerard, just kind of an overall question, what opportunities do we see available for funding and permitting and construction of such facilities at scale, within The United States. A little comment for you, James, too. I mean, we do note, the refining capacity that's implicit in the prefeasibility study. And then, you know, additional assumptions made for the initial assessment. Most of that is focused on spending in the 2030s and beyond. But, obviously, look, The US has a major gap when it comes to certain metals. And, you know, TMC is fortunate to have know, not only the expertise here, but the ability to be flexible. On what product formats might be. And I think we've demonstrated that with the world first production of manganese sulfate. From the nodule-derived intermediate manganese silicate product. So I think our overall message is, you know, we've put out our PFS and our initial assessment assessment, and those assumptions are quite clear in those documents. But there is flexibility that we have through this unique nodule resource, and that puts us in a very good position. When talking about, capital providers, whether it's, through the US government, the private markets. Operator: And I still show no questions from the phone line. Gerard Barron: Okay. Well, thank you everyone for attending today's call. And we have an exciting run-in to the end of the year. Craig is off to Benchmark Conference. I'm off to DC. And, we're happy the government's back to work. And, you know, we'll be sure to keep you updated on exciting developments If not, we'll chat to you on our next quarter. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to Relmada Therapeutics, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded and will be available for replay on the Relmada Therapeutics, Inc. website. I would now like to turn the call over to Brian Ritchie of LifeSci Advisors. Please go ahead. Brian Ritchie: Thank you for joining us today. This afternoon, Relmada Therapeutics, Inc. issued a press release providing a business update and outlining its financial results for the three months ended September 30, 2025. Please note that certain information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Relmada's management team will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Relmada's press release issued today, and the company's SEC filings including in the annual report on Form 10-Q for the quarter ended September 30, 2025, filed after the close today. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, on November 13, 2025. Relmada Therapeutics, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With me on today's call are Relmada's CEO Dr. Sergio Traversa, who will briefly provide a summary of recent business highlights, Dr. Raj S. Pruthi, Relmada's CMO, who will provide an NDV-01 program update, and Relmada's CFO Maged S. Shenouda, who will provide an update on our financial results. After that, we will open the line for a brief Q&A session. Now I would like to hand the call over to Sergio. Sergio, please go ahead. Sergio Traversa: Thank you, Brian, as always. And good afternoon, and welcome everyone to the Relmada Therapeutics, Inc. Third Quarter 2025 Conference Call. 2025 is shaping up to be a standout year for Relmada Therapeutics, Inc. with excellent product development progress, driven by the effort of our outstanding team and strengthened by our recent successful capital raise. We are developing one late-stage and one mid-stage clinical program that we believe could be life-changing for patients. Each program has the potential to be the best-in-class treatment. Our lead program is NDV-01, a sustained release formulation of gemcitabine docetaxel or Gemdosi in development for non-muscle invasive bladder cancer or NMIBC, which affects about 68,000 new patients each year in the US and has a prevalence of approximately 744,000 patients in the US. Our second program is Sepranolone. It is intended to normalize GABA A receptor activity in compulsive disorder. The plan is in development for Prader-Willi syndrome, which has a US prevalence of approximately 20,000 patients. Here are the three key messages that we will cover today. Number one, we report the nine months data from the phase two study of NDV-01 in patients with NMIBC. In brief, the study showed a 92% overall response rate at any time, with favorable overall safety. We are very pleased by these encouraging and consistent data. Number two, we are pleased to have secured FDA alignment on the key elements of the phase three program for NDV-01. It is intended to enable two distinct and independent registrational tracks for NDV-01 in NMIBC. This is an important key de-risking milestone for the program that opens the door to a broad market opportunity in NMIBC. Number three, with the recently completed $100 million underwritten finance, we are well capitalized. The recent offering provides the resources to support our planned operation into 2028 and drive forward the plan of registration studies for NDV-01 and the phase two study for Sepranolone in PWS. We are preparing to initiate these studies in 2026. For NDV-01, we expect to begin two separate registrational studies for NMIBC, starting in 2026. For Sepranolone, we anticipate starting a phase two study in PWS also in 2026. We are well positioned to advance our pipeline thanks to our expanding clinical team. Earlier this year, we appointed Dr. Raj S. Pruthi as Chief Medical Officer, Uro-Oncology. Dr. Pruthi is a highly respected expert in bladder cancer urologic oncologist who brings vast experience advancing novel therapies for NMIBC. We have also established a clinical advisory board to provide additional guidance for the pivotal program for NDV-01. The board is comprised of prominent leaders in NMIBC and chaired by Dr. Yair Lotan, a renowned urologist oncologist. In October, we were pleased to welcome Dr. Max Cates to our advisory clinical advisory board. Dr. Cates brings a wealth of experience from chairing the landmark phase three BRIDGE study and leading several other practice-changing studies. I am very pleased with Relmada Therapeutics, Inc.'s work this year to de-risk our pipeline and advance two potentially life-changing therapies. We are looking ahead to 2026 with enthusiasm, with several value inflection catalysts ahead. Next, Raj is going to provide an update on the NDV-01 development program, including a nine months follow-up data from the phase two and a summary of the key highlights from the recent Type B, pre-IND meeting with the FDA. Raj? Raj S. Pruthi: Thank you, Sergio, and good afternoon, everyone. I believe this is a very exciting time for our patients based on our excellent progress with the NDV-01 development program. I want to touch on three items today. An overview of the patient care journey in non-muscle invasive bladder cancer or NMIBC, a review of the nine-month data, and a summary of the FDA meeting highlights. Let's start with the NMIBC and the patient journey. There are about 85,000 new cases of bladder diagnosed each year in the United States and 744,000 people living with bladder cancer. About 80% of bladder cancer patients have NMIBC, and recurrence rates over five years are about 60 to 80%. Relmada Therapeutics, Inc. is focused on high-risk NMIBC and on intermediate-risk NMIBC, representing about 80% of NMIBC cases or 54,000 people per year. In brief, the patient care journey most commonly begins when a patient presents with blood in the urine or hematuria. Suspected bladder cancer cases are diagnosed using cystoscopy and cytology. Treatment begins with a surgical procedure called transurethral resection of the bladder tumor or TURBT. This procedure allows surgeons to classify the patient's disease stage and risk category and define the treatment plan. After surgery, patients with high-risk disease receive intravesical adjuvant therapy with standard of care immunotherapy known as bacillus Calmette-Guerin or BCG. Patients are then monitored with regular and urine cytology every three months to assess for recurrence. Patients with recurrent disease are treated with repeat surgery alternating with intravesical treatments. NDV-01 is a novel sustained release intravesical formulation of two chemotherapy agents, gemcitabine and docetaxel, or Gemdosi, as we say. It was designed to build on data from numerous studies conducted over the past decade showing that combination use of these two agents achieves response rates and recurrence-free survival that are comparable to or better than historical standard of care BCG. And for those who are unresponsive to BCG, it can provide a second-line bladder-sparing option to avoid radical cystectomy. The sustained release formulation of NDV-01 will be provided to study sites in a ready-to-use format that does not require a specialized pharmacy or biocontainment hood to formulate the Gemdosi combination. NDV-01 is intended to be instilled into the bladder through a regular catheter in a less than five-minute intravesical installation. Upon administration, the formulation creates a soft matrix that is intended to enhance local exposure and minimize systemic toxicity. Moving to the nine-month data, we're pleased to report that NDV-01's continued positive phase two performance strongly supports its potential to transform the treatment of NMIBC. The study is a single-arm, single-center ex-US trial in patients with high-risk NMIBC. Patients are treated with NDV-01 in a six biweekly induction phase followed by monthly maintenance for up to one year. Patients receive regular assessments with cystoscopy, cytology, and if needed, biopsy. The study is designed to enroll up to 70 patients with localized high-risk NMIBC. The primary endpoints are safety and complete response at twelve months. Secondary efficacy endpoints are duration of response and event-free survival. Efficacy assessments for the nine-month follow-up included analysis of data at nine months and at any time point. These are the same safety and efficacy parameters that were applied to the six-month data reviewed during our Q2 call in August and the three-month data presented at the American Urological Association meeting in April. Looking at the data, we observed a complete response rate of 92% at any time based on 25 patients. Amongst patients with BCG unresponsive disease, we see a 91% CR anytime. At the nine-month assessment, we observed a complete response rate of 85%. No patient had progression to muscle-invasive disease and no patients underwent a radical cystectomy. Patients who had been reinduced had a 60% complete response rate. The study also includes certain defined subpopulations. For example, patients with BCG unresponsive disease, we saw 91% CR anytime and a nine-month CR rate of 88%. NDV-01 continues to demonstrate favorable safety consistent with our expectations and known efficacy and safety of Gemdosi. There were no reported new safety signals, no patients who had treatment-related adverse events that were grade three or higher, and no patients discontinued treatment due to adverse events. The most common treatment-related adverse events were transient dysuria and hematuria and asymptomatic positive urine cultures, an incidental finding observed in 9% of patients with hematuria only seen in 7%. All patients with dysuria were grade one and resolved within 24 hours. Our goal is to bring NDV-01 to patients as soon as possible. We intend to initiate the phase three program for NDV-01 in 2026. The recent positive type B FDA meeting is a key milestone that reinforces our confidence in the path forward for NDV-01. I'd like to summarize the key outcomes from the FDA meeting, a very positive, constructive, and prior dialogue discussion with them. Relmada Therapeutics, Inc. secured FDA alignment on certain key elements of the planned Phase III pivotal program for NDV-01, incorporating two separate and distinct registrational paths. Number one, high-risk second-line BCG unresponsive NMIBC patients. And number two, intermediate-risk NMIBC in the adjuvant setting. In the setting of high-risk second-line BCG unresponsive disease, the FDA stated that a single-arm trial might be acceptable in a more refractory patient population. We're excited about this approach because it could offer a rapid route to approval. In the indication of intermediate-risk in the adjuvant setting, the FDA agreed that a proposal to randomize patients post-TURBT to adjuvant NDV-01 versus observation evaluating a time-to-event endpoint is generally acceptable. We feel that the opportunity to incorporate NDV-01 into patient care after TURBT is very attractive. It could pave the way for an additional indication and broader clinical adoption. Importantly, the FDA indicated that no further clinical nonclinical studies are required to support a 505(b)(2) NDA. This is very good news. We look forward to working with the FDA to complete the study design and initiate the registrational program in 2026. Our efforts in the coming months will also focus on transferring production to contract manufacturers to complete scale-up and production of clinical batches. As I hand the call over to our CFO, Maged S. Shenouda, I am optimistic about the NDV-01 clinical development program based on the excellent nine-month results, positive outcomes with the FDA meeting, and our ongoing phase three preparation. Maged? Maged S. Shenouda: Thanks, Raj, and good afternoon, everyone. Today, I'll spend a few minutes on Sepranolone, and then provide you with an overview of our third quarter 2025 financials. Sepranolone is a member of a new subgroup of neurosteroids called GAMSAs or GABA modulating steroid antagonists. We believe Sepranolone's novel action on the GABA neurotransmitter pathway gives it unique potential to normalize GABA A receptor activity and alleviate the repetitive symptoms and disorders where compulsive behaviors are a common feature. These disorders affect millions of people in the US and around the world and include indications such as Prader-Willi syndrome and Tourette's syndrome. We have selected Prader-Willi syndrome, or PWS, as the first clinical indication that we will evaluate for Sepranolone. It affects approximately 350,000 people worldwide, including approximately 20,000 people in the US. PWS is a complex genetic disorder often defined by persistent hunger and overeating. Current treatment is focused on improving the obsessive-compulsive behaviors. Phase II data from a study in patients with Tourette's syndrome established Sepranolone's initial efficacy in a compulsivity disorder with good overall tolerability. We intend to initiate a proof of concept study in PWS in 2026. Our immediate efforts are dedicated to completing study preparations, including engaging with the FDA on our proposed trial design and in establishing a robust supply chain. Moving now to our financial results. As noted earlier by Brian, this afternoon, Relmada Therapeutics, Inc. issued a press release announcing our business and financial results for the third quarter and nine months ended September 30, 2025. As of September 30, 2025, Relmada Therapeutics, Inc. had cash, cash equivalents, and short-term investments of approximately $13.9 million compared to $44.9 million as of December 31, 2024. Notably, this excludes net proceeds of approximately $94 million from our $100 million underwritten offering of common stock prefunded warrants, which the company closed on November 5, 2025. Based on current plans, the company believes that its current cash balance, including net proceeds from the offering, is sufficient to support planned expenses into 2028. Cash used in operations in the third quarter ended September 30, 2025, was $6.7 million compared to $16.7 million for the same period in 2024. During today's call, I'll review our third quarter 2025 financial results. Information regarding the nine months results are included in our press release and 10-Q filings issued this afternoon. Research and development expense for the third quarter 2025 totaled $4 million compared to $11.1 million for 2024, a decrease of $7.1 million. The lower spend was primarily driven by lower study costs with a wind-down of clinical trials for Rel-1017 partially offset by an increase in manufacturing drug storage costs associated with the ramp-up of NDV-01 and Sepranolone study and an increase in R&D employees. General and administrative expense for the third quarter 2025 totaled $6.3 million compared to $11.9 million for 2024, a decrease of approximately $5.6 million. The decrease was primarily driven by a decrease in stock-based compensation expense as well as direct employee and administrative expense. The net loss for 2025 was $10.1 million or 30¢ per basic and diluted share, compared with a net loss of $21.7 million or 72¢ per basic and diluted share for 2024. Sergio? Before we open the call for questions, I'll turn back to Sergio for some closing comments. Sergio Traversa: Thank you, Maged. Before we go to the Q&A session, I would like to share that I'm very pleased with Relmada Therapeutics, Inc.'s work this year to advance and de-risk a portfolio of potentially life-changing therapies for patients. With our progress comes our gratitude for your support and for taking time to join today's call. 2026 is shaping up to be another very important year for the company, and we look forward to updating you on our continued progress. Operator, I would like now to open the call for questions. Operator: Thank you. Ladies and gentlemen, as a reminder, if you have a question, please press one on your telephone keypad. Our first question comes from Uy Sieng Ear of Mizuho Securities. Please go ahead. Uy Sieng Ear: Hey, guys. Congrats on all the progress that you've made over the last nine months. It takes a lot of doing. Maybe, you know, the first question we have is maybe just help us understand a little bit about, you know, the different potential market opportunity for the two, I guess, indications that you are kind of going after, and maybe also, you know, help us understand the sequence of it. Will you start the study at the same time? And when do you think that one study will finish before the other, and if you can maybe provide some guidance on when each of the studies could complete. So maybe, you know, talk about the potential number of patients in the refractory second-line setting versus the potential number of patients in low-grade intermediate risk who could benefit from the adjuvant combination of NDV-01. First question. Thanks. Sergio Traversa: Thank you, Uy, for the question. I believe Raj, who runs the clinical program, can answer your question appropriately. Raj, do you want to try? Raj S. Pruthi: Yeah, of course. So as I mentioned, there's two proposed indications. One is in BCG unresponsive, refractory to first-line therapy. And I'll talk, let me talk a little bit about this population, then the intermediate risk, and then we'll talk about timelines. So this is a relatively smaller, about 8,000 patients per year. Now with current therapies, 55 to 80% of those patients will recur after first-line therapy. So there's a growing number of patients that are needed in this second-line indication. So from 8,000, you can take that down to 55 to 80% that will each year be BCG unresponsive that fail primary therapy. High-grade and low-grade intermediate risk. Now the intermediate risk population, and this is a much larger patient population estimated about 80,000 incident and prevalent patients each year in the United States with intermediate risk NMIBC. A significant number of them, probably over half, will receive an adjuvant therapy. And so that's about 40,000. So that represents a significant market for us to address. And I think if you look at surveys of urologists, chemotherapy and Gemdosi chemotherapy is the preferred choice. Regarding your question on timing, our plan is to initiate both of these trials, although they're separate indications, both trials at about the same time in 2026. I think this will provide for operational efficiencies and cost checks, contracting, and addressing sites. And I think for the sites, it will be easier as they kind of know how to do a clinical trial one side or the other. And the unresponsive patient population, with the first patient in being Q2 2026, will likely have clinical data, three-month data by Q4 2026 to provide internally and externally. And then the endpoint is going to be a twelve-month CR. So that'll be Q2 2027, with top-line data in Q2 2028. And the intermediate risk study also initiating in Q2 2026. That's an open-label but randomized study. That'll take probably about fifteen months to complete enrollment. Within that completed enrollment, we'll need probably about 24 months of follow-up. It's, I think it's a little bit trickier. We plan to do an interim analysis that's 70% events. Regarding the ability to provide data before then, I think that's a conversation we'll have to have with the FDA. Although it's an open-label study, we certainly wouldn't want to expend alpha along the way. So I hope that gives you an idea of the size of the populations and the timelines. Uy Sieng Ear: Yeah. That was super helpful. So maybe just help us with the other element. So, you know, with J&J and Lexo, I think the price is $69,000 per dose or per one of those pretzel tubes. And the induction phase is, I think it's what you need eight of those. So that sort of rounds up to about $550,000 a year. Does that sort of make sense in terms of, I know it's probably too early to sort of speak about pricing. Just wanted to maybe get your view on what potential pricing could look like. Raj S. Pruthi: Yeah. Let me actually take a quick answer to that, and then I would like to ask our CEO Sergio to comment. So, yeah, I think if you actually add up the induction phase and maintenance phase in the first year for Inlexo, it approaches $700,000. So that certainly is now set the new benchmark above ANTIVA for one if you look at one year of therapy. The other end of the spectrum to me is Zosduri, which is in low-grade intermediate chemoablation, which the yearly cost there is about $120,000. So I think the numbers will fall somewhere between. But, Sergio, do you mind if I ask you to comment on that? Sergio Traversa: Yeah. No. Sure. Thanks, Raj. I know it look. It's a bit early to talk about pricing. Because, like, we have to, we'll be data-driven depending on what the data looks like. We will, you know, price accordingly to the value added for patients. But we do have the luxury to watch what the uptake and the penetration of J&J and the other chemotherapy origin with their pricing, and we'll base our decision based on also how their pricing will be received by the urology community. So I hope I answered your question the best way I can. But we don't really have any specific pricing orientation for now. Uy Sieng Ear: Mhmm. Yeah. Thanks for that. I know it's probably way too early. And you're right. You know, you need to look at the data, but it's, I guess it's kind of encouraging that the pricing is kind of interesting. So maybe our last question, you know, maybe just help us to kind of a little better with respect to the differentiation from, you know, the conventional Gemdosi. I think on the call, you mentioned that, you know, you need a special biochemical hood and you need a special pharmacist as, I guess, someone who maybe even licensed who needs to put the product into syringes to be used. Yeah. Just