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Operator: Hello, and thank you for standing by for Tuniu's 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Mary. Please go ahead. Mary Chen: Thank you, and welcome to our 2025 third quarter earnings conference call. Joining me on the call today is Donald Yu, Tuniu's Founder, Chairman and Chief Executive Officer; and Anqiang Chen, Tuniu's Financial Controller. For today's agenda, management will discuss business updates, operation highlights and financial performance for the third quarter of 2025. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our Founder, Chairman and Chief Executive Officer, Donald Yu. Dunde Yu: Thank you, Mary. Good day, everyone. Welcome to our third quarter 2025 earnings conference call. In the third quarter, with the peak travel season approaching, demand for travel accelerated and the tourism industry demonstrated thriving growth. Tuniu also recorded year-over-year growth in both transaction volume and the number of trips booked. From a destination perspective, both domestic and outbound travel achieved year-over-year growth in transaction volume and the number of trips booked. In the third quarter, net revenues increased by 9% year-over-year with revenues from our core packaged tour products growing by 12%. Since the beginning of this year, quarterly revenues from our packaged tours have consistently achieved double-digit year-over-year growth. We also continued to deliver quarterly profitability on both a GAAP and a non-GAAP basis. As customer needs continue to evolve this quarter, we tapped into our core capabilities across products, supply chain and sales channels to better tailor our portfolio to market demand. In addition, we further enhanced our operational efficiency by leveraging technology tools. Next, I will elaborate in detail on some of our key initiatives. In terms of products, we continue to focus on customer needs and enhance our offerings to meet their evolving expectations. For experienced travelers and repeat customers who tend to prioritize the travel experience and usually have more time and budget. We leveraged the company's strength in outbound tourism to introduce a wider range of niche destination products. For example, in October, our new tour launched its first organized tour to South Africa -- South America. Our new tour series now spans all major regions across Asia, Europe, Africa, the Americas and Oceania. In addition, to meet the surge in leisure travel demand during the summer, we expanded our long-haul island offerings, including destinations such as Seychelles and Mauritius. In the third quarter, transaction volume for these long-haul island products grew by several times year-over-year. We fully leveraged our supply chain advantages to continuously expand destinations for our new select products and attract customers with compelling high-value offerings. For key domestic destinations such as Guizhou, we adopted on-site live streaming to offer customers a more immersive experience. In the outbound travel market, we expanded our destination coverage and offered more price competitive options, helping value-conscious customers reach their preferred destinations on a smaller budget. In the third quarter, transaction volume for our new select outbound travel products increased by more than 100% year-over-year. In response to the growing number of self-guided travelers in China, we continued to leverage Tuniu's advantages in dynamic packaging technology to expand our Hotel+X product offering. Our self-drive tour products now cover all provinces in Chinese Mainland. During the National Day holiday this year, transaction volume for our self-drive tour products increased by 5x year-over-year. For our sales channels, live streaming is playing an increasingly important role for our sales. In the third quarter, both payments and verification volume through our live streaming channels continued to record double-digit year-over-year growth while maintaining single quarter profitability. On the product side, we fully leveraged our supply chain strength during the peak season to maintain a wide reliable product range and deliver price competitive offerings. In terms of format, we expanded our outdoor live streaming activities, including inviting live streamers to broadcast live from destination sites. We formed a professional verification team and specialized system support, which together have improved efficiency across the entire process from product supply verification. In terms of external partnerships, we collaborate with top-tier live streamers to create synergies. And we work closely with mid- and long-tail creators, providing them with support and resources so we can grow together. We are pleased to see that more and more external live streamers are choosing to partner with Tuniu with some even becoming our exclusive live streamers focusing solely on selling our products. Offline stores remain an essential part of our overall sales and service network. Their personalized face-to-face service makes them particularly popular among senior travelers and community-based customers who are also key customer segments for our organized tour products. In the third quarter, we continued to expand our offline store footprint, adding locations in major cities as popular tourist destinations and key transportation hubs. In September, we opened 2 flagship stores in Xi'an on the same day to better serve customers, preparing for National Day holiday travel. In the third quarter, transaction volume from offline stores increased by nearly 20% year-over-year. The summer season is a peak period for leisure travel. And while serving individual travelers, we also continued to provide high-quality services to corporate clients. In addition to business travel bookings, we leveraged our extensive experience and strength in the leisure travel sector to offer tailored vacation products to corporate clients. We provide customized trips for some corporate clients and further extended our products and services to offer their employees with a range of personal and family vacation options. In the third quarter, transaction volume from corporate customers also recorded double-digit year-over-year growth. In terms of technology, various technology tools and methodologies have been embedded across all aspects of our operations and management, including product development and marketing, supply chain management and financial management. This has strengthened communication and collaboration between internal and external teams and further improved our operational efficiency. We will continue to explore advanced technologies such as dynamic packaging and AI applications and apply them across more scenarios to further enhance our operational efficiency and profitability. We were pleased to see the robust travel demand during this year's National Day holiday, supported by favorable factors such as the extended holiday period. Although the industry typically enters a low season in the fourth quarter. We continue to see active demand for off-peak travel, ice and snow trips and other niche segments. We will continue to seize these market opportunities by strengthening product development and adjusting our marketing efforts for seasonal needs. With a richer, more distinctive and more value-for-money product portfolio, we aim to attract both new and existing customers while also preparing fully for the peak travel period during the Chinese New Year holiday. I will now turn the call over to Anqiang, our Financial Controller, for the financial highlights. Anqiang Chen: Thank you, Donald. Hello, everyone. Now I'll walk you through our third quarter of 2025 financial results in greater detail. Please note that all monetary amounts are in RMB, unless otherwise stated. You can find the U.S. dollar equivalents of the numbers in our earnings release. For the third quarter of 2025, net revenues were CNY 202.1 million, representing a year-over-year increase of 9% from the corresponding period in 2024. Revenues from packaged tours were up 12% year-over-year to CNY 179 million and accounted for 89% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours and self-drive tours. Other revenues were down 14% year-over-year to CNY 23 million and accounted for 11% of our total net revenues. The decrease was primarily due to the decrease in the commission fees received from other travel-related products. Gross profit for the third quarter of 2025 was CNY 109.6 million, down 10% year-over-year. Operating expenses for the third quarter of 2025 were CNY 95.8 million, up 3% year-over-year. Research and product development expenses for the third quarter of 2025 were CNY 15.7 million, up 15% year-over-year. The increase was primarily due to the increase in research and product development personnel-related expenses. Sales and marketing expenses for the third quarter of 2025 were CNY 61.5 million, up 2% year-over-year. The increase was primarily due to the increase in sales and marketing personnel-related expenses. General and administrative expenses for the third quarter of 2025 were CNY 18.5 million, which was almost in line with general and administrative expenses in the third quarter of 2024. Net income attributable to ordinary shareholders of Tuniu Corporation was CNY 19.8 million in the third quarter of 2025. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation, which excluded share-based compensation expenses and amortization of acquired intangible assets was CNY 21.8 million in the third quarter of 2025. As of September 30, 2025, the company had cash and cash equivalents, restricted cash, short-term investments and long-term deposits of CNY 1.1 billion. Capital expenditures for the third quarter of 2025 were CNY 2.1 million. For the fourth quarter of 2025, the company expects to generate CNY 111 million to CNY [ 116.1 ] million of net revenues, which represents an 8% to 13% increase year-over-year. Please note that this forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change. Thank you for listening. We are now ready for your questions. Operator? Operator: [Operator Instructions] And today's first question comes from [ Emma Li, ] a private investor. Unknown Attendee: Congratulations on a solid quarter. I've got 2 questions. First, can management share the revenue proportions by domestic and outbound tours in the third quarter? Well second, can you please elaborate on travel performance during this year's National Day holiday. Will our company still remain profitable in the fourth quarter? That's all. Dunde Yu: Thanks for your questions. For your first question, currently, domestic tour still dominate. In the third quarter, domestic tours consisted of about 2/3 of our total GMV and overseas tours consisted of 1/3, which is almost the same as the previous quarter. For second question, we observed healthy increase in both domestic and outbound travel market during the National Day holiday. Both our GMV and the number of trips recorded during the holiday had double-digit growth compared with the same period last year. This reinforced our confidence in the sustained growth of China's travel market. For domestic market, we saw growing numbers of self-guided tours. In particular, our self-drive tours increased over 5x during the holiday. As self-guided tour is prevailing in the domestic market, we leveraged our dynamic packaging technology to enrich the supply of Hotel+X products. We used to focus our self-guided tour products on popular regions such as Yangtze River Delta and hot scenic spots such as [indiscernible] Park. This year, we extended our product offerings to all provinces throughout Chinese Mainland, partnership penetrating to lower-tier cities. We will continue to adopt this strategy as we see great potential in lower-tier cities. For outbound travel market, we recorded double-digit growth during the holiday. We saw nearly 50% increase in GMV from APAC regions. Popular destinations included Singapore, Malaysia and certain islands such as Maldives and Bali. For long-haul destinations, the Americas ranked #1 in terms of growth rate. Niche destinations are gaining appeal, especially for sophisticated travelers by their natural beauty and unique local experiences. For the fourth quarter, we expect an 8% to 13% year-over-year increase in our net revenues and the packaged tours may grow faster. We will also try our best to achieve non-GAAP breakeven or profitability for the quarter. Thank you. Operator: Thank you. We are now approaching the end of the conference call. I will now turn the call over to Tuniu's Director of Investor Relations, Mary, for closing remarks. Mary Chen: Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support, and we look forward to speaking with you in the coming months. Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the Celebrus Technologies plc Half Year Results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I'd now like to hand over to Bill Bruno, CEO. Good afternoon, sir. Guerino Bruno: Good afternoon. Thank you, sir, and thank you all, everyone, for attending today. We're excited to walk through this with you, share some customer stories, we'll walk through the financials and kind of give you a glimpse in some of the things that we've been doing in the product with regards to artificial intelligence and some other areas of importance. From a company perspective, this is -- for those of you that have been on this journey in previous calls, our last one having been in July, that was the first time where we sort of presented the new sort of revenue segments that we've now brought live in these first half results for this year as well as some adjusted versions of the prior year results to give you a proper comparison along the lines of those new categories. Ash will go through all of those in detail and help further explain that. But as a reminder, we now have sort of 4 revenue segments in the reporting. The first of which is ultimately Celebrus Software. Now that's candidly the line item to pay special attention to going forward. That is the key focus of our business is in driving our software revenue and Celebrus Software line item ultimately contributes to -- directly to the Celebrus Software ARR, and Ash will walk through the ARR growth from the first half and what that looks like compared to the previous year. The second revenue segment that you'll see mentioned is non-Celebrus ARR. These are our customers where we have long-standing relationships and deliver people-based services that are built around managing large analytic environments that don't contain Celebrus Software as a line item. So we've partitioned that out so that all of you going forward will be able to track the growth of our own software IP and the sales of that software IP. The third category is professional services. Those professional services are project-based work. So things that don't repeat. In our Celebrus Software deals, we do build in services that recurs. So for example, X number of days a month or per year as part of our managed service and Celebrus Cloud -- our Celebrus Cloud single-tenant private cloud environments that we stand up for customers. And in that case, it would show up in Celebrus software. Project work would be additional configuration or the client needs support with connecting our data into a different system or these are sort of one-off engagements and we treat them as such in that revenue segment. And then the final is hardware revenues. And that's pretty straightforward. For those of you that have followed the business for many years, we sell hardware occasionally to customers. It's not something that we offer to new customers, but it is something that we continue to support with customers that have been with us for quite some time. And anything that we do in that regard will show up in that bucket. Obviously, we'll continue sort of on this journey, and Ash will explain and reiterate sort of the revenue recognition policies and all the things that changed heading into this year. I know we had a lot of moving pieces as we sort of finish sort of the transformation of the business that we discussed about in July, but now we have tangible numbers and results that you'll be able to see and then hopefully better understand from a transparency perspective, everything that's going on in the inner workings of the business and where our focus lies. From an operational standpoint, we did have a couple of very key wins in this first half. The first of which was a fintech platform in the States and the other was a financial services firm here in the U.K. Both of those organizations are exploring some significant upsell opportunities with our customer success team that we stood up a little over a year ago as well, which has us quite excited. Now this has been a trend that we've built as we brought new logos into the business in this cloud-first mentality. It's allowed us, one, to be better connected to customers; two, deliver more value more quickly; but three, to also be able to engage customers differently and help them understand some of the things that our platform can do for their business above and beyond what it's doing today, and allow us to turn those features on or enable those use cases in a very streamlined manner now that we're not focused on delivering on-premise environments. We also had a significant number of upsells. And this is, again, a core part of our business, a core part of our pipeline. Ash will speak to the pipeline and some of the numbers that we're providing for the first time, as we've promised you for some time now that we would be bringing pipeline metrics into some of the things that we discussed to help give you a better comfort about what we're doing as a business and where we're adding value and what that pipeline and opportunity structure looks like for our sales teams, our new business teams as well as our partner opportunities. The Celebrus platform as a whole, we continue to innovate significantly. We do 2 releases a year. That's been our cadence for quite some time. I don't see that changing. It's just enough for us to manage from a development perspective, but it's also just enough for customers to have new features, new functionality at a pace at which our competitors are not delivering upon. And these -- much of this innovation has been focused really in what to do with the data. We've spent many, many years, Celebrus, perfecting how we capture digital data and how we contextualize that through the data models that we provide for customers, where a lot of our effort and a lot of our innovation has been focused is on taking that data and doing something with it. So namely things like our customer identity capabilities, the ability to sort of impact paid media investments, the ability to enhance from an analytics perspective and a reporting perspective to sort of bring that forth. From a marketing perspective, hopefully, those of you that interact with the brand, follow us on LinkedIn, if you haven't. We're quite loud on there with new content, new capabilities, et cetera. I'd urge you to do so above and beyond just browsing the investor website of the company, but it's been largely focused on creating content and awareness to support our prospecting efforts and to also better enable our partners to speak about the platform in a much more simplified manner focused on the way that we're selling it and where we're seeing that success. And finally, before I throw things over to Ash to work through some of the financials. The security side of the business is something we take very serious. Compliance, security, privacy, all of these things are very important to our business. We have several certifications through independent third parties, things like ISO 27001 as an example and to continue to grow in that journey and to continue to provide more certainty and more comfort to our customers. We also just recently added a SOC 2 certification as well. It's much more applicable in the States than it is throughout Europe, as we tend to lean on ISO 27001 throughout Europe. But nevertheless, it is a great certification to have, and again, speaks to not only the capabilities of our platform, but also our security processes, how we go about building product and how we go about securing customer data in the single tenant private cloud environments. So with that, I will turn it over to Ash to walk through some of the financials. Ashoni Mehta: Great. Thanks, Bill. Hello, everyone. So we're going to go through the financial highlights first, and I will just touch on this briefly because I'll probably go into each of these items in a bit more detail on the subsequent slides. The key points are: The Celebrus ARR increased during the period to $15.6 million, that's an increase of just under 15% in the first half of the year, and it's just over 20% year-on-year, i.e., compared to the ARR at the end of H1 FY '25. The total revenue was $10.4 million. That's a fall of last year, and obviously, that's related for the large part to the move to straight line revenue recognition, and I'll go on and describe that in a bit more detail. Likewise, the Celebrus Software revenue, fourth bullet point, very significant. If you remember back to July, we talked about how we account for our costs and the fact that we reallocate them up into the cost of sales line. We no longer do that, as we announced in July. And so our Software and our gross profit margin is what you'd expect to see for a software company up in 93.1% in the period compared to 95.4% this time last year. The impact on revenues, obviously, has an impact on the loss before tax, and I'll go into that in more detail also and that flows through to our EPS. The cash position at the year-end -- at the half year was healthy at $27.3 million, and that cash balance is likely to grow ahead of the end of the financial year in March '26. And we continue to pay dividend. So we increased the dividend by 3.2% up to 0.98p for the first half. So let's get into a bit of detail. So if you remember back in July, we talked about a number of changes that we are making to our accounting and reporting. One of those was that we were changing the revenue segments. And as Bill described, some of the confusion about the old revenue segments was that we aggregated Celebrus and non-Celebrus into a single license line and also into a single support and maintenance line. So as a driver for these changes to the segmentation that you see at the top of the income statement is proved to be very clear in terms of what's Celebrus Software, what's non-Celebrus Managed Services; and then also, there are 2 lines there, which are less significant in many ways, the Professional Services, which is an aggregation of some Celebrus-related work and some non-Celebrus-related work. And then, of course, the hardware, which we talked about in the past and which will taper off in due course. So if we focus on the Celebrus Software line, we'll see that's down year-on-year, and that's driven by the changes to our contracts. So this is not an accounting change. It's a practical contractual change. In that, we've tweaked the terms of our contracts such that the revenue recognition for our licenses. Whereas previously, we would recognize the whole of the first year, for example, in a lump-sum in the month of signing, we now recognize our license revenue month by month. The impact of that is that let's take, for example, we signed something in late December, we will now recognize 3 months of revenue in this financial year, whereas previously, we would have recognized 12 months of revenue. And that's applied already to the deals that Bill talked about that we've signed in the first half. So that's a reduction year-on-year because of the straight-line revenue recognition. Because this isn't an accounting change, we do not restate the prior year numbers. So that's why the H1 '25 is higher and why now we're recognizing sort of month by month to get a lower revenue number. That period, as I described in July, will flush through over the next 3 years. So we have contracts renewing this year around now, in fact, in November-December. We have some more quite significantly renewing this time next year, and then we have slightly fewer renewing the year after that. So the impact of that year-on-year. This year, we're expecting an impact of around $6 million to our revenue line in total as a result of that revenue recognition change. About half of that is new wins and about half of that is renewals. What we'll find in FY '27 is an impact on the revenue line of somewhere around just around $3 million. And then in FY '28, we will see an impact on our revenue line of just over $1 million, i.e., under the old basis, we would have had $6 million, $3 million and $1 million-or-so more in years FY '26, '27 and '28. So this will be -- this will, as said, flush through. So once we've renewed all of the contracts which currently exists, everything will be on a straight-line basis, and you'll get better sort of like-for-like comparability in terms of software revenues. Another change we made in the period, we announced back in July, was the cost of sales, and I talked about that just a few seconds ago. In the past, what we would do is that we would allocate some of our OpEx costs into the cost of sales line. And this was something which we've been doing historically when the business was very different and it principally related to the managed service teams and the professional service teams in terms of those people being engaged in delivery services to our customers. With the business changing as it has started moving towards being a software business, we no longer do that. And that has 2 benefits. Firstly, you can see a true software GP percentage margin. And that's very important as you're trying to extrapolate forward in terms of what this business could look like in 3, 4, 5 years' time, you need to know the gross profit percentage for that. And then the other benefit is that you can very clearly see the OpEx line without the kind of confusion of how much we've recharged into cost of sales, whether it's $4 million or $5 million or $6 million. So you can see the OpEx line more clearly, and that's beneficial as you kind of track our OpEx and how we're controlling it. And in this period, what you see very clearly is that our OpEx has gone down. So earlier in the year, we took out just over 10 headcount. These were noncustomer-facing. Generally, these are back-office and some of them were in our Managed Services and Professional Services teams, and these were -- we were able to do that as a result of automation, systematization that we continue to do to seek efficiencies and there'll be more of that coming up in the next sort of 6 to 12 months-or-so. So OpEx is well controlled as we're going through this transition period. The adjusted PBT had a loss of $1.5 million roughly, and that is obviously related to the lower revenues driven by the straight-line revenue recognition. And that brings us down to an adjusted diluted EPS, which is $0.0351 per share. I should point out, and I'll explain this perhaps also in the subsequent slides is that whilst we calculate an adjusted diluted EPS, the dilution comes from share options. However, we have enough shares that we bought back in treasury to effectively negate that dilution. So whilst we calculate this, and this is a key metric that we have used for some years, in practice, it's unlikely that there would be this dilution for investors. Interim dividend, I talked about. So let's go on to the annual recurring revenue. I talked about the percentage increases over the period, and those are obviously reasonably significant. Let me talk now, as Bill implied about, the pipeline that's driving future ARR growth. So this is a metric we will start sharing in our announcements from the final results. But for the time being, I can tell you the size of our pipeline, currently, is $26 million. And let me just describe how that number comes about. So in our pipeline, we have around 60 opportunities. And the aggregate of all of those values on those opportunities amounts to $26 million. So that's a growth of around 13% year-on-year, which will then obviously drive our ARR growth. The key point behind that is -- let me just talk through the stages we have in the pipeline. So we have stages 1 to 5 and the 1 is when it's first recognized and accepted by the sales team as being an opportunity and then 5 is verbal agreement and just moving to signing. Within that, we have a stage 3, which is proposals. So when I look at sort of the value of $26 million, that is accounted for by 44 opportunities out of those 60. The early stage opportunities tend not to have a value, as they're still scoping them, still in early stage meetings. So the value generally arises at stage 3, which is proposal stage, i.e., we've sent out a proposed, we know the value. There may be some opportunities in stage 2, where they're far enough advanced, we've done the scoping sufficiently that we can attribute a value to them. So the key point there is that these are not probalized. These are total values of proposals and other opportunities in the system. And the key point right now is that of the 60 we have roughly now, and we had a similar number this time last year, this year, 44 of those 60 have a value attributed to them; whereas, last year, 33 of those 60 had a value attributed to them. And the significance of that is that whilst the pipeline is 13% larger than this time last year, it is actually mature as well, i.e., opportunities are further advanced in the pipeline and nearer to closure than there were at this time last year. And that's obviously very positive as we look to making our numbers for this year and building out the pipeline for FY '27. Moving on to the balance sheet. The balance sheet is a lot cleaner. It gets cleaner every year. Obviously, you'll remember, we sold off our freehold property at the end of March. So that's no longer in the balance sheet. In terms of the other items, probably not a whole lot to say. You'll be able to see that in the property, plant and equipment, we've got the IFRS 16 leases, and those are winding down over the period of lease, typically around 5 years-or-so. Our trade debtors tend to fluctuate. At the half year, they're generally quite low, and then they're higher around November-December. We have a lot of billing and that billing converts to cash around February-March. So you should see a healthy cash balance at the end of March, and that debtor figure will be probably there or thereabouts. The other interesting item in the balance sheet, and I know a lot of investors track this, is the deferred income. So that is where we have invoiced a customer and they've paid typically, but we haven't recognized the revenue. So basically, what that represents is what have we billed that hasn't been recognized, but will be recognized as revenue. So in the past, if you look at the previous periods, we've had some pretty large numbers and those invariably were related to some of the hardware deals that we had done for one of our customers. Now that's largely flushed through. So that deferred revenue figure will fluctuate period-to-period, but the general long-term trend should be upward because, of course, as we sign on more customers, as we grow the business, there will be more billings going out and there will be more sort of cash payment upfront coming into us, so that will increase over a period of time. And of course, as I said, with high billings in November and December, that will be very high at that point and then sort of come down a little bit by the end of March. The upshot of all of that is that we've got net assets of $38.4 million, of which cash comprises $27.3 million. We have no debt. We continue to have no debt. And another point to make is that the majority of our cash is held in U.S. dollars. We hold only enough GBP to be able to pay for our GBP cost base, which is our employees and our property in the U.K. Then finally on to the cash flow. Again, a relatively clean cash flow. If you look at the movements in working capital, historically, there have been large movements. And these again connected to the hardware deals that we had done in those periods. As that's flushing through now, we see a positive working capital movement with $1.1 million coming in from working capital movements. As you know, we have very little CapEx. We did have significant CapEx in the last couple of periods, partly related to the property moves and the CapEx we had to invest into furniture and fittings, et cetera, and leasehold improvements. But the figure you see now in H1 is a typical kind of internal laptops and IT equipment and those sorts of things. We continue to capitalize development costs and those have increased now. And the reason for that is that we have a much more rigorous methodology for calculating the capitalization of development costs. In summary, previously, we used to do it on a percentage of FTE basis. So knowing what people's role was and how much they contributed to development costs. We now do it in a much more granular fashion, and that's by using a product called Tempo where people enter their time relate to particular tasks. And that's very important. Firstly, it gives us a higher number, and we were getting pressure from the auditors to recognize a higher amount because that was a sense of where we were. Now we have the data to prove that. And that's important also because we're seeing HMLRC chasing companies more rigorously in terms of their R&D tax credits. So we now have, in great granularity, all of the data that supports our R&D tax credit claim. And that's also important in our Patent Box claims as well. And if you remember, that was a very significant reason for our low tax charge last year. So moving down into the financing activities. We paid a dividend, of course, that was $1.2 million. That was the final dividend that we paid in the first half of this year. We did have a share buyback scheme. That is now completed. We purchased 500,000 shares over the last few months for a total of just under $1 million. And those are the shares I referred to earlier, the treasury shares, which are held on our balance sheet. The purpose of those is not to enhance earnings, it is solely around negating the dilutive impact of share options. So whenever an employee exercise their share options, we can issue them from the shares we already hold in treasury without issuing more shares and creating dilution for existing investors. And that, I think, is pretty much the balance sheet. I will just repeat again the impact of the change to USD reporting about a year ago is very significant because it reduces our FX exposure. It also reduced the amount of time and effort we spend creating FX hedging contracts. So previously, we would hedge contract for every new deal that we won. We would hedge it for year 1 and year 2 and year 3. That's a lot of time and effort and a lot of risk. Now what we do at the start of the year is we merely hedge the GBP cost base on a month-by-month basis. We know when it's going to happen, we know roughly how much it is. And that's why -- well, part of the reason why when you look at the balance sheet -- sorry, the cash flow, rather, the effect of the FX is really minimal. It's because most of our revenues, most of our cash coming in is in USD, and of course, our reporting also is in USD. That's the financials. Bill? Guerino Bruno: Thanks, Ash. So I'll spend a bit of time before we go over to the questions. And please continue to submit those, and we'll try to go through as many of them as we can. There are some fun ones in there that I'm looking forward to addressing already. But the platform and the positioning of the platform hasn't changed. We've kind of landed on what we think is an easy-to-understand story that seems to be resonating in the market, embodying our values such as simplicity. We think that the content we're putting out is easier to understand. The feedback that we're getting from the market is that it's easy to understand. And ultimately, in the market, there's been sort of, say, 2 main drivers in the pipeline at the moment in terms of both prospects as well as existing customers. From a prospect perspective, 90-some-odd percent of our deals in the pipeline right now are driven by one core challenge that our platform is uniquely positioned to solve. And that's around better understanding who your customers are. We talk about digital identity in all of our marketing materials and when we're meeting with prospects in sort of 3 phases, right? If you think about how you interact with the brand, hopefully, this will make sense and resonate, right? If you go to a website on your laptop or on your mobile device or what have you, and you've never been there before, let's say, you're anonymous to that brand. In the Celebrus world, we start building a profile about you in a compliant manner from the very first time you arrive on these sites, taking into account what you look at, the content you consume, the journeys you take, et cetera. Now at some point, maybe down the line, weeks later, et cetera, maybe you create an account or you log in or you tell the brand who you are. So in that session, you're authenticated. That's sort of the phase on the other side from authenticated to -- or from anonymous to authenticated. Now where the meet the standard is and where 70-plus percent of interactions happen between a consumer like us and a brand is when you're known but not currently authenticated. So what that means is maybe I've logged in previously, but in this current visit, I'm not logged in. In the Celebrus technology, we have the ability to remember that and to stitch your journeys together across devices and to be able to tell brands, "Hey, this is Bill, he's not logged in right now, but he was last time he was here, and here's everything we know about Bill." And that creates an opportunity for brands, whether it's on the marketing side and they're trying to generate more value or trying to create a better experience or on the fraud side, where they're trying to use all of that information about you and I to confirm whether it's actually us before that purchase, before that transfer. And that identity, that needing to know your customers better, not only has it become a main driver of business for us, but it's also become sort of the proof point that we use with a lot of companies that we're coming into contact with, and I'll share that story on the next slide. The second thing that's coming up quite a bit, and I'll delve into some of this as well, is this topic of AI readiness. A lot of organizations, at least in our experience thus far, are starting to hire people or put people into roles that are focused on artificial intelligence or data intelligence or something to that effect. This is becoming an area of investment and strategic sort of guidance for many brands that we're interacting with. And this topic that's come up several times is one that they call AI readiness. And the best way I can describe is, it's a little bit tongue and cheek, right? But it's -- they're not sure what they want to do with AI, but they want to be ready for it. And our platform, our data platform and our digital identity platform, happens to deliver the 2 most important things when it comes to building ethical AI, and that's better data and better customer identification. And so I'll walk through some of that and what that means as well as we step through a few of these slides. From an identity perspective, I walked through this already. But in essence, what we're helping with the Celebrus platform, and we've done to a pretty significant degree, is in lowering that water level and making those things below the water level easier to understand, easier to comprehend and more complete from a customer profile and a customer identity perspective. And I'll give you a couple of case studies. These are actual case studies. The names have been cleared to protect the brands themselves. But in most cases, and I mentioned this in the RNS, and we mentioned this in the RNS, but we have competitors out there naturally. On the marketing side, our biggest competitor tends to be Adobe and a few other solutions here and there. But this particular gaming customer had been using Adobe for many years. And the recall of a consumer, so what I was talking about before where that known category, the meat in the sandwich, right? If you came to their site and then came back to their site a number of days later, about 25% to 30% chance that they'd remember who you were, and that was the best that they predicted they could do. They deployed our technology for only 8 weeks. Now keep in mind, that 25%, 28%, 30% realm that they fluctuated within, that's what they achieved over multiple years. In 8 weeks of having our software deployed, that number for them, the ability to remember someone and be able to remember who they are and tie it to a rewards IP and all of the other great stuff that comes with that, shot north of 80%. I think it was 82% at my last look. And that is a significant increase in sort of building a better addressable audience because not only do you then know using our technology that people are coming back to the site, but you also know who they are, you know what they care about, you know what they've looked at, you know perhaps what bookings they've abandoned, et cetera, et cetera. And it creates much more opportunity for the marketing teams at this brand to generate value. Similarly, a completely different vertical, but in the auto industry, we had a very similar case study in the first half, which was around this particular auto manufacturer was trying to answer a very simple, albeit complicated question. As you guys are all aware, you have sort of configurators on auto websites, right? You could build a car, right, or build a car and the features and things that you want. And sometimes during that process, you can provide an e-mail address or maybe in a previous visit, you could provide an e-mail address or you've signed up for a newsletter or some sort of notification. And they wanted to go through their historical data and basically say, anybody over the last 6 months that configured a car that we know, let's send them an e-mail and try to get them into the dealership that's local to them, right? When they went through their own data that they had in their CRM, it was about 7,000 e-mails. When they went into Celebrus, because of our ability to persist profiles over time, let's say you provided an e-mail address 6 months ago and then 3 months later, you came and configured a car, that was missing in their data set, in their CRM because they didn't know who the customer was. But in the Celebrus dataset, it was known and it was stitched together to the profile. So what we ended up actually being able to provide them was another 10,000 e-mail addresses. So driving the total number up for this campaign from 7,000 to 17,000 just by -- just because of our identity solution and the capabilities of that. So again, another story where we're providing very real results that are taking and expanding the addressable audience that these brands can activate and build better relationships with and then ideally generate more mutual beneficial value from that. A lot of this, when it comes to artificial intelligence, for those of you that have heard me talk about this, you've heard me talk about our data model, and it's a big differentiator of the product. The fact that not only do we make digital data easy to collect, but the fact that we give it a structure when a lot of marketing technologies do not. And that structure is table and logical and easy to work with. I've said for years, even before I worked here that Celebrus creates sort of a data scientist dream for data because it makes it easy not only to use and interrogate and work with, but it also makes it very easy to integrate it with other datasets. And that's been a core part of our value prop for many years. And being able to do that now creates some of that AI readiness that I mentioned before. And AI in general is a significant investment for us and also a significant area of exploration. Internally, when I'm meeting with my management team and we're talking about sort of what does good look like in the business? Our stance is that if you're not utilizing AI that we're not doing it right to build efficiencies, to build better processes, to simplify and automate the mundane so our people can be applied against things that are much higher value and require much higher brain power. And that's been the focus internally as well as how we sort of centralize information to better support our customers as well. From a customer perspective, Celebrus data has been used in machine learning, in predictive models, et cetera, for many years. It's never been hotter though than now because of just the last 16 to 18 months of sort of, I'll call it, AI hysteria, I suppose. And we have a small but mighty data science team internally, and they sort of built upon that. So in working with one of our customers in the U.S., we've built our first AI predictive model. It's a churn model. So what that means is if you have a funnel, say, a loan application process or a shopping cart, as 2 examples. We've now built and we're in the process of testing the portability of this across our customer base, but we've built within Celebrus, it's our own IP, it's our own code, and it's built on top of the Celebrus data model. But ultimately, we've built a churn model that can predict the likelihood of somebody abandoning a process. And the reason that, that could be so powerful is probably best shown through visual. There's a lot going on in this visual, data science charts aren't the pretest charts on the planet. But ultimately, what's happening here is these are different probability intervals and outputs of the model. And focusing on sort of what's rectangled there on the left, I suppose, and highlighted, is you'll see sort of blue in the bar and you'll see red in the bar. For different probability elements, what this is showing is our model's accuracy at predicting that somebody abandoned. And so this could be, like I said, a loan application process where someone has started that process and our model is predicting are they likely to finish this or are they just window-shopping, maybe they're going to abandon, et cetera. And for many of our customers, particularly in the financial sector and retail as well, if someone's window-shopping, this is a potential opportunity to convince them to do business with you. So the goal of this model inside of Celebrus is to be able to prompt that brand with the opportunity to intervene and try to engage those individuals if they have a high likelihood of not completing. And you'll see there's not much red because the model for this particular customer where we've rolled it out in development with them is predicting with a very good amount of accuracy how likely somebody is to actually complete that process. The value of this can be exponential to customers. And we're in the process of sort of doing some early access with our customer success teams engaging a few other customers that we think would be the right fit for us to do sort of an early access to test the portability of this from one customer to the next. This will be targeted at all customers in Celebrus Cloud because we deploy those all in a very -- in the same construct with the same versions of Celebrus. We keep it up to date because we manage this on behalf of each customer that has a Celebrus environment. And so that should make this very easy to bring in, to train and to add value to customers in a very short window of time and fits perfectly with the use case selling-based model that we have where we're trying to land and expand with customers from that perspective. So hopefully, that gives you a bit of a glimpse into some of the things that we're doing and some of the things that are driving the pipeline that Ash mentioned and some of the details that we've provided with regards to that pipeline. I'll make a couple of final comments on outlook here, and then we'll turn over to the Q&A and try to answer as many of these with the remaining time that we have today. As Ash mentioned, we have a significant number of deals in late-stage pipeline. As a reminder, 3 years ago, we didn't have a sales team. And we've been building, innovating and learning candidly on the fly as we're doing this. And we have gotten better at positioning the platform and simplifying that story of figuring out what resonates like the things that I just walked you through and utilizing that to keep brands focused and move deals through the pipeline in a very sort of laser-focused, you have this pain, we fix that pain and we upsell you on the rest of the later once we've proven our value-type model. And so right now, our focus is on late-stage pipeline and bringing those deals over the line in the last mile. We are comfortable with where we sit. You've heard the pipeline statistics. We'll continue to bring more data out as that is vetted by finance, and we're comfortable doing so. But given what's in that pipeline, the 44 deals that have dollar values attributed to it, the $26 million in deals in that pipeline, we currently are comfortable with our expectations and ultimately, our ability to deliver the results for this year. Just like every other business, though, we are keeping our eye on market challenges. I'd be remiss if I didn't -- if I and we didn't comment on that. We have had some deals take longer to get budget approvals where we've gotten the verbal, where they're happy to proceed and we're just waiting for budgets to be approved. We've had a few situations where there's been some turnover as a result of layoffs and redundancies in some prospects and deals that we're working, where we've kind of had to sort of ride that wave out as those changes were being implemented prior to sort of reengaging to complete those deals. And it's just -- it's an interesting market, and I say interesting in every sense of the word, I suppose. But we do believe we have the right strategy, we believe we have the right team and we have enough pipeline to support our ability to deliver on those goals for this year. So with that, we're going to turn things over to questions. There's some fun ones in here. So we're going to go through a few of these here. Guerino Bruno: The first one is, I'm assuming this is referring to the RNS where I talk a little bit in my section about some of our main competition. And this person is saying that risk aversion or blaming customers who don't buy seems like a poor excuse. How would you describe this concern in further detail? What can be done to address these? So in the RNS, I'll highlight a few things. But I do think this is a really important topic to understand. One, we definitely have technology competition. On the marketing side, we run into solutions like Adobe all the time. Two, both new wins that we announced to the market happen to both be situations where we're replacing Adobe. That being said, there is a fear of change in organizations. We are sometimes up against technologies, take the gaming company, for example, where they've been utilizing that technology platform that's the incumbent for 4, 5, 6 years. People on their teams have been trained, certified on that, maybe in their careers as analysts. That's the only technology they know. When we talk about the risk aversion or the fear of change, that's what I'm referring to, it is very real. We have had deals that we've lost not because we didn't prove we were better, not because we didn't have a stakeholder or a main point of contact that wanted to proceed, but because each year they were overruled by somebody who didn't want to make the change regardless and didn't want to uproot the existing technology despite us being more cost effective and us offering a more powerful solution. So it's not an excuse. It's just the reality of life. We run into that quite a bit, and it's something that we've gotten better and better at mitigating. We also have gotten better and better at identifying whether or not those people and those mentalities exist in that organization so that we know how -- so that we try to sidestep them or placate them along the way to avoid them trying to interfere with our deals. So there is a lot of things that we've learned and that we've strategically adjusted in how we do deals so that we know ahead of time if we're walking into that. We also have specific people on the team that in these situations where we run into that inertia, if you will, there are certain people on the team that we bring into those calls because of some of their prior experience to be able to help and work with organizations to get them comfortable in making that change because they've done it in their careers and they know what it looks like and can kind of help with some of the handholding. But it is a very real thing we run up against. So I did want to address that. The next question that's in there is you didn't mention any churn, which you have historically. Was there any? So our churn is quite low, but we always wait until the end of the year to break that down. For those of you that have followed our results, you know that at the end of each fiscal year, when we do the rounds in July, we provide a waterfall of ARR that shows sort of the new wins, any churn, et cetera, et cetera, and adjustments so that you get a full breakdown of that. But given the nature of when our renewals are and things like that, providing it at this point in time wouldn't be a complete picture. So it's best to look at that over the course of the year. I will tell you that from a renewal perspective, we've largely secured -- well, we've secured every main renewal that we intended to secure this year, and we've done a great job across the whole list of existing customers that were renewed, barring a few small things here and there, nothing major. It's always typically in the realm of a couple of percentage points of churn in any given year, and our customer success team is focused on retention and also growth targets in terms of revenue growth from our existing customers, and we've got a good handle on that. Have any customers pushed back on the new terms you are proposing? So -- that's a great question. It's something that I definitely want to clarify. So I will tell you that our customers see no difference. This is -- as Ash mentioned, this is not an accounting change, which is why we haven't had to go back and restate anything. All we've done is work with our auditors on the right language to sort of have in the new contracts such that it qualifies as the managed service that it is. But if you went and asked our clients, in their mind, we've been delivering a service anyways. And the language terms is just simply changing a little bit of the wording around the delivery of that service so that it can be recognized monthly instead of in one lump-sum under IFRS. And then ultimately, nothing's changed. We invoice the client annually upfront for the entire year on the anniversary date of each agreement. So to them, there really is no difference. So there hasn't been any pushback at all because to them, it's all the same. It's just us changing how we're recognizing the revenue to make it more clear to the market and also to make it more aligned with the managed service that we're offering now that we've moved to a cloud-based service as our primary delivery model. What is the conversion rate from stage 3 to stage 5 opportunities? We've given you guys a glimpse into the pipeline. As I said, we will continue to advance some of those details. They're being vetted as we go through finance for accuracy and when level of comfort comes into play around things like those conversion rates, we'll bring those to the market as well when we're ready. I'm an experienced investor, I'm rather confused. How are you really doing? Is it better and stronger than it was in July? Can you give me a view? So I think -- and Ash, feel free to chime in here if you think I've missed any of this. I mean I think, [ Tony ], from where I'm sitting, there's 2 things that are important to follow from a company sort of strategy and execution perspective. One is the Celebrus Software revenue line, which ultimately feeds the ARR, CElebrus ARR. In the first half, as you've seen and Ash walked through, Celebrus' ARR increased by 14.7% from period-to-period comparison, almost 21% year-on-year. That is what we care about. So when I think of success, when I'm meeting with the company, when I'm meeting with investors like yourselves, who have put your faith in us to deliver value, when I'm meeting with the management team, it's really do we have happy customers that are going to renew? Are we going to grow those customers? But ultimately, are we going to hit our ARR targets? And that's really where the value of the business lies. That's why we've built out the segments, the new segments also in the way that we have to make that very clear to the market because we know that it's been confusing for many of the reasons that Ash mentioned to understand sort of where the growth is coming from. All of the growth that we had in the first half fell in the Celebrus Software and as a result, the Celebrus software ARR total. That is the plan going forward, and that is where the growth will be. And hopefully, we execute as a team and we continue to close deals and continue to be successful so that we can continue to drive that number up year-on-year because that is what we focus on. And it's -- we've made a lot of changes to the business. We've brought the business a very long way in a short period of time in the 4 years that Ash and I have been here in transforming the business, the culture, et cetera. Right now, the focus is quite simple. It's selling more software. We've done all the other bits. We've hopefully brought more transparency to the market around company performance. We've built the business around software. We've taken many, many steps and put the right systems, processes and people in place around the globe to help us execute on that. And right now, the focus is just simply on executing and selling more software. Ash, anything you want to add on that? Ashoni Mehta: It's all good. Guerino Bruno: Has there been any interest from other airlines? There are a lot of airlines in the world. Yes. So we have a salesperson who's solely focused on travel and hospitality. That includes airlines, hotels. We've got some large airlines using the platform today. And similarly, the case studies that I provided for auto and for the gaming customer previously in this meeting, we're using those as well. Everybody's story is an opportunity to sell to more just like it. And the challenges that we're solving in one airline are the same challenges another airline is having. Similarly, what we're doing for banks, what we're doing for hotels, what we're doing for auto manufacturers. Getting these stories in a very simple, factual, easy-to-understand stories that our sales team can use in prospecting and can use at events and our marketing teams can use to build better video communications, better LinkedIn posts, et cetera, all of that helps. There's ample greenfield opportunity for us. Right now, our focus is on finding the right way to get our teams in the room with these brands with the right people so that they can do what they do best, and that's still the vision of what Celebrus could do for their business. What percentage of recent deals are direct versus via partners? Everything that we've closed in recent memory, Ash, keep me honest here, but it's all been direct, I believe, right? Ashoni Mehta: Yes. Certainly. Guerino Bruno: So everything has been direct. From a partner perspective, we are sort of revamping the partner relationships. I want them to be much more of a 2-way street where we're providing value to partners so that they also feel compelled to provide value to us. And that's how we're sort of transforming our engagements with technology partners as well as with some of our service partners around the globe to make it much more focused on revenue generation. But to date, everything that we've been doing has been driven from marketing investment and direct sales. You didn't ask this, but just in case others want to know this, the majority of our leads, the best lead source for us these days continues to be events. And there are events where in our sponsorship package of these events, we're guaranteed a number of one-to-one meetings with brands in our ICP or our ideal customer profile. That continues to be the best opportunity for us, these one-on-one interactions where we can show them the platform, help them understand the value and ideally get them excited for follow-up meetings once everybody returns home from those events. Are you going to split out identity security revenue from marketing revenue? No. It's all Celebrus Software revenues. And the reason being is clients are taking on use cases that traverse both. I think I mentioned back in July during this meeting, things like bot detection, as an example, being something that both the marketing and the fraud departments are using. We don't really see the value in splitting that out. Where we see the value is reporting our software -- Celebrus Software ARR, the growth there in and the revenues associated with that in each year. As that number grows and we continue to show that growth, we think that's what matters from a value perspective. If we show, for example, 20% to 30% growth in ARR year-on-year, I don't know that it matters how we split it as long as it's our IP that's driving it. How many substantial-sized customers do you have? The number of global deployments, I think, now is upwards of 140-ish maybe when we factor in deployments. We don't have -- in the Celebrus Software side, we don't have a single customer that sort of makes up a substantial amount. We have several customers that are north of 7 figures. Our average deal size, as I've mentioned in previous meetings, is about $0.5 million a year, so TCV of about $1.5 million as a starting point since our deal structure is a standard 3-year deal. Do you have any realistic medium-, long-term ARR target? I just kind of mentioned a growth percentage. I don't know, Ash, if you want to add anything else to that from your perspective? Ashoni Mehta: No, I don't think so. I mean, obviously, we model this out sort of 3, 5 years forward. And so we have some ideas as to where we could get to. You could argue kind of the next milestone, if you want to talk around numbers, is 25 and then 50s. But yes, so we do monitor that and our progress against it, but we don't disclose that publicly. Guerino Bruno: Thank you, Ash. And it looks like we've got one more question. So with the current market cap, are you concerned you become an acquisition for someone, particularly given the high cash holding? Absolutely. I'd be remiss if I didn't acknowledge that and say, yes, that's a conversation that we actively have at the Board level and also that Ash and I have been acutely aware of during the tenure here. Obviously, there's a lot of things that you can do in terms of readiness as a business to be able to respond to something like that and try to drive as much value as possible for shareholders should something like that happen that forces us to consider that a real offer and take the necessary steps from a regulatory perspective. But that's not as far as it goes. We're covered, we thought about it, we're prepared. But I don't really let the business focus on that. I'm not a big fan of like what ifs, right? Because I think you can get really caught up in that and take your eye off the ball. I think as a business, what we need to do right now is continue to focus on executing, selling more software and continuing to grow our customer base, but we can only control what we can control at the end of the day. And so you can be as prepared as you want the running -- the comment I always make. And I suppose it's very American of me, but it's the Mike Tyson philosophy of everybody's got a strategy until you get punched in the mouth. I think you could plan and plan and plan, but really what we need to focus on is what we can control. What we can control is what we're doing in the business day to day, how we're engaging with our customers, how we're executing in the market, how we're engaging our partners, and ultimately, what we're doing to drive that ARR number up so that our value for the business and for our shareholders and in the market continues to go up. And that's why I try to keep it laser-focused on, but I want to do least acknowledge that question because, yes, it's obviously something that we keep an eye on, it's something we're acutely aware of, but it's not something that we like it in our way of executing the business day to day. Operator: And that's it, Bill, Ash, thank you. Indeed, you've covered off every single question that we've had through, so thank you so much for that. Of course, any further questions do come through, we'll be able to review those. Just before redirecting investors to provide you with their feedback, which is particularly important to you and the team. Bill, could I just ask you just for a few closing comments, please. Guerino Bruno: Absolutely. As always, I'm just going to end it with thank you. I appreciate -- for those of you that have invested in us, I appreciate your faith in the business and our strategy. I appreciate your engagement today and all of the questions. This is the first sort of foray into the new way we're presenting our results. So hopefully, that came through clearly. If it didn't, obviously, feel free to you reach out, reach out to Cavendish, we're happy to have further meetings to make sure that you're comfortable and understand sort of where we're going and what we're focused on. But thank you so much for your time, and have a great rest of your day. Operator: Fantastic, Bill, Ash, thanks indeed for updating investors today. Can I please ask investors not to close the session. It should now be automatically redirected to provide your feedback, in order the team can better understand your views and expectations. This may take a few moments to complete and it would be greatly valued by the company. On behalf of management team of Celebrus Technologies plc, we'd like to thank you for attending today's presentation. And that concludes today's session, and good afternoon to you all.
