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Operator: Good afternoon, and welcome to Airgain's Third Quarter 2025 Conference Call. My name is Paul, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Suen, and CFO, Michael Elbaz. As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at investors.airgain.com. Following management's prepared remarks, the call will be opened for questions from Airgain's covering analysts. I caution listeners that during this call Airgain management will be making forward-looking statements about future events as well as Airgain's business strategy and future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and Airgain's SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, 11/12/2025. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. In addition, this conference call will include a discussion of non-GAAP financial measures. Please see today's GAAP earnings release for further details, including a reconciliation of GAAP to non-GAAP results. Now I'd like to turn the call over to Airgain's CEO, Jacob Suen. Jacob? Jacob Suen: Good afternoon, everyone, and thank you for joining us. Throughout 2025, we have remained deliberate about how we built Airgain, focusing on what we can control, refining where we compete, and executing step by step to create a stronger, more scalable company. Our focus continues to show in our results. In Q3, we delivered our third consecutive quarter of sequential revenue growth, met guidance, achieved strong gross margins, and generated positive adjusted EBITDA. We also reached key certification milestones that move our growth platforms closer to scale. Before diving deeper, I want to step back and frame where we are in our growth journey. With the year nearly complete, this is a good time to reflect on the progress we have made and how it positions Airgain for sustainable growth in 2026. Airgain was founded on a simple idea: we simplify wireless. From day one, our mission has been to help our customers' devices, vehicles, and networks connect more reliably by removing complexity from wireless design. Our technology reaches across three core markets: consumer, enterprise, and automotive, connecting leading carriers, service providers, and OEMs that depend on reliable wireless performance. Our business rests on two pillars. First, our core markets that provide stability and a solid foundation to fund growth. Second, our growth platforms, AirgainConnect and Lighthouse, are opening new scalable opportunities in fleet and network coverage solutions. Let me start with our core business, which remains healthy and profitable on a standalone basis. In consumer, we expect revenue to grow at a double-digit rate for the second consecutive year, driven by the WiFi 7 transition among Tier 1 cable operators and growth of FWA antenna sales to a Tier 1 mobile network operator. Looking ahead to 2026, we expect continued growth supported by the WiFi 7 transition and new design wins, such as the one we announced this week with another Tier 1 US carrier for its next-gen WiFi 7 fiber broadband gateway. The new platform is targeted for commercial launch in 2026, with projected shipments exceeding 5 million units within the next five years. In embedded modems, we also expect double-digit revenue growth for the second consecutive year, fueled by rising demand in utility infrastructure monitoring, including energy management and electrical grid applications. We launched our Skywire Tier 1 base embedded modem and recognized initial revenue in Q3, and we expect this solution to be a growth driver in 2026. Embedded modem sales now represent more than half of our enterprise market revenue, and we continue to invest in next-generation development to expand our leadership position. Jacob Suen: While our consumer and embedded modem businesses generated higher revenue and contribution margins this year, other product lines faced challenges that we are actively addressing. Asset tracker sales have moderated, reflecting a lack of traction on customer projects. Aftermarket antenna and enterprise custom products remain weighed down by channel inventory overhang, partly driven by government agency project deployment delays. Given the current government funding climate, we expect this overhang to persist through 2026. Additionally, we are leveraging our high-performance antenna portfolio to expand into emerging markets and applications, including unmanned flight systems, smart infrastructure, and industrial IoT, which are expected to create new revenue streams for Airgain in 2026 and beyond. Taken together, our core markets are performing largely as expected, providing steady revenue and EBITDA. We expect core markets will be up modestly in 2026 and to remain self-sustaining, generating the cash flow that supports continued investment in our platform strategy. With our foundation in place, let's transition to our growth platforms, AirgainConnect and Lighthouse, where we are seeing tangible progress and expanding engagement. Jacob Suen: AirgainConnect is our integrated 5G gateway platform for enterprise applications, such as fleets, utilities, and mobile usage. Following the AT&T FirstNet trustee certification earlier this year, we achieved another significant milestone by obtaining T-Mobile key priority certification last month, validating AirgainConnect for mission-critical connectivity and opening access to T-Mobile's public safety and enterprise networks. As we have shared on prior calls, the AirgainConnect sales cycle varies by fleet size, which impacts the timing of revenue recognition. Tier 3 customers, under 50 vehicles, move the fastest with a sales cycle of roughly three months, providing near-term revenue potential. Tier 2 customers, 50 to 500 vehicles, generally take six to twelve months from engagement to deployment. Tier 1 customers, over 500 vehicles, have the longest cycle, twelve to eighteen months, and often structure RFPs in pilot validation programs. Our sales approach is consultative and multi-pronged, spanning partnerships with carriers, strategic value-added resellers, and distributors to direct engagements with key customers as a trusted solution provider. We have a dedicated sales, marketing, and customer support team, which continues to evolve to better address customer needs. Our sales opportunity pipeline continues to expand, with roughly 80 opportunities in play, two-thirds of which are in pretrial phases. We currently have approximately 60 Tier 3 opportunities, averaging 10 units each, with nearly half already in the post-trial phase. Our Tier 1 and Tier 2 opportunities vary in size, with most still in the early engagement or pretrial stage. About two-thirds are focused on the first responder market, where adoption has been slowed by budget and funding constraints that were further accentuated by the recent government shutdown. While the AirgainConnect value proposition in the first responder market centers around its all-in-one design and integrated eSIM capability, we are finding strong traction in utility and energy infrastructure markets. For these customers, the conversation shifts from replacing their current cellular setup to enabling true edge connectivity, a new level of integrated high-performance connectivity that supports advanced in-vehicle sensing, multi-camera video recording, and image recognition capabilities, and external environmental sensors with continuous cloud connectivity. AirgainConnect is more than a hardware upgrade; it simplifies network management, improves coverage and performance, and meaningfully reduces OpEx by allowing fleets to consolidate multiple SIM-based connections into a single intelligent gateway. A good example is our engagement with a large fleet operator pursuing a digital transformation to improve operational efficiency and reduce annual operating expenses. Today, each truck relies on multiple SIMs to power cameras and sensors. ACP is being evaluated as a single gateway solution with multiple carrier eSIM capability, simplifying connectivity management and enabling remote carrier switching. Jacob Suen: Looking ahead, we are on track for Tier 2 opportunities to begin converting into design wins in 2026, with Tier 1 programs expected to follow in the second half of the year. These milestones reflect steady progress to customer validation and demonstrate strong alignment with our strategic engagement roadmap. Compared to Lighthouse, AirgainConnect is the more immediate growth driver, and we enter 2026 with strong visibility and confidence in the platform's adoption trajectory. As AirgainConnect establishes our leadership in fleet connectivity, Lighthouse marks our expansion into network infrastructure optimization, helping carriers and enterprises expand 5G coverage and offload extra capacity more efficiently. We achieved FCC certification last month, a significant milestone that now enables Lighthouse to be deployed commercially in the U.S. Lighthouse, our 5G network control repeater, provides a faster, lower-cost, and more sustainable alternative to traditional base station infrastructure and passive distributed antenna systems. Equipped with an optional solar package, it can operate autonomously in off-grid or rural locations, addressing both performance and sustainability objectives. We continue to make meaningful progress across our target regions. In the U.S., we have secured a Tier 1 carrier trial that is expected to be completed by the end of this year. Jacob Suen: This trial represents months of technical collaboration and senior executive sponsorship, underscoring its significance as a company milestone. As part of this engagement, we will deploy our first dual carrier installations, validating Lighthouse's capability to aggregate multiple spectrum channels simultaneously, delivering higher throughput, improved signal stability, and a superior end-user experience. This channel aggregation capability is unique to Lighthouse and represents a clear competitive differentiator in the 5G coverage expansion market. While we are excited about this U.S. trial, we remain cautiously optimistic given the lengthy carrier engagement cycle. We're also finalizing a system integrator agreement with a leading U.S. system integrator covering thousands of sites transitioning from 4G LTE to 5G. The integrator plans to use Lighthouse to upgrade these locations and support future deployments. This is a strategic relationship designed to enable and scale customer deployments while also supporting the integrator's enterprise clients. In the Middle East, installations are progressing with Ormatio through the initial phase, and we are planning for a joint sales and marketing rollout in 2026. In parallel, we are engaged in additional regional discussions and expanding Lighthouse adoption across neighboring markets. In South America, we are currently executing a trial with a top five global tower provider in collaboration with two regional Tier 1 mobile network operators. This trial marks the industry's first dual operator deployment with Lighthouse, supporting two independent carriers through a single installation. This capability eliminates redundant hardware, reduces deployment cost, and accelerates network expansion. While the opportunity could be significant, we remain cautiously optimistic regarding the financial impact, which is expected to materialize over the next twelve to eighteen months. Looking ahead, our focus is on completing active deployments, scaling commercial pilots, and expanding system integrator partnerships globally. We expect modest Lighthouse revenue contribution in the first half of next year, followed by stronger growth in the second half as U.S. system integrator engagements expand and international projects advance. Our strategy is working, momentum is building, and execution remains our priority. As we conclude 2025, our focus remains clear: to complete our transition from a component supplier to a scalable wireless systems solutions company. We're maintaining financial discipline, executing on our engineering roadmap, advancing customer pilots, and delivering on our sales and operational goals, all of which position us to scale efficiently and sustain growth in 2026 and beyond. Our model remains capital efficient and supported by the resources needed to execute our strategy effectively. With that, I'll hand over to Michael to discuss our financial results. Michael? Michael Elbaz: Thank you, Jacob. Before I dive into the numbers, I will note that my remarks refer to non-GAAP figures unless otherwise