help us understand, like, because of this hurdle where the product is currently used? Is it mostly in academic centers? And if all of this goes away, like, how does it open up the market for you if it does? Thanks. Raj S. Pruthi: Yeah. That's a wonderful question. And I think that has been the hurdle of Gemdosi. Right? We know it works as urologists. We know it works well, like I mentioned, for a decade. The obstacles for the community urologist, where 70 to 80% of these patients are taken care of in the community, is you need a specialized pharmacy. And if you look at the overall procedural time of sequential gemcitabine followed by docetaxel, it's upwards of four hours. So that's very easy to do in an academic center, and I think that's where most of the uptake has been. Very difficult in the community, lack of specialized pharmacy, and room or chair time and the staff for that for four hours. So I think by having prefilled syringes, avoiding the specialized pharmacy, and having a five-minute or so installation to a catheter, removing the catheter, watching the patient, allowing them to go home, I think opens the door. This is an opportunity for academic centers as well, but I think also to meet the patients where they're at and to meet the urologists where they're at as well. So I think this opens up the market significantly. Uy Sieng Ear: Okay. Sorry. Maybe just one additional question. I know you're going after just the two indications, which is actually quite broad, particularly in the intermediate risk section. But you know, there's an ongoing study in BCG naive patients called the, I guess, the BRIDGE study. If this study succeeds, like, what does that do to the potential opportunity for this product to be used off-label even though you, you know, you won't be promoting it because every doc will probably know about your product. Sergio Traversa: Yeah. Raj, you want to give your view? Raj S. Pruthi: Yeah. Thank you, Sergio. So that's a very insightful question, Uy. And, actually, Max Cates is one of the heads in the BRIDGE trial. So the BRIDGE trial is a randomized study of BCG versus Gemdosi in high-risk disease. And it's an 800 patient trial, cooperative group trial that is near end of enrollment and will read out in two years. So timing is nice for us. It's meant to look if Gemdosi is noninferior to BCG. So we know that the obstacle with BCG now are supply issues, and that's been ongoing for fifteen years in the US globally. And, also, it does have toxicity to it. It's effective, but it does have toxicity. So if now you introduce the ability of Gemdosi to substitute in for BCG, you know, Uy, I think that especially as you said in an off-label use, an easier way to give it, I think that opens the market significantly. That's a tremendous opportunity for Relmada Therapeutics, Inc. Great question. Thank you. Uy Sieng Ear: Okay. Thank you. Operator: Ladies and gentlemen, this concludes the question and answer session. I will now hand over to Sergio Traversa for closing remarks. Sergio Traversa: Thank you very much, and thank everyone. And just an extended thank you to investors, patients, employees, collaborators, and consultants that have helped us to get where we are now, and they will continue to help us to get where we want to be. That is to bring NDV-01 and Sepranolone available for doctors and patients. Thank you very much, and I wish everyone a great evening for the rest of the day. Brian Ritchie: Thank you. Operator: Thank you, sir. Ladies and gentlemen, that concludes today's call. Thank you for joining us, and you may now disconnect.
Operator: Greetings. And welcome to the Pioneer Power Solutions, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star and then 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Corbin Woodall of Hayden HR. Thank you, and you may begin. Corbin Woodall: Thank you, Claudia. The call today will be hosted by Nathan J. Mazurek, Chairman and Chief Executive Officer, Walter Michalec, Chief Financial Officer, and Geo Murickan, President of Pioneer eMobility. On the call today, we will review the third quarter financial results and recent business highlights. Following this, there will be a Q&A session open to participants on the call. Before we get started, I would like to remind participants this call is being recorded. During this call, management may make forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release issued earlier today, Thursday, November 13, which applies to the content of this call. I would now like to turn the call over to Nathan J. Mazurek, Chairman and CEO. Nathan, please go ahead. Nathan J. Mazurek: Thank you, Corbin. Good afternoon, everyone, and thank you for joining us today. The third quarter was a highly successful period for Pioneer Power Solutions, Inc., highlighted by key equipment deliveries, strong order momentum, and significant penetration into the distributed power space. These achievements, combined with a robust project pipeline and Pioneer's continuing investment in product development, position us to realize our full year 2025 growth objectives and position us for accelerated growth in 2026. For the third quarter, we generated revenue of $6.9 million, an increase of 7.4% year over year, driven primarily by an increase in service sales from our critical power business. Year to date, revenue reached $22 million, up 68% compared to the same nine-month period last year, driven primarily by demand for our eBoost mobile charging solutions. These results reflect our ongoing success in expanding our product scope, broadening our customer base, and capitalizing on large new vertical markets. Specifically, in the third quarter, we completed delivery of the last five eBoost units of a 25-unit order for a landmark school district project totaling $1.3 million. This project represents one of the largest school bus fleet electrification initiatives in the country and underscores our ability to deliver turnkey mobile charging solutions for heavy-duty, high-utilization electric vehicles. This milestone strengthens our position as a leader in fleet electrification and highlights the growing demand for mobile, high-capacity energy solutions in the public sector. In the broader fleet electrification market, we delivered our eBoost Mobile OpenFlex unit to the city of Portland. This 175-kilowatt multifunctional unit features a level three fast charger, multiple level two chargers, and a grid-tie transfer switch. Pioneer Power Solutions, Inc.'s ability to design and implement the power-dense, flexible mobile power system further solidifies our reputation as a trusted vendor of complex, resilient, distributed power. Also in Q3, we received a $725,000 order from the city of Long Beach, California, for an eBoost mobile stretch unit, a specialized 250-kilowatt off-grid EV charging system, which is scheduled to ship before year-end. Securing this project also highlights Pioneer Power Solutions, Inc.'s ability to craft custom, complicated, and value-driven power charging solutions. The last mile delivery market continues to represent strong demand for eBoost equipment. Following a successful pilot during the peak holiday shopping season last year, one of the world's largest online retailers placed a follow-up order for new eBoost units, which were delivered in the third quarter and indeed confirms the success of the initial pilot last year. Based on current discussions with this retailer, we expect additional eBoost units to be deployed at many depots and distribution centers in 2026. Also, shortly after quarter-end, our strategic partner, SparkCharge, placed an additional order for four new eBoost pure energy 275-kilowatt units, valued at $1.6 million, as part of a multiyear purchase plan reinforcing eBoost's critical role in supporting rideshare and autonomous vehicle electrification. These units are also expected to be delivered by year-end. More importantly, Q3 marks the actualization of Pioneer Power Solutions, Inc.'s two most impactful growth initiatives. First, our natural expansion into the distributed power market and second, the technical completion of our residential power/charging unit originally known as HomeBoost, now rebranded as PowerCore. Pioneer's expansion into the distributed power market was validated in Q3 with over $700,000 in product deliveries and an additional $750,000 in new purchase orders. The expertise gained in designing and integrating complex mobile power solutions with the original launch and evolution of the eBoost platform enabled us to smoothly transition to a pure custom distributed power suite of solutions. Indeed, Q3 deliveries of our distributed power solutions cut across a swath of verticals, including a large shopping center, a large condominium tower, and a solid waste processing facility. The new $750,000 distributed power order we received is from one of the largest fitness chains in the United States for a peak shaving application at its flagship facility. Together, these wins underscore the increasing demand across various sectors for fast deployable flexible power solutions. Building on this early success, we are expanding our focus to serve the broader distributed power market and are excited to introduce a pre-engineered scalable power block system designed to meet the increasing energy requirements of large data centers, industrials, universities, and hospitals. Our 1.25-megawatt natural gas-fired, resilient, and modular power solution is engineered to provide reliable, redundant, efficient power for critical needs and the new surge in demand for on-premise compute power needs. We anticipate launching this innovative system by the end of 2025, exponentially expanding our ability to address the overall distributed power space. Secondly, within the broadened product portfolio, our HomeBoost power unit product is being rebranded as PowerCore and is on track to launch later this year on December 15 and December 17 at a scheduled event hosted by Pioneer Power Solutions, Inc. at our Miami, Florida facility. We initially introduced HomeBoost as a residential product that seamlessly integrates distributed generation with EV charging. In its original form, HomeBoost offered homeowners the ability to combine prime power generation, natural gas or propane, with advanced fast EV charging and an automatic transfer switch to manage utility outages or go into island mode during extended grid outages. With the transition to the PowerCore branding, the solution is positioned as a scalable, always-on power platform that integrates natural gas power generation and, at the user's discretion, combines fast DC charging into a single system architecture. This elevated design is not just aimed at the residential segment, but indeed also at light commercial and other resilience-demanding markets, where continuous reliable on-site power and EV charging are critical but not easily available. This offering essentially provides the user with their own natural gas-powered power plant. We continue to receive positive feedback from early customer demonstrations, and we believe that PowerCore will be a key growth driver for Pioneer Power Solutions, Inc. in 2026 and beyond. PowerCore materially expands Pioneer Power Solutions, Inc.'s addressable market, moving us beyond large fleets and municipal deployments to permanent high-value installations that demand both power generation and/or high-capacity EV charging. This product represents the next chapter in our evolution toward providing fully resilient distributed power solutions. Finally, there are several countries around the world that are currently experiencing a high EV growth market supported by policies and incentives similar to US policies back in 2021. Pioneer Power Solutions, Inc. is actively engaging with several charging businesses in these thriving international EV markets through an eBoost franchise-type model where we are able to leverage our existing engineering and development expertise to help local partners achieve similar success. These strategic alliances will enable faster adoption of EVs in those markets and provide Pioneer Power Solutions, Inc. an additional stream of revenue from licensing, technology transfer, and revenue share models. In summary, the third quarter reflects both continued operational execution and important strategic progress. We are expanding our reach, diversifying our revenue mix, and strengthening our foundation for long-term growth. Based on the momentum we have built and our visibility into the pipeline, we are reaffirming our full year 2025 revenue guidance of $27 million to $29 million, representing approximately 20% year-over-year growth. With that, I'll turn the call over to Walter for a detailed review of our financial results. Walter Michalec: Thank you, Nathan, and good afternoon, everyone. Please be advised that we have included a non-GAAP financial measure of operating income or loss from continuing operations. This excludes corporate overhead expenses, research and development costs, depreciation and amortization expense, and nonrecurring professional fees. Please refer to our press release issued earlier today, November 13, 2025, for further information, including a reconciliation between GAAP and non-GAAP financial measures. The press release can be found on our website at pioneerpowersolutions.com/investors/newsroom. Such non-GAAP measures should not be used as a substitute or alternative to any measure of financial performance calculated and presented in accordance with US GAAP. Instead, we believe this non-GAAP measure should be used to supplement our financial measures derived in accordance with US GAAP in order to provide a more complete understanding of the trends affecting the business. Third quarter revenue was $6.9 million compared to $6.4 million in the year-ago quarter, an increase of approximately 7%. The increase was primarily due to an increase in service sales from our Critical Power Solutions business. Third quarter gross profit was $640,000 or a gross margin of approximately 9% compared to a gross profit of $1.5 million, a gross margin of approximately 20% in the third quarter of last year. The decrease in gross profit was primarily attributable to an unfavorable sales mix. During 2025, Pioneer Power Solutions, Inc. incurred an operating loss from continuing operations of $1.4 million compared to an operating loss from continuing operations of $714,000 in the third quarter of last year. Additionally, during 2025, Pioneer Power Solutions, Inc. incurred a non-GAAP operating loss from continuing operations of $196,000, which excludes corporate overhead expenses, R&D expense, depreciation and amortization, and nonrecurring professional fees, compared to a non-GAAP operating income from continuing operations of $865,000 for the same quarter in 2024. Net loss from continuing operations for 2025 was $1.8 million compared to a net loss from continuing operations of $738,000 during 2024. Taking a look at our balance sheet, as of September 30, 2025, we had cash on hand of $17.3 million, zero bank debt, and working capital of approximately $22.8 million, compared to $41.6 million of cash on hand, zero bank debt, and working capital of $26.7 million as of December 31, 2024. The cash on hand as of September 30, 2025, represents cash per share of approximately $1.56. The decrease in our cash on hand compared to the prior year-end is primarily due to the payment of a one-time special cash dividend of an aggregate of $16.7 million in January and the payment of federal and state income taxes totaling approximately $4 million during the second quarter. Today, we are reaffirming our guidance for revenue of $27 million to $29 million for the full year of 2025, which represents year-over-year growth of approximately 20%. This concludes my remarks, and I will now turn the call back over to Nathan. Nathan J. Mazurek: Operator, you can open the lines for questions. Operator: Thank you very much. At this time, we will conduct a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. Please limit your questions to one question and one follow-up question. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star key. One moment, please, while we poll for questions. The first question comes from Amit Dayal from H.C. Wainwright. Please proceed with your questions, Amit. Amit Dayal: Thank you. Good afternoon, everyone. Thank you for taking my questions. Nathan, looks like another strong quarter. You know, what's interesting is your end markets are getting increasingly diverse. I'm just wondering, you know, how you are creating your marketing awareness to reach across, you know, multiple segments that you are now playing in? Nathan J. Mazurek: So excellent question. So, I mean, we started turning our attention to it because so many of the applications that we've been working on end up, you know, the heart of the expertise is really delivering this power. Adding a charger is an expertise or a series of chargers. But not as complicated all the time. To date, we've been doing it almost in a haphazard way. People either it's you know, we're being recommended from others based on other projects that we've done, or the same contractor or the same engineering firm. And then we had some significant success already in the third quarter. Which really means that we need to put together a very, very focused team to focus on certain verticals. And that's what we plan on doing. One on the industrial side, and the other really focused on the on the larger modular edge computing type data center, where a 1.4 power block under the right circumstances that's quickly deployable you know, we should be benefiting from and offering some sort of a value proposition there. Amit Dayal: Interesting. Thank you for that, Nathan. Then just one on the gross margin side. You attributed the softness this quarter to the sales mix. Do you expect some bounce back in the next quarter? Nathan J. Mazurek: Yeah. So, I mean, we you know, we're already experiencing it, but, yes, we expect a bounce back. And you're right. You know, the issue was the gross margin. The last five units for the for the large school district that we did were were not good. Not good for us even below what we'd experienced earlier in the year for whatever those reasons were. And it's not important to discuss openly here. But that that hurt. City of Portland did achieve more or less the margins that we had set out for it, a little bit less against some execution issue, but overall okay, but not enough to command gross margins that we did the other quarter. Fourth quarter, the mix is much more favorable to us. And and we expect them to bounce back. Amit Dayal: Okay. Thank you, Nathan. I'll get back in queue. Operator: Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star and then 1. If you'd like to ask a question, please press star and then 1. The next question comes from Rob Brown from Lake Street Capital. Please proceed with your questions, Rob. Rob Brown: Good afternoon. Hey, Rob. Nathan J. Mazurek: Hi. My first question is on the online retailer project and the expansion there. You talked sort of some opportunity in 2026. Could you kind of outline the scale of that relative to sort of what you've done or maybe the the planning steps that need to happen here and and how that might look next year? Nathan J. Mazurek: Yeah. I mean, to date, what we've been doing with them is short term rentals. You know, we did a short term, a ninety day rental last year at the end of the year for the holiday period to help them with that and and let them sort of prove it out under the more intense part of their year. This year, it's it's it's a six month rental, so the revenue is is relatively small. And the discussions are, you know, pending, again, that these units work as we plan as the initial one did. They're talking about probably five to 20 units next year from a for a purchase. Rob Brown: Okay. And she's moving moving from rental to a purchase model. Nathan J. Mazurek: Yeah. So okay. Great. Great. And then on the on the on the modular sort of data center project, you talked a little bit about here. But but that's how do you kinda see that opportunity? What what's sort of the the the ideal application there? And I guess, sort of that larger megawatt unit is I assume, a fairly large, ASP on that, but you can give a sense sort of the range of of what those units, sell for? Nathan J. Mazurek: Yeah. So so we're gonna do a formal kind of unveiling of this before the end of the year. You know, with the with the team around it and its own sort of cache. But I'll let let Geo give you a little I don't know. Give give Rob a little you know, a a a concise teasing view of it now, if you can, for in in ninety seconds. Geo Murickan: Yeah. Thank you, Nathan. Rob, so the what we have in the market engagement we've done we have seen in the data center market, the move to AI compute applications And one of the more immediate needs has been the need to test the AI compute loads because they are they have a very variant use compared to normal cloud compute load the data centers have today. So in order to test these, they need a lot of smaller systems on data center premises. That are behind the meter powered and can be actuated in a four to six months time frame. In order for them to scale and plan for the bigger data center cycles. Beyond that, there are also industrials who are adding critical power applications across different retail sectors. So those are some of the markets that we are addressing in the next one to three years. Rob Brown: Okay. Excellent. Thank you. I'll turn it over. Operator: Thank you so much. Ladies and gentlemen, we have reached the end of the question and answer session. And now I'd like to turn the call back to Nathan J. Mazurek for closing remarks. Thank you, sir. Nathan J. Mazurek: Thank you, Claudia. This quarter's results reflect strong execution and meaningful progress in expanding into new markets including distributed power. With a robust pipeline, strategic product launches like PowerCore, and continued operational momentum, we are well positioned to drive growth and achieve our full year 2025 objectives. Thank you for your continued support. We look forward to updating you on our next earnings call. Operator: Thank you very much. Ladies and gentlemen, that does conclude today's call. Thank you very much for joining us. You may now disconnect your lines.