Operator: Welcome to the Beta Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Devon Rothman, Head of Investor Relations. Please go ahead. Devon Rothman: Thank you, operator, and good morning, everyone. My name is Devon Rothman, and I lead Investor Relations here at BETA Technologies. We appreciate you joining us for our third quarter 2025 earnings call. Joining me today are Kyle Clark, our Founder and Chief Executive Officer; and Herman Cueto, our Chief Financial Officer. Following their prepared remarks, we will open the call for Q&A. Before we begin, I'd like to remind everyone that earlier this morning, we issued a press release announcing our third quarter financial results. We also published our Q3 investor presentation. You may access this information on the Investor Relations section of beta.team. Additionally, please note that today's discussion of our business, operations and financial performance will include forward-looking statements under federal securities law. These statements are based on our current expectations and assumptions and involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and uncertainties, please refer to our filings with the SEC, including our IPO prospectus dated November 3, 2025, and our Form 10-Q for the third quarter that will be filed later this morning. We do not undertake any obligation to update our forward-looking statements. During the call, we will reference both GAAP and non-GAAP financial measures. Reconciliations between historical non-GAAP and the nearest GAAP measure can be found in our earnings materials posted on our Investor Relations website. Our slide deck for today's call is also available on the site for those who wish to follow along. With that, let me turn the call over to Kyle. Kyle Clark: Thanks, Devon. Good morning, everyone. First, I'd like to say thank you to the folks that helped us through a successful IPO. Fidelity has been with us from the very first round, along with Amazon, Chuck Davis, John Abele, TPG in our Series B and more recently, Larry Culp and the entire GE Aerospace team, and of course, the overwhelming support from all of you throughout the IPO process. This support has made it possible for us to enter the public markets with a uniquely aligned and world-class group of investors. Since this is our first earnings call, before we dive into our quarterly numbers and updates on our aircraft, our charge network progress, GE Aerospace and GE programs and new orders from Embraer Eve, I'd like to take a few minutes to introduce myself and our company, our mission and specifically how we think about redefining aviation and why this team has earned the credibility it has and is uniquely capable of changing the way people fly. My name is Kyle Clark. I'm an engineer, a pilot and the founder of BETA. BETA began as my senior thesis in college more than 20 years ago and has shaped my life's work ever since. I still spend as much time as possible designing, flying and building airplanes. It's all I've ever wanted to do. Prior to BETA, many of the team members here and I spent our professional careers designing and building high reliability power electronics and control systems for organizations like the National Nuclear Labs, Raytheon, Tesla and many others, helping them to electrify and control things that once seemed impossible, like the Patriot missile system. In every case, we created systems that were far superior to what they replaced. Throughout those years, I kept refining the idea that would become BETA, thinking about how electric aviation could serve the industry in a practical and impactful way. When I met Martine Rothblatt of United Therapeutics in 2017, I felt like 2 missions were aligning. We shared the belief that electric aviation could reshape the future of flight and even more importantly, save lives by enabling large-scale transport of organs. Martine became our first customer, helping define early focus on cargo, medical and logistics. For the first time, the work we had been doing with others converged with a mission of our own, one that had the potential to make a real difference. The electrification of aviation is inevitable. The electric aircraft that we are certifying are safer than their traditionally fueled counterparts. Electric aircraft are less expensive to operate, quieter, more sustainable and have a higher reliability and dispatch rates than complex legacy aircraft. But these advantages and others aren't just things that come for free because the aircraft are electric. They come from a disciplined engineering approach, a product philosophy rooted in simplicity, reliability and pragmatism. Our dedication to simplicity through design and first-principle physics is the foundation of our entire business and the reason electric aviation will deliver on its full promise. Here are the guiding principles of BETA's business. BETA owns and controls the enabling technologies for electric aviation. This includes the batteries, motors, flight controllers and chargers. We work extremely close with the customers and the regulators. We have earned their respect and they have earned ours. We offer a full stack solution to our customers, everything they need to operate from the aircraft to the batteries to the data systems to the training to a global charging network. Our aircraft and designs are a platform for new technologies such as advanced batteries, fuel cells, hybrid and autonomy. We have put all the hooks and the flexibility into our aircraft to adopt these improvements. We understand and respect physics. This has enabled us to hold every meaningful world record in electric aviation, range, payload and both speed records. We're a show not tell business that's focused on keeping our promises and hitting our milestones. We let our accomplishments speak for themselves. We focus on safety, performance and reliability through simplicity. At the very core of BETA are the people. We are a team of scientists, engineers, aviators and builders. We fly what we build. We expose the issues early. We believe in data, integrity and honesty. We are intensely connected to the mission. And the financial success of this business and the economic benefits to our customers are directly aligned with our mission of creating a sustainable aviation future. Now that we've established who we are, let's talk about what we do here at BETA. We design and build both electric conventional takeoff and landing airplanes and vertical takeoff and landing powered-lift aircraft. We also sell high-performance systems that power them, the motors, batteries, flight computers and sensor systems. We manufacture, sell and install thermal management and charging infrastructure. We're the only OEM with a certified charger and a nationwide interoperable and multimodal charging network. And now we're expanding that footprint internationally. The mature propulsion and charging products are producing positive contribution margin today, and these technologies are sought after by the most respected aerospace and defense companies in the world. We fly what we build. Our family of electric aircraft has logged more than 100,000 nautical miles across 3 continents in 10 countries landing over more than 380 airports. We've flown in the rain, the sleet, the snow, the fog, dust in every class of airspace from class Golf to busy class Bravo airspace across a wide range of payloads. And we've done it with more than 10x as many different pilots in the left seat than any other company in our sector. Nobody has as much real-world data as we do, not even close. When we go out and fly, I typically close our briefs by saying, let's go expose the issues. The data produced in these flights is critical feedback to our engineers, our manufacturing teams and for training our AI models. We've executed real-life flight missions on our aircraft with United Therapeutics, UPS, Bristow, Air New Zealand and many others, including the U.S. Military. This real-world flying with executives and chief pilots from these companies has resulted in a deposit-backed commercial aircraft backlog of $3.5 billion and a component backlog that just crossed $1 billion, mostly due to a major deal with Embraer Eve Air Mobility. This aircraft backlog doesn't include the post-sale services and aftermarket components, which makes the total backlog about 4x higher. We sell aircraft at a good margin, but that isn't the insight to our business. The beautiful thing here is that BETA gets both the aircraft sale and high-margin recurring revenue from battery and aftermarket sales. This is highly unique for airframers, even among electric aircraft developers. All the while, our customers get a lower cost of operation and ever-increasing performance. This model is an entirely new paradigm for aviation. The philosophy of simplicity and pragmatism is clearly reflected in our certification strategy. We've taken a strategic stepwise buildup approach to certification, which is also unique within our industry and rooted in a deep understanding of how the FAA works and the current regulatory readiness to certify new and novel technologies. It started with the propeller in partnership with Hartzell, which we achieved a full type certification last summer. In parallel, but phase shifted, we went on to the electric aircraft engine, the H500A, then the CX-300, which is being certified as a Part 23 FAA airplane. We presently are building conforming articles for this program. And again, in parallel, but phase shifted, the A250 vertical takeoff and landing aircraft, which has a closed G1 certification basis. Each of these steps are done so that the success and certification of one builds directly into the next. Another piece of our strategy is shown at the bottom of this slide, where the propeller and engine are ported directly into the CX-300 airplane. And then the designs, conformities and requirements of the CX-300 airplane, they complete over 80% of the A250 powered-lift aircraft. The commonality between these models streamlines not only certification through the reuse of artifacts, but also production systems and pilot and maintenance training. Our dedication to simplicity and first-principle physics has positioned us to be the leading voice in the industry, especially when it comes to working closely with the regulators. In addition to leading BETA, I chaired the Gamma Electric Propulsion and Innovation Committee, an industry group comprises of top subject matter experts in new technologies, specifically around electric propulsion and autonomy. This position has given BETA the unique opportunity to work directly with the FAA as well as international authorities as we develop policy for our industry. Through our work with the FAA, I've seen firsthand their focus, commitment and a renewed prioritization of safely bringing electric aviation into the national airspace. Major thematic shifts led by this administration have resulted in the Powered-Lift type certification advisory circular being published this past summer and a transformative executive order, American Drone Dominance, which mandates the implementation of an eVTOL integration pilot program, or EIPP. This will allow us to launch commercial operations next summer. Our industry has seen remarkable political, regulatory and commercial tailwinds recently. I believe it's a product of the flying we're doing all over the world, demonstrating that electric aviation is fundamentally better. The world now recognizes that the United States is leading the AAM industry, and maintaining that leadership is essential to realizing the full benefits to our GDP, our national security and our planet. The current administration through the Department of Transportation and ultimately, the FAA has cleared the path for near-term operations domestically. Here at BETA, we put a high value on the transparency and intellectual honesty. I want to spend a moment outlining 5 key performance indicators that we'll be using on a regular basis to share with you our progress. The first KPI is our backlog. You should expect this to steadily increase as exposure to the company and the aircraft grows. Today, the combined number of orders stands at 891 aircraft with hundreds more in active negotiation. These are deposit-backed orders. The second KPI is real-world flying. We measure nautical miles flown by our BETA electric aircraft. Our aircraft are out flying every day on 3 continents. These miles don't just represent a number. They represent exposure, experience, safety and reliability and produce extremely valuable data for our engineering certification and service efforts. I don't believe anyone in the industry has even flown half as many miles. And yes, the units are nautical miles. Our third major KPI is our charging network. It's large and growing. It covers the majority of the East Coast into the Southeast, has nodes out West, and we're actively filling in those gaps. Note that these are sites. Some of these sites have multiple chargers on site. They are multimodal, which means you can charge cars, trucks and vans and interoperable, which means it's usable by anyone flying. We also track charging cycles, which exercises our mobile applications, billing, data management and customer experience. We have over 62,000 so far this year. The fourth KPI we acutely track is the production readiness of all of our facilities, both at our primary manufacturing facilities, making composites, metallics, welding, paints and coatings as well as our final assembly facility like this one I'm in now, the 188,000 square foot production facility. We exercise these lines intermittently at max rate to ensure that we expose the issues of rate production early. Our KPI for production readiness will be defined as our maximum demonstrated aircraft output on a monthly basis. We plan to provide guidance for 2026 rate in our year-end call. And fifth is arguably our most important metric to track as a new OEM, our certification progress and the completion steps to our primary product. We are in the last stages of certification now for the H500A, and we just hit another first this quarter when we became the first OEM to begin for credit testing with the FAA on an electric engine certification project. I believe we're on track to be the first electric engine certified stand-alone in the United States. On the CX-300, which is the Part 23 airplane, we're building conforming articles now, and we're working in partnership with the FAA, who has a great team deployed to support this. And the ALIA A250 aircraft, which has a clean and clear certification basis. We will add to these KPIs in future years as production ramps and our industry matures. Now on to the quarterly update. It's been a big quarter, and we have big goals. And the pace we set for ourselves to deliver on these goals plus the drive that meets or exceeds it is what makes this team different. We've had several key accomplishments this quarter that position us to successfully deliver on those KPIs we discussed in this coming year. In addition to our successful financing and the certification milestones I mentioned, we've proven our aircraft in demanding real-world operations that position us to lead the deployment of aircraft into the eVTOL integration pilot program. We now have 10 BETA-supported state applications in play for DOT review and BETA chargers have been specified in applications that has the potential to add 57 charge sites. We are conducting demos with Republic Airways in the Midwest and other major operators in the Pacific Northwest. We're carrying cargo with Bristow in Norway and operating with Air New Zealand down under. Over the summer, one of the Air New Zealand pilots was the first pilot to earn their FAA commercial license in any advanced air mobility aircraft. And of course, it was in BETA's ALIA. After comprehensive flight test campaigns on multiple prototypes in the past years, this quarter, we've been flight testing our first ALIA VTOL aircraft built in our production facility and on our production tooling. I've personally flown this aircraft model many times in New York and Vermont and it flies beautifully. The team here at BETA never ceases to amaze me with their ability to keep promises. We delivered our first products to General Dynamics this quarter. The undersea propulsion work we're doing with General Dynamics in support of DARPA is indeed classified, but it serves as a powerful validation of our core technologies. The simplicity and performance of our systems are being trusted for some of the most demanding applications and missions in the world. Our vision is to deploy charging to every suitable airport and vertiport in the world and own the flow of energy into the future of aviation. This quarter, on the charge network development, in addition to commissioning several chargers and thermal management systems in Michigan, we also won the contract to electrify the Abu Dhabi airports, and we recently installed, commissioned and tested the first aircraft chargers in the UAE. Like our certification, our market entry strategy is stepwise. I believe that deploying chargers in Abu Dhabi will lead to an airport-to-airport electric cargo and medical flights before urban air mobility really takes hold. With our recent order from e-Smart Logistics in the UAE, a leading provider to global cargo airlines, BETA will be the one to provide these steps. This quarter, our relationship and technical work with the GE Aerospace team grew once again. GE Aerospace continues to be a mentor and a supporter of our certification work and a great partner to BETA. This relationship is rooted in complementary technical expertise and a strategic alignment to field hybrid electric power systems. We completed Phase 1 of our joint development CT7-based turbo generator program, and we even increased our scope of work. Beyond the technical and specific program work, the financial relationship has grown as well. And GE Aerospace participated in both our Series C private placement investment round and again in the IPO. This past quarter, we delivered all the motors necessary for Eve to enter their next phase of flight test campaign. I've spent significant time in Brazil this past year, and I can attest to the fact that Eve has amazing people and a great development process. I'm confident they will deliver with their thorough, methodical and comprehensive approach. Embraer is a world-class company, and Eve's genetics are closely tied. However, they don't do propulsion. They come to us for this, and we're proud to partner with Eve. Although this production supply deal is in the works for the last year, we said little about the total scope and positive impact to BETA. Earning this production contract for motors and aftermarket services is worth more than $1 billion in revenue over the next 10 years alone. This wasn't included in our financial model shared with the sell-side analysts and represents a transformative upside to our backlog. I believe this is a testament to our industry-leading motor designs for safety-critical applications vetted by the most respected airframers in the world. The motor we're selling to Eve is the H500B, which we're testing now and proving a significant increase in power and power density. You see the data point occupies the top right corner of this comparative chart. We're excited to begin this next phase of our business as a public company and humbled by the support we've received in the process. By drastically lowering the cost of aviation through electrification, the growth potential in the TAM expands and is nearly unbounded. There's a ton of work ahead of us, but we love what we do, and we're excited for the work. This is a team that thrives on engineering a vision into reality, solving challenges and delivering results. Lastly, I just want to say thank you again to our existing investors, and thank you to our new investors who joined us in the IPO. We're excited to partner with you and build the future of aviation. With that, please let me introduce our CFO, Herman Cueto. Herman is a trusted colleague and a friend. He comes from a background of manufacturing and assembly of high-quality products within a very regulated environment. He has extensive experience in the things that matter most to BETA and has earned the unwavering respect of his team and his peers here at BETA. Herman, please brief us on the financial results this quarter and our cash position. Herman Cueto: Thank you, Kyle, and good morning, everyone, and thank you again for joining. When Kyle and I first met, our initial conversation was about strategic costing, the cost of an input when it enters a process versus when it leaves and all the factors that explain why. As someone who grew up in the business and having had the privilege of working cross-functionally my entire career, in that moment, I knew that BETA was a place where engineering and finance were truly in lockstep, a place where a deep understanding of things like materials, labor and overhead drives a strategic approach to building a better, safer, cleaner and more cost-effective product for our customers. And that leads us to the question we focus on every day. How do we leverage engineering data and financial insights to develop products that meet the financial outcomes we're aiming for, outcomes that ensure not only BETA wins, but that our customers do as well. The last 6 months have been transformative for BETA, strategically, operationally and financially. Through the third quarter and into the fourth, we advanced our strategy and significantly strengthened our balance sheet, reinforcing the foundation we need as we continue moving with purpose through certification and industrialization. Our current balance sheet gives us the longest runway in the industry. At BETA, we have an incredible opportunity to build a world-class business alongside a world-class team, partners and customers. We've already achieved many of the near-term milestones, but the truth is we're just getting started. Turning back to the third quarter and adding a bit of context to the strategy Kyle just outlined. Beyond engineering services, BETA is the only company in our space actively monetizing our enabling technologies with a positive contribution margin. Two examples of how we do that organically today are: one, through the sale of our electric propulsion systems; and two, the sale of products and services that we have pioneered through our network of charging infrastructure. I'm happy to report revenues of $8.9 million in the third quarter, which was a significant increase to Q3 of last year. Our results were ahead of our expectations as we benefited from motor sales that were originally planned for the fourth quarter of 2025. Sales in the third quarter to legacy aerospace companies like Embraer Eve were made possible by the earlier-than-expected commercialization of our propulsion technology, a commercial milestone we reached ahead of our internal schedule. We also saw strong growth in engineering services revenue as well as continued expansion in priority access fees from our charging network. Year-to-date revenue through Q3 was $24.5 million, again, a significant increase over the first 9 months of the previous year, reflecting strength in both product and service revenues. In Q3, operating expenses totaled $86.8 million, including $56.4 million invested in research and development to support aircraft design and certification. Additionally, we invested $30.4 million in supporting functions that make up selling, general and administrative expenses. On a year-to-date basis, our Q3 operating expense totaled $256.7 million with $170.5 million invested in research and development and $86.2 million invested in selling, general and administrative. Adjusted EBITDA for the third quarter of negative $67.6 million also positively beat our expectations and is a reflection of our efforts to closely manage expenses. Through 9 months year-to-date, adjusted EBITDA was negative $200.7 million. We ended the quarter with $687.6 million in cash. This reflects the proceeds of our latest private financings, including the $300 million investment from GE. Subsequent to quarter end, we received approximately $1.1 billion of net proceeds from our IPO, which will be captured in our Q4 results. Taken together, BETA is well funded to continue pursuing our certification and industrialization targets. On the theme of industrialization and vertical integration, in the third quarter, we invested $13 million in capital expenditures. And through the first 9 months, we invested $25.7 million. This efficient use of capital supports the expansion of our manufacturing capacity, testing facilities and other resources for aircraft development. It's important to highlight that the lion's share of capital expenditures required for industrialization has already been completed. Principally, the construction of our 188,000 square foot production facility that was designed to support up to 300 aircraft per year has been online since late 2023. And just for reference, in 2023, our capital expenditures were $153 million, highlighting the early investment in industrialization. Looking at the full year 2025, we expect revenue to be in a range of $29 million to $33 million and adjusted EBITDA to be in the range of negative $295 million to negative $325 million. As you heard from Kyle, BETA is building for the future, and to stay at the forefront of innovation in electric aviation, it's essential that we continue setting ourselves up for financial success, both today and in the years ahead. Our go-to-market strategy is intentionally designed to financially capture the full product life cycle from initial aircraft sales to the significant long-term service and aftermarket revenues that follow. We are continuously innovating and pushing the boundaries of what electric aviation can be. And by strengthening our balance sheet, staying disciplined and focused and executing against our strategy, we are positioning BETA for long-term enterprise profitability and success. Thank you, everybody. And with that, I turn the call back over to the operator to begin Q&A. Operator: [Operator Instructions] Our first question comes from Anthony Valentini with Goldman Sachs. Anthony Valentini: Kyle, I appreciate all the color you provided. I think the transparency is going to be really welcomed by the entire industry here. I just want to focus a little bit on the certification metrics that you guys provided. And it might be helpful just to kind of like talk through the metrics here. I'm looking at Page 15 and beyond in the deck. Are these numbers provided to you by the FAA? Or are these metrics that you guys are kind of coming up with on your own just to give people an idea of how far along you are? Kyle Clark: Anthony, thanks for the question. So we decided to track metrics that are directly aligned with FAA order 8110 as opposed to coming up with our own stages. So these stages directly track to the FAA. The second thing that we did is we ensured that these metrics are measuring not just BETA's progress or the FAA's progress, it's actually a simulation of both. For example, in the CX300, you see the tracking, for example, our compliance planning. But for additional color, we've submitted 13 of 20 plans. So nearly 70%, 65% completed of the submissions, and the FAA has accepted 6 of those plans for certification. So what we're doing is we're looking at it as both parties have to show up and agree to a final acceptance as opposed to just tracking what we've done on our end, knowing that this particular industry due to the regulatory oversight requires that we both show up. And I could go into each detail on each piece. But largely, one of the things that I think we should mention also is that in the implementation phase, which is about half of the total certification time in our estimation, will be broken up into 4 discrete metrics in the coming quarters as we work through these TIA aircraft and do the company conforming builds matched with the SOI Phase 3, which is a stage of involvement for software audits that both have to converge to the same place in the same time in order to enter the last stage of implementation, which is the flight test. So again, like the percent complete is based on what has been accepted, not what's been submitted. Anthony Valentini: Got it. Okay. That's incredibly helpful. A follow-up on that. In terms of the engine, I think when we were going through the process, you guys had mentioned that you were targeting end of 2025, early 2026 on the motor. And now I'm noticing that it's early 2026. Did it get kicked to the right a little bit because of the government shutdown? Or can you just talk a little bit about that? Kyle Clark: Yes, for sure. It is early '26 that we're tracking to right now. We are in durability endurance testing, which is the longest pole of all that testing. That just takes time to get done. And that's one of the reasons we provided a range. Getting into that durability endurance testing, which we're running again right now requires ultimately thousands of hours of testing, and we're testing to the maximum extent possible in time. So that is planned for the first half of next year. And that for credit testing, we -- just by way of example, we built a whole lot of company conforming articles and have 11 FAA conformed articles. So when we're talking about the equivalency of TIA testing in airplanes, fully conformed articles and for credit testing is the electric engine equivalent. That is all complete and in test right now. And we started with the tests that take the longest to achieve, and we're performing the other tests. And one other kind of piece of color on that is, of course, this isn't the first time we run those tests. It's the first time we run them in front of the FAA. So we run and vet them over and over again internally, and the FAA comes to see them early, but to formally witness them is what's happening now. Operator: Our next question comes from Kristine Liwag with Morgan Stanley. Kristine Liwag: Congratulations on the IPO, and thank you for the color you provided on the prepared remarks, Kyle. So maybe on the EIPP that you noted, you said you could have flights as early as next summer. Can you provide more details on what this pilot project could look like? What types of operations do you intend to support? And is this with the CTOL or both the CTOL and the VTOL? Kyle Clark: Yes. Great question, Kristine. So it is both the CTOL and the VTOL in time. The CTOL goes first. So the general time is that the FAA -- the DOT and the White House, earlier this summer, issued the executive order. The FAA then put that into some amount of clarity with the DOT in September. Applications go in actually next week for all -- and the application -- the formal front of the application is a state. So the state applies for this, and that includes an operator, of course, the aircraft provider and the chargers. We are in, I believe, most all of the applications by us and all of our peers in the industry for the chargers. We are in at least 10 applications with the states right now, and some of those states are pairing up multiple states together. We get selected sometime before March of next year. Now we've positioned ourselves to be able to deliver our first aircraft into that within 90 days of that selection. And naturally, that means that we've had to actually manage our supply chain, our production, our labor, our tooling so that we can deliver this on time. The part that's, I think, being worked out right now is what level of maturity and cert is included in these aircraft. And we're at a really advanced state for the cargo medical logistics, and that's our focus initially with these states, particularly rural access before we go to urban passenger, urban air mobility with the vertical takeoff and landing aircraft. So it's a phased approach, much like the balance of our business, and we're in a wide range of applications that will start as early as June of next year. Kristine Liwag: Super helpful color. And you said that the VTOL will follow after the CTOL. So with the June 2026 for the CTOL, how much faster or how quickly could you get the VTOL to also be in this program? Kyle Clark: Yes. So everything around the design of the stepwise approach certification manufacturing and the EIPP has about just under a 12-month lag from the CTOL to the VTOL. Remember, our first CTOL came off the production line last November, our first VTOL came off the production line in August. All of the engineering assets and production assets are set up to do this type of cadence, learning from the conformities of the motor into the CTOL, learning from the conformities of CTOL into the VTOL. We will be able to provide a direct data on that -- or a firm data on that when we understand the level of conformity and maturity that is demanded in those applications. But in my opinion, we will achieve that sooner by focusing on cargo medical logistics because the FAA and their safety-first approach really likes applications that have a lower risk, and that's where we're starting. So about a year phase shifted is the answer to your question, probably less. Operator: We'll go next to Ron Epstein with Bank of America. Ronald Epstein: Congratulations on the IPO. Maybe following up on some of your comments, Kyle, on supply chain and labor. How are you thinking about that with regard to the ramp? How are you thinking about recruiting personnel to have enough people on the floor to build aircraft? And then two, what challenges do you foresee in the supply chain in order to ramp the way you want to? Kyle Clark: Yes. Great question. So the first part of it is a heavy focus on vertical integration to manage our supply chain. So we are largely in control of our own destiny when it comes to delivering the products from our primary manufacturing, which is, of course, the welding machining composites. There was post recently, you may have seen, that we've achieved a conformity of our composites in our own composite shop. We also leverage supply chain to kind of come together to create our composite structure. That has been a big focal point. In parallel with that, we focused on magnet semiconductors and batteries. For semiconductors, for example, we prebought both the safety critical semiconductors for controls and also our power semiconductors for everything we needed through development certification and initial deliveries. So there are certain strategies in certain places, vertical integration, prebuy. We have also focused on our labor. So we had a pretty phenomenal turnout at a recent Career Day where we had to shut the doors at around 600 people who showed up to attempt to work here at BETA. We have no lack of access to really, really good talent when it comes to building things. But one piece of like really important insight is we're not doing this without focusing on the economics of our product, the cost of build materials, for example, where we continue to focus on reducing the total touch time, labor and floor time of every single component. Recently, we took our fastened wing, which had 14,000 fasteners, 580 parts, took 6 weeks to build, and we redesigned it to be a bonded wing, which reduced it to less than 250 parts went to 0 fasteners, it took 4 days to build. And of course, it's significantly less expensive. And by the way, it lost 18 pounds and became stiffer. So that's what we're applying to the major commodities that drive our cost of build materials. And of course, cost generally directly tracks with the reliance on labor. So vertical integration, prebuy in some cases and focusing on reduction of labor has given us a strategy that we're seeing our ability to produce the aircraft that we promised. Ronald Epstein: That's great. Great. And then maybe just one last follow-on from one of your comments. In your prepared remarks, you talked about deposited backlog. Can you mention why you framed it that way, deposited backlog as opposed to just backlog? Kyle Clark: Yes. Thank you. It's actually a really big deal for us. We have to plan our production around something that has high-level surety. Naturally, engagements with customers starts with memorandum of understanding, letters of intent, then may go to term sheet. At some point in that with those kind of preorders, you get to the point where you get a deposit. So it's a financial commitment from these businesses that we want to buy n number of aircraft for x dollars. That is where we trigger a backlog kind of checkmark. So that deposit backlog, each of those are tied to some financial commitment. The last phase, which we're in now, and this is one of the things we're tracking very acutely internally, is converting those deposit-backed backlogs to actual serial numbers with a delivery date so that we can start exercising our progress payments. So that's one step further than the deposit-backed backlog. So those APAs, or aircraft purchase agreements, exactly solidify that schedule, and then we start getting those milestone payments. I'm sure Herman can talk to the recognition of revenue on that, but that's an important cash management tool for us. Herman Cueto: Yes. So Ron, I think when we talked about working capital a couple of months ago, we have set it up in a way where we get a deposit upon the firm order about a year before we begin manufacturing, we begin -- we get another deposit. And then 3 months before we begin manufacturing, we get another deposit. And when you sum it all up, it's about 50% of the selling price of the aircraft. So that puts us in a very good position from a working capital perspective. And then ultimately, we get the final payment when we deliver the aircraft to the customer, and we recognize 100% of the revenue once the customer signs off on it. So it's a very easy and pragmatic revenue recognition approach. Operator: We'll go next to Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Congratulations on the IPO. Maybe 2 questions on the partnerships you announced. So the first on DB and the undersea propulsion systems, can you discuss the timing of that opportunity and how we think about overall marine for BETA? Kyle Clark: Sure. So that program, much like our other propulsion programs, started because, in this case, DARPA and GD got wind of what we were doing and had hosted them here. I toured them personally around the business, showed them all the technologies. What really triggered the initiation of that program was BETA's ownership of the software, the hardware, the control electronics, the electromagnetics, putting that all together into something that could meet the national security needs because of that full ownership. But the second part was the performance and the performance of our propulsion systems won us that job. Now it started with a relatively small job and for round numbers, $3 million to $5 million. The next phase of that particular program is approximately 10x greater than that, and the next phase is 10x greater than that. So it's a classified program, so I can't speak specifically to the technologies, but that's the progression over the next 2.5 years of that program. And I was just down at DARPA headquarters getting some classified briefs on the extension of that. So because of the successful deliverables that we just had, we've been exposed to 2 more major programs that are both classified as well. So to answer the second part of your question, we are expanding our undersea applications. And as I mentioned in the prepared remarks, like people in the air, I'm a pilot, as you know, I think we flew together. We did. That was an awesome flight in the electric airplane. We can't tolerate failures in the air. We can't tolerate a system that we don't understand every part of it. You can't tolerate those failures when you're under the sea, when you're under the Arctic ice shelf ever. And if there are any issues, you need to have a backup system or redundancy that allows you to continue the mission. So although the tech is just a little bit different, of course, the cooling systems are different, the requirements are actually remarkably similar for those different types of applications. So I think you will see us expand into more marine applications, specifically the safety-critical and mission-critical undersea work. Sheila Kahyaoglu: Got it. No, really neat stuff. And then maybe one on the Eve partnership just because it progressed this quarter to a full-on agreement. And I think you mentioned $1 billion in the backlog for it. So just how do we think about that? And are there more to come? Kyle Clark: Yes, for sure. There are more to come. We -- those relationships don't evolve overnight. In every case, and I think there's about 5 of them that we've identified with you guys. These airframers typically kind of start evaluating the market. They may choose somebody else, maybe they have some successes, maybe they have some failures. And they end up back looking at our propulsion because of its path to certification, its performance and the ability to rely on us as a production partner in the future. We delivered a bunch of motors down to Brazil that allowed Eve to step into their flight test program, and that earned us the production contract. And again, it's just for the pusher right now. That production contract was only awarded after some pretty thorough risk assessment on our ability to produce here in Vermont, our quality management systems, our certification plan. And this is where I do need to openly compliment the rigor and the thoroughness of their engineering leadership and their supply chain leadership. We learned a ton working with them. So the actual deal itself, yes, it's approximately $1 billion based on their current backlog, and that's about 60-40 split between the initial sale of motors and the in-service agreed to kind of pay per hour fees that are associated with the use of that motor kind of totaling about $1 billion. Operator: Our next question comes from John Godyn with Citigroup. John Godyn: Congratulations. Kyle, you made a comment that there were hundreds more aircraft in active negotiation when you were talking about the backlog. And I was just hoping to kind of spend an additional second on that and understand what the contours of that may look like? Is that CTOL? Is that VTOL? Is that engines? Like you just mentioned, there were some other airframers interested. Existing customers? New customers? Whatever you can share? I feel like you wouldn't have made that comment if there wasn't some visibility and confidence to it. Kyle Clark: Yes. I guess maybe I'll point to one that was quite public at the Paris Air Show with the second largest kind of regional carrier in the country, which is Republic Airways. And we openly allow people to track our aircraft. It's funny, like early this morning about 3:00 a.m., I saw our aircraft landed with a bunch of pilots that have been flying like a continuous 70-hour mission. They are flying in the rain, the sleet, the snow up here, and that is with one of those customers that we're trying to convert from an MOU into deposit-backed orders. And that would add a couple of hundred aircraft to the backlog alone. Now that will start with CTOL and go to VTOL. And what we've seen in our backlog, especially over the last quarter is that the majority of the orders are coming in for conventional takeoff and landing, or CTOL, aircraft and with an intention to go to VTOL. And the reason is, is that the infrastructure exists today. The pilot licensing is clear and very, very attainable for their existing pilots, and they consume it on the routes that make sense for them, especially when they start with cargo and logistics. And the performance of the aircraft, and I do want to note something, one of the things that everybody -- I mean, you got to make airplanes light, you got to make them reliable, you got to make them meet the mission. Our CTOL aircraft right now actually has payload margin. That means that when we say it carries 1,250 pounds, there's actually -- it can carry more than that, even within its max gross takeoff weight. And it was a bit of a conservative engineering miss that we're going to leverage into the next aircraft release. So I bring up that example to say that when we go out and say we can fly this mission, we're covering that and more. So the CTOL is an obvious order right now for those folks based on the operational economics of it. And that's where we're seeing the biggest growth in our backlog. John Godyn: Yes, that's great. It sounds like there's a lot of activity out there. And given that you're willing to kind of offer some of those KPIs, I feel like it's likely, and it sounds like you would say we should see more orders every quarter for the next few quarters. It sounds like there's a lot of activity. Is that what we should expect every quarter kind of some more of these orders coming in? Kyle Clark: Yes. That's what we expect. We're seeing those come in. Given the success we're having, it gives us actually a little more leverage on the pricing because those orders are coming in and they're starting to get a little bit of urgency around securing those production slots through APAs. So it's not -- we're not just counting the number of aircraft. Now we're really focusing on the quality of the orders that is both the terms that we agreed to, of course, the pricing being one of them and other secondary and tertiary terms to those contracts, but also the quality of the operators that we're deploying into. We get asked a lot about MRO services and pilot training and other things. And as you probably know, we really do focus on the large, credible operators that already have those things in place and can be successful partners, especially in the early days of these launches. So yes, you should see increased orders, but also please note the quality of the orders that we're pursuing and the level of which those engagements produce near-term revenue through the CTOL aircraft building into the VTOL. John Godyn: Great. And if I could slip just one more in. You had that comment that the aftermarket backlog was 4x the size of the backlog, if I heard that correctly. That may not be perfectly quantified, but I just thought that was a fantastic data point. Do you guys have any plans to maybe dig into that, elaborate on that, firm that up? Is there a way to kind of do that contractually? I think the aftermarket piece is obviously a big part of the story, and that was just a great data point. Kyle Clark: Yes. Let me just correct that for one second. The aftermarket backlog is 3x higher than the sale of the aircraft. What I mentioned was the total backlog is 4x higher because you have the 1 unit plus 3x, that's the total backlog. So just to -- I hate to be the engineering nerd of being very precise with language, but the total backlog is 4x higher. The -- but to elaborate a little bit more on the qualitative portion of that, which is the -- in certain contracts, we have a contractual price for the aftermarket battery. In other contracts, one that was made very public with Air New Zealand, for example, it's a leased aircraft, and they're doing power or energy by the hour. So that backlog will come in 2 forms: selling of the aftermarket product on a per unit basis, where we provide a core refund for the return batteries and a charge for overhaul battery; and energy by the hour. Now we're being very thoughtfully cautious about getting extended too far on anything that is a per flight hour payment. But that's where these APAs come in to make sure that we're protected, the customer gets a lower cost of operation and an ever-increasing performance in the battery. But we estimate for each $4 million to $4.5 million airplane, there's about $13 million of backlog -- excuse me, of aftermarket. Herman Cueto: Yes. And one thing, John, is as we had spoken about in the past, the aircraft is a working aircraft. It will fly for 20 years, 35,000 hours. And if the aircraft is flown like that, the battery will be changed about once a year. And that aftermarket, if you look in the slide deck that we shared today, you see -- we call it the double whale back chart, you see how big and durable that aftermarket revenue is. And it goes on for close to 20 years. So it's a meaningful part of our business. It's a wonderful gross margin opportunity for our business. And I think it's important that, that point is made on that aftermarket. So it's extremely durable. Operator: Our next question comes from Chris Pierce with Needham. Christopher Pierce: I'd love to hear the early learnings you guys are getting from customer deployments and how this might help with more linear adoption. Like I mean, do you see partners being in orders as they turn over their fleets? Or are they already running new routes to see sort of how they can expand their operating envelope? Kind of whatever you could share on that? Kyle Clark: Yes. So the biggest learnings, we're getting a lot out of our overseas deployments. We fly a lot in the U.S., of course. One of the learnings in Europe is that reserves really matter. The ATC and the efficiency of getting aircraft in, especially when there's high-traffic regions, are really important to manage. So having adequate reserves and having acute knowledge of what those reserves are. So very technically, like we have a state of charge estimator within the battery, that state of charge estimator is pretty pessimistic all the time because we have a conservative approach with the FAA for safety. So if you think you have 45 minutes of flight time remaining, you may have 60 or 120 in some cases. But learning to train the pilots to know under what conditions they can maximize those ranges in reserves and how to do that has been a really positive learning. And that goes in informing both the technology and the training regimens for the pilots. The second big thing is around the maintenance requirements. So as we've been flying these things, we started -- in our first deployments earlier this year, we would deploy a couple of maintainers, a couple of pilots, usually a flight test engineer and somebody to manage the chargers. We're down to deploying things overnight with just a pilot. And that is a product of understanding what that pilot needs to successfully and safely complete that mission, the next mission and every mission after that. What do they need to inspect? What do they need to maintain? And it turns out to be very, very little. We flew across the country and back numerous times now. And in our last run across the country, the only thing we did is put a little bit of air in the tires. So that's been a really phenomenal learning and more of a validation that electric aviation offers a safer and more reliable product out in the real world. We've learned a lot about charging and flight planning as well. But there hasn't been any big ahas. We, of course, got the little technical things like flying in the rain and the sleet and the snow. We found a couple of little leaks that we quickly remedied with seals around gaskets and other things. And yes, it -- there hasn't been big ahas, but getting out in the real world just reminds us that aviation is a serious business, you got to get the right reserves and you got to have the right flight planning in place, and that data is important to us. Christopher Pierce: And how are they thinking about what are they telling you, hey, this is great for our existing routes. This creates new routes we hadn't been able to consider before. Like what are you kind of hearing as far as how they might integrate the aircraft into their kind of route planning? Kyle Clark: Yes. So there's 2 big like draws to the implementation of it. Yes, in their existing route planning, that's where the CTOL fits. If you lower the cost of carriage for the packages, they're just simply -- they have an attrition problem with their existing aircraft where they're worn out, they can't get parts. They're begging for this airplane to just simply fulfill the feeder fleet network that they have today. There's no question with that. Some of the larger new orders see it as an augmentation to their existing business for a couple of reasons. One of them is pretty interesting. It's to fulfill a gap in the pilot pipeline. So we have dual control side-by-side seating that allows a pilot to progress from primary training, they first learn at an airplane, to get into a low-risk application like cargo and logistics with a captain in the left seat, a first officer in the right seat or vice versa. As that pilot builds time, they move into what you consider the left seat, and they would move then into regional like jet transport, for example, or corporate flying. So that's a gap that exists today, and a lot of our customers see value in implementing the CTOL aircraft to fill that gap, provide a new service to their customers and train their pilots. And that's a keen interest in our aircraft. Operator: Our next question comes from Andre Madrid with BTIG. Andre Madrid: You've given a lot of color on the milestones to look ahead for on the CTOL and the VTOL variants. But can we maybe just dive a little deeper into mVTOL, the military variant? I mean, what should we be looking out for? And could you fill us in on some of the recent updates there? Kyle Clark: Yes. Probably not going to go too deep on it, but I will -- I'll hit the top of the waves here. Our engagement with General Electric very strategically starts with the MV-250, which is a military variant of the 250. It is an autonomous, unmanned hybrid aircraft that has performance that exceeds existing vertical takeoff and landing aircraft. What I mean by performance is that it will go further and faster than a helicopter. It is -- it's really a totally different argument to the military than the one we were making previously, which was higher reliability, lower fuel dependency, low thermal signature and low noise. Now we fundamentally have a product that does more than the existing product. And we know that China is putting these things in the air right now. And if we unfortunately get into a fight in South China Sea or in the first, second, third and island chains, we need a long-range support vehicle for our troops. First, aerial cargo logistics and then potentially other applications. So the 3 pieces of that equation are the autonomy in the aircraft. BETA owns 100% of that. The autonomy outside the aircraft. We partnered with several partners. One of them we announced was Near Earth Autonomy. The hybridization. And as you know, we've built several hybrid aircraft. Now we're moving into the big leagues with GE, who makes the best engines in the world, coupled with our generator, and now we have a turbo generator together mounted on top of our aircraft. And that -- those things right there are built on exactly the same wing, boom, motors, flight control systems as our civil aircraft. So when we talk about this, it's no secret that whether you're carrying medical cargo, people or military supplies, you want a safe, reliable, lightweight and super high-performance system. So all you really do in this case is you change the fuselage so that you can accommodate the loads of that particular mission, whether it be passenger, cargo, in this case, military. The beautiful thing about the military application is by taking the pilot out, you save a lot more than the weight of the pilot. You take all the safety infrastructure that you need for human flight, and that's actually a significant amount. And net-net, and you're going to get probably surprised with this. When you do that, you get about twice the performance of the aircraft. And I could break down all the technical reasons why that happens. But really, it comes down to eliminating the weight necessary to hold a person is significantly greater than the person itself. That allows us to have commonality on the what we call the top deck, the wing, the booms, the tail and the motors and the props, and then a fuselage that changes out, the addition of the turbo generator, more than twice the performance of the overall system and you add in hybridization and you get remarkable ranges that are greater. And I think personally, as an American, I would not want to supply our troops with something that was inferior to our adversaries. So we want to deliver a cargo logistics support infil-exfil aircraft that will connect all of those islands in a way that can support our troops with critical supplies. And we are actively doing that and putting those puzzle pieces together. And I think that you can expect that you're going to see quite a bit more from us. And again, in spirit of BETA, we talk about stuff we've already done. So I'm not going to sit here and tell you all the things that we're going to do next year, but we'll report on that very shortly. Andre Madrid: Well, I'm looking forward to that, and you're right, I was pretty surprised on the performance. That's great to hear. Another follow-up, if I could squeeze it in. I mean, a peer of yours recently announced that they're supplying an electric powertrain for a strategic partnership between the U.S. and the foreign contractor. I mean you mentioned the opportunity to serve as a merchant supplier for commercial customers, but with the rise in allied defense spending, I mean, how are you guys looking at the international defense opportunity as a merchant supplier? Kyle Clark: Yes. Well, our team spent the last week replying to an RFI and RFP with a foreign ally. So it is not lost on us that Europe is drastically increasing their percentage of their GDP on military spending, and that drones, drone warfare and troop support is a necessary thing in the future of fights. So we are there as well. We are actively engaging with those folks. I personally went and met with the commander of Europe, NATO, and we kind of talked through the time lines of this stuff. And I think that I can't speak for our competitors, but I know that we are right there in the conversation and proving that this thing flies on a regular basis in Europe and people are seeing it down under and even over in Asia. Andre Madrid: Awesome. That's super helpful. I appreciate it, Kyle. It's great to hear the progress you're making with our allies. Kyle Clark: Thanks, Andre. Operator: That concludes the question-and-answer portion of today's call. With that, I will now turn the call back over to Kyle for closing remarks. Please go ahead. Kyle Clark: Awesome. Thank you, operator. Appreciate it, and thanks for everybody who stuck around this long through our earnings call. I just want to kind of provide a heartfelt sincere appreciation for the people here at BETA, the employees, the contractors, our suppliers who have just really accelerated this company from an R&D company into something that's delivering real product now. So thank you, everybody. It's incredibly meaningful to the mission that we're trying to pursue. And I think that we are trying to kick this off in the right way as a serious A&D company that keeps our promises, focuses on results, reports things after they happen. And we have a strategy that is stepwise pragmatic. And before people think about what to do with BETA stock, I think it's important to look a little bit deeper. And I think each of the people who have dug into BETA have realized that there is quite a foundation being built for the future of aerospace, both in technology, in people, in infrastructure for manufacturing and all the pieces that go into a long-term enduring business that's going to step up and up and up and grow into a leading supplier and producer of aircraft and other high-reliability technical products that help our U.S. military, help our GDP and ultimately close in our mission of creating a sustainable aviation future. So thank you, everybody. Really appreciate the time. Operator: This concludes today's BETA Technologies Third Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the KNOP Third Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Derek Lowe. Please go ahead, sir. Derek Lowe: Thank you, Karina, and good morning, ladies and gentlemen. My name is Derek Lowe, and I'm the Chief Executive and Chief Financial Officer of KNOT Offshore Partners. Welcome to the Partnership's earnings call for the third quarter of 2025. Our website is knotoffshorepartners.com, and you can find the earnings release there along with this presentation. On Slide 2, you will find guidance on the inclusion of forward-looking statements in today's presentation. These are made in good faith and reflect management's current views, known and unknown risks and are based on assumptions and estimates that are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied in forward-looking statements, and the partnership does not have or undertake a duty to update any such forward-looking statements made as of the date of this presentation. For further information, please consult our SEC filings, especially in relation to our annual and quarterly results. Today's presentation also includes certain non-U.S. GAAP measures, and our earnings release includes a reconciliation of these to the most directly comparable GAAP measures. We begin on Slide 3 with clearly the most material development during and since Q3 2025, which is our receipt of an unsolicited and nonbinding offer from our sponsor, KNOT, to buy the publicly owned common units for $10 per common unit. The offer is currently being evaluated by the Conflicts Committee of the Board, which is comprised of directors who are not affiliated to KNOT, and they have appointed Evercore and Richards Layton & Finger as their independent professional advisers. Given the outstanding nature of that process, I will not be addressing that matter on today's call and would refer you to the press release that we issued on the 3rd of November and to KNOT's own 13D filing with the SEC on the same date, as those contain all the detail that's currently available. On Slide 4, we have the Q3 financial and operational headlines. Revenues were $96.9 million, operating income $30.6 million and net income $15.1 million. Adjusted EBITDA was $61.6 million. And as of September 30, 2025, we had $125.2 million in available liquidity, made up of $77.2 million in cash and cash equivalents, plus $48 million in undrawn capacity on our credit facilities, and that was $20.4 million higher than at June 30. We operated with 99.9% utilization, taking into account the scheduled drydocking of Tove Knutsen, which amounts to 96.5% utilization overall. And following the end of Q3, we declared a cash distribution of USD 0.026 per common unit, which was paid in November. On Slide 5, we have developments during Q3, most of which you will likely have seen in our update in late September. On July 2, we purchased the Daqing Knutsen from our sponsor. The headlines of this are set out on Slide 6 and includes 7 years of a guaranteed higher rate. Also on July 2, we announced the establishment of a buyback program. We purchased just under 385,000 common units at a total cost of just over $3 million, which averages $7.87 per common unit. The program was concluded in October. We completed 2 refinancings in the quarter. The first was our $25 million revolving credit facility with NTT and the second was for the Tove Knutsen, where we used the sale and leaseback to increase capital by a net $32 million. On the contractual front, in August, we obtained an extension with Shell for the Hilda Knutsen of up to 1 year. That is 3 months firm and then 3 plus and then 9 months at our option. And in September, we secured an extension with Equinor for the Bodil Knutsen, which is now contracted through to March 2029 fixed plus 2 options of 1 year each. On Slide 7, we have the key developments in the fourth quarter to date. Most material is the offer from KNOT, which I described earlier. We have completed this year's refinancing schedule with a $71 million loan secured by the Synnøve Knutsen in October and a $25 million revolving credit facility, which was rolled over with SBI Shinsei. And on the contracting front, we have signed a time charter with KNOT for the Fortaleza Knutsen to begin in Q2 2026, which is for 1-year fixed, followed by 2 charter options each of 1 year. Turning to Slide 8 for a high-level summary of our current momentum. The shuttle tanker market has been tightening in both Brazil and the North Sea as well, in either case, driven by FPSO start-ups and ramp-ups. Certain of these projects were a long time coming, and it's been encouraging to see them up and running, driving shuttle tanker demand growth. We've extended our backlog as of September 30, 2025, to $963 million of fixed contracts averaging 2.6 years and rather more if all options are exercised. At September 30, our fleet of 19 vessels had an average age of 10 years. We are continuing to repay debt at $95 million or more per year, which we think is prudent with a depreciating asset base. And our robust model has been validated by the 4 refinancings we've completed in the second half of 2025. Over Slides 10 to 13, we provide the financials for Q3, for which the headlines are revenues of $96.3 million, operating income of $30.7 million, net income $15.1 million, adjusted EBITDA of $61.6 million, and available liquidity at quarter end of $125.2 million, made up of $77.2 million in cash and cash equivalents, plus $48 million in undrawn capacity on our credit facilities, and that's $20 million higher than available liquidity at the end of Q2. On Slide 14 is our debt maturity profile, which has been updated to reflect the refinancing since quarter end of the Synnøve Knutsen loan and the second revolving credit facility. Notably, the average margin on our floating rate debt was 2.2% over SOFR. We're encouraged by our experience of the refinancing this year and the signal they provide for lenders' appetite to provide refinancing in the future. Moving on to Slide 16 and our charter portfolio. I've covered most of the updates here, but I believe that this is a very useful resource for investors looking to track the primary movements where they change -- where change can occur in a highly stable portfolio of cash flows. In other words, when charters turn over and when there are drydocks that will cause off-hire and incurrence of CapEx costs. Based on current charter rates, we believe the charters' options are likely to be taken up given the strength of the charter market. On Slide 17, you can see our strong coverage through the coming quarters. Some charters options that market conditions suggest have a good likelihood of being exercised and a small amount of open time. In all, we have 93% of vessel time in 2026 covered by fixed contracts and 69% in 2027. If all relevant options are exercised, this rises to 98% in 2026 and 88% in 2027. On Slide 18, you can see the dropdown inventory held at the sponsor. Dropdowns have been the route to growth in the fleet throughout the life of the partnership and other means of replenishing and rejuvenating the fleet given the depreciation in our assets. On Slides 19 to 21, we include again some commentary from Petrobras with relevant highlights from the 5-year plan they just released for 2026 through to 2030. Overall volumes produced and anticipated project start-up time lines in the pre-salt continue to be in line with or above prior expectations, while CapEx on pre-salt projects comes down marginally. We believe that these materials from Petrobras provide a useful insight into the Brazilian offshore market, and we would encourage you to review the extensive materials that Petrobras have just published last week for the full picture. In short, though, from the shuttle tanker owners' perspective, there is a lot to like about what Petrobras is saying and importantly, in what they're putting into action. Crucially, it is this trackable and measurable activity, including numerous additional FPSOs that have already been funded, but expected to come online in the years ahead that gives us comfort that shuttle tanker demand should readily absorb the current order book. Further, we believe that the current order book still trends towards a medium-term shortage of shuttle tankers when set against the forthcoming production. To summarize on Slide 22. During Q3, we had strong utilization and financial results. We bought the Daqing Knutsen, refinanced 2 facilities, including a cash generation via sale and leaseback. We secured additional charter cover and paid the quarterly distribution. And so far during Q4, we've received the unsolicited and nonbinding offer from our sponsor, KNOT. We've refinanced 2 further facilities. We've secured the next period of charter coverage for the Fortaleza Knutsen. And we've announced the annual meeting for December 15, which our Board has nominated Ms. Pernille Østensjø for election as Independent Director. With that, I'll hand the call back to Karina for any questions. Thank you. Operator: [Operator Instructions] Your first question comes from the line of Poe Fratt from Alliance Global Partners. Charles Fratt: Just a couple of questions. One on the Fortaleza. Can you give me an appreciation for the potential rate change versus the current time charter with Transpetro when it moves over to KNOT? Derek Lowe: We don't comment on individual rates, I'm afraid, but I can say that we're certainly satisfied with the rate that we'll be getting. Charles Fratt: Okay. Can I assume it's a higher rate then or directionally, Derek? Derek Lowe: Yes, we don't comment on particular rates. I mean you'll appreciate the timing of when this new contract has been signed by comparison with when the previous one was signed some years ago. And obviously, there will be a change in market conditions between the 2 times. Charles Fratt: Okay. And then looking at '26 for dry dockings, it looks like it's a pretty active year with at least what, probably 4, potentially 5 dry docks? Derek Lowe: Yes, that's right. Charles Fratt: Okay. And then you added the additional -- I can't pronounce the name, but the Daqing. But G&A didn't go up at all. Is that something we should continue to look at sort of the G&A at the $1.6 million per quarter range? Derek Lowe: Yes, we're not expecting that to change materially. I mean if you're thinking that, that ought to or question whether that should have changed with acquisition of one vessel out of turning 18 into 19, we don't see any material increase in the administrative burdens of 1 vessel... Charles Fratt: Yes. Derek Lowe: As seen in the G&A. Charles Fratt: Yes. Just wanted to double check. And then did I hear you correctly that -- or did I hear you say that the buyback -- the unit buyback program had concluded? Derek Lowe: That's right, yes. Charles Fratt: So you've -- so you stopped at 3 instead of going to the full $10 million... Derek Lowe: That's right. Charles Fratt: $10 million authorization? Derek Lowe: Yes. Charles Fratt: Okay. And then -- no, that's it for me. Derek, and I just have to ask, I know you said you couldn't comment it, but can you at least give us a ballpark time frame when you think this independent committee process of evaluating or potentially getting a definitive agreement in place, what a ballpark time frame for that would be? Derek Lowe: Yes. I'm afraid all the information that's currently available is what's been announced already on the 3rd of November. And that was a press release from the partnership and a 13D filing from KNOT. But beyond those, there's nothing further that we can provide by way of comment, I'm afraid. Charles Fratt: Yes. Okay. But just mechanically, it's just so -- we all understand what the process is. You get a definitive agreement, then you'll have to put a proxy out and then you'll have a shareholder vote, or a unitholder vote at some point in time. So it really looks more realistically, at least in my mind that this will be a first quarter event at the earliest. Derek Lowe: Yes. I mean that's in the process that the Conflicts Committee is going through now. So it's for them to develop with their advisers and obviously in discussion with -- in response to KNOT in due course. Charles Fratt: Great. Derek Lowe: Thanks, Poe. Operator: [Operator Instructions] It appears we have no further questions in queue. I will hand the call back to Derek Lowe for closing remarks. Derek Lowe: Thank you again for joining this earnings call for KNOT Offshore Partners third quarter in 2025. I look forward to speaking with you following the fourth quarter results, and I encourage you to provide your proxy vote into the annual meeting within the next few days. Thank you. Operator: This now concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, and welcome to the Celebrus Technologies plc Half Year Results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I'd now like to hand over to Bill Bruno, CEO. Good afternoon, sir. Guerino Bruno: Good afternoon. Thank you, sir, and thank you all, everyone, for attending today. We're excited to walk through this with you, share some customer stories, we'll walk through the financials and kind of give you a glimpse in some of the things that we've been doing in the product with regards to artificial intelligence and some other areas of importance. From a company perspective, this is -- for those of you that have been on this journey in previous calls, our last one having been in July, that was the first time where we sort of presented the new sort of revenue segments that