indicated. Reconciliations to GAAP results can be found in today's earnings release. Third quarter revenue came in at $14 million, at the midpoint of our guidance and up 3% sequentially from the second quarter. Breaking this down by market, consumer revenue was $6.7 million, up $1 million sequentially, driven by higher WiFi 7 antenna shipments to cable operators. On a year-to-date basis, our sales to cable operators grew by over 50%, fueled by the WiFi 7 technology refresh. Enterprise revenue was $6.9 million, down $300,000 sequentially due to lower enterprise antenna sales. Our embedded modems product line recorded a third consecutive quarter of sequential sales growth. The growth was driven by end customers in the utility infrastructure monitoring market. Automotive revenue was $500,000, down $300,000 sequentially, driven by lower aftermarket antenna sales. Third quarter non-GAAP gross margin was 44.4%, up from 43.8% in Q2. On a year-over-year basis, margin increased by 160 basis points, driven by improved enterprise and consumer product margins. Third quarter non-GAAP operating expenses were $6.1 million, lower both sequentially and year over year, reflecting an expense realignment within our core product lines and a decrease in our G&A expenses. While total expenses have decreased, we continue to invest in our growth platforms, specifically the sales, marketing, and engineering functions to support a scalable system solution company. On a year-to-date basis, our non-GAAP engineering, sales, and marketing expenses decreased 10% year over year. Within that, we estimate the engineering, sales, and marketing expenses for our core product lines decreased by approximately 30%, while investment in our growth platforms increased by about 30%. Adjusted EBITDA improved to a gain of $300,000 compared to a loss of $400,000 in Q2. Q3 non-GAAP net income was $100,000 or 1¢ per share, compared to a loss of $500,000 or 4¢ per share in Q2. We ended the quarter with $7.1 million in cash and equivalents, down $600,000 sequentially and down $300,000 on a year-over-year basis. Year to date, we received $2.1 million in net proceeds from the employee retention credit we applied for over two years ago. The ERC credits helped offset the impact of $1.7 million year-to-date non-GAAP operating loss on our cash balance. Looking ahead to the fourth quarter, we expect revenue in the range of $12 million to $14 million, with a midpoint of $13 million, representing a sequential decline of approximately 7%. This decline reflects a temporary moderation in our consumer and enterprise sales following strong year-to-date performance. We expect non-GAAP gross margin for the fourth quarter to be in the range of 42.5% to 45.5%, or 44% at the midpoint. We do not anticipate a material impact from tariffs or the recent government shutdown, although this environment may result in supply chain disruption costs. We expect non-GAAP operating expenses for the fourth quarter of approximately $5.8 million, resulting in positive adjusted EBITDA of approximately $100,000 at the midpoint of our guidance range. Now I will turn the call back over to Jacob for his closing remarks. Jacob? Jacob Suen: Thanks, Michael. To put it simply, 2025 has been a year of validation and disciplined execution, and we are entering 2026 with stronger visibility, a clear roadmap, and the foundation to scale. We have achieved key certifications and driven customer engagement across our growth platforms. Our core business provides stability, our platforms create drivers for growth, and our team continues to execute with focus and accountability. The opportunity ahead of us is clear, and our conviction has never been higher. Thank you to our employees, partners, and investors for your continued trust and support. Operator, we are now ready to take questions. Operator: Thank you. We'll now be conducting a question and answer session. It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Jacob Suen: Thank you. Our first question is from Anthony Stoss with Craig Hallum Capital. Anthony Stoss: Hey, Jacob and Michael, it's Ryan on for Tony. I'm just curious about your recent WiFi 7 design win with the Tier 1 carrier. Is this an existing customer upgrade for you guys, or is it a completely new customer? And then how do you think of the cadence of the ramp on the revenue impact for next year? Jacob Suen: Thanks. Hi, Ryan. Yes, this is Jacob here. The customer is an existing customer, although this is, you know, as far as the end customer, it is a US Tier 1 operator, and this is their flagship gateway for the next generation. So this is, you know, their largest scale. Anthony Stoss: Okay. Got it. And then how do you guys think of the, I know it's ramping in the second half of next year. How do you think of the revenue impact for 2026? Jacob Suen: Look, we talk about the size, it's in excess of 5 million units. You know, it's going to be within five years because that's usually how operators, you know, roll out their deployment. As far as 2026, we would be able to get more visibility, I would say, in the first half of the year because it's planned to be, you know, start deploying in the beginning of the second half of next year. Anthony Stoss: Okay. Got it. And then maybe one for Michael on OpEx. It's nice to see continued cost discipline both in the results and the guide for December. I'm curious how you think about OpEx fluctuation next year as you ramp some of the new products? Michael Elbaz: So our goal is really to be at EBITDA breakeven, if not positive. And so as we have some runway left to have the revenue ramp in the AC fleet and Lighthouse, we will maintain that tight management of OpEx. We're always looking for efficiencies in our G&A expenses. This has always been the case. And at the same time, we're also looking very deliberately at our investment in our core market, mainly because we want to make sure that we continue to invest in the growth platform just like we have done over the past few years. Anthony Stoss: So, it would be basically a tight management of OpEx, it will be deliberate type of investment. It would be focused on the growth platforms. On the core markets, we mentioned, the consumer product line along with the embedded product line, which is part of the enterprise market, definitely have been bright spots for us in FY '25. And so we have as well an engineering roadmap along with increased focus on the sales and marketing effort as we continue to win designs on those two major product lines. Anthony Stoss: Alright. Got it. Thank you, Jacob. Thank you, Michael. Michael Elbaz: Thank you. Operator: Thank you. This concludes our question and answer session. If your question was not answered, you may contact Airgain's Investor Relations team at airg@gatewayir.com. I'd now like to turn the call back over to Mr. Suen for any closing comments. Jacob Suen: Thank you for your thoughtful questions and for your continued interest in Airgain. If there's one takeaway, it's that Airgain is a more focused, disciplined company entering 2026, positioned for sustainable growth and increasing platform adoption. Michael and I will be attending the Quick Conference in New York City on Tuesday, November 18, and we look forward to connecting with many of you there. Operator, you may now conclude the call. Operator: Thank you for joining us today for Airgain's Third Quarter 2025 Earnings Call. You may now disconnect.
Operator: Good evening. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky Harbour 2025 Third Quarter Earnings Call and Webinar. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply submit a question online using the webcast URL posted on our website. Thank you. Francisco Gonzalez, you may begin your conference. Francisco Gonzalez: Thank you, Tiffany, and a warm welcome to the 2025 Third Quarter Investor Conference Call and Webcast for Sky Harbour Group Corporation. We have also invited our bondholder investors and our borrowing subsidiary Sky Harbour Capital to join and participate on this call. Before we begin, I've been asked by counsel to note that on today's call, the company will address certain factors that may impact this and next year's earnings. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management assumptions, which may or may not come true. You should refer to the language on slides one and two of this presentation as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. So now let's get started. The team with us this afternoon, known from our prior webcast, includes our CEO and chair of the board, Tal Keinan, our treasurer, Tim Herr, chief accounting officer, Michael Schmitt, our accounting manager, Tori Petro, and Andreas Frank, our assistant treasurer. We have a few slides we'll want to review with you before we open it to questions. These were filed with the SEC an hour ago in Form 8-K along with our 10-Q. They will also be available on our website later this evening. We also filed our third quarter Sky Harbour Capital obligated group financials with MSRB EMMA an hour ago. As the operator stated, you may submit written questions during the webcast using the Q4 platform, and we will address them shortly after our prepared remarks. Let's get started. In the third quarter, on a consolidated basis, assets under construction and completed construction continued to increase, reaching over $300 million on the back of construction activity at the recently completed campuses at Phoenix, Dallas, and Denver. Please note this graph is soon to accelerate its upward trajectory as we break ground in Bradley International, Salt Lake City, Addison Phase 2, and other campuses. Consolidated revenues experienced an increase of 78% year over year and 11% sequentially, reaching $7.3 million for the quarter, reflecting the acquisition of Camarillo Campus last December and higher revenues from existing and new campuses. Operating expenses in Q3 actually dropped slightly as some of the one-time non-recurring startup expenses and new campuses that we experienced in Q2 did not carry into the last quarter. SG&A had a one-time non-cash expense in the quarter related to the recognition of vesting of our former CLO's equity award compensation. We are working hard to keep SG&A stable. As indicated in prior public discussions, we look for these line items not to exceed $20 million on a cash basis when it reaches its peak. This line item has many non-cash elements which Michael, our chief accounting officer, will review shortly. Most importantly, on the lower right-hand quadrant, we are only less than $1 million away from breakeven on a cash flow for operation basis and expect to reach that goal next month on a run rate basis as discussed in prior calls and part of our formal guidance. Next slide, please. This is a summary of the financial results of our wholly-owned subsidiary Sky Harbour Capital, its operating subsidiaries that form the Obligated Group. This basically incorporates the results of our Houston, Miami, and Nashville campuses along with the newly opened campuses in Phoenix, Dallas, and Denver. Revenues in Q3 increased 25% year over year and 8% sequentially. We expect a continued increase in Q4 and the first quarter of next year as these campuses, the new campuses, continue to be leased and Phase 2 at Opa-locka, Miami, is expected to open around early April of next year. Operating expenses decreased moderately as discussed before, while the operating leverage is shown in the strong cash flow generation coming from operating activities. You can see in the lower right-hand quadrant. Let's turn now to our Chief Accounting Officer, Michael Schmitt, for a breakdown of adjusted EBITDA. Michael Schmitt: Thank you, Francisco. Adjusted EBITDA is a measurement tool utilized by us to evaluate our operating and financial performance. You should note that it is supplemental in nature, and it is not calculated in accordance with U.S. GAAP. We have provided a reconciliation from our GAAP net loss results to the three months ended 09/30/2025. Amongst the most significant items that are components of our reconciliation to adjusted EBITDA are the non-cash portion of our ground lease expense, as we discussed in prior quarters. Most of, virtually all of, our new ground leases signed do not actually require us to make cash payments until we receive two certificates of occupancy. Nonetheless, under U.S. GAAP, we are required to recognize straight-line expense. We show in this chart the effect of adding back that non-cash expense to adjusted EBITDA. Another significant component this particular quarter was