Operator: Greetings, and welcome to the Tenon Medical Third Quarter 2025 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your hosts today are Steven Foster, President and Chief Executive Officer, and Kevin Williamson, Chief Financial Officer. Mr. Foster and Mr. Williamson will present results of operations for the third quarter ended 09/30/2025 and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website at www.tenonmed.com. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast may include predictions, estimates, and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind, we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. For a more complete discussion of these factors and other risks, you should review our quarterly and annual reports on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'd like to turn the call over to Tenon Medical's Chief Executive Officer, Steven Foster. Please go ahead, sir. Steven Foster: Thank you, Rob, and good afternoon, everyone. I'm pleased to welcome you to today's Third Quarter 2025 Financial Results and Corporate Update Conference Call for Tenon Medical. The third quarter was a very exciting time for Tenon Medical, where our progress is really showing through in our financial results. Our results demonstrate significant momentum in executing our strategic growth initiatives. We achieved record revenue of $1,200,000 with a 32% increase compared to the same period last year. This performance was fueled by unprecedented cadmium procedure volumes, underscoring strong demand and growing adoption among physicians. Additionally, the integration of the SciVantage portfolio contributed meaningfully to our top-line growth, an early indication of what our portfolio expansion strategy can deliver. These results affirm the strength of our commercial and the increasing recognition of our differentiated solutions in the marketplace. As discussed during our second quarter earnings conference call, and in line with our commitment to advancing innovation and expanding our market presence, we completed a strategic asset acquisition of CyVantage's Symmetry and Symmetry Plus sacroiliac joint fusion technologies during the third quarter. This transaction marks a pivotal milestone in our growth strategy, transforming Tenon into a multiproduct, multiproach company capable of addressing a broader spectrum of sacropelvic fixation infusion needs. The Symmetry platform brings a well-established clinical foundation and a differentiated approach to fusion, complementing our existing cadmium system. Importantly, this acquisition has been immediately accretive to revenue and enhances our ability to serve a wider range of physicians and patients. We also welcome key members of the CyVantage leadership team whose deep experience and expertise will be instrumental in accelerating our commercial execution and driving continued innovation. I'd like to quickly acknowledge the efforts of the newly combined team for efficiently coming together as one, aggressively completing integration activities, and delivering a strong quarter. Another key milestone this quarter was the full commercial launch of our Catamaran SE, SI joint fusion system, which expands our implant portfolio and strengthens our competitive position in the sacroiliac joint fusion market. The Catamaran SE features a reduced profile, offering physicians greater flexibility when treating patients with smaller SI joint anatomy or performing revision procedures. This design enhancement supports a minimally invasive inferior posterior approach and includes a proprietary instrument set with multiple drilling options catering to diverse surgical preferences. Backed by expanded inventories and field support, bolstered by our recent SciVantage acquisition, we are well-positioned to meet growing market demand. With over a thousand catamaran devices implanted to date, the system continues to demonstrate strong clinical performance across a range of indications, including primary SI joint dysfunction, revision, and adjunctive applications in complex multilevel spine fusions. The successful transition from alpha testing to full launch reflects our commitment to innovation and our ability to execute with speed and precision. During the quarter, we were proud to share that the second peer-reviewed publication from our ongoing main sales study was published. This further validated the safety, efficacy, and durability of the Catamaran SI joint fusion system. This prospective multicenter clinical trial evaluated patient outcomes in patients with sacroiliac joint disruptions, degenerative sacroiliac treated with our catamaran implant. The twelve-month data from the first twenty-four patients demonstrated statistically significant improvements in pain and disability scores. VAS scores dropped from 78.8 preoperatively to 23 postoperatively, and ODI scores improved from 51.6% to 20.8%. Notably, eighty-three percent of patients showed unequivocal evidence of fusion with bridging bone across the SI joint at twelve-month CT confirmed by independent radiographic review. The study also reported no serious adverse events, reoperations, or reinventions, and eighty-three percent of patients expressed high satisfaction with their outcomes. These results reinforce the Catamaran system's clinical value and support its role as a reliable, minimally invasive solution for SI joint dysfunction. As we continue to build our clinical evidence base, we believe these findings will be instrumental in driving broader adoption and payer coverage that supports our long-term growth. Subsequent to quarter end, we announced a major regulatory milestone with the FDA 510(k) clearance of our Symmetry Plus SI joint fusion system. This next-generation platform builds on the proven foundation of the original Symmetry system and introduces several key advancements, including 3D printed titanium implants, a robust joint decorticator, and a simplified bone graft delivery system. These enhancements are designed to support authentic arthrodesis through a minimally invasive lateral approach, rooted in established orthopedic fusion principles. With this clearance, Tenon now offers two distinct minimally invasive surgical approaches: an inferior posterior through our Symmetry Plus and Catamaran systems, respectively. This multiplatform strategy significantly strengthens our competitive position and enables physicians to tailor treatment to individual patient anatomy and pathology. We are prepared for an alpha launch of Symmetry Plus in the coming weeks. A select group of physician users whose feedback will guide our broader market introduction will be the first to use the technology. This milestone not only expands our portfolio but also reinforces our commitment to delivering durable, clinically validated outcomes for patients suffering from sacroiliac joint dysfunction. Physician education remains a top priority. In the third quarter, we hosted 26 physicians in various Tenon workshops, including critical peer-to-peer engagements. We ended the quarter with $3,400,000 in cash and no debt. Subsequent to quarter end, we bolstered our cash position with a $2,850,000 pipe financing primarily consisting of investment from industry partners, giving us the flexibility to continue executing our strategic roadmap with confidence. Looking ahead, we remain focused on driving adoption across our expanded product portfolio and leveraging recent regulatory and clinical milestones to support commercial growth. With a strong foundation in place, we are confident in our ability to scale up operations, deepen market penetration, and deliver continued value in the quarters to come. We are actively onboarding sales professionals to the Tenon commercial team through a strategic hybrid structure, and we're already seeing the momentum build into the fourth quarter, driven by the expansion of our commercial footprint and increased horsepower of our sales organization. And with that, I'll turn the call over to Kevin to discuss our financials in detail. Kevin Williamson: Thank you, Steve. I will now provide a summarized review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Revenue for 2025 was $1,200,000, an increase of 32.3% compared to $900,000 in the same period last year. Revenue for the nine months ended 09/30/2025 was $2,500,000, in line with $2,500,000 for the nine months ended 09/30/2024. The increase in the third quarter revenue was primarily driven by an increase in the number of surgical procedures in which the catamaran system was used, as well as the addition of sales in the last two months of the quarter from the newly acquired Symmetry SI joint fusion system. The demand for both Catamaran and Symmetry increased throughout the quarter and has continued into the fourth quarter. Gross profit was $800,000 or 66% of revenue in 2025, compared to $400,000 or 47% in the prior year quarter. For the nine months ended 09/30/2025, gross profit was $1,300,000 or 54% of revenue, compared to $1,400,000 or 54% of revenue for the previous year's period. Gross margin for the quarter improved due to higher revenue absorbing fixed overhead costs in our cost of goods sold. With a similar margin profile for both Symmetry and Catamaran, we expect our gross margin to continue to improve as revenue increases and fixed overhead costs are further absorbed. Operating expenses totaled $4,200,000 in 2025, up from $3,600,000 in the prior year period. For the nine months ended 09/30/2025, operating expenses totaled $11,300,000, compared to $12,000,000 in the prior year period. The increase in operating expenses for the quarter was primarily due to higher sales expenses driven by higher revenue and related variable commission expenses, as well as higher marketing and G&A expenses driven by integration efforts in relation to the SciVantage acquisition. The decrease in operating expenses in the nine months was driven by lower fixed expenses, including lower stock-based compensation across several operating categories. Net loss for the third quarter was $3,300,000 or $0.40 per share, compared to a net loss of $3,200,000 or $3.63 per share in 2024. For the nine months ended 09/30/2025, net loss was $9,700,000, compared to $10,600,000 in the same year-ago period. The year-over-year improvement was largely driven by reduced operating expenses and lower fixed costs, raising operational leverage. We ended the quarter with $3,400,000 in cash and cash equivalents, compared to $6,500,000 as of 12/31/2024. Subsequent to quarter end, Tenon raised an additional $2,850,000 in cash to fund future growth initiatives through a pipe financing. The pipe was led by an industry-supported investor cohort that believes in the strategic vision of Tenon and the growth opportunity in front of us. Additionally, Tenon had no outstanding debt as of quarter end, further positioning the company to continue executing on our strategic initiatives, including the development and launch of the SciVantage assets, continuing to build clinical evidence, and expanding our commercial footprint. In summary, we believe the transformational steps taken this quarter, both financially and strategically, position Tenon well to accelerate growth while maintaining a lean and focused cost structure and driving long-term shareholder value. I'll now hand the call back to Steve for closing comments. Steven Foster: Thank you, Kevin. In summary, the third quarter was marked by strong execution across our strategic priorities, from record revenue growth and the successful integration of the SciVantage acquisition to the full market launch of Catamaran SE and key regulatory and clinical milestones. We remain focused on expanding our portfolio, deepening physician engagement, and building a robust foundation for sustained growth. With momentum building across our commercial and clinical initiatives, we are confident in our ability to drive long-term value for patients, providers, and shareholders. I thank you all for attending, and I'd like to hand the call back over to our operator to begin the question and answer session with our covering analysts. Operator: Rob? Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Scott Henry with AGP. Please proceed with your question. Scott Robert Henry: Thank you, and good afternoon. It's exciting to see the company come together as it approaches greater scale. A couple of questions. First, could you comment on the product revenues, how much was the kind of base CyVantage revenues of the $1,200,000? Steven Foster: Thank you, Scott. I appreciate the question. Yes. So we're, obviously, early. We had two months of CyVantage product contribution, if you will, to the top line. Right, in the third quarter. We closed right around August 1. The transaction itself. So primarily, the primary driver of our revenue was record catamaran procedures and what have you. We did a little over a million, close to a million one in catamaran revenue. And the rest of the revenue was early Symmetry activity. Keep in mind that the Symmetry activity is base what I refer to as base Symmetry technology. We're just now in the coming week or two, going to initiate the Symmetry Plus Alpha. So start seeing revenue build from Symmetry Plus here going forward. Scott Robert Henry: Okay. Great. And, you know, obviously, sequentially in the fourth quarter, you'll get another month of the base CyVantage revenues. You'll get the Symmetry Plus contribution even if it's small at that point. But would you expect Catamaran to grow sequentially from third quarter 2025 to fourth quarter 2025? Steven Foster: We do. I think, you know, look. The drivers behind Catamaran is data. You know, the main sale data continuing to come out and show that Catamaran is delivering on its promises. So we do expect Catamaran activity, number of surgical procedures, etcetera, to continue to grow. And to your point, you know, we'll get the extra month of CyVantage activity in the full fourth quarter. And, frankly, what means more to us is this initial phase of the alpha launch of Symmetry Plus. We have physicians who are really excited about getting their hands on that technology. We anticipate it'll be a good growth driver as we move through alpha. Scott Robert Henry: Okay. Great. And when we think about the Symmetry Plus Alpha launch, you know, how should I think about that? Should I think of that as a pilot launch at first, or is that a full-scale launch? Just trying to get a sense of how that launch will evolve, you know, over the next six to twelve months. Steven Foster: Yeah. I appreciate that question. Absolutely. It's the physicians that informed us and partnered with us to give us feedback on what they wanted the system to do, etcetera, will be the first users of the technology. So it's a relatively small and focused group in the first, call it, sixty to ninety days of the alpha. Then we get feedback and make absolutely sure, hey, is everything working as expected? Are refinements required? Are there tweaks required? Etcetera. To make sure this is ready for prime time, if you will, and to go to a broader audience. And at that point, we'll start expanding things pretty aggressively. So it's exactly what you said. Right? It's a bit of a pilot, if you will, for a short period of time to make sure we got everything right. And that the instruments and the implants are meeting expectations. Scott Robert Henry: Okay. Great. And just the final question, perhaps for Kevin. G&A, do you think the third quarter is reflective of what we'll start to see on a quarterly basis? Or I know you'll have another month of, should we be thinking about, you know, CyVantage, but, you know, it looks like maybe there were some one-time stuff in there as well. Is it $2,100,000 to $2,200,000 a quarter? Kevin Williamson: Yes. Good question, Scott. Fair on both of your comments. So a little bit of some one-time more integration type expenses in there. But also some increased expenses going forward. So, you know, probably somewhere just south of that number we posted here in Q3. But closer to that number than where we were previously, given some of the increased expenses going forward. Scott Robert Henry: Okay. Great. Thank you for that color. And thank you guys for taking the questions. Operator: Thank you, Scott. Please press 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Thomas McGovern with Maxim Group. Please proceed with your question. Thomas McGovern: Thank you. So it sounds like you guys are well on your way to integrating CyVantage. I just want to get maybe an update on how that process is going. Is it fully done? Are there additional milestones you're looking to achieve in this integration process? Maybe just kind of high level how you view it moving into the fourth quarter. Steven Foster: Yeah. Thanks for the question, Thomas. Yeah. Look. I'm really, really proud. I mentioned it in the prepared statements here, and we'll reinforce it here. Live through a lot of integrations. Bringing people together and getting them to, if you will, take the risk to dive in, to trust each other, to get after it, and start performing as one is really the biggest challenge in these integrations. Right? And I'm just really, really pleased with the progress that we've made. Sure. There's all kinds of stuff to do with the audit itself. You know, just some of the tactical stuff that has to be done as part of an integration. It's really about winning hearts and minds. And this team is coming together really nicely as one and starting to check all the boxes so we can perform as an integrated team going forward. So just super, super proud of the work that's being done. Kevin can comment a little bit, but I think largely, we are finished now. And a good indicator of that, probably the best indicator of that, is bringing the Symmetry Plus Alpha in on time and executing on that in the course of all of the integration activities going on. You know, we'll initiate that here this month. And we're super excited about seeing what Symmetry Plus can do out there with physicians that prefer a lateral approach. So all of those things are coming together, Thomas. And I'm just really thankful to the CyVantage folks, the Tenon folks coming together and becoming the new Tenon. It really has been a pleasure to work with everybody. Thomas McGovern: Great. I appreciate that answer. Kevin Williamson: Apologies there. I can just quickly add, you know, to keep in mind this even though this was a business combination, we really acquired just the assets of CyVantage. So integrating the assets, the inventories, the know-how into our quality system and into our commercial team was really the main focus. Obviously, a focus on launching Symmetry Plus as we acquired those products right before this launch coming up here in the coming weeks. And then integrating the customer base, the physician base, distributor base to continue and accelerate sales. So I think we feel very good about how that played out throughout the quarter and how we're rolling up here so far in Q4. Thomas McGovern: Great. Glad to hear it. And, again, thank you guys for answering that. Next question for me. You guys mentioned adding commercial sales professionals. So just curious if you could maybe quantify, just give us an idea of the scope of these headcount additions. And then maybe a little bit more on kind of how you guys plan to balance marketing for Catamaran versus CyVantage and Symmetry Plus. You know, are there going to be specialized salespeople for specific products? Are these going to be cross-trained salespeople? Just kind of give us an idea of your strategy as you move forward. Steven Foster: Excellent. Yeah. So first to the scope of commercial additions. Right? So one of the many upsides to the CyVantage activity in the transaction that we did is onboarding some really key commercial members, Nate Rowe, White Geist, really experienced people that come on board that have an entire network of relationships through their years of experience, etcetera, it's going to greatly enhance what we're doing out there. We're committed to a hybrid commercial structure, meaning we'll be engaging independent distributors and ten ninety-nine resources. And that'll be managed by our direct sales management team led by Nate Growe as our chief commercial officer. So, we'd see the scope of that continuing to grow really quickly. Onboarding these distributors and getting them trained, etcetera. To your second question, these folks will be informed and trained across Tenon and all of our products in the portfolio. Right? What we want to be able to do is present ourselves to a physician as having a tool bag that will allow them to choose what they prefer in treating patients with these sacropelvic disorders. Right? They prefer lateral approaches. We want to have the state-of-the-art solution for what they're looking for. If they prefer an inferior posterior approach, we have that with Catamaran, etcetera. And what we rally around, Thomas, are the principles of an authentic fusion. Right? You'll see all of these products check the boxes of AO principles of arthrodesis. Right? We don't dance around that topic. We don't just put a screw in and say there. These are technologies, surgical techniques, and instruments that deliver across those requirements. So the distributors that we're interfacing with rally around those principles. And they will be trained on all aspects of what Tenon has to offer. Thomas McGovern: Understood. I appreciate the thorough response there. And last thing for me, you know, you guys highlighted again your clinical data. Obviously, you know, great in terms of not only, you know, educating physicians but also pursuing additional payer coverage decisions. So just curious, you know, maybe how are you weighting that as you're looking at several commercial ramp-ups, the commercial pilot program or the pilot launch, if you will, of Symmetry Plus. How are you balancing, you know, your focus on that expanding headcount and integration along with using this data to pursue, you know, additional payer coverage? Just kind of want to understand how you're stacking your priorities maybe in the next several months. Steven Foster: Yeah. Sure. So, you know, priorities were more strategic in the last two to three years as it related to, you know, engaging the process and making sure coding big picture coding issues were addressed. And that codes became clear so that, you know, things could be done accurately out in the field. That's fantastic. But you have a medical device technology. It has to be backed by prospective data in order for it to be accepted in most cases and covered by the private payers in particular. And so we're in that stage now with the publication of the catamaran data with the data that the dataset that's in place for symmetry technology, we can have a very, very thorough discussion with private payers and commercial payers and make sure these technologies are recognized and covered within their policies. So there's a great deal of work going on there. You know, it's not the fastest work in the world. I wish it was, but it's not. But working through all of that takes time and effort from a focused group. But that's a separate group from our commercial organization. Our commercial organization is really focused on engaging physicians, providing world-class training opportunities for them so they can be fully informed. World-class peer-to-peer opportunities so they can learn from physicians who have adopted these technologies, etcetera. That's really a separate set of activities, Thomas. And so, really, we're doing those things, you know, in parallel out there and really one's not prioritized over the other. They're both equally important and exceedingly important to drive our opportunities to grow going forward. Thomas McGovern: Got it. Well, thanks for answering all my questions, and congrats on the quarter, I guess. Steven Foster: Thanks, Thomas. Operator: We have reached the end of the question and answer session. I'd now like to turn the call back over to Steven Foster for closing comments. Steven Foster: Thank you, Rob. I'd like to thank each of you for joining our earnings conference call today. We look forward to continuing to update you on our ongoing progress. And if for some reason we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who'll be more than happy to assist. And with that, I wish everybody a good evening. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the STRATA Skin Sciences, Inc. Third Quarter 2025 Financial Results and Corporate Update Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. Please, I would now like to turn the call over to Jules Abraham, Core of IR, the company's Investor Relations firm. Please go ahead. Jules Abraham: Thank you, Arielle. Good afternoon, everyone, and thank you all for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended September 30, 2025. A copy of that press release can also be found on the company's website at www.strataskinsciences.com under the Investors tab. Joining me on today's earnings call from STRATA Skin Sciences' management team are Dr. Dolev Rafaeli, Chief Executive Officer, and John Gillings, Vice President of Finance. During this call, management will be making forward-looking statements, including statements that address STRATA Skin Sciences' expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in STRATA Skin Sciences' most recently filed annual report on Form 10-Ks and subsequent periodic reports filed with the SEC and STRATA Skin Sciences' press release that accompanies this call, particularly the cautionary statements within. The content of this call contains time-sensitive information that is accurate only as of today, November 13, 2025. And except as required by law, STRATA Skin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It's now my pleasure to turn the call over to Dr. Dolev Rafaeli, CEO of STRATA Skin Sciences. Dolev? Dolev Rafaeli: Thank you, Jules, good afternoon to everyone on the call. During 2025, we continued to position our business for future growth and lasting shareholder value creation. Key to the progress will be the historic expansion of CPT codes for STRATA's XTRAC 308-nanometer excimer laser, which are expected to become effective January 1, 2027. As a reminder, the revision of these codes expands reimbursement eligibility for excimer laser treatments to include multiple inflammatory and autoimmune skin conditions beyond their original psoriasis indication, enabling coverage for conditions such as vitiligo, atopic dermatitis, mycosis fungoides, lichen planus, alopecia areata, and cutaneous T-cell lymphoma, better known as CTCL, among approximately 30 indications. The implication of these changes is pivotal to our future business and that of our partners, as they exponentially expand our opportunity to provide services to patients in need while creating a meaningful increase in potential revenue from procedures, which until now would not be within reach. While the revisions are set to go into effect on January 1, 2027, we have commenced the process to expand this change to private payers as well. The latest progress of the recognition of these expanded codes is that the Centers for Medicare and Medicaid Services, or CMS, has recognized both the existing psoriasis-only codes and the expanded ones in its calendar year 2026 Medicare physician fee schedule final rule publication, which will then reflect into the 2027 reimbursement codes. As we have previously indicated, these additional reimbursement codes open our addressable markets to over 30 million patients, expanding our total available markets by threefold. In addition, we have submitted economic data to support a potential increase in the reimbursement rates for each of our codes, which the CMS 2026 final rule has indicated will be reviewed for consideration. We've also continued to strengthen our practice partners through our Elevate360 consulting model and our innovative DTC campaign. Elevate360 focuses on improving utilization of the partner clinics by supporting the implementation of best practices to drive optimal use of XTRAC lasers. Since the beginning of 2025, 99 of our approximately 838 clinics operating under our XTRAC usage agreement have entered the Elevate360 program, which has resulted in an average of 7% growth year over year for those businesses, completing a review as a part of the program's design. Additionally, average gross billings per device for all 838 of our U.S. partner clinics of $5,981 for 2025 increased 8.5% versus 2024 and represents the highest gross billings per device since 2022. Turning back to Elevate360, I want to share a specific example of a partner which began with two clinics in 2024 and after adopting the Elevate360 program expanded to nine clinics, and revenue contribution from the account increased tenfold. By providing deeper analytics, we help these partners better understand financial opportunities associated with the patients they already see in their clinics and those they have prescribed but did not follow through with XTRAC scheduling. We expect that these kinds of improvements will become exponential in the coming year with the addition of new reimbursement opportunities resulting from the extension of indications for which XTRAC treatment will become available. Turning to international expansion, while this remains a small but growing portion of our revenue, we reached an important milestone with the regulatory approval and subsequent initial commercial placements in Mexico. We believe the continued international expansion of both the XTRAC and TheraClear X technologies represents significant opportunity for growth and value generation. During the third quarter, we continued to experience challenges in our international business, which we believe is attributable mainly to the current trade policy of the United States government, creating uncertainty and pressuring our total revenue for the quarter. Turning to litigation, we offered an update on our case against LaserOptik regarding its use of false and misleading statements in its marketing. We believe we are strongly positioned in this suit and have the potential to be awarded significant damages. Additionally, an injunction issued late last year was very helpful in limiting any further damage to our domestic recurring business. We are pleased that the court agreed with our position that LezoAppe Korea, the parent of LaserOptik America, as well as another entity which was used as the base for LaserOptik's U.S. sales efforts, should be added as defendants. We believe this will result in our ability to collect damages. In the meantime, the injunction and clarity offered by the litigation allowed us to engage multiple dermatology clinics that had been previously misled by false claims about the Palace solid-state lasers. To date, over 20 such LaserOptik buyers have partnered back with STRATA under our program or have purchased excimer lasers directly from us, which represents more than $1 million in annual capital and recurring revenue, emphasizing XTRAC as the recognized gold standard in targeted UVB therapy. With that, I'd like to turn the call over to John Gillings, who will review our financial results in more detail. John? John Gillings: Thanks, Dolev. Our total revenue for 2025 was $6.9 million, down 20% compared to 2024. This was driven primarily by the challenging international environment Dolev described. That said, recurring revenue remained solid, with gross code sales up 4.1% and net U.S. recurring XTRAC revenue up 2.8%. Global recurring revenue of $5.5 million increased 3% year over year, and equipment revenue of $1.4 million decreased 60% in 2025 compared with the prior year period. Gross profit for 2025 was $4.2 million or 60% of revenue. Gross margin was roughly flat versus the prior year period. Total operating expenses were $5.4 million in 2025, versus $6.9 million in the prior year period. The meaningful reduction was primarily due to higher costs in the prior year period related to a one-time $1.8 million accrual for sales tax in New York State recorded in G&A in 2024 and settlement gains booked this quarter for roughly $680,000. Net loss for 2025 was $1.6 million or EPS of negative $0.36 per basic and diluted common share, as compared to a net loss of $2.1 million or EPS of negative $0.51 per basic and diluted common share in 2024. Adjusted EBITDA was slightly positive in the quarter compared to negative $240,000 in the comparable quarter of the prior year. The improvement was driven primarily by lower operating expenses. During the quarter, we raised $2.2 million net in a straight common registered direct offering. Cash and cash equivalents at September 30, 2025, were $7.1 million. That concludes my prepared remarks. And I'd like to turn the call back over to Dolev for any remaining comments. Dolev? Dolev Rafaeli: Thank you, John. In summary, our team is extremely passionate about our business and focused on driving growth. We are excited about what lies ahead, including a seasonally stronger fourth quarter of 2025, the tripling of our patient population with expanded indications for use of our excimer laser, and favorable reimbursement trends. That said, we believe it is important to continue to remind investors about the lingering impact of tariffs on our international business. While there were no meaningful impacts on our business in the first quarter, we saw some weakening in China in the second quarter and continued weakness in the third quarter. We hope to move past these issues and hope to be able to offer greater clarity on the fourth quarter call, which we expect to hold in early March. Operator: On for Jeff. Thank you for taking our questions. Could you maybe talk to the average revenue per device in the third quarter? And any trends you're seeing going into the fourth quarter in terms of treatment volumes? Dolev Rafaeli: Yes. Hi, Destiny. Nice hearing from you. As I mentioned in my prepared remarks, the average revenue, the gross average revenue per device was $5,981, just shy of $6,000. It's the highest average revenue per device we had since 2022. We're in a growth trend. If you follow the last few quarters, you'll see this is growing, and it's growing because of the increased utilization of devices, which is driven mostly by two things. One, we're removing non-productive devices. So we're moving them back into inventory. That helps us in not having to build new devices, not having to invest in CapEx. We own these devices. They're on our balance sheet. And two, we're focusing on increasing utilization through our Elevate360 and our normal DTC operations. And we anticipate this continuing to go up. As you can recall, just three years ago, the average revenue per device was in the range of $7,500. So we see this as a huge opportunity because if we could increase our average revenue per device from $6,000 to $7,500, that's $6,000 per device per year times the 800 and some devices. Just that is an increase in the top line of about $5 million. So we're very aggressively pursuing that, and we're using these two tools and removing non-productive devices and increasing utilization on the existing ones. We do anticipate that towards the end of this year, our installed base is going to start increasing again. I hope I answered your question. Operator: Yes, you did. Thank you. And then sticking on the theme of your DTC campaigns, I'm wondering if there has been any increase in your show-up rates and if that's helping or improving the revenue per device as well. And then can you just remind me how many clinics are part of your or clinic groups are part of your Elevate360 program currently? Dolev Rafaeli: Well, that's a very complex question. I'll break it into parts. We have, as of the end of Q3, we had 838 partner clinics that are part of our usage agreement relationship. Of these, we have managed to perform Elevate360 with 99, and I covered that in our prepared remarks. And we're actively pursuing others. As you can see in our investor presentation, we have approximately 25 territories covered by 25 territory managers. So it's approximately four accounts per territory manager that were covered from the beginning of this year. We hope to accelerate the pace and get to a much bigger number than that. Obviously, we're going after those that we see the potential, those that either had higher performance or we have reason to believe that they can grow, whether it's because of their patient population or because of the history that we had with them. So these are the more lower-hanging fruits. We're going after these, and as you can see, not only our gross and net recurring revenue grew, and I'll spend a minute talking about this in a second, but not only the gross and net recurring revenue grew, but also the average revenue per device grew, which means the utilization per device. As I mentioned in our prepared remarks, approximately two dozen devices were comebacks as a result of the litigation. We were able to bring them back. These were accounts that were very productive in the past and were approached by another company with false pretense and giving them false claims. We lost them in either in 2023 or 2024. We're able to bring them back. A big chunk of that, almost half of these two dozen devices, is coming back towards the back half of this year. And they're going to be just these 10 accounts are going to be accountable for an increase of just about $5 million a year in revenue. So, we're doing this one piece at a time, making sure that our installed base and presence in the market is ready towards 2026 for the expansion of the codes and being able to handle more patients coming in because of the expanded indications, but also being able to handle the existing patients more effectively. Now going back to the beginning of your question, which is DTC, our DTC covers nationwide. But we cover, we go in geographies. We go after the accounts that could see the benefits from having DTC patients. And these accounts would be the accounts that are already very good at converting their own patients and see the benefits of an increased patient flow and utilization. So what we do see in DTC, and that's not geography-specific, is that in 2025, because of a variety of reasons, we have much lower cost per acquisition of DTC patients, which is driven both by better cost per lead, so our cost of media, better conversion, that means the efficiency of our call center and being able to place them into appointments. And then down the funnel, better show rates and better conversion rates, and that is mostly because of the focus we have with these accounts. We stopped sending patients to accounts that are not converting. We're using these patients with accounts that do convert. Redirect patients from accounts that are not very good at converting and use them better. So these numbers are basically across the funnel of DTC. And this is why we can see with more or less the same sales and marketing expense, we're getting better results in recurring revenue, which is converting into better contribution margins from the business. And may I point out that our gross margin stayed flat even though we lost international business. So we were actually doing better as a core recurring revenue business in the U.S. Again, hope I answered the question in full. Operator: Yes, so that makes perfect sense. Thank you. And then one last one for me. On TheraClear, excuse me. Can you remind us what the installed base on that might look like by the end of 2025? And I think you previously mentioned 2026, but I'm also curious to understand how moving into Mexico and having commercial placements there may tie into the overall strategy of TheraClear. Thank you for taking the questions. Dolev Rafaeli: Sure. So let me start with Mexico. And Mexico, interestingly enough, is a country that lies just south of the U.S. So we don't need to travel far to support them, whether it's marketing-wise, clinically-wise, or even technical support. We were actively pursuing, throughout 2024 and 2025, the registrations with Cofepris, which is the registering body in Mexico. And just a few weeks ago, we were happy to announce that we got the TheraClear registered with Cofepris and are able to report the first commercial placement. Our approach in Mexico is very much like the one in the U.S. Instead of trying to sell capital equipment and run into issues of us having to get paid very meaningful sums of money. And as you probably know, because I know that you are also covering other capital equipment companies or the capital equipment markets are suffering from high interest rates, from tariffs, and so on. Our approach with Mexico from the beginning was if we can get the registrations, we can expand by placing into Mexico. We were hoping to get the XTRAC registered in Mexico first, but that did not happen. It's still in progress. We got the TheraClear registered in Mexico, and we've already announced the first commercial placement, and we hope to be able to announce by the end of 2025 a significant number of placements in Mexico, which are going to be following the same commercial relationship we have in the U.S., in which we take the risk of the equipment, we take the risk of training the accounts and supporting the account, and the account shares the revenue with us. The average rate of payments that a patient pays in Mexico for an acne visit is about the equivalent of about $140, and we don't see a reason why we cannot collect the same levels we collect in the U.S., which is approximately 40% of that, $50 to $60 of our money. And our technical support teams and our clinical support teams are able to support in Mexico. We've spent multiple visits in Mexico in the last three months getting the local sales team of the distribution partner we have in Mexico, a company by the name of MinaLabs, ready to do the sales. We've participated with them in some of the initial meetings with customers. They have access to over 3,000 dermatologists in Mexico, and they have access to many, many of them. And we believe that the belief in the technology and the need in the market are going to show up as early as in Q4 this year. We are participating with them in a national dermatology conference next week, and I think that's going to be the trigger for these placements. Now going back to the first part of your question, our U.S. installed base is about 161 devices. Even though we don't parse, we do not parse in our financials the portion of what TheraClear means inside the recurring revenue that John discussed. As I mentioned in my prepared remarks, it's still a small portion, but it's a growing portion, and more importantly, it gives us a second touchpoint within the same account. So, all of these 161 accounts are within these 838 XTRAC accounts. So our territory managers, when they visit an account, they cover both the XTRAC and the TheraClear. We have been at the process of expanding usage of TheraClear in the U.S. now for about a year. We are happy to report that the use of the dedicated CPT code 10040 is expanding. About two-thirds of our 161 accounts are using that code for insurance reimbursement. The other one-third is charging patients cash for the treatment. And we anticipate, to wrap up my answer to your question, we are still hoping to get much closer to 200 devices deployed, whether in the U.S. or elsewhere, under the usage agreement by the end of 2025. Operator: Okay. Thank you for those updates. I appreciate it. Dolev Rafaeli: Absolutely. Thank you. Operator: Our next question comes from Jeremy Pearlman of Maxim Group. Please go ahead. Jeremy Pearlman: Thank you for taking the question. Good afternoon. First one, maybe you could help us understand a little bit the delta if I heard correctly. So you said that there was 7% year-over-year growth from those businesses that were part of the Elevate360 program, but then you said overall, average gross billings were up 8.5%. So maybe help us understand where that delta is coming from? Dolev Rafaeli: Yes. So first of all, I owe a portion of the answer to the question that was asked before by Destiny. So just as a reminder, we report two numbers on the recurring revenue. We report the gross number and the net number. The difference between the gross and the net is, even though it's itemized in our financial reports and in our releases, it includes two components. One, we are netting out some of our support to the market. So, for example, our coupons given to patients for reimbursing their co-pays are netted out. But the bigger portion of changes happens because we need to defer out revenue that came in during the last part of the quarter, and we deferred that into the following quarter. So there's always going to be a difference between our gross numbers and our net numbers. In addition to that, I reported two growth numbers. One has to do with specifically these 99 accounts that were handled through Elevate360, and with these accounts, we have seen a growth of 7% in revenue. These accounts, as I mentioned before, are we break our accounts into five tiers, Tier one to Tier five, Tier one being the highest producing tiers and Tier five being the lowest producing tiers. And we are focused on, with our Elevate360, we're focused on tiers two, three, and four, being able to move accounts from tier four to tier three or tier three to tier two. And with tier fives, we're either removing them or they have to move up on their own because they're too small for us to focus on. We're not really focused on Tier one with Elevate360 deals or the accounts that got it and know how to make it work. That 7% number is a 7% growth over these 99 accounts. The 8.5% growth in average recurring revenue per device is across the 838 devices, or it's two different populations. The 7%, if you wish, is what we were able to get in growth for these 99 accounts that are mostly Tier two, three, and four, where the 8.5% is across the board. And across the board, it could be also from tier ones and tier fives. I hope that helps answer the question, and again, the 8.5% is a gross number. So, it gets netted out when we grow, actually you can actually see these in the net numbers going up slower. That's why when John went through his numbers, you saw a number that's about 4% in overall numbers. Because the average numbers are per device. I hope that the math makes sense. Jeremy Pearlman: Yes, understood. So it's how the tiered clinics are within the program versus the overall? Okay, got it. Is that 4%, is that a net revenue growth number? Is that something we could or you're not providing that number this quarter? Dolev Rafaeli: John, do you mind jumping in on gross to net? John Gillings: Yes. So, that is the 4% is the net number. And just in general terms, because anything can happen later in the quarter. But in general terms, if you see the gross number growing a bit faster than the net number, that's usually a positive leading indicator. Jeremy Pearlman: Okay. Understood. Great. Okay. And then maybe just talking about litigation, you said that you had roughly two dozen devices that are coming back on litigation. Is there anything else left in the field that you think you can pull back? And just roughly how many more devices you think you can get from? Dolev Rafaeli: Yes. So I'm not going to go into specific account numbers or quantities of accounts, but I will say that the overall damage caused by the false claims is in the range of 75 to 100 accounts. And we are actively pursuing bringing all of them back. So again, if you take a perspective over the last year and a half, even though you saw our top line number since 2024, you saw our top line number slightly decreased because of removals, you should look at what happened between 2023 and 2024, and this is when we lost these accounts. More