we've now brought live in these first half results for this year as well as some adjusted versions of the prior year results to give you a proper comparison along the lines of those new categories. Ash will go through all of those in detail and help further explain that. But as a reminder, we now have sort of 4 revenue segments in the reporting. The first of which is ultimately Celebrus Software. Now that's candidly the line item to pay special attention to going forward. That is the key focus of our business is in driving our software revenue and Celebrus Software line item ultimately contributes to -- directly to the Celebrus Software ARR, and Ash will walk through the ARR growth from the first half and what that looks like compared to the previous year. The second revenue segment that you'll see mentioned is non-Celebrus ARR. These are our customers where we have long-standing relationships and deliver people-based services that are built around managing large analytic environments that don't contain Celebrus Software as a line item. So we've partitioned that out so that all of you going forward will be able to track the growth of our own software IP and the sales of that software IP. The third category is professional services. Those professional services are project-based work. So things that don't repeat. In our Celebrus Software deals, we do build in services that recurs. So for example, X number of days a month or per year as part of our managed service and Celebrus Cloud -- our Celebrus Cloud single-tenant private cloud environments that we stand up for customers. And in that case, it would show up in Celebrus software. Project work would be additional configuration or the client needs support with connecting our data into a different system or these are sort of one-off engagements and we treat them as such in that revenue segment. And then the final is hardware revenues. And that's pretty straightforward. For those of you that have followed the business for many years, we sell hardware occasionally to customers. It's not something that we offer to new customers, but it is something that we continue to support with customers that have been with us for quite some time. And anything that we do in that regard will show up in that bucket. Obviously, we'll continue sort of on this journey, and Ash will explain and reiterate sort of the revenue recognition policies and all the things that changed heading into this year. I know we had a lot of moving pieces as we sort of finish sort of the transformation of the business that we discussed about in July, but now we have tangible numbers and results that you'll be able to see and then hopefully better understand from a transparency perspective, everything that's going on in the inner workings of the business and where our focus lies. From an operational standpoint, we did have a couple of very key wins in this first half. The first of which was a fintech platform in the States and the other was a financial services firm here in the U.K. Both of those organizations are exploring some significant upsell opportunities with our customer success team that we stood up a little over a year ago as well, which has us quite excited. Now this has been a trend that we've built as we brought new logos into the business in this cloud-first mentality. It's allowed us, one, to be better connected to customers; two, deliver more value more quickly; but three, to also be able to engage customers differently and help them understand some of the things that our platform can do for their business above and beyond what it's doing today, and allow us to turn those features on or enable those use cases in a very streamlined manner now that we're not focused on delivering on-premise environments. We also had a significant number of upsells. And this is, again, a core part of our business, a core part of our pipeline. Ash will speak to the pipeline and some of the numbers that we're providing for the first time, as we've promised you for some time now that we would be bringing pipeline metrics into some of the things that we discussed to help give you a better comfort about what we're doing as a business and where we're adding value and what that pipeline and opportunity structure looks like for our sales teams, our new business teams as well as our partner opportunities. The Celebrus platform as a whole, we continue to innovate significantly. We do 2 releases a year. That's been our cadence for quite some time. I don't see that changing. It's just enough for us to manage from a development perspective, but it's also just enough for customers to have new features, new functionality at a pace at which our competitors are not delivering upon. And these -- much of this innovation has been focused really in what to do with the data. We've spent many, many years, Celebrus, perfecting how we capture digital data and how we contextualize that through the data models that we provide for customers, where a lot of our effort and a lot of our innovation has been focused is on taking that data and doing something with it. So namely things like our customer identity capabilities, the ability to sort of impact paid media investments, the ability to enhance from an analytics perspective and a reporting perspective to sort of bring that forth. From a marketing perspective, hopefully, those of you that interact with the brand, follow us on LinkedIn, if you haven't. We're quite loud on there with new content, new capabilities, et cetera. I'd urge you to do so above and beyond just browsing the investor website of the company, but it's been largely focused on creating content and awareness to support our prospecting efforts and to also better enable our partners to speak about the platform in a much more simplified manner focused on the way that we're selling it and where we're seeing that success. And finally, before I throw things over to Ash to work through some of the financials. The security side of the business is something we take very serious. Compliance, security, privacy, all of these things are very important to our business. We have several certifications through independent third parties, things like ISO 27001 as an example and to continue to grow in that journey and to continue to provide more certainty and more comfort to our customers. We also just recently added a SOC 2 certification as well. It's much more applicable in the States than it is throughout Europe, as we tend to lean on ISO 27001 throughout Europe. But nevertheless, it is a great certification to have, and again, speaks to not only the capabilities of our platform, but also our security processes, how we go about building product and how we go about securing customer data in the single tenant private cloud environments. So with that, I will turn it over to Ash to walk through some of the financials. Ashoni Mehta: Great. Thanks, Bill. Hello, everyone. So we're going to go through the financial highlights first, and I will just touch on this briefly because I'll probably go into each of these items in a bit more detail on the subsequent slides. The key points are: The Celebrus ARR increased during the period to $15.6 million, that's an increase of just under 15% in the first half of the year, and it's just over 20% year-on-year, i.e., compared to the ARR at the end of H1 FY '25. The total revenue was $10.4 million. That's a fall of last year, and obviously, that's related for the large part to the move to straight line revenue recognition, and I'll go on and describe that in a bit more detail. Likewise, the Celebrus Software revenue, fourth bullet point, very significant. If you remember back to July, we talked about how we account for our costs and the fact that we reallocate them up into the cost of sales line. We no longer do that, as we announced in July. And so our Software and our gross profit margin is what you'd expect to see for a software company up in 93.1% in the period compared to 95.4% this time last year. The impact on revenues, obviously, has an impact on the loss before tax, and I'll go into that in more detail also and that flows through to our EPS. The cash position at the year-end -- at the half year was healthy at $27.3 million, and that cash balance is likely to grow ahead of the end of the financial year in March '26. And we continue to pay dividend. So we increased the dividend by 3.2% up to 0.98p for the first half. So let's get into a bit of detail. So if you remember back in July, we talked about a number of changes that we are making to our accounting and reporting. One of those was that we were changing the revenue segments. And as Bill described, some of the confusion about the old revenue segments was that we aggregated Celebrus and non-Celebrus into a single license line and also into a single support and maintenance line. So as a driver for these changes to the segmentation that you see at the top of the income statement is proved to be very clear in terms of what's Celebrus Software, what's non-Celebrus Managed Services; and then also, there are 2 lines there, which are less significant in many ways, the Professional Services, which is an aggregation of some Celebrus-related work and some non-Celebrus-related work. And then, of course, the hardware, which we talked about in the past and which will taper off in due course. So if we focus on the Celebrus Software line, we'll see that's down year-on-year, and that's driven by the changes to our contracts. So this is not an accounting change. It's a practical contractual change. In that, we've tweaked the terms of our contracts such that the revenue recognition for our licenses. Whereas previously, we would recognize the whole of the first year, for example, in a lump-sum in the month of signing, we now recognize our license revenue month by month. The impact of that is that let's take, for example, we signed something in late December, we will now recognize 3 months of revenue in this financial year, whereas previously, we would have recognized 12 months of revenue. And that's applied already to the deals that Bill talked about that we've signed in the first half. So that's a reduction year-on-year because of the straight-line revenue recognition. Because this isn't an accounting change, we do not restate the prior year numbers. So that's why the H1 '25 is higher and why now we're recognizing sort of month by month to get a lower revenue number. That period, as I described in July, will flush through over the next 3 years. So we have contracts renewing this year around now, in fact, in November-December. We have some more quite significantly renewing this time next year, and then we have slightly fewer renewing the year after that. So the impact of that year-on-year. This year, we're expecting an impact of around $6 million to our revenue line in total as a result of that revenue recognition change. About half of that is new wins and about half of that is renewals. What we'll find in FY '27 is an impact on the revenue line of somewhere around just around $3 million. And then in FY '28, we will see an impact on our revenue line of just over $1 million, i.e., under the old basis, we would have had $6 million, $3 million and $1 million-or-so more in years FY '26, '27 and '28. So this will be -- this will, as said, flush through. So once we've renewed all of the contracts which currently exists, everything will be on a straight-line basis, and you'll get better sort of like-for-like comparability in terms of software revenues. Another change we made in the period, we announced back in July, was the cost of sales, and I talked about that just a few seconds ago. In the past, what we would do is that we would allocate some of our OpEx costs into the cost of sales line. And this was something which we've been doing historically when the business was very different and it principally related to the managed service teams and the professional service teams in terms of those people being engaged in delivery services to our customers. With the business changing as it has started moving towards being a software business, we no longer do that. And that has 2 benefits. Firstly, you can see a true software GP percentage margin. And that's very important as you're trying to extrapolate forward in terms of what this business could look like in 3, 4, 5 years' time, you need to know the gross profit percentage for that. And then the other benefit is that you can very clearly see the OpEx line without the kind of confusion of how much we've recharged into cost of sales, whether it's $4 million or $5 million or $6 million. So you can see the OpEx line more clearly, and that's beneficial as you kind of track our OpEx and how we're controlling it. And in this period, what you see very clearly is that our OpEx has gone down. So earlier in the year, we took out just over 10 headcount. These were noncustomer-facing. Generally, these are back-office and some of them were in our Managed Services and Professional Services teams, and these were -- we were able to do that as a result of automation, systematization that we continue to do to seek efficiencies and there'll be more of that coming up in the next sort of 6 to 12 months-or-so. So OpEx is well controlled as we're going through this transition period. The adjusted PBT had a loss of $1.5 million roughly, and that is obviously related to the lower revenues driven by the straight-line revenue recognition. And that brings us down to an adjusted diluted EPS, which is $0.0351 per share. I should point out, and I'll explain this perhaps also in the subsequent slides is that whilst we calculate an adjusted diluted EPS, the dilution comes from share options. However, we have enough shares that we bought back in treasury to effectively negate that dilution. So whilst we calculate this, and this is a key metric that we have used for some years, in practice, it's unlikely that there would be this dilution for investors. Interim dividend, I talked about. So let's go on to the annual recurring revenue. I talked about the percentage increases over the period, and those are obviously reasonably significant. Let me talk now, as Bill implied about, the pipeline that's driving future ARR growth. So this is a metric we will start sharing in our announcements from the final results. But for the time being, I can tell you the size of our pipeline, currently, is $26 million. And let me just describe how that number comes about. So in our pipeline, we have around 60 opportunities. And the aggregate of all of those values on those opportunities amounts to $26 million. So that's a growth of around 13% year-on-year, which will then obviously drive our ARR growth. The key point behind that is -- let me just talk through the stages we have in the pipeline. So we have stages 1 to 5 and the 1 is when it's first recognized and accepted by the sales team as being an opportunity and then 5 is verbal agreement and just moving to signing. Within that, we have a stage 3, which is proposals. So when I look at sort of the value of $26 million, that is accounted for by 44 opportunities out of those 60. The early stage opportunities tend not to have a value, as they're still scoping them, still in early stage meetings. So the value generally arises at stage 3, which is proposal stage, i.e., we've sent out a proposed, we know the value. There may be some opportunities in stage 2, where they're far enough advanced, we've done the scoping sufficiently that we can attribute a value to them. So the key point there is that these are not probalized. These are total values of proposals and other opportunities in the system. And the key point right now is that of the 60 we have roughly now, and we had a similar number this time last year, this year, 44 of those 60 have a value attributed to them; whereas, last year, 33 of those 60 had a value attributed to them. And the significance of that is that whilst the pipeline is 13% larger than this time last year, it is actually mature as well, i.e., opportunities are further advanced in the pipeline and nearer to closure than there were at this time last year. And that's obviously very positive as we look to making our numbers for this year and building out the pipeline for FY '27. Moving on to the balance sheet. The balance sheet is a lot cleaner. It gets cleaner every year. Obviously, you'll remember, we sold off our freehold property at the end of March. So that's no longer in the balance sheet. In terms of the other items, probably not a whole lot to say. You'll be able to see that in the property, plant and equipment, we've got the IFRS 16 leases, and those are winding down over the period of lease, typically around 5 years-or-so. Our trade debtors tend to fluctuate. At the half year, they're generally quite low, and then they're higher around November-December. We have a lot of billing and that billing converts to cash around February-March. So you should see a healthy cash balance at the end of March, and that debtor figure will be probably there or thereabouts. The other interesting item in the balance sheet, and I know a lot of investors track this, is the deferred income. So that is where we have invoiced a customer and they've paid typically, but we haven't recognized the revenue. So basically, what that represents is what have we billed that hasn't been recognized, but will be recognized as revenue. So in the past, if you look at the previous periods, we've had some pretty large numbers and those invariably were related to some of the hardware deals that we had done for one of our customers. Now that's largely flushed through. So that deferred revenue figure will fluctuate period-to-period, but the general long-term trend should be upward because, of course, as we sign on more customers, as we grow the business, there will be more billings going out and there will be more sort of cash payment upfront coming into us, so that will increase over a period of time. And of course, as I said, with high billings in November and December, that will be very high at that point and then sort of come down a little bit by the end of March. The upshot of all of that is that we've got net assets of $38.4 million, of which cash comprises $27.3 million. We have no debt. We continue to have no debt. And another point to make is that the majority of our cash is held in U.S. dollars. We hold only enough GBP to be able to pay for our GBP cost base, which is our employees and our property in the U.K. Then finally on to the cash flow. Again, a relatively clean cash flow. If you look at the movements in working capital, historically, there have been large movements. And these again connected to the hardware deals that we had done in those periods. As that's flushing through now, we see a positive working capital movement with $1.1 million coming in from working capital movements. As you know, we have very little CapEx. We did have significant CapEx in the last couple of periods, partly related to the property moves and the CapEx we had to invest into furniture and fittings, et cetera, and leasehold improvements. But the figure you see now in H1 is a typical kind of internal laptops and IT equipment and those sorts of things. We continue to capitalize development costs and those have increased now. And the reason for that is that we have a much more rigorous methodology for calculating the capitalization of development costs. In summary, previously, we used to do it on a percentage of FTE basis. So knowing what people's role was and how much they contributed to development costs. We now do it in a much more granular fashion, and that's by using a product called Tempo where people enter their time relate to particular tasks. And that's very important. Firstly, it gives us a higher number, and we were getting pressure from the auditors to recognize a higher amount because that was a sense of where we were. Now we have the data to prove that. And that's important also because we're seeing HMLRC chasing companies more rigorously in terms of their R&D tax credits. So we now have, in great granularity, all of the data that supports our R&D tax credit claim. And that's also important in our Patent Box claims as well. And if you remember, that was a very significant reason for our low tax charge last year. So moving down into the financing activities. We paid a dividend, of course, that was $1.2 million. That was the final dividend that we paid in the first half of this year. We did have a share buyback scheme. That is now completed. We purchased 500,000 shares over the last few months for a total of just under $1 million. And those are the shares I referred to earlier, the treasury shares, which are held on our balance sheet. The purpose of those is not to enhance earnings, it is solely around negating the dilutive impact of share options. So whenever an employee exercise their share options, we can issue them from the shares we already hold in treasury without issuing more shares and creating dilution for existing investors. And that, I think, is pretty much the balance sheet. I will just repeat again the impact of the change to USD reporting about a year ago is very significant because it reduces our FX exposure. It also reduced the amount of time and effort we spend creating FX hedging contracts. So previously, we would hedge contract for every new deal that we won. We would hedge it for year 1 and year 2 and year 3. That's a lot of time and effort and a lot of risk. Now what we do at the start of the year is we merely hedge the GBP cost base on a month-by-month basis. We know when it's going to happen, we know roughly how much it is. And that's why -- well, part of the reason why when you look at the balance sheet -- sorry, the cash flow, rather, the effect of the FX is really minimal. It's because most of our revenues, most of our cash coming in is in USD, and of course, our reporting also is in USD. That's the financials. Bill? Guerino Bruno: Thanks, Ash. So I'll spend a bit of time before we go over to the questions. And please continue to submit those, and we'll try to go through as many of them as we can. There are some fun ones in there that I'm looking forward to addressing already. But the platform and the positioning of the platform hasn't changed. We've kind of landed on what we think is an easy-to-understand story that seems to be resonating in the market, embodying our values such as simplicity. We think that the content we're putting out is easier to understand. The feedback that we're getting from the market is that it's easy to understand. And ultimately, in the market, there's been sort of, say, 2 main drivers in the pipeline at the moment in terms of both prospects as well as existing customers. From a prospect perspective, 90-some-odd percent of our deals in the pipeline right now are driven by one core challenge that our platform is uniquely positioned to solve. And that's around better understanding who your customers are. We talk about digital identity in all of our marketing materials and when we're meeting with prospects in sort of 3 phases, right? If you think about how you interact with the brand, hopefully, this will make sense and resonate, right? If you go to a website on your laptop or on your mobile device or what have you, and you've never been there before, let's say, you're anonymous to that brand. In the Celebrus world, we start building a profile about you in a compliant manner from the very first time you arrive on these sites, taking into account what you look at, the content you consume, the journeys you take, et cetera. Now at some point, maybe down the line, weeks later, et cetera, maybe you create an account or you log in or you tell the brand who you are. So in that session, you're authenticated. That's sort of the phase on the other side from authenticated to -- or from anonymous to authenticated. Now where the meet the standard is and where 70-plus percent of interactions happen between a consumer like us and a brand is when you're known but not currently authenticated. So what that means is maybe I've logged in previously, but in this current visit, I'm not logged in. In the Celebrus technology, we have the ability to remember that and to stitch your journeys together across devices and to be able to tell brands, "Hey, this is Bill, he's not logged in right now, but he was last time he was here, and here's everything we know about Bill." And that creates an opportunity for brands, whether it's on the marketing side and they're trying to generate more value or trying to create a better experience or on the fraud side, where they're trying to use all of that information about you and I to confirm whether it's actually us before that purchase, before that transfer. And that identity, that needing to know your customers better, not only has it become a main driver of business for us, but it's also become sort of the proof point that we use with a lot of companies that we're coming into contact with, and I'll share that story on the next slide. The second thing that's coming up quite a bit, and I'll delve into some of this as well, is this topic of AI readiness. A lot of organizations, at least in our experience thus far, are starting to hire people or put people into roles that are focused on artificial intelligence or data intelligence or something to that effect. This is becoming an area of investment and strategic sort of guidance for many brands that we're interacting with. And this topic that's come up several times is one that they call AI readiness. And the best way I can describe is, it's a little bit tongue and cheek, right? But it's -- they're not sure what they want to do with AI, but they want to be ready for it. And our platform, our data platform and our digital identity platform, happens to deliver the 2 most important things when it comes to building ethical AI, and that's better data and better customer identification. And so I'll walk through some of that and what that means as well as we step through a few of these slides. From an identity perspective, I walked through this already. But in essence, what we're helping with the Celebrus platform, and we've done to a pretty significant degree, is in lowering that water level and making those things below the water level easier to understand, easier to comprehend and more complete from a customer profile and a customer identity perspective. And I'll give you a couple of case studies. These are actual case studies. The names have been cleared to protect the brands themselves. But in most cases, and I mentioned this in the RNS, and we mentioned this in the RNS, but we have competitors out there naturally. On the marketing side, our biggest competitor tends to be Adobe and a few other solutions here and there. But this particular gaming customer had been using Adobe for many years. And the recall of a consumer, so what I was talking about before where that known category, the meat in the sandwich, right? If you came to their site and then came back to their site a number of days later, about 25% to 30% chance that they'd remember who you were, and that was the best that they predicted they could do. They deployed our technology for only 8 weeks. Now keep in mind, that 25%, 28%, 30% realm that they fluctuated within, that's what they achieved over multiple years. In 8 weeks of having our software deployed, that number for them, the ability to remember someone and be able to remember who they are and tie it to a rewards IP and all of the other great stuff that comes with that, shot north of 80%. I think it was 82% at my last look. And that is a significant increase in sort of building a better addressable audience because not only do you then know using our technology that people are coming back to the site, but you also know who they are, you know what they care about, you know what they've looked at, you know perhaps what bookings they've abandoned, et cetera, et cetera. And it creates much more opportunity for the marketing teams at this brand to generate value. Similarly, a completely different vertical, but in the auto industry, we had a very similar case study in the first half, which was around this particular auto manufacturer was trying to answer a very simple, albeit complicated question. As you guys are all aware, you have sort of configurators on auto websites, right? You could build a car, right, or build a car and the features and things that you want. And sometimes during that process, you can provide an e-mail address or maybe in a previous visit, you could provide an e-mail address or you've signed up for a newsletter or some sort of notification. And they wanted to go through their historical data and basically say, anybody over the last 6 months that configured a car that we know, let's send them an e-mail and try to get them into the dealership that's local to them, right? When they went through their own data that they had in their CRM, it was about 7,000 e-mails. When they went into Celebrus, because of our ability to persist profiles over time, let's say you provided an e-mail address 6 months ago and then 3 months later, you came and configured a car, that was missing in their data set, in their CRM because they didn't know who the customer was. But in the Celebrus dataset, it was known and it was stitched together to the profile. So what we ended up actually being able to provide them was another 10,000 e-mail addresses. So driving the total number up for this campaign from 7,000 to 17,000 just by -- just because of our identity solution and the capabilities of that. So again, another story where we're providing very real results that are taking and expanding the addressable audience that these brands can activate and build better relationships with and then ideally generate more mutual beneficial value from that. A lot of this, when it comes to artificial intelligence, for those of you that have heard me talk about this, you've heard me talk about our data model, and it's a big differentiator of the product. The fact that not only do we make digital data easy to collect, but the fact that we give it a structure when a lot of marketing technologies do not. And that structure is table and logical and easy to work with. I've said for years, even before I worked here that Celebrus creates sort of a data scientist dream for data because it makes it easy not only to use and interrogate and work with, but it also makes it very easy to integrate it with other datasets. And that's been a core part of our value prop for many years. And being able to do that now creates some of that AI readiness that I mentioned before. And AI in general is a significant investment for us and also a significant area of exploration. Internally, when I'm meeting with my management team and we're talking about sort of what does good look like in the business? Our stance is that if you're not utilizing AI that we're not doing it right to build efficiencies, to build better processes, to simplify and automate the mundane so our people can be applied against things that are much higher value and require much higher brain power. And that's been the focus internally as well as how we sort of centralize information to better support our customers as well. From a customer perspective, Celebrus data has been used in machine learning, in predictive models, et cetera, for many years. It's never been hotter though than now because of just the last 16 to 18 months of sort of, I'll call it, AI hysteria, I suppose. And we have a small but mighty data science team internally, and they sort of built upon that. So in working with one of our customers in the U.S., we've built our first AI predictive model. It's a churn model. So what that means is if you have a funnel, say, a loan application process or a shopping cart, as 2 examples. We've now built and we're in the process of testing the portability of this across our customer base, but we've built within Celebrus, it's our own IP, it's our own code, and it's built on top of the Celebrus data model. But ultimately, we've built a churn model that can predict the likelihood of somebody abandoning a process. And the reason that, that could be so powerful is probably best shown through visual. There's a lot going on in this visual, data science charts aren't the pretest charts on the planet. But ultimately, what's happening here is these are different probability intervals and outputs of the model. And focusing on sort of what's rectangled there on the left, I suppose, and highlighted, is you'll see sort of blue in the bar and you'll see red in the bar. For different probability elements, what this is showing is our model's accuracy at predicting that somebody abandoned. And so this could be, like I said, a loan application process where someone has started that process and our model is predicting are they likely to finish this or are they just window-shopping, maybe they're going to abandon, et cetera. And for many of our customers, particularly in the financial sector and retail as well, if someone's window-shopping, this is a potential opportunity to convince them to do business with you. So the goal of this model inside of Celebrus is to be able to prompt that brand with the opportunity to intervene and try to engage those individuals if they have a high likelihood of not completing. And you'll see there's not much red because the model for this particular customer where we've rolled it out in development with them is predicting with a very good amount of accuracy how likely somebody is to actually complete that process. The value of this can be exponential to customers. And we're in the process of sort of doing some early access with our customer success teams engaging a few other customers that we think would be the right fit for us to do sort of an early access to test the portability of this from one customer to the next. This will be targeted at all customers in Celebrus Cloud because we deploy those all in a very -- in the same construct with the same versions of Celebrus. We keep it up to date because we manage this on behalf of each customer that has a Celebrus environment. And so that should make this very easy to bring in, to train and to add value to customers in a very short window of time and fits perfectly with the use case selling-based model that we have where we're trying to land and expand with customers from that perspective. So hopefully, that gives you a bit of a glimpse into some of the things that we're doing and some of the things that are driving the pipeline that Ash mentioned and some of the details that we've provided with regards to that pipeline. I'll make a couple of final comments on outlook here, and then we'll turn over to the Q&A and try to answer as many of these with the remaining time that we have today. As Ash mentioned, we have a significant number of deals in late-stage pipeline. As a reminder, 3 years ago, we didn't have a sales team. And we've been building, innovating and learning candidly on the fly as we're doing this. And we have gotten better at positioning the platform and simplifying that story of figuring out what resonates like the things that I just walked you through and utilizing that to keep brands focused and move deals through the pipeline in a very sort of laser-focused, you have this pain, we fix that pain and we upsell you on the rest of the later once we've proven our value-type model. And so right now, our focus is on late-stage pipeline and bringing those deals over the line in the last mile. We are comfortable with where we sit. You've heard the pipeline statistics. We'll continue to bring more data out as that is vetted by finance, and we're comfortable doing so. But given what's in that pipeline, the 44 deals that have dollar values attributed to it, the $26 million in deals in that pipeline, we currently are comfortable with our expectations and ultimately, our ability to deliver the results for this year. Just like every other business, though, we are keeping our eye on market challenges. I'd be remiss if I didn't -- if I and we didn't comment on that. We have had some deals take longer to get budget approvals where we've gotten the verbal, where they're happy to proceed and we're just waiting for budgets to be approved. We've had a few situations where there's been some turnover as a result of layoffs and redundancies in some prospects and deals that we're working, where we've kind of had to sort of ride that wave out as those changes were being implemented prior to sort of reengaging to complete those deals. And it's just -- it's an interesting market, and I say interesting in every sense of the word, I suppose. But we do believe we have the right strategy, we believe we have the right team and we have enough pipeline to support our ability to deliver on those goals for this year. So with that, we're going to turn things over to questions. There's some fun ones in here. So we're going to go through a few of these here. Guerino Bruno: The first one is, I'm assuming this is referring to the RNS where I talk a little bit in my section about some of our main competition. And this person is saying that risk aversion or blaming customers who don't buy seems like a poor excuse. How would you describe this concern in further detail? What can be done to address these? So in the RNS, I'll highlight a few things. But I do think this is a really important topic to understand. One, we definitely have technology competition. On the marketing side, we run into solutions like Adobe all the time. Two, both new wins that we announced to the market happen to both be situations where we're replacing Adobe. That being said, there is a fear of change in organizations. We are sometimes up against technologies, take the gaming company, for example, where they've been utilizing that technology platform that's the incumbent for 4, 5, 6 years. People on their teams have been trained, certified on that, maybe in their careers as analysts. That's the only technology they know. When we talk about the risk aversion or the fear of change, that's what I'm referring to, it is very real. We have had deals that we've lost not because we didn't prove we were better, not because we didn't have a stakeholder or a main point of contact that wanted to proceed, but because each year they were overruled by somebody who didn't want to make the change regardless and didn't want to uproot the existing technology despite us being more cost effective and us offering a more powerful solution. So it's not an excuse. It's just the reality of life. We run into that quite a bit, and it's something that we've gotten better and better at mitigating. We also have gotten better and better at identifying whether or not those people and those mentalities exist in that organization so that we know how -- so that we try to sidestep them or placate them along the way to avoid them trying to interfere with our deals. So there is a lot of things that we've learned and that we've strategically adjusted in how we do deals so that we know ahead of time if we're walking into that. We also have specific people on the team that in these situations where we run into that inertia, if you will, there are certain people on the team that we bring into those calls because of some of their prior experience to be able to help and work with organizations to get them comfortable in making that change because they've done it in their careers and they know what it looks like and can kind of help with some of the handholding. But it is a very real thing we run up against. So I did want to address that. The next question that's in there is you didn't mention any churn, which you have historically. Was there any? So our churn is quite low, but we always wait until the end of the year to break that down. For those of you that have followed our results, you know that at the end of each fiscal year, when we do the rounds in July, we provide a waterfall of ARR that shows sort of the new wins, any churn, et cetera, et cetera, and adjustments so that you get a full breakdown of that. But given the nature of when our renewals are and things like that, providing it at this point in time wouldn't be a complete picture. So it's best to look at that over the course of the year. I will tell you that from a renewal perspective, we've largely secured -- well, we've secured every main renewal that we intended to secure this year, and we've done a great job across the whole list of existing customers that were renewed, barring a few small things here and there, nothing major. It's always typically in the realm of a couple of percentage points of churn in any given year, and our customer success team is focused on retention and also growth targets in terms of revenue growth from our existing customers, and we've got a good handle on that. Have any customers pushed back on the new terms you are proposing? So -- that's a great question. It's something that I definitely want to clarify. So I will tell you that our customers see no difference. This is -- as Ash mentioned, this is not an accounting change, which is why we haven't had to go back and restate anything. All we've done is work with our auditors on the right language to sort of have in the new contracts such that it qualifies as the managed service that it is. But if you went and asked our clients, in their mind, we've been delivering a service anyways. And the language terms is just simply changing a little bit of the wording around the delivery of that service so that it can be recognized monthly instead of in one lump-sum under IFRS. And then ultimately, nothing's changed. We invoice the client annually upfront for the entire year on the anniversary date of each agreement. So to them, there really is no difference. So there hasn't been any pushback at all because to them, it's all the same. It's just us changing how we're recognizing the revenue to make it more clear to the market and also to make it more aligned with the managed service that we're offering now that we've moved to a cloud-based service as our primary delivery model. What is the conversion rate from stage 3 to stage 5 opportunities? We've given you guys a glimpse into the pipeline. As I said, we will continue to advance some of those details. They're being vetted as we go through finance for accuracy and when level of comfort comes into play around things like those conversion rates, we'll bring those to the market as well when we're ready. I'm an experienced investor, I'm rather confused. How are you really doing? Is it better and stronger than it was in July? Can you give me a view? So I think -- and Ash, feel free to chime in here if you think I've missed any of this. I mean I think, [ Tony ], from where I'm sitting, there's 2 things that are important to follow from a company sort of strategy and execution perspective. One is the Celebrus Software revenue line, which ultimately feeds the ARR, CElebrus ARR. In the first half, as you've seen and Ash walked through, Celebrus' ARR increased by 14.7% from period-to-period comparison, almost 21% year-on-year. That is what we care about. So when I think of success, when I'm meeting with the company, when I'm meeting with investors like yourselves, who have put your faith in us to deliver value, when I'm meeting with the management team, it's really do we have happy customers that are going to renew? Are we going to grow those customers? But ultimately, are we going to hit our ARR targets? And that's really where the value of the business lies. That's why we've built out the segments, the new segments also in the way that we have to make that very clear to the market because we know that it's been confusing for many of the reasons that Ash mentioned to understand sort of where the growth is coming from. All of the growth that we had in the first half fell in the Celebrus Software and as a result, the Celebrus software ARR total. That is the plan going forward, and that is where the growth will be. And hopefully, we execute as a team and we continue to close deals and continue to be successful so that we can continue to drive that number up year-on-year because that is what we focus on. And it's -- we've made a lot of changes to the business. We've brought the business a very long way in a short period of time in the 4 years that Ash and I have been here in transforming the business, the culture, et cetera. Right now, the focus is quite simple. It's selling more software. We've done all the other bits. We've hopefully brought more transparency to the market around company performance. We've built the business around software. We've taken many, many steps and put the right systems, processes and people in place around the globe to help us execute on that. And right now, the focus is just simply on executing and selling more software. Ash, anything you want to add on that? Ashoni Mehta: It's all good. Guerino Bruno: Has there been any interest from other airlines? There are a lot of airlines in the world. Yes. So we have a salesperson who's solely focused on travel and hospitality. That includes airlines, hotels. We've got some large airlines using the platform today. And similarly, the case studies that I provided for auto and for the gaming customer previously in this meeting, we're using those as well. Everybody's story is an opportunity to sell to more just like it. And the challenges that we're solving in one airline are the same challenges another airline is having. Similarly, what we're doing for banks, what we're doing for hotels, what we're doing for auto manufacturers. Getting these stories in a very simple, factual, easy-to-understand stories that our sales team can use in prospecting and can use at events and our marketing teams can use to build better video communications, better LinkedIn posts, et cetera, all of that helps. There's ample greenfield opportunity for us. Right now, our focus is on finding the right way to get our teams in the room with these brands with the right people so that they can do what they do best, and that's still the vision of what Celebrus could do for their business. What percentage of recent deals are direct versus via partners? Everything that we've closed in recent memory, Ash, keep me honest here, but it's all been direct, I believe, right? Ashoni Mehta: Yes. Certainly. Guerino Bruno: So everything has been direct. From a partner perspective, we are sort of revamping the partner relationships. I want them to be much more of a 2-way street where we're providing value to partners so that they also feel compelled to provide value to us. And that's how we're sort of transforming our engagements with technology partners as well as with some of our service partners around the globe to make it much more focused on revenue generation. But to date, everything that we've been doing has been driven from marketing investment and direct sales. You didn't ask this, but just in case others want to know this, the majority of our leads, the best lead source for us these days continues to be events. And there are events where in our sponsorship package of these events, we're guaranteed a number of one-to-one meetings with brands in our ICP or our ideal customer profile. That continues to be the best opportunity for us, these one-on-one interactions where we can show them the platform, help them understand the value and ideally get them excited for follow-up meetings once everybody returns home from those events. Are you going to split out identity security revenue from marketing revenue? No. It's all Celebrus Software revenues. And the reason being is clients are taking on use cases that traverse both. I think I mentioned back in July during this meeting, things like bot detection, as an example, being something that both the marketing and the fraud departments are using. We don't really see the value in splitting that out. Where we see the value is reporting our software -- Celebrus Software ARR, the growth there in and the revenues associated with that in each year. As that number grows and we continue to show that growth, we think that's what matters from a value perspective. If we show, for example, 20% to 30% growth in ARR year-on-year, I don't know that it matters how we split it as long as it's our IP that's driving it. How many substantial-sized customers do you have? The number of global deployments, I think, now is upwards of 140-ish maybe when we factor in deployments. We don't have -- in the Celebrus Software side, we don't have a single customer that sort of makes up a substantial amount. We have several customers that are north of 7 figures. Our average deal size, as I've mentioned in previous meetings, is about $0.5 million a year, so TCV of about $1.5 million as a starting point since our deal structure is a standard 3-year deal. Do you have any realistic medium-, long-term ARR target? I just kind of mentioned a growth percentage. I don't know, Ash, if you want to add anything else to that from your perspective? Ashoni Mehta: No, I don't think so. I mean, obviously, we model this out sort of 3, 5 years forward. And so we have some ideas as to where we could get to. You could argue kind of the next milestone, if you want to talk around numbers, is 25 and then 50s. But yes, so we do monitor that and our progress against it, but we don't disclose that publicly. Guerino Bruno: Thank you, Ash. And it looks like we've got one more question. So with the current market cap, are you concerned you become an acquisition for someone, particularly given the high cash holding? Absolutely. I'd be remiss if I didn't acknowledge that and say, yes, that's a conversation that we actively have at the Board level and also that Ash and I have been acutely aware of during the tenure here. Obviously, there's a lot of things that you can do in terms of readiness as a business to be able to respond to something like that and try to drive as much value as possible for shareholders should something like that happen that forces us to consider that a real offer and take the necessary steps from a regulatory perspective. But that's not as far as it goes. We're covered, we thought about it, we're prepared. But I don't really let the business focus on that. I'm not a big fan of like what ifs, right? Because I think you can get really caught up in that and take your eye off the ball. I think as a business, what we need to do right now is continue to focus on executing, selling more software and continuing to grow our customer base, but we can only control what we can control at the end of the day. And so you can be as prepared as you want the running -- the comment I always make. And I suppose it's very American of me, but it's the Mike Tyson philosophy of everybody's got a strategy until you get punched in the mouth. I think you could plan and plan and plan, but really what we need to focus on is what we can control. What we can control is what we're doing in the business day to day, how we're engaging with our customers, how we're executing in the market, how we're engaging our partners, and ultimately, what we're doing to drive that ARR number up so that our value for the business and for our shareholders and in the market continues to go up. And that's why I try to keep it laser-focused on, but I want to do least acknowledge that question because, yes, it's obviously something that we keep an eye on, it's something we're acutely aware of, but it's not something that we like it in our way of executing the business day to day. Operator: And that's it, Bill, Ash, thank you. Indeed, you've covered off every single question that we've had through, so thank you so much for that. Of course, any further questions do come through, we'll be able to review those. Just before redirecting investors to provide you with their feedback, which is particularly important to you and the team. Bill, could I just ask you just for a few closing comments, please. Guerino Bruno: Absolutely. As always, I'm just going to end it with thank you. I appreciate -- for those of you that have invested in us, I appreciate your faith in the business and our strategy. I appreciate your engagement today and all of the questions. This is the first sort of foray into the new way we're presenting our results. So hopefully, that came through clearly. If it didn't, obviously, feel free to you reach out, reach out to Cavendish, we're happy to have further meetings to make sure that you're comfortable and understand sort of where we're going and what we're focused on. But thank you so much for your time, and have a great rest of your day. Operator: Fantastic, Bill, Ash, thanks indeed for updating investors today. Can I please ask investors not to close the session. It should now be automatically redirected to provide your feedback, in order the team can better understand your views and expectations. This may take a few moments to complete and it would be greatly valued by the company. On behalf of management team of Celebrus Technologies plc, we'd like to thank you for attending today's presentation. And that concludes today's session, and good afternoon to you all.
Operator: Good day, and thank you for standing by. Welcome to Metcash 2026 Half Year Results Briefing. [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, Doug Jones, CEO. Please go ahead. Douglas Jones: Thank you, operator, and good morning, and welcome to the Metcash Limited FY '26 Half Year Results Presentation. As noted, my name is Doug Jones, Group CEO. And I'm joined this morning in Sydney by Deepa Sita, Group CFO; Grant Ramage, Food CEO; Kylie Wallbridge, Liquor CEO; and Scott Marshall, CEO of the Total Tools and Hardware Group; as well as Steve Ashe, EGM, Investor Relations. Before I go any further, you'll no doubt be aware that this morning, the ASX has a technical issue uploading certain documents to their public site. This affects all companies and not just us. We lodged all of our release statement, our financial report, our dividend declaration and our presentation this morning just before 9:00 a.m. All of those, except for the presentation, were released by the ASX on their site shortly thereafter. We have confirmed with the ASX that because all price-sensitive information is in the market, we may proceed with this call. I'd like to begin by acknowledging the traditional custodians of the land from which we are all connecting today. I'm in Wallumedegal Country, and I pay my respects to elders across country, past, present and emerging. As you know by now, our purpose guides our strategy and is an integral part of our culture. As I said at year-end, the contribution to communities by independent retailers across Australia is well documented and is something we're all proud of. The idea of making a meaningful difference in the communities our networks serve and operate in is part of our DNA. At the same time, we're energized by the opportunity to win alongside independents. This is a great time to be in partnership with independents, and we recognize the advantaged strategic positioning that this provides to support sustainable and meaningful value creation for our shareholders, too. It's also a good time to reflect on our updated aspiration, purpose and values that encompasses the strong balanced partnership that we enjoy with independent retailers. And on this basis, I'm pleased to share that our new purpose statement, winning with independents, is now live as well as our updated aspiration and values. We believe these reflect the nature of that partnership and our ambitious vision for the future. We continue to hold dear the belief that independents are worth fighting for, and we have developed in consultation with our engaged teams an updated set of values that underpin that aspiration. Everything we do is focused on driving our flywheel. It remains the manifestation of our competitive advantages and of how we create value for independent customers, shareholders and suppliers, more and more of whom are selecting us as their route-to-market partner. Our flywheel is also the heart of the platform from which we can grow our services to independent businesses across Australia, and it forms the foundation from which we can move closer to the shopper and through the value chain. These results are what I would call solid but behind our own expectations. But that simplistic view belies the many, many moving parts that make them up, including the trading conditions that you've heard about from many of our competitors. This year, we've maintained good momentum in the core of our business. And despite the challenging conditions, our independent networks remain healthy and confident. And the strategies of each of our pillars is delivering the results that you'd expect in those markets. Food is now a highly diversified and resilient business and has again delivered strong earnings growth. Once again, Liquor has won market share. While the improvements in Hardware & Tools continues, and we are seeing sustained signs of market recovery. TTHG earnings, excluding once-off strategy and integration costs, were in line with last year. Strong earnings and EBITDA leverage has been founded on disciplined operational and strategic execution as evidenced by our core operational metrics, those being delivery and logistics performance measures, which are high and trending in the right direction. As you know, the tobacco decline has accelerated, fueled by emboldened illicit operators and even more changes to the regulations. That said, we are starting to see a ramp-up at state level in both practical legislation and enforcement. It's certainly too early to claim any sort of victory, but it's pleasing to see at last some concerted effort by state authorities. In the face of all this, costs and working capital were well managed. And as I noted earlier, we're continuing to win new suppliers into the Metcash distribution networks. I'm delighted to have delivered the first-ever cross-pillar consumer-facing program this year in Big Family, Big Prizes. Not only did this drive engagement with shoppers across our brands, it provided our suppliers a new campaign and trade marketing tool and galvanized our own team and network of independent retailers who are incredibly positive about being part of a network of over 3,000 family-founded stores. The family-founded concept with its associated logos and brand iconography is now firmly launched and available to support further executions. In Horizon, I'm pleased to share that we've completed the core solution build phase, and we're now into testing with the first deployment of the solution scheduled for June next year and completion by the end of '26. We continue to balance carefully between cost, time, risk and quality, prioritizing the last of these. As of right now, the Sorted platform on an annualized basis is almost a $4 billion B2B digital marketplace. This follows the migration of all ALM states, except New South Wales and Queensland onto the platform. Once those two states migrate in January next year, on an annualized basis, Sorted will be doing around $6 billion, representing over 30% of group revenue. This is a significant and material modernization and transformation of our wholesale business and one that offers exciting new growth opportunities. At the same time as delivering on our core business priorities, we remain well positioned with attractive growth prospects. We've made good progress in integration of both Total Tools and Hardware Group as well as the Foodservice & Convenience business unit with a high-caliber TTHG leadership team already in place. The recovery in the building market remains an attractive opportunity that we are well placed to take advantage of. Our localized retail media build-out is on track. In summary, we remain well positioned for continued structural growth within Food and Liquor, the essentials part of our portfolio and for the recovery we see coming in Tools and Hardware, the more cyclical part of our portfolio. And we have the balance sheet flexibility to pursue our growth plans. As I noted a moment ago, there are many moving parts in our business. And to understand where we are in the journey requires we step back a moment and take a longer view. The reality is that this has been another period of disciplined execution and strategic progress. But it's also true that this operating discipline and focus on our core business imperatives, together with the strategic decisions taken over the last few years, have not only improved that core business but have put us in a position to take advantage of where we think the market will be in the next few years. The improvement in the core is a few proof points, and I'd start with the improvement of 22% uplift in EBIT and 34% uplift in cash earnings using EBITDA as a proxy. The Food pillar is a great example of a business that is of a higher quality at its core as well as being bigger and more diversified with more growth options. In the face of a massive and unprecedented decline in our largest category, earnings have grown consistently. This is down to both strong execution of core wholesale and logistics functions as well as the choices to diversify the business by not only improving the IGA value proposition and reducing reliance on tobacco, but at the same time, reinvesting in Campbells & Convenience to create the market leader in the petrol and convenience market and entering the foodservice market through Superior. The results of the consistent improvements in the core means that despite the most competitive grocery market in years, IGA itself is more competitive and relevant than ever. And at the same time, we are diversified and more resilient than ever. I received many questions about liquor consumption patterns in my meetings with investors, and I respond the same way each time. The ALM channel strategy of a diverse balanced focus on our banner retail, contract and on-premise customers provides unmatched scale and a natural hedge. And our strategy of reinvesting in our flywheel to keep our customers competitive and improving the shopper value proposition means that today, our strategic advantage is as strong as ever. And this is why I believe there remains further growth potential. The evidence of the network's competitiveness and relevance is in the market share gains. The addition of new customers to our networks and the choice by new suppliers to come into our DCs. The current earning headwinds are the result of margin and cost pressures in a competitive market where volume growth has to be earned. The growth of the Hardware & Tools pillar has been delivered through a strategy that saw Metcash acquired Total Tools Holdings and then implement the plan, honed-in IHG of investing in retail alongside our independent partners. Though the tailwinds of the pandemic undoubtedly helped, Total Tools is now a $1.3 billion leader in a category ideally positioned to serve the tradie in a market that needs to build 1 million homes in the next 5 years. While we're seeing early signs of market improvement, as I said in June, when we announced the formation of the Total Tools and Hardware Group, we're not waiting for the clouds to part. We're trying to make our own weather. The business is in better shape than ever and is ready for the uplift in market conditions that many believe is inevitable. Project Horizon is moving forward with deliberate and concrete steps, and we have good plans in place to get it done. We're further modernizing and strengthening the core through the expansion of Sorted, which, as I said, by early '26, when the two final ALM states are migrated, will be one of the largest B2B marketplaces in the country, if not the largest. This should support growth in our core and adjacent markets and talks to our digital leadership in the B2B space. Finally, the Metcash retail media network build-out continues on plan. We're installing assets at pace and steadily building the supporting tech stack and have already executed more than 270 campaigns. Before leaving this slide, I also want to point to the improvements inside, which aren't always visible to the observer. Our operating discipline, our teamwork and our alignment are stronger than ever. As I talk about our portfolio through the lens of sector participation, I want to again remind you of the strategy of steadily rebalancing the portfolio of revenue and value drivers. At year-end, I said that Metcash is often a misunderstood business and that assessing it as purely a wholesaler materially underestimates both the quality of the business and the opportunity. It's most helpful to understand the balance of the group as a wholesaler, retailer, distributor of food and liquor to the on-premise and out-of-home market and more recently as a franchisor. And secondly, through a deeper understanding of how the shape and balance has changed in recent years. And as you can see, continues to change. In the first half of this year, the contribution to total revenue from wholesaling has continued to moderate and now stands at 72%, down from 74% last year. We continue to think about the idea of winning with independents through the lens of operating businesses alongside them. We've done this for a long time now in Hardware and Total Tools, and we've signaled our intent to do the same in Food and Liquor. Each revenue model lets us tap into new markets and allows us to broaden our business goals beyond wholesaling. And as I said then, at the heart of our flywheel is our logistics capability. And at the heart of our business as a platform to support and win with independents is our wholesale business. But neither of those are the full extent of the Metcash Group nor of our ambition. Turning to the financial overview. Excluding tobacco, sales grew by a pleasing 4.5% in the half and was still positive 0.4% even including tobacco to a total of $9.6 billion. As I noted earlier, EBITDA was strong, up 2% or 4.3% excluding the once-off integration and strategy costs, which we called out at the recent AGM, and which are included in underlying earnings. The group delivered $240.2 million of EBIT and $126.7 million of underlying earnings or $0.115 a share. Cash performance was again strong as headlined by the almost 60% increase in operating cash flows leading to debt leverage ratios at the lower end of the target range and underlying the strong balance sheet. The Board has declared a fully franked dividend of $0.085 per share. Turning to the pillars now. It's pleasing to see revenue growth, excluding tobacco in all pillars, sustained in Food, excluding tobacco and in Liquor and accelerating in Hardware. Remember that Superior was included for just 5 months of last year. I noted the cash performance earlier, and it's good to note EBITDA up 2%. Excluding $8.3 million of once-off integration and strategy costs, group underlying EBIT for the half was up 1% and group EBITDA up 4.3%. Before I talk to the Food slide, the key note among you will notice that there's less data and information and more focus on the core strategic points that we want to make on these slides. You can rest assure that all the data that we've always provided is available in the appendices at the end of the slide pack. As we did at year-end, we've also provided updates on important strategic initiatives, including Horizon, retail media and Sorted as well as further information on our ESG progress in these appendices. But back to Food now. I really do want to highlight the continued competitiveness and relevance of the IGA offer. The market hasn't gotten easier, and competitive intensity has, if anything, increased. Despite that, our price competitiveness has continued to improve, and this has underpinned an improved rate of growth in the second quarter. The targeted Extra Specials promotional program, which is focused on large stores and which recently expanded from 75 to 95 stores is showing strong results. Average shelf prices across all 249 large IGA stores are now at or below the majors. I'm sure you'll appreciate the significance of this, more so in the current environment. Both Campbells & Convenience and Superior continue to grow. In Campbells & Convenience, we're winning new customers and growing our business with existing customers. I described it as a reinvigorated business in the year-end results, and we're seeing continued evidence of this. This business is actually growing tobacco sales as the preferred route-to-market partner for tobacco suppliers. This is the manifestation of a desire to control what we can, not waiting for someone else to change our fortunes. The growth in Superior increased through the half in a highly competitive market, and I'm pleased to have won the Coffee Club contract, which started at the beginning of the second half. Food earnings grew by 9.8% at the EBITDA level and 3.6% at the EBIT level. Higher depreciation and amortization is driven by the new DC in Truganina, as you would have seen in the second half of last year as well as the amortization of Superior customer contracts and right-of-use assets. EBIT growth was 6.1%, excluding strategy -- once-off strategy and integration costs. EBIT margins were up 10 basis points on the back of an improved product mix away from tobacco and an increased contribution from Foodservice & Convenience, even including those once-off costs. The liquor market has been described as lumpy in the half with the weather in New South Wales not helping things and is also characterized by an increased retail competitive intensity that we had expected. The IBA and ALM contract retail customers continue to deliver a competitive, relevant and convenient offer that differentiates them in the market and has allowed them to continue to take market share from their more formal competitors. It's pleasing that we've seen an acceleration of sales to on-premise customers, too. There have been several key wins with our customers in this half in the renewal of the Liquor Stax contract and the conversion of the Redcape Group from contract to the IBA banner group, which are standouts, and reflect the confidence that those important partners have in our ability to help them win in the market. In terms of key strategic initiatives, the Platinum growth program continues to deliver results, and we've recently completed the acquisition of Steve's Liquor Warehouse group, and these sales and earnings will be included from the second half. I spoke earlier about Sorted, which is now live across all ALM states, except New South Wales and Queensland, which will be transitioning in January next year. Earnings are impacted by $1.5 million of once-off integration and strategy costs, flat sales volumes in a declining market, inflationary cost pressures not offset by volume growth, margin pressure and lower inflationary environment and D&A related to the Truganina DC and digital investments in our supply chain. We're responding in all areas, including through disciplined cost and productivity programs, continued IBA growth, winning share of shopper wallets in the retail market and bringing more suppliers into the network. EBITDA as a proxy for cash earnings, excluding once-off costs, shows a very small decline and highlights the impact of the steps we've taken. I'm pleased with how the team has both managed costs and still gained share in challenging trading conditions. During the half, we announced the merger of the Independent Hardware Group and Total Tools to form the Total Tools and Hardware Group. I'm pleased and grateful for the way in which our team members have continued to deliver for their customers through these changes. They've continued to operate with discipline and trade with hunger in difficult markets and times of change. In our business, we prize the ability to hustle, and these teams have certainly done this. As you can see, both Hardware and Total Tools are in growth, and this has accelerated in the second quarter. It's pleasing to note that building supplies, builders' hardware and timber are categories that are now in growth and the Total Tools delivered growth in all three of their key models: franchise, exclusive brands and retail store sales. Earnings in the pillar are most impacted by trading conditions in Victoria, New South Wales and Tasmania. Again, you'll be interested in what actions we've taken. We have a high-caliber leadership team in place and continue to refine our offer through range and pricing reviews in both Hardware & Tools to meet the needs of our core trade and professional customer in both businesses. Mitre 10's Low Prices Nailed Down promotional program is now well settled and delivering pleasing results. We've refocused our private and exclusive brands program, and we see more upside here. The cost-out programs that have been in place for a few years remain, and we continue to balance this with making sure we have the capacity to serve our customers. We're also seeing that some of the improved market trends were sustained into the half, and I'm pleased that housing starts have now returned to growth at a national level with sustained strength in WA, South Australia and Queensland. The frame and truss pipeline is full in Queensland and building in other states. EBITDA, excluding once-off costs, was up 2.5%, underpinned by the improved sales performance. I'm particularly pleased that excluding these once-off costs, the business returned to positive EBIT growth and leverage in the second quarter. I'll now hand over to Deepa for