share-based compensation, which totaled approximately $2 million inclusive of certain non-recurring charges previously addressed by Francisco. With that, I will pass it over to Tal. Tal Keinan: Alright. Thanks, Mike. Just a quick look at site acquisition. I think this is pretty self-explanatory. It's the same chart that we put up every week. We have 19 airports on the chart today. That's airports that are either in operation or development. We gave guidance that we will have 23 by the end of this year, and we plan on hitting that guidance. Excellent. Okay. Our latest airport is Long Beach, California. As we've discussed on previous calls, Los Angeles is a critical market for us, both with a very robust installed base of business aviation and also high growth. Long Beach itself is a real emerging technology hub, particularly in the aerospace and defense sectors. We've identified our first residents already there. A very significant airport for us, and I don't think it exhausts or it comes anywhere near exhausting our opportunity in the Los Angeles market. Next slide, please. This is a bit of an eye chart, but based on questions from the previous earnings calls, we thought we would provide this level of detail here, and I hope it's helpful to everybody. I'm just gonna go through line by line so people understand exactly what we're looking at. Actually, before we say that, all of the green airports are stabilized campuses. The blue ones are in initial lease-up, the campuses that were recently completed construction or about to complete construction. And then the yellow is our initial pre-leasing pilot that we discussed on the last earnings call. So going line by line, revenue run rate is exactly what it looks like. That is the annual total revenue run rate from each campus as of now. Rentable square feet is the amount of square footage of hangar and hangar support space that we have built or are going to build in the yellow case on each of these campuses. People have asked in the past about what is their actual rentable square footage, how do we get to above 100% occupancy in these spaces? We'll get to that in a minute, but it's just important that everyone understands in, you know, BNA, that's Nashville International Airport, we have 149,000 built square feet that can be rented. The next line is private square footage. The private square footage is the square footage of hangar that is leased on an exclusive or private basis. You'll see that there are certain airports where that is the dominant form of lease. So Sugar Land, for example, the first one, 100% of the hangars are fully private. There are no semi-private spaces at Sugar Land. And I don't know. Let's take San Jose, where the vast majority of our space is actually leased on a semi-private basis. I think a good way to look at that semi-private line, the next, the fourth line, is the square footage of hangar at that airport that is not privately leased. Okay? That is available for common use or what we call semi-private. That's the square footage of hangar available for semi-private use on that airport. The fifth line is the actual square footage of aircraft in semi-private spaces. And remember, we don't care so much about the square footage of aircraft in private spaces because you're paying for every square foot in that space, regardless of the square footage of airplane in that section of that space. Semi-private space is leased on the basis of aircraft square footage. So what we're seeing here is the actual aircraft square footage that is sitting in semi-private space. To answer one of the questions from, I think, the previous quarterly earnings call, if you look at, for example, SJC, that's San Jose Norman Mineta, you'll see that we have about 50,000 square feet of airplane sitting in about 41,500 square feet of hangar. Okay? That's an example of getting to more than 100% occupancy. As people who are following us know, we've transitioned from the old Sky Harbour 16, which was the prototype hangar and had 12,000 square feet of rentable hangar space, to the new prototype, which is going up in all of the current campuses, the Sky Harbour 37, which has 37,000 square feet of rentable hangar space. The dividend you get from that is especially pronounced on a semi-private basis. Right? You can get, without getting too crowded, you can get close to 70,000 square feet of airplane into that 37,000 square feet of hangar. And I think if people could look on the website to understand exactly how that works, but we want to give you some empirical data points on what that's looking like. The next line, line number six, is revenue per square foot. And the way that works is very simple. We just take the total revenue, the top line, divide it by the rentable square footage, the second line, that gives you your effective revenue per square foot. Then the last line, which I think is an important nuance, I think it's very important to understand, particularly in light of our current leasing strategy, shows you what the high and lows are on contracted revenue per square foot. Okay? Or contracted revenue per leased square foot. And the reason that's important is, you know, if you look a little bit closer, you'll see that there is a correlation between the recency of a signed lease. The later the lease was signed, the higher the revenue per rentable square foot. And also a correlation between the duration of the lease and the revenue per rentable square foot. Longer duration leases have higher revenues per square foot. Different from what you're gonna find in most real estate, and that has to do with, I think, our tenant community's appreciation of the expected inflation on airports. So we charge a higher rentable square foot on longer-term leases. That feeds into our current leasing strategy before we move to pre-leasing, what you can see on the blue columns, the airports that are in initial lease-up right now, in that, what we're trying to do on those airports is actually get to as quickly as possible to 100% occupancy. And do that in general on the basis of short-term leases. Call it twelve-month leases, with the idea of establishing kind of more permanent occupancy at our target rents. So at the beginning, it's about speed getting to 100%, that puts us in a very different position with regard to leverage in negotiating new leases. And then go back and correct to market. Now that said, in each of those blue airports, we do have one or two residents who are on longer-term leases that are paying full rent. What you can see on the green side is you have the relatively high disparities between the highest and the lowest leases. Again, the highest tend to be the ones that are assigned latest and or the leases that have the longest tenor. Just a couple things to point out before we move on. Is just to preempt any questions. Sugar Land, that campus was gradually taken over by its anchor tenant. Started with seven hangars. The anchor tenant had two of those seven. Every time one of the hangars came due, that anchor tenant took over that lease. Which brings us to the state of affairs today where there is only one resident in the entire campus, so they're paying the same rent across the board. The last thing I'll point out to people is the higher the ratio of semi-private to private space, the bigger the disparity you'll see in the, yeah, between the highest and the lowest revenue per square foot. And, again, that is a nod to our evolving strategy of increasing our emphasis on semi-private space versus private space. In general, you know, under most conditions, that's actually a better business for us. And then the last thing I'll say is the yellow bar is just our initial pre-leasing. That pilot has moved on to a, it's been successful, and we've turned that into a permanent leasing program going forward. And with that, let me turn it over to Tim. Tim Herr: Thanks, Tal. At the Obligated Group, we completed a modification of our construction program by removing the second phase of Centennial Airport and adding in the second phase at Addison Airport. Addison has an earlier expected completion date, at a lower expected construction cost. And with its higher expected revenues, the modification will be positively accretive to our bondholders as we approach the final completion of all of the projects in the Obligated Group. Next slide. We also finalized a $200 million tax-exempt drawdown facility announced with JPMorgan in September. This five-year facility will provide debt funding for our next projects in the development pipeline. We expect to draw on the facility over the next two years as you can see on the chart on the left, followed by an eventual takeout with longer-term tax-exempt bonds once the projects are completed. We recently announced that we have locked in our cost of financing at 4.73%, the four seventy-three, through a floating first fixed swap. Now let me turn it over to Francisco for the discussions on future capital formation. Francisco Gonzalez: Thank you, Tim. We closed the quarter with $48 million in cash and US Treasuries, which are now enhanced with a $200 million committed JPMorgan facility that Tim discussed. We have been served well historically to continue to be a fortress of liquidity and be funded eighteen to twenty-four months ahead of our needs. Given the accelerating growth ahead of us, we continue to explore various private and public alternatives in terms of the right type and cost of growth capital. Until we decide to start paying a dividend, we will reinvest our positive operating cash flow next year into additional hangar campuses. We have also not used our ATM program to issue any equity given that we consider the share price too low. Instead, we are exploring the possibility of issuing yet additional private activity bonds outside the Obligated Group, outside the JPMorgan facility. Specifically, the five-year probability curve looks attractive for an interim issuance while we construct our next portfolio of six to seven campuses. That will provide us with adequate time to come to a long-term fund issuance once our Obligated Group program achieves investment grade. We also announced today that we entered into a binding LOI with an ultra-high-net-worth family office. It is expected to acquire a 75% participation in a new Sky Harbour 34 hangar at Phase 2 in Opa-locka for $30,750,000 in cash. The transaction is expected to close on or about April 1, subject to certain conditions. If completed, we expect to use the proceeds first to fund any remaining capital needs to construct Phase 2 at Addison and then repay certain past payments previously advanced by our holding company to the Obligated Group. The balance will pass to the Obligated Group's waterfall, be subject to the restrictive payments test of the surplus account. This type of asset monetization is a prudent way to generate capital to fund our future growth, if and only if valuations support it and if the alternatives are less attractive to us from a dilution and cost of capital perspective. We continue to explore a few more potential hangar sales from people who simply do not like to rent and prefer to own their own hangar. With this, let me turn it back to Tal for Q3 highlights and for the coming initiatives in the four pillars of our business. Tal Keinan: Alright. Thanks, Francisco. We're breaking it down the same way we always do. Site acquisition, 19 airport ground leases. We're on track to deliver 23 airports by the end of the year. We have begun pursuing same-field expansion opportunities, and I'm going to expand on that on the next slide. And as we've mentioned before, much of the focus has shifted to really targeting tier-one airports rather than just a lot of airports. Development: So our manufacturing subsidiary Stratus is now pumping out steel in full gear, meeting all of our development needs. The construction program under our construction subsidiary, Ascend, is also in full gear. We're on an accelerated track to meet our 2026 construction schedule, which as people have probably noticed, is a real step function in construction volume. Specifically, Miami Opa-locka Phase 2 is on schedule. We have broken ground in Connecticut, Bradley, Connecticut. We've nearly completed site demolition at Dallas Addison Phase 2. It's gonna be probably the tightest schedule spread between Phase 1 and Phase 2 on an airport, and Dallas is a very good market for us. We've begun site work in Salt Lake City. And we have ten airports in development now. Again, hopefully, that expands by four by the end of the year. We've