importantly, these accounts were very productive accounts, and they were lost based on false claims. The false claims had to do with two major areas. One was the technical and clinical equivalence or superiority, which the defendants in this case cannot support because they do not have not even one clinical study to their name that shows clinical efficacy on treating psoriasis. And they have one 16-patient case done in Korea for vitiligo, and that's what they have in clinical studies. And the technical claims that have to do with speed and ease of use and performance, which are far from being substantiated. But more importantly, they claim that their device can be used for treatment for reimbursement. And the CPT codes are very specific. They say excimer laser treatment for psoriasis. And so there's no two ways to understand that. It says excimer laser. If you have something that's not an excimer laser, then it's not an excimer laser. And these very productive accounts do not want to face both the first part, which is not getting clinical efficacy for their patients and being straddled with something that works slower, maybe does not work. But also most importantly, they do not want to face the potential of being pursued for non-ethical billing of something that cannot be billed. So this is why they tend to come back and work with us, and in addition to the fact that we give them a full envelope of services that includes helping them with pre-authorization of patients and driving DTC patients to them and so on and so forth. So there's a meaningful additional upside of comebacks to come from them. Just as a reminder, in the past, we had a similar situation with a competitor, a company called RA Medical, which we ended up eventually acquiring the business in 2021. But before that, they had a few hundred devices, and we were actively pursuing them, and we were able to convert a few hundred devices of RA Medical's Steroids device into being XTRAC users. Jeremy Pearlman: Okay. Understood. That's good information. And then just two questions. I think I might have missed it on the call. Did you say how many patients the DTC marketing campaign drove through this quarter into clinics? Or I might have missed that. Dolev Rafaeli: Good catch. No, we did not. We will probably have to follow up with a press release that outlines that. Jeremy Pearlman: Okay. And then just last question from me. You mentioned, I think, last quarter that you got the CPT codes to hopefully go into effect, the expanded codes in 2027. And you did say there's a possibility of getting temporary codes. Is that something that's still on the table for 2026? And when might that be, if that's a possibility? Dolev Rafaeli: So the CMS physician fee schedule that came out about ten days ago, the final rule for 2026, CMS specifically related to our request and said that they do not want to create confusion in the market considering that there's the existing codes for psoriasis only. There is a set of expanded codes coming in January 1, 2027. And then there's the ongoing examination of the value of the codes, which is right now in the hands of the RUC committee. Between these three things, the CMS thought it would not be a good or wise thing to create temporary codes for the 2026 cycle. Jeremy Pearlman: Okay, understood. Thank you for all the information. I'll hop back in the queue. Dolev Rafaeli: Absolutely. Thank you. Operator: This concludes the question and answer session. I would like to turn the conference back over to Dolev Rafaeli for any closing remarks. Dolev Rafaeli: Thank you, everyone, for showing up for this call. I appreciate your interest in the company. We will be presenting again in the middle of March, presenting our fourth quarter results. Thank you very much. Operator: Thank you. This conference call has now concluded. You may disconnect your lines. Thank you for attending today's presentation.
Arturo Langa: Good afternoon. Welcome to Globant's third quarter 2025 earnings conference call. I am Arturo Langa, Investor Relations Officer at Globant. All participants on this call will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded and streamed live on YouTube. By now, you should have received a copy of the earnings release. If you have not, a copy is available on our website, investors.globant.com. We will begin with remarks by our Chief Executive Officer, Martin Migoya, our Chief Financial Officer, Juan Ignacio Urthiague, and our Chief Technology Officer, Diego Tartara. This will be followed by a Q&A section. Before we begin, I would like to remind you that some of the comments on our call today may be deemed forward-looking statements. This includes our business and financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainties as described in the company's earnings release and other filings with the SEC. Please note that we follow IFRS accounting rules for our financial statements. During our call today, we will report non-IFRS or adjusted measures, which is how we track performance internally, and the easiest way to compare Globant to our peers in the industry. You will find a reconciliation of IFRS and non-IFRS measures at the end of the press release we published on our Investor Relations website. Announcing this quarter's results. I will now turn the call over to Martin Migoya. Martin Migoya: Hello, everyone, and welcome back as Globant presents its earnings for Q3 2025. We appreciate your continued interest as we navigate the ever-evolving technology landscape. Our commitment to innovation and reinvention remains at the core of who we are. The speed of change is only accelerating. This quarter, we are excited to share how we are not only adapting to market trends but also proactively shaping the future of our industry. Our focus on sustainable growth and delivering exceptional value continues to drive our efforts as we look ahead. Our business fundamentals remain strong, and we continue to perform by putting innovation first. Our AI studios bring together our talent to provide a new kind of AI-based solutions, specific for each industry. They transform how consumers interact with brands and how our clients run their businesses. Our AI bots are our next-generation offering designed to deliver agentic AI-based services that scale faster, operate more transparently, and focus on measurable outcomes. They combine the speed and autonomy of AI with the creativity and oversight of our experts, enabling customers to access continuous outcome-driven transformation at scale. All our agentic AI-based solutions from our industry-specific AI studios to our AI pods are orchestrated through Globant Enterprise AI, our central intelligence platform that acts as the golden path for enterprise-wide AI adoption and impact. Delivered through a transparent consumption-based model, it transforms AI isolated experiments into a predictable, scalable, and measurable source of enterprise value. Together, these elements form the backbone of Globant's growth to provide value for our customers and shareholder returns. During Q3, we generated $617.1 million in revenue, $2 million above our most recent guidance. We also launched a share buyback program reflecting how bullish we are on our long-term prospects. The pipeline has hit another all-time high, currently at $3.7 billion, representing 30% year-over-year growth. It marks the solid demand we see for our services, and it grew this quarter despite very strong bookings. AI continues to emerge as the world's dominant technology. With an expected market of $4.8 trillion by 2033, it would have made a 25x increase in one decade. Over the past few months, we have seen a healthy dose of realism in the AI space. There has been a shift beyond hype towards tangible and effective adoption. We see tremendous potential in AI transformation today. While software as a service has played a crucial role in corporate technology by providing efficient and scalable solutions, our new AI pod subscription model represents a significant evolution in how organizations can leverage technology. With our AI Pods, we empower leaders to develop tailored solutions that effectively address their unique and ever-changing needs. Our AI studios and core studios are having these conversations with our clients to provide clarity in AI transformation, build versus buy, and cost optimizations that are top of mind for corporate leaders today. Since doubling down on our 100 square strategy this year, we have seen the execution being shown in bookings and revenue. Our top five clients grew sequentially by 2.1%, exceeding the company's average growth over this period. The share of clients we have identified as 100 square potential as part of our total bookings is currently 56.7%, up from 50% last year. Today, we have over a thousand engagements related to GenAI, CoreAI, or data currently running, representing a third of our overall projects. We have over 900 projects related to AI readiness in our pipeline. The new offering of AI pods, a departure from traditional consulting engaging models, has nearly doubled in its share of our pipeline. This growth significantly outpaced the overall pipeline expansion. Clients access these solutions via the Globant Enterprise AI platform, which serves as a multipurpose hub. First, as an AI hub connecting seamlessly with more than 140 LLMs. Clients can interact with the LLMs that are best for their needs without being locked into a single provider. Second, it is a corporate hub that connects with all major corporate information systems and data lakes, like SAP, Salesforce, Databricks, and many others. And third, an agent hub that allows clients to create agentic workflows to automate corporate processes. Globant Enterprise AI can be acquired on a subscription basis. This shift to our subscription revenue model is not just a theoretical goal. It is actively underway in our most valuable client base. Within our top 20 customers, a group that collectively represents close to 40% of our total revenue, we are currently embedding our subscription model with 17 of them in meaningful ways. This is a huge milestone, specifically considering we officially launched this methodology in June. We are encouraged to see how our clients are incorporating this new model. For example, at YPF, the largest shale oil operator in the world outside The United States, we are moving into full execution with 46 agents to optimize sourcing, inventory, contract, and supplier management, bringing clarity and efficiency to how the company interacts with its complex supply chain. As you know, Globant has a talent for applying AI to reinvent the human experience in entertainment, which is why we are particularly proud of our new engagement to bring agentic process to La Liga, one of the world's top sports leagues. Diego will expand on this later. A great example of our growing partnership is our work with Natura, a Brazilian multinational cosmetics company. This quarter, we announced that Globant will lead their S/4HANA migration, chosen for our ability to seamlessly integrate innovation and AI SAP methodology, development, and testing while enhancing traditional implementation efficiency. Together with SAP's SHU, our AI agents and platforms will accelerate delivery, reduce time to market, and support the clean core strategy by anticipating deviations and suggesting real-time corrections. Governed by our AI agents, this project brings a new vision of how technology can transform SAP implementations and drive business performance. This month, we also announced an important partnership with Riot Games, the company behind global esports phenomena League of Legends and Valorant. Globant will support its advancement in artificial intelligence, new game development, esports experiences, and software engineering capabilities. Over the next several years, both companies will push the boundaries of technology to deliver richer, more personalized experiences for millions of players and fans globally. This partnership is one of the largest agreements in the history of our games business. We are proud to work with companies that continue to shape global esports culture and inspire millions of players. We are making decisions to unlock the full power in our core studios as well. We recently announced that all of Globant's marketing and advertising efforts were consolidated under the GAT brand umbrella. Today, Globant and GAT bring a uniquely consistent and complete value proposition to the entire C-suite, empowering CTOs and CEOs to transform their business through technology while helping CMOs push creativity and marketing performance better than ever. Just as Amazon transformed the technology landscape by removing friction from how businesses access and scale computing infrastructure, effectively inventing the modern cloud industry, we aim to do the same for technology and professional services through our AI pods and subscription model. Traditional consulting engagements are filled with friction, lengthy planning cycles, detailed scope definition, change requests, and constant budget negotiations that slow down execution and dilute impact. Our AI pods eliminate those barriers by combining agentic AI with expert human oversight, a transparent token-based subscription model that focuses on outcomes rather than hours. We define supervised talking capacity and continuous monitoring, execution becomes faster, auditable, and adaptive, allowing our clients to focus on delivering value instead of managing project logistics. We are not just redefining consulting. We are leading a revolution in how businesses access technology and professional services. Thank you for joining us on this exciting journey. Hello, all. Arturo Langa: As we look at the third quarter, one thing has remained constant. The urgency for enterprises to deliver measurable results through AI. We have tirelessly enhanced our portfolio of services Diego Tartara: and products around that very premise to enable our clients to apply AI fast and effectively to unlock business value at scale. What we are doing with LaLiga is a great example. The world's most successful football league is becoming the first global sports organization to adopt agentic models to reinvent its business end-to-end. From talent development, performance analysis, workflow automation, to personalized content creation. This quarter, we also expanded our footprint in immersive high-impact experiences. Through our strategic collaboration with Adobe and Red Sea Global, Saudi Arabia's vertically integrated real estate developer, together we are building a connected visitor experience platform. From trip planning to arrival and stay, the platform unites content, data, and AI agents to deliver personalized context-aware journeys at scale. Global Enterprise AI is at the core of our AI-centric solutioning and keeps delivering on our commitment to make it the best common gateway for clients to navigate the complex forest of AI. Less than a week after OpenAI launched the agentic commerce protocol in late September, we released a new version of Global Enterprise AI, including ACP and enabling our clients to create AI agents capable of executing commercial transactions safely and intelligently. Our partner ecosystem remains critical to scaling our AI vision, and as we see that our clients' biggest challenge is not the lack of technology, but the complexity of integrating it for real business outcomes or how to make their long-standing core systems agile, intelligent, and cloud-native without disrupting the business. With Unity, the world's leading platform to create interactive experiences, we join a service partner program combining Globant's global footprint with Unity's real-time 3D capabilities to power new immersive and interactive experiences in industries such as automotive, healthcare, and manufacturing. With AWS, we achieved the MSP partner program designation, recognizing our ability to deliver end-to-end cloud transformation and manage mission-critical operations at scale. A fundamental layer for AI adoption, while others provide basic cloud migration, Globant differentiates by focusing on cloud-native development and optimization. We leverage the full stack of AWS services from serverless computing to their Bedrock AI platform to build resilient, scalable, and cost-efficient solutions. With Microsoft, we have been appointed as a finalist of the 2025 Microsoft Media and Telco Partner of the Year award. Globant was honored among more than 4,600 entries from more than 100 countries for demonstrating outstanding Microsoft cloud application services, devices, and AI innovation during the past year. And by joining the IBM Quantum Network, we are preparing our clients to embrace quantum computing and unlock the next computing paradigm, ensuring they remain ahead of the curve as the future of intelligent systems unfolds. GAT, now powered by Globant's global creative and marketing capabilities, keeps accelerating cross-selling and elevating leading brands including AB InBev, P&G, MercadoLibre, Easting, Kraft Heinz, Verizon, and Havaianas. Also, Brazil's team created the first fully AI-generated campaign for MercadoLibre, Latin America's largest e-commerce platform in partnership with Samsung. Additionally, the official report was published listing GAT as the number nine global agency network at Cannes Lions 2025. Across sectors and geographies, our team continued to work with passion and creativity. Our AI pods are gaining traction. Our AI platform continues to improve, and new industries are embracing our approach to reinvention. We believe the winners will be those who act decisively today, and we are positioning Globant to help them accelerate that journey as we continue shaping the future of enterprise transformation. Thank you very much. Hello, and good afternoon, everyone. I am pleased to discuss our third quarter results. Juan Ignacio Urthiague: During this period, we increased our top line, expanded profitability, and generated strong free cash flow, all while maintaining a prudent and healthy balance sheet. Our revenues reached $617.1 million, up 0.4% year over year and 0.5% sequentially, exceeding our previous guidance expectations. Excluding the positive impact of foreign currency, revenue was flat year over year. Turning to profitability, we closed Q3 with an adjusted gross profit margin of 38.1%, flat relative to our previous quarter despite significant FX headwinds coming from LatAm currencies. Our adjusted operating margin reached 15.5%, an increase of 50 basis points sequentially. In addition, this quarter we managed to dilute adjusted SG&A by 20 basis points sequentially. The effective tax rate for the quarter stood at 29.4%, increasing significantly due to the acceleration of the Argentine peso depreciation during the quarter, which resulted in higher taxes than anticipated. We were able to partially offset this impact with FX hedges. Despite the mentioned tax effect, we achieved an adjusted net income of $69.7 million with an 11.3% adjusted net profit margin, flat relative to our previous quarter. Adjusted diluted EPS for the quarter was $1.53 based on 45.6 million average diluted shares, in line with our guidance. Our balance sheet remains strong, ending this quarter with $167 million in cash and short-term investments, $205.3 million in net debt. We repaid $56.7 million of our debt during the quarter, reducing our total leverage. During the third quarter, we generated $67.5 million of free cash flow, achieving a free cash flow to adjusted net income ratio exceeding 96%. This strong performance is consistent with our historical pattern where free cash flow generation is much stronger in the second half of the year. Lastly, as mentioned by Martin, we have authorized a $125 million share repurchase program, which reflects our belief in our long-term strategic position and our commitment to enhancing shareholder value. Now let's turn to our guidance. Demand trends across our client base have started to stabilize, though the macro environment remains fluid. For 2025, we expect revenue to be at least $6.5 billion, reaffirming the implied guidance provided in our prior earnings call. This Q4 guidance implies a minus 5.8% year-over-year growth and includes a positive FX impact of 150 basis points. We expect a non-IFRS adjusted operating margin to be at least 15%. And the IFRS effective income tax rate is expected to be in the 22 to 24% range. Non-IFRS adjusted diluted EPS is expected to be at least $1.53 per share, assuming an average of 45.2 million diluted shares outstanding during the fourth quarter. For the full year 2025, we now expect revenue to be at least $2.447 billion, representing 1.3% year-over-year growth. This expected growth includes a positive FX impact of 30 basis points. We now expect our non-IFRS adjusted operating margin to be at least 15% and the IFRS effective income tax rate is expected to be in the 23 to 25% range. Our full-year non-IFRS adjusted diluted EPS is expected to be at least $6.12 per share, assuming a full-year average of 45.2 million diluted shares outstanding. To conclude, while much of the uncertainty persists, we are confident in our market position and ability to adapt. Our DNA is built on constant reinvention and industry-leading growth. Based on our operational discipline, we will continue investing in our AI studios, our subscription model, and top-notch talent to deliver differentiated value to our customers. Thank you for your continued support, and we look forward to sharing more updates on our growth and achievements in the coming months. Arturo Langa: Thank you, Juan, and hi, everybody. So as we go through the Q&A section of this call, I will first announce your name. At that point, please unmute your line and ask your question. Please mute your line after your question is done, and I would also ask you to please limit yourself to one question and one follow-up. Puneet Jain: So thank you very much. And with that in mind, we take the first question today from the line of JPMorgan. Puneet, please go ahead. Hey. Thanks for taking my Juan Ignacio Urthiague: So I wanted to ask about AI use cases. Like, are you seeing clients looking for AI use cases in global gut area, like AI-powered form factors for customers to do retailing or banking, through new form factors. Martin Migoya: Thank you, Puneet, for the question. You said mute what? New what? Juan Ignacio Urthiague: So the new platforms, like, new way, like, in which consumers can buy or do banking, like the which is powered by AI. Martin Migoya: Yeah. I think the whole consumer experience is being transformed, and there's a lot of active projects that are going in the direction of changing that interface from a navigational interface towards a transactional or a conversational interface. And in that direction, we have been doing several projects on those areas, in many different customers. But it's not just connected to financial services, I would say that this kind of conversational interface is being seen in many different areas and in many different types of industry. I would love Diego to take it over. Diego Tartara: Sure. So, Puneet, here's an overview of what we are seeing and how it is working. Many large companies, the ones that are heavily regulated, what they are doing is they are building their platform for AI transformation and development. But while doing that, they are