her financial review. Deepa Sita: Thank you, Doug, and good morning, everyone. I'll start by presenting a high-level overview of the financial performance for the first half. Disciplined execution continues to drive strong cash generation and sustained profitability despite the ongoing market pressures. Maintaining robust operational and financial management remains central to the strategic framework, ensuring we are well positioned to adapt to changing external conditions. The group's robust cash performance is evidenced by a 3-year rolling cash realization ratio of 106%. Given the timing and seasonal effects of period-end CRR results, the 3-year rolling measure remains the most meaningful indicator. While certain working capital timing differences are anticipated to reverse in the second half of the year, we project that the 3-year CRR will remain at the upper end of the previously guided range of 80% to 90% by year-end. Balance sheet flexibility is maintained, with the debt leverage ratio positioned at the low end of the guided range of 1 to 1.75x. As Doug mentioned, the Board has declared a final dividend of $0.085 per share, reflecting a moderate increase against the annual target payout ratio. The dividend reinvestment plan remains in place with no discount applied. The ROFE at 20% reflects the short-term impact of business acquisitions, ongoing investment in long-term enablers as well as the softer earnings. Turning to capital management. This half's outcome reflects a consistent and disciplined application of the capital management framework. The operating cash flow for the half amounted to $262 million, underpinned by effective cost control and diligent working capital management. Capital expenditure and M&A investments amounted to $104 million with a portion allocated to the acquisition of Steve's Liquor. The remaining funds were allocated towards reinforcing core business operations and advancing key priorities, including technology upgrades, network expansion and growth initiatives. The year-on-year variance mainly reflects last year's $400 million investment in business acquisitions, most notably the purchase of Superior Foods. The $126 million decrease in net debt primarily reflects robust operating cash flows and timing of investments as the business continues to evaluate potential investment opportunities. The interim dividend of $0.085 per share reflects a payout ratio of approximately 74% underlying NPAT. The key dates for the dividend and DRP are provided in the appendix section of the presentation. The moderation of ROFE was expected and as mentioned, is primarily due to the short-term impact of business acquisitions, continued investment in long-term enablers such as technology and supply chain and a softer trading environment. This slide provides an overview of the group's P&L performance and other key financial highlights. Revenue and EBITDA have remained steady, supported by a diversified business model. Excluding tobacco, revenue growth has been achieved across all pillars. EBITDA growth is reflective of solid underlying cash generation and operating leverage within the group. The depreciation and amortization for the first half of FY '26 is in line with the second half of the prior year. The increase relative to the first half in the prior year reflects the addition of new assets such as the Truganina DC, which became operational mid-period in the prior year. Additional uplift also arose from the Superior Foods acquisition and new leases, noting that Superior Foods was only consolidated for 5 months in the first half of last year. As highlighted at the year-end, the finalization of the Superior Foods purchase price allocation in the second half of FY '25 also increased customer-related amortization. Notwithstanding the increase in depreciation and amortization, EBIT before strategy and integration costs, reflects a modest year-on-year improvement and underscores the company's continued emphasis on cost management as well as operational efficiencies. The net finance cost for the half amounted to $60.1 million. The year-on-year increase is attributable to the timing of the Superior Foods acquisition during the first half of last year. Looking ahead, we anticipate the higher average debt utilization in the second half, which will align with peak trading periods as well as planned investment activities. Assuming interest rates remain unchanged in the second half, we expect the full year finance cost to remain in line with previous guidance of between $120 million and $125 million. Significant items are of the same nature as those disclosed in the prior years and further details are available on the slide as well as in the financial report. The year-on-year change in underlying EPS at $0.115 is largely attributable to the one-off integration and strategic costs, which are reflected within EBIT. Excluding these costs, underlying EPS is broadly in line with the prior year. Strong operating cash flows, combined with considered capital investments reflect Metcash's disciplined approach to cash management, enabling ongoing expansion and growth while preserving the group's financial resilience. Capital expenditure continues to be carefully evaluated in line with our capital management framework. FY '26 capital expenditure, excluding acquisitions, is expected to remain in line with previous guidance of approximately $200 million. As in the prior years, we will provide future CapEx guidance at the year-end. The group retains balance sheet flexibility and remains well within the parameters of its capital management framework. Net working capital closed at $430 million with the increase in inventory levels supported by favorable supplier funding ratios. The increase in inventory was primarily driven by the strategic uplift in tobacco stock, which is fully funded through accounts payable and supplier trade finance at no cost to Metcash. Average working capital days remained low at 13.2 days, reflecting our ongoing focus on working capital efficiency and performance. Metcash maintains a healthy, well-balanced and carefully managed debt maturity profile with total facilities of $1.56 billion. Undrawn facilities of approximately $860 million provide the flexibility required to manage net working capital fluctuations throughout the year, both intra-month as well as seasonally. Closing net debt was approximately $600 million, resulting in a DLR of 1x, which is in line with our target range of 1 to 1.75x. Given the fluctuation in net working capital throughout the year, closing net debt should not be viewed in isolation. Therefore, in line with previous reporting periods, we've again shared the average net debt position to offer a clearer picture of our financial leverage. The average net debt during the first half was approximately $800 million, remaining generally consistent with the preceding two periods -- reporting periods. This corresponds to a DLR of 1.32x. The weighted average debt maturity is at 3.2 years. The facility maturities are strategically staggered within our syndicated structure, enhancing resilience throughout business cycles. The weighted average cost of debt is lower than the prior year, benefiting from the RBA interest rate cuts earlier this year. $295 million remains hedged at a favorable rate of 3.69%. In conclusion, our balance sheet remains strong with leverage well within target parameters. Our cash-focused culture continues to deliver with operating cash outperforming expectations and working capital discipline remaining a hallmark of our approach. I'll now hand back to Doug for the group trading update and outlook. Douglas Jones: Thanks, Deepa. Growth momentum, excluding tobacco has continued into the second half of FY '26. We're seeing an uplift in growth rates across Supermarkets and Total Tools with broadly sustained performance in Foodservice & Convenience, Hardware and Liquor. In Supermarkets, the business has maintained its competitive edge despite heightened price competition. The increased growth rate observed in Q2 has continued, driven by our differentiated and localized offer as well as the success of the Extra Specials promotional program in large stores. Strong growth continues in Campbells & Convenience, supported by investments in the Sorted order portal and distribution center upgrades. These initiatives underpin our leading position in the petrol and convenience market. Notably, we've secured more large P&C customers as part of our tobacco mitigation strategy with the tobacco supply to BP commencing mid-December and representing approximately $60 million per annum. In Superior, sales growth remains robust, buoyed by customer expansion, including the Coffee Club contract win, which began in late October and is valued around $55 million per year. Liquor sales are flat to start the half, reflecting the effectiveness of the multichannel strategy in a challenging market. We've seen accelerated sales to on-premise customers while sales to IBA and contract customers in Australia reflect that more subdued market. The Total Tools and Hardware Group sales growth has strengthened compared to the improved first half with Total Tools showing particularly strong underlying growth. This is attributed to improved operational performance and earlier start to Black Friday promotions and continued store growth. In Hardware, growth has been sustained in the subdued market, thanks to strong execution. We're also seeing early signs of market recovery. The frame and truss pipeline, as I noted, remains at capacity in Queensland and is building in other states. While this is only a 4-week period, the start to the second half has been pleasing, and we're planning for positive sales momentum for the remainder of the half. The business is well positioned due to an increased diversity and resilience and with a continued focus on disciplined execution of our strategy. Before I hand to the operator, I do want to make a comment on Horizon, and I'm recognizing that we are in this unique situation of not all the appendices in your hands. There's been an immaterial increase in the total investment over the full life of the program and some savings that we've made in the last 18 months, which will be spent and invested over the next 12. But as I say, a very, very small, I'd call it, immaterial increase, which I think is a strong result. All right. I'll now hand over to the operator, who will take questions. Operator: [Operator Instructions] Our first question comes from Adrian Lemme from Citi. Adrian Lemme: Look, I had a question on Liquor. It's really good, obviously, to see share gains in what is a very tough market. Obviously, your competitors are trying to address their share losses, and it has gotten more competitive. Are you planning to support your retail partners to hold share? And if so, should we expect further margin decline, please? Douglas Jones: Yes. Thanks, Adrian. I'll make a few comments, and then I'll invite Kylie to make some comments about the market and our plans. I think what you've seen, as I noted, is that the earnings pressure is fundamentally a function that you've seen in all of our competitors of a much lower inflation environment and flat volume in our business, which means that absorbing and offsetting CODB inflation is just that much more difficult. Absolutely, you've heard me say, and I think you're probably all sick of hearing me say that our flywheel is the most important thing for us and making sure that we keep our retailers competitive is how we keep that flywheel spinning. That said, we haven't invested over and above in pricing for our retailers. Those are the programs that are in place. And so that margin compression is not because we're giving away more margin to them. It's because of the relationship between volume and inflation. I'll invite Kylie to make a few comments about the market generally. Kylie Wallbridge: Yes. I will -- thank you for the question. And I would echo Doug's comments that our margin impact isn't as a result of upweighting increasing pricing activity in the market. In fact, our investment in our network is around improving that shopper proposition, the quality of that experience and the quality of those programs in partnership with our suppliers. We are the second largest customer for most of our suppliers. And in fact, in some categories, we're actually the #1 customer for the largest suppliers in the market. So that partnership without investing over and above in price and resulting in market share gains, I think, speaks to long-standing quality and the service proposition. Adrian Lemme: That's very helpful. If I may ask just a second question, just Doug, more broadly on the strategy costs that have been incurred this year, mostly in the first half. Can you just confirm you are not planning to incur those costs in '27? And now that the work has mostly been completed, what do you see as being the benefits of this investment, please? Douglas Jones: Yes. So I'll make two points there. The first is that we told you that we were looking at $12 million for the year of integration and strategy costs. We've incurred $8.3 million in total, and so you can do the math. There will still be some in the second half. And I can confirm that we don't see any more coming in, in the following year. I do want to just reassure that the bulk of those costs are in integration costs. Operator: Next, we have Craig Woolford from MST Marquee. Craig Woolford: Just two questions, if I can. The first one, just on your Total Tools performance. It does look quite a strong period. I'm just wrestling with how you want us to interpret 9.8% versus, say, a trend of 3% to 4% in the first half '26. How much do you think is Black Friday? How much is an underlying consumer? What would you say about the competitive environment in the [ tools ] segment? Douglas Jones: Yes, sure. I'll make a couple of comments and then invite Scott to add, hopefully, not correct. So we have had -- we're cycling new stores, and we've had a few more stores. Black Friday, when we talk about going early on Black Friday, that was our competitors who went early, and we responded. I'm really pleased and grateful for the way that the team responded quickly and with precision, and we're very comfortable with that. It's very difficult, Craig, you'll know, to attribute how much of it is to a particular promotion. And just remember, it's 4 weeks. But certainly, I think that the underlying trend is strong, and we did point to a strong second quarter as well. Scott, do you want to add anything? Scott Marshall: No, I think that's broadly right, Doug. And Craig, look, if you look at the growth for the half in total, we only added three stores. We're quite happy with the underlying performance. And we are working really hard with our customers. So where you've got our loyalty programs, we're very focused on our direct engagement with them and running the right promotions at the right time. So there's been a lot of work in resetting range and repositioning ourselves. Craig Woolford: And you just talked -- right at the start of the presentation, Doug, you talked about the independents in healthy shape and also looking to be more involved in retail in Food and Liquor. What exactly does that mean? Is there any examples you can give us of what you've done or what you would like to do? Douglas Jones: Yes. I mean I can be very specific about what it means is that -- and we've told you guys this before that we see ourselves owning retail stores in the future. We're very cautious about how we deploy that capital. We're not going to overpay. I mean the example -- obviously, I won't talk to any specific discussions or engagements that we've had. But other than that, that we've closed, which is Steve's Liquor Warehouse, $50-odd million of turnover and $3 million to $4 of EBIT, that's what it means, and we're in progress. Operator: Next, we have David Errington from Bank of America. David Errington: Doug, just a quick clarification before I ask my questions. I've been asked -- an e-mail came through, and I must admit it's to Adrian's question about the recurrence of the restructuring costs in '27. You said that you wouldn't get an increase. Could you just clarify what you meant by that? In other words, will those restructuring costs of $10 million or so disappear? Or will they just stay flat into the foreseeable future? If you could just clarify that before I ask the next question, that would be great. Douglas Jones: Yes. I'm sorry, I wasn't clear. They will disappear. We do not expect them to recur. David Errington: Right. Excellent. So that's a $10 million tailwind in '27. I think that was important to clear up, Doug. Doug, one of the attractions of this result for me was the performance of Campbells & Convenience, the performance there. And I must admit, it's snuck under the radar for me. And if you could take a minute to go through some of your commentary in the release where you say the acceleration in growth continued to be underpinned by the business' new growth strategy, which has positioned it as the leading supplier in the sector, supplying all major petrol and convenience operators. I mean it's a pretty big increase, like $50 million first half on first half sales growth. It's really quite meaningful now. So could you go into saying, what is it that you're doing differently now compared to what you were doing previously that's actually seeing some really chunky sales growth here? I mean Superior is doing very well. I get that, new contracts and whatnot. But this convenience business is sort of like crept up on me. And I must admit, if you could spend a couple of minutes elaborating what your new strategy has been and going forward, that would be wonderful. Douglas Jones: Sure, Dave. That sneaks up on you, so I'm -- I don't know if that's a good thing or not. So yes, thanks, and thanks for calling it out. I'm going to invite Grant to make some comments. But just to remind you that we're still in the -- what is the word, annualizing the Ampol contract. But Grant is the leader of the business, and I'll invite him to talk about the strategy. Grant Ramage: Thanks, Doug. Thanks, David, for your question. As you know, we commenced supplying Ampol in February. It ramped up through the course of February. So you've got 6 months now in the result of full supply. At the time we won that contract, which was over a year ago, we talked about around a $70 million annualized total. It looks like it's going to be a bit more than that, which we're pretty happy with. And I think beyond that obvious upside is we are growing really well with most of our large customers in petrol and convenience. And why is that? Well, we've worked hard to be a partner to that industry. It's not a side gig for us. As a wholesaler, it's the main game. So investing in our Sorted platform where many of them place their orders, investing in DCs, upgrading the DCs. Obviously, you're well aware of Truganina last year, but we're also upgrading in WA. We've been able to shift some volume around to support the Superior business, create capacity for them to grow. So moving QSR volume into Truganina, moving QSR volume into Canning Vale early in the year has created the capacity for wins like Coffee Club. And it's a good example of the benefits that we're getting of putting the businesses together as a new Foodservice & Convenience business. So there's a number of factors, but really, it's being a great partner, and that's our aim. We've even won a couple of awards from our customers through the course of the half, which we're really happy with. But it's -- I believe that there's ongoing opportunity for us in that space. David Errington: Yes, that was where I was going. Is there more upside do you think? Or is there more wins out there for you in the near term? Grant Ramage: Yes. Well, we're working with all of the big players in petrol and convenience now, but we're not supplying any of them with all of their needs. So there's a share of wallet opportunity that remains, and we're actively competing and participating in tender processes and looking to build on the wins that we've had. And obviously, the key to that is providing good service to our customers and good value. So yes, I think there is opportunity, but it's a competitive market as well. And we've had a few wins at the expense of competitors, and you don't expect them to stand still in the future. David Errington: Okay. And Doug, can I finish off, look, you mentioned Horizon. I remember at your Strategy Day, it got a lot of press. This would have been over a year ago now, I suppose. It got a lot of press. You seem to be on top of it now or it's coming -- and now we've got a line of sight, it's going to be coming on live in about a year. Are you confident that it's going to come on without much of a hitch? Or is it something that we as investors should keep at the back of our minds? It seemed to be on your comments, you're a little bit more comfortable now than what you might have been a year ago. But can you give us a bit of flavor as to where your feelings are toward this major project when it comes on? Douglas Jones: Yes, sure. Thanks for the opportunity. There's a couple of things I'd say, and I'll start with the fact that, as I always say, it's a large and complex program. I do want to quote our CIO, Neil Whiteing, who always reminds us that the system will be tested. We just want to make sure it's by us and not by the users. And so we're very focused on making sure that what has been built is of a high quality. We -- I said maybe a year, maybe it was 1.5 years ago. I think it was a year ago, I spoke about this idea of as we move through the program, we'll essentially buy down the risk. And what that means is that as you go through specific milestones, you kind of tuck those to bed and the risk diminishes. It doesn't go away. The completion of the solution build was a significant milestone for us and one that was completed on time and actually well on budget, slightly better. I referenced some savings that we've had. And so all of that does -- it does give you confidence. But I want to be very clear, this is no means easy, and it's not yet done. So we are very focused. We're in the phase where the business is very engaged with the program, and they have their hands on it. And you can never really be sure what will come out of testing, but so far, so good. So yes, my confidence grows with each passing milestone. Sorry, the one last thing I'd say is I think we've done a very good job. The team have done a very good job of managing the costs, what we call the burn rate. And that's why, as I pointed to the fact that the costs in the next 12 months are slightly higher than we showed, but that's because we've actually had a lower burn rate leading up to it as well as that small increase in the total overall spend. We have also engaged now with customers and suppliers to talk to them about our deployment plans. So stuff is very real for us. David Errington: It just seems a little bit more optimistic today than what it was about 12 months ago. And there's a line of sight for it now. So yes, that's why my question. Hopefully, it goes well. And good cash realization too, Deepa. That wasn't lost as well. Operator: Next, we have Bryan Raymond from JPMorgan. Bryan Raymond: First one is just on this Extra Specials program that's in, I think, 75 going to 95 stores within the Food business, started during September. Just wondering if that is meaningful enough to move the dial for, say, the acceleration into the trading update over November. And then just the second part of that question is just how it's funded between supplier, wholesaler, retailer in general terms. Douglas Jones: Bryan, thanks for the questions. Yes, I'll let Grant talk to the details of it. I do want to say, though, that the business is made up of many, many moving parts and an enormous amount of effort across many programs. And so as always, pinning results on one intervention is dangerous. But I'm confident Grant is going to tell you that it is making a difference. Grant Ramage: Yes. Thanks, Doug. Thanks, Bryan, for the question. you're right. It started just after the AGM. We announced it there. We started with 75 stores. It's increased to 95 recently, and we think that will grow again in the new year. Obviously, the 95 stores that it's in today are 95 of our biggest stores, and therefore, their contribution to the overall network sales number is disproportionately high. So I can tell you that the program is delivering strong results to the retailers. They're getting roughly double the sales growth rate than the rest of the network, and it's good for us as a wholesaler as well and it's growing our wholesale sales, too. So we see value in it. Obviously, it's about delivering great value to shoppers. The specials themselves are better than market pricing. And it's really good to put IGA in that light of really being very, very competitive. And it builds on our large group of stores where we've done exceptional work over the last few years in getting them to a really competitive position and where their shelf prices, as Doug called out earlier, are now below Coles and Woolworths in many cases. In terms of how it's funded, like everything we do, it's a combination of supplier support. Suppliers continue to be supportive of independents, and they want independents to succeed. Our retailers, of course, invest margin in promotions to drive results. And Metcash also has invested in this through the course of the half. It's embedded within our results. We're very careful about our price investment. You see price match is the single biggest part of that. We always make some other investments around that, and it's within the bounds of normal for us. But it's very targeted investment, and I'm very pleased with the results. Bryan Raymond: Okay. That's fantastic. And then just second one for me is just on employee costs. I was a bit surprised, I just look at -- the sort of through the detail that we do have at this stage. It looked like about 8% employee cost growth over the period, sort of 2x sort of wage inflation. I understand there's lots of moving parts in the business, and I'm sure there's some JV contribution to that in stores that have converted and other elements. But it just seems like a very high number compared to your sales growth and compared to wage growth. So is there sort of a simple explanation, maybe one for Deepa, in terms of how that might have come through? Douglas Jones: No. I mean we're a large and complex business, Bryan. So there isn't one simple explanation. The part of it is Superior. There's additional cost because we had an additional month as well as some of the other small acquisitions we've made. There is also a higher, what do you call it, accrual of short-term incentives than there was last year and natural CPI increases. I'm sure you'll be aware that certainly in the bargaining space, there's quite a lot of pressure. So there's a number of contributing factors. Operator: Next comes from Shaun Cousins from UBS. Shaun Cousins from UBS. Next, we have Caleb Wheatley from Macquarie. Caleb Wheatley: Just a follow-up on the IGA network. It sounds like the Extra Specials is doing quite well. Can you just talk to where you're seeing average price index now across the network relative to the sector? Any comments you can make on other initiatives being considered to drive market share, please? Grant Ramage: Yes, I can answer that, Caleb. The price index, we've never shared the exact number of the price index, but we've described over the last 5 years, continuous improvement. That continues to be the case in all channels, so small, large and medium-sized stores all continue to improve. What I'm particularly pleased about is year-on-year, our price index is flat. So in a market that's clearly become more competitive, we've held that position. And through programs like Extra Specials in particular stores, we've obviously improved the position. So it's an ongoing process. It's the sum of many parts. So it's a combination of shelf prices, the promotional program that we run, and it's a weighted average measure of price paid looking backwards. So it compares the average price paid in IGA to price paid in the chains. And then beyond that, other factors for performance in the network, obviously, store numbers, you can see we're continuing to open stores in our sweet spot, medium-sized stores, which is healthy. We also continue to move stores out of IGA and into other banners where they are unwilling or unable to meet the channel standards we set for IGA. We keep raising those standards along with working with retailers. And there are some stores that simply don't fit into the network anymore. And as they move out of IGA, they continue generally to be Metcash wholesale customers, but they do drop out of the Metcash -- the IGA market share [ rate. ] But we think that's better because having that strong cohort of very good execution stores is what allows us to work with suppliers to get additional investment in things like high-compete Extra Specials. Caleb Wheatley: That's clear. And just a second one, if I could, just on margins in Hardware. I appreciate the comments, Doug, on the one-offs and those rolling out as we go into next year, but you've also noted retail margin pressures in the release. Just keen to understand what you're seeing on that retail margin pressure front and including the implications of some of the comments you made on Black Friday starting a bit earlier from your competitor set there as well, please? Douglas Jones: Yes, sure, Caleb. Happy to comment on those. I think it's important, firstly, when you're talking about the Hardware business and we say retail, what we really mean they're trade distribution sites that we own in the main. And so they trade, they negotiate and make prices with their customers very often. And so that's where you're seeing that competitive intensity and margin pressure coming through. We're very comfortable that our teams are balancing that well. I know Scott and his team have got a huge focus on driving sustainable sales growth. In Total Tools, the retail sales margins have been a little steadier. In terms of Black Friday, I think I've kind of said it all, it was the market that moved earlier than they have in the past. We were alive and waiting for it, and I think we responded very well. I know Scott and the team are comfortable. And let's see how we trade. Black Friday itself has just finished, but let's see how we trade in the next few weeks of the half. Operator: Next, we have Ben from Jarden. Ben Gilbert: Just the first one, just on Hardware. Just keen to dig into a little bit in terms of the comments around seeing green shoots. Obviously, the Total Tools update was stronger. Could you talk to outside of Queensland, where the order book is obviously pretty full for frame and truss, how are you seeing the order book more broadly? Are you seeing lengthening of it? Are you seeing sort of some improving growth there? And then also, Scott, just be interested in just that very strong like-for-like update for Total Tools in the first 4 weeks. Is there anything funny or unusual in that? Or do you think that's -- could be the beginning of a bit of a trend? Douglas Jones: Ben, the line is not that great. So we're going to answer the question. But if we miss something, then please prompt us again. We can answer what we thought we heard. Scott Marshall: Yes. Thanks, Ben. I appreciate it. Look, for us, your -- the first part of the question around Hardware and performance, I think we called out the differences by state. Where we are seeing greater challenges, definitely Victoria, Tas and then New South Wales. There -- if you look at the national approval starts, there is an uptick, which gives us some confidence, there's some green shoots there. There is still those structural challenges around trades that are meaning completions are prolonged. But for us, we are trading, I think, well and out there hunting business, as Doug said, but the market is competitive. So if you want -- we don't normally give a split by market, but Victoria, where we have a higher share of our own network is a drag for us. The other part of your question around Tools. And look, I think we've called out, it's a 4-week period. The half growth in the network has been strong. We're working hard to have the right promotions at the right time. We're really pleased with that month performance being really targeted with our customer engagement and having the right promotions. So again, it's a very short period. I wouldn't -- I don't think I can add more commentary than that. Ben Gilbert: And just a second question. The market's got a pretty material lift in the rate of margin expansion for Hardware into fiscal '27. And I appreciate we're sort of looking at the crystal ball here and we're not going to get guidance for '27. But could you just give us a bit of an understanding or feeling for how you feel that leverage can run through this business as the cycle turns? Because we haven't really seen an up cycle in the business in its current form. Do you think that the cost base is largely embedded with the business now, so improving top line should drive decent leverage through the P&L? If it's more trade driven, is it dilutive? Just could you give us a few sort of -- I suppose, sort of [ going forward, ] how you think about the margin construct as the cycle starts to tick up? Douglas Jones: Ben, I'll take a crack at that. We obviously have to be cautious about any forward guidance, and I'm not going to do that because I just can't. But our plans and strategies are designed in such a way that as volume lifts, we're able to take advantage of that. I don't think it should be lost on anybody that while volume may be subdued and has been for a while now, cost inflation has continued to grow. It doesn't go away. And that is what we've been managing very carefully, and it's very, very difficult to offset it in a business that has relatively high fixed costs like particularly trade distribution businesses do. And so we've been working very, very hard to stay in one place. The flip side, mathematically, should happen as well as volume lifts. Now we're very focused on making sure that we don't somehow feed into the volume pressures by taking out so many costs that we're unable to serve our customers, and it's a very live issue that the team manage on a site-by-site basis. So I think that's the best we can give you now. I'd sum it up by saying our plans and strategies are designed to deliver leverage. And remember, I did say that if you take away the second quarter integration and strategy costs, we did achieve positive leverage in the second quarter. I mean it's only one quarter, but we did achieve it. Operator: Next, we have Shaun Cousins from UBS. Shaun Cousins: Can you hear me now? Douglas Jones: Yes, we got you loud and clear. Shaun Cousins: Yes. Apologies about before. Maybe just regarding the Food business. And I was just curious to understand how you're handling the contagion of the tobacco weakness since the 1st of July on the broader Food business? Do you think you can -- should we just see an annualization of what looks like sort of weaker sales growth? And I'm not sure -- just trying to work through your presentation materials, if you've provided what like-for-like is maybe on that second quarter period, but it looks sort of as there's been somewhat of a step down. So should we anticipate that the weakness that you've seen, say, since the 1st of July in that in Food that, that continues on? Or can you do better and actually improve that? And maybe just further to IGA, just how do you think your price perception is relative to the price reductions that you've spoken about before in that -- in your leading stores? Douglas Jones: Yes. I mean we don't generally give you quarter-by-quarter for everything, but we did call out that particularly talking about the Extra Specials program, actually Supermarkets growth recovered a bit in the second quarter. But I'll let Grant talk about the actions and initiatives we're taking to, I like your word, defend against the contagion. Grant Ramage: Shaun, thanks for the question. As you say, since the beginning of July, we've seen a significant step-down in tobacco even from a declining market before that as more and more of the sales pushed into the illegal market. There's obviously a loss of tobacco sales on top of that, you lose the associated product sales, the products that would have been bought in the same transaction, and that is definitely a drag on the network, and we called that out as we see that, but the dropdown in July was a little bit more significant than we expected. Our objective is to grow the whole store. We've been working very hard with retailers, both on a competitive front, which I think we've covered already. We see things like Chobani coming into our DCs through the course of the half. That is good not just for Metcash, but good for the network because Chobani in our distribution model means more stores getting more frequent deliveries, better in-stock position and a significant improvement in our competitive position there. There are other suppliers continuing to come in. So Monde Nissen with the rest of their products came in just at the end of -- the beginning of the second half. and there's more products like that in the pipeline. We work hard on that competitive position. We've talked about the Extra Specials, but improving across all of the store network. How is it for -- how do people perceive that? That's a much harder thing to change. It takes time. But I think if we're doing the right things, we're calling out those Extra Specials, very active in digital marketing. We've really seen a shift of our marketing focus from printed [ walked ] catalogs increasingly to digital means, and that allows us to increase our reach and reach more people with that message. So it takes time to shift perception, but we are doing all the right things, and I'm confident that over time, that will continue to improve. So I think you can expect that step-down in tobacco to continue for -- until it cycles out at the end of June. We are seeing some positive signs on enforcement, as Doug touched on earlier. And we continue to advocate for the network because we can see the impact that it has, particularly on our customers in the tobacco loss. So we've been very actively advocating for improved enforcement measures, and we're pleased to see some evidence of that happening now. Shaun Cousins: Great. And maybe just a question on -- within the Hardware division. Have you split out the Total Tools and IHG Hardware EBIT? Douglas Jones: Shaun, we split out the -- no, we don't split out the EBIT. We split out the retail sales, as we said we would. And you'll see that in the appendix, so I'm just paging to it. So we'll give you sales between the two, and we'll split out owned stores and third-party sales, and then we give you total EBITDA and EBIT. Shaun Cousins: So you're no longer telling us what Total Tools and IHG EBIT is respectively? Douglas Jones: No. And remember I told you that we weren't going to be able to do that because we have now started combining a number of functions. So I told you that at year-end. Shaun Cousins: Yes. Okay. Maybe just one quick question on disclosure going forward. You've spoken about a change to a different revenue model by way of sort of being a wholesaler, foodservice retailer, franchisor. Is there an intention to sort of maybe think about disclosing [indiscernible] earnings on that basis, just given that, that can help shift the way of thinking from the investment community if we have some earnings on that with some history, please? Douglas Jones: Yes. We are thinking about how to do that. Your words are ringing in my ears from the last time we discussed this, and you made your point well. As you've seen, we've given you some more information this time around. We need to think carefully about being very helpful and accurate in the way we attribute earnings. We won't be able to do it at the EBIT level because there's a whole lot of costs that are not attributable between them. But -- so not this time around, Shaun. I think you'll see some movements when we talk to the market in March at our Investor Day next year and at year-end. Operator: Next, we have Phil Kimber from E&P Capital. Phillip Kimber: My first question is just on the Food business. You guys are doing a great job there, and you've talked about some sales momentum. Just trying to understand from your customers' perspective, with such a big fall in tobacco, is it having a more material impact on their profitability than it seems to be on your profitability? Or are they managing it well like you are? Grant Ramage: Thanks, Phil. I'll take that. Yes, it undoubtedly is having a bigger impact on our customers' profitability. I think we've said consistently over the years that our margin on tobacco is considerably lower than non-tobacco, and that most of the profit made on tobacco is being made in the network. So you see that in other integrated retailers as well where they're calling out substantial drops in their tobacco income. The challenge for us is to replace that value in our customers' P&L. So we've been supporting them to drive growth. So it's pleasing to see that at a department level, fresh is now bigger than tobacco for Metcash. And in retail, fresh is growing strongly. Fresh is the biggest driver of store choice. Obviously, we talked about value a lot already, so I won't repeat that, but really focusing on getting the basics right across the store, macro space allocation, ranging, pricing, the promotional program that we run, high-quality service, high-quality fresh. All of those things help lift overall store performance, and they are the things that we've been working on for some time with retailers but really accelerated in this period because everybody has seen the challenge of tobacco, and it's really helping to galvanize the network around some initiatives to drive improvement in performance that will ultimately offset that tobacco challenge. And who knows, some of the tobacco business might come back. Phillip Kimber: Yes. And then my second one, just quickly was on -- I think on the call, it was mentioned that there was a strategic investment in tobacco. And I just wanted to understand that given you also said that sales took a step down from the recent change. Why would you be making a strategic investment in the inventory in tobacco? And is there a sort of one-off profit rebate benefit from that? Douglas Jones: Phil, I'll take that one. So as a wholesaler, we're always taking positions. And what we do is make sure that we're taking those positions in a responsible way ahead of price increases. And you'll also recall that at year-end, we told you that we expected that the impact of the removal of the accelerated tobacco excise program will be around $5 million, we estimate. And that's part of our -- that buy-in ahead of increase is part of our strategies to manage that as well as all sorts of other things from retail media to all of the initiatives Grant spoke about. I just want to be clear, there's no profit recognized until the product is sold. And then the last point I want to make is that this is done in consultation and in partnership with our tobacco suppliers. And I've spoken for a while now and so is Grant about our strategic partnership with them as their chosen preferred route to market. We do this every year. This is entirely normal, and there is nothing unusual about it. Operator: Next, we have Michael Simotas from Jefferies. Michael Simotas: First one for me on Food, just fleshing out some of the topics that have been covered a little bit. There's a line in the release that the Food retail market is the most competitive it has been in a number of years, and I think many would agree with that. Metcash has done a very good job of maintaining its underlying Food margin since the rebase about 10 years ago. And then there's been some benefit from mix shift away from tobacco, et cetera. Are you confident that you've got enough levers to pull and drivers to be able to continue to maintain margins on an underlying basis, notwithstanding the market continuing to become more competitive? Douglas Jones: Michael, before Grant comments specifically within Food and the levers, everything I'll say is couched in we have plans and strategies designed to rather than we're going to. So please hear it that way. But at a high strategic level, we've spoken for a while now about the reduction in proportion of total Food sales from IGA and we've spoken about it being around 60%. And that's a function of us obviously selling to other Supermarket customers but also growing our Campbells & Convenience business and the entry into the foodservice market. So the expansion of margins that you've seen is in part because of the shift away from tobacco, but it's also a higher contribution to earnings from the now combined Foodservice & Convenience business. I'll invite Grant to make some more specific comments. Grant Ramage: Thanks, Michael. The short answer is, yes, I think we have the levers. Over the last few years, we've been carefully managing our costs to allow us to maintain a competitive position, our cost to serve our customers. We've invested in DCs. We've put new automation in new DCs like Truganina, continuing to invest in systems, not just the core ERP system, which is well publicized, but all the systems around that, that support better choices around ranging pricing promotions. All of that means that the efficiency of the work is good. I've talked already about high-quality execution. That drives a really neat flywheel in Food and has been for the last 5 years of better execution, good supplier investment, better returns equals more good investment and more execution. And that's been working really nicely for us for a while and continues to be a driver of our competitive position and success there. So I think we have got it. I mean it's an interesting market in that it's competitive. It's very competitive. But the investments that we've seen by others in the market, we've been able to keep track of and match and build programs with suppliers, with retailers that keep us in a competitive position. And as I've already referenced on our measure of price paid, it's equivalent to what it was a year ago. So we've held that position very well. Douglas Jones: Michael, you've heard me say in the past that expanding wholesale margins is not always the way to grow profits. We focus on spinning the flywheel faster and growing wholesale profit dollars in that way. But as we -- both Grant and I have touched on, there are other strategies and other revenue streams and business models that have a higher margin that will -- if our plans are executed well and our strategies are successful, should support margin expansion. Michael Simotas: Yes. I think you've done a very good job on that. The second question I've got is on Hardware. Look, I think the ingredients for a recovery have been in place for a little while, but it's taking time for this to come through and with the monetary policy backdrop potentially being a little bit less favorable as of the last few weeks. What do we need to see to get this business to really fire? And maybe to give a little bit more comfort, can you talk about in markets like Queensland where you have seen pretty good demand, whether there has been more favorable pricing backdrop for some of the heavy building materials, frame and truss production, et cetera? Douglas Jones: Yes. So what we really need to see, I mean, it's fairly simple is a material uplift in starts in actual activity. We need trades on site, and we need tradies confident and we need builders on site and building or renovating new homes. So that's pretty simple. And what will happen is that activity will uplift, but you're not going to be able to gain pricing power, if you like, or expand through pricing power until capacity is used up. So there's still capacity in the market. And while that's there, people are -- us and our competitors are going to fight hard to utilize it. We're -- it's a bit right now, but we're very focused on making our own weather. We're not waiting for the market to improve. We've taken very specific actions, which I think I've outlined today and in the past that are designed to support our business. Scott Marshall: And Michael, it's Scott. Nice to hear from you. And just as a build, I think we were asked a question earlier around leverage as well. Definitely, now is the time for us to ensure that we come out of this period strongly. So being really clear that we lead in trade and being set up and organized the right way for that. And then just how we localize our formats whether it be convenience or trade and our range and pricing policies around that. So we're very focused on our execution right now of our offer. And as Doug has said, doing what we can to come out of this strongly. Operator: Next, we have Richard Barwick from CLSA. Richard Barwick: Just a quick one, probably a question for Grant on IGA stores. I noticed that you opened 10 but closed 9 through this half, but you're planning to open 17 in the second half. Can you give us -- or do you have a view here as to what number of closures you'd also be expected in the second half? And then a little bit longer dated, how should we be thinking about a net number of IGA stores if we look into next year as well, please? Grant Ramage: I don't have a number for anticipated closures in the second half. Sometimes these things happen quite quickly, and they're not planned, probably when I look at the reasons for those closures, sometimes it's competitors acquiring stores or sites. I think we're on the record in our calls for stronger action on mergers and reform in that space, and that's come now. So we'll be interested to see whether that actually benefits us in stopping the chains from some of their acquisitions of sites and stores. Beyond that, we always have a bit of churn in the network. It's normal, particularly in small stores. They do open and close relatively frequently, larger stores less. We're pleased with our pipeline. We've got a really strong pipeline of store growth for the remainder of the year. And we -- the planning that goes into opening a store obviously means you've got good visibility to it coming forward. So we're confident in that number. And looking further out, confident in that number because we're really focused on stores in that sweet spot of around sort of 1,200, give or take, 300. So 900 to 1,500 is what we think of as the sweet spot for new stores. Beyond that, as I mentioned, you do see stores moving out of the IGA brand in terms of net number of stores in the IGA brand, it's sitting just under 1,250 now. I think we'll probably have a few more that exit as we continue to drive standards up. There's a few final stores to do that with. I'm hopeful that you'll also see some stores coming back in where people have decided that they aren't able to be in IGA, they leave, but then they see the benefits of being in that brand, and they'll come back over time. Richard Barwick: Okay. And then, I mean, you sort of touched on, I think, Grant, the -- I mean -- and maybe, Doug, this is a bigger one for you perhaps, but the ACCC has obviously changed some of its processes around acquisitions in terms of what's to be reported in the way that they go about it. Does that -- I mean are you hinting here that that's a positive impact for you in the sense of supermarkets, but I was also wondering if this might have been perhaps a bit of a negative for you in terms of your approach to bolt-on acquisitions, especially within Hardware? So I'd love to hear your thoughts there, please. Douglas Jones: Yes. I mean I'm not a lawyer. So you can take what I say with that caveat. The changes that are coming in early next year are around the notification regime and the -- and being more proactive about that and getting preclearance from the ACCC. What the ACCC haven't done is reverse the onus of proof on the impact of the market, which is what we had hoped that they would do and have consistently asked for because very high market share businesses should be able to demonstrate that their actions are not contrary to good competition. We will obviously -- as you say, we will be subject to the new notification rules, and we'll be ready to do that. That may add some time to everybody's process, and it may, therefore, involve costs. Anytime you've got legal teams on the clock, it could cost money. So I think we'll all have to wait and see. But we feel comfortable that with our market positioning, we have the right to be confident that we'll be able to get those through. There's been a lot of activity towards the end of this year, as you can imagine, trying to get deals over the line across the market. So let's wait and see what happens next year. Operator: Next, we have Tom Kierath from Barrenjoey. Thomas Kierath: Just a quick one. Can you just give us the Superior EBIT contribution? And then just an update on the synergies there, how you're tracking, please? Douglas Jones: Tom, yes, you'll remember we said at year-end, just like in Hardware, we're not able to break it out specifically because we've merged so much of the business. So we've shown you the sales. We're on track with synergies. We feel comfortable that we'll meet the run rate of $14 million by the end of year 2, which will be around June next year. I think what's important is the strategy of the Foodservice & Convenience -- sorry, the results of our Foodservice & Convenience strategy are bearing out, and we're very happy with the performance of that business. As Grant said, we've moved products between distribution sites. We've integrated teams. And so it's just not possible to give you an individual number, but at a total level, we're very pleased, and you should take confidence from that. Operator: That concludes our Q&A session. I will now turn the conference back to Doug for closing remarks. Douglas Jones: Thank you, operator. Thank you to the team. Thank you to all the listeners for your support and attention and for your questions. I also want to thank you for your patience on the call with the lack of the presentation. It's not our doing, and we're as frustrated as you are. We're liaising with the ASX. And as soon as we've got their clearance that we can distribute the presentation, we'll make it available on our website. As it stands right now, the Chief Compliance Officer of the ASX tells us that they're unable to give us estimated timing of when that issue will be resolved. So I can only apologize and thank you for your forbearance. And with that, I will -- I'll be seeing most of you later in the week. Looking forward to your engagement. And I just want to thank you all again for your time and attention this morning.
Operator: Welcome to the Laurentian Bank Financial Results Conference Call. Please note that this call is being recorded. I would now like to turn the meeting over to Raphael Ambeault, Vice President, Finance and Investor Relations. Please go ahead, Raphael. Raphael Ambeault: [Foreign Language] Good morning, and thank you for joining us. Today's opening remarks will be delivered by Eric Provost, President and CEO, and the review of the fourth quarter and annual financial results will be presented by Yvan Deschamps, Executive Vice President and CFO, after which we'll invite questions from the phone. Also joining us for the question period is Christian De Broux, Executive Vice President and CRO. All documents pertaining to the quarter can be found on our website in the Investor Relations section. I'd like to remind you that during this conference call, forward-looking statements may be made and it is possible that actual results may differ materially from those projected in such statements. For the complete cautionary note regarding forward-looking statements, please refer to our press release or to Slide 2 of the presentation. I would also like to remind listeners that the bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Eric and Yvan will be referring to adjusted results in their remarks unless otherwise noted as reported. I will now turn the call over to Eric. Eric Provost: [Foreign Language] Good morning. Thanks for being with us today. Our road map for 2025 was ambitious. We are proud to report that we delivered against our plan, achieving several transformational milestones. Notably, the deployment of cloud-based systems has significantly improved our operational efficiency, resilience and customer experience. These investments are foundational to building a bank that is agile, secure and well positioned for the future. Operational resiliency and redundancy were also meaningfully enhanced, enabling the bank to respond swiftly to change, maintain stability and ensure consistent service delivery to our clients. Elevated interest rates and moderated economic activity influenced other income streams, notably lending fees. Despite these headwinds, net interest income increased year-over-year, reflecting a more favorable business mix and an improved net interest margin. Credit performance remained stable at 17 bps with slightly lower allowances for credit losses compared to 2024, supported by resilient asset quality and disciplined risk management. In line with the spending levels outlined in our strategic plan, we continue to make targeted investments in IT infrastructure during the fourth quarter. These planned and essential initiatives are designed to simplify operations, strengthen resiliency and deliver long-term efficiency gains for both our clients and shareholders. As a result, we closed the year with an adjusted efficiency ratio of 75.2%, aligned with our guidance. The bank divestitures of assets under administration from the full-service and discount brokerage division earlier in the fiscal year contributed to lower noninterest expenses through reduced headcount and broker commissions while also driving higher other income from the associated gain on the sale of the division on a reported basis. Our capital and liquidity positions remained consistently strong throughout the year, reinforcing the bank's financial resilience and ability to navigate the current macroeconomic environment. This solid foundation provides the stability and flexibility required to support growth while staying firmly focused on executing our strategic priorities. Throughout the year, we have achieved steady progress in strengthening our portfolio by increasing the proportion of commercial loans from 47% to 50%. Notably, commercial loan balances grew by 2% on a quarter-over-quarter basis and by 8% year-over-year. This strategic shift in our business mix contributed to an improvement in our net interest margin, which rose from 1.79% in the prior year to 1.83% in 2025. Turning to the composition of our commercial growth. Our key specialization delivered strong results. Inventory financing closed at $4.2 billion, making an impressive 12% year-over-year increase. This performance was supported by an expansion of our dealer base of more than 3% and continued diversification into new segments, areas where we see meaningful opportunities for further growth. In commercial real estate, activities started the year slowly, but interest rate reductions later in the year resulted in a notable improvement, particularly in rental construction. This momentum allowed us to expand our unfunded pipeline by 13% and grow our loan book by 11% year-over-year. On the personal banking front, our continued engagement with customers allowed us to maintain a relatively stable deposit base within the retail segment while simultaneously building positive momentum in broker-sourced deposits. The agreements we announced earlier this week are aligned with the acceleration of our commercial specialization and the partnership strategy we had announced as part of our strategic plan. In recent years, we have assessed multiple approach for our retail and SME banking services. However, the substantial investments needed to sustain a competitive position in the Canadian banking landscape, coupled with the evolving regulatory requirements and rising customer expectations have made it increasingly difficult to compete effectively. Joining forces with Fairstone Bank will allow us to grow our specialized commercial business even further while maintaining our brand identity and head office in Montreal, where we were funded over 175 years ago. Partnering with National Bank, a leading Quebec-based institution will provide our customers with access to a broader suite of services and enhance modern technology. The press release regarding this announcement is available in the News Release section of our website and includes detailed information. As the special shareholder meeting to vote on these agreements is scheduled for the first quarter of 2026, the proxy circular will be published in early January. With that, I'll turn it over to Yvan. Yvan Deschamps: [Foreign Language] I would like to begin by turning to Slide 6, which highlights the bank's financial performance for 2025. Total reported revenue for the year was $983.7 million, down 3% compared to last year. On a reported basis, net income and diluted EPS were $139.9 million and $2.85, respectively. On an adjusted basis, the bank generated net income of $147.2 million in fiscal 2025 or $3 per share. Adjusting items after taxes include restructuring and other impairment charges of $8 million and a profit on sale of assets under administration of $0.6 million. Additional details are available on Slide 21 and in the 2025 annual report. The remainder of my comments will be on an adjusted basis and focus on the fourth quarter. Total revenue, as displayed on Slide 7, was $244.7 million, up 3% year-over-year, mainly from higher net interest income, driven by favorable business mix and the growth of average earning assets. Diluted EPS of $0.73 was down 18% year-over-year and down 6% quarter-over-quarter. Net income of $34.2 million was down by 16% compared to last year and down 14% compared to last quarter. The bank's efficiency ratio increased by 60 basis points compared to last year, but declined by 10 basis points compared to last quarter. The increase year-over-year reflects our ongoing investments in strategic priorities. Our ROE for the fourth quarter stood at 5%, down by 40 basis points from last quarter. Slide 8 displays net interest income up by $8.8 million or 5% year-over-year, mainly driven by favorable shifts in the bank's business mix, notably with respect to the commercial loan mix. On a sequential basis, net interest income was down by $3.2 million or 2%, reflecting a seasonal decline in average inventory financing loan volumes during the quarter. Early signs of the buildup season appeared late in Q4, while real estate growth partially offset residential mortgage headwinds. Our net interest margin was up by 2 basis points year-over-year and down 3 basis points sequentially at 1.79%, essentially for the same reasons. Slide 9 highlights the bank's funding position. We manage our funding in line with our loan book. On a quarterly basis, total funding was down by $100 million. Lower wholesale deposits largely contributed to this decrease due to the maturity of a $340 million senior deposit note. The $400 million increase in deposits sourced from the advisers and brokers channel was offset by a reduction in partnership deposits. Cost-efficient long-term debt related to securitization activities increased by $200 million over the quarter. The bank maintained a healthy liquidity coverage ratio remaining at the high end of the industry. Slide 10 presents other income of $62.1 million, which was 1% lower compared to last year and 2% higher compared to last quarter. Quarterly increase in other income is driven primarily by higher lending fees and reflects the stronger momentum in commercial real estate activity towards the end of the fourth quarter. Slide 11 shows noninterest expenses of $185.1 million, up 4% compared to last year, mainly due to higher salaries and employee benefits, together with higher technology costs as the bank pursues investments in infrastructure and strategic objectives. On a sequential basis, noninterest expenses were down 1%, primarily due to lower employee benefits costs. On Slide 12, you will observe that our CET1 ratio remained stable at 11.3%. We are maintaining a solid capital position, and we are well positioned to redeploy capital. Slide 13 highlights our commercial loan portfolio, which was up $1.3 billion or 8% year-over-year and up $400 million or 2% on a sequential basis, both of which were mainly driven by the growth of commercial real estate pipeline. Slide 14 provides details of our inventory financing portfolio. This quarter, utilization rates were 41%, remaining below historical averages, normally in the high 40s. Slide 15 illustrates that most of our commercial real estate portfolio is focused on multi-residential housing with our exposure to the office segment at around 4% of our commercial loan portfolio. As noted in previous quarters, the bulk of our portfolio consists of multi-tenant properties with minimal exposure to single-tenant buildings. Slide 16 presents the bank's residential mortgage portfolio. Residential mortgage loans were down 2% year-over-year and down 1% on a sequential basis. We adhere to cautious underwriting standards and are confident in the quality of our portfolio. This is reflected in our 63% proportion of insured mortgages and a low loan-to-value ratio of 50% on the uninsured portion. Allowances for credit losses on Slide 17 totaled $189 million, down $15 million compared to last year and $1.1 million compared to last quarter, mainly due to lower allowances on performing loans, partly offset by an increase in allowances on impaired loans, notably commercial loans. Turning to Slide 18. The provision for credit losses was $18 million, an increase of $7.6 million from a year ago, impacted by higher provisions on impaired loans, partly offset by higher releases on performing loans. Sequentially, PCLs were up $6.9 million, mainly from higher provisions on impaired commercial loans. As a percentage of average loans and acceptances, PCLs increased by 8 basis points year-over-year and quarter-over-quarter to 20 basis points. Slide 19 provides an overview of impaired loans. On a year-over-year basis, gross impaired loans increased by $47.1 million or by $6.5 million sequentially. Thanks to our prudent underwriting standards and the strong credit quality of our portfolio, about 95% of which is collateralized, we're able to manage credit migration effectively with minimal impact on our ACL and PCL outcomes. We remain committed to a prudent and disciplined approach to risk management. I will now turn the call back to the operator. Operator: [Operator Instructions] And your first question will be from Stephen Boland at Raymond James. Stephen Boland: Maybe, Eric, if you could just talk about the evolution of the transaction. We all know you went through a formal kind of process a couple of years ago before you took over. I'm just wondering how this transaction started and got to this point? Eric Provost: Stephen, well, actually, as per our strategic plan release in May 2024, like we clearly made it a priority to seek out partnership and to try to explore avenues for all business lines. And as you can see, we took actions throughout the year, but it was definitely through various interactions that we landed in terms of discussions engaging with Fairstone. And you're going to have way more details when we publish a proxy in the upcoming weeks. Stephen Boland: Okay. That's great. Second question, which you're probably getting a lot of. Can you just talk about the dividend sustainability here until closing? Is there any thoughts of closing or shutting the -- reducing the dividend? Is there anything in the purchase agreement about that? And just I'll add a third here, just on the same topic kind of thing. Do you expect any issues on closing the branches? I know Quebec can be very -- they're not your regulator, but certainly, the government is always protective of employment. Maybe you could just touch on those 2 things. Yvan Deschamps: Thank you, Stephen, and thank you for raising the question on dividend. We also did receive a lot of questions on it. So I'll answer that portion, and Eric will step in for your last question. So on the dividend side, as you see this morning, we declared the $0.47 dividend on the common shares. So there is no restrictions on paying dividend in the agreement. The only restriction is that we're not allowed to increase the dividend going forward. Eric Provost: Stephen, I'll take the branches and employees. This is the hardest part of the decision we took because it impacts colleagues and people that have been working with us for some time, a very long time. So in terms of branches like this, this is physical presence, the fact that we're going to National Bank, they have an extended network across the province, which we believe will be well received in terms of point of service for our customers. And in terms of employment, we announced the fact that National Bank has offered a post-transition channel to actually prioritize posting and opportunities for the employees that will be impacted and terminated by this announcement. So I feel good about our approach towards the regulatory approvals, and we're confident we're going to get the right levels of support. Operator: [Operator Instructions] We'll go next to Sohrab Movahedi at BMO Capital Markets. Sohrab Movahedi: I just wanted to confirm that you intend to continue with your investment agenda here, Eric and Yvan. And to the extent that you continue to make the investments, if you could kind of -- I suppose, portion it out as to how much of investments to date have been more in favor of the commercial franchise as opposed to the retail and SME and what the split may look like on a go-forward basis as well? Eric Provost: Yes, it's a great question, Sohrab. And our #1 goal is to execute on conversion getting to closing, like the migration towards National Bank will become definitely our priority. So there's a portion that's going to go there. And yes, like we've been working throughout the last 1.5 years on improving foundational and making sure that we create the right resiliency and redundancy. And part of it is focused and will be focused towards keeping the momentum towards our specialized group. So it's going to be really a split, but big focus will be on conversion. Sohrab Movahedi: Okay. And Eric, as obviously -- I mean, you're in the midst of something and we'll learn more about the details when the proxy becomes available. But is the bank now mostly focused on ensuring that -- are you more managing the downside risk? Or are you still trying to deploy capital and I don't know, grow the bank and the loan book and all of that? Eric Provost: Well, yes. So first and foremost, like our customers from a retail standpoint is our focus in terms of maintaining level of services, making sure that our people are taken care of and that we have a clear game plan towards executing our path towards National Bank migration. But for the rest, like this is the future path in terms of being a specialized bank. So we're fully engaged with our customer base on the commercial front, our specialized group, inventory financing, equipment financing and commercial real estate. The instructions to our team is definitely to continue and grow and seek out business that we want to continue into. So that continues. Sohrab Movahedi: Okay. So not to belabor the point, but it is possible then I suppose -- like, I mean, let me ask the question a little bit directly. Do you have capital for SME growth? Or is that more in a controlled amortization mode until the deal closes? Yvan Deschamps: Yes. I'll be clear, Sohrab. So we're still in business, and we want to grow this bank. So as mentioned by Eric, definitely, the future is on the commercial side. But we're going to work with National to support our customers as well, and that includes the retail and the SME. And we want to make sure that those customers are well treated, and we're going to keep them. And definitely, the focus of the bank going forward is going to be on the commercial side. But we've mentioned for the last many quarters that we have a lot of liquidity and capital, and we still have resources that we can redeploy. Operator: [Operator Instructions] Seeing we have no other questions registered. This concludes the Q&A session. I will now hand the meeting over to Eric Provost for closing remarks. Eric Provost: Thank you. This week marks the beginning of a new chapter for Laurentian Bank. As we look to the months ahead, our priorities are clear. We will work relentlessly and diligently to close the agreements with Fairstone Bank and National Bank while having our customers and employees' best interest at heart. Our priority is to ensure uninterrupted excellent service for our customers during this transition. Wishing you all a wonderful holiday season. Thank you. Operator: Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and ask that you please disconnect your lines. Thank you.