also instituted a comprehensive assurance program. It's kind of a nose-to-tail program starting at the design phase through manufacturing, through construction. You know, as people on the call have heard, this is an industry that's fraught with construction snafus. And one of the benefits of specialization and pumping out exactly the same prototype hangar across the country is it introduces quality assurance tools that are not really available elsewhere in the industry. Leasing: Stabilized campuses continue to grow revenues at a really robust pace, post-stabilization, right? And again, this, I think, we'd like to take credit to a certain extent in the quality of the offering and the fact that Sky Harbour has really kind of become an established brand in the business aviation community. If people have a choice, they will come to Sky Harbour in general. Part of it is just inflation. Right, we're aware of that. Again, that's the central part of our thesis. I call the inflation kind of our macro tailwinds, and the quality of the offering is the thrust on the aircraft. That's how we look at that. And we see no reason for that growth to abate. The airports that are in round one lease-up, that's Deer Valley in Phoenix, Addison, Dallas, and Centennial in November. Like I said before, the objective is to first get to 100% occupancy with compromises on revenue per square foot as long as our lease terms are short. And then in term two, really establish our market rents on these fields, and we're again, already seeing that. Even on those four airports, we're already seeing that the longer-term leases are above our target rents. So we expect that to work nicely. And then, like we said, going forward, pre-leasing will be the strategy. So starting with Bradley, Connecticut, all airports will be subject to that pre-leasing strategy. On the operations side, we've got nine fields in operation today. We've got two phase twos in preparation. Right? That's Miami and Dallas. One of the things I think, you know, the more astute observers will notice is there's actually a very modest change in OpEx when you open a second phase on a campus. So while your revenues might double on that campus, your OpEx change is actually quite small. And we will, you know, hopefully be realizing those efficiencies on a lot of airports going forward. So please stay tuned for that. Industry recognition, we can, you know, it's one of these things that is a little bit difficult to judge objectively. But I think it's a pretty emphatic across-the-board recognition, not just in our own resident community, but in people who are coming in to reserve spots in places like Dulles International or Bradley or Miami Phase 2. We're very satisfied with the ops training program, which we continue to improve. Which has a lot of features that you don't see elsewhere in the industry. Actually, I think we have two pictures on this slide, so I'll call everybody's attention to that. Would you stay on the right side of the slide? Is a training rig that we actually manufacture ourselves. Which allows our line crew to do both initial and recurrent training in operating and towing operating tow equipment and moving aircraft, not on an actual aircraft. Okay? So which means there's no risk of damage to a tenant's property. We do virtually all of our training now on this rig. One of the side benefits of that is you could train much more often. Again, if you're towing a $50 million airplane, you can be very, very judicious about the amount of time you spend on it. We don't do that anymore. Maybe others in the industry do, but that's one example of what we think is kind of an innovative new approach to providing just top, top-level service. We've also instituted what we call the Sky Standard Property Management Program. It's not just about the service. It's also about the upkeep of these facilities, which have to be six stars, and I think our residents have come to expect that. And we've invested quite heavily in managing that centrally and getting really the best property management program in aviation across the country. Next slide. Looking ahead, on-site acquisition, again, we've said it. We believe we're on course to meet our guidance for 2025. That's 23 airports by the end of the year. 2026, the focus will be on, number one, max revenue capture, that is the tier one, the best airports in the country is our primary focus. And then secondarily is same-field expansion. And what we're finding is in the airports that we're already operating, we know the players both on the airport sponsor side and in the resident community. Have real intimate knowledge of how that market works and how it's evolving, there are just great benefits in expanding. I would say if you could double the ground lease at an existing airport, it's probably worth a lot more than establishing a new ground lease on a brand new airport. All of the things held equal. On top of that, as I alluded to with the phasing discussion, there are real operational efficiencies. Right? If you double the size of your campus, you do not need to double the size of your team or double your equipment list on that campus. Moving on to development. We feel ready for all the reasons I enumerated on the last slide. We are ready for the surge in 2026. It's almost an order of magnitude change in the scope and volume of our manufacturing and construction. And there's gonna be another one in 2027. Another phase shift or step up in development volume in 2027, and we're getting ready for that. Leasing, we have grown the leasing team threefold as the volume of leasable space has gone up. That team, all of the growth in that team has been veterans. You know, as some of the people who track us closely know, we've had really great success in recruiting military veterans to our team, a lot of benefits to a team that's so heavily weighted toward veterans. That's been a big advantage. Order of operations, let's start with the short term. We're bringing those blue campuses from one of the previous slides to 100% occupancy. That is mission number one. Mission number two is bringing those campuses to market rent. Meaning cycle those short-term leases to longer-term leases at higher rents. When we call those campuses fully stabilized. And then circle back to our legacy campuses to focus on revenue enhancement. You know, again, we've had perhaps too small a leasing team. You know, it took us a little longer than I would have liked to get to the size of the leasing team that we have today. Now that we have it, though, it's going back, you know, really culling those waiting lists in Miami and in Nashville and, you know, the various other locations. And looking for the best residents to bring in. It's not just a matter of maximizing revenue. It's a matter of bringing the best residents in the industry into Sky Harbour. And then longer term, as we've discussed, we're migrating starting with Bradley, Connecticut, to a pre-leasing model where we go out and lease these campuses up well in advance. Remember, we have ground leases, we have, sorry, tenant leases already in Bradley, which is twelve months out and Dulles, which is eighteen months out for delivery. If, you know, just take a moment to also just note with gratitude that people are affording us the credibility to put down cash deposits and enter binding leases on products that we're only gonna be delivering a year and a half from now. That really is, at least for me, a milestone event in the evolution of this company. Lastly, operations. We have a very active resident feedback loop. A lot of our residents, principals speak to me directly, which we value a ton, both for better and for worse when we do something good and when we do something bad. Which allows us to really institute a rapid feedback loop which I think people increasingly appreciate. We certainly do because it's making us better all the time. On the defense side, I made the same points last time, and I think they're critical and they stand every time. We aim to be absolutely bulletproof on safety, security, and efficiency. That's not where we get creative. That's where we're perfect. And then offense, where we get creative, is continuing innovating, introducing new services or new variations on services, customized services that really delight the residents, and they're often created in partnership with the residents, to continue really growing that value gap between the Sky Harbour offering and really anything else that you can access in business aviation. And with that, I think we are done. Francisco Gonzalez: Thank you, Tal. This concludes our prepared remarks. We now look forward to your questions. Operator, please go ahead with the queue. Operator: At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We'll pause for a moment to compile the Q&A roster. Your first question comes from Tom Catherwood with BTIG. The question is, with the pre-leasing program now becoming the standard approach for all new developments, how will Sky Harbour manage the potential risk of locking in lease economics before the full scope of construction costs is determined? Tal Keinan: Alright. Thanks, Tom. Good question. I'd say two things. Number one, as we systematize and diversify, we think the risk of significant overruns in any of these projects continues to come down. You know, we certainly in early days when we were a little bit more experimental and bringing a different hangar design to each new campus, I think the risk was significantly higher. We've, I think, lowered that considerably. Remember that we're locking in guaranteed maximum price contracts on these projects, which further mitigates the risk. Secondly, the objective is not to get to full occupancy through pre-leasing. You know? So we've yet to determine what the optimum is. You know, it's gonna be north of 50%. But does that mean 60, 70? It's not 100%. But we do want to leave a little bit in reserve for later. Fundamentally, the real risk here, assuming construction is going to cost what it costs, the real risk here is underestimating a market's potential. You know, if we think this is a, you know, a $50 a foot market and it ends up being a $60 a foot market, that is the basic risk we're taking. So I think between those two factors, that risk is significantly mitigated. It's certainly something that's on our mind, I appreciate the question. Operator: Your next question comes from Timothy D'Agostino with B. Riley Securities. The question is, are any properties in operation over 100% occupancy? Can you talk to which ones those would be? Tal Keinan: Yeah. Thanks, Tim. You might have posted this question before we hit the slides. So just in case, you skip back to the leasing slide, you'll see examples, like San Jose, are, you know, significantly above 100% occupancy. What you'll find is the more heavily weighted we are to semi-private hangars versus private hangars, the higher the occupancy is going to be. And remember, all of the new campuses are Sky Harbour 37 Hangars, which just geometrically fit more aircraft. I mean, the ratio of aircraft square footage to hangar square footage can be a lot higher in a Sky Harbour 37 than it can be in a 16. So I think you'll see, well, hopefully, an increase in occupancy as we go forward with these new airports. Operator: Your next question is from Ryan Myers with Lake Street Capital Markets. And is as follows. Congrats on another solid quarter showing progress. First question for me, is there anything from this quarter, qualitative or quantitative, that highlights early signs of scale in the business? Tal Keinan: Yeah. So what I can say on that is, you know, there doesn't have to be too much guesswork, Ryan, on that. Is that, you know, there's a funnel in this business, and it really goes along the lines that, you know, I've been enumerating in all of these calls, which is look inside acquisition, look at development phase, and then look at operations as revenues start flowing. Which will give you, you know, a very solid sense of what that is. If you kind of look at 2025, for most of 2025, we were under construction in three campuses, right, Denver, Dallas, and Phoenix. In 2026, that goes to 10. Okay? So the very significant scale. Now the revenues from that will start accruing a real step function, right? This is not incremental growth. Starting in late 2026, and entering 2027. If you look at the pipeline, watch the pipeline closely. If we hit the 23 airports by the end of this year, and we'll obviously publish new guidance for asset acquisition in 2026. You see how the top