already doing AI projects. You mentioned, as an example, financial services. Fraud detection is one of the examples. Hyper customization for claim management is another one. With regards to internal operation, portfolio management is being also handled by Ascentyx system these days. So that is how it looks now. Even the most regulated sectors are jumping into AI, doing AI projects. I have to say that more than half of our projects are heavily related to AI. Juan Ignacio Urthiague: No. That makes sense. Like, the reason I asked, like, it seems like there's a lot of demand, like, the underlying demand for AI, but, like, that's not reflecting in overall results. Bryan Bergin: Do you think, like, the clients are at a point that, like, all those AI use cases and AI projects that they are ready to move them into mainstream or into production so that can overcome, like, the weak macro or other headwinds that you faced basically, can, like, should we expect, like, much better growth rates next year based on the pipeline, based on what you are saying compared to current trends. Martin Migoya: Yeah. I mentioned in my part of speech, I was saying, Puneet, that the pipeline grew to something that was 30% higher than the same period last year. And about 900 projects are currently being inside a pipeline that are based on this kind of AI transformation projects. So I see a clear evolution from the beginning of the year in which projects were more exploratory and now they are more kind of transformational efforts going across the different parts of the company. And this is not just on what we were talking before, which is consumer interaction, but also on how to run processes. And, specifically, in that case, we announced a case with YPF but also the one with Riot Games with the one with Natura in which AI kind of takes a central role. And I think that this is something that will keep on evolving as we move forward. Also, our AI pod offering is also gaining a lot of momentum. It's kind of now the pipeline more than doubled from what we had on the last quarter just in two and a half months that we launched the initiative. Bookings are also high, the number of customers got increased substantially too. So we are seeing that AI is taking a central role. Of course, the digital transformation projects, the enterprise projects, like SAP migrations, now all of them are including this kind of AI initiatives inside of them. So it's difficult to split them, but it's very clear that these are the technology is making an impact. And, again, it's not that it's easy to implement one of these things and make it productive. And make it into production for large corporations. We're talking about probabilistic systems that need to be managed in a slightly different way from the traditional systems. And that will require a lot of our help to our customers moving forward. And I see pretty much all the industries now growing, as opposed to the last few quarters. All of the industries are moving forward in terms of revenue. So that is helping. And as you have seen on the news, we have announced many deals with many different big companies and deals in many different sectors. So I hope that will propel the revenue for 2026, and we will see good growth next year. Juan Ignacio Urthiague: Thank you. Arturo Langa: Thank you, Puneet. The next question comes from the line of TD Cohen. Brian, please go ahead. Hey, guys. Good afternoon. Thanks for taking the question. Bryan Bergin: Was hoping if you could just help us connect the strong pipeline commentary with the operation headcount dynamics just sequentially. I understand you were going through a transition here. But can you give us a sense of just early 2026 client budgeting conversations we're just trying to determine when a growth trough may form for you. And just any early comments are you willing to share here, on next year's top line potential. Martin Migoya: Yeah. I would take the pipeline thing. The pipeline, as I said, is much higher. The conversion speed as opposed to what we see in the first half of the year has also increased in the last few months. So that makes us happy. And I would say that we see a clear evolution towards the end of the year with all the deals we have. In terms of the headcount, I would like to take it. Sure. Juan to answer it. Hi, Brian, how are you? Juan Ignacio Urthiague: Look. In terms of headcount, as you know, last quarter, we announced a business optimization plan to align our company, our headcount, to the needs of the business, given the changes that we put in place in terms of industry studios, in terms of the subscription model, and also looking at the level of growth. You have to keep in mind that we started the year with expectations of much higher growth. Now all that is aligned. We are seeing flattish type of numbers for the fourth quarter. And when we look into 2026, when we look at how the new AI studios, new AI industry studios are tractioning combined with the traction on the pipeline and also on our top customers related to the subscription model, I think that puts us in a much better place to start thinking about 2026. The conversations with customers are ongoing. Everybody is finalizing budgets. When we look at all our internal numbers, initial numbers, we are seeing more growth in '26 than what we have now for the rest of the year in '25. So we are optimistic. I think that the situation is improving. You start to close deals like the one we recently announced with Riot Games or some other things that are being worked right now where they are growth-oriented. And for us, that's always great news. Right? When we start to see all the deals we're doing with YPF or with McCallery, a lot of those deals are growth-oriented. And when that happens, we tend to do better. We tend to gain market share. And that puts us in a much more optimistic position relative to '26 than what we were before. And as you can see, after a difficult year in terms of guidance and everything, this quarter, we were able to maintain the implied fourth quarter. We were able to raise a little bit the full-year number. So in general, we think it's a much better quarter. Based on the $2 million that we exceeded the number in Q3. And we are optimistic about 2026. Bryan Bergin: Okay. That's helpful. Thanks for that detail. And maybe just one on the margin front. So, obviously, that's a bigger focus for you going forward. Talk about the early efforts around efficiencies and how you're feeling about those efforts. Juan Ignacio Urthiague: Yeah. So this quarter, we had a good quarter in terms of operating income. It increased about 50 basis points sequentially, together with accelerating growth during Q3. We have mentioned over the last two, three calls, and we continue to mention that there is a much bigger focus also on maintaining or improving margins, also on our free cash generation. It's a moment that, until the level of growth becomes much higher, we need to pay attention at the same time to hold those variables together. Right? And that's what we are doing. We will be executing on that. When you look at, for example, the CapEx levels going forward, they're going to be a little bit more aligned to the current levels of growth. So we are paying attention not just to the revenue or to the top line, but also to the gross margin. And you can look at the numbers. There has been a lot of peers taking margins significantly down. We have been very cautious on not doing that. You look at our margin, gross margin was stable, operating margin improved. And when you look at the fourth quarter operating margin is again above 15%. So we are trying to balance all the different things that are happening at the same time. Arturo Langa: Thank you. Thank you, Brian. The next question comes from the line of Citi. Brian, please go ahead. Your line is open. Yeah. Hi, guys. Just wanna ask about the pricing environment in general. Bryan C. Bergin: You know, there's some concern just with GenAI that there's pricing pressure through contracts and contract pricing as cost saves get passed on to clients. How do you guys think about the whole pricing environment through, as GenAI gets put into all these contracts? And what do you think about pricing as you head into next year? Martin Migoya: Thank you, Brian, for the question. We don't look measure pressure on the pricing environment. I believe that the deals that we are putting together have a lot of value added, and that helps us to position the pricing in the place we want. Indeed, the revenue per head is doing okay. So it's not changing or going down. So that's a good sign of us being able to maintain that pricing efficiently. Martin Migoya: But the most important comment I would say is there's a very strong connection between what you offer and how much you can charge for that and which is the value that you're creating for your customer. And at Globant, we have always paid a lot of attention to that value creation and to that specialization. And now with our AI studios that are capable of delivering a very substantial know-how for each of the industries in which we specialize. Plus, our core studios are bringing solutions that can go across pretty much all the industries, and I think that value proposition is resonating quite well. And if you add on top of that, we are accelerating the offering and we are discussing with 17 out of the 20 top customers the next generation model on how to engage with us, with our AI bots and with the subscription model. And enterprise AI, which is our platform, also is gaining a lot of traction as each time we sell an AI pod, it has to do with our enterprise AI platform. So I believe that this is being accepted and this is being like, you know, we are able to reflect that on the price that we put on proposals hence maintaining our margin and maintaining our revenue per head. I don't know, Juan or Diego, if you want to comment. Diego Tartara: No. I think that pretty much summarizes it. If you think about the individuals, like, on a profile basis and you tell me how does probably that price compare to what it used to be four years back? Yes. There's pressure there. But the mindset today is about efficiency. The mindset is about business impact. And when you talk about that, and that's one of our main strategies with the AI studios. When you talk about that, the conversation changes completely. So and that's why we've been able to maintain revenue per head. Bryan C. Bergin: Got it. And then that's helpful. And then just one just thinking about the third quarter being roughly flat in revenue growth, and then it drops to about 7% organic. X x currency. Can you just help us to step down in revenue growth? What's causing that? And then I'm guessing this might be the trough in revenue growth in the fourth quarter. And then what does the first quarter look like sequentially? Juan Ignacio Urthiague: On the talking about the fourth quarter, you know, the main impact that we have over there are the furloughs in mostly in professional services. That's impacting, you know, pretty much that's explaining pretty much the decrease on a sequential basis. When we look at I just give you some color on Q1, but when we look at the Q1 right now in all the initial numbers that we are seeing, we don't see any scenario similar to what we have in the last few years. You know, for example, 2025, Q1 was sequentially down 4.7%. We don't see anything similar to that at this point, anything at all. And that puts us in a much better place to get the ears that gives us also, you know, some we look at, you know, okay, how the ASR is building up, what are the conversations with the customers, what each AI studio is bringing to the table, what are the we are to just sign a very large deal with a gaming company as we discussed. Now when we accumulate all that, the Q1 number, you know, is definitely a lot better than, you know, what we have seen in prior years. Right? And I think that that puts us in a much better place getting into 2026. Bryan C. Bergin: Great. Thank you. You're welcome. Arturo Langa: Thank you, Brian. The next question from the line of William Blair. Maggie, please go ahead. Maggie Nolan: Thank you. Hi. Jamie Friedman: I wanted to put a finer point on the margin question, particularly as it relates to SG&A. Can you drive more SG&A dilution from here? And are you planning to? Or is this a reasonable level SG&A to settle as a percentage of revenue? Juan Ignacio Urthiague: You know, we closed the quarter at 17.7%. You know, almost one point below Q4 last year, for example. There is of course, there is always room to keep on diluting over time. But we also need to balance the growth that we expect to recover. You know, we need to balance all the changes that we are making in terms of our offering, all the changes we are making about our business units, you know, with all the AI industry studios. So there is more room, but, I mean, as always, you need to keep looking at, you know, 10 to 20, even 30 basis points of dilution every year, not more than that. But definitely, you know, as a business, this is a business that has the potential to run at, you know, about 15% SG&A over time. But it's something that you have to achieve as you scale. Right? When you look at which are the companies that are running at those levels, those are the ones that are already at a very large scale. I think that 17.9%, 17.8%, 17.7% is a good number for the size that we have right now. Given all the different things that we are doing these days. Right? So I think that that's how we see SG&A in my Jamie Friedman: Thank you. That's helpful. And then it does sound like there's some momentum building across the business. I was wondering if you could comment on professional services in particular. Maybe if you back out the impact of the furloughs that you already commented on, do you feel like that vertical is showing signs of stabilizing? Maggie Nolan: Yeah. Definitely. I mean, when you look at Juan Ignacio Urthiague: and I think that when we are looking into Q1, for example, it's one area of recovery. Right? I mean, after the furloughs in Q4, we have started to see stabilization in one large customer that was impacting that group. Plus, we are seeing growth in two or three others that will help us to offset what has happened to that customer that I mentioned before. But even in that large customer, now it has stabilized in a new level, but we see opportunities to recover from this new level upwards. So we think on professional services, once we go through the furloughs, that's the bottom of that sector for us. And we should start to see better numbers Jamie Friedman: Great. Thank you. Juan Ignacio Urthiague: Going forward starting in Q1. You're welcome, Maggie. Martin Migoya: Thank you. Bye. Arturo Langa: Thank you very much, Maggie. The next comes from the line of Goldman Sachs. Jim, your line is open. Maggie Nolan: We cannot hear you, Jim. Arturo Langa: As Jim tries to get his line back, we will go on to the next participant. The next question comes from the line of Guggenheim. Jonathan, please go ahead. Maggie Nolan: Great. Thanks for taking our questions. Can you help one some of the vertical and geographic assumptions around that 4Q outlook and maybe the level of conservatism that you're assuming? Yeah. Juan Ignacio Urthiague: As mentioned, you know, the one sector that will come down further down is professional services. Because of the furloughs that they it's going to be impacting that sector. And pretty much for almost all other sectors, you're going to see stable numbers. So I think that's something that again, I think that after a few quarters of moving pieces, we are definitely seeing stabilization in the business. With some green shoots that are putting us in a more positive way looking into '26. You know? Deals like some of the ones that we announced today have been on the cook for several months. And you start to see them closing. Some of them and companies are again becoming more aggressive in terms of growth. And I think this is always a positive sign for Globant. Conversations are in a much better place than where they were six months ago. So we are more confident about '26. And we think that, you know, that that's something that will be very positive for the business. And also Martin Migoya: I think it's quite clear how you know, the difference in terms of conversion that we have seen in the at the very beginning of the year. I mean, at the very beginning of the year, everything kind of got frozen. Right? And now the things start to move not at the speed we saw in 2021, but, you know, much faster than before. And that is remarkable because Martin Migoya: and also, the pipeline generation has been quite because we closed, like, large deals. And even closing those large deals, the pipeline grew a lot. So I think that dynamic is very different from what we have seen in the first half of the year. And that's the most remarkable part. That conversion coming back, our AI studio has been able to articulate that value proposition much better. I think that that evolution of Globant and that evolution of the market are two positive things to consider moving forward and into 2026. Maggie Nolan: Appreciate that color, guys. You know, as you think about your confidence around 2026, what gives you incremental confidence that these client conversions or these pipeline conversions should continue into the middle of next year. Martin Migoya: Well, we saw in the last few months a lot of activity in the space. I would say abnormal as opposed to one year ago or something like that. So I believe that this momentum will continue moving into Q4 and Q1 next year. That would generate increasing opportunities and incremental opportunities as Juan said, we don't see, you know, something happening on the first quarter, like, happened in February 2025. I mean, 2026 will be much more close to Q4 than it was before. So, I think that that's a positive sign of what we are seeing and how the momentum is coming. Jonathan, I think that, Juan Ignacio Urthiague: what we are seeing is mostly shared by the industry today. So I think that everybody is being more positive about the market, the rural market condition. About 2026, so I think that we are after, you know, a few quarters of us or a few quarters or even a few years, if you look at some of our peers, of a very negative sentiment in terms of the market, in terms of the opportunities, I think that everybody is becoming a little bit more constructive. Maggie Nolan: Mhmm. And we are in on that same boat. Yeah. And everybody's realizing that, you know, creating these projects takes a lot of energy. Martin Migoya: And takes a lot of knowledge and takes, you know, really, you know, Martin Migoya: deep knowledge on how to navigate the AI landscape that is exponentially growing and exponentially becoming more complex. So I think that discussion is coming to an end. And people are starting to realize that yeah, they want to adopt AI. They need someone to help them adopt AI. Hundreds of new projects that didn't exist before now are happening. And are possible to happen. And then the traditional projects would need to keep on going. Now with the new AI technology. So opportunity keeps on building, keeps on being very large for the whole industry. And I'm more convinced than ever that, you know, once we pass this kind of difficult situation during the first half of the year, the opportunities moving forward will multiply and expand our opportunities for 2026. Arturo Langa: Thank you for the question, Jonathan. Next question comes from the line of Itau Maraclara, please go ahead. Your line is open. Maggie Nolan: Hi, everyone. Thanks for the opportunity. I just wanna Maria Clara: to explore more about how you can balance employee and grow ahead. So even the current headcount and utilization levels, do you believe that you need to hire new people to honor a potential acceleration of growth in 2026, or maybe employees are becoming more productive with AI, so you are fine with your current headcount? Thank you. Yeah. Thank you, Maria Clara. So there's going to be a Juan Ignacio Urthiague: combination of slightly higher utilization and hires. We're not gonna be able to get back to highest levels of growth without incrementing a little bit our headcount going forward. We have made all the equalization or the balancing of the level that we need right now. But as we get into next year and as we start to see those deals materializing, utilization, there is still room to go up because even though we increased 50 basis points, we're still below our target of 80%. There is some room there. But also we see that headcount is still a part of the equation. Of course, AI increases productivity of our developers. But you also will see headcount growing as we get higher levels of growth going forward. Maria Clara: Thank you. Juan Ignacio Urthiague: You're welcome. Maria Clara: Thank you, Maria Clara. Arturo Langa: The next question comes from the line of UBS. Leonardo, please go ahead. Bryan Bergin: Hi, everyone. Good evening. First of all, congrats on the huge leverage reduction, 20 quarter on quarter. I've been particularly critical about Leonardo Olmos: cash generation now. You've proved me wrong, so congrats on the figure. My question is about AI. I think you mentioned something about the embedded solution in 17 embedded AI pods in 17 out of the top 20 clients. Right? You said you said they're embedded in meaningful ways. Would like you to discuss that a little bit so we can try to assess, how could that eventually become, ready. Martin Migoya: Leonardo, let me first clarify what I said. I said inside 17 of the top 20 accounts, we are about that. Not in all of them, we included already the AI bots, but in some of them, yes. Martin Migoya: But the important thing is that those discussions are progressing quite healthy. Martin Migoya: And I think the expectation in general of the model around a consumption model instead of different kind of metrics. While you have, like, variable scope, and you need to have a methodology that doesn't punish you and is more transparent than other methodologies that you have in the past. Is the concept that has been extremely well accepted by our customers. So what we foresee is that many new deals will come and are coming with that offering inside the proposal. By default. So what we're seeing is a natural growth of the pipeline of these. The conversion of that is quite healthy. It's almost doubling the pipeline, doubling the conversion, and the amount of customers is almost, you know, double from the 18 that we announced last quarter into what we have now. So I believe that those are the variables to have in mind. I don't know if you want any specific explanation of how we are implementing those things, but please, your question if you want. You're muted. Bryan Bergin: Guess I didn't learn Leonardo Olmos: 2020. Thanks for that. No. It's quite clear on that. I think just if you could talk a little bit, maybe, at is difficult to predict. Maybe a little bit ahead, three, five years, how much of revenue could come from subscriptions more model and if AI plus will be the single driver of outcome-based out of time and materials. Are you thinking of something else? Martin Migoya: No. Look. I mean, I don't have, like, a prediction to share with you about how much of the revenue that will be. Yes. What I