Operator: Hello, and welcome, everyone, to the GTC Q3 2025 Results Webinar. My name is Becky, and I will be your operator today. [Operator Instructions] I will now hand over to your GTC host, Botond Rencz, CEO; Jacek Baginski, CFO; and Michal Kuzawinski, Head of Investor Relations. Botond, please go ahead. Antal Rencz: Thank you very much, Becky, for the kind and warm introduction. And I would like to welcome everybody for our Q3 results call. I'm really honored and privileged. For me, this is the first call that we are having as a CEO of the company. And I'm also very happy that I have Jacek with myself, sitting together. We are a new team. We are a new team with the two other management Board members. We have a lot of experience, and we also represent a very good, a different country representation where our operations are located. This new team is international and very much focused and interested in driving the future of the GTC company. This is also a new chapter for us and for the company as well. And last week, we decided to go for a 3-day strategy discussion to discuss our priorities, discuss what are the immediate critical items that we need to think about and also reflect a little bit where we would like to go in the coming months and years. Now I can confirm the most important message or messages from this meeting. One, we would like to continue deleveraging our company. We would like to continue with asset sales. And also, we will be very much focused on cost and efficiency improvements. As far as today's agenda is concerned, I would like to give you a little bit of an overall picture of our financial performance, and I would like the team to maybe turn to the slide where we can show the results. After that, I will like to ask Jacek to give a little bit more details about our financial performance, and then we are going to go more into details. So can I have the slide, please? Basically, what I can say is that the last quarter represented mixed results for GTC. On one hand, the revenues were increasing, which is a positive phenomenon. On the other hand, when you look at the revenue increase, it has two different directions. One, we, in this year, incorporated our German acquisition revenues, which show a 9% overall growth. But without Germany, unfortunately, we are minus 4%, which is a reflection of us selling some of our income-generating assets. When I look at our profitability, it is not showing such a positive result, and this is mainly due to the German acquisition, where we are experiencing quite significant financing costs, and our overall efficiency and profitability is not that strong. Where we did very good in the last quarter, we were very successful with our bond refinancing program. And I think that was the most relevant and important action and task for us in the last quarter, which doesn't mean that we are not going to have some further refinancing needs in the coming half year. But I think this was probably our largest debt. So for us, it was extremely important that we successfully refinance it. Now with all of the refinancing happening nowadays in our industry and also in other industries, the new cost of finance will be a little bit more expensive. But talking to our lenders, the banks, they feel very comfortable actually supporting us in the future as well. As I mentioned a little bit before, the end result for us is to continue our deleveraging process, selling some of our assets, but also making quite some steps in improving our operational excellence and cost control. And I think that is, I would say, probably the right time for us to give, so to speak, the mic to Jacek because we have spent a lot of time already on budgets. Jacek Baginski: Okay. Hello, guys. So Botond has already reported on the performance of ours for the period ending September. Obviously, I just want to highlight the successful story around the refinancing of the bonds, which is behind us. I will talk about these next steps with the bonds in a moment. Other parameters, obviously, are more or less flat, but I will talk about them in a minute. So Michal, if you can turn on another slide. In regard of the bond refinancing, I hope you were following the story. We managed to refinance or to issue the new bonds for the amount of EUR 455 million, out of which we received EUR 430 million cash, and we utilized that cash partially to buy the outstanding bonds for the amount of EUR 195 million. The balance of cash from the issue of new bonds is deposited on the escrow account pledged to the benefit of new bondholders. And that balance together with the balance of cash that we keep on the balance sheet of the company will be good enough to buy back the outstanding bonds, which is going to happen by the end of Q1 2026. Michal, if you can flip on the next slide. On portfolio, so nothing really changed from the last quarters. This is obviously the picture already after the acquisition of the German portfolio. So again, 88% of the portfolio is the income generating, out of which you can see on the left side on the bottom, we have the majority of our assets are office, retail and residential portfolio purchased in Germany. Michal, if you can flip on another slide, please. On performance of the office portfolio, nothing really changed comparing to the last 9 months of 2024, you see certain drop of -- on occupancy in Hungary that is offset by increase of occupancy in Poland. The weighted average lease is around the same, 3.6 years, as it was last year. The good thing is basically the leasing activity, if you look at the overall business for the -- in Q3 this year, the company managed to lease approximately 27,000 square meters. Next slide, please. Retail portfolio, as in the previous quarters, it's doing well. It's fully occupied. There is some potential of increased occupancy in Poland, in Galeria Polnocna. But again, the weighted average lease remained the same, around 4 years. And the company is able to extend and lease the remaining space, which is seen here, the company managed to lease the 15,000 square meters of space in Q3 2025. Next slide, please. German portfolio, we purchased it, as you all know, at the end of last year. Here, what you can see, obviously, there is a slight increase of the occupancy from 83% to 86%, which is, I would think, a good direction. Still, there is a lot of to do in regard of the occupancy in this German portfolio. The annualizing rent [ in-place ] is stable, around EUR 24 million. Next slide, please. On the results, so looking at the rental from -- the revenue from rental activity as Botond was mentioning, we are seeing an increase comparing to first 9 months of 2024. But excluding the Germany, it's a decrease by 4%, mainly driven by the fact that we sold some office buildings in course of 2025. On the other hand, we recorded increase of the cost of the rental operations, so simply property expenses, by 8%. This is again without Germany. This is something that we are looking in depth and Botond was mentioning about it already at the beginning that this is one of the issues that we are dealing with among many others to have these costs under control. Then looking at EBITDA and already on consolidated basis, we see a drop from EUR 84 million to EUR 77 million. It's mainly driven by the -- again, by the fact of the disposal of a part of the assets, the office buildings, but also there is a substantial increase of the property expenses, administrative expenses. This is again mainly driven by the consolidation of the business with acquisition of portfolio of the German assets. Profit, there is below EBITDA, you see an important increase of the expense related to the revaluation of the assets. This is mainly driven by the fact that we incurred certain CapEx for the fit-outs and maintenance of the buildings, which did not contribute to the value of that building. So it was expensed. Also, we expensed some option -- cost of the option related to the acquisition of the shares in German portfolio. So the combination of the two elements resulted of that loss of EUR 45 million from, I would say, investing activity. Then below, again, something that we anticipated, but it's seen here in line finance cost, which is a substantial increase of the finance cost is mainly driven by the consolidation of the financing that was drawn to finance the acquisition of the German portfolio. So overall, the company incurred a loss of EUR 28 million for the given period comparing to the profit of EUR 41 million last year. Next slide, please. On cash flow, obviously, on the cash flow from operating activities is flat with last year. Then below, investment activity, you can see here that the company fortunately reduced its investment activity, which is mainly CapEx related to some developments, but also CapEx spend for fit-outs and maintenance of the CapEx. At the same time, the company sold a number of assets for EUR 100 million. There is another outflow that you already noticed in the past periods of EUR 45 million, which is related to the settlement of the price for the acquisition of the German portfolio for EUR 45 million, and there is EUR 44 million, I would say, accounting [ entry ], which is nothing else like basically moving cash from the investing activity to the deposit account. Obviously, I already mentioned about it, the interest expense went significantly up from EUR 28 million to EUR 50 million, but it's related to the acquisition of the German portfolio. Next slide, please. On the balance sheet, nothing unusual except of maybe the line #2. You see the drop of the asset held for sale. This results from the fact that, as you remember from the previous slide, a substantial amount of assets were sold in course of 2025. But as Botond was mentioning at the beginning, we are working on the list of the assets that we will dispose in course of 2026 in order to deleverage the company, and you will see most likely at the end of the year, the increase of that number, assets held for sale, since we'll be able to provide the market with, I would say, more indicative number of how many assets and how much we want to generate out of disposal in the course of 2026. Next slide, please. And our debt position, obviously, here, you still see the picture of the balance sheet before refinancing of the bonds. So there is a substantial increase of the short-term financing from EUR 220 million to EUR 860 million. That obviously at most was dealt with because of the refinancing of the bonds. But still, there is approximately EUR 400 million of financing to be refinanced. Next slide, please. This is what you can see on that graph on the right side. So basically, we refinanced close to EUR 500 million Eurobonds by issuing new bonds and that you saw proceeds from the issue of new bonds in combination of the cash that we keep on balance sheet will allow us to redeem all the outstanding bonds by the end of Q1 2026. In regard of the remaining EUR 350 million of the refinancing. This is asset-backed financing. As you can see, there's basically three jurisdictions that this financing was drawn and will be maturing in course of 2026 is Germany; EUR 124 million loans, Polish entities and -- Hungarian entities and Polish entities. So -- but again, what was said at the beginning, we are very well advanced with the discussions with the lenders. Some of them provided us with the term sheets. Some of them provided us with the credit decision. So we are working towards the extension or finalization of that process of extending the loans by the end of Q1 2026. Next slide. Antal Rencz: Thank you very much, Jacek. I think now probably this is the time for us to ask questions, Michal. Michal Kuzawinski: Yes. Thank you, Botond, and good afternoon, everybody. Michal Kuzawinski, Head of Investor Relations at GTC. I have pleasure to be your host for the Q&A session. [Operator Instructions] Meanwhile, I received the first question from David Sharma from Trigon. The question is, could you please walk us through GTC short-term FFO assumptions following bonds refinancing? What is our targeted FFO run rate following recent divestments and refinancing? Jacek Baginski: So as it was said first, I would say a couple of comments on the FFO going forward. So first, we recognize the need of the reduction of LTV and the interest expense related to that. Obviously, at the first instance, we will focus on the refinancing, on the repayment of the most expensive loans. And we will be dealing with that in course of 2026. That would result in the decrease of that interest expense, again, but this will be seen only, I think, in the second part of 2026 or even in 2027. That process of, again, disposal and the repayment, the reduction of the most expensive debt will take us easily a year or more. Then obviously, this is point number one. Point number two is operating activity. As Botond was saying, the reduction of operating expenses is of the key importance, but also the fact that our vacancy or vacancy on our portfolio is still substantial, and it applies to really to office portfolio and the German asset portfolio. There is, I would say, a substantial work that we need to do in order to increase it and then increase the rental income from that portfolios of assets. So it's not, I would say, a simple answer to the question, what would be our running FFO, right? We need to look at that, and we'll be looking at that within the next couple of months. By the way, we are well advanced in the budgeting process for next year, where we actually engaged the entire company in all the jurisdictions to work on that plan. We already see certain improvement of EBITDA in all jurisdictions comparing to the actual results that we anticipate to record in 2025. But again, that improvement will take time, and we only will be able to really to discuss the FFO run rate in a more detailed way by the time when we will publish the results for 2025, will be sometime in March 2026. Michal Kuzawinski: Thank you, Jacek. Olivier Monnoyeur from BNP Paribas has a follow-up question. Olivier would like to know some more details about the German debt. So the composition, the maturity, the call date and how advanced the company is in the process of disposing part of the German portfolio? Jacek Baginski: Okay. So on the debt side, basically, let's say, that part consists of two -- I would say, two segments, the senior loans and the loan provided by the party that actually financed the -- a chunk of the purchase price for -- that allow GTC to buy the portfolio. So in regard to the senior loans, there are two German lenders that we work with. The discussions are well advanced. We were greenlighted in regard to the extension of that EUR 140 million loans. We'll be receiving term sheets from this lender -- term sheet from the lender this week. Again, so the discussions will take some time on conclusion and signing the extension. But as I said, we aim to sign and to extend the loan that is terminating at the end of this year, sometime in Q1. So what is going to happen, the current lender will give us the extension of the loan for the next 3 to 6 months for us -- to give us enough time to sign the new loan agreement with another lender that will refinance the current lender. So this is, I would say, on the front of the senior loan. And there is obviously that loan that we drawn in order to finance the acquisition. It's a 5-year loan. The loan was drawn at the end of 2024. So it's still for 4 years outstanding. Michal Kuzawinski: Thank you, Jacek. And we have more questions about Germany. So I'll try to put all the questions in this context. Now we have from Andrew [ Edmondson ]. Gross margin from Germany was EUR 11 million, but admin expenses increased by EUR 8 million year-on-year, mainly because of Germany. Then there are significant debt interest expenses related to Germany. Please talk through this in greater detail. What needs to happen to bring this back to profitability? Jacek Baginski: Three things have to happen. First, on the top line, as I said, you saw on the slide, there is 85%, 86% of occupancy. There's still room to improve, which will take some time, but that's something that we are working on to increase it substantially. Second thing is the property expenses, which are relatively high comparing to our portfolio. Again, since the company purchased this portfolio only at the beginning of this year. And still, the management of this portfolio is organized in the way that it's done by the seller, by the previous owner of the property, so we try -- we are in the process of taking over the asset management and property management from the seller, which is going to happen in course of 2026. And in consequence, we anticipate certain decrease of the property expenses, which will increase the NOI. Again, this is a process that will take us easily 1 year to improve. Then on the financing side, as you rightly noticed, the substantial increase of the cost. This can only be reduced by the repayment, partial repayment or full repayment of the loan that was provided to finance that acquisition. Again, there are -- the major source of obviously, of the repayment would be to start selling the German portfolio. But again, we are looking at that right now. We do not want to commit on the timing of this process. We simply still need more time to understand how quickly we can improve the performance of the portfolio increase -- in order to increase its value before certain decisions on the disposal will be taken. Michal Kuzawinski: Thank you, Jacek. We have also a follow-up question from Olivier on Germany. Olivier is reminding us that we have not answered the question about advancement in the process of selling part of the portfolio. If we can give an update where we are in selling the residential units in Germany. Jacek Baginski: I already answered to someone else that we are analyzing basically different scenarios and of -- let's say, and different strategies of selling that portfolio or part of the portfolio, we recognize the importance of the reduction of LTV and a decrease of this finance costs related to the loan provided to finance the acquisition. But again, it's too early for us to talk about the details of the phasing or the volumes of the assets that we will sell in course of 2026. I can only say that we will be able to talk more about it during our presentation of the final results for this year, which will be sometime in March next year. Antal Rencz: But I think we can also say that we are working with potential buyers and agents who are interested in the portfolio, but we are not ready yet to commit the deals. Michal Kuzawinski: Olivier is also asking about the interest rate of the senior loan. Olivier, we don't disclose the interest rates on particular funding sources, but we did disclose the average weighted interest rate of about 3.8% for the 9 months. And the next question is from [ Vicki Chen. ] Vicki is wondering if -- when are we going to start paying dividends again. And also asks for a detailed outlook on the asset sales program in 2026. Antal Rencz: Okay. Maybe this question I would answer. I think both are very good questions. I would say the first question relating to the dividend payments. I mean, I think it's very clear for us that there are certain priorities that we would like to make sure that they are delivered. And for us, it's really making sure that we are finishing the journey on the refinancing. And once we are finishing that journey, also, we are deleveraging our assets. Until that is done to the extent, I feel it's very comfortably that we can pay a dividend. I would not like to commit to any date in terms of dividend payments. But definitely, 2026 is not going to be a year where we are going to pay dividends. And from when, I think we are actually, as I mentioned, started our strategy directions with the management team. We still need quite some time to finalize it at the moment for us, the real challenge is what I have just basically said. So that was the dividends. The question on the 2026 portfolio sale. Now I don't want to be unpolite, but for me, this is probably one of the most confidential information that we can have because believe it or not, there are a lot of companies and people are coming to us asking this question and trying to get some of our assets. Obviously, sometimes it is cheaper than what we think is the right level of compensation. So for me, this is very confidential what and how we would like to kind of sell because we would like to make sure that we get the maximum return for our investors and lenders, and that actually requires quite some tactical approach on our side. I hope you understand that. Michal Kuzawinski: So we have no more questions at this point. [Operator Instructions] Maybe let's -- I propose to allow a minute to check if any more questions appear. Antal Rencz: But I think we can also say that in case new questions pop up, please feel free to contact us after the call. Michal Kuzawinski: It's also a good idea. So with that, Botond, I pass the voice over to you for concluding remarks. Antal Rencz: First of all, thank you very much for joining this call. I hope we managed to shed some light on our current status, our current business and the directions. I would like to thank Jacek and yourself as well for the information. For me, what is the most important that we are truly committed to the future success of this company. And we are very conservative in that respect. And for us, the financial goals and also the goals for improving our business is equally critical. I think that we are very close to finishing our fourth quarter, and I really would like to come and see you again and talk to you again after our fourth quarter is finished and we can actually finish the year. So thank you very much for joining and looking forward to -- I wouldn't say seeing you because you can see us, we cannot see you now, but let's say, talking to each other next time. Michal Kuzawinski: Thank you. And we received no questions -- no more questions. If you still want to ask a question, you can please e-mail or call us. And thank you, gentlemen. Thank you, everybody, for joining this call. And see you again next year when we report our annual earnings. Goodbye. Jacek Baginski: Thank you. Antal Rencz: Thank you. Operator: This concludes today's webinar. Thank you, everyone. You may now disconnect your lines.
Operator: Hello, and welcome, everyone, to the GTC Q3 2025 Results Webinar. My name is Becky, and I will be your operator today. [Operator Instructions] I will now hand over to your GTC host, Botond Rencz, CEO; Jacek Baginski, CFO; and Michal Kuzawinski, Head of Investor Relations. Botond, please go ahead. Antal Rencz: Thank you very much, Becky, for the kind and warm introduction. And I would like to welcome everybody for our Q3 results call. I'm really honored and privileged. For me, this is the first call that we are having as a CEO of the company. And I'm also very happy that I have Jacek with myself, sitting together. We are a new team. We are a new team with the two other management Board members. We have a lot of experience, and we also represent a very good, a different country representation where our operations are located. This new team is international and very much focused and interested in driving the future of the GTC company. This is also a new chapter for us and for the company as well. And last week, we decided to go for a 3-day strategy discussion to discuss our priorities, discuss what are the immediate critical items that we need to think about and also reflect a little bit where we would like to go in the coming months and years. Now I can confirm the most important message or messages from this meeting. One, we would like to continue deleveraging our company. We would like to continue with asset sales. And also, we will be very much focused on cost and efficiency improvements. As far as today's agenda is concerned, I would like to give you a little bit of an overall picture of our financial performance, and I would like the team to maybe turn to the slide where we can show the results. After that, I will like to ask Jacek to give a little bit more details about our financial performance, and then we are going to go more into details. So can I have the slide, please? Basically, what I can say is that the last quarter represented mixed results for GTC. On one hand, the revenues were increasing, which is a positive phenomenon. On the other hand, when you look at the revenue increase, it has two different directions. One, we, in this year, incorporated our German acquisition revenues, which show a 9% overall growth. But without Germany, unfortunately, we are minus 4%, which is a reflection of us selling some of our income-generating assets. When I look at our profitability, it is not showing such a positive result, and this is mainly due to the German acquisition, where we are experiencing quite significant financing costs, and our overall efficiency and profitability is not that strong. Where we did very good in the last quarter, we were very successful with our bond refinancing program. And I think that was the most relevant and important action and task for us in the last quarter, which doesn't mean that we are not going to have some further refinancing needs in the coming half year. But I think this was probably our largest debt. So for us, it was extremely important that we successfully refinance it. Now with all of the refinancing happening nowadays in our industry and also in other industries, the new cost of finance will be a little bit more expensive. But talking to our lenders, the banks, they feel very comfortable actually supporting us in the future as well. As I mentioned a little bit before, the end result for us is to continue our deleveraging process, selling some of our assets, but also making quite some steps in improving our operational excellence and cost control. And I think that is, I would say, probably the right time for us to give, so to speak, the mic to Jacek because we have spent a lot of time already on budgets. Jacek Baginski: Okay. Hello, guys. So Botond has already reported on the performance of ours for the period ending September. Obviously, I just want to highlight the successful story around the refinancing of the bonds, which is behind us. I will talk about these next steps with the bonds in a moment. Other parameters, obviously, are more or less flat, but I will talk about them in a minute. So Michal, if you can turn on another slide. In regard of the bond refinancing, I hope you were following the story. We managed to refinance or to issue the new bonds for the amount of EUR 455 million, out of which we received EUR 430 million cash, and we utilized that cash partially to buy the outstanding bonds for the amount of EUR 195 million. The balance of cash from the issue of new bonds is deposited on the escrow account pledged to the benefit of new bondholders. And that balance together with the balance of cash that we keep on the balance sheet of the company will be good enough to buy back the outstanding bonds, which is going to happen by the end of Q1 2026. Michal, if you can flip on the next slide. On portfolio, so nothing really changed from the last quarters. This is obviously the picture already after the acquisition of the German portfolio. So again, 88% of the portfolio is the income generating, out of which you can see on the left side on the bottom, we have the majority of our assets are office, retail and residential portfolio purchased in Germany. Michal, if you can flip on another slide, please. On performance of the office portfolio, nothing really changed comparing to the last 9 months of 2024, you see certain drop of -- on occupancy in Hungary that is offset by increase of occupancy in Poland. The weighted average lease is around the same, 3.6 years, as it was last year. The good thing is basically the leasing activity, if you look at the overall business for the -- in Q3 this year, the company managed to lease approximately 27,000 square meters. Next slide, please. Retail portfolio, as in the previous quarters, it's doing well. It's fully occupied. There is some potential of increased occupancy in Poland, in Galeria Polnocna. But again, the weighted average lease remained the same, around 4 years. And the company is able to extend and lease the remaining space, which is seen here, the company managed to lease the 15,000 square meters of space in Q3 2025. Next slide, please. German portfolio, we purchased it, as you all know, at the end of last year. Here, what you can see, obviously, there is a slight increase of the occupancy from 83% to 86%, which is, I would think, a good direction. Still, there is a lot of to do in regard of the occupancy in this German portfolio. The annualizing rent [ in-place ] is stable, around EUR 24 million. Next slide, please. On the results, so looking at the rental from -- the revenue from rental activity as Botond was mentioning, we are seeing an increase comparing to first 9 months of 2024. But excluding the Germany, it's a decrease by 4%, mainly driven by the fact that we sold some office buildings in course of 2025. On the other hand, we recorded increase of the cost of the rental operations, so simply property expenses, by 8%. This is again without Germany. This is something that we are looking in depth and Botond was mentioning about it already at the beginning that this is one of the issues that we are dealing with among many others to have these costs under control. Then looking at EBITDA and already on consolidated basis, we see a drop from EUR 84 million to EUR 77 million. It's mainly driven by the -- again, by the fact of the disposal of a part of the assets, the office buildings, but also there is a substantial increase of the property expenses, administrative expenses. This is again mainly driven by the consolidation of the business with acquisition of portfolio of the German assets. Profit, there is below EBITDA, you see an important increase of the expense related to the revaluation of the assets. This is mainly driven by the fact that we incurred certain CapEx for the fit-outs and maintenance of the buildings, which did not contribute to the value of that building. So it was expensed. Also, we expensed some option -- cost of the option related to the acquisition of the shares in German portfolio. So the combination of the two elements resulted of that loss of EUR 45 million from, I would say, investing activity. Then below, again, something that we anticipated, but it's seen here in line finance cost, which is a substantial increase of the finance cost is mainly driven by the consolidation of the financing that was drawn to finance the acquisition of the German portfolio. So overall, the company incurred a loss of EUR 28 million for the given period comparing to the profit of EUR 41 million last year. Next slide, please. On cash flow, obviously, on the cash flow from operating activities is flat with last year. Then below, investment activity, you can see here that the company fortunately reduced its investment activity, which is mainly CapEx related to some developments, but also CapEx spend for fit-outs and maintenance of the CapEx. At the same time, the company sold a number of assets for EUR 100 million. There is another outflow that you already noticed in the past periods of EUR 45 million, which is related to the settlement of the price for the acquisition of the German portfolio for EUR 45 million, and there is EUR 44 million, I would say, accounting [ entry ], which is nothing else like basically moving cash from the investing activity to the deposit account. Obviously, I already mentioned about it, the interest expense went significantly up from EUR 28 million to EUR 50 million, but it's related to the acquisition of the German portfolio. Next slide, please. On the balance sheet, nothing unusual except of maybe the line #2. You see the drop of the asset held for sale. This results from the fact that, as you remember from the previous slide, a substantial amount of assets were sold in course of 2025. But as Botond was mentioning at the beginning, we are working on the list of the assets that we will dispose in course of 2026 in order to deleverage the company, and you will see most likely at the end of the year, the increase of that number, assets held for sale, since we'll be able to provide the market with, I would say, more indicative number of how many assets and how much we want to generate out of disposal in the course of 2026. Next slide, please. And our debt position, obviously, here, you still see the picture of the balance sheet before refinancing of the bonds. So there is a substantial increase of the short-term financing from EUR 220 million to EUR 860 million. That obviously at most was dealt with because of the refinancing of the bonds. But still, there is approximately EUR 400 million of financing to be refinanced. Next slide, please. This is what you can see on that graph on the right side. So basically, we refinanced close to EUR 500 million Eurobonds by issuing new bonds and that you saw proceeds from the issue of new bonds in combination of the cash that we keep on balance sheet will allow us to redeem all the outstanding bonds by the end of Q1 2026. In regard of the remaining EUR 350 million of the refinancing. This is asset-backed financing. As you can see, there's basically three jurisdictions that this financing was drawn and will be maturing in course of 2026 is Germany; EUR 124 million loans, Polish entities and -- Hungarian entities and Polish entities. So -- but again, what was said at the beginning, we are very well advanced with the discussions with the lenders. Some of them provided us with the term sheets. Some of them provided us with the credit decision. So we are working towards the extension or finalization of that process of extending the loans by the end of Q1 2026. Next slide. Antal Rencz: Thank you very much, Jacek. I think now probably this is the time for us to ask questions, Michal. Michal Kuzawinski: Yes. Thank you, Botond, and good afternoon, everybody. Michal Kuzawinski, Head of Investor Relations at GTC. I have pleasure to be your host for the Q&A session. [Operator Instructions] Meanwhile, I received the first question from David Sharma from Trigon. The question is, could you please walk us through GTC short-term FFO assumptions following bonds refinancing? What is our targeted FFO run rate following recent divestments and refinancing? Jacek Baginski: So as it was said first, I would say a couple of comments on the FFO going forward. So first, we recognize the need of the reduction of LTV and the interest expense related to that. Obviously, at the first instance, we will focus on the refinancing, on the repayment of the most expensive loans. And we will be dealing with that in course of 2026. That would result in the decrease of that interest expense, again, but this will be seen only, I think, in the second part of 2026 or even in 2027. That process of, again, disposal and the repayment, the reduction of the most expensive debt will take us easily a year or more. Then obviously, this is point number one. Point number two is operating activity. As Botond was saying, the reduction of operating expenses is of the key importance, but also the fact that our vacancy or vacancy on our portfolio is still substantial, and it applies to really to office portfolio and the German asset portfolio. There is, I would say, a substantial work that we need to do in order to increase it and then increase the rental income from that portfolios of assets. So it's not, I would say, a simple answer to the question, what would be our running FFO, right? We need to look at that, and we'll be looking at that within the next couple of months. By the way, we are well advanced in the budgeting process for next year, where we actually engaged the entire company in all the jurisdictions to work on that plan. We already see certain improvement of EBITDA in all jurisdictions comparing to the actual results that we anticipate to record in 2025. But again, that improvement will take time, and we only will be able to really to discuss the FFO run rate in a more detailed way by the time when we will publish the results for 2025, will be sometime in March 2026. Michal Kuzawinski: Thank you, Jacek. Olivier Monnoyeur from BNP Paribas has a follow-up question. Olivier would like to know some more details about the German debt. So the composition, the maturity, the call date and how advanced the company is in the process of disposing part of the German portfolio? Jacek Baginski: Okay. So on the debt side, basically, let's say, that part consists of two -- I would say, two segments, the senior loans and the loan provided by the party that actually financed the -- a chunk of the purchase price for -- that allow GTC to buy the portfolio. So in regard to the senior loans, there are two German lenders that we work with. The discussions are well advanced. We were greenlighted in regard to the extension of that EUR 140 million loans. We'll be receiving term sheets from this lender -- term sheet from the lender this week. Again, so the discussions will take some time on conclusion and signing the extension. But as I said, we aim to sign and to extend the loan that is terminating at the end of this year, sometime in Q1. So what is going to happen, the current lender will give us the extension of the loan for the next 3 to 6 months for us -- to give us enough time to sign the new loan agreement with another lender that will refinance the current lender. So this is, I would say, on the front of the senior loan. And there is obviously that loan that we drawn in order to finance the acquisition. It's a 5-year loan. The loan was drawn at the end of 2024. So it's still for 4 years outstanding. Michal Kuzawinski: Thank you, Jacek. And we have more questions about Germany. So I'll try to put all the questions in this context. Now we have from Andrew [ Edmondson ]. Gross margin from Germany was EUR 11 million, but admin expenses increased by EUR 8 million year-on-year, mainly because of Germany. Then there are significant debt interest expenses related to Germany. Please talk through this in greater detail. What needs to happen to bring this back to profitability? Jacek Baginski: Three things have to happen. First, on the top line, as I said, you saw on the slide, there is 85%, 86% of occupancy. There's still room to improve, which will take some time, but that's something that we are working on to increase it substantially. Second thing is the property expenses, which are relatively high comparing to our portfolio. Again, since the company purchased this portfolio only at the beginning of this year. And still, the management of this portfolio is organized in the way that it's done by the seller, by the previous owner of the property, so we try -- we are in the process of taking over the asset management and property management from the seller, which is going to happen in course of 2026. And in consequence, we anticipate certain decrease of the property expenses, which will increase the NOI. Again, this is a process that will take us easily 1 year to improve. Then on the financing side, as you rightly noticed, the substantial increase of the cost. This can only be reduced by the repayment, partial repayment or full repayment of the loan that was provided to finance that acquisition. Again, there are -- the major source of obviously, of the repayment would be to start selling the German portfolio. But again, we are looking at that right now. We do not want to commit on the timing of this process. We simply still need more time to understand how quickly we can improve the performance of the portfolio increase -- in order to increase its value before certain decisions on the disposal will be taken. Michal Kuzawinski: Thank you, Jacek. We have also a follow-up question from Olivier on Germany. Olivier is reminding us that we have not answered the question about advancement in the process of selling part of the portfolio. If we can give an update where we are in selling the residential units in Germany. Jacek Baginski: I already answered to someone else that we are analyzing basically different scenarios and of -- let's say, and different strategies of selling that portfolio or part of the portfolio, we recognize the importance of the reduction of LTV and a decrease of this finance costs related to the loan provided to finance the acquisition. But again, it's too early for us to talk about the details of the phasing or the volumes of the assets that we will sell in course of 2026. I can only say that we will be able to talk more about it during our presentation of the final results for this year, which will be sometime in March next year. Antal Rencz: But I think we can also say that we are working with potential buyers and agents who are interested in the portfolio, but we are not ready yet to commit the deals. Michal Kuzawinski: Olivier is also asking about the interest rate of the senior loan. Olivier, we don't disclose the interest rates on particular funding sources, but we did disclose the average weighted interest rate of about 3.8% for the 9 months. And the next question is from [ Vicki Chen. ] Vicki is wondering if -- when are we going to start paying dividends again. And also asks for a detailed outlook on the asset sales program in 2026. Antal Rencz: Okay. Maybe this question I would answer. I think both are very good questions. I would say the first question relating to the dividend payments. I mean, I think it's very clear for us that there are certain priorities that we would like to make sure that they are delivered. And for us, it's really making sure that we are finishing the journey on the refinancing. And once we are finishing that journey, also, we are deleveraging our assets. Until that is done to the extent, I feel it's very comfortably that we can pay a dividend. I would not like to commit to any date in terms of dividend payments. But definitely, 2026 is not going to be a year where we are going to pay dividends. And from when, I think we are actually, as I mentioned, started our strategy directions with the management team. We still need quite some time to finalize it at the moment for us, the real challenge is what I have just basically said. So that was the dividends. The question on the 2026 portfolio sale. Now I don't want to be unpolite, but for me, this is probably one of the most confidential information that we can have because believe it or not, there are a lot of companies and people are coming to us asking this question and trying to get some of our assets. Obviously, sometimes it is cheaper than what we think is the right level of compensation. So for me, this is very confidential what and how we would like to kind of sell because we would like to make sure that we get the maximum return for our investors and lenders, and that actually requires quite some tactical approach on our side. I hope you understand that. Michal Kuzawinski: So we have no more questions at this point. [Operator Instructions] Maybe let's -- I propose to allow a minute to check if any more questions appear. Antal Rencz: But I think we can also say that in case new questions pop up, please feel free to contact us after the call. Michal Kuzawinski: It's also a good idea. So with that, Botond, I pass the voice over to you for concluding remarks. Antal Rencz: First of all, thank you very much for joining this call. I hope we managed to shed some light on our current status, our current business and the directions. I would like to thank Jacek and yourself as well for the information. For me, what is the most important that we are truly committed to the future success of this company. And we are very conservative in that respect. And for us, the financial goals and also the goals for improving our business is equally critical. I think that we are very close to finishing our fourth quarter, and I really would like to come and see you again and talk to you again after our fourth quarter is finished and we can actually finish the year. So thank you very much for joining and looking forward to -- I wouldn't say seeing you because you can see us, we cannot see you now, but let's say, talking to each other next time. Michal Kuzawinski: Thank you. And we received no questions -- no more questions. If you still want to ask a question, you can please e-mail or call us. And thank you, gentlemen. Thank you, everybody, for joining this call. And see you again next year when we report our annual earnings. Goodbye. Jacek Baginski: Thank you. Antal Rencz: Thank you. Operator: This concludes today's webinar. Thank you, everyone. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the SDI Group plc investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Stephen Brown, CEO. Good afternoon, sir. Stephen Brown: Hello, and a warm welcome to today's half year results ending 31st of October 2025. I am Stephen Brown, CEO of SDI Group, and joining me is CFO, Ami Sharma. In terms of the agenda for today reviewing half year '26, I will provide an overview of the group and our dual-pronged strategy to drive growth. This will be followed by an operational review for the period. I'll then hand over to Ami, who will cover the financial results. Ami will then pass back to me for a wrap-up with a summary, and I will then run through the outlook going forward. We will, of course, leave time for Q&A at the end of the presentation. First, let me reintroduce you to the SDI Group and our business model. We are a buy-and-build group with currently 17 established businesses and roughly 500 employees operating from 19 locations worldwide. We maintain a lean and supportive group structure, operating at a centralized model that fosters growth, autonomy, independence and agility. Our focus is on high-growth scientific niche markets, and we have a proven strategy of combining organic growth with earnings-enhancing acquisitions, having made 20 since 2014. In FY '25, we achieved a total group revenue exceeding GBP 66 million and our current guidance for FY '26 showing growth to around GBP 75 million. With our operations being geographically diverse, we estimate that we export approximately 70% of our products internationally with 40% from direct sales and a further 30% of U.K. distributor sales ultimately shipped overseas. Importantly, our buy-and-build model relies on a compounding cycle of growth. Turning to Slide 6. And for those of you less familiar with SDI and what we do, I'd like to briefly explain our business model. The key takeaway from this slide is that the group is a sustainable and robust platform with a clear strategy to drive growth. We can simply define the strategy in 2 parts: organic growth and inorganic growth. Looking at organic growth, this is driven by our ability to build and sustain revenues and profitability across our strong portfolio of existing businesses. Inorganic growth is our ability to identify and execute accretive acquisitions that add value to the portfolio. We will also offer synergies and cross-selling opportunities for the existing portfolio of businesses. Cash flow generated from organic activities feeds our capital allocation strategy and drives inorganic growth where we seek to acquire complementary, profitable businesses in niche markets. This feeds back to create a compounding effect. Now to provide a bit more detail on what we delivered during the half year. This year has been focused on continuing momentum from last year, and we delivered excellent progress against our strategy and continue to see our plans come to fruition. This financial year, we expanded SDI's management team, increasing our capacity for organic growth and effective portfolio management with 2 divisional managing directors. This strength increases our ability to facilitate knowledge sharing and synergies across the group, supporting portfolio leadership teams to ultimately deliver. Strategic acquisitions have continued to contribute strongly to our financial performance this half year and the successful acquisition of Severn Thermal Solutions. In short, our business model has demonstrated its resilience against a highly visible backdrop of challenging and uncertain global conditions. And finally, we are delighted that we have restructured our debt financing with a renewed debt finance facility with HSBC, which is committed for the next 3 years. This will support our future inorganic growth. Now to go into a bit more detail on some of our key group organic growth activities. This year, throughout the group, we are focusing on operational excellence, leveraging the sum of our parts. We have invested across the group in new ERP systems at Fraser, LTE and Peak with the learnings expanded across the rest of the group, and we continue to invest in R&D, enabling new product launches and have benefited from revenues being generated from new product commercialization from last year. The drive to foster synergies from market access across the businesses has continued with numerous collaboration initiatives. For example, we repeated lab innovations for the second time, bringing 5 companies together to promote a unified product offering. Fraser and InspecVision are working together for expansion into the EV automotive sector as well as targeted geographic access. And we have exploited several internal customer initiatives such as ATC supplying Severn Thermal. We have improved knowledge sharing across the group also. For example, the group marketing function established last year has supported many portfolio companies with the launch of new websites across 6 businesses and rebranding initiatives, perhaps more prominent at Monmouth, Atik Cameras and Collins Walker. Now looking at each of our operating divisions in turn. I am pleased to report that we've seen revenues in Lab Equipment increase 12% to over GBP 12 million. This is reflecting improving conditions in the life sciences and biomedical markets. Also, the organic initiatives we drove last year are having impact, particularly with Monmouth Scientific, allowing second half momentum from last year to follow into this year. Safelab had an exceptional performance through contract momentum. This was cemented by them receiving a substantial GBP 1.3 million government contract for the delivery of high-performance fume cabinets to be delivered at the end of this financial year. There have been further significant contract wins across the division, including Severn Thermal, who has 2 furnaces in production for a key nuclear contract with a value of over GBP 300,000. And increased order intake by LTE for environmental rooms as well as the new Labclave-L product. There have been numerous new initiatives across the division, including, as I mentioned, LTE's new range of autoclaves for a focus on sustainability, smart performance and safety and Monmouth's drive for improving product mix through growing their clean room revenues and capability. Again, we developed revenue growth with the Sensors division growing 6% to GBP 9 million and posting solid margins. We saw solid performance from Sentek with increased demand from both new and existing customers for products and bespoke solutions. Encouragingly, they have strong capability and tenacity for market expansion. In addition to last year's strong order intake, in January, they expect to receive an annual recurring order of GBP 2 million for blood gas sensors from one of their key OEM customers and can boost a further life science giant awarding them recurring contracts on the back of a new relationship. Astles had a strong recovery in demand for the chemical dosing systems and are executing a strong order book this year. Chell continues to perform well with an excellent order intake in H1 for execution in the second half with solid demand for core products. In addition to this, they have received a notable order for the supply of 2 gas meter calibration machines valued at around GBP 1 million, again, for delivery in H2. Again, we see solid performance this time across the Products division with revenues up 12% to GBP 13 million. I'm pleased to see Atik Cameras continue to perform well, executing on its market expansion strategy. They're adding to the life sciences revenues by growing into the buoyant professional astronomy market. This has been evidenced by a significant project valued at $4 million that commenced delivery earlier this year with further delivery expected across the second half. They look forward to further traction in this market. Applied Thermal Control has been facing market headwinds in the first half relating to regulatory use of refrigerants, predominantly in the U.S. However, in response, ATC released earlier this year updated G and H series products to meet the changing market requirements, and they continue to develop the range. We also had a number of new products launched across the division, in addition to ATCs these include Atik who launched a new xGbE 60 camera for multi-camera installations. Moving on to our inorganic strategic development. This year, we have completed one excellent acquisition so far, in line with our key criteria. I am pleased to welcome Severn Thermal Solutions to the SDI Group. Completed in June, Severn will be kept autonomous as part of a decentralized model. They manufacture and sell high-temperature furnace systems and environmental chambers for advanced material processing and testing. They are focused on innovative high-value markets such as aerospace, semiconductors and nuclear. Since joining the group, the integration of Severn has already exceeded our expectations with the team showing a strong alignment to the group and rapidly fostering the collaborative spirit we have across the portfolio. Now over to Ami for a financial overview. Amitabh Sharma: Thank you, Stephen. Hello, everyone. Looking at the financial highlights for the period, I'm pleased to report that we've had a good first half with 10% total revenue growth, which was made up of 3% organic growth and around 7% acquisition growth. The stronger sales performance led to a good profit performance compared to the equivalent period last year. Net operating margins improved from 12.6% to 13.5%. We saw growth in adjusted PBT and adjusted diluted EPS as well as all the income statement measures. Net debt increased primarily due to the acquisition of Severn Thermal in the period. Turning to the income statement. We saw organic growth of 3% in the first half, as I previously mentioned. This followed on from 2% organic growth over the second half of the last financial year. We expect to see this improving trend continue over the second half of FY '26 due to some of the contract wins Stephen outlined. The GBP 2.1 million acquisition growth came from InspecVision, Collins Walker and Severn Thermal. I'm pleased to report that our gross profit margin increased by around 100 basis points to 66.3%. This is on materials only. We have grown our gross margins over recent times through a focus on pricing, and this focus continues. On a like-for-like basis, our cost base increased by over 4% due to inflation, national insurance increases, bonus provisions and a strengthened central team. Lower interest rates and net finance charges were only marginally up on last year despite the higher level of borrowing in the first half compared to last year. The tax rate on the statutory profit before tax is estimated at 26.8%, whilst the tax rate on adjusted PBT is estimated at 23% for the first half, which is similar to the FY '25 tax rate. Looking at below-the-line expenditure, share-based payments were around GBP 100,000 lower than a year ago due to the FY '23 LTIP was lapsing in the period. We also had lower acquisition costs due to abortive acquisitions last year. The next 3 slides provide a bit more detail on the financial performance of the 3 segments. We start with the Laboratory Equipment division. This division showed organic growth of 5.9% with a further GBP 700,000 of revenues as a result of the acquisition of Severn Thermal. Monmouth had a very strong first half, as Stephen mentioned. LTE Scientific and Safelab systems both saw some growth, but Synoptics saw a slower market. Net operating margins improved to 11.7% as a result of the addition of Severn Thermal. Next, the Sensors division. This division showed organic growth of 5.6%. Astles grew strongly as did Sentek, the latter seeing strong demand for its pH sensors. Chell Instruments also grew, but NPV had a slower period of trading as it had tougher comparatives. Margin is largely held in this division at 21.7%. Next, the Products division. This division had GBP 1.4 million of revenues from the InspecVision and Collins Walker acquisitions. Beyond this, organically, the division was largely flat in the period with a small decline of 1.2%. Atik saw a strong revenue growth as it executed a $4 million professional astronomy order. However, Scientific Vacuum Systems saw a slower period of trading as it worked on large program over the first half compared with two in the comparative period. Fraser improved their cost control and increased their margins in a flat market. This led to margins improving to 21.6%, up from 19.8% in the comparative period. Turning to cash. Cash generated from operations reduced from GBP 4.7 million a year ago to GBP 4.2 million. This was due to an increase in inventories of GBP 1.2 million. A number of our businesses built up inventories in anticipation of a strong second half. The largest increases came at Atik as they deliver their professional astronomy contract and at Safelab Systems as they prepare for the large government contract they are to execute in the second half. Other businesses saw smaller increases, Monmouth through increased level of trading and Severn Thermal as it executes its furnace contract for the nuclear industry. Customer advances of GBP 2.9 million were broadly flat compared to April 2025 on a like-for-like basis. CapEx grew due to capitalized R&D spend, most significant at Synoptics and Fraser. Excluding acquisitions, our working capital as a percentage of sales, therefore, increased to 21%. The acquisition of Severn Thermal cost GBP 4.8 million, which was funded through additional borrowings. This is more clearly illustrated in the next slide. This slide shows graphically the movements in net debt. The GBP 4.2 million of cash generated by operations is on the left-hand side of the graph, and our utilization of that cash is illustrated on the right-hand side. We ended the period with GBP 18 million of debt, excluding leases, compared to GBP 13.8 million at the beginning of the financial year. Our leverage at the end of the half was circa 1.3x net debt to EBITDA, which is within the Board's preferred range of 1x to 1.5x. At the period end, we had a headroom of GBP 5.5 million. And as Stephen mentioned, we renegotiated our bank facility over the autumn with some improved terms. This was signed last week and provides committed funding for another 3 years with a further 2 option years available. The accordion option has been increased from GBP 5 million to GBP 15 million, which will give us additional flexibility in the future as we grow. And now I'd like to hand back to Stephen, who will take you through the outlook. Stephen Brown: Thank you, Ami. Now looking ahead to the rest of the year. For the future, our strategy remains consistent. We will continue to drive organic growth by investing in new product development, promoting synergies and driving operational excellence across the portfolio whilst also pursuing high-quality acquisitions. We remain mindful of wider economic uncertainties, but are confident in a resilient business model and long-term opportunities and drivers in our markets. Inorganically, our acquisition pipeline remains robust and actively managed, and we continuously maintain and review the pipeline. Our focus inorganically is to execute on the significant contracts we have. As expected, we remain second half biased, but we remain positive in delivering FY '26 results in line with market guidance, and are confident in our ability to generate sustainable, long-term value for all of our stakeholders. SDI remains a dynamic business, and we very much look forward to communicating further as we continue to deliver to our model. Thank you for listening. Operator: [Operator Instructions] If I may just I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Stephen, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Amitabh Sharma: Right. Okay. I'll take it here. Stephen Brown: Thank you. Amitabh Sharma: First question, what's your biggest challenge? Stephen, do you want to answer that? Stephen Brown: Yes, certainly, I think by far, the biggest challenge won't surprise anybody to hear this, but it's geopolitical. It's the uncertainty. We don't really understand what's going to happen tomorrow, let alone next week. So I think that's definitely the biggest challenge and really how we navigate that. However, we do feel as if our business model is robust enough to feel most of this. We are able to pivot between markets, not only geographic markets, but also physical markets as well. But yes, absolutely, geopolitical, 100%. Amitabh Sharma: Next question, why are directors not buying shares? I'll take that one. Last couple of years, we've both taken our bonuses of shares. Those will vest over the next 2 to 3 years. So what you ought to see is our -- both of our shareholdings increasing over the next couple of years. Stephen Brown: And this is available at the end of the back of the presentation as well, you'll see our shareholding increase and the option holding increasing. Amitabh Sharma: Next question. Can you tell us more about the recently appointed divisional directors and what their roles are? Stephen Brown: Yes, absolutely. So we recently appointed 2 divisional directors. One has got responsibility of the Products division. The other one's got responsibility of the Lab division. And the reason for doing this is so that the businesses we've got in the portfolio have gotten much closer attention. As we scale, we're currently 17 businesses. And quite frankly, the bandwidth that we had before was not adequate to give the businesses enough attention and to really support the leadership teams to deliver. But really, with bringing the structure in place with two of the regional MDs, that means we've got roughly 6 businesses to each director, which that intensive focus and is really starting to come and pay dividends. You can see it in our financial results. You'll see it more come in the second half as well. So we're seeing the businesses, which were slightly lower last year, really starting to come to fruition despite the challenging markets. So it also gives us as we continue to grow and scale as more businesses come into the group, we are an acquisitive group. So that will continue. We really need to have that structure to allow us to develop and scale. For us, organic growth is really important, and that's something that we will always have that focus on. So that's the main role for those divisional directors. Of course, as well, they do fit into the inorganic piece as well in the due diligence and making sure that we do make the right acquisitions. So that's the secondary to their main role. Amitabh Sharma: Okay. What impacts have you seen from the recent budget changes? Okay. I'll take that one. The main one was the rise in the minimum wage. Quantify that, that's about GBP 80,000 per annum, GBP 80,000 per annum. So it's not massive, but it was still an impact nonetheless. That was the main thing that I saw from the budget. Next one. Please, can you provide an update on the M&A pipeline and potential timings? Stephen, do you want to take that one? Stephen Brown: Yes, absolutely. So the pipeline remains very strong. We are an acquisitive business, as I said. That will never change, and that will never stop. We've done one successful acquisition so far this year. Hopefully, there will be more. Obviously, I can't communicate too much more than that. But other than that, we are an acquisitive business, and we will continue. Amitabh Sharma: Okay. The next one is for me. What is your CapEx guidance for FY '26 and beyond? Fair to assume 2.5% to 3% of sales? Yes, that's about right. That's kind of -- it's between 2% and 3%, but yes, 2.5% to 3% is right for FY '26. Next question, can you comment on the typical size EBITDA multiples and target characteristics that you're prioritizing for future potential M&A? Stephen Brown: Yes. I can take that. So our multiples pretty much remain the same. We've always said that on EBIT, you look at EBIT rather than EBITDA, we're looking at roughly 4 to 6x. We're currently focusing towards the lower end of that rather than the higher end. We are seeing that market dynamics means that we can potentially look towards that at the moment. So we're seeing opportunity at this point. So key characteristics, we're looking for profitable businesses. We're looking for higher net margins is also important to us. We're looking for niche markets and/or regulatory-driven markets. We're looking at those tailwinds-driven businesses. We're also looking for strong order books. We're looking for resilient markets. We're looking for large significant exporters as well, which is also very important to us. We're not locked to the U.K. either. So we are looking at on a global perspective. The EU is particularly of interest to us and so too is the U.S., but more so the EU. And also, we're looking at businesses which will increase our recurring revenue as well, which is also quite important to us as we continue to grow and scale. Amitabh Sharma: And in terms of typical size of about GBP 1 million EBIT and above if you can? Stephen Brown: Yes, GBP 1 million and above is typically sweet spot that we're looking at, at the moment. What we're really looking for is accretive acquisitions. So we're looking at acquisitions, which are really going to add value and add to our scaling. Amitabh Sharma: You previously said that the long-term organic growth target for SDI is between 5% and 8%. Is this still valid in the midterm? Do you expect improved organic sales growth trend already in H2 '26 versus H1 '26? Stephen Brown: We'll, split, I'll take the first bit. So are we looking at 5% to 8% as a medium to long-term goal? Absolutely, yes. And you'll see that going forward. So I think that's still a realistic target for us. As I said before and said in the presentation, organic growth is important to us and it will always be a focus. Hence, the earlier question about the divisional directors, for example. So we are focusing on it. Do you want to take the second piece? Amitabh Sharma: Yes. I mean we are going to see strong organic growth in the second half. And the reason for that is because of the contract timings, as we talked about earlier. That will drive the organic growth, which will be quite significant in the second half. But then that is a function of the contracts and how they fall timing-wise within FY '26. So you'll still see strong organic growth. Over the full year, you should see organic growth, too. And so I think that one answers that question. Why is the profitability of the Lab Equipment business unit so much lower versus the other business units? Is this driven by temporarily softer market demand? Do you want to try? Stephen Brown: Yes, certainly. So I'll take the last part of the question first. Is it softer market demand? No, it's not. The market demand is definitely there. You can see with large contract wins I spoke to earlier. There has been others in the Monmouth business as well, which has been quite helpful to us. The lower margins is purely market dynamics. There is serious competition in the market, and that ultimately keeps the profitability a little bit lower. But we are holding our own. We're actually growing market share within those markets, and it is looking quite strong for us. It has come back quite strongly this year, and it continues to increase. But are we going to see large profitability coming in other than where we are? We can probably improve on it a little with operational excellence, for example, and with Severn Thermal going into the Lab Equipment division as well will help the profitability also. But it's really down to the dynamics of the market. Amitabh Sharma: Okay. Next one, I think, is me. Expenditure in development and other intangibles increased compared to the same period last year. Can you share the reasons behind the higher level of intangible investments? Well, we had a couple of product developments that are in progress. Expenditure on development increased, but certain amortization actually. And what I would -- the way I would look at this one is that you compare how much has been capitalized versus how much has been amortized. And the delta is GBP 0.2 million in the first half, GBP 0.2 million, and that compares to GBP 0.1 million last year. So there isn't -- these are not big numbers on a net basis. So the delta is GBP 0.1 million in the context of almost GBP 5 million EBIT -- GBP 4.5 million to GBP 5 million EBIT. So yes, it has, but it's not hugely significant on a net basis. Next question. The interest cost on net finance, I think, is still high despite the limited leverage, diversified group and strong execution. Does the renewed RCF with HSBC allow for some lower cost of debt? How much? The simple answer to your question is, yes, our new facility is cheap, is lower in terms of cost than the previous one by a fair bit. So we have improved terms. I won't say exactly how much, but it is going to be improved. I was saying that we do have -- I wouldn't say we've got limited leverage because we're at 1.3x, however -- and we managed to maintain the finance costs at a similar level to last year and the average borrowings in the first half were a fair bit higher than the average borrowings in the first half of last year. But the answer to your question is, yes, there are improved terms and you ought to be able to see that in the financing charges as we go forward. Could you please comment on your midterm organic growth ambition? Do you still see 5% to 8% as the right range? And within your 3 reported segments, which do you believe offers the strongest long-term organic growth potential? Stephen Brown: I think the first part of the question has been answered to the earlier question. But the second part, good question. It definitely will be the product side because we've got more -- we've got most of our high-growth businesses within that segment. So we will always see that higher level of organic growth there, absolutely for sure. Amitabh Sharma: Okay. Next one, it's a working capital question, that's me. Working capital levels last couple of years averaged at circa 13% of sales, which is much lower versus the level in recent years. Do you expect working capital as a percentage of sales to drop back from circa 19% of sales towards 15% out? So there was a buildup of working capital in the first half. I sort of explained it during the presentation, which is due to an inventory buildup for the second half. I think you're looking at the reference of 13% are a full year percentage, I think. You ought to see it come back down again. As we execute these contracts in the second half, the inventories will start coming back down again. And I think you'll see working capital as a percentage of sales under our own internal definition will come back down from around the 21% mark, which it currently is to near 19%, 20%, which is where it was under our definition. I'm not sure how -- I think it's Emmanuel, how you calculated that 13%, which balance sheet lines you've used. But it ought to come back down, and it's due to execution of those contracts, which will reduce inventories. Next question, how much capital do you target to spend per annum on M&A, between GBP 5 million and GBP 10 million? Is the pipeline strong enough to execute on this? I'll answer the first part. Stephen, join to answer the second part. So the first part is that we typically focus our free cash flow towards M&A. Historically, it's been around circa GBP 6 million. And we could move that a bit with our leverage because we typically say between 1x and 1.5x. We can spend more than about GBP 6 million or GBP 7 million, if we move the leverage up a bit towards 1.5 and 1.6 and it's quite -- and we may choose to do that in the future just to -- it will be a timing thing, and we can vary that. It's a management decision. So anywhere from GBP 6 million, it could be GBP 7 million or GBP 8 million, it could be more than that, but the leverage would reflect that in the short term, and then that will start coming down again. Is the pipeline strong enough? Stephen Brown: 100%, yes. So the pipeline is looking as strong as ever. We could execute a lot more than that if we really wanted to. But absolutely, yes, the pipeline is reassuringly very strong and gives us the opportunity of choice as well, which is very valuable to us. Amitabh Sharma: Do you see room to further improve group margins? How? Interesting question. Stephen Brown: 100%, yes. And the focus we've currently got on organic will ultimately result in that. With the introduction of the divisional directors who've got a wealth of experience, both operational as well as commercial coming in, we will continue to really focus on the businesses. So what's going to drive that? What's going to drive that is increase in commercial activity, increase in sales. Organic growth will ultimately drive that. But we've also got a real drive as well for operational excellence as well. So we're looking at good business management. Cost optimization is also very important to us. So we will continue to drive the efficiency of the businesses, which will ultimately improve that. Amitabh Sharma: Operating leverage will also contribute. So in other words, higher sales will drop through with the gross margin. And the M&A also, we are targeting higher net margin businesses that we talked about earlier. Those will also have a positive impact and the mix on the... Stephen Brown: Exactly. The inorganic will shift the dial quite considerably actually because of the focus of the businesses we're currently looking at. Amitabh Sharma: Is there a minimum size of acquisition in terms of the target turnover or profit that you will look at? Stephen Brown: What we look for typically is accretive acquisitions and acquisitions that really move the dial. So for us to go much below GBP 1 million EBIT, it isn't really going to have that impact. Of course, if there's a really interesting business with significant growth potential and a market which we really see the potential in, of course, never say never. But ideally for us to make the impact at this point, that we're currently looking at sort of a minimum of GBP 800,000 to GBP 1 million, ideally more. Amitabh Sharma: Can you comment on the growth in central costs over the last 2 years? Yes, I'll answer that one. This one is due to some of the additional headcount at head office to drive inorganic and organic growth, which we've talked about. We have a Head of M&A to help us drive the M&A cycle, and we've introduced divisional directors to help us drive organic. And so the combination of all of those things have contributed to the increase in central costs. But we needed to drive growth for the reasons that Stephen outlined earlier in terms of management bandwidth and to grow to the level to help us scale as well. So that's the reason we've done that. Stephen Brown: The SDI Group will always be a lean and agile business. So any increase on head office costs... Operator: [Operator Instructions] Amitabh Sharma: Hopefully, we're back. Operator: I can hear you now. Amitabh Sharma: We'll go back to the Q&A. How do you manage capital allocation between your existing businesses? What is your target R&D spend? Does this need to increase to generate organic growth? In terms of capital allocation, we don't -- we do it on a business-by-business basis. Most businesses will put forward their budgets and strategic plans every year at which they will request additional capital to do CapEx or, whatever, the R&D, and we will generally approve it. We will look at each one on an individual cases. We will not say no just because we want to restrict that capital to any particular business. We said this before -- I said this before in this very presentation. We don't restrict capital to any of our businesses. They're just going to put a business case forward. And we are very supportive of our investments. That's why that's one of the great things about being part of the SDI Group, I think, for companies coming in is that ability for us to invest more than perhaps previous management did as in the lead up to sale. Stephen Brown: And looking at the R&D spend as well, R&D spend is very important to us because what's the secret of organic growth is really keeping on top of the market and understand the market requirements. As the markets require more, we have to deliver and essentially execute products and put away our products into those markets what the markets ultimately need and want. That will need a regeneration of the products and a revitalization of the product as well, which ultimately feeds into R&D spend. So that's something which we will always be doing. We do encourage the portfolio of businesses to keep on top of that. And in fact, if we're not getting requests for R&D spend, we're asking the question why. So that's a real significant focus for us, and it is ultimately the secret of organic growth. Amitabh Sharma: Last one for now. Could you sell a company to raise to acquire? I think would you dispose of something probable or improbable? I think meaning any subsidiaries, I think, is his question. I suppose the answer is nothing is impossible, right? Stephen Brown: No. Amitabh Sharma: We do get inbounds for our assets. And if someone is a better owner of one of our assets, then we would absolutely consider doing so. I mean it's not really what our business model is, but never say never. Stephen Brown: If it makes sense, we will consider it. Amitabh Sharma: If it makes sense, we will consider. Sometimes portfolio churn is necessary. It does happen from time to time. So if it happens, we will -- or if we have a decent enough, we'll go for it. Operator: That's great. Thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and will publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Stephen, could I please just ask you for a few closing comments? Stephen Brown: Of course. I'd like to thank you all for listening. It's very much appreciated, and we very much look forward to communicating with you further. Operator: That's great. Thank you for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SDI Group plc, we'd like to thank you for attending today's presentation, and good afternoon.