of the funnel widens, and I think you can trace directly from that to revenues. So I think that's probably the best way to look at that question. Operator: Your next question is from Gaurav Mehta with Alliance Global Partners. They ask, what are the details on the potential five-year $75 to $100 million tax-exempt bond? What's the potential timing, and what is the expected rate? Francisco Gonzalez: Thank you, Gaurav. This is Francisco. Thanks also for your coverage of our company. Yes. So we're looking at a financing that could come to market certainly as next month. And, as late as January or February. And, you know, it will be a, think about yourself, holding company issuance, meaning that it would be structurally subordinate to the existing bondholders in the Obligated Group and the JPMorgan facility. So it will basically come in lieu of issuing equity. In lieu of, so in terms of expected rates, you know, it's going to be subject to market conditions. But, these are transactions that we hope that will be in the 6% area. And if rates don't come at, you know, at the level that we're looking for, then we'll just not do the deal. One of the things, as I mentioned earlier, to have the flexibility that our liquidity provides is that, you know, we tap the markets that make sense. And if we don't like the pricing, we just, you know, don't do the deal. And look at all the alternatives or wait and things like that. So that's kind of like the short answer to your question. Thank you for the question. Next. Operator: Next is from Peyton Skill. The JV deal implies that the hangar is valued at $41 million. At that valuation, are you looking to do more of these deals? How are you evaluating this strategy versus the core operation of leasing hangars over the life of the ground lease? Tal Keinan: Alright. Peyton, thanks for the question. Let me answer it, and let me ask Francisco to answer it because I think you're coming in from two directions. I think what you're implying here without getting into valuations specifically is that the net present value of a fifty-year stream of lease revenue is probably significantly higher than what you calculated here, and we agree with that. I think that's true. However, I don't know that that should be the only bogey for doing these deals. I think there's a capital formation angle that you need to take into account as well. So Francisco, can you talk to that for a minute? Francisco Gonzalez: Yeah. Sure. Thank you, Tal. Thank you, Peyton, for the question. Indeed, you know, we look, as I mentioned earlier, at all the alternatives in terms of equity, debt, different structures, and so on. We're looking always at what makes sense for the company from a risk-reward perspective, and a cost of capital perspective. So at this juncture, when the equity markets, you know, seem not to fully capture, you know, basically what we believe is the value of this company. Looking at the monetization of very deliberate one or two hangars here and there makes a lot of sense. In lieu of having to issue equity at the current prices. So of course, our core business, as Tal mentioned, is the leasing of hangars over time. If present value of our expected leasing rates and cash flows we believe, are higher even than the implied valuation that you mentioned of $41 million. But still, the analysis doesn't end there, the analysis has to be compared to our alternatives, and right now, we're looking to take advantage of this opportunity. I will say also the following. There are certain potential tenants out there that just intrinsically don't like to rent. So by looking at opportunities where they can actually have opportunities to acquire a hangar rather than rent it, you know, it basically also expands our universe a little bit on that front. Anyway, but very good question, and that's kind of like the balanced approach. And why we're taking advantage of the superclass. Tal Keinan: By the way, Peyton, I'll add to that. I don't know that it's exactly a strategy. I mean, you asked how are you evaluating this strategy versus the core operation? I don't know if it's exactly a strategy. You know, we might do one. We might do two, maybe three of these. I don't see this becoming part of the remember, we don't need that much more equity to fund our development. This is primarily a cost of capital question. So, right, I mean, once you're covered in terms of your equity, it really becomes a matter of maximizing net present value. Next. Operator: Your next question is a follow-up from Tom Catherwood. By our math, the letter of intent for a 75% JV ownership stake in a 34 hangar at OPF LL implies a gross valuation of more than $1,000 per square foot. With an expected cost of roughly $353 per square foot, this deal represents a development margin of more than 180%. Is this indicative of value across your portfolio? Or is the deal unique given the specific needs of your JV partner? Tal Keinan: Yes. Tom, thanks for that. But I really enjoyed your research coverage. I think you've got us dialed in, I think, quite well. Look. I similar question to the previous one. What I'd say is I wouldn't say it's indicative of the value across the portfolio necessarily. But it's also not unique to the specific needs of that JV partner. Anybody who has an appreciation who's living in that market I think comes to the same conclusion that we come to. Which is the airport system is Manhattan. It's Manhattan. You cannot build more airports in this country. There is no room for it. So we are stuck with a static supply of developable land for what a very, very growing demand, a very, very sharply growing demand for aviation hangar space. So yeah, what I'd recommend all the analysts do is look at your model's sensitivity to inflation assumptions. And, you know, again, I'm not saying we're gonna necessarily hit the same inflation rate as Manhattan residential real estate over the past decades, but I wouldn't be surprised if we do. Anybody who shares that view, I think, understands that there is tremendous value here. Again, we think it's we tend to think it's worth more than what we're selling it for today. I think we're creating win-wins with some of these people because, again, for a it's primarily a cost of capital question for us. So I think it's a good compromise for us to be making. Francisco Gonzalez: Yeah. Just want to add on your math, just be aware that given the square footage of the Sky Harbour 34, the implied valuation is roughly about $1,200 per constructed, you know, rentable square foot of that hangar. And we hope to come at a cost lower than $353. So, basically, you're looking at even north of two times maybe even three times our cost in terms of the implied valuation. Next question. Tal Keinan: Right. The cost of the hangar, not the cost of getting to a place where you could actually put these hangars up. Operator: Your next question is from Joe Jackson. Regarding the Miami JV, how was the $30,750,000 valuation for a 75% stake determined? Is this a repeatable financing model you plan to use at other campuses? Tal Keinan: Yeah. So, again, it's a similar question. If we definitely think it's repeatable. We don't know that we're gonna wanna repeat it too much, but it's certainly repeatable. There's definitely demand for this across the country. Next question. Operator: Your next question is from Philip Bristow. Congratulations on the quarter. What are your thoughts about more hangars similar to the 75% in Miami in an SPV? Also, are these more likely to happen if the equity price for Sky Harbour is below that is attractive to raise equity capital, or is that not a major factor? Thanks. Tal Keinan: Okay. So definitely a lot of we get a lot of focus on this particular transaction. Philip, you're bringing a new angle to it, and I think you if I understand your question right, you get this. Right? This is not something this is not the new business model for Sky Harbour. It's about cost of capital. And it's about getting to a place where the company is not reliant on primary equity issuance to fund its growth even if that growth is as fast as we hope it's gonna be. We want to be independent of the primary issuance market. For as a benefit, obviously, to all current shareholders of the company. There is some breakeven. We're probably gonna be debating that late at night, over the coming year or so. Is what is the share price at which it does make sense to raise private equity in the company considering the options that we have. Remember, there's, I don't know how many, 70 some hangars in the network today. It's not taking a significant bite out of your total addressable market. If you do, you know, two or three deals like this. So that is something I think is probably not unlikely to happen over the next, you know, over the coming months. But you're absolutely right that the equity price is a factor that we have to consider. Operator: Your next question is from Ryan Myers. You think you could see similar JV partnerships across other campuses? Like the one you announced at Miami Phase 2? Tal Keinan: I think again, I think all these questions were probably asked before. That's I think we've addressed that. Why don't we go to the next question? Operator: Next is Gaurav Mehta. Is there an opportunity to do pre-leasing at more airports? Tal Keinan: Yep. Gaurav, thanks for the question. That is the strategy going forward. It's starting with Bradley, Connecticut, we want to do pre-leasing at all future airports. Operator: Next is from Future Hendrix. It has been projected that some of the NY area locations can reach rents of $100 per square foot. Do you think this is possible? Where is BDL shaking out in your pre-leasing? Tal Keinan: Yeah. The answer is it's definitely possible. You know, Bradley is not at $100 a square foot today. But let's see how that goes. Again, remember, these are pre-leases that are way out. So we think the willingness to pay when we're ready to open and there's, you know, very short supply will hopefully be significantly higher. Remember also that the closer you get to New York City, the higher the rents on those airports. And of the four New York airports, Bradley is actually the farthest from New York City. So that's actually a significant repositioning flight, you know, from Bradley to New York and back. But yeah, the big answer is yes. We do think that's possible. Operator: Your next question is from Alan Jackson. Two questions. Can you please provide a status update on when Sky Harbour expects to receive investment-grade ratings? I believe the original target was the end of this year. Second question, in general, what percentage of the portfolio leases are expected to expire in 2026? Should we expect the same step up in rental revenue on this second turn of the lease as discussed in prior calls? Francisco Gonzalez: Alan, very good question. I'll answer the first one. Tal will take the second one. In terms of the first one, you know, we as you heard us say before, we're very conscious that we want to take the program to investment-grade ratings, and we want to arrive at the ratings with our best foot forward to, you know, not just be a triple B minus, you know, hanging by the balance, but be a very strong triple B minus. If you let me, I'm gonna make the case to rating agencies that we should go right to triple B, but, you know, let me temper also my everyone's expectation. The idea here is that now that we're completing the leasing of these three new campuses, and then we open Opa-locka Phase 2, and then we finish Addison next summer, is really where we want to approach the rating agencies and save the triple B minus and hopefully triple B ratings. Tal? Tal Keinan: Yeah. So Alan, I don't know what the actual percentage of portfolio leases that are expected to expire in 2026. What I'll say is it's more significant because, you know, if you look at the mature campuses, you know, Houston, Miami, Nashville, you'll see that the average tenure on those leases is very long. Yeah. I don't know exactly what it is, but I'm guessing more than five years. Because those are campuses that are in a relatively permanent state. Right? That we're kind of much closer to finish cycling out of the shorter-term leases where we've compromised both on the identity of the resident and on the revenue per square foot. The new campuses are in that first phase. Right? So Dallas, Denver, Phoenix, are all in that phase where our objective is to get to 100% occupancy first with compromises, at least on the shorter-term leases, and then go back and recycle. So we do