can tell you is that the model is progressing much faster than any other thing that we have proposed to our customers in the past in terms of next-generation proposals. So that's a clear sign that it will take over, you know, I think, by storm next year. But I cannot predict a specific number. I know you want to include it in the model, but the thing is I don't have a number to provide to you at this moment. It's just two months and a half. But the things are the signals that we're receiving from the customers are very, I would say, positive. Leonardo Olmos: Sounds promising. Thank you very much. Good evening. Martin Migoya: Thank you. Thank you. Arturo Langa: The next call the next question comes from the line of Sean Kennedy from Mizuho. Sean, please go ahead. Hi, everyone. Thanks for taking my questions. Sean Kennedy: I was wondering if you could discuss what factors could raise conversion rates for the pipeline because as you noted, the growth there is robust. Is it just as simple as a better global economy, or are there other factors like AI, as in your customers are taking more time to think through their AI strategies before investing. Martin Migoya: Yeah. I think there are several factors that may help. Of course, you know, as the global economy improves, it makes more sense for people to make more transformational projects. I know companies are I think that by the nature of understanding and going deeper into the benefits of that AI that any company can get from this new technology, I think companies are starting to understand that they need to move out from, I would say, trials into full programs. And this always takes time, and in other massive technology shifts we have seen in the past, these took time. So we expect now that there will be needed some more time Martin Migoya: for the companies to agree that they need to go in the Martin Migoya: full transformation, multi-year full transformation AI program for every single area. But the good news is that we are seeing that happening already maybe not on 100% of the cases, but in many more cases than six months ago. So that's a clear maturity of understanding how these projects must be developed that will help in the transform sorry. That would help on the conversion of these deals. And then, you know, if interest rates go down, if, you know, the economy, you know, in the US, which is one of our main markets, it has been quite stable if you take out the investments in AI. Martin Migoya: So I believe that this will come back to growth Martin Migoya: in some way as the whole economy improves. And that will help a lot. Right? But then Martin Migoya: on the internal side, on the Globant side, Martin Migoya: as we progress with our AI studios, and as we progress with our offering, and as we progress with our value proposition of new ideas like the AI and the enterprise AI and the subscription model. All those things will help, you know, customers say, okay. Yeah. Let's do it. You know, enterprise AI is the perfect path for AI. It will isolate you from any vendor dependence. You can connect with 140 LLMs on one side, on the other side with all the corporate information systems, then you can use those two things to create agents. And to give workflow that, you know, automate processes. But also that transform how consumers interact with your brand. So, as that value proposition gets stronger and deeper, and goes deeper into our customers, I think conversion will accelerate too. So there are multiple factors there affecting in my perspective in the future. But I don't know, Juan or Diego. Diego Tartara: No. I think just to add a little bit on top of what Martin said. I think there's something related to what you mentioned, Sean, that the market continues to be in a mood that is about efficiency and impact. Right? And this is very important because what we see is, first of all, all the proposals that we send, they're being evaluated. And, of course, they need to understand the impact that will have in the business. And they're either a go or no. But I think with regards to the time it takes to evaluate proposals, close them up, which has certainly their larger period of times lead times, until closure, I think that it has a lot to do with the maturity both of the market and the technology as well. Evaluating a proposal, how to properly use new platforms, the proper model, the implementation, which is super complicated, and you have three different offers that might be totally different and you're not even super mature with regards to that, tends to take a lot more time. I think that will only improve in time, and hopefully, we will get back to the usual times of the industry. Sean Kennedy: Great. Good Sean Kennedy: good to hear. Thanks for that. And then as a quick follow-up, I was wondering you were seeing demand from helping companies or companies prepare for AI in terms of data and cloud. Like, before the AI pods implementation? Sean Kennedy: Yeah. Yeah. I think that those are interesting data points mentioned in the script. Juan Ignacio Urthiague: There are 900 projects or potential projects in the pipeline. That are what we would call data readiness projects, which is either data, either a generative AI, either AI bots or a mix of the above. So there are plenty of projects that are happening and plenty of projects that are in the pipeline. That are AI-related. We still see many companies that need to get prepared for making a better use of AI. Right? And that's going to continue for a while. You have some comments that are there. Others are getting there. Martin Migoya: Well, I'm sorry. But I know and not all the projects are generative AI. I mean, there's a lot of projects that are traditional AI, machine learning projects, in which a massive amount of information is being involved and models are being trained or tuned or I mean, not all the projects are about conversational projects or interfaces. There's a lot of AI projects that are traditional AI, you know, projects, of course, get enhanced by the use of generative AI. But it's much more the traditional data gathering and then trying to train models based on that information to predict certain factors or certain things, that you cannot do only by using a generic LLM. Right? So, it gets accelerated by using LLMs but it's traditional AI or fine-tuning or doing machine learning on specific industries, specific sectors, on specific areas of the company, that are also fueling that pipeline and that amount of projects that Juan was mentioning. Sean Kennedy: Great. Sean Kennedy: You. Appreciate all the color. Martin Migoya: Thank you. Arturo Langa: Thank you for your question, Sean. Unfortunately, that's all the time we have for the Q&A section today. I will now Arturo, Martin Migoya: hold on a second. There was one that got missed on the line. I don't know if he's ready for the question. Jim? Arturo Langa: Jim, are you there on the line? If not, we can move to one more question then. Maggie Nolan: I'm sorry. Arturo Langa: Unfortunately, that's all the time that we have today. I don't see Jim in there. But with that, we will conclude the call today. Maggie Nolan: And I would like to turn over the line to Martin. Martin, please go ahead for some closing remarks. Martin Migoya: Thank you very much, guys, for supporting us, for being here with us. For another quarter of Globant. I'm looking forward to seeing you in the next one.
Operator: Good day, and welcome to the Legacy Education, Inc. First Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded and broadcast live. It will also be archived on the Legacy Education website for future reference. To kick off the call, I will turn it over to Nicole Joseph, Senior Vice President of Legacy Education, Inc. Nicole, please go ahead. Nicole Joseph: Thank you, and hello, everyone. Legacy Education has issued a news release reporting its financial results and corporate developments for the first quarter fiscal year ended September 30, 2025. The release is available in the Investor Relations section of our corporate website at legacyed.com. With us today on the call are LeeAnn Rohmann, Chief Executive Officer; and Brandon Pope, Chief Financial Officer. On today's earnings call, statements made by Legacy's management regarding the company's business, which are not historical facts, may be forward-looking statements as identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond the company's control. That may influence the accuracy of the statements and projection upon which the statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Legacy undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date thereof. I will now hand the call over to LeeAnn Rohmann, CEO of Legacy Education. LeeAnn to you. LeeAnn Rohmann: Thank you, Nicole, and good afternoon, everyone. Welcome to Legacy Education's First Quarter Fiscal Year 2026 Earnings Call. I'm joined today by our Chief Financial Officer, Brandon Pope. We are pleased to report a strong start to fiscal 2026, building on the transformative momentum of 2025, a year of record enrollment, robust financial performance and strategic progress that solidified our leadership in the high-demand allied health education sector. Our growth is accelerating, driven by the nation's urgent need for skilled health care professionals and our proven ability to deliver job-ready graduates through innovative hands-on programs with chronic shortages in fields like nursing, medical assisting, ultrasound technology, cardiac sonography and MRI, where hospitals and clinics are actively seeking talent. Legacy Education is at the forefront, capitalizing on this structural demand to expand our reach and impact. These are not just careers. They are essential roles that require human empathy, precision and expertise, qualities we instill in every student, preparing them to meet the needs of a resilient and growing sector. Our Q1 results reflect disciplined execution and the effectiveness of our growth strategy. We delivered meaningful year-over-year improvements across key metrics, revenue, enrollment, EBITDA and EPS while making targeted investments to expand capacity and program offerings. This performance confirms that we are starting the fiscal year on track, beating our internal projections and leading with strong momentum and a clear path to sustained value creation. Let me walk you through the highlights. Revenue grew 38.5% to $19.4 million, driven by a 31.6% increase in new student starts to 1,117 and a 37.7% rise in ending student population to 3,495. This is an all-time high and a clear sign of strong demand and the success of our enrollment initiatives. Importantly, this growth represents our 13th consecutive quarter of double-digit revenue growth, and it does not yet even include the contributions from the 4 new programs that we have recently received approvals. Adjusted EBITDA rose 9.6% to $3.1 million, with a margin of 15.9%. The year-over-year decline in margin reflects deliberate front-loaded investments in growth and nonrecurring charges, which Brandon will detail shortly. Net income increased 4.6% to $2.2 million. Diluted EPS was $0.16 compared to $0.21 last year. This was impacted by the increase in diluted shares from 9.8 million to 13.9 million, following our September '24 IPO. On a normalized share count, EPS would have been $0.22, demonstrating the underlying strength of our earnings. Now let's talk about accounts receivable. In Q4 of fiscal '25, we recorded a $700,000 reserve for graduated borrowers who had fallen behind on payments, a conservative, transparent action to strengthen our balance sheet without writing off the receivable. We committed to you a quarterly write-off and reserve analysis to improve visibility and control. We delivered on that commitment. This quarter, we recorded $178,000 reserve. That's 0.9% of revenue, exactly in line with our expectations. We've enhanced our collections process through executing a partnership with well-known collection company, Williams & Fudge. We are doing weekly AR reviews and a proactive borrower outreach and support to our graduates exactly what we've been doing with our active students in-house. The delinquency trends are stabilizing. We are seeing the improvement in the collections and AR is under control with no anticipated surprises. This disciplined approach reflects our commitment to financial rigor and long-term shareholder value. Moving to our taxes. Last year's tax estimates created some variability. But this quarter, we reported an effective tax rate of 26.5%, better than the annual estimated 29.4%. This benefit was a result that was tied to employee stock option exercises following our IPO, an advantage that we anticipated and now realize. Taxes are stable, they're predictable and aligned with our projections, reflecting enhanced financial governance and operational maturity. As I move to margins, this quarter reflects strategic investment for long-term growth. Adjusted EBITDA margin was 15.9%, down from 20.1% a year ago. This reflects strategic front-loaded investments and 4 new programs approved and not yet launched this quarter. Three of those are degree programs and one is a certificate in high-demand fields, including MRI, cardiac sonography, surgical technology and sterile processing. These investments included curriculum development and regulatory approvals, faculty recruitment for hiring subject matter experts from the field, simulation lab and facility upgrades, surgical tech and sterile processing lab, ADN continued program enhancements and new finance leadership. That's our new controller. Annual investments and professional development and training for our exceptional instructional leadership and staff to conduct quality education training that gets our graduates jobs. Educational service expenses rose 53.2% of revenue from 51.4%. This is a reflection of our unwavering commitment to clinical quality and hands-on training. G&A expenses increased to 31.5% from 28.3%, but this is driven by professional services increase, audit, legal, compliance and M&A-related valuations, all nonreoccurring. Brandon will share more detail when I turn it over to him. Additionally, under G&A expenses, marketing investment up 15% to $1.6 million. This is driving enrollment and the launch of the new programs. And then additionally, in G&A, D&O insurance and bad debt reserves tied to the revenue growth, and it's all in line with projections. These are not cost overruns. They are strategic investments in capacity, compliance and market reach. All these programs scale and fixed leverage costs. We expect margins to expand sequentially throughout the year. This is our playbook for sustainable high-return growth and a resilient sector. Our balance sheet, it remains a competitive advantage. We're cash-rich, low debt and high liquid. We are well positioned to fund organic growth, pursue accretive M&A and navigate any environment with confidence. Operating cash flow was positive but lower year-over-year. This was simply due to the timing of our Federal Title IV disbursements. It's a function of the enrollment cycles and regulatory processing, completely unrelated to the government shutdown. Student collections remain strong and growing. CapEx was $200,000 with a targeted and high ROI. Our liquidity position is robust. Cash flow dynamics will normalize as disbursement timing aligns in our future quarters. As I turn to our strategic developments and milestones, the allied health sector is defined by the enduring human need, not disruption. Technology can assist in diagnostics, it cannot replace the nurse at the bedside. AI can streamline workflows. We're taking advantage of that internally, but it cannot perform a sterile procedure with precision and care. Data can inform decisions, but it cannot build trust with a patient in crisis. We are training the professionals who deliver that care. The demand remains structural and unrelenting with more than 200,000 nursing openings annually through 2031, growing shortages and medical assisting, sonography and sterile processing, just to name a few. Health care systems actively seeking job-ready graduates. We are meeting that demand with precision. Our key achievements, I am so thrilled to share with you that Contra Costa Medical Career College that we acquired in December of last year is now over 500 students. We have been able to secure our vocational nursing program approval so that their nursing program is aligned with our legacy standards and programs. We have additional new program approvals, MRI, Associates of Applied Science, Cardiac Sonography, Associate of Applied Science at Central Coast College. Similarly, Surgical Technology Associate of Applied Science approval at High Desert Medical College, it's Lancaster, it's Bakersfield and [Temecula] Campuses. Sterile processing technician certificate program at our Integrity College of Health and High Desert Medical College, Lancaster, Bakersfield and [Temecula]. These are all new program approvals that we've talked about that we have secured and that we've been making the investments in order for you to see those in the future quarters. Additionally, RN program approvals are in active pursuit across several more of our campuses. Our Advisory Board is providing strategic guidance and telehealth integration, AI-assisted diagnostics and hybrid training models, ensuring that we are leveraging innovation to enhance, not replace the human-centered care. We're preparing our graduates to respond to the changes that are occurring. The graduate placement rates remain above the industry standard and our graduates are placed within 6 months. We are incredibly proud of that, and it's a testament of the program quality and the employer alignment. These milestones reflect our operational excellence that we are constantly and continuously striving for as well as a deep commitment to our outcomes for our students, for our employees, our shareholders and the communities that we serve. With that, I'm going to turn it over to Brandon for a detailed financial review. Brandon? Brandon Pope: Thank you, LeeAnn. I'll review the first quarter results with year-over-year comparisons, then discuss our balance sheet and cash flow. First quarter 2026 highlights include revenue increased to $19.4 million, up $5.4 million or 38.5% from $14.0 million last year, driven by a 31.6% increase in new student starts to 1,117 students from 849 students last year, resulting in a 37.7% rise in ending student population to 3,495 as LeeAnn mentioned, an all-time high. EBITDA increased to $2.8 million, up 2.5% compared to prior year. Adjusted EBITDA increased to $3 million from $2.8 million from prior year, representing an increase of 9.6%. The effective tax rate was 26.5% compared to 28% in prior year. This improvement is based upon our estimated annual effective tax rate of 29.4% less the impact of stock option exercises within the period in which they receive the tax benefit. As LeeAnn mentioned, we improved our practice to review our effective tax rate each quarter as opposed to simply annually. Net income increased to $2.2 million or 4.6% increase from $2.1 million last year. Diluted earnings per share was $0.16. However, on a comparative share basis, diluted earnings per share would have been $0.22 compared to $0.21 per diluted share last year. Now turning to expenses. Educational services expense was $10.3 million or 53.2% of revenue compared to $7.2 million or 51.4% of revenue in prior year. This increase as a percentage of revenue of 1.8% is primarily attributable to enhancements in the ADN program, new program approvals, new hires, externship fees and noncash compensation. General and administrative expenses were $6.1 million or 31.5% of revenue compared to $4 million or 28.3% of revenue. The increase as a percentage of revenue of 3.2% is primarily attributable to increases in the first quarter period costs relating to audit, legal, regulatory acquisition valuation costs, representing approximately $742,000 compared to $423,000 in prior years. These costs relate only to the first quarter when these activities occur. Additional increases as a percentage of revenue are in the areas of marketing to support new programs, D&O insurance due to being a public company and the increase in bad debt expense. Bad debt expense as a percentage of revenue increased 0.9% of revenue or $178,000 due to our quarter write-off and reserve analysis and consistent with our projections. Now turning to the balance sheet and cash flow. Cash, $20.6 million. Accounts receivable was $17.6 million compared to $15.1 million in prior year or year-end specifically. The increase is primarily attributable to increase in student population as well as timing of Title IV disbursements. AR reserve was $1.9 million or 9.5% of AR compared to $1.6 million or 9.8% of AR at year-end, consistent with our quarterly reserve requirement process. Current assets were $40.9 million, total assets were $72.1 million, current liabilities, $15 million and debt was $700,000. And finally, stockholders' equity was $43.7 million. And returning to cash flow. Cash provided by operating activities was $1.1 million compared to $3.2 million last year, primarily due to Title IV disbursement timing. Cash used for investing activities was $300,000 for both periods relating to investments in program expansion and technology. The cash used from financing activities was $500,000 related to paying off of an equipment lease in the quarter compared to cash provided by operating financial activities of $8.3 million related to the IPO of last year. Overall, we have a very strong balance sheet and positioned well to execute on our strategic strategy. With that, I'll turn it back over to LeeAnn. LeeAnn Rohmann: Thank you, Brandon. Looking ahead, we are focused on 4 strategic priorities: continuing the enrollment momentum. We are going to be driving organic growth by scaling our digital marketing, deepening our employer partnerships and expanding our high school outreach. We have curriculum expansion and in particular, full rollout of the new programs in cardiac sonography, surgical technician and sterile processing, all aligned with the employer demand. As we look at our operational innovation, we're continuing our advancement of our hybrid model delivery with simulation technology, clinical partnerships for superior outcomes, and we remained committed to a disciplined growth to leverage our $20.6 million in cash and our legacy Board to evaluate accretive M&A opportunities. Compliance and regulatory. We are operating in a highly regulated environment, and compliance is not just a requirement, it's a core competency and a competitive advantage for us. Title IV disbursements in Q1 were impacted only by normal timing variations unrelated to any government shutdown or the Department of Education staffing changes. Recent reductions in federal workforce have no material impact on our operations. Our programs are accredited. They're approved and fully compliant across all jurisdictions. We're offering programs AI can't replace. We remain robust with internal controls. We are performing regular audits and proactive engagement with regulators, ensuring 0 disruption to funding our program delivery. In fact, as policy shifts and workforce challenges at the federal level only underscore the critical importance of our mission and what we do. The private sector led by institutions