Operator: Good day, and thank you for standing by. Welcome to Metcash 2026 Half Year Results Briefing. [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, Doug Jones, CEO. Please go ahead. Douglas Jones: Thank you, operator, and good morning, and welcome to the Metcash Limited FY '26 Half Year Results Presentation. As noted, my name is Doug Jones, Group CEO. And I'm joined this morning in Sydney by Deepa Sita, Group CFO; Grant Ramage, Food CEO; Kylie Wallbridge, Liquor CEO; and Scott Marshall, CEO of the Total Tools and Hardware Group; as well as Steve Ashe, EGM, Investor Relations. Before I go any further, you'll no doubt be aware that this morning, the ASX has a technical issue uploading certain documents to their public site. This affects all companies and not just us. We lodged all of our release statement, our financial report, our dividend declaration and our presentation this morning just before 9:00 a.m. All of those, except for the presentation, were released by the ASX on their site shortly thereafter. We have confirmed with the ASX that because all price-sensitive information is in the market, we may proceed with this call. I'd like to begin by acknowledging the traditional custodians of the land from which we are all connecting today. I'm in Wallumedegal Country, and I pay my respects to elders across country, past, present and emerging. As you know by now, our purpose guides our strategy and is an integral part of our culture. As I said at year-end, the contribution to communities by independent retailers across Australia is well documented and is something we're all proud of. The idea of making a meaningful difference in the communities our networks serve and operate in is part of our DNA. At the same time, we're energized by the opportunity to win alongside independents. This is a great time to be in partnership with independents, and we recognize the advantaged strategic positioning that this provides to support sustainable and meaningful value creation for our shareholders, too. It's also a good time to reflect on our updated aspiration, purpose and values that encompasses the strong balanced partnership that we enjoy with independent retailers. And on this basis, I'm pleased to share that our new purpose statement, winning with independents, is now live as well as our updated aspiration and values. We believe these reflect the nature of that partnership and our ambitious vision for the future. We continue to hold dear the belief that independents are worth fighting for, and we have developed in consultation with our engaged teams an updated set of values that underpin that aspiration. Everything we do is focused on driving our flywheel. It remains the manifestation of our competitive advantages and of how we create value for independent customers, shareholders and suppliers, more and more of whom are selecting us as their route-to-market partner. Our flywheel is also the heart of the platform from which we can grow our services to independent businesses across Australia, and it forms the foundation from which we can move closer to the shopper and through the value chain. These results are what I would call solid but behind our own expectations. But that simplistic view belies the many, many moving parts that make them up, including the trading conditions that you've heard about from many of our competitors. This year, we've maintained good momentum in the core of our business. And despite the challenging conditions, our independent networks remain healthy and confident. And the strategies of each of our pillars is delivering the results that you'd expect in those markets. Food is now a highly diversified and resilient business and has again delivered strong earnings growth. Once again, Liquor has won market share. While the improvements in Hardware & Tools continues, and we are seeing sustained signs of market recovery. TTHG earnings, excluding once-off strategy and integration costs, were in line with last year. Strong earnings and EBITDA leverage has been founded on disciplined operational and strategic execution as evidenced by our core operational metrics, those being delivery and logistics performance measures, which are high and trending in the right direction. As you know, the tobacco decline has accelerated, fueled by emboldened illicit operators and even more changes to the regulations. That said, we are starting to see a ramp-up at state level in both practical legislation and enforcement. It's certainly too early to claim any sort of victory, but it's pleasing to see at last some concerted effort by state authorities. In the face of all this, costs and working capital were well managed. And as I noted earlier, we're continuing to win new suppliers into the Metcash distribution networks. I'm delighted to have delivered the first-ever cross-pillar consumer-facing program this year in Big Family, Big Prizes. Not only did this drive engagement with shoppers across our brands, it provided our suppliers a new campaign and trade marketing tool and galvanized our own team and network of independent retailers who are incredibly positive about being part of a network of over 3,000 family-founded stores. The family-founded concept with its associated logos and brand iconography is now firmly launched and available to support further executions. In Horizon, I'm pleased to share that we've completed the core solution build phase, and we're now into testing with the first deployment of the solution scheduled for June next year and completion by the end of '26. We continue to balance carefully between cost, time, risk and quality, prioritizing the last of these. As of right now, the Sorted platform on an annualized basis is almost a $4 billion B2B digital marketplace. This follows the migration of all ALM states, except New South Wales and Queensland onto the platform. Once those two states migrate in January next year, on an annualized basis, Sorted will be doing around $6 billion, representing over 30% of group revenue. This is a significant and material modernization and transformation of our wholesale business and one that offers exciting new growth opportunities. At the same time as delivering on our core business priorities, we remain well positioned with attractive growth prospects. We've made good progress in integration of both Total Tools and Hardware Group as well as the Foodservice & Convenience business unit with a high-caliber TTHG leadership team already in place. The recovery in the building market remains an attractive opportunity that we are well placed to take advantage of. Our localized retail media build-out is on track. In summary, we remain well positioned for continued structural growth within Food and Liquor, the essentials part of our portfolio and for the recovery we see coming in Tools and Hardware, the more cyclical part of our portfolio. And we have the balance sheet flexibility to pursue our growth plans. As I noted a moment ago, there are many moving parts in our business. And to understand where we are in the journey requires we step back a moment and take a longer view. The reality is that this has been another period of disciplined execution and strategic progress. But it's also true that this operating discipline and focus on our core business imperatives, together with the strategic decisions taken over the last few years, have not only improved that core business but have put us in a position to take advantage of where we think the market will be in the next few years. The improvement in the core is a few proof points, and I'd start with the improvement of 22% uplift in EBIT and 34% uplift in cash earnings using EBITDA as a proxy. The Food pillar is a great example of a business that is of a higher quality at its core as well as being bigger and more diversified with more growth options. In the face of a massive and unprecedented decline in our largest category, earnings have grown consistently. This is down to both strong execution of core wholesale and logistics functions as well as the choices to diversify the business by not only improving the IGA value proposition and reducing reliance on tobacco, but at the same time, reinvesting in Campbells & Convenience to create the market leader in the petrol and convenience market and entering the foodservice market through Superior. The results of the consistent improvements in the core means that despite the most competitive grocery market in years, IGA itself is more competitive and relevant than ever. And at the same time, we are diversified and more resilient than ever. I received many questions about liquor consumption patterns in my meetings with investors, and I respond the same way each time. The ALM channel strategy of a diverse balanced focus on our banner retail, contract and on-premise customers provides unmatched scale and a natural hedge. And our strategy of reinvesting in our flywheel to keep our customers competitive and improving the shopper value proposition means that today, our strategic advantage is as strong as ever. And this is why I believe there remains further growth potential. The evidence of the network's competitiveness and relevance is in the market share gains. The addition of new customers to our networks and the choice by new suppliers to come into our DCs. The current earning headwinds are the result of margin and cost pressures in a competitive market where volume growth has to be earned. The growth of the Hardware & Tools pillar has been delivered through a strategy that saw Metcash acquired Total Tools Holdings and then implement the plan, honed-in IHG of investing in retail alongside our independent partners. Though the tailwinds of the pandemic undoubtedly helped, Total Tools is now a $1.3 billion leader in a category ideally positioned to serve the tradie in a market that needs to build 1 million homes in the next 5 years. While we're seeing early signs of market improvement, as I said in June, when we announced the formation of the Total Tools and Hardware Group, we're not waiting for the clouds to part. We're trying to make our own weather. The business is in better shape than ever and is ready for the uplift in market conditions that many believe is inevitable. Project Horizon is moving forward with deliberate and concrete steps, and we have good plans in place to get it done. We're further modernizing and strengthening the core through the expansion of Sorted, which, as I said, by early '26, when the two final ALM states are migrated, will be one of the largest B2B marketplaces in the country, if not the largest. This should support growth in our core and adjacent markets and talks to our digital leadership in the B2B space. Finally, the Metcash retail media network build-out continues on plan. We're installing assets at pace and steadily building the supporting tech stack and have already executed more than 270 campaigns. Before leaving this slide, I also want to point to the improvements inside, which aren't always visible to the observer. Our operating discipline, our teamwork and our alignment are stronger than ever. As I talk about our portfolio through the lens of sector participation, I want to again remind you of the strategy of steadily rebalancing the portfolio of revenue and value drivers. At year-end, I said that Metcash is often a misunderstood business and that assessing it as purely a wholesaler materially underestimates both the quality of the business and the opportunity. It's most helpful to understand the balance of the group as a wholesaler, retailer, distributor of food and liquor to the on-premise and out-of-home market and more recently as a franchisor. And secondly, through a deeper understanding of how the shape and balance has changed in recent years. And as you can see, continues to change. In the first half of this year, the contribution to total revenue from wholesaling has continued to moderate and now stands at 72%, down from 74% last year. We continue to think about the idea of winning with independents through the lens of operating businesses alongside them. We've done this for a long time now in Hardware and Total Tools, and we've signaled our intent to do the same in Food and Liquor. Each revenue model lets us tap into new markets and allows us to broaden our business goals beyond wholesaling. And as I said then, at the heart of our flywheel is our logistics capability. And at the heart of our business as a platform to support and win with independents is our wholesale business. But neither of those are the full extent of the Metcash Group nor of our ambition. Turning to the financial overview. Excluding tobacco, sales grew by a pleasing 4.5% in the half and was still positive 0.4% even including tobacco to a total of $9.6 billion. As I noted earlier, EBITDA was strong, up 2% or 4.3% excluding the once-off integration and strategy costs, which we called out at the recent AGM, and which are included in underlying earnings. The group delivered $240.2 million of EBIT and $126.7 million of underlying earnings or $0.115 a share. Cash performance was again strong as headlined by the almost 60% increase in operating cash flows leading to debt leverage ratios at the lower end of the target range and underlying the strong balance sheet. The Board has declared a fully franked dividend of $0.085 per share. Turning to the pillars now. It's pleasing to see revenue growth, excluding tobacco in all pillars, sustained in Food, excluding tobacco and in Liquor and accelerating in Hardware. Remember that Superior was included for just 5 months of last year. I noted the cash performance earlier, and it's good to note EBITDA up 2%. Excluding $8.3 million of once-off integration and strategy costs, group underlying EBIT for the half was up 1% and group EBITDA up 4.3%. Before I talk to the Food slide, the key note among you will notice that there's less data and information and more focus on the core strategic points that we want to make on these slides. You can rest assure that all the data that we've always provided is available in the appendices at the end of the slide pack. As we did at year-end, we've also provided updates on important strategic initiatives, including Horizon, retail media and Sorted as well as further information on our ESG progress in these appendices. But back to Food now. I really do want to highlight the continued competitiveness and relevance of the IGA offer. The market hasn't gotten easier, and competitive intensity has, if anything, increased. Despite that, our price competitiveness has continued to improve, and this has underpinned an improved rate of growth in the second quarter. The targeted Extra Specials promotional program, which is focused on large stores and which recently expanded from 75 to 95 stores is showing strong results. Average shelf prices across all 249 large IGA stores are now at or below the majors. I'm sure you'll appreciate the significance of this, more so in the current environment. Both Campbells & Convenience and Superior continue to grow. In Campbells & Convenience, we're winning new customers and growing our business with existing customers. I described it as a reinvigorated business in the year-end results, and we're seeing continued evidence of this. This business is actually growing tobacco sales as the preferred route-to-market partner for tobacco suppliers. This is the manifestation of a desire to control what we can, not waiting for someone else to change our fortunes. The growth in Superior increased through the half in a highly competitive market, and I'm pleased to have won the Coffee Club contract, which started at the beginning of the second half. Food earnings grew by 9.8% at the EBITDA level and 3.6% at the EBIT level. Higher depreciation and amortization is driven by the new DC in Truganina, as you would have seen in the second half of last year as well as the amortization of Superior customer contracts and right-of-use assets. EBIT growth was 6.1%, excluding strategy -- once-off strategy and integration costs. EBIT margins were up 10 basis points on the back of an improved product mix away from tobacco and an increased contribution from Foodservice & Convenience, even including those once-off costs. The liquor market has been described as lumpy in the half with the weather in New South Wales not helping things and is also characterized by an increased retail competitive intensity that we had expected. The IBA and ALM contract retail customers continue to deliver a competitive, relevant and convenient offer that differentiates them in the market and has allowed them to continue to take market share from their more formal competitors. It's pleasing that we've seen an acceleration of sales to on-premise customers, too. There have been several key wins with our customers in this half in the renewal of the Liquor Stax contract and the conversion of the Redcape Group from contract to the IBA banner group, which are standouts, and reflect the confidence that those important partners have in our ability to help them win in the market. In terms of key strategic initiatives, the Platinum growth program continues to deliver results, and we've recently completed the acquisition of Steve's Liquor Warehouse group, and these sales and earnings will be included from the second half. I spoke earlier about Sorted, which is now live across all ALM states, except New South Wales and Queensland, which will be transitioning in January next year. Earnings are impacted by $1.5 million of once-off integration and strategy costs, flat sales volumes in a declining market, inflationary cost pressures not offset by volume growth, margin pressure and lower inflationary environment and D&A related to the Truganina DC and digital investments in our supply chain. We're responding in all areas, including through disciplined cost and productivity programs, continued IBA growth, winning share of shopper wallets in the retail market and bringing more suppliers into the network. EBITDA as a proxy for cash earnings, excluding once-off costs, shows a very small decline and highlights the impact of the steps we've taken. I'm pleased with how the team has both managed costs and still gained share in challenging trading conditions. During the half, we announced the merger of the Independent Hardware Group and Total Tools to form the Total Tools and Hardware Group. I'm pleased and grateful for the way in which our team members have continued to deliver for their customers through these changes. They've continued to operate with discipline and trade with hunger in difficult markets and times of change. In our business, we prize the ability to hustle, and these teams have certainly done this. As you can see, both Hardware and Total Tools are in growth, and this has accelerated in the second quarter. It's pleasing to note that building supplies, builders' hardware and timber are categories that are now in growth and the Total Tools delivered growth in all three of their key models: franchise, exclusive brands and retail store sales. Earnings in the pillar are most impacted by trading conditions in Victoria, New South Wales and Tasmania. Again, you'll be interested in what actions we've taken. We have a high-caliber leadership team in place and continue to refine our offer through range and pricing reviews in both Hardware & Tools to meet the needs of our core trade and professional customer in both businesses. Mitre 10's Low Prices Nailed Down promotional program is now well settled and delivering pleasing results. We've refocused our private and exclusive brands program, and we see more upside here. The cost-out programs that have been in place for a few years remain, and we continue to balance this with making sure we have the capacity to serve our customers. We're also seeing that some of the improved market trends were sustained into the half, and I'm pleased that housing starts have now returned to growth at a national level with sustained strength in WA, South Australia and Queensland. The frame and truss pipeline is full in Queensland and building in other states. EBITDA, excluding once-off costs, was up 2.5%, underpinned by the improved sales performance. I'm particularly pleased that excluding these once-off costs, the business returned to positive EBIT growth and leverage in the second quarter. I'll now hand over to Deepa for her financial review. Deepa Sita: Thank you, Doug, and good morning, everyone. I'll start by presenting a high-level overview of the financial performance for the first half. Disciplined execution continues to drive strong cash generation and sustained profitability despite the ongoing market pressures. Maintaining robust operational and financial management remains central to the strategic framework, ensuring we are well positioned to adapt to changing external conditions. The group's robust cash performance is evidenced by a 3-year rolling cash realization ratio of 106%. Given the timing and seasonal effects of period-end CRR results, the 3-year rolling measure remains the most meaningful indicator. While certain working capital timing differences are anticipated to reverse in the second half of the year, we project that the 3-year CRR will remain at the upper end of the previously guided range of 80% to 90% by year-end. Balance sheet flexibility is maintained, with the debt leverage ratio positioned at the low end of the guided range of 1 to 1.75x. As Doug mentioned, the Board has declared a final dividend of $0.085 per share, reflecting a moderate increase against the annual target payout ratio. The dividend reinvestment plan remains in place with no discount applied. The ROFE at 20% reflects the short-term impact of business acquisitions, ongoing investment in long-term enablers as well as the softer earnings. Turning to capital management. This half's outcome reflects a consistent and disciplined application of the capital management framework. The operating cash flow for the half amounted to $262 million, underpinned by effective cost control and diligent working capital management. Capital expenditure and M&A investments amounted to $104 million with a portion allocated to the acquisition of Steve's Liquor. The remaining funds were allocated towards reinforcing core business operations and advancing key priorities, including technology upgrades, network expansion and growth initiatives. The year-on-year variance mainly reflects last year's $400 million investment in business acquisitions, most notably the purchase of Superior Foods. The $126 million decrease in net debt primarily reflects robust operating cash flows and timing of investments as the business continues to evaluate potential investment opportunities. The interim dividend of $0.085 per share reflects a payout ratio of approximately 74% underlying NPAT. The key dates for the dividend and DRP are provided in the appendix section of the presentation. The moderation of ROFE was expected and as mentioned, is primarily due to the short-term impact of business acquisitions, continued investment in long-term enablers such as technology and supply chain and a softer trading environment. This slide provides an overview of the group's P&L performance and other key financial highlights. Revenue and EBITDA have remained steady, supported by a diversified business model. Excluding tobacco, revenue growth has been achieved across all pillars. EBITDA growth is reflective of solid underlying cash generation and operating leverage within the group. The depreciation and amortization for the first half of FY '26 is in line with the second half of the prior year. The increase relative to the first half in the prior year reflects the addition of new assets such as the Truganina DC, which became operational mid-period in the prior year. Additional uplift also arose from the Superior Foods acquisition and new leases, noting that Superior Foods was only consolidated for 5 months in the first half of last year. As highlighted at the year-end, the finalization of the Superior Foods purchase price allocation in the second half of FY '25 also increased customer-related amortization. Notwithstanding the increase in depreciation and amortization, EBIT before strategy and integration costs, reflects a modest year-on-year improvement and underscores the company's continued emphasis on cost management as well as operational efficiencies. The net finance cost for the half amounted to $60.1 million. The year-on-year increase is attributable to the timing of the Superior Foods acquisition during the first half of last year. Looking ahead, we anticipate the higher average debt utilization in the second half, which will align with peak trading periods as well as planned investment activities. Assuming interest rates remain unchanged in the second half, we expect the full year finance cost to remain in line with previous guidance of between $120 million and $125 million. Significant items are of the same nature as those disclosed in the prior years and further details are available on the slide as well as in the financial report. The year-on-year change in underlying EPS at $0.115 is largely attributable to the one-off integration and strategic costs, which are reflected within EBIT. Excluding these costs, underlying EPS is broadly in line with the prior year. Strong operating cash flows, combined with considered capital investments reflect Metcash's disciplined approach to cash management, enabling ongoing expansion and growth while preserving the group's financial resilience. Capital expenditure continues to be carefully evaluated in line with our capital management framework. FY '26 capital expenditure, excluding acquisitions, is expected to remain in line with previous guidance of approximately $200 million. As in the prior years, we will provide future CapEx guidance at the year-end. The group retains balance sheet flexibility and remains well within the parameters of its capital management framework. Net working capital closed at $430 million with the increase in inventory levels supported by favorable supplier funding ratios. The increase in inventory was primarily driven by the strategic uplift in tobacco stock, which is fully funded through accounts payable and supplier trade finance at no cost to Metcash. Average working capital days remained low at 13.2 days, reflecting our ongoing focus on working capital efficiency and performance. Metcash maintains a healthy, well-balanced and carefully managed debt maturity profile with total facilities of $1.56 billion. Undrawn facilities of approximately $860 million provide the flexibility required to manage net working capital fluctuations throughout the year, both intra-month as well as seasonally. Closing net debt was approximately $600 million, resulting in a DLR of 1x, which is in line with our target range of 1 to 1.75x. Given the fluctuation in net working capital throughout the year, closing net debt should not be viewed in isolation. Therefore, in line with previous reporting periods, we've again shared the average net debt position to offer a clearer picture of our financial leverage. The average net debt during the first half was approximately $800 million, remaining generally consistent with the preceding two periods -- reporting periods. This corresponds to a DLR of 1.32x. The weighted average debt maturity is at 3.2 years. The facility maturities are strategically staggered within our syndicated structure, enhancing resilience throughout business cycles. The weighted average cost of debt is lower than the prior year, benefiting from the RBA interest rate cuts earlier this year. $295 million remains hedged at a favorable rate of 3.69%. In conclusion, our balance sheet remains strong with leverage well within target parameters. Our cash-focused culture continues to deliver with operating cash outperforming expectations and working capital discipline remaining a hallmark of our approach. I'll now hand back to Doug for the group trading update and outlook. Douglas Jones: Thanks, Deepa. Growth momentum, excluding tobacco has continued into the second half of FY '26. We're seeing an uplift in growth rates across Supermarkets and Total Tools with broadly sustained performance in Foodservice & Convenience, Hardware and Liquor. In Supermarkets, the business has maintained its competitive edge despite heightened price competition. The increased growth rate observed in Q2 has continued, driven by our differentiated and localized offer as well as the success of the Extra Specials promotional program in large stores. Strong growth continues in Campbells & Convenience, supported by investments in the Sorted order portal and distribution center upgrades. These initiatives underpin our leading position in the petrol and convenience market. Notably, we've secured more large P&C customers as part of our tobacco mitigation strategy with the tobacco supply to BP commencing mid-December and representing approximately $60 million per annum. In Superior, sales growth remains robust, buoyed by customer expansion, including the Coffee Club contract win, which began in late October and is valued around $55 million per year. Liquor sales are flat to start the half, reflecting the effectiveness of the multichannel strategy in a challenging market. We've seen accelerated sales to on-premise customers while sales to IBA and contract customers in Australia reflect that more subdued market. The Total Tools and Hardware Group sales growth has strengthened compared to the improved first half with Total Tools showing particularly strong underlying growth. This is attributed to improved operational performance and earlier start to Black Friday promotions and continued store growth. In Hardware, growth has been sustained in the subdued market, thanks to strong execution. We're also seeing early signs of market recovery. The frame and truss pipeline, as I noted, remains at capacity in Queensland and is building in other states. While this is only a 4-week period, the start to the second half has been pleasing, and we're planning for positive sales momentum for the remainder of the half. The business is well positioned due to an increased diversity and resilience and with a continued focus on disciplined execution of our strategy. Before I hand to the operator, I do want to make a comment on Horizon, and I'm recognizing that we are in this unique situation of not all the appendices in your hands. There's been an immaterial increase in the total investment over the full life of the program and some savings that we've made in the last 18 months, which will be spent and invested over the next 12. But as I say, a very, very small, I'd call it, immaterial increase, which I think is a strong result. All right. I'll now hand over to the operator, who will take questions. Operator: [Operator Instructions] Our first question comes from Adrian Lemme from Citi. Adrian Lemme: Look, I had a question on Liquor. It's really good, obviously, to see share gains in what is a very tough market. Obviously, your competitors are trying to address their share losses, and it has gotten more competitive. Are you planning to support your retail partners to hold share? And if so, should we expect further margin decline, please? Douglas Jones: Yes. Thanks, Adrian. I'll make a few comments, and then I'll invite Kylie to make some comments about the market and our plans. I think what you've seen, as I noted, is that the earnings pressure is fundamentally a function that you've seen in all of our competitors of a much lower inflation environment and flat volume in our business, which means that absorbing and offsetting CODB inflation is just that much more difficult. Absolutely, you've heard me say, and I think you're probably all sick of hearing me say that our flywheel is the most important thing for us and making sure that we keep our retailers competitive is how we keep that flywheel spinning. That said, we haven't invested over and above in pricing for our retailers. Those are the programs that are in place. And so that margin compression is not because we're giving away more margin to them. It's because of the relationship between volume and inflation. I'll invite Kylie to make a few comments about the market generally. Kylie Wallbridge: Yes. I will -- thank you for the question. And I would echo Doug's comments that our margin impact isn't as a result of upweighting increasing pricing activity in the market. In fact, our investment in our network is around improving that shopper proposition, the quality of that experience and the quality of those programs in partnership with our suppliers. We are the second largest customer for most of our suppliers. And in fact, in some categories, we're actually the #1 customer for the largest suppliers in the market. So that partnership without investing over and above in price and resulting in market share gains, I think, speaks to long-standing quality and the service proposition. Adrian Lemme: That's very helpful. If I may ask just a second question, just Doug, more broadly on the strategy costs that have been incurred this year, mostly in the first half. Can you just confirm you are not planning to incur those costs in '27? And now that the work has mostly been completed, what do you see as being the benefits of this investment, please? Douglas Jones: Yes. So I'll make two points there. The first is that we told you that we were looking at $12 million for the year of integration and strategy costs. We've incurred $8.3 million in total, and so you can do the math. There will still be some in the second half. And I can confirm that we don't see any more coming in, in the following year. I do want to just reassure that the bulk of those costs are in integration costs. Operator: Next, we have Craig Woolford from MST Marquee. Craig Woolford: Just two questions, if I can. The first one, just on your Total Tools performance. It does look quite a strong period. I'm just wrestling with how you want us to interpret 9.8% versus, say, a trend of 3% to 4% in the first half '26. How much do you think is Black Friday? How much is an underlying consumer? What would you say about the competitive environment in the [ tools ] segment? Douglas Jones: Yes, sure. I'll make a couple of comments and then invite Scott to add, hopefully, not correct. So we have had -- we're cycling new stores, and we've had a few more stores. Black Friday, when we talk about going early on Black Friday, that was our competitors who went early, and we responded. I'm really pleased and grateful for the way that the team responded quickly and with precision, and we're very comfortable with that. It's very difficult, Craig, you'll know, to attribute how much of it is to a particular promotion. And just remember, it's 4 weeks. But certainly, I think that the underlying trend is strong, and we did point to a strong second quarter as well. Scott, do you want to add anything? Scott Marshall: No, I think that's broadly right, Doug. And Craig, look, if you look at the growth for the half in total, we only added three stores. We're quite happy with the underlying performance. And we are working really hard with our customers. So where you've got our loyalty programs, we're very focused on our direct engagement with them and running the right promotions at the right time. So there's been a lot of work in resetting range and repositioning ourselves. Craig Woolford: And you just talked -- right at the start of the presentation, Doug, you talked about the independents in healthy shape and also looking to be more involved in retail in Food and Liquor. What exactly does that mean? Is there any examples you can give us of what you've done or what you would like to do? Douglas Jones: Yes. I mean I can be very specific about what it means is that -- and we've told you guys this before that we see ourselves owning retail stores in the future. We're very cautious about how we deploy that capital. We're not going to overpay. I mean the example -- obviously, I won't talk to any specific discussions or engagements that we've had. But other than that, that we've closed, which is Steve's Liquor Warehouse, $50-odd million of turnover and $3 million to $4 of EBIT, that's what it means, and we're in progress. Operator: Next, we have David Errington from Bank of America. David Errington: Doug, just a quick clarification before I ask my questions. I've been asked -- an e-mail came through, and I must admit it's to Adrian's question about the recurrence of the restructuring costs in '27. You said that you wouldn't get an increase. Could you just clarify what you meant by that? In other words, will those restructuring costs of $10 million or so disappear? Or will they just stay flat into the foreseeable future? If you could just clarify that before I ask the next question, that would be great. Douglas Jones: Yes. I'm sorry, I wasn't clear. They will disappear. We do not expect them to recur. David Errington: Right. Excellent. So that's a $10 million tailwind in '27. I think that was important to clear up, Doug. Doug, one of the attractions of this result for me was the performance of Campbells & Convenience, the performance there. And I must admit, it's snuck under the radar for me. And if you could take a minute to go through some of your commentary in the release where you say the acceleration in growth continued to be underpinned by the business' new growth strategy, which has positioned it as the leading supplier in the sector, supplying all major petrol and convenience operators. I mean it's a pretty big increase, like $50 million first half on first half sales growth. It's really quite meaningful now. So could you go into saying, what is it that you're doing differently now compared to what you were doing previously that's actually seeing some really chunky sales growth here? I mean Superior is doing very well. I get that, new contracts and whatnot. But this convenience business is sort of like crept up on me. And I must admit, if you could spend a couple of minutes elaborating what your new strategy has been and going forward, that would be wonderful. Douglas Jones: Sure, Dave. That sneaks up on you, so I'm -- I don't know if that's a good thing or not. So yes, thanks, and thanks for calling it out. I'm going to invite Grant to make some comments. But just to remind you that we're still in the -- what is the word, annualizing the Ampol contract. But Grant is the leader of the business, and I'll invite him to talk about the strategy. Grant Ramage: Thanks, Doug. Thanks, David, for your question. As you know, we commenced supplying Ampol in February. It ramped up through the course of February. So you've got 6 months now in the result of full supply. At the time we won that contract, which was over a year ago, we talked about around a $70 million annualized total. It looks like it's going to be a bit more than that, which we're pretty happy with. And I think beyond that obvious upside is we are growing really well with most of our large customers in petrol and convenience. And why is that? Well, we've worked hard to be a partner to that industry. It's not a side gig for us. As a wholesaler, it's the main game. So investing in our Sorted platform where many of them place their orders, investing in DCs, upgrading the DCs. Obviously, you're well aware of Truganina last year, but we're also upgrading in WA. We've been able to shift some volume around to support the Superior business, create capacity for them to grow. So moving QSR volume into Truganina, moving QSR volume into Canning Vale early in the year has created the capacity for wins like Coffee Club. And it's a good example of the benefits that we're getting of putting the businesses together as a new Foodservice & Convenience business. So there's a number of factors, but really, it's being a great partner, and that's our aim. We've even won a couple of awards from our customers through the course of the half, which we're really happy with. But it's -- I believe that there's ongoing opportunity for us in that space. David Errington: Yes, that was where I was going. Is there more upside do you think? Or is there more wins out there for you in the near term? Grant Ramage: Yes. Well, we're working with all of the big players in petrol and convenience now, but we're not supplying any of them with all of their needs. So there's a share of wallet opportunity that remains, and we're actively competing and participating in tender processes and looking to build on the wins that we've had. And obviously, the key to that is providing good service to our customers and good value. So yes, I think there is opportunity, but it's a competitive market as well. And we've had a few wins at the expense of competitors, and you don't expect them to stand still in the future. David Errington: Okay. And Doug, can I finish off, look, you mentioned Horizon. I remember at your Strategy Day, it got a lot of press. This would have been over a year ago now, I suppose. It got a lot of press. You seem to be on top of it now or it's coming -- and now we've got a line of sight, it's going to be coming on live in about a year. Are you confident that it's going to come on without much of a hitch? Or is it something that we as investors should keep at the back of our minds? It seemed to be on your comments, you're a little bit more comfortable now than what you might have been a year ago. But can you give us a bit of flavor as to where your feelings are toward this major project when it comes on? Douglas Jones: Yes, sure. Thanks for the opportunity. There's a couple of things I'd say, and I'll start with the fact that, as I always say, it's a large and complex program. I do want to quote our CIO, Neil Whiteing, who always reminds us that the system will be tested. We just want to make sure it's by us and not by the users. And so we're very focused on making sure that what has been built is of a high quality. We -- I said maybe a year, maybe it was 1.5 years ago. I think it was a year ago, I spoke about this idea of as we move through the program, we'll essentially buy down the risk. And what that means is that as you go through specific milestones, you kind of tuck those to bed and the risk diminishes. It doesn't go away. The completion of the solution build was a significant milestone for us and one that was completed on time and actually well on budget, slightly better. I referenced some savings that we've had. And so all of that does -- it does give you confidence. But I want to be very clear, this is no means easy, and it's not yet done. So we are very focused. We're in the phase where the business is very engaged with the program, and they have their hands on it. And you can never really be sure what will come out of testing, but so far, so good. So yes, my confidence grows with each passing milestone. Sorry, the one last thing I'd say is I think we've done a very good job. The team have done a very good job of managing the costs, what we call the burn rate. And that's why, as I pointed to the fact that the costs in the next 12 months are slightly higher than we showed, but that's because we've actually had a lower burn rate leading up to it as well as that small increase in the total overall spend. We have also engaged now with customers and suppliers to talk to them about our deployment plans. So stuff is very real for us. David Errington: It just seems a little bit more optimistic today than what it was about 12 months ago. And there's a line of sight for it now. So yes, that's why my question. Hopefully, it goes well. And good cash realization too, Deepa. That wasn't lost as well. Operator: Next, we have Bryan Raymond from JPMorgan. Bryan Raymond: First one is just on this Extra Specials program that's in, I think, 75 going to 95 stores within the Food business, started during September. Just wondering if that is meaningful enough to move the dial for, say, the acceleration into the trading update over November. And then just the second part of that question is just how it's funded between supplier, wholesaler, retailer in general terms. Douglas Jones: Bryan, thanks for the questions. Yes, I'll let Grant talk to the details of it. I do want to say, though, that the business is made up of many, many moving parts and an enormous amount of effort across many programs. And so as always, pinning results on one intervention is dangerous. But I'm confident Grant is going to tell you that it is making a difference. Grant Ramage: Yes. Thanks, Doug. Thanks, Bryan, for the question. you're right. It started just after the AGM. We announced it there. We started with 75 stores. It's increased to 95 recently, and we think that will grow again in the new year. Obviously, the 95 stores that it's in today are 95 of our biggest stores, and therefore, their contribution to the overall network sales number is disproportionately high. So I can tell you that the program is delivering strong results to the retailers. They're getting roughly double the sales growth rate than the rest of the network, and it's good for us as a wholesaler as well and it's growing our wholesale sales, too. So we see value in it. Obviously, it's about delivering great value to shoppers. The specials themselves are better than market pricing. And it's really good to put IGA in that light of really being very, very competitive. And it builds on our large group of stores where we've done exceptional work over the last few years in getting them to a really competitive position and where their shelf prices, as Doug called out earlier, are now below Coles and Woolworths in many cases. In terms of how it's funded, like everything we do, it's a combination of supplier support. Suppliers continue to be supportive of independents, and they want independents to succeed. Our retailers, of course, invest margin in promotions to drive results. And Metcash also has invested in this through the course of the half. It's embedded within our results. We're very careful about our price investment. You see price match is the single biggest part of that. We always make some other investments around that, and it's within the bounds of normal for us. But it's very targeted investment, and I'm very pleased with the results. Bryan Raymond: Okay. That's fantastic. And then just second one for me is just on employee costs. I was a bit surprised, I just look at -- the sort of through the detail that we do have at this stage. It looked like about 8% employee cost growth over the period, sort of 2x sort of wage inflation. I understand there's lots of moving parts in the business, and I'm sure there's some JV contribution to that in stores that have converted and other elements. But it just seems like a very high number compared to your sales growth and compared to wage growth. So is there sort of a simple explanation, maybe one for Deepa, in terms of how that might have come through? Douglas Jones: No. I mean we're a large and complex business, Bryan. So there isn't one simple explanation. The part of it is Superior. There's additional cost because we had an additional month as well as some of the other small acquisitions we've made. There is also a higher, what do you call it, accrual of short-term incentives than there was last year and natural CPI increases. I'm sure you'll be aware that certainly in the bargaining space, there's quite a lot of pressure. So there's a number of contributing factors. Operator: Next comes from Shaun Cousins from UBS. Shaun Cousins from UBS. Next, we have Caleb Wheatley from Macquarie. Caleb Wheatley: Just a follow-up on the IGA network. It sounds like the Extra Specials is doing quite well. Can you just talk to where you're seeing average price index now across the network relative to the sector? Any comments you can make on other initiatives being considered to drive market share, please? Grant Ramage: Yes, I can answer that, Caleb. The price index, we've never shared the exact number of the price index, but we've described over the last 5 years, continuous improvement. That continues to be the case in all channels, so small, large and medium-sized stores all continue to improve. What I'm particularly pleased about is year-on-year, our price index is flat. So in a market that's clearly become more competitive, we've held that position. And through programs like Extra Specials in particular stores, we've obviously improved the position. So it's an ongoing process. It's the sum of many parts. So it's a combination of shelf prices, the promotional program that we run, and it's a weighted average measure of price paid looking backwards. So it compares the average price paid in IGA to price paid in the chains. And then beyond that, other factors for performance in the network, obviously, store numbers, you can see we're continuing to open stores in our sweet spot, medium-sized stores, which is healthy. We also continue to move stores out of IGA and into other banners where they are unwilling or unable to meet the channel standards we set for IGA. We keep raising those standards along with working with retailers. And there are some stores that simply don't fit into the network anymore. And as they move out of IGA, they continue generally to be Metcash wholesale customers, but they do drop out of the Metcash -- the IGA market share [ rate. ] But we think that's better because having that strong cohort of very good execution stores is what allows us to work with suppliers to get additional investment in things like high-compete Extra Specials. Caleb Wheatley: That's clear. And just a second one, if I could, just on margins in Hardware. I appreciate the comments, Doug, on the one-offs and those rolling out as we go into next year, but you've also noted retail margin pressures in the release. Just keen to understand what you're seeing on that retail margin pressure front and including the implications of some of the comments you made on Black Friday starting a bit earlier from your competitor set there as well, please? Douglas Jones: Yes, sure, Caleb. Happy to comment on those. I think it's important, firstly, when you're talking about the Hardware business and we say retail, what we really mean they're trade distribution sites that we own in the main. And so they trade, they negotiate and make prices with their customers very often. And so that's where you're seeing that competitive intensity and margin pressure coming through. We're very comfortable that our teams are balancing that well. I know Scott and his team have got a huge focus on driving sustainable sales growth. In Total Tools, the retail sales margins have been a little steadier. In terms of Black Friday, I think I've kind of said it all, it was the market that moved earlier than they have in the past. We were alive and waiting for it, and I think we responded very well. I know Scott and the team are comfortable. And let's see how we trade. Black Friday itself has just finished, but let's see how we trade in the next few weeks of the half. Operator: Next, we have Ben from Jarden. Ben Gilbert: Just the first one, just on Hardware. Just keen to dig into a little bit in terms of the comments around seeing green shoots. Obviously, the Total Tools update was stronger. Could you talk to outside of Queensland, where the order book is obviously pretty full for frame and truss, how are you seeing the order book more broadly? Are you seeing lengthening of it? Are you seeing sort of some improving growth there? And then also, Scott, just be interested in just that very strong like-for-like update for Total Tools in the first 4 weeks. Is there anything funny or unusual in that? Or do you think that's -- could be the beginning of a bit of a trend? Douglas Jones: Ben, the line is not that great. So we're going to answer the question. But if we miss something, then please prompt us again. We can answer what we thought we heard. Scott Marshall: Yes. Thanks, Ben. I appreciate it. Look, for us, your -- the first part of the question around Hardware and performance, I think we called out the differences by state. Where we are seeing greater challenges, definitely Victoria, Tas and then New South Wales. There -- if you look at the national approval starts, there is an uptick, which gives us some confidence, there's some green shoots there. There is still those structural challenges around trades that are meaning completions are prolonged. But for us, we are trading, I think, well and out there hunting business, as Doug said, but the market is competitive. So if you want -- we don't normally give a split by market, but Victoria, where we have a higher share of our own network is a drag for us. The other part of your question around Tools. And look, I think we've called out, it's a 4-week period. The half growth in the network has been strong. We're working hard to have the right promotions at the right time. We're really pleased with that month performance being really targeted with our customer engagement and having the right promotions. So again, it's a very short period. I wouldn't -- I don't think I can add more commentary than that. Ben Gilbert: And just a second question. The market's got a pretty material lift in the rate of margin expansion for Hardware into fiscal '27. And I appreciate we're sort of looking at the crystal ball here and we're not going to get guidance for '27. But could you just give us a bit of an understanding or feeling for how you feel that leverage can run through this business as the cycle turns? Because we haven't really seen an up cycle in the business in its current form. Do you think that the cost base is largely embedded with the business now, so improving top line should drive decent leverage through the P&L? If it's more trade driven, is it dilutive? Just could you give us a few sort of -- I suppose, sort of [ going forward, ] how you think about the margin construct as the cycle starts to tick up? Douglas Jones: Ben, I'll take a crack at that. We obviously have to be cautious about any forward guidance, and I'm not going to do that because I just can't. But our plans and strategies are designed in such a way that as volume lifts, we're able to take advantage of that. I don't think it should be lost on anybody that while volume may be subdued and has been for a while now, cost inflation has continued to grow. It doesn't go away. And that is what we've been managing very carefully, and it's very, very difficult to offset it in a business that has relatively high fixed costs like particularly trade distribution businesses do. And so we've been working very, very hard to stay in one place. The flip side, mathematically, should happen as well as volume lifts. Now we're very focused on making sure that we don't somehow feed into the volume pressures by taking out so many costs that we're unable to serve our customers, and it's a very live issue that the team manage on a site-by-site basis. So I think that's the best we can give you now. I'd sum it up by saying our plans and strategies are designed to deliver leverage. And remember, I did say that if you take away the second quarter integration and strategy costs, we did achieve positive leverage in the second quarter. I mean it's only one quarter, but we did achieve it. Operator: Next, we have Shaun Cousins from UBS. Shaun Cousins: Can you hear me now? Douglas Jones: Yes, we got you loud and clear. Shaun Cousins: Yes. Apologies about before. Maybe just regarding the Food business. And I was just curious to understand how you're handling the contagion of the tobacco weakness since the 1st of July on the broader Food business? Do you think you can -- should we just see an annualization of what looks like sort of weaker sales growth? And I'm not sure -- just trying to work through your presentation materials, if you've provided what like-for-like is maybe on that second quarter period, but it looks sort of as there's been somewhat of a step down. So should we anticipate that the weakness that you've seen, say, since the 1st of July in that in Food that, that continues on? Or can you do better and actually improve that? And maybe just further to IGA, just how do you think your price perception is relative to the price reductions that you've spoken about before in that -- in your leading stores? Douglas Jones: Yes. I mean we don't generally give you quarter-by-quarter for everything, but we did call out that particularly talking about the Extra Specials program, actually Supermarkets growth recovered a bit in the second quarter. But I'll let Grant talk about the actions and initiatives we're taking to, I like your word, defend against the contagion. Grant Ramage: Shaun, thanks for the question. As you say, since the beginning of July, we've seen a significant step-down in tobacco even from a declining market before that as more and more of the sales pushed into the illegal market. There's obviously a loss of tobacco sales on top of that, you lose the associated product sales, the products that would have been bought in the same transaction, and that is definitely a drag on the network, and we called that out as we see that, but the dropdown in July was a little bit more significant than we expected. Our objective is to grow the whole store. We've been working very hard with retailers, both on a competitive front, which I think we've covered already. We see things like Chobani coming into our DCs through the course of the half. That is good not just for Metcash, but good for the network because Chobani in our distribution model means more stores getting more frequent deliveries, better in-stock position and a significant improvement in our competitive position there. There are other suppliers continuing to come in. So Monde Nissen with the rest of their products came in just at the end of -- the beginning of the second half. and there's more products like that in the pipeline. We work hard on that competitive position. We've talked about the Extra Specials, but improving across all of the store network. How is it for -- how do people perceive that? That's a much harder thing to change. It takes time. But I think if we're doing the right things, we're calling out those Extra Specials, very active in digital marketing. We've really seen a shift of our marketing focus from printed [ walked ] catalogs increasingly to digital means, and that allows us to increase our reach and reach more people with that message. So it takes time to shift perception, but we are doing all the right things, and I'm confident that over time, that will continue to improve. So I think you can expect that step-down in tobacco to continue for -- until it cycles out at the end of June. We are seeing some positive signs on enforcement, as Doug touched on earlier. And we continue to advocate for the network because we can see the impact that it has, particularly on our customers in the tobacco loss. So we've been very actively advocating for improved enforcement measures, and we're pleased to see some evidence of that happening now. Shaun Cousins: Great. And maybe just a question on -- within the Hardware division. Have you split out the Total Tools and IHG Hardware EBIT? Douglas Jones: Shaun, we split out the -- no, we don't split out the EBIT. We split out the retail sales, as we said we would. And you'll see that in the appendix, so I'm just paging to it. So we'll give you sales between the two, and we'll split out owned stores and third-party sales, and then we give you total EBITDA and EBIT. Shaun Cousins: So you're no longer telling us what Total Tools and IHG EBIT is respectively? Douglas Jones: No. And remember I told you that we weren't going to be able to do that because we have now started combining a number of functions. So I told you that at year-end. Shaun Cousins: Yes. Okay. Maybe just one quick question on disclosure going forward. You've spoken about a change to a different revenue model by way of sort of being a wholesaler, foodservice retailer, franchisor. Is there an intention to sort of maybe think about disclosing [indiscernible] earnings on that basis, just given that, that can help shift the way of thinking from the investment community if we have some earnings on that with some history, please? Douglas Jones: Yes. We are thinking about how to do that. Your words are ringing in my ears from the last time we discussed this, and you made your point well. As you've seen, we've given you some more information this time around. We need to think carefully about being very helpful and accurate in the way we attribute earnings. We won't be able to do it at the EBIT level because there's a whole lot of costs that are not attributable between them. But -- so not this time around, Shaun. I think you'll see some movements when we talk to the market in March at our Investor Day next year and at year-end. Operator: Next, we have Phil Kimber from E&P Capital. Phillip Kimber: My first question is just on the Food business. You guys are doing a great job there, and you've talked about some sales momentum. Just trying to understand from your customers' perspective, with such a big fall in tobacco, is it having a more material impact on their profitability than it seems to be on your profitability? Or are they managing it well like you are? Grant Ramage: Thanks, Phil. I'll take that. Yes, it undoubtedly is having a bigger impact on our customers' profitability. I think we've said consistently over the years that our margin on tobacco is considerably lower than non-tobacco, and that most of the profit made on tobacco is being made in the network. So you see that in other integrated retailers as well where they're calling out substantial drops in their tobacco income. The challenge for us is to replace that value in our customers' P&L. So we've been supporting them to drive growth. So it's pleasing to see that at a department level, fresh is now bigger than tobacco for Metcash. And in retail, fresh is growing strongly. Fresh is the biggest driver of store choice. Obviously, we talked about value a lot already, so I won't repeat that, but really focusing on getting the basics right across the store, macro space allocation, ranging, pricing, the promotional program that we run, high-quality service, high-quality fresh. All of those things help lift overall store performance, and they are the things that we've been working on for some time with retailers but really accelerated in this period because everybody has seen the challenge of tobacco, and it's really helping to galvanize the network around some initiatives to drive improvement in performance that will ultimately offset that tobacco challenge. And who knows, some of the tobacco business might come back. Phillip Kimber: Yes. And then my second one, just quickly was on -- I think on the call, it was mentioned that there was a strategic investment in tobacco. And I just wanted to understand that given you also said that sales took a step down from the recent change. Why would you be making a strategic investment in the inventory in tobacco? And is there a sort of one-off profit rebate benefit from that? Douglas Jones: Phil, I'll take that one. So as a wholesaler, we're always taking positions. And what we do is make sure that we're taking those positions in a responsible way ahead of price increases. And you'll also recall that at year-end, we told you that we expected that the impact of the removal of the accelerated tobacco excise program will be around $5 million, we estimate. And that's part of our -- that buy-in ahead of increase is part of our strategies to manage that as well as all sorts of other things from retail media to all of the initiatives Grant spoke about. I just want to be clear, there's no profit recognized until the product is sold. And then the last point I want to make is that this is done in consultation and in partnership with our tobacco suppliers. And I've spoken for a while now and so is Grant about our strategic partnership with them as their chosen preferred route to market. We do this every year. This is entirely normal, and there is nothing unusual about it. Operator: Next, we have Michael Simotas from Jefferies. Michael Simotas: First one for me on Food, just fleshing out some of the topics that have been covered a little bit. There's a line in the release that the Food retail market is the most competitive it has been in a number of years, and I think many would agree with that. Metcash has done a very good job of maintaining its underlying Food margin since the rebase about 10 years ago. And then there's been some benefit from mix shift away from tobacco, et cetera. Are you confident that you've got enough levers to pull and drivers to be able to continue to maintain margins on an underlying basis, notwithstanding the market continuing to become more competitive? Douglas Jones: Michael, before Grant comments specifically within Food and the levers, everything I'll say is couched in we have plans and strategies designed to rather than we're going to. So please hear it that way. But at a high strategic level, we've spoken for a while now about the reduction in proportion of total Food sales from IGA and we've spoken about it being around 60%. And that's a function of us obviously selling to other Supermarket customers but also growing our Campbells & Convenience business and the entry into the foodservice market. So the expansion of margins that you've seen is in part because of the shift away from tobacco, but it's also a higher contribution to earnings from the now combined Foodservice & Convenience business. I'll invite Grant to make some more specific comments. Grant Ramage: Thanks, Michael. The short answer is, yes, I think we have the levers. Over the last few years, we've been carefully managing our costs to allow us to maintain a competitive position, our cost to serve our customers. We've invested in DCs. We've put new automation in new DCs like Truganina, continuing to invest in systems, not just the core ERP system, which is well publicized, but all the systems around that, that support better choices around ranging pricing promotions. All of that means that the efficiency of the work is good. I've talked already about high-quality execution. That drives a really neat flywheel in Food and has been for the last 5 years of better execution, good supplier investment, better returns equals more good investment and more execution. And that's been working really nicely for us for a while and continues to be a driver of our competitive position and success there. So I think we have got it. I mean it's an interesting market in that it's competitive. It's very competitive. But the investments that we've seen by others in the market, we've been able to keep track of and match and build programs with suppliers, with retailers that keep us in a competitive position. And as I've already referenced on our measure of price paid, it's equivalent to what it was a year ago. So we've held that position very well. Douglas Jones: Michael, you've heard me say in the past that expanding wholesale margins is not always the way to grow profits. We focus on spinning the flywheel faster and growing wholesale profit dollars in that way. But as we -- both Grant and I have touched on, there are other strategies and other revenue streams and business models that have a higher margin that will -- if our plans are executed well and our strategies are successful, should support margin expansion. Michael Simotas: Yes. I think you've done a very good job on that. The second question I've got is on Hardware. Look, I think the ingredients for a recovery have been in place for a little while, but it's taking time for this to come through and with the monetary policy backdrop potentially being a little bit less favorable as of the last few weeks. What do we need to see to get this business to really fire? And maybe to give a little bit more comfort, can you talk about in markets like Queensland where you have seen pretty good demand, whether there has been more favorable pricing backdrop for some of the heavy building materials, frame and truss production, et cetera? Douglas Jones: Yes. So what we really need to see, I mean, it's fairly simple is a material uplift in starts in actual activity. We need trades on site, and we need tradies confident and we need builders on site and building or renovating new homes. So that's pretty simple. And what will happen is that activity will uplift, but you're not going to be able to gain pricing power, if you like, or expand through pricing power until capacity is used up. So there's still capacity in the market. And while that's there, people are -- us and our competitors are going to fight hard to utilize it. We're -- it's a bit right now, but we're very focused on making our own weather. We're not waiting for the market to improve. We've taken very specific actions, which I think I've outlined today and in the past that are designed to support our business. Scott Marshall: And Michael, it's Scott. Nice to hear from you. And just as a build, I think we were asked a question earlier around leverage as well. Definitely, now is the time for us to ensure that we come out of this period strongly. So being really clear that we lead in trade and being set up and organized the right way for that. And then just how we localize our formats whether it be convenience or trade and our range and pricing policies around that. So we're very focused on our execution right now of our offer. And as Doug has said, doing what we can to come out of this strongly. Operator: Next, we have Richard Barwick from CLSA. Richard Barwick: Just a quick one, probably a question for Grant on IGA stores. I noticed that you opened 10 but closed 9 through this half, but you're planning to open 17 in the second half. Can you give us -- or do you have a view here as to what number of closures you'd also be expected in the second half? And then a little bit longer dated, how should we be thinking about a net number of IGA stores if we look into next year as well, please? Grant Ramage: I don't have a number for anticipated closures in the second half. Sometimes these things happen quite quickly, and they're not planned, probably when I look at the reasons for those closures, sometimes it's competitors acquiring stores or sites. I think we're on the record in our calls for stronger action on mergers and reform in that space, and that's come now. So we'll be interested to see whether that actually benefits us in stopping the chains from some of their acquisitions of sites and stores. Beyond that, we always have a bit of churn in the network. It's normal, particularly in small stores. They do open and close relatively frequently, larger stores less. We're pleased with our pipeline. We've got a really strong pipeline of store growth for the remainder of the year. And we -- the planning that goes into opening a store obviously means you've got good visibility to it coming forward. So we're confident in that number. And looking further out, confident in that number because we're really focused on stores in that sweet spot of around sort of 1,200, give or take, 300. So 900 to 1,500 is what we think of as the sweet spot for new stores. Beyond that, as I mentioned, you do see stores moving out of the IGA brand in terms of net number of stores in the IGA brand, it's sitting just under 1,250 now. I think we'll probably have a few more that exit as we continue to drive standards up. There's a few final stores to do that with. I'm hopeful that you'll also see some stores coming back in where people have decided that they aren't able to be in IGA, they leave, but then they see the benefits of being in that brand, and they'll come back over time. Richard Barwick: Okay. And then, I mean, you sort of touched on, I think, Grant, the -- I mean -- and maybe, Doug, this is a bigger one for you perhaps, but the ACCC has obviously changed some of its processes around acquisitions in terms of what's to be reported in the way that they go about it. Does that -- I mean are you hinting here that that's a positive impact for you in the sense of supermarkets, but I was also wondering if this might have been perhaps a bit of a negative for you in terms of your approach to bolt-on acquisitions, especially within Hardware? So I'd love to hear your thoughts there, please. Douglas Jones: Yes. I mean I'm not a lawyer. So you can take what I say with that caveat. The changes that are coming in early next year are around the notification regime and the -- and being more proactive about that and getting preclearance from the ACCC. What the ACCC haven't done is reverse the onus of proof on the impact of the market, which is what we had hoped that they would do and have consistently asked for because very high market share businesses should be able to demonstrate that their actions are not contrary to good competition. We will obviously -- as you say, we will be subject to the new notification rules, and we'll be ready to do that. That may add some time to everybody's process, and it may, therefore, involve costs. Anytime you've got legal teams on the clock, it could cost money. So I think we'll all have to wait and see. But we feel comfortable that with our market positioning, we have the right to be confident that we'll be able to get those through. There's been a lot of activity towards the end of this year, as you can imagine, trying to get deals over the line across the market. So let's wait and see what happens next year. Operator: Next, we have Tom Kierath from Barrenjoey. Thomas Kierath: Just a quick one. Can you just give us the Superior EBIT contribution? And then just an update on the synergies there, how you're tracking, please? Douglas Jones: Tom, yes, you'll remember we said at year-end, just like in Hardware, we're not able to break it out specifically because we've merged so much of the business. So we've shown you the sales. We're on track with synergies. We feel comfortable that we'll meet the run rate of $14 million by the end of year 2, which will be around June next year. I think what's important is the strategy of the Foodservice & Convenience -- sorry, the results of our Foodservice & Convenience strategy are bearing out, and we're very happy with the performance of that business. As Grant said, we've moved products between distribution sites. We've integrated teams. And so it's just not possible to give you an individual number, but at a total level, we're very pleased, and you should take confidence from that. Operator: That concludes our Q&A session. I will now turn the conference back to Doug for closing remarks. Douglas Jones: Thank you, operator. Thank you to the team. Thank you to all the listeners for your support and attention and for your questions. I also want to thank you for your patience on the call with the lack of the presentation. It's not our doing, and we're as frustrated as you are. We're liaising with the ASX. And as soon as we've got their clearance that we can distribute the presentation, we'll make it available on our website. As it stands right now, the Chief Compliance Officer of the ASX tells us that they're unable to give us estimated timing of when that issue will be resolved. So I can only apologize and thank you for your forbearance. And with that, I will -- I'll be seeing most of you later in the week. Looking forward to your engagement. And I just want to thank you all again for your time and attention this morning.