think you're gonna get those step-ups. Perhaps even higher step-ups here because that was not the deliberate strategy in Miami, Houston, and Nashville. Operator: Your next question is from Philip Bristow. What are your thoughts on new locations for 2026? Tal Keinan: Well, Phil, thanks. That's probably one of the areas where we think we should be playing our cards as close as possible to our vest. Probably the most proprietary thing that we do is site acquisition. The company. Again, we're structured in a way that we really couldn't find any other company, couldn't find people to hire who have this skill set to do the, you know, the type of site acquisition we do across the country. And the targeting methodology is key to that. It's not always so obvious which airports we should be going after and which airports we actually are going after. So apologies, I'm not going to get any more specific on that. Other than to say the primary focus is on tier-one airports. Operator: Next question is from Tess Tekol. Your projected DSCR is three basis points above your covenant level in 2026. How do you weigh the probability of a cure in the case of a delay or slow leasing? Francisco Gonzalez: Yes. Thank you for the question. You know, it's important for those of you guys following the Obligated Group and the, you know, we, of course, have been slower or a little bit delayed in terms of delivery of these campuses than the time that we projected this portfolio four years ago now when we did the bond deal. But and construction cost, as you all know, has been higher, as you know, we all basically met that with additional equity into the portfolio. The most important thing, as Tal has mentioned before and we mentioned in prior calls, is that rents ended up being higher than what we forecasted and higher on a present value basis than the cost increases. Thus, debt service coverage when you look out into the future is actually higher than what we forecasted at the time of the bond issuance four years ago. And as we mentioned earlier in the press release, and as our team discussed, we just filed the quote-unquote, pivot in the Obligated Group bringing the second phase of Addison into the Obligated Group and pushing out the Centennial Phase 2. And as part of that, you're required to file an updated market and feasibility report, basically. On the entire portfolio of properties. I encourage everybody to, you know, look at the EMMA filing that we did today. And be able to look at this comprehensive report that has a lot of information regarding all our campuses. Obviously, it's their assumptions, their work, and so on, but it gives you a sense of what coverage is gonna be in the future. And so we're very comfortable that the debt service coverage covenant test will be met in terms of compliance. Next question. Operator: Your next question is from Pat McCann with Noble Capital Markets. Can you elaborate on the statement that 2026 will be focused on MAX revenue capture? Tal Keinan: Yeah. Thanks, Pat. If you think about it, you know, we have a defined threshold that we've published that we want to see double-digit yield on cost on the basis of current revenues. An airport and our projected construction costs at that airport. If you only use that criterion, you know, there's 100 airports in the country where you can do that. I'm not gonna name any airport specifically, but there are a lot of attractive airports in the country. Now that we have our methodology in the place that we want it, and we have existing processes at the top airports in the country, we want to shift our focus, at least for the time being, to the airports where you can get much more than just double-digit yield on cost on those airports. And as I've said here before, the denominator of yield on cost, which is primarily construction costs, right, because OpEx is pretty low in our business. That construction cost varies within a fairly tight range across the country. Right? It's not double in one place. It is in another. Whereas the numerator, the revenue is very significant. Like, we're in the real estate business. Right? It's primarily about location. So, you know, as we're in a place where, you know, I don't think we've still seen real competition come into our space, but we're anticipating it. I mean, you know, we're on these calls every quarter, people are seeing the numbers, what this business looks like. We're sure there are gonna be other players in our space. We would like to be, you know, in the best 30, 40 airports in the country before, you know, before we have robust competition. And then we'll compete for the remainder. Right? We'll still be doing, you know, the airports will still be out there. And so I think that's the appropriate shift to the way, by the time we get to those airports, the hope is that our construction cost through prototyping, manufacturing, value engineering, everything that we're doing to get construction costs down, will be significantly lower, which now increases the universe of airports you can achieve those double-digit yields on cost. So, you know, hopefully, we get there. Cost of capital, of course, will also be a factor in that. But for the time being, call it 2026, we think the focus should be on getting the best airports in the country first, then service back. Operator: Your next question comes from Dave Storms. Do you see a greater percentage increase between first and second leases of square feet that is private and compared to square feet that is semi-private? Tal Keinan: Well, in general, we're migrating to a more semi-private model, again, because of the occupancy rates. We do see that there are flight departments in the country who recognize, hey. Look. You can get to a 130% occupancy on this airport like we are in San Jose today. Privacy is important enough to me that I'm gonna pay you a 30% premium per square foot than what you're getting there, which is great for us. We're happy to have that as well. So increasingly, we are migrating to a more semi-private weighted model. Francisco Gonzalez: Also, if I may, it has to do also with our prototype being so much bigger. That's right. And it allows, obviously, the ability to send it private. And as we have discussed in the past, semi-private has that punch in terms of being able to get occupancy theoretically in that 34 all the way to a 140% of economic occupancy. Next question. Operator: Your next question is from Connor Kaim. Do you expect to begin pre-leasing OPF two in the coming quarters? Tal Keinan: Yes. So we've already begun leasing Opa-locka two. I don't know that we exactly call it pre-leasing because we're already there, and a number of the new residents coming into Opa-locka Phase 2 are actually currently Phase 1 residents. And we're very happy because there's a big waiting list on Phase 1, so it's relatively straightforward to backfill those hangars also at higher rent. So that's already in progress. What we've called pre-leasing is really what we're doing on these fresh campuses like Bradley and Dulles. Operator: There are no further questions at this time. Mister Gonzalez, I'd now like to turn the call back over to you. Francisco Gonzalez: Thank you, operator. Thank you for all of you for joining us this afternoon and for your interest in Sky Harbour. Additional information may be found on our website at www.skyharbour.group and you can always reach out directly with any additional questions through the email investors@skyharbour.group. Thank you again for your participation. With this, we have concluded our webcast. Thank you, operator. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the authID Inc. Q3 Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Graham N. Arad, General Counsel. Please go ahead. Graham N. Arad: Thank you, Operator. Greetings and good afternoon. This is Graham N. Arad, General Counsel of authID Inc. Welcome to the authID Inc. third quarter 2025 results conference call. As a reminder, this conference is being recorded. Joining me on today's call are our CEO, Rhoniel A. Daguro, our CFO, Edward C. Sellitto, and our founder and CTO, Tom Szoke. By now, you should have access to today's press release announcing our third quarter 2025 results. If you have not received this, the release can be found on our website at investors.authid.ai under the news and events section. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP and may be calculated differently from other companies' similarly titled non-GAAP information. Quantitative reconciliation of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appears in today's press release. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release. Others are discussed in our Form 10-Ks and other filings made available at www.sec.gov. Finally, if you are listening to this call via the webcast, you will be able to see the results presentation and advance the slides yourself as prompted by our speakers. I'd now like to introduce our CEO, Rhoniel A. Daguro. Rhoniel A. Daguro: Thank you, Graham. Thank you all for joining us today. I will walk you through our top-line performance, our customer and partner updates, our product and technology updates, and our priorities for the remainder of the year. Since becoming CEO, our management team has sought to build a balanced portfolio of both FAST 100 companies with potential for explosive growth and FAT 100 companies with stable operations and strong balance sheets. Initially, we focused on the FAST 100 as authID Inc. had not yet built the reputation to be credible with the FAT 100. That began to change in 2025 with the addition of several FAT 100 clients I will be sharing with you today. While making great progress this year with numerous prospective key customers, unfortunately, we saw two major early FAST 100 engagements underperform, resulting in negative net revenue for the third quarter. In 2024, we signed a customer contract with clear assurances and the expectation that the customer would meet their contractual obligation. However, reflected in our financials, the customer faced significant challenges to meet the agreed-upon requirements. As disclosed in our 10-Q, we proactively stopped recognizing revenue from them. We are still in active conversations with this customer, who continues to make introductions to more potential customers, but we do not plan to recognize any further revenue from them until we agree on revised terms and they complete the changes they are making to implement their new business model. Regarding the second customer contract, we recorded approximately $700,000 in estimated concessions that relate to an annual usage minimum fee payable at the end of the year. While this customer is experiencing its own business challenges, they remain a valued and strategic partner to us as we believe their activity will ramp over time. But we have adjusted our revenue to reflect this timing. The accounting adjustments for these two contracts drove the negative net revenue for the quarter. On the next slide, in terms of new contracts, in the third quarter, we booked two large enterprise customers and we booked two smaller customers, which were not enough to offset the revenue adjustments. These four contracts represent $200,000 in BAR for 2025. The first contract, as announced in a press release, is one of the largest global retailers based in the UK and represents significant validation of authID Inc.'s technology. They are initially using authID Inc.'s biometric authentication to protect their back-office employee workforce and call centers. The second contract is a phase one of a multiphase strategy where we embed authID Inc. inside NESIC's platform. NESIC, a subsidiary of NEC, will use authID Inc. for identity verification and employee onboarding. The third contract is with the Pipeline Group, a fast-growing lead generation company that will use authID Inc. to onboard remote workers, monitor worker activity, and authenticate remote workers into core systems. This represents our entry into the growing lead generation market. The final contract is with an international bank for identity onboarding, identity verification, and authentication. Onto the next slide. It's important to note that authID Inc.'s new customer list and target customer list is much different today than a year ago. The caliber and the scale of customer opportunities we are now engaged in have improved significantly and reflect the excitement around our unique technology. To that end, I think it is important for me to share some of the descriptions of the customers we are actively