like Legacy is stepping in to rapidly train the job-ready allied health professionals where public systems cannot keep pace. Hospitals don't want to wait for policy. The clinics don't pause their hiring. They need graduates now, and we deliver them with industry-leading placement rates, employer-aligned curricula and a compliance culture second to none. The resilience combined with growing bipartisan support for workforce development funding positions legacy to thrive regardless of the regulatory backdrop. We expect sequential margin improvement as investments mature and revenue scales. And a sector supported by strong policy tailwinds and structural demand, our compliance strength, program quality and financial discipline position us to deliver sustained growth and shareholder value. Let me share a story with you that represents exactly what we're doing. A recent graduate from a medical assisting program in Lancaster, a first-generation student and a working mother, completed her flexible -- our flexible hybrid curriculum while balancing her family responsibilities. She passed her certification exam on the first attempt and secured a full-time clinic position within 2 weeks of graduation. That program took her less than 9 months for her to complete. And today, she leads patient intake, trains new staff and provides stable support for her family. This is the legacy impact, one graduate, one career, one community at a time. I want to thank you for participating today, and I want to turn over to the operator now for questions. Operator: [Operator Instructions] And the first question comes from the line of Mike Grondahl with Northland Securities. Mike Grondahl: Nice quarter. I wanted to ask about the 4 new programs. I think they roughly started in October. Could you talk about how they started and sort of what capacity they have over the next, I don't know, a couple of quarters? LeeAnn Rohmann: So Mike, in terms of as we -- I know that these questions are coming in terms of they are starting in our second quarter. The capacity for these are -- these degree granting programs enroll 20 to 24 in each of the approvals and the locations. We can start them both in the morning and in the evening, and we are excited to see the response that we have benefited from the marketing efforts that we incurred through the first quarter marketing efforts that we've seen. Sure. Very excited. Mike Grondahl: Any sense of I guess, break it down a little, if you can. There was 4 programs and everyone started a morning and an evening class. Like incrementally, did this add 50 students, 150 students? LeeAnn Rohmann: It didn't add any into the Q1 results. None of those have been realized yet. They will be in Q2 and Q3 and beyond. Mike Grondahl: Got it. Got it. And then how is the acquisition pipeline looking? Are you spending more time there, less time there? Any color would be helpful. LeeAnn Rohmann: Yes. The acquisition pipeline remains strong. We have several that have been elevated to the Board level in order for us to really ensure that we are targeting the right plan for us is how we are driving to remain in California as well as to extend outside of California. So our real goal has been, as I've said in the past, that we've done all single campus acquisitions. We're looking at multi-campus acquisitions, both that would reside inside California and outside of California. And we're on track and on pace for the timing for which we are hopeful to be able to announce the next one. Mike Grondahl: Is that roughly the next 6 months? Or how do you see that playing out? LeeAnn Rohmann: That's how we actually talked about it in the last call and what we've shared in the past is, yes, within this fiscal year. Operator: The next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Jeffrey Cohen: I think I just have 3. So I guess, firstly, are you nearing being capacity constrained with the existing buildings and facilities? What kind of total patient population can you handle at this point? LeeAnn Rohmann: So we have some of our -- like a lot of our campuses are ranging upwards of 700 and 800 students per campus. in the existing ones that we've had. In those campuses, those are where we also have leases that will be expiring in the next 12 to 24 months. And so we are taking all of that into consideration as we are doing our lease renewals and expansion to do this in line with where we see that the increase in capacity will be needed. We're benefiting a lot from the hybrid delivery of the programs. Many of our degree granting programs start their first 6 to 9 months in their general education courses, those are all online, and they don't need to come to the campus for anything. It's post to that 6 to 9 months, that's when they'll start coming in for their laboratory interactions and the things that they do for showing up on the campus a couple of days a week. Jeffrey Cohen: Got it. Sorry, I meant students, not patients. Okay. Secondly, can you talk about the placement side the Legacy? Is Legacy itself in touch with ASCs and physician offices and hospitals directly? LeeAnn Rohmann: So our placements in terms of we continue to add for our clinical as well as our external placements. We are reaching out to both local facilities and partners in the community. Many of our partnerships are hospitals and facilities like RadNet, like Sharp, health care systems, like Scripps, these particular locations and facilities, they take our MAs, they take our nurses, they take our MRIs. They're taking cardiac. So as these new programs that we're adding, this is as a direct impact of them telling us what they're needing. And then these graduates are sequentially, these are the places where they are getting hired. Jeffrey Cohen: Got it. And then one more, if I may. As far as placements goes, currently, are you placing any students outside of the state? And are you placing any students outside the U.S.? LeeAnn Rohmann: So outside of the U.S., we have not had much, if any, experience, maybe a few that have crossed over into Canada. But when it relates to us placing students outside of California, that's going to be -- it would be when the student is actually transferring out from there. They're not actually enrolling in our campuses to obtain education and then to participate outside the state. There's anything that I would kind of circle back with is as both Jeff and Mike continue to ask about just our M&A activity as we have also mentioned in the past that we're ready to do the next greenfielding, and we will continue to make sure that at the same time that you are looking at announcements that we would be making in the next 6 months for M&A, we have experience in greenfielding and identifying the right locations outside of California where we could do that. Operator: As there are no further questions at this time, I would now like to turn the call back over to LeeAnn Rohmann for closing remarks. LeeAnn Rohmann: Thank you, operator, and thank you all for joining us. Q1 fiscal 2026 marked a strong foundation with robust continued growth, strategic progress and confidence in our financial and operational discipline. We remain deeply committed to our mission, training exceptional health care professionals to strengthen our nation's workforce and improve lives every day. To our employees, our students and our shareholders, I want to continue to thank you for your trust and partnership. We are on track, well positioned and poised to deliver an outstanding year. Back to you, operator. Operator: Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining us, and have a great day.
Operator: Good afternoon. Thank you for attending today's Q3 2025 Marchex Earnings Conference Call. My name is Shayla, and I'll be your moderator for today. [Operator Instructions] At this time, I'd like to pass the conference over to our host, Frank Feeney, the COO. Please proceed. Francis Feeney: Thank you. Good afternoon, everyone, and welcome to Marchex' Business Update and Third Quarter 2025 Conference Call. Joining us today is Russ Horowitz, our Chairman of the Board; Troy Hartless, our President; and Brian Nagle, our Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements, including references to our financial and operational performance, and actual results may differ materially from those contemplated by these forward-looking statements. Risks and uncertainties that could cause these results to differ materially are set forth in today's earnings press release and in our most recent annual or quarterly report filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements for subsequent events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release is available in the Investor Relations section of our website. At this time, I will turn the call over to Russ. Russell Horowitz: Thanks, Frank. I'm going to start with a few introductory remarks and then hand the call over to Troy, Brian and then Frank. The main item I'd like to share is that we feel the company is at a very positive inflection point, both strategically and operationally. There's always more to accomplish, but we've come a long way with expanding our customer and opportunity footprint, evolving our product capabilities and starting to create real sales momentum. With this progress and deeper strategic understanding, which is against the backdrop of the very real and very massive AI revolution, we have gained proprietary insight into what we believe may be a much bigger market opportunity, one where we evolve beyond mainly providing strategic analytics to vertical market-leading companies to one where we accelerate delivering more comprehensive solutions that address higher value impact needs across the entire customer acquisition and optimization journey. At the end of the day, our customers fundamentally rely on our AI-driven strategic insights to more efficiently drive growth-oriented customer acquisition. We believe there is a significant opportunity for us to rapidly expand into highly measurable AI-powered bundled solutions, which provide the strategic insights our customers need, the automated actions those insights inform and the outcomes those actions achieve. We believe that there are significant untapped opportunities with our customers and solutions within each of our current verticals. We believe selling such bundled solutions across the entire customer value chain can accelerate our business and make us much more valuable, sticky and scalable. And with that, I'll hand the call to Troy to briefly discuss the third quarter. Troy Hartless: Thank you, Russ. The third quarter represented continued progress with launching new products and accelerating sales bookings to our highest levels this year. While we did see some additional revenue migration dilution as we near completion of our technology platform migration at this year's end, we still saw meaningfully improved sequential adjusted EBITDA, showing the magnitude of our operating leverage. Based on this overall progress with accelerating sales bookings, which we anticipate can continue and compound, we believe we are gaining visibility on increased sustainable sales growth moving into 2026. We have a core focus on select very large vertical markets where the combination of our unique capabilities, combined with first-party data, create unique solutions for world-class market-leading companies. To that end, we deliver industry-specific AI solutions for automotive, auto services, home services, health care and advertising and media as well as other industries and subverticals. Overall, our AI-driven products revolve around the mission of understanding and capitalizing on customer conversations and leveraging first-party data for our customers' strategic and financial benefits. Our AI-driven conversational intelligence platform integrates universal and industry AI models with extensive API integrations and industry-specific applications. The Engage platform is driven by agentic AI and enables any client to easily understand their insight to action path, allowing business leaders across multiple business functions to make complex decisions, leveraging prescriptive analytics across the full customer journey. All of the new products and features we have launched or anticipate launching in the course of 2025 are key components of our go-forward growth strategy. With that, I'll turn the call over to Brian to provide an overview of the third quarter financial results. Brian Nagle: Thank you, Troy. Revenue for the third quarter of 2025 was $11.5 million, which is down from $11.7 million for the second quarter of 2025. We saw favorable impact of new sales and existing customer upsells benefit the company in the period. We also saw some offsets to that growth due to migration activities from our legacy platforms onto our new Marchex Engage platform. For operating expenditures, we saw efficiencies throughout the business as we had a full quarter of benefit from the realignment of the organization that took place in the first half of 2025 following the completion of certain technology platform initiatives. We anticipate that our gross profit margins can continue to improve over time as we are carrying an overall lower cost structure going forward, which could enable meaningful future operating and financial leverage for the business as new products and features sell through. On the balance sheet, cash decreased to $10.3 million from $10.5 million at the end of the second quarter of 2025. The decrease in cash was primarily due to the timing of customer payments at the end of the quarter. Moving to guidance. As previously communicated in the second quarter of 2025 earnings announcement, based on typical seasonality and the revenue migration dilution associated with migrating more than 1,000 customers onto the new technology platform, we currently anticipate that both revenue and adjusted EBITDA will be sequentially lower in the fourth quarter of 2025, as compared to the third quarter of 2025. That being said, as Troy previously noted, in the third quarter of 2025, we saw meaningful increases in sales bookings. With this and the ongoing launch of our various new products, we believe we can continue to see sales levels increase going forward, which will, in turn, drive increased revenue growth. So with the sales expansion currently underway and the primary platform migration completion by year's end, we currently believe that in the course of 2026, we can see revenue growth on a run rate basis in the 10% range from year-end levels. We also believe that in the course of 2026, the combination of increasing revenue growth, combined with lower overall operating expenses can lead to adjusted EBITDA margins of 10% or more. With that, I will hand the call to Frank. Francis Feeney: Thank you, Brian. I would like to take a moment to walk through today's announced agreement in principle to acquire Archenia. While the details regarding the potential transaction are included in today's earnings press release as well as certain Archenia estimated financial metrics, at a high level, Marchex has entered into an agreement in principle to acquire Archenia for consideration, consisting of a $10 million convertible promissory note and an earn-out in the 2 years following closing of up to 4 million shares to the extent Archenia's revenue and adjusted EBITDA exceeds thresholds to be agreed to in the definitive agreement for the transaction. A special committee of Marchex' Board of Directors consisting solely of independent directors has approved Marchex entering into the agreement in principle because certain of the sellers are related parties. The parties have agreed to promptly commence the negotiated definitive purchase agreement relating to the transaction. Conditions to entering into the definitive agreement, including receipt of audited financial statements of Archenia for such periods as required by SEC rules, and receipt of a customary fairness opinion by a financial adviser selected by the special committee. Conditions to closing the transaction shall include approval of the transaction by a majority of Marchex' disinterested stockholders and the closing date in the event a definitive agreement is entered into and the transaction is approved by disinterested stockholders is anticipated to occur in the first half of 2026. For your reference, Archenia is a performance-based, customer qualification and acquisition company, which transforms consumer intent into AI verified outcome-based results. Leveraging advanced AI signals, natural language analytics and automated decisioning, Archenia detects consumer intent and advertiser value in real time, optimizing customer acquisition campaigns dynamically across channels. With machine learning models that continuously refine qualification accuracy and ROI, Archenia enables its customers to pay for verified AI-validated outcomes such as appointments, sales and high-intent conversations. We believe that Marchex' potential combination with Archenia, if successfully consummated, we create a vertically focused AI-driven customer acquisition and outcome optimization platform, integrating deep insights, automated actions, and verifiable outcomes. Additionally, we believe that the expanded AI-driven product offerings across insights, actions and outcomes could create more ways to win new business and the bundling of solutions could create greater customer value, stickiness and risk mitigation. We believe that the potential combined company could have the opportunity to achieve greater revenue scale and growth higher margins, expanded market reach and enhanced strategic flexibility, which could include: first, a potentially expanded addressable market with opportunity to cross-sell and bundle. Marchex believes the combined ability to sell insights, actions and outcomes would meaningfully expand our addressable market into new large vertical markets. Additionally, we believe we would have the ability to relatively quickly offer or bundle Archenia's outcome-based solutions to many of Marchex' insights-based enterprise customers. Second, greater potential revenue, scale and growth. Marchex believes that revenue run rates for the potential combined company are approximately $15 million quarterly or approximately $60 million annualized, which could grow in the 15% to 20% range in the course of 2026. Third, we see the potential for adjusted EBITDA expansion. Marchex believes that our adjusted EBITDA margins are anticipated to trend up to 10% or more in 2026, and that Archenia could contribute additional positive adjusted EBITDA beyond these levels. And finally, Rule of 30 to Rule of 40 trajectory. For reference, the Rule of 30 to 40 metric represents the combination of annual revenue growth rates plus adjusted EBITDA margins. If we are able to achieve the anticipated revenue run rate growth in the 15% to 20% range and combine this with improving adjusted EBITDA margins in double digits, the combined company could be positioned to potentially achieve these Rule of 30 to 40 metrics over time, which we believe helps highlight the unique opportunity of the combined company if consummated. With that, I will hand the call back to Russ for closing remarks. Russell Horowitz: Thank you, Frank. We've already covered a whole lot today. So I simply want to close out by thanking all of our investors, partners and other stakeholders for all of your ongoing support. Additionally, I want to deeply thank our employees for their unique expertise, sense of urgency and continued commitment while we execute on what we believe is an increasingly dynamic opportunity. And with that, I will hand the call back to the operator. Operator: [Operator Instructions] Our first question comes from Ross Koller with company Koller Capital. Ross Koller: Congrats on the proposed acquisition. I have a couple of questions on what the go-forward business looks like. Russ, first, can you discuss how you view the TAM for the combined solutions? Russell Horowitz: Good question. Yes, we think the opportunity and addressable market, when you look at the combined company's ability to sell insights, actions and outcomes is multiples of our existing one, we're predominantly selling insights only. Our insights, we believe, are tied to meaningful 9-figure customer acquisition budgets, and we get used strategically to inform those. And our ability to continue to deliver more capabilities across that insights, actions, outcomes value chain translates to a significantly larger TAM, one we believe could be multiples of what we're operating against today. Ross Koller: Okay. Great. And can you talk about how you're thinking about the trade-off between growth and profitability as you scale up the business? Russell Horowitz: Definitely. It's -- obviously, it's an internal focus when we think about arbitrating, validating that the investments we've made are translating into growth. We're pleased that on the back end of the migration, we're at an inflection point on a stand-alone basis where we believe we're seeing that happen now, and we can build on that. But net-net, as we look at the acquisition and our ability to accelerate growth potentially to the extent it gets consummated, we're just focused on maximizing the revenue growth and maintaining some baseline positive adjusted EBITDA margins in that 10% or more range. We believe emphasizing customer penetration and really scaling up while prioritizing our growth rates is going to be the best approach for us for now. Ross Koller: Perfect. And lastly, can you discuss how you view the growth breaking down between new versus existing customers? And also, how big a business can you build just inside your current installed base? Russell Horowitz: Yes. Look, I think the best way to frame it is you've heard us say historically that we believe we have a $100 million revenue opportunity over time. But on a combined basis, this deal closes, we really believe that $100 million in revenue is way more tangible and way more achievable much sooner even just with the existing or installed base. We look at the verticals we operate in, and we look at the market-leading companies that we work in, in those verticals, and we look at the opportunities even within the subverticals, and call it the virtuous cycle of the expertise that we're putting together, combined with the unique first-party data that we have that -- informs our expanding set of solutions. And we think there's other customers we don't have that look like them, and we're going to be more relevant to with more capabilities that are easier to say yes to. But on kind of a stand-alone basis with existing installed base, yes, the combined company is well positioned in a more tangible way to get to $100 million rate much sooner. Operator: At this time, there are no more questions registered in queue. I'd like to pass the conference back over to our hosting team for closing remarks. Russell Horowitz: Look, I appreciate everybody's interest in Marchex. Obviously, we're excited about where we are and what our possible opportunity can look like as we move forward. We've got a lot of congruency and clarity around what that looks like. And we just appreciate all your ongoing support and look forward to keeping you posted as we execute and hope we make that happen. Thank you, everyone. Operator: That will conclude today's conference call. Thanks for your participation, and enjoy the rest of your day.