Operator: Good afternoon, and welcome to the SDI Group plc investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Stephen Brown, CEO. Good afternoon, sir. Stephen Brown: Hello, and a warm welcome to today's half year results ending 31st of October 2025. I am Stephen Brown, CEO of SDI Group, and joining me is CFO, Ami Sharma. In terms of the agenda for today reviewing half year '26, I will provide an overview of the group and our dual-pronged strategy to drive growth. This will be followed by an operational review for the period. I'll then hand over to Ami, who will cover the financial results. Ami will then pass back to me for a wrap-up with a summary, and I will then run through the outlook going forward. We will, of course, leave time for Q&A at the end of the presentation. First, let me reintroduce you to the SDI Group and our business model. We are a buy-and-build group with currently 17 established businesses and roughly 500 employees operating from 19 locations worldwide. We maintain a lean and supportive group structure, operating at a centralized model that fosters growth, autonomy, independence and agility. Our focus is on high-growth scientific niche markets, and we have a proven strategy of combining organic growth with earnings-enhancing acquisitions, having made 20 since 2014. In FY '25, we achieved a total group revenue exceeding GBP 66 million and our current guidance for FY '26 showing growth to around GBP 75 million. With our operations being geographically diverse, we estimate that we export approximately 70% of our products internationally with 40% from direct sales and a further 30% of U.K. distributor sales ultimately shipped overseas. Importantly, our buy-and-build model relies on a compounding cycle of growth. Turning to Slide 6. And for those of you less familiar with SDI and what we do, I'd like to briefly explain our business model. The key takeaway from this slide is that the group is a sustainable and robust platform with a clear strategy to drive growth. We can simply define the strategy in 2 parts: organic growth and inorganic growth. Looking at organic growth, this is driven by our ability to build and sustain revenues and profitability across our strong portfolio of existing businesses. Inorganic growth is our ability to identify and execute accretive acquisitions that add value to the portfolio. We will also offer synergies and cross-selling opportunities for the existing portfolio of businesses. Cash flow generated from organic activities feeds our capital allocation strategy and drives inorganic growth where we seek to acquire complementary, profitable businesses in niche markets. This feeds back to create a compounding effect. Now to provide a bit more detail on what we delivered during the half year. This year has been focused on continuing momentum from last year, and we delivered excellent progress against our strategy and continue to see our plans come to fruition. This financial year, we expanded SDI's management team, increasing our capacity for organic growth and effective portfolio management with 2 divisional managing directors. This strength increases our ability to facilitate knowledge sharing and synergies across the group, supporting portfolio leadership teams to ultimately deliver. Strategic acquisitions have continued to contribute strongly to our financial performance this half year and the successful acquisition of Severn Thermal Solutions. In short, our business model has demonstrated its resilience against a highly visible backdrop of challenging and uncertain global conditions. And finally, we are delighted that we have restructured our debt financing with a renewed debt finance facility with HSBC, which is committed for the next 3 years. This will support our future inorganic growth. Now to go into a bit more detail on some of our key group organic growth activities. This year, throughout the group, we are focusing on operational excellence, leveraging the sum of our parts. We have invested across the group in new ERP systems at Fraser, LTE and Peak with the learnings expanded across the rest of the group, and we continue to invest in R&D, enabling new product launches and have benefited from revenues being generated from new product commercialization from last year. The drive to foster synergies from market access across the businesses has continued with numerous collaboration initiatives. For example, we repeated lab innovations for the second time, bringing 5 companies together to promote a unified product offering. Fraser and InspecVision are working together for expansion into the EV automotive sector as well as targeted geographic access. And we have exploited several internal customer initiatives such as ATC supplying Severn Thermal. We have improved knowledge sharing across the group also. For example, the group marketing function established last year has supported many portfolio companies with the launch of new websites across 6 businesses and rebranding initiatives, perhaps more prominent at Monmouth, Atik Cameras and Collins Walker. Now looking at each of our operating divisions in turn. I am pleased to report that we've seen revenues in Lab Equipment increase 12% to over GBP 12 million. This is reflecting improving conditions in the life sciences and biomedical markets. Also, the organic initiatives we drove last year are having impact, particularly with Monmouth Scientific, allowing second half momentum from last year to follow into this year. Safelab had an exceptional performance through contract momentum. This was cemented by them receiving a substantial GBP 1.3 million government contract for the delivery of high-performance fume cabinets to be delivered at the end of this financial year. There have been further significant contract wins across the division, including Severn Thermal, who has 2 furnaces in production for a key nuclear contract with a value of over GBP 300,000. And increased order intake by LTE for environmental rooms as well as the new Labclave-L product. There have been numerous new initiatives across the division, including, as I mentioned, LTE's new range of autoclaves for a focus on sustainability, smart performance and safety and Monmouth's drive for improving product mix through growing their clean room revenues and capability. Again, we developed revenue growth with the Sensors division growing 6% to GBP 9 million and posting solid margins. We saw solid performance from Sentek with increased demand from both new and existing customers for products and bespoke solutions. Encouragingly, they have strong capability and tenacity for market expansion. In addition to last year's strong order intake, in January, they expect to receive an annual recurring order of GBP 2 million for blood gas sensors from one of their key OEM customers and can boost a further life science giant awarding them recurring contracts on the back of a new relationship. Astles had a strong recovery in demand for the chemical dosing systems and are executing a strong order book this year. Chell continues to perform well with an excellent order intake in H1 for execution in the second half with solid demand for core products. In addition to this, they have received a notable order for the supply of 2 gas meter calibration machines valued at around GBP 1 million, again, for delivery in H2. Again, we see solid performance this time across the Products division with revenues up 12% to GBP 13 million. I'm pleased to see Atik Cameras continue to perform well, executing on its market expansion strategy. They're adding to the life sciences revenues by growing into the buoyant professional astronomy market. This has been evidenced by a significant project valued at $4 million that commenced delivery earlier this year with further delivery expected across the second half. They look forward to further traction in this market. Applied Thermal Control has been facing market headwinds in the first half relating to regulatory use of refrigerants, predominantly in the U.S. However, in response, ATC released earlier this year updated G and H series products to meet the changing market requirements, and they continue to develop the range. We also had a number of new products launched across the division, in addition to ATCs these include Atik who launched a new xGbE 60 camera for multi-camera installations. Moving on to our inorganic strategic development. This year, we have completed one excellent acquisition so far, in line with our key criteria. I am pleased to welcome Severn Thermal Solutions to the SDI Group. Completed in June, Severn will be kept autonomous as part of a decentralized model. They manufacture and sell high-temperature furnace systems and environmental chambers for advanced material processing and testing. They are focused on innovative high-value markets such as aerospace, semiconductors and nuclear. Since joining the group, the integration of Severn has already exceeded our expectations with the team showing a strong alignment to the group and rapidly fostering the collaborative spirit we have across the portfolio. Now over to Ami for a financial overview. Amitabh Sharma: Thank you, Stephen. Hello, everyone. Looking at the financial highlights for the period, I'm pleased to report that we've had a good first half with 10% total revenue growth, which was made up of 3% organic growth and around 7% acquisition growth. The stronger sales performance led to a good profit performance compared to the equivalent period last year. Net operating margins improved from 12.6% to 13.5%. We saw growth in adjusted PBT and adjusted diluted EPS as well as all the income statement measures. Net debt increased primarily due to the acquisition of Severn Thermal in the period. Turning to the income statement. We saw organic growth of 3% in the first half, as I previously mentioned. This followed on from 2% organic growth over the second half of the last financial year. We expect to see this improving trend continue over the second half of FY '26 due to some of the contract wins Stephen outlined. The GBP 2.1 million acquisition growth came from InspecVision, Collins Walker and Severn Thermal. I'm pleased to report that our gross profit margin increased by around 100 basis points to 66.3%. This is on materials only. We have grown our gross margins over recent times through a focus on pricing, and this focus continues. On a like-for-like basis, our cost base increased by over 4% due to inflation, national insurance increases, bonus provisions and a strengthened central team. Lower interest rates and net finance charges were only marginally up on last year despite the higher level of borrowing in the first half compared to last year. The tax rate on the statutory profit before tax is estimated at 26.8%, whilst the tax rate on adjusted PBT is estimated at 23% for the first half, which is similar to the FY '25 tax rate. Looking at below-the-line expenditure, share-based payments were around GBP 100,000 lower than a year ago due to the FY '23 LTIP was lapsing in the period. We also had lower acquisition costs due to abortive acquisitions last year. The next 3 slides provide a bit more detail on the financial performance of the 3 segments. We start with the Laboratory Equipment division. This division showed organic growth of 5.9% with a further GBP 700,000 of revenues as a result of the acquisition of Severn Thermal. Monmouth had a very strong first half, as Stephen mentioned. LTE Scientific and Safelab systems both saw some growth, but Synoptics saw a slower market. Net operating margins improved to 11.7% as a result of the addition of Severn Thermal. Next, the Sensors division. This division showed organic growth of 5.6%. Astles grew strongly as did Sentek, the latter seeing strong demand for its pH sensors. Chell Instruments also grew, but NPV had a slower period of trading as it had tougher comparatives. Margin is largely held in this division at 21.7%. Next, the Products division. This division had GBP 1.4 million of revenues from the InspecVision and Collins Walker acquisitions. Beyond this, organically, the division was largely flat in the period with a small decline of 1.2%. Atik saw a strong revenue growth as it executed a $4 million professional astronomy order. However, Scientific Vacuum Systems saw a slower period of trading as it worked on large program over the first half compared with two in the comparative period. Fraser improved their cost control and increased their margins in a flat market. This led to margins improving to 21.6%, up from 19.8% in the comparative period. Turning to cash. Cash generated from operations reduced from GBP 4.7 million a year ago to GBP 4.2 million. This was due to an increase in inventories of GBP 1.2 million. A number of our businesses built up inventories in anticipation of a strong second half. The largest increases came at Atik as they deliver their professional astronomy contract and at Safelab Systems as they prepare for the large government contract they are to execute in the second half. Other businesses saw smaller increases, Monmouth through increased level of trading and Severn Thermal as it executes its furnace contract for the nuclear industry. Customer advances of GBP 2.9 million were broadly flat compared to April 2025 on a like-for-like basis. CapEx grew due to capitalized R&D spend, most significant at Synoptics and Fraser. Excluding acquisitions, our working capital as a percentage of sales, therefore, increased to 21%. The acquisition of Severn Thermal cost GBP 4.8 million, which was funded through additional borrowings. This is more clearly illustrated in the next slide. This slide shows graphically the movements in net debt. The GBP 4.2 million of cash generated by operations is on the left-hand side of the graph, and our utilization of that cash is illustrated on the right-hand side. We ended the period with GBP 18 million of debt, excluding leases, compared to GBP 13.8 million at the beginning of the financial year. Our leverage at the end of the half was circa 1.3x net debt to EBITDA, which is within the Board's preferred range of 1x to 1.5x. At the period end, we had a headroom of GBP 5.5 million. And as Stephen mentioned, we renegotiated our bank facility over the autumn with some improved terms. This was signed last week and provides committed funding for another 3 years with a further 2 option years available. The accordion option has been increased from GBP 5 million to GBP 15 million, which will give us additional flexibility in the future as we grow. And now I'd like to hand back to Stephen, who will take you through the outlook. Stephen Brown: Thank you, Ami. Now looking ahead to the rest of the year. For the future, our strategy remains consistent. We will continue to drive organic growth by investing in new product development, promoting synergies and driving operational excellence across the portfolio whilst also pursuing high-quality acquisitions. We remain mindful of wider economic uncertainties, but are confident in a resilient business model and long-term opportunities and drivers in our markets. Inorganically, our acquisition pipeline remains robust and actively managed, and we continuously maintain and review the pipeline. Our focus inorganically is to execute on the significant contracts we have. As expected, we remain second half biased, but we remain positive in delivering FY '26 results in line with market guidance, and are confident in our ability to generate sustainable, long-term value for all of our stakeholders. SDI remains a dynamic business, and we very much look forward to communicating further as we continue to deliver to our model. Thank you for listening. Operator: [Operator Instructions] If I may just I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Stephen, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Amitabh Sharma: Right. Okay. I'll take it here. Stephen Brown: Thank you. Amitabh Sharma: First question, what's your biggest challenge? Stephen, do you want to answer that? Stephen Brown: Yes, certainly, I think by far, the biggest challenge won't surprise anybody to hear this, but it's geopolitical. It's the uncertainty. We don't really understand what's going to happen tomorrow, let alone next week. So I think that's definitely the biggest challenge and really how we navigate that. However, we do feel as if our business model is robust enough to feel most of this. We are able to pivot between markets, not only geographic markets, but also physical markets as well. But yes, absolutely, geopolitical, 100%. Amitabh Sharma: Next question, why are directors not buying shares? I'll take that one. Last couple of years, we've both taken our bonuses of shares. Those will vest over the next 2 to 3 years. So what you ought to see is our -- both of our shareholdings increasing over the next couple of years. Stephen Brown: And this is available at the end of the back of the presentation as well, you'll see our shareholding increase and the option holding increasing. Amitabh Sharma: Next question. Can you tell us more about the recently appointed divisional directors and what their roles are? Stephen Brown: Yes, absolutely. So we recently appointed 2 divisional directors. One has got responsibility of the Products division. The other one's got responsibility of the Lab division. And the reason for doing this is so that the businesses we've got in the portfolio have gotten much closer attention. As we scale, we're currently 17 businesses. And quite frankly, the bandwidth that we had before was not adequate to give the businesses enough attention and to really support the leadership teams to deliver. But really, with bringing the structure in place with two of the regional MDs, that means we've got roughly 6 businesses to each director, which that intensive focus and is really starting to come and pay dividends. You can see it in our financial results. You'll see it more come in the second half as well. So we're seeing the businesses, which were slightly lower last year, really starting to come to fruition despite the challenging markets. So it also gives us as we continue to grow and scale as more businesses come into the group, we are an acquisitive group. So that will continue. We really need to have that structure to allow us to develop and scale. For us, organic growth is really important, and that's something that we will always have that focus on. So that's the main role for those divisional directors. Of course, as well, they do fit into the inorganic piece as well in the due diligence and making sure that we do make the right acquisitions. So that's the secondary to their main role. Amitabh Sharma: Okay. What impacts have you seen from the recent budget changes? Okay. I'll take that one. The main one was the rise in the minimum wage. Quantify that, that's about GBP 80,000 per annum, GBP 80,000 per annum. So it's not massive, but it was still an impact nonetheless. That was the main thing that I saw from the budget. Next one. Please, can you provide an update on the M&A pipeline and potential timings? Stephen, do you want to take that one? Stephen Brown: Yes, absolutely. So the pipeline remains very strong. We are an acquisitive business, as I said. That will never change, and that will never stop. We've done one successful acquisition so far this year. Hopefully, there will be more. Obviously, I can't communicate too much more than that. But other than that, we are an acquisitive business, and we will continue. Amitabh Sharma: Okay. The next one is for me. What is your CapEx guidance for FY '26 and beyond? Fair to assume 2.5% to 3% of sales? Yes, that's about right. That's kind of -- it's between 2% and 3%, but yes, 2.5% to 3% is right for FY '26. Next question, can you comment on the typical size EBITDA multiples and target characteristics that you're prioritizing for future potential M&A? Stephen Brown: Yes. I can take that. So our multiples pretty much remain the same. We've always said that on EBIT, you look at EBIT rather than EBITDA, we're looking at roughly 4 to 6x. We're currently focusing towards the lower end of that rather than the higher end. We are seeing that market dynamics means that we can potentially look towards that at the moment. So we're seeing opportunity at this point. So key characteristics, we're looking for profitable businesses. We're looking for higher net margins is also important to us. We're looking for niche markets and/or regulatory-driven markets. We're looking at those tailwinds-driven businesses. We're also looking for strong order books. We're looking for resilient markets. We're looking for large significant exporters as well, which is also very important to us. We're not locked to the U.K. either. So we are looking at on a global perspective. The EU is particularly of interest to us and so too is the U.S., but more so the EU. And also, we're looking at businesses which will increase our recurring revenue as well, which is also quite important to us as we continue to grow and scale. Amitabh Sharma: And in terms of typical size of about GBP 1 million EBIT and above if you can? Stephen Brown: Yes, GBP 1 million and above is typically sweet spot that we're looking at, at the moment. What we're really looking for is accretive acquisitions. So we're looking at acquisitions, which are really going to add value and add to our scaling. Amitabh Sharma: You previously said that the long-term organic growth target for SDI is between 5% and 8%. Is this still valid in the midterm? Do you expect improved organic sales growth trend already in H2 '26 versus H1 '26? Stephen Brown: We'll, split, I'll take the first bit. So are we looking at 5% to 8% as a medium to long-term goal? Absolutely, yes. And you'll see that going forward. So I think that's still a realistic target for us. As I said before and said in the presentation, organic growth is important to us and it will always be a focus. Hence, the earlier question about the divisional directors, for example. So we are focusing on it. Do you want to take the second piece? Amitabh Sharma: Yes. I mean we are going to see strong organic growth in the second half. And the reason for that is because of the contract timings, as we talked about earlier. That will drive the organic growth, which will be quite significant in the second half. But then that is a function of the contracts and how they fall timing-wise within FY '26. So you'll still see strong organic growth. Over the full year, you should see organic growth, too. And so I think that one answers that question. Why is the profitability of the Lab Equipment business unit so much lower versus the other business units? Is this driven by temporarily softer market demand? Do you want to try? Stephen Brown: Yes, certainly. So I'll take the last part of the question first. Is it softer market demand? No, it's not. The market demand is definitely there. You can see with large contract wins I spoke to earlier. There has been others in the Monmouth business as well, which has been quite helpful to us. The lower margins is purely market dynamics. There is serious competition in the market, and that ultimately keeps the profitability a little bit lower. But we are holding our own. We're actually growing market share within those markets, and it is looking quite strong for us. It has come back quite strongly this year, and it continues to increase. But are we going to see large profitability coming in other than where we are? We can probably improve on it a little with operational excellence, for example, and with Severn Thermal going into the Lab Equipment division as well will help the profitability also. But it's really down to the dynamics of the market. Amitabh Sharma: Okay. Next one, I think, is me. Expenditure in development and other intangibles increased compared to the same period last year. Can you share the reasons behind the higher level of intangible investments? Well, we had a couple of product developments that are in progress. Expenditure on development increased, but certain amortization actually. And what I would -- the way I would look at this one is that you compare how much has been capitalized versus how much has been amortized. And the delta is GBP 0.2 million in the first half, GBP 0.2 million, and that compares to GBP 0.1 million last year. So there isn't -- these are not big numbers on a net basis. So the delta is GBP 0.1 million in the context of almost GBP 5 million EBIT -- GBP 4.5 million to GBP 5 million EBIT. So yes, it has, but it's not hugely significant on a net basis. Next question. The interest cost on net finance, I think, is still high despite the limited leverage, diversified group and strong execution. Does the renewed RCF with HSBC allow for some lower cost of debt? How much? The simple answer to your question is, yes, our new facility is cheap, is lower in terms of cost than the previous one by a fair bit. So we have improved terms. I won't say exactly how much, but it is going to be improved. I was saying that we do have -- I wouldn't say we've got limited leverage because we're at 1.3x, however -- and we managed to maintain the finance costs at a similar level to last year and the average borrowings in the first half were a fair bit higher than the average borrowings in the first half of last year. But the answer to your question is, yes, there are improved terms and you ought to be able to see that in the financing charges as we go forward. Could you please comment on your midterm organic growth ambition? Do you still see 5% to 8% as the right range? And within your 3 reported segments, which do you believe offers the strongest long-term organic growth potential? Stephen Brown: I think the first part of the question has been answered to the earlier question. But the second part, good question. It definitely will be the product side because we've got more -- we've got most of our high-growth businesses within that segment. So we will always see that higher level of organic growth there, absolutely for sure. Amitabh Sharma: Okay. Next one, it's a working capital question, that's me. Working capital levels last couple of years averaged at circa 13% of sales, which is much lower versus the level in recent years. Do you expect working capital as a percentage of sales to drop back from circa 19% of sales towards 15% out? So there was a buildup of working capital in the first half. I sort of explained it during the presentation, which is due to an inventory buildup for the second half. I think you're looking at the reference of 13% are a full year percentage, I think. You ought to see it come back down again. As we execute these contracts in the second half, the inventories will start coming back down again. And I think you'll see working capital as a percentage of sales under our own internal definition will come back down from around the 21% mark, which it currently is to near 19%, 20%, which is where it was under our definition. I'm not sure how -- I think it's Emmanuel, how you calculated that 13%, which balance sheet lines you've used. But it ought to come back down, and it's due to execution of those contracts, which will reduce inventories. Next question, how much capital do you target to spend per annum on M&A, between GBP 5 million and GBP 10 million? Is the pipeline strong enough to execute on this? I'll answer the first part. Stephen, join to answer the second part. So the first part is that we typically focus our free cash flow towards M&A. Historically, it's been around circa GBP 6 million. And we could move that a bit with our leverage because we typically say between 1x and 1.5x. We can spend more than about GBP 6 million or GBP 7 million, if we move the leverage up a bit towards 1.5 and 1.6 and it's quite -- and we may choose to do that in the future just to -- it will be a timing thing, and we can vary that. It's a management decision. So anywhere from GBP 6 million, it could be GBP 7 million or GBP 8 million, it could be more than that, but the leverage would reflect that in the short term, and then that will start coming down again. Is the pipeline strong enough? Stephen Brown: 100%, yes. So the pipeline is looking as strong as ever. We could execute a lot more than that if we really wanted to. But absolutely, yes, the pipeline is reassuringly very strong and gives us the opportunity of choice as well, which is very valuable to us. Amitabh Sharma: Do you see room to further improve group margins? How? Interesting question. Stephen Brown: 100%, yes. And the focus we've currently got on organic will ultimately result in that. With the introduction of the divisional directors who've got a wealth of experience, both operational as well as commercial coming in, we will continue to really focus on the businesses. So what's going to drive that? What's going to drive that is increase in commercial activity, increase in sales. Organic growth will ultimately drive that. But we've also got a real drive as well for operational excellence as well. So we're looking at good business management. Cost optimization is also very important to us. So we will continue to drive the efficiency of the businesses, which will ultimately improve that. Amitabh Sharma: Operating leverage will also contribute. So in other words, higher sales will drop through with the gross margin. And the M&A also, we are targeting higher net margin businesses that we talked about earlier. Those will also have a positive impact and the mix on the... Stephen Brown: Exactly. The inorganic will shift the dial quite considerably actually because of the focus of the businesses we're currently looking at. Amitabh Sharma: Is there a minimum size of acquisition in terms of the target turnover or profit that you will look at? Stephen Brown: What we look for typically is accretive acquisitions and acquisitions that really move the dial. So for us to go much below GBP 1 million EBIT, it isn't really going to have that impact. Of course, if there's a really interesting business with significant growth potential and a market which we really see the potential in, of course, never say never. But ideally for us to make the impact at this point, that we're currently looking at sort of a minimum of GBP 800,000 to GBP 1 million, ideally more. Amitabh Sharma: Can you comment on the growth in central costs over the last 2 years? Yes, I'll answer that one. This one is due to some of the additional headcount at head office to drive inorganic and organic growth, which we've talked about. We have a Head of M&A to help us drive the M&A cycle, and we've introduced divisional directors to help us drive organic. And so the combination of all of those things have contributed to the increase in central costs. But we needed to drive growth for the reasons that Stephen outlined earlier in terms of management bandwidth and to grow to the level to help us scale as well. So that's the reason we've done that. Stephen Brown: The SDI Group will always be a lean and agile business. So any increase on head office costs... Operator: [Operator Instructions] Amitabh Sharma: Hopefully, we're back. Operator: I can hear you now. Amitabh Sharma: We'll go back to the Q&A. How do you manage capital allocation between your existing businesses? What is your target R&D spend? Does this need to increase to generate organic growth? In terms of capital allocation, we don't -- we do it on a business-by-business basis. Most businesses will put forward their budgets and strategic plans every year at which they will request additional capital to do CapEx or, whatever, the R&D, and we will generally approve it. We will look at each one on an individual cases. We will not say no just because we want to restrict that capital to any particular business. We said this before -- I said this before in this very presentation. We don't restrict capital to any of our businesses. They're just going to put a business case forward. And we are very supportive of our investments. That's why that's one of the great things about being part of the SDI Group, I think, for companies coming in is that ability for us to invest more than perhaps previous management did as in the lead up to sale. Stephen Brown: And looking at the R&D spend as well, R&D spend is very important to us because what's the secret of organic growth is really keeping on top of the market and understand the market requirements. As the markets require more, we have to deliver and essentially execute products and put away our products into those markets what the markets ultimately need and want. That will need a regeneration of the products and a revitalization of the product as well, which ultimately feeds into R&D spend. So that's something which we will always be doing. We do encourage the portfolio of businesses to keep on top of that. And in fact, if we're not getting requests for R&D spend, we're asking the question why. So that's a real significant focus for us, and it is ultimately the secret of organic growth. Amitabh Sharma: Last one for now. Could you sell a company to raise to acquire? I think would you dispose of something probable or improbable? I think meaning any subsidiaries, I think, is his question. I suppose the answer is nothing is impossible, right? Stephen Brown: No. Amitabh Sharma: We do get inbounds for our assets. And if someone is a better owner of one of our assets, then we would absolutely consider doing so. I mean it's not really what our business model is, but never say never. Stephen Brown: If it makes sense, we will consider it. Amitabh Sharma: If it makes sense, we will consider. Sometimes portfolio churn is necessary. It does happen from time to time. So if it happens, we will -- or if we have a decent enough, we'll go for it. Operator: That's great. Thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and will publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Stephen, could I please just ask you for a few closing comments? Stephen Brown: Of course. I'd like to thank you all for listening. It's very much appreciated, and we very much look forward to communicating with you further. Operator: That's great. Thank you for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SDI Group plc, we'd like to thank you for attending today's presentation, and good afternoon.