engaged with. While we are not permitted to provide the names of these customers for contractual reasons, some notable examples include household names across target industries that will expand our reach. First, a global leader in payroll technology, the largest global biometric hardware provider, a global leader in digital payments, a tier-one AI chip manufacturer, global professional sports organizations, one of the largest European retail chains, a major US healthcare network, a global cosmetics retailer, a national US specialty retailer, a leading US energy company, a Fortune 500 identity and access management company, a major luxury hotel operator, and one of the largest hotel brands. Again, these are not just targets but active engagements with industry principals. Even a year ago, none of these top-tier organizations would have considered authID Inc. Today, they are actively engaging with us because of the quality of our technology. Just this list alone represents over $20 million in BAR authID Inc. is actively engaged in closing. Our goal was to close enough of these opportunities to achieve our $18 million BAR target for 2025. Unfortunately, due to the longer sales cycles of these enterprise deals, our new BAR target for 2025 is now reduced to $6 million. Moving to the next slide. The strongest endorsement of our technology comes from our current channel partners. We have over 25 partners, many of which are the most established category leaders in their respective markets. Let me tell you about three partners specifically. Last quarter, I described our enthusiasm and appreciation for our partnership with NESIC, a part of NEC Corporation, which is a $20 billion global company that can work with anyone they choose. They chose authID Inc. An incredibly powerful statement about our technology. AuthID Inc. is now embedded in NESIC's software. Building on this partnership, NESIC and authID Inc. have agreed to work together to deliver enterprise identity management and AgenTek AI security solutions. Another key partner is Prove, one of the largest identity security platforms in the industry. Prove has selected authID Inc.'s PrivacyKey product as the biometric authentication solution for their next-generation platform. The unique cryptographic signing capability of PrivacyKey opens new business opportunities for Prove and authID Inc. Last quarter, I mentioned that we were working on signing a joint customer with Prove. I'm happy to note that this joint customer, a fintech company that provides digital infrastructure for more than 150 banks, has contracted with authID Inc. directly to launch our technology into their platform. We signed a contract with them in October, with their first bank going live next month. Finally, MajorKey, one of the largest Microsoft providers of identity solutions and services, announced last week their launch of ID Proof Plus leveraging biometric technology developed in collaboration with authID Inc. This is another example of companies launching their most important services and capabilities on authID Inc.'s core technology. Just discussed how our partnerships lead us to new opportunities. Now I'm going to talk about our greatest strengths, authID Inc.'s products and technology. On the next slide, as part of the foundational rebuild needed when I joined authID Inc., we had to make significant product breakthroughs to unlock enterprise adoption, specifically for our FAT 100 large enterprise accounts. In response to this need, we introduced two major innovations that I've already mentioned. The first one is PrivacyKey, which is biometric authentication without storing biometrics. As expected, with the existing contract signed, PrivacyKey adoption is ramping. The next one is IDX, which provides enterprise scalability and identity assurance for distributed workforces and supply chains and biometrically secures humans, nonhumans, and AI agents. Let me comment on the term AI agents. On the next slide, AI agents represent a massive opportunity in the market today. Industry analysts project trillions to flow through AgenTek AI commerce and hundreds of billions of that will be for AgenTek AI security. We've already heard from customers that they are slow-rolling the launch of AgenTek AI projects due to the lack of governance because unaccountable AI agents bring substantial risk of misuse and abuse. In response, we have added new capabilities to our IDX platform to tie each AI agent to a human to create accountability for all AI agent actions and behaviors. IDX provides accountability, compliance, security, and audit for the AgenTek AI-driven enterprise, and I believe we are going to be the most important company leading that category. The development of these innovations was required to deliver strong foundational capabilities and tech innovation. Many customers, partners, and industry experts acknowledge we have some of the best technology in the market. If you pick any industry, you're talking to the number one and the number two in that space. The best companies want to use the best technology available, and I believe we have that capability, which brings me to my final slide. The market is starting to value biometric solutions as an indispensable technology. To us, this has been obvious for years, but the market is waking up to the identity risks of AI. I say all of this to reiterate that authID Inc. is viewed as one of the few leaders in the marketplace for biometric authentication, AI deepfake detection, and now AgenTek AI security. The demand is so high for biometrics that a major identity company just recently acquired a biometrics company. We have received incredible validation of our technology with some of the largest and most valuable companies in the world. Therefore, our mandate for the remainder of the year into 2026 is clear: continue to serve the companies that entrust us to manage their biometric authentication needs and win the $20 million-plus in enterprise deals we are currently engaged in. We have made incredible progress to date. As a shareholder myself, I've never been more excited about the future of authID Inc. Thank you very much for listening. And now I'll turn it over to our CFO, Edward C. Sellitto. Edward C. Sellitto: Thank you, Ron. Thank you all for joining us today. I'll now review the financial results for the quarter. As Ron discussed earlier, our third quarter was impacted by contractual challenges with two customers. Our resulting third-quarter revenue adjustments exceeded our sales in the quarter, resulting in negative net revenue. I will expand on these adjustments in a moment. Looking at our GAAP results, for this quarter, we are breaking out our revenue into both gross and net revenue. Net revenue is equal to gross revenue minus any customer discounts and concessions. Gross revenue for the quarter was $600,000 compared to $200,000 last year. Net revenue, which reflects Q3 concessions totaling $700,000, was a negative $100,000 compared with a positive $200,000 last year. For additional context, I'll expand on Ron's earlier comments regarding the two contracts impacting net revenue. The first contract is with a partner signed in October 2024, which is delayed in ramping their usage due in part to a change in their own go-to-market strategy as well as recent challenges that arose with doing business in international markets. After we experienced delays in payment from this customer in 2025, the customer ultimately made a partial payment in the third quarter but requested a contract amendment before committing to making further payments. Since then, we have received no further payments nor have we amended our contract. Until any further negotiations are concluded, we have ceased revenue recognition for this contract and adjusted contract balances to reflect only the amount, approximately $400,000, that has been paid to date. The second contract that impacted our third-quarter revenue relates to the $700,000 in concessions estimated to be granted to a customer who is also delayed in their usage and is tracking significantly below their annual minimum usage commitment. This customer was signed in 2023 and began ramping in 2024 toward their commitment. The customer's usage declined unexpectedly due to shifts in their marketing strategy and remained significantly below the minimum commitment by September 30, 2025, despite consistent communication from the customer that they projected their usage to resume its growth. That said, the customer has paid all amounts due for their actual usage in compliance with our agreements. Given the customer's strategic importance to the company, as well as management's belief in their future anticipated usage growth and ongoing new business development opportunities, the company expects to make a concession on the annual minimum fee in order to maintain the relationship going forward. Revenue and performance obligations for this customer were adjusted in the third quarter to account for the estimated concession. Before moving on to the remaining financial results, I want to reiterate Ron's sentiment. We hope these customers can deliver growth in their business to fulfill our signed contracts. We are encouraged by the fact that we maintain relationships with each customer, are able to collect partial payments, and have year-over-year growth in our remaining customer base. We also proactively addressed this issue by focusing our efforts to work with larger, established enterprise organizations. Moving on to the remaining GAAP metrics, operating expenses for Q3 were $5.1 million compared to $3.8 million a year ago. The year-over-year increase is primarily due to increased headcount and investment in sales and R&D as we continue to execute our enterprise sales strategy. Net loss for the quarter was $5.2 million, of which non-cash charges were $1.1 million. This compares to a net loss of $3.4 million for the same period last year, which included $600,000 in non-cash charges. Net loss per share for the quarter was $0.38, compared with $0.31 a year ago. Turning to RPO on the next slide, remaining performance obligation, or RPO, represents the minimum revenue expected to be recognized from our signed contracts based on our customers' contractual commitments. As of September 30, 2025, our total RPO was $3.6 million, a decrease of approximately $10.9 million over the prior quarter as we recognized contracted revenue in Q3 and adjusted for payment issues and concessions related to the customer contracts I described earlier. Our RPO for the quarter is slightly below the RPO at the same time last year, which was $3.8 million. The combination of the one-off challenges we incurred with earlier contracts and our resulting proactive shift to pursue major enterprise customers with longer sales cycles has resulted in a temporary decline in our RPO, which we expect to resume its upward trend as we gain traction closing deals in our pipeline in the coming months. On to our non-GAAP results on the next slide, adjusted EBITDA loss was $4.1 million for Q3, compared with a $2.9 million loss for the same period last year. As described with our operating expense results, the year-over-year increase in EBITDA loss is primarily due to increased headcount and investment in sales and R&D. Next is annual recurring revenue, or ARR, which is defined as the amount of recurring revenue recognized during the last three months of the relevant period multiplied by four. ARR as of Q3 is $1.7 million, compared to $1 million of ARR as of Q3 2024. The year-over-year growth reflects our proactive efforts to sign and go live with established market leaders, including Prove Identity and the major global retailers signed this year. Turning to BAR, or booked annual recurring revenue, which is the projected amount of annual recurring revenue we believe will be earned under contracted orders, looking at eighteen months from the date of signing of each customer contract. The gross amount of BAR signed in 2025 was $200,000, down from $1.15 million of gross BAR a year ago. The decrease in BAR for the quarter is a result of the longer sales cycles associated with our enterprise deals as we progress through these more expensive sales conversations. As previously explained during our quarterly earnings call, BAR comprises two components, which we refer to as CAR and UAC. CAR, or committed annual recurring revenue, represents the total annual customer contractual commitment through fixed license fees and minimum usage commitments. These commitments are directly recognized as revenue in each