Amanda: Good morning. My name is Amanda, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Victoria's Secret & Co.'s Third Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I would now like to turn the call over to Priya Trevetti, Senior Vice President and Global Head of Investor Relations and Treasury at Victoria's Secret & Co. Priya, you may begin. Priya Trevetti: Good morning, and welcome to Victoria's Secret & Co.'s Third Quarter Earnings Conference Call. The period ended November 1, 2025. I would like to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today is Chief Executive Officer, Hillary Super, and Chief Financial and Operating Officer, Scott Sekella. We are available today for approximately thirty minutes to answer any questions. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press releases in our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and in the investor presentation posted on the Investors section of our website. With that, I'll turn the call over to Hillary. Hillary Super: Thanks, Priya. Good morning, everyone, and thank you for joining us today. I'm pleased to share that we delivered standout third quarter results, with outperformance on the top and bottom lines that far exceeded the high end of our guidance. These outstanding results reflect what we can achieve as we advance our path to potential strategy, which is built around four pillars: supercharging our bra authority, recommitting to PINK, fueling growth in beauty, and evolving our brand projection and go-to-market strategy. This is the first quarter that our new leadership team has been fully on board, and their impact is clear. When the implementation of our strategy is aligned and working in concert, it creates a powerful multiplier effect, accelerating global growth, elevating the distinctiveness of our brands, and unlocking greater value across our ecosystem to drive sustained shareholder returns. A great example of this multiplier effect was the iconic Victoria's Secret Fashion Show. Brand-right product, a major upper funnel moment, and digital and social amplification came together, propelling us into the cultural conversation, ultimately driving mindshare, customer share, and market share. This translated into tangible business impact, particularly in our Intimates business. In the quarter, our Intimates business returned to growth, up mid-single digits, resulting in us gaining over 1% share in the U.S. Intimates market. Additionally, a big unlock for the quarter was customer acquisition. Before I arrived, there was not enough focus here, and as a result, our active customer base was shrinking. We have made reversing that trend a priority. For the first time this year, our total customer file grew, and importantly, we saw growth coming from an increase in new customers. Now let's walk through third quarter results. We delivered net sales of $1.47 billion, an increase of 9% versus last year, with robust adjusted gross margin expansion of 170 basis points and earnings growth of 45%. This was driven by growth across Victoria's Secret, PINK, and Beauty and underpinned by broad-based outperformance across channels and geographies. Our international business continues to grow at an accelerated pace, with Q3 marking our third consecutive quarter of double-digit retail sales growth. Sales were up over 30% during the quarter, driven by exceptional performance in China, primarily in the digital channel. In late October, we saw a strong start to the Singles Day selling period. These results continue to affirm our brand's global appeal and international's role as a growth engine. With Black Friday and Cyber Monday behind us, our fourth quarter is off to a strong start. We saw our highest Black Friday customer turnout since our spin-off, with roughly 1 million customers shopping our brands in North America, up high single digits from last year and a strong engagement from new customers. Building on our third quarter outperformance and the momentum of the fourth quarter, we are raising our outlook for the year. With the strength of two iconic brands and a thoughtfully curated product assortment, amplified by our merchandising and marketing strategies, we are well-positioned to deliver a strong holiday season and a solid finish to fiscal 2025. Now let's turn to a signature brand moment for us as the world's leading intimates brand, the Victoria's Secret Fashion Show, which celebrated the new era of sexy, masterfully blending pop culture with storytelling. It was a full-force celebration of our community, brought to life by a dynamic lineup of global music artists, including Madison Beer, Carol G, TWICE, and Missy Elliott, alongside iconic runway talent. Pink's moment in the spotlight sparked tremendous excitement, amplifying the impact of the entire event and elevating the experience for fans around the world. The show once again became a cultural phenomenon. In the four weeks following the show, streaming views reached approximately 61 million, up over 60% versus last year. We gained nearly 9 million new social followers, and total media impressions hit 51 billion, an increase of over 30% versus last year. On Show Day alone, the event dominated fashion media, with over 42 billion impressions, while traffic to our site surged over 60% year over year, converting over 15% more new customers. Post-show, Victoria's Secret kept the cultural spotlight, converting the buzz into measurable business results as engagement soared across search volume, click-through rates, positive sentiment, and brand desire. The fashion show delivered strong commercial impact, significantly exceeding both last year's results and our expectations. The halo from the show is evident across our business, from the increased demand for sexy and glamorous bras and related lifestyle collections to renewed traction for iconic brand codes. Shoppable product linked to the event doubled year over year, with several key styles selling out. We also launched our holiday collection alongside the show, which started strong in the third quarter and continues to perform well. The show serves as a powerful customer acquisition engine. We saw double-digit growth in new and reactivated customers following the event, with particularly strong traction among the 18 to 34-year age group. The show remains an unrivaled cultural event, fueling growth, brand love, and engagement while reinforcing our leadership in the global intimates market. This year's fashion show was a defining moment, allowing us to show the world how we've evolved into our new era of sexy. In this era, beauty is no longer a singular standard. It's on her own terms. A conscious, liberating choice. Some of this shift is subtle. It's in the tone, the gaze, the feeling. And some of it is unmistakable. More diverse bodies and ages, a fuller spectrum that's joyful at its core, and an expanded product assortment that empowers her to feel exactly how she wants. Our role isn't to dictate or to define. It's to meet women where they are, to inspire them, listen to them, and reflect the many ways they show up today. Let's review the meaningful progress we made in the third quarter across each pillar of our path to potential strategy. Turning to our first strategic pillar, supercharging our bra authority. Bras are the heart of our business, and we are a market leader in the bra category. We want to reinforce our position as her number one destination for all bras because when we win in bras, it creates a halo effect across our entire brand. Our bra customer is among our most valuable and loyal. She spends more, visits us more frequently, and shops additional categories, reinforcing her connection with us. To achieve this, we are delivering market-leading innovation with style and fashion that solves real-life needs. We are educating with authority to showcase our expertise. We are amplifying our digital marketing voice through a social-first approach to attract new customers and grow the value of existing ones. And we are elevating the experience with bra fitting experts in top stores and creating emotionally connected digital experiences. These actions position us to unlock significant growth and deepen loyalty through an exceptional bra experience. The third quarter showcased our ability to win across the bra lifestyle with a frequent drumbeat of fashion and innovation complemented by sharp messaging. The Body by Victoria Flex Factor bra with the tagline "Better Than Braless" delivered casual comfort and innovation and has quickly become one of our top styles, driving incremental growth. Ahead of our fashion show, we activated a sophisticated campaign for the Very Sexy franchise, which delivered impressive results. Finally, in sport, we expanded our range of support levels, reinforcing our authority in sports bras across all wearing occasions. In North America, our Victoria's Secret bra business delivered a mid-single-digit increase in the third quarter, signaling a strong return to growth in the category. Performance was steady throughout the quarter across our bra offering, from casual to sexy and glamour, with the latter accelerating with the heightened interest around the fashion show. As a result, we grew our share of the U.S. Bra market by low single digits, a nice acceleration from last quarter. By connecting emotionally with the customer, we've been able to increase regular price selling, pull back on promotions, and execute select strategic price increases, all while growing the bra base business. As our bra category accelerated, so did the rest of Victoria's Secret brand. For the fourth quarter, we've been very pleased with the response to our intimate collection thus far, and momentum continues to build. The Versus lifestyle extends into sexy and casual sleepwear and gift sets, a key gifting category for the quarter. Then as we transition into post-holiday, we are excited to unveil a fresh Valentine's Day assortment designed to keep our customer engaged and inspired. The Victoria's Secret brand proposition of sexy, glamorous, and luxurious is clearly resonating. The customer is responding, returning, and reengaging with the brand. As we continue to innovate, deliver differentiated product, and communicate in compelling ways, we are not just succeeding, we are gaining share. Our next pillar is recommitting to PINK. PINK has long been an iconic, immediately recognizable, and beloved brand. We are focused on returning PINK to its roots as a lifestyle brand designed for 18 to 24-year-olds, a segment we pioneered and once dominated. That means reestablishing Pink's identity as digitally first and socially driven, while staying true to its DNA: bold, playful, and irreverent. This is at the heart of everything we do, from product design to storytelling. By showing up in the moments that matter most to her and creating compelling products and experiences, we are building the emotional connections needed to win her loyalty for the long term. Pink delivered an outstanding third quarter with double-digit sales growth, accelerating from the second quarter. As we increase our apparel penetration, we are delivering frequent fashion to create a steady drumbeat of newness. We showed up in key moments like back to school, game day, Halloween, supported by culturally relevant and entertainment-led digital and social content. A record-breaking Love Shack Fancy collaboration and Pink's inclusion in the fashion show also fueled awareness and connection. Our Love Shack Fancy collaboration was highly successful. We seized the launch on our social channels and hosted a pop-up event in New York City with media and influencers. At launch, traffic to our site soared, and we logged our highest five minutes of digital volume ever. Importantly, this is all at regular price and incremental to the PINK base business. This buzz translated into authentic brand content that drove engagement across social channels. Nearly 15% of customers shopping this collaboration were new or reactivated. Pink also took center stage at the fashion show, with the K-pop sensation TWICE and a lineup of talent that appeals to Gen Z. This collaboration resonated with our target customer and reintroduced pink to their highly engaged fan bases. The wear everywhere bra worn by TWICE sold out following the performance, and related content on social media went viral, generating over 52 million views to date. Pink intimates also returned to growth, signaling positive momentum across the brand. This remarkable post-show lift in pink intimates reinforced a key insight: with the right innovation and brand experience, PINK Intimates can unlock meaningful growth. PINK has gotten off to a strong start in the fourth quarter. Earlier this week, we launched our second collaboration with Loveshack Fancy. PINK is regaining its spark, and we are confident in our strategy to drive growth, deepen customer connection, and build long-term brand value. Our next pillar is fueling growth in beauty. A powerhouse business nearing $1 billion in net sales in North America. Beauty is a high-frequency category, and our beauty customer is our second most valuable in spend. Yet only 40% of our customers purchase beauty, which is a clear opportunity. To capture this, we are investing in talent to scale Victoria's Secret beauty, build a differentiated offering for Pink Beauty, and strengthen our innovation pipeline. We're putting innovation at the forefront while enhancing merchandising and speed-to-market capabilities to consistently deliver fresh, exciting products. With a strong team in place, we see tremendous runway for growth in North America and internationally. In the third quarter, our Beauty business grew low single digits, building on last year's mid-teens increase. An important reason our business is thriving is because we listen and act. After last year's fashion show, customers asked for more glamour, so we delivered runway exclusives, and the response was electric. This year, the customer buzz after the fashion show got even louder, and we are turning those insights into innovation for upcoming product launches. Scent is our secret weapon. It creates lifelong memories and a deep emotional connection with our brand. You see it with Bombshell, which is America's number one fragrance. This quarter, we introduced the holiday edition of Bombshell and launched our first integrated lifestyle campaign for The Very Sexy franchise, bringing together intimates and the restaged fragrance, which drove solid growth. For the fourth quarter, beauty is a key gifting category. We have a full selection of fine fragrances, mists, and beautifully packaged gift sets heading into the holiday season. We are investing in the future of this business to innovate and differentiate to capture market share across North America and internationally, where beauty is a key category. Finally, evolving our brand projection and go-to-market pillar. We are creating a compelling shift in our market presence. More purposeful, more provocative, and more aligned with who our customer is today. Our focus is on driving brand heat to reclaim mindshare, which ultimately fuels market share and growth. Over the past year, we clarified our target customer for each brand's positioning. This clarity informs every decision, from product creation to how our brand shows up in the world, helping to reestablish our relevance and leadership position. To capture mindshare, we are continuing to fine-tune our marketing investments. This includes rightsizing direct mail spend to protect our most valuable customers while investing in digital and social marketing. We are leveraging owned channels that reach more than 145 million followers and expanding influencer campaigns, all with a sharp focus on acquiring new customers. We are delivering bold, entertainment-led creative content that is forging an emotional connection. Our approach is working. The momentum in brand buzz and mindshare gains are evident with the commercial success of our Flex Factor bra launch late July, Loveshack Fancy collaboration in early August, and the ultimate cultural moment, our fashion show in mid-October. This strategic marketing shift combined with our product initiative is also driving meaningful customer growth. In the third quarter, our total customer file grew low single digits, a significant improvement over the second quarter. We saw gains across all customer segments: new, reactivated, and active, with our new customers showing the biggest shift in trend. Additionally, we saw nice increases in both the number of customers and average sales per customer across all income cohorts. Our gains in mindshare and customer share are translating into market share. In the third quarter, despite the total U.S. Intimates market declining, we grew our share of the market by over 1%, driven by growth across our intimates business. This was our second consecutive quarter of gaining market share, reinforcing that our growth is not dependent on the category growing. It comes from creating desire, building brand heat, and providing exceptional customer experiences. Our brand projection and marketing efforts are delivering heightened awareness, deeper affinity, and increased relevance. Victoria's Secret is now dominating the conversation and moving into the center of culture, converting buzz into measurable business impact and market share gains. In closing, we delivered a standout third quarter with sales and earnings growth that positions us to raise our outlook for the year. We feel confident in our ability to execute, are being thoughtful about the consumer, particularly post-holiday. We are heading into the holiday season with momentum and are well-positioned to deliver a strong finish for the year. I would like to thank our incredible, talented, and passionate teams for their tireless work in driving our transformation strategy forward and for delivering exceptional service to our customers every day. When the implementation of our path to potential strategy is aligned and working in concert, it creates a powerful multiplier effect, unlocking greater value across our ecosystem. We are reinforcing our leadership in global intimates and beauty to drive sustained, long-term profitable growth. I will now turn it over to Scott to provide a financial overview of the quarter and our updated fiscal 2025 guidance. Scott? Scott Sekella: Thanks, Hillary, and thank you, everyone, for joining today's call. Our third quarter results significantly exceeded expectations, building on the momentum from our strong first half of the year. This outperformance was broad-based and reflects continued progress on our path to potential strategy. We continue to focus on the fundamentals while prioritizing investments in product innovation, brand strength, and customer experience. These investments are positioning us for long-term differentiation and success. Now let's turn to our third quarter results in more detail. Net sales for the quarter were $1.472 billion, an increase of $125 million or 9% over last year, with comparable sales growth of 8%, exceeding the high end of our guidance. These strong results build on last year's third quarter growth of 7%. As Hillary highlighted, these results reflect growth across all businesses: Victoria's Secret, PINK, and Beauty. This momentum was supported by broad-based outperformance across channels and geographies, improved sales metrics, including higher comp traffic and average order value, and increased regular price selling. We saw solid growth leading into the fashion show and then an acceleration following the fashion show. In North America, the Victoria's Secret brand delivered a strong mid-single-digit increase in sales versus last year, while PINK achieved a low double-digit sales increase. Traffic continued to outperform the mall, driven by enhanced product offerings, our digital-first and socially centric marketing approach, and haloed by the fashion show later in the quarter. AURs in the quarter were up 3% compared to last year, and excluding panties, which is a low AUR category, AURs increased 6%. As Hillary highlighted, customers also responded to the frequent drumbeat of newness. In the quarter, we were extremely pleased with our performance in intimates in the Victoria's Secret brand, where we saw major trend improvements from the first and second quarter across both bras and panties. Contributing to this improvement was strong demand and regular price selling through the quarter for our full assortment, across casual to sexy and glamour bras, with the latter accelerating post-fashion show. Additionally, pink intimates returned to growth for the first time in years, a real positive trend shift and a key learning going forward. For the quarter, we grew our market share in U.S. Intimate by over 1% compared to last year, driven by increases in our bra business. Beauty again delivered top-line growth with sales up low single digits over last year, on top of the exceptional results in 2024. Our international business also continued to perform exceptionally well during the quarter. Reported third quarter sales grew 34% to $265 million, reflecting an improvement over a strong second quarter. Approximately six points of the sales increase reflect a shift in the reporting of European digital sales, which were previously fulfilled from our U.S. distribution center and recorded in North American direct sales. They are now being fulfilled from our European distribution center as part of our ongoing efforts to enhance international operations and will be reported as part of our international sales. International retail sales grew in the high teens during the quarter, driven by exceptional performance in China, primarily in the digital channel. In late October, we also saw a strong start to the Singles Day selling period. International results included low double-digit retail comparable sales gains across both stores and digital, combined with continued new store openings. Third quarter adjusted gross margin dollars were $537 million, with an adjusted gross margin rate of 36.5%, which was 170 basis points above last year and 250 basis points above our guidance. We've built a solid operational foundation, creating a business model that enables us to scale effectively and support the company's growth. This was evident in the significant leverage on our buying and occupancy expenses, which contributed nicely to margin expansion. Additional favorable drivers versus last year included continued strength in regular price selling and a pullback in traditional promotions, resulting in lower discounting throughout the quarter. Altogether, these factors allowed us to more than offset approximately $15 million or 100 basis points in tariffs in the quarter. This operational foundation positions us well for long-term success. Adjusted SG&A dollars were $537 million in the third quarter, and our adjusted SG&A rate was 36.5%, which was 30 basis points better than our guidance and leveraging 30 basis points versus the prior year rate of 36.8%. Our better-than-expected adjusted SG&A rate in the quarter was driven by the sales beat along with continued disciplined expense management across all aspects of the business. We did make additional strategic marketing investments in the quarter where we saw positive ROAS opportunity. Driven by the sales beat, as well as the disciplined expense management, adjusted operating income for the third quarter was breakeven, which was better than our guidance of an adjusted operating loss of $35 million to $55 million. This result compares to last year's third quarter adjusted operating loss of $28 million. Adjusted non-operating expenses, consisting principally of interest expense, were $18 million in the quarter, in line with our guidance and down from last year, driven by a lower level of weighted average borrowings and lower interest rates. Our third quarter adjusted tax rate was 15%, and our adjusted net loss per share came in at $0.27, significantly better than our guidance of an adjusted net loss per diluted share of $0.55 to $0.75 and last year's adjusted net loss of $0.50 per share. Turning to the balance sheet, total inventories ended the third quarter up 7% compared to last year and in line with our guidance. From a liquidity standpoint, we ended the third quarter with a cash balance of $249 million, which is $88 million above last year, and our outstanding balance under our $750 million ABL credit facility was $375 million, which was down $65 million from last year. Since the end of the quarter, we have paid off approximately $165 million and expect to fully pay off the outstanding balance this quarter and end the year with full availability under the ABL. Our liquidity position is strong and provides us financial flexibility for continued execution of our strategic pillars. Now let's turn to our updated outlook for fiscal year 2025. We are raising our full-year outlook for net sales and are now forecasting net sales in the range of $6.45 billion to $6.48 billion, compared to our prior guidance calling for net sales in the range of $6.33 billion to $6.41 billion. This compares to net sales of $6.23 billion in fiscal 2024 or approximately $6.204 billion excluding the previously disclosed benefit of the approximately $26 million cumulative adjustment related to the gift card breakage change in accounting estimate recognized in 2024. This adjustment increased net sales, gross margin, and operating income by approximately $26 million in the fourth quarter and full year of 2024. Adjusting for this benefit in 2024, our raised sales outlook anticipates a growth of approximately 4%. As we discussed, we saw significant outperformance in the third quarter. Additionally, we continue to see momentum into the fourth quarter, haloed by the fashion show, and our holiday offering is resonating well. We are winning in big moments like Black Friday and Cyber Monday, and we also have a robust gifting assortment across key categories like beauty, sleep, and pink, and continued brand moments planned through the holiday season. Post-holidays, we will be ready with a Valentine's Day floor set, giving us confidence in our ability to deliver a strong finish to fiscal 2025. We are also raising our full-year guidance for adjusted operating income, which is now expected to be in the range of $350 million to $375 million for fiscal year 2025, compared to our previous guidance of $270 million to $320 million. This compares to last year's adjusted operating income of $373 million in 2024 or approximately $347 million excluding the $26 million gift card breakage benefit. Our guidance for the full year 2025 now assumes a net tariff impact of approximately $90 million, with approximately $65 million impacting the fourth quarter. Our mitigation efforts include optimizing costs with vendors, further diversifying our sourcing, ensuring we have a more efficient air versus ocean freight mix, and implementing a combination of select pricing adjustments through more targeted promotion and strategic price modification where we see a value proposition gap in the marketplace. Adjusted non-operating expenses, consisting principally of interest expense, are projected to be about $65 million for fiscal year 2025, down from $84 million in fiscal year 2024 and lower than the previous guidance, driven by expected lower levels of weighted average borrowings along with lower interest rates. We estimate our adjusted tax rate will be approximately 24% to 25% for fiscal year 2025, in line with guidance last quarter. We estimate weighted average diluted shares outstanding of approximately 83 million for fiscal year 2025. Given these inputs, we are raising our fiscal year 2025 adjusted net income per diluted share to be in the range of $2.40 to $2.65, compared to our previous guidance of $1.80 to $2.20, and $2.69 in fiscal year 2024. Fiscal 2024 EPS would have been approximately $2.45 excluding the $26 million gift card breakage benefit. We continue to be prudent with planning capital expenditures and still expect approximately $200 million in fiscal year 2025. Capital investments will primarily focus on investing in stores, the customer experience, along with investments in technology and logistics related to our strategic initiatives to drive growth and support productivity. We are also increasing our forecast of adjusted free cash flow to approximately $170 million to $210 million in fiscal year 2025. Store counts and renovation plans in North America in 2025 continue to be similar to what we discussed on our previous calls. Square footage in our North American stores this year is still expected to decrease approximately 2% compared to 2024. By the end of the year, we estimate our Store of the Future presence in North America will be nearly 200 stores or approximately 25% of the fleet. Internationally, we estimate our Store of the Future presence at the end of '25 will be approximately 40% of the fleet. Turning to our outlook for the fourth quarter, we are forecasting net sales in the range of $2.17 billion to $2.2 billion, compared to last year's fourth quarter net sales of $2.106 billion or approximately $2.08 billion excluding the $26 million gift card breakage benefit. Excluding last year's breakage benefit, our forecast assumes an approximate 4% to 6% top-line growth based on continued momentum we are seeing quarter-to-date in our North America business as well as strength in our international business. At this forecasted level of sales, we expect fourth quarter 2025 adjusted operating income to be in the range of $265 million to $290 million, compared to an adjusted operating income of $299 million in 2024 or approximately $273 million excluding the $26 million card breakage benefit. We expect our fourth quarter 2025 adjusted gross margin rate to be about 37% to 38%. For comparison, last year's fourth quarter gross margin rate was 39.7% or approximately 38.9% excluding the $26 million gift card breakage benefit. This means we anticipate the fourth quarter 2025 gross margin rate to be down between 90 to 190 basis points year over year. The decline reflects estimated net tariff pressure of approximately 300 basis points, partially offset by our disciplined promotional strategy and the strength of our operational model, which continues to deliver leverage on buying and occupancy expenses as net sales grow. The adjusted SG&A rate in the fourth quarter 2025 is expected to lever slightly compared to the fourth quarter 2024's adjusted rate of 25.4% or approximately 25.8% excluding the $26 million gift card breakage benefit. The forecasted increase in SG&A dollars is primarily driven by store labor and other costs to drive top line. We expect total inventories to be up mid-teens percent to last year. This increase is driven by growth to support business trends, the impact of tariffs, and timing related to our operations. Mostly as we strategically shift toward ocean freight from air freight, which results in us taking ownership of inventory earlier as compared to last year. Given these inputs, we are forecasting fourth quarter adjusted earnings per diluted share to be in the range of $2.20 to $2.45, compared to $2.60 in 2024 or approximately $2.35 excluding the $26 million card breakage benefit. In closing, I want to reiterate a few key points. Our path to potential strategy is producing tangible results. We remain focused on managing costs while prioritizing investments in product innovation, brand strength, and customer experience. These efforts, along with the solid operational foundation we have built, enable us to scale effectively and support the company's future growth. Hillary Super: We feel confident in our ability to execute Scott Sekella: but are being thoughtful about the consumer, particularly post-holiday. Despite the uncertain macro environment, our fundamentals remain strong and resilient. Our outperformance in the third quarter, along with our market share gains and momentum into the fourth quarter, give us confidence in delivering the raised outlook for 2025 and positioning us for long-term success. I would now like to open it up for questions. Operator? Amanda: Ladies and gentlemen, if you wish to ask a question, please press 1 and record your name when prompted. To withdraw your question at any time, you may press star then 2. As a reminder, we ask that each participant limit themselves to one question and one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we will go to the line of Mauricio Serna with UBS. Your line is open. Mauricio Serna: Great. Good morning, and thanks for taking my question. First, could you elaborate a little bit more on how you are maintaining the momentum so far post the fashion show and just give a little more detail on initiatives that you're thinking as you look into the start of '26 just to maintain, like, you know, the momentum around the brand? And generally speaking, I guess, where do you see the market share opportunities in bras and beauty, particularly with the comment about pink intimate returning to the quilt? Thank you. Hillary Super: Hi, Mauricio. I'll take that one. Momentum post fashion show. We are still in the halo of the fashion show. We see it in our traffic, which has been very, very strong in both channels, particularly in stores. We're seeing it much stronger than the balance of the mall. And internationally, we're seeing just incredible momentum. That is led and grounded by bras and sexy and glamour. And so the messaging from the fashion show and the work that we've done really build a sharp brand point of view is paying off. The initiatives are the initiatives in the path to potential. You know, we continue to focus on those categories. We are incredibly pleased with the progress we've made in top and bottom line, in increased market share, and in the growth of our file, particularly from new and reactivated customers and customers that are coming in on higher AURs and are being compelled by brand and product and not necessarily by deal. So all of that feels really good and feels like things we can continue to play forward and double down on in the future. As we enter 2026, we have a full pipeline of innovation in the bra world in particular as well as in the beauty world. We are building on what we've learned from partnerships and collaborations in pink. Pink we did well, as we said, with Love Shack Fancy. Very, very pleased with that, and there are many things that we have in the future that we can apply those learnings to as well as in the fashion show was a big surprise for us. The partnership with TWICE and the virality of that moment and how it impacted our PINK business was new news for us, and we quickly played that forward and impacted the first quarter of next year. So lots to be excited about here. And with all cylinders firing on our four key pillars, we feel very well positioned for 2026. Got it. Just a quick follow-up on the part of Mauricio Serna: promotions. Maybe could you elaborate on strategies in place to keep pulling back on promotions? How much and how much is this lever contributing to gross margin expansion? Scott Sekella: Hey, Mauricio. It's Scott. I'll take that one. So, yeah, we continue to pull back on promotions. We saw a good benefit to our gross margin in Q3, and that's even net of some increases in GWPs. And as we've talked on prior calls, having GWPs as a lever to provide value for customers as we pull back on promos. We've had a lot of success through that. While our promotional level is going to be much more similar in Q4 year over year, we have utilized the GWPs in a way where we've increased the amount that triggers the GWP, and we've seen great success into Q4 in the Black Friday period with that. The demand through our stores was very, very strong for those GWPs and getting customers to come in with a much higher average order value. And as we've talked, promotions will be a multiyear journey, so we'll continue to find these opportunities to drive more regular price selling, pull back on full box promotions, and continue to be more about emotion versus promotion as Hillary has said. Mauricio Serna: Great. Thanks for that, and good luck. Congratulations on the results. Thank you. Thank you. Amanda: Thank you. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open. Good morning and thank you for taking our question. Hillary, I wanted to talk a little bit more about the change in rate of new customer acquisition that you're seeing this quarter. Can you talk a little bit about the profile of those customers? Are they younger? Are they higher income? What are you seeing across your brands, particularly in North America? And what drives your plans for marketing as a result as you look ahead into '26? Hillary Super: Hi, Brooke. I'm happy to answer that question. So customer acquisition and reactivation is something that we are extremely focused on and very excited about. And happy to report that we are seeing it distorted to 18 to 24-year-olds. So that was our goal. We are seeing that come to life. Would also add that they're coming in on a higher AUR, so we feel like the quality and we know just anecdotally from interactions in stores that customers are coming in with their phones and showing videos and content whether, you know, whether it's Love Shack, whether it's better than braless, whether it's fashion show content. They're bringing their phones in and saying, I need this. And that is the ultimate goal rather than I want this price point. And so we feel really good about that. In terms of the cohorts, we're seeing growth across all cohorts. Maybe a slight uptick in higher income customers on the growth side, but I do want to just add that I know a big question has been how are all income cohorts doing. I'll just take this moment to say that we are seeing consistent positive performance across all income cohorts. And we're really pleased with that and feel like that's a real proof point as we move forward. Brooke Roach: Great. And then just a follow-up for Scott. Historically, the business had targeted a low double-digit EBIT margin profile. Is this rate achievable in your view? And how are you thinking about the potential pace of expansion offset by any reinvestment to continue the positive comp momentum? Scott Sekella: Yeah. So we definitely still see a low double-digit operating margin as achievable. I think the question is when over the next couple of years. The margin expand is continue to expand, number one, as we grow, and we've talked about we have that low leverage point for both our buying and occupancy expenses, but also our SG&A. So as we grow north of 1% to 2%, we're going to expand margin. That's still going to allow us to make select investments back into the business, in particular, in marketing. We've had success with some of that where we've seen positive ROAS opportunities. We'll continue to take advantage of those. But even taking advantage of those, we feel like we can get back to that low double-digit operating margin over the next couple of years through our path to potential growth strategy. Brooke Roach: Great. Thanks so much. Best of luck with holiday. Bye. Amanda: Thank you. Our next question comes from Adrienne Yih with Barclays. Your line is open. Great. Thank you so much. And really great to see the stores, the product, the brands really turning Hillary, I guess on that Hillary Super: the fall of this year, we really start to see that broad focus and the franchise bra focuses kind of calling out those products Adrienne Yih: And it kind of reminded me of kind of historically when Victoria's Secret would regularly come to market with bra launches. And so I'm wondering kind of what do you have in the pipeline for 2026 to keep that going? And then on PINK, sort of more at the high level, kind of from a trend perspective, it does feel like and maybe I'm wrong here, but it does feel like we're kind of in a little bit of a retro, maybe, like, the tracksuits coming back. Some of that kind of juicy look that sort of, like, very good for pink. So I'm wondering if you can talk about some of that that's happening. And then Scott, really, kinda wanna talk about kind of the multiyear opportunity. We're sitting at a mid-single-digit margin. You just talked about a 10% opportunity. Promos are inflecting. And really wanted just to kind of understand where we are in that merch margin journey Seems like we're very in the very, very early signs of that. With some good underpinnings for long term. Thank you so much. Hillary Super: Okay. I will take those first couple of questions. So bras, bras franchises, and launches. Yeah. You're right. Extremely important, and we have been uber, uber focused on our innovation pipeline and our strategy around bra launches and have several in the pipeline next year for both brands. But the point that I want to make here is an unlock that we had in with the Flex Factor launch and throughout Q3 was that we were able to have a successful launch and continued growth across all bras. And that was a change for us. You know? We in recent history, have had a number of successful bra launches but often with a softening of the bras around it. And that was not the case this quarter, and I really credit our full funnel marketing strategy for that. That was able to talk about multiple things at one time and communicate our full breadth of range and wearing occasions, and we saw major payback for that. And we creatively emotionally connected with the customer in a way that just drove outsized traffic. So feeling great about the learnings there, feeling great about what's in the pipeline, and very confident that this is just the beginning of raw growth. For us as a total company. Pink and trend. Yeah. I think, you know, trends are cyclical. We're definitely seeing a number of trends that harken back to those early days of pink. We always wanna put a modern spin on it, but that's just one part of Pink's opportunity. We're seeing outsized growth in apparel, but also saw incredible improvement in both panties and bras. And that was a bit of a surprise to me. I was thinking that the opportunity was primarily in apparel accessories and beauty for pink, but we've seen that with the right cadence of fashion newness, we can drive growth across all categories in pink, which is an extremely, exciting learning and something that we're running with. I would also point to partnerships and collaborations as a lever that we have across the entire brand. And those take various forms. Sometimes as big as Love Shack, sometimes much smaller with, you know, an influential person that we're collaborating with, sometimes you know, it's an item rather than an entire collection, so you'll see us dipping toe into a lot of those different things, but we have clearly seen the power of getting the product right, getting the brand heat right, and having the right media strategy to get that in front of the right audiences is the winning ticket here, and we intend to run with those strategies forward. Scott Sekella: And taking Adrian, it's Scott. Taking the last part of your question, and building upon Brooke's question as well. You know, you mentioned promos inflecting, and that's absolutely the case we've been seeing and going to continue to see. But a couple points to just solidify that AURs in Q2, we talked about were up 1%. But when you exclude panties, they were up 8%. This quarter, as I mentioned on the call, AURs were up 3% and excluding panties are up 6%. So that's both pulling back in promotions, but also driving more full price selling. In Q4, I do expect AURs to be up, probably not to the same degree because it's a heavier promotion quarter, as you know. But that momentum from Q2, Q3 will definitely carry into next year. And, again, it's not just promos coming, but it's driving more of our mix in the full in the regular price selling. And one sort of antidote on that building upon the momentum we have with PINK and as Hillary was talking about, particularly PINK apparel, PINK apparel, we're seeing double-digit increases in AURs right now because we're driving that newness in that in that more regular price selling. And that's gonna help build these margins getting back to that double-digit operating margin over the long term. Fantastic. Great to see the progress. Best of luck. Thank you. Thank you. Our next question comes from Matthew Boss with JPMorgan. Your line is open. Matthew Boss: Thanks and congrats on a nice quarter. So, Hillary, could you speak to the inflection in your performance relative to category growth as we think about market share capture relative to larger picture category trends in The U.S. Or globally. And then near term, could you just help break down the cadence of your monthly comps that you saw in the third quarter, particularly October or the exit rate And just elaborate on the strong start that you cited to the fourth quarter, maybe relative to 8% comps in the third quarter or relative to second half of the quarter or October? Have you seen any change in momentum or demand? Scott Sekella: You want to take that one first? Yeah. I'll take the last one first. So we saw strong performance through the entire third quarter. Started off with Pink Friday in the Loveshack Fancy co-lab. That momentum sustained into September. Particularly as we had a very sexy launch later in August and then a sort of a sport reset in September. But then the comps really amplified in October with the fashion show, particularly the back half. And sort of the virality of both shoppable collections, but also even the pink and the wear everywhere bras. So that momentum we've seen sustained into November through the Black Friday selling period. We are, though, cautious as we get sort of post-holiday you know, will we see a broader consumer pullback? And so that's contemplated sort of in our Q4 thinking right now. But the momentum from the fashion shows definitely carried through November into this early December selling period. But I'll let Hillary take the first couple. Hillary Super: Okay. So raw performance, Internet performance versus total share performance. I think what we have learned is that we can continue to perform and grow market share despite the market. And just as a point of reference, you know, we are the number one market shareholder. We all know that, but the next closest is about eight points less than us. So we really have we have a hold on this market. And when we execute well and when we connect emotionally with the customer and really talk about our innovation and the value we add to her life, we win. And we're seeing that. Bras and panties both grew market share in the quarter, and panties to, you know, a really impressive degree. And, you know, we're proud of that, and we see a long runway. And we're excited to keep that going. Matthew Boss: Scott, maybe just as a follow-up. Relative to the benefit from lower promotional activity in the third quarter, I mean, to what extent did you embed opportunity in the fourth quarter? And maybe just what inning overall do you see this opportunity on the promotional front? Or is there a way to kinda bifurcate the margin to get to double digits relative to where we're at today? How much of this is promotional activity? How much of this is SG&A? Maybe just any way to break down that delta. Scott Sekella: Yes. So tackling the Q4 piece first, there's less promotional benefit in our Q4 margins right now just because it's a heavier promotional quarter as you know, but there is still a shift to more, I would say, regular price selling, which is a bit different than just a straight pullback in promo. So and, you know, an example is really, you know, we just this week, we had our second collab on Love Shack Fancy and Pink, and so that's gonna be more regular price selling sort of mix than what we've had in the past. And then as you think longer term, the promo piece, I think we're still in sort of the early middle innings, I would say, on the promotional pullback. So it is gonna be a multiyear journey, but the number one lever is we about margin expansion, is just how we're going to leverage our solid operational foundation, and that's both on buying and occupancy and SG&A as we grow north of 1% to 2%. That flow through to the bottom line will far outweigh the promotional pullback over the next couple of years. Matthew Boss: Great color. Best of luck. Hillary Super: Thank you. Amanda: Our next question comes from Dana Telsey with Telsey Group. Your line is open. Dana Telsey: Good morning, everyone, and congratulations on the nice progress. Two things. As you think about beauty, which I think you've always mentioned is the bigger market than intimate, how do you think about the beauty progress over the next year? What it could do on the top line and how it could impact margins? And then also the marketing being as effective as it is in attracting new customers. Any framework of those customers' age, income levels, anything that you're noticing? And what what what you do differently next year at all to keep the active customer growth going. And then just lastly, store the future. Thoughts on next year for Store of the Future? Any changes or enhancements that you wanna make? Thank you. Hillary Super: Thanks, Dana. I'll start out with the question around beauty. So as you know, beauty has been our stronger business for the last couple of years and has been has, like, a very impressive two-year stack. We have just started really reinvesting in beauty, reinvesting in the innovation pipeline, investing in talent, and thinking about how can we really supercharge this business. As I think about 2026 and 2027, in 2026, there are a number of insights that we have that are known to us. That we can go after, whether it's the fact that only 40% of our customer of our current customer base is shopping beauty and there's a lot within our own internal file that can be claimed and converted. And then continued customer acquisition and really integration of beauty within each brand to be an extension and more connected to each brand. And then Pink Beauty, we've only just very much scratched the surface of. So we think there's a lot of near-term known opportunities for optimization in beauty. 2027 and beyond, it's really about what's unknown today and the innovation pipeline and reaching into the future and bringing that to market. To really excite and delight our customers. So short term, double down on what we know the opportunities are and optimize the business. Slightly longer term. It's really about reaching into the unknown and innovating. Your second question is about marketing a new customers. Okay. So we're very excited about this both in the new and reactivated. We are seeing an uptick in 18 to 24-year-olds, which is extremely exciting. We're seeing growth across all income cohorts with a slightly larger uptick in high-income customers. But growth across all of them. And I would say most importantly, they were coming into the brand based on product brand, and emotion and not on promotion. Coming into the stores. They're showing associates photographs and videos and saying they need this. They want this. And, you know, that's exactly the place that we want to be. And so as we continue to fine-tune our brand heat initiatives, as we continue to fine-tune our creative, we're really going hard at what is culturally inspiring in this moment and how do we engage with that new customer? Scott Sekella: And then I'll tackle the store the future. You know, we're continuing to look at our store of the future concept and how do we optimize it with the path to potential strategy. So how do we better assort, you know, as we continue to supercharge bras, as we continue to drive pink, particularly pink apparel, but now with some of the learnings around pink intimates that we had in the quarter, how do we better optimize and assort pink in the stores and differentiate pink in the stores? So I think those are things we're taking away, these learnings, and applying them real-time. And it'll, you know, impact not only next year, but I would say the next couple of years. And then I think the last opportunity we're looking at with Store of the Future is how do we drive that cross with beauty even better, you know. And so you know, when we have a very sexy launch, not only on the intimate side, how do we tie in beauty with that sort of stuff. And so you'll you won't see a wholesale change to store of the future, but you'll see these enhancements to help better drive our path to potential strategy. Amanda: Thank you. Thank you. Our next question comes from Jonah Kim with TD Cowen. Your line is open. Thank you for taking my question. Just curious on the apparel side, what's the mix now and where you see that trending over time? And, also, I know you've been working on your lead time on the apparel side. What is the lead time now, and is there further opportunities to expedite that? Thank you. Sure. Hillary Super: So when we first started talking about the pink apparel opportunity, we had shared that at one point it was about 70-ish percent of the business and it had gone all the way down to mid-30s. It's now above 40% and climbing. We think, ultimately, it's somewhere in between 50-60% of the total pink business. And we are extremely pleased. It was the leading category in the pink business in Q3. We saw that as Scott mentioned, at much higher AUR, lower discount rate. It was a very solid business. Lots of optimism about that. We also shared previously that we did the Love Shack Fancy collaboration in twenty-six weeks. We continue to look for opportunities to shorten timelines and gain that agility. You know, we have a wide range of ways to make chase into and make product and get to the market more quickly. And I think we have even further room that we can go in some cases, you know, we're doing things like making T-shirts in LA and get those very, very quickly. And, you know, we have core raw materials in all of our top iconic items. We can get into those quickly sub twenty-six weeks. And we continue to work on it. So I would say we are, you know, early to mid-inning on our optimization of how we go to market in pink apparel and lots of opportunity to optimize that in the future. Jonah Kim: Thank you so much. Amanda: Thank you. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open. Marni Shapiro: Hey, guys. Congratulations. The stores have had so much energy. It's been a pleasure to shop. So I'm so curious. I wanna dig into beauty a little bit, dovetailing on what everybody has said. I really liked your home launch in Victoria's Secret, and I'm curious what I guess, what you're thinking about in the future specifically, you know, candles are a big opportunity in general in the market. I thought it looked really beautiful. And then just also in pink beauty, there, you know, with this brand coming back and the younger customer coming back in, the younger customer today is much more sophisticated than they were when Pink first launched. And there's a lot of good youth-facing brands that have come to market. So are you seeing a different kind of pink beauty? And I would assume, like, isn't there room for a real pink beauty business out there? In light of the way the customer has changed? Hillary Super: Yeah. The short answer is yes. We have recently just made some key hires in this area. Senior leader to oversee beauty and merchandising and another senior leader to oversee Pink. They were at once a combined role. And, you know, as with everything, you focused on the bigger piece. So we see the opportunity. We're gonna go after the and I couldn't agree more that this is a much more sophisticated consumer than twenty years ago. And I think there's a significant prize ahead for that business. And what a fun job that is. So I think we can't wait to roll our sleeves up and get into that. And then in home, we also think it's beautiful, and are excited about it, and we think it's we continue to believe it's an opportunity. In hindsight, I think we went, you know, very broad and very large or relatively unknown for us. So we've gotten very key learnings and are honing in on the best of the best and pushing that forward. And so, you know, we're gonna continue to iterate on that category and we feel good about it. We're proud of it. And then can I just ask one quick follow-up on marketing? You've done a lot of collaboration a lot of fun things this year. As we think about marketing as a percentage of sales into '26, are you guys gonna plan it up or sales increase? You're gonna keep percentage flat? Like, what's just the thinking, I guess, behind where marketing spend should be? Scott Sekella: Yeah. I think you'll see the marketing tick up both in and percent of sales. I don't know that it's gonna be a massive jump, but we'll keep inching it up. And we're, you know, as we saw positive ROAS opportunities, we continue to invest in the quarter. So there are even real-time decisions we can make there. And you know, our working media as a percent of total last year was closer to 70%. It's increasing more to 75% this year. And so even as the spend stays the same, we are shifting more of spend into sort of consumer-facing areas. Marni Shapiro: Great. Thanks, guys. Best of luck for holiday. Thank you. Hillary Super: Thank you. Amanda: Our last question will come from Ike Boruchow with Wells Fargo Securities. Your line is open. Ike Boruchow: Hey, everyone. Thanks for squeezing me in. Scott, a couple ones on the gross margin, was hoping to ask. So just the way you're talking about ex the gift card breakage last year, the merch the gross margin you're planning ex tariffs is up 200 basis points. Is that is that accurate, ballpark? Yeah. That's a good description. Yeah. Okay. And that's a little bit lower than the ex tariff gross margin in 3Q because you're not planning as much as you are. So I guess that makes sense. I guess the other the follow-up question I would have to that is is this kinda run rate the way we should think about the first half assuming tariffs stay in place? And then obviously, margin trajectory is now starting to move up. Does next year kinda act as a buffer year to that just because of the first couple quarters of the year where you have to kinda, like, embed these tariff headwinds into the business. Just kind of curious like how much that throws you off your trajectory like just said differently, like can you take margins up next year despite those pressures that you guys have in front of you? Thank you. Scott Sekella: Yeah. And we're still working through our plans specifically for next year. But as you said, tariffs will be a headwind through the first half as they continue to come on. The other thing we do have is our mitigation efforts will increase through next year because a big chunk of them really aren't taking hold here till Q4. So we'll be able to anniversary that plus some of the select price increases we took in back half of this year will help offset in the first part of next year. So there'll be some headwinds continued with tariffs, but the mitigation efforts will be ramping through the year as well. So that's how to think about it right now. Ike Boruchow: Okay. Great. Thank you. Amanda: Thank you. I will now turn the call back to Hillary Super for closing remarks. Hillary Super: Thank you, operator. I want to end by expressing my sincere thanks to all of our associates for their passion and hard work and to our partners, our customers, and our shareholders for their support. We're energized heading into holiday and excited about what's ahead for our brands. I'd like to wish everyone a happy holidays, and we will see you in March. Amanda: Thank you all for participating in the Victoria's Secret & Co.'s Third Quarter 2025 Earnings Conference Call. That concludes today's conference. Please disconnect at this time, and enjoy the rest of your day.
Operator: Good day, and welcome to the MoneyHero Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call may be recorded. I would now like to turn the call over to Miner Pan. Please go ahead. Miner Pan: Thank you. Hello, everyone, and welcome to MoneyHero's 2025 Third Quarter Earnings Conference Call. I am Miner Pan, the Head of Corporate Development. Before we begin, I would like to remind you today's call will include forward-looking statements, which are inherent subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our earnings press release, which was issued earlier today and is also available on our IR website. In addition, please note that today's discussion will include both IFRS and non-IFRS financial measures for comparison purposes only. For reconciliation of these non-IFRS measures to the most directly comparable IFRS measures, please refer to our earnings release and SEC filings. Lastly, a webcast replay and a script of this conference call will be available on our IR website. Joining me today are Rohith Murthy, CEO; and Danny Leung, CFO. Our management will share the strategy and business updates, operating highlights and financial performance for the third quarter of 2025. This will be followed by a Q&A session. With that, let me turn the call over to Rohith. Rohith Murthy: Thank you, Miner. Hello, everyone, and thank you for joining us. This is our final earnings call of 2025, and it marks the inflection point where MoneyHero completes its strategic reset and enters the next phase with an immediate line of sight to structural profitability and value creation than at any point since listing. Now before getting into the quarter, I want to anchor the long-term picture because this really frames where the company is heading and why we believe our execution will ultimately be reflected in the share price that better matches our intrinsic value. Now over the next few years, we expect to deliver healthy annual revenue growth, continued margin expansion and sustained positive free cash flow, driven by our ongoing revenue mix shift towards higher-margin products, AI-enabled operating leverage through Project Odyssey, and structurally lower operating costs and the new growth engines launched in Q4. This is the algorithm guiding the company, and it's the lens through which we want investors to view our performance as we move through Q4 and into our medium-term trajectory. Now let me get into Q3 where this turnaround has become visible. Now Q3 delivered $21.1 million in revenue, up 17% quarter-on-quarter and 1% year-on-year. This was our second consecutive quarter of double-digit sequential revenue growth reflecting a recovery built on healthier unit economics rather than volume alone. More importantly, Q3 makes the structural operating leverage of the model more visible. Adjusted EBITDA loss improved 68% Y-o-Y to negative $1.8 million, and adjusted EBITDA margin improved over 1,800 basis points Y-o-Y from minus 26.5% to minus 8.4%. Over the past 9 months, adjusted EBITDA improved 67% Y-o-Y, while our net loss narrowed from $19.6 million to $5.7 million. This is not one-off. It's the continuation of the trend we have been signaling all year and a foundation for closing the valuation gap that exists today. Now let me talk about the revenue mix. Our revenue quality is materially stronger than what it was 18, 24 months ago. Insurance and wealth now account for 23% of revenue with insurance up 13% Y-o-Y and wealth up 5% Y-o-Y. We see a clear path for our high-margin verticals to take on meaningfully larger share of our revenue mix over the next few years. These verticals already delivered twice the incremental profitability of our lower-margin verticals even before AI upside. This deliberate mix shift we have been signaling combined with disciplined capital allocation into these segments, is central to how we're building durable compounding earnings power rather than chasing volume-led growth. I would like to talk about the cost base now. Our operating costs, excluding FX, fell 13% Y-o-Y to $23.9 million. Our tech costs dropped from $2 million to $0.9 million, employee benefit expenses from $5.7 million to $4.2 million, with 70% to 80% of our service inquiries now automated. We expect operating costs such as tech costs, employee benefit expenses and other operating expenses to remain broadly flat next year against strong revenue growth, a clear demonstration of margin first execution. In practical terms, this means incremental revenue will increasingly flow through to the bottom line reinforcing our confidence in sustaining profitable growth once we cross the Q4 inflection point. I would like to talk about Project Odyssey and how this is a strategic advantage and not just efficiency. Now Project Odyssey is a core pillar of our medium-term value creation. It brings together performance marketing, content automation, credit scoring intelligence, membership enrichment, conversational journeys and service automation into a single coordinated AI stack. Our pilots are already live, and we expect steady improvement in CAC efficiency, approval prediction, funnel conversion and reward optimizations, while automating more than 60% of service interactions without increasing headcount. Based on the work streams launched this year, and pipeline scheduled for 2026, we see Project Odyssey driving meaningful uplift in unit economics across every major verticals from lower CAC for approved customer and higher approval quality to our TransUnion-powered models to smarter routing across lenders and insurers, better organic traffic efficiency and a higher repeat usage through membership and personalized journeys. When aggregated, these work streams are projected to deliver a substantial improvement in annual EBITDA over the next few years with further upside as adoption deepens. Importantly, Odyssey is being trained on providing right content, behavioral approval data from 8.8 million members, giving us a defensible data moat and positioning MoneyHero as one of the region's first AI-native financial decisioning platforms. This is not just an efficiency program, it's a structural driver of margin expansion and a key catalyst for our long-term rerating potential. It also reinforces our regulatory first approach as we design AI journeys to closely align with regulators and partners to ensure suitability, transparency and consumer protection are all embedded from day one. I would like to talk about Q4 now, the profitability inflection. We expect Q4 adjusted EBITDA to be positive. The first profitable quarter on an adjusted EBITDA basis since listing. And this is driven by the mixed tailwinds in insurance and wealth, strong partner budgets in Singapore and Hong Kong. Growth in Hong Kong personal loans through the newly launched Credit Hero Club and the tax-alone season, the cost reset already in the P&L and ongoing improvements in marketing efficiency. Q4 will be the inflection point that we have been signaling all year, the catalyst for the business to be viewed fundamentally different in the market. From there, the focus shifts from proving profitability once to delivering it consistently and scaling it with AI and high-margin verticals doing more of the heavy lifting while the cost base remains tightly controlled. Now in terms of value creation, as we think about closing the gap between our intrinsic value and share price, I would like to sort of speak directly to why we believe our progress will ultimately be reflected in a share price that better matches our intrinsic value. Firstly, after proving profitability in Q4, we will consistently deliver and scale it. For the full year 2026 next year, we target to drive solid top line growth, meaningful improvement in profitability and a further revenue mix towards insurance and wealth moving beyond the roughly 23% they contribute today into the next band of our revenue mix. Second, we will -- the equity story with more proactive IR, clear medium-term guidance and more emphasis on our mix shift. And our auditory-driven margin expansion and our leadership in a fragmented market. Sequential revenue growth of 26% and 17% in the past 2 quarters already show what the new foundation can deliver. Third, we will pursue disciplined capital allocation and strategic optionality. Our priorities are clear: invest in Odyssey, the Credit Hero Club and real-time car insurance journeys, explore consolidation opportunities where we can unlock revenue and cost synergies and evaluate share repurchases once free cash flow is established. Across global fintech, there are very few companies capable of combining profitable growth, structural expansion and capital-light free cash flow, and our objective is to make it increasingly obvious that MoneyHero belongs in that group. I would like to close with the summary. 2024 was the year of reset, 2025 was the rebuild and path to profitability, 2026 will be the profitable scale up. Thank you. I'll now hand it over to Danny for our detailed financial review. Danny Leung: Thank you, Rohith, and hello, everyone. I'll take the next several minutes to walk through our third quarter financials with a focus on data. The operational drivers behind the numbers and how the financial profile of the business continues to evolve. Let me begin with revenue. For the third quarter, we reported $21.1 million in revenue, representing a 17% sequential increase from Q2 and a 1% year-over-year growth. This is now our second consecutive quarter of double-digit sequential revenue growth and it demonstrates a consistent recovery pattern built on healthy unit economics rather than the volume-driven growth we saw prior to the model reset last year. That 1% year-over-year increase needs to be interpreted in the context of the deliberate reshaping of our volume mix. As we have outlined in prior quarters, the company intentionally scaled back lower-margin products such as credit cards. So modest headline revenue growth is a sign that the strategic pivot is working as intended. We are growing again, but this time on a structurally stronger base. What gives us the confidence is the quality of revenue, which continues to improve. Insurance revenue grew 13% year-on-year to $2.3 million and wealth revenue grew 5% to $2.6 million. Together, they represent 23% of group revenue, compared to 21% a year ago. The shift reflects the fundamental change in our foundation, one that is already raising margins, improving predictability and strengthening the durability of earnings. Both internal data and external research highlight insurance and wealth as the core engines of long-term gross profit compounding and the Q3 data confirms that momentum. Looking geographically, Singapore was a standout performer with revenue rising to $10.2 million versus $7.9 million a year ago. That growth reflects improved approval quality, healthier participation from back-end insurers and broader product debt. Hong Kong delivered $7.5 billion in revenue slightly lower year-on-year, but in line with our expectation due to the proactive reduction of low-margin credit card campaign. Importantly, Hong Kong showed sequential stabilization as car insurance integrations deepened and Credit Hero Club continue to scale membership. Taiwan and the Philippines, which were reflected -- affected last year by the exit of Citibank's operations came in at $1 million and $2.4 million, respectively. These markets are recovering gradually, consistent with partners own acquisition strategy resets. Neither market is yet back to full run rate, but the operational issues seen earlier in the year are now largely behind us. Now let me turn to operating expenses. Operating costs, excluding FX, fell to $23.9 million, a 13% reduction year-over-year. This is consistent with our stated objective of reshaping our cost base and reflects progress across every major category. Advertising and marketing costs declined as we executed fewer low-yield campaigns and increased our use of fixed fee and sponsorship arrangement with partners, something we spoke about extensively during the Singapore Best of Awards, which attracted more than 170 guests. Technology costs also declined meaningfully year-on-year, decreasing from $2 million to $900,000. By consolidating platforms, reducing vendor count, and embedding AI-driven automation in internal workflows. We are enabling the business to ship more product features and handle more operational work without increasing cost. Employee benefit expenses were notably lower versus last year, decreasing from $5.7 million to $4.2 million. This is partly due to our restructuring efforts completed earlier in 2024. But just as importantly, due to the scaling impact of AI. As we shared on the prior quarter, our support and service automation now handles 70% to 80% of incoming queries. This enables us to maintain a flat headcount even as application volumes and member engagement grow. It's worth noting that this sets the stage for multiyear operating leverage. Increase in throughput will no longer require proportional increase in personnel. For Q3, adjusted EBITDA improved to a loss of $1.8 million compared to $5.5 million a year ago, an improvement of 68%. Adjusted EBITDA loss margin improved from 26.5% to 8.4%. This is the second consecutive quarter of sequential improvement and underlying drivers mix shift, operating leverage and reduce the cost of revenue remained consistent. Let me close by discussing our outlook. The leading indicators impacted in the Q3 results, rising share of insurance wealth, stable to improving approval quality, consistent cost discipline and increasing contribution from AI-enabled workflows all support the guidance we have provided throughout the year. We expect Q4 to be our first quarter of positive adjusted EBITDA since listing. Our cost base is structurally lower. Our revenue mix is structurally stronger, and the benefit of Project Odyssey are becoming visible, not only in service automation but also in conversion and acquisition efficiency. We will continue allocating capital to the higher-return verticals, namely insurance, wealth and personal loans. Overall, Q3 shows a company that continues to progress, operationally, financially and structurally towards our stated goal of sustainable, profitable growth. Thank you. And I will now hand the call back to the operator for questions. Operator: [Operator Instructions] And our first question comes from [ Calvin Wong with Sticker Capital ]. Unknown Analyst: I would like to ask 4 questions, if I may. And then pre more on business strategies and one on financials. The first one related to your crypto. What is the plan for the crypto segment since you have announced the partnership with OSL, HashKey and the survey with Coinbase so any revenue target or goal from this segment; and two, about AI. Can you elaborate about the AI displacement risk because you are a comparison platform. And three, you've mentioned many times in the press release that you're backed by a few partners like Palantir, [ Thiel ], Pacific Century. Can you share with us if there is any further partnership potential? And finally, on financials, we've seen that revenue basically flat year-on-year in the third quarter, but adjusted EBITDA actually improved quite significantly. So is that within your expectation? Any -- what are the drivers of this improvement? And why are you so confident in Q4 and beyond. So to recap one on crypto and one on AI and then another one on partnership and finally, about your profitability. Rohith Murthy: Dan, do you want to start with the profitability and then I'll take those 3. Danny Leung: Okay. Yes, perhaps I'll answer the first question about revenue first and then the one on Q4. Okay. So yes, thank you for your questions again. So while revenue was essentially flat year-over-year at $21.1 million. The economics under the hood of the business shift very meaningfully. The core driver of the 68% improvement in adjusted EBITDA was the combination of high-quality revenue mix and structurally lower operating costs, both of which reflect the execution of our modest -- model reset over the past 12 to 15 months. On the revenue side, you can see that insurance grew 13% year-on-year and wealth grew 5%, together accounting for 23% of group revenue, up from 21% last year. These verticals carry significantly higher contribution margins compared to credit cards, and the shift towards them has a direct positive impact on adjusted EBITDA. At the same time, operating costs, excluding FX, fell 13% year-over-year from $27.4 million to $23.9 million, as you can see. And we continue to optimize marketing spend, consolidate technology platforms and scale AI-driven automation across workforce. Notably, technology costs declined from $2 million to $900,000. Employee benefit expenses fell from $5.7 million to $4.2 million, enabled in part by our AI stack now handling 70% to 80% of service periods. Advertising and marketing efficiency improved as we prioritize higher yield campaigns and increased fixed fee structures with partners. So despite flat reported revenue compared to last year, the quality of what we earn and the efficiency with which we operate have both improved sharply, and that is what is being shown in the adjusted EBITDA. And on your second question about Q4 and beyond. Our confidence in Q4 and in the medium-term trajectory is anchored in both structural revenue mix improvements and sustained operating leverage. First, the revenue mix is fundamentally stronger now. Insurance and wealth are most profitable verticals now represent 23% of revenue. We have visibility towards taking this mix into next band of our revenue over the next few years, which will continue to rise margins and earnings durability. Second, sequential growth momentum is building. Q3 was our second consecutive quarter of double-digit sequential growth, and that growth came from healthy unit economics, non aggressive reinvestment. Singapore, in particular, saw strong product activity, and we expect that strength to continue into Q4. Third, our cost base is now fundamentally different from a year ago. So this all creates multiyear operating leverage that continues expanding EBITDA margins as we grow. Combining all these factors, Q4 is positioned to be the inflection point, the first quarter of positive adjusted EBITDA since listing and 2026 is set up to be the year in which we scale profitability while continuing to invest in insurance, wealth and AI impacted operating leverage. And I'll pass it on to Rohith. Rohith Murthy: Sure. I'll take the crypto question first. Look, our approach to crypto has been very deliberate, regulated and compliance first. You're right, a partnership with OSL gives us a very licensed sort of institutional-grade partner for execution. Recently, we partnered with Coinbase and we launched the pulse of crypto Singapore, a survey that actually provides like market insight, credibility and alignment with our regulatory expectations. We work very closely with the local regulators to ensure all our user journeys remain suitability aligned and compliant. And in the near term, our role is to educate, compare and route users to regulated platforms. We're not here to take any balance sheet risk. And over time, we'll integrate these digital assets into broader wealth journey so users can see crypto alongside cash and savings and traditional investments rather than just a stand-alone speculative category. We're not really setting a stand-alone crypto revenue target externally. Instead, we plan to underwrite it as an upside within the wealth segment with the goals that the digital assets become a meaningful contributor over the next 2 to 3 years. So that's on crypto. Now on the AI, that's an interesting question. And my response would be if we were just a static comparison platform, then yes, we would definitely look at AI as a risk. But when you think about us, a, we have vertical integration and insurance; b, deeper integrations and credit, we've been moving towards journeys with very meaningful data-driven insights rather than just a page of options. And now we have Project Odyssey. So if you put these together, we see AI actually as an amplifier of our value. Users still need someone to aggregate, normalize and curate across dozens of banks, insurers and wealth platforms, and that's us. Our partners still need a cost-effective, data-rich acquisition channel. And our job is to be the AI enhanced layer between users and providers not just a mere static list. And I think finally, on your question around partnership potentials, we're always in close dialogue with our major backers, including Pacific Century Group. We routinely explore partnerships within the ecosystem, particularly in Hong Kong, where we do see a strategic threat. And I think our relationship with Bolttech is a very good example of how these collaborations can really create value when the infrastructure and capability is really aligned with our distribution and product strategy. Thank you for the questions. Operator: Our next question comes from William Gregozeski with Greenridge Global. William Gregozeski: Rohith, yes, congratulations on the work you guys have done over the last year, really reshaping the company and getting ready for profitability. A couple of questions for you. With the talk about the positive cash flow coming here, is there any plans to use that on M&A? Or do you think you're just going to focus on the existing business and driving that profitability before looking outside the company? Rohith Murthy: Great question, Bill, and good to hear from you. Look, our capital allocation philosophy, as I would like to believe it's been very simple in sequence. The first thing we do is we invest organically in the core engine. And you're right, we've really rebuilt that core engine. Second, we're really looking at scaling Project Odyssey, we want to really deepen our AI advantages and even really accelerate our go-to-market for a lot of new capabilities. For example, the Credit Hero Club, the real-time car insurance journeys and even expanding our higher-margin insurance and wealth verticals. And these are where we believe have the highest return on our invested capital and it directly drive our revenue growth and margin expansion. So that's the first lens we have. The second lens, as you asked, we will pursue M&A but in a very disciplined way because we do believe, as the industry consolidation accelerates, we want to focus on acquisitions that will offer very clear revenue or cost synergies or both, stronger capabilities, a strategic scale, and now more so importantly, they need to fit our AI-enabled operating model. William Gregozeski: Okay. Great. You mentioned the Credit Hero Club and you just launched that. Can you kind of talk about how that reception is going and just kind of give an update on how the loan segment is looking for the fourth quarter with that launch and then in 2026? Rohith Murthy: That's the question. Look, the Credit Hero Club is really sort of a marquee membership program we have launched in Hong Kong. It's the first of its kind in partnership with TransUnion. There's a lot of work that has happened throughout the year. And we're very happy we were able to get this launched this year. So the power of the membership program is consumers in Hong Kong will be able to get detailed information about their credit profile for free, credit score for free and through this, we will be able to make very personalized offers on credit products, very powerful in that sense. And to a large extent, it's related in terms of how we think about the personal loan segment in Hong Kong, it's a very important vertical for us. We have a category leadership there. But you're right, Hong Kong is a very unique market where we do have seasonality around tax loans, and we are in the tax loan season as we speak. And that's been great for us. It's a great contributor to our lending business. It continues to be every time we do have a tax loan season, more and more consumers pick us as a platform to find the best offers, and we've also been improving our overall user experience to make it easier for them to compare offers. We have great partnerships with exclusive offers that we provide. So that will continue to be a very attractive part of our loan strategy. But now bringing in the Credit Hero Club, we not only amplify seasonality like tax loans, but during, like, say, off seasonality, we are able to now be a lot more contextual, real time and really understand the credit needs of our consumers. And that capability is going to be extremely critical as we think about scaling personal loans so in that sense, we're very excited that we've also launched the Credit Hero Club in the tax loan season, and we really hope to scale this membership program in Hong Kong. William Gregozeski: Okay. Great. Great. And last question is, you've been touching on the revenue mix and the margin profiles of the different segments. Can you just kind of give not necessarily guidance, but just some kind of outlook we should be looking for on the different segments for '26? Rohith Murthy: Absolutely. Now when you think about our business, credit cards will continue to remain a core vertical. And the way we think about credit cards is you have a medium to high-intent users. They are very rewards-driven. There is moderate seasonality and you're right, it's a low to medium margin profile. That's how we think about credit cards. When we look at personal loans, they are a lot more cyclical, but there's still a large essential category where margins continue to improve, especially as we shift towards higher approvals, better economic campaigns, Credit Hero Club being a big, big driver of that. And then there's insurance where we have motor, home and other general lines, these offer lower seasonality, there's a stronger repeat intent, and they structurally have higher margins. And this makes it like a really core EBITDA anchor for us as we really expand into real-time pricing and more end-to-end journeys. And travel insurance is more seasonal with lower margins, but really high volume. And this year, we've done a lot of work on wealth, whether that's brokerage accounts, savings products, investment marketplaces and digital assets that we spoke about. And these carry again, moderate to high margins, and we really believe there's a lot of meaningful long-term upside. So across the portfolio, each segment serves, I would like to believe, need-based demand, but they all differ in seasonality and margin structure. And that's why our strategy is steadily shifting towards recurring, higher-margin verticals. And we really -- with the target of bringing them from 23% level, which is there today into the next band of mix contribution in the next few years. And we plan to do this while improving economics in some of those cyclical categories I spoke about. This was a very disciplined expenses, cost disciplines and a sustained revenue momentum, we believe and we expect very strong operating leverage. And that was one of the strategic pillars we always laid out. And this is a dynamic that's going to carry into next year, which is why, as Danny mentioned, we expect EBITDA to improve significantly versus 2025, and this momentum and progress should go into 2027 and beyond. Operator: Thank you. I'm showing no further questions. I'd like to turn the call back over to Rohith for closing remarks. Rohith Murthy: Again, this is the last earnings call, and I would like to take this opportunity to thank every member in MoneyHero, who has worked incredibly hard to reshape and return this business. We're very proud of what we've achieved, and we have a lot more to do in the coming year. We want to like -- we would like to thank our partners, our investors, our shareholders, who continue to believe in this business. And I would like to take this opportunity to wish you all in advance Merry Christmas and happy holidays. We'll see you all in the next earnings call. Thank you. Operator: Thank you for your participation. You may now disconnect. Good day.