contract year after each customer goes live with the service. Q3 2025 CAR represents $110,000, approximately 58% of reported BAR. UAC, or estimated usage above commitment, is an estimate of annual customer usage that will exceed contractual commitments. Q3 UAC represents the remaining $80,000, or 42% of reported BAR. Turning to our revenue growth stages on the next slide, I'll conclude by revisiting our progress aligned to the revenue growth stages we report each quarter. The first milestone we use to monitor our growth is bookings as measured by BAR. Through Q3, we realized a total gross BAR of $2.4 million. We've seen the momentum build with a number of new enterprise prospects in our pipeline, and we've seen others progress to more advanced sales stages. While the timeline for larger enterprise deals is drawing out longer than expected, the demand for biometric solutions and excitement over our technology is there from our customers and prospects. We're focused on bringing more of these deals with market-leading organizations over the finish line as we exit 2025. The next milestone is our remaining performance obligation, or RPO. As I detailed earlier, as of Q3, we have approximately $3.6 million in RPO, a number that we expect to climb back towards its previous levels as our bookings come in during the coming months. Our third milestone is revenue recognized in accordance with GAAP. Our Q3 year-to-date revenue of $1.6 million continues to surpass our 2024 full-year revenue, and we expect this growth to continue in Q4 as our core customers continue to go live and ramp. As we've called out in prior earnings calls, customer retention and expansion remain an important focus of ours, particularly in establishing that our customers get value from using our solutions and want to continue working with us as their needs grow and we offer new product capabilities. I'll end by saying that despite the turbulence we've faced as a younger company, we are witnessing a growing market, particularly in the enterprise, that is increasingly turning to biometrics. We're watching our prospects' excitement to engage as we demonstrate our solutions. As we've already started to do, I strongly believe we can continue to sign up large household brand names to use authID Inc. to secure their workforce and their customers. I hope that at least a few will even allow us to reveal their names to you all and share in our excitement along the way. With that, Operator, we'd now like to open up for questions. Operator: Certainly. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. And we do have a question in queue. Rhoniel A. Daguro: One moment. Operator: At this time, I would like to turn the call to Rhoniel A. Daguro, CEO, for closing remarks. Rhoniel A. Daguro: Thank you. We'd like to thank everyone for listening to today's call. If you have any further questions about our progress, please reach out to Investor Relations at investor-relations@authid.ai. We'd be happy to address the questions accordingly. We look forward to speaking with you when we report our full-year results in March. Thank you again for joining us. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Gary C. Evans: Greetings. Welcome to the United States Antimony Corporation Third Quarter and Nine Months Ended September 30, 2025, Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference call and webcast is being recorded. I will now turn the call over to your host, Gary C. Evans, Chairman and CEO. You may begin. Gary C. Evans: Thank you, Paul, and welcome to our listeners today. First, I'd like to start by introducing other members of our company's management team that are joining me on this conference call today. We have Lloyd Joseph Bardswich, who's a director and executive vice president and our chief mining engineer, Rick Isaak, who's senior vice president as well as our chief financial officer. We've got a new participant today, Aaron Tinesh, who's vice president of our antimony division. And then Jonathan Miller, who's vice president of investor relations. So I thought I would start today out doing something a little different and give everybody a little lesson on antimony because no question as I've gone around the country, whether it be with investors or bankers or stockbrokers, even the government, a lot of people don't know what antimony is. So let me give you just a little bit of education here. Antimony is one of those raw materials that has historically been completely unknown to the public. But for the military and industrial sectors, this mineral is absolutely essential. So in military applications, antimony is diverse and far-reaching. Antimony alloys play a significant role in making ammunition production extremely difficult to replace. Hard lead alloys enriched with antimony significantly increase the hardness and the dimensional stability of projectiles. This not only improves penetration and accuracy but also enables more consistent ballistics, which is essential for reliable weapons. In percussion caps and ignition mixtures, antimony sulfide, also known as stibnite, ensures the reliable ignition of the propellant. This is an application where failure rates can lead to catastrophic failures. Furthermore, antimony in specialized forms is used extensively in high-frequency electronics and sensor technology. It is essential for night vision devices such as cameras and goggles, thermal imaging cameras, infrared sensors, and used in modern warheads, drones, reconnaissance systems, and air-to-ground communication systems. These are technologies that define our modern warfare today. In civilian applications, antimony is invaluable, primarily as an alloying element. When antimony is combined with lead, it fundamentally alters material science. In car batteries, lead always contains small amounts of antimony to ensure the necessary structural integrity of the battery. The global automotive and energy storage industries would be inconceivable without this rare critical element. The industrial applications of antimony extend far beyond batteries, though. In glassmaking, it's an indispensable refiner. It is used to remove bubbles and defects from molten glass and to improve the optical quality of that instrument. Antimony has gained increasing importance, particularly in the solar industry, as it enhances the transparency and light transmission of solar glass modules. With the global expansion of solar energy, demand for high-quality solar glass has risen exponentially. And I just read within the last, oh, three weeks that China has come up with a new solar panel that is about 12% more efficient, which is huge in the solar panel business, and it's all because of antimony. So the majority of antimony use, however, is in flame retardants. People don't realize this. Approximately 30 to 40% of the world's antimony production is used to manufacture flame retardants for use in plastics, textiles, and polymers. This is not just an academic chemistry issue. It's one that protects human lives. So with that, I'd like to turn over our call to Rick Isaak. He's gonna give more details regarding our operating and financial results. Rick is our CFO. Rick, you wanna take it from here? Rick Isaak: Sure. Thanks, Gary. I'll start with some comments on our consolidated operating results and then go to the balance sheet. Sales for the first nine months of this year were $26.2 million, up 182% over the prior year. This increase was largely due to price increases with some volume increase in our zeolite business. Looking ahead, our antimony sales volume increased in October with some of the expansion efforts that we've been talking about, and our consolidated sales were $5.6 million for the month of October, compared to third-quarter sales of $8.7 million. Our gross margin increased by four percentage points from 24% last year to 28% this year. There'll be some pressure on our gross margins in the fourth quarter, with a declining antimony market price. We're looking to offset as much of this decline as we can with lower costs and higher-margin long-term contracts. Also, we're pushing to increase antimony sales volume to increase our gross profit dollars and generate more cash flow. Our consolidated net loss was $4.1 million for the first nine months of this year. However, this loss included $5.2 million of non-cash expenses. From a cash flow perspective, our operating activities generated positive cash flow when you exclude working capital changes, which I'll talk a little bit about later. And that positive cash flow improved compared to the same period last year. Next, looking at the balance sheet, there were three main drivers that increased several accounts more significantly in our balance sheet. First, antimony inventory was up about 300,000 pounds this year, which increased our working capital account, specifically inventory, prepaids, accounts receivable, and accounts payable. The sales value of our inventory similarly increased from about $3 million at the end of last year to $9 million at the end of the third quarter of this year using today's antimony market price for both values. Second, we acquired mining claims this year in Alaska, Canada, and Montana, and we're expanding our Montana processing facility. These were the main drivers increasing our fixed asset balance. Third, nearly $43 million of cash was generated this year from the exercise of preexisting warrants and stock sales, which increased our common stock and additional paid-in capital balances. We ended the third quarter of this year with cash and best investments of $38.5 million, which is an increase this year of $20 million. And we had long-term debt of only $229,000. The antimony industry has had its opportunities and challenges over the past year, which makes the financials a little more complicated. However, we cut through the noise, and we really remain focused on generating positive cash flow. We're also focused on creating a solid foundation for the future of our company. To accomplish this, we strengthened our ore supply by securing a three-year supply agreement with a new supplier of antimony ore and by expanding our capabilities and becoming a fully vertically integrated business with the ability to mine, process, and sell antimony products. We also strengthened the sales side of our business by securing a five-year sole source sales contract with the DLA and another recently announced five-year sales contract with a commercial customer. In addition, we had seven acquisitions of mining claims over the past twelve months, with the expectation of several critical minerals being generated from these mining claims. We will continue to be focused on being the preferred provider of critical minerals, which will provide growth, diversification, and sustainability for our company. I'll pass it back over to you, Gary. Gary C. Evans: Thanks, Rick. And I'd like to now turn the next section of today's conference call over to Lloyd Joseph Bardswich. Joe is our chief mining engineer. He's also a director and executive vice president of the company. He's gonna provide everyone with an update on all of our mining operations located in Montana, Alaska, and Ontario, Canada. Lloyd Joseph Bardswich: Thank you, Gary. I will start with Stibnite Hill in Montana. Stibnite Hill has been mined from underground by many previous owners and then by US Antimony from 1968 until 1983. In '83, the decision was made to shut the operation down and depend on Mexico with lower labor costs to provide stibnite feedstock for our Madero smelter and for the supply of military spec antimony trisulfide for primers for ammunition. We believe we remain the only North American supplier of military spec antimony trisulfide. We assembled a great team of geologists, both employees and consultants, throughout the company operations. From Alaska to Montana to Ontario, one of them did the record search at Montana Tech and at the US Forest Service. And the fieldwork on Stibnite Hill itself provided sufficient evidence that enabled the start of a bulk sampling exploration program to uncover and excavate the narrow and flat-lying vein of high-grade stibnite on the patented Eliza Monoclean. With the cooperation of Montana DQ, we were able to modify our operating permit to include taking a bulk sample from the Eliza and immediately start extraction of that stibnite bulk sample. There's an old adage in the mining industry that grade is king. We are blessed with good grade and geologists who are experienced in grade control at the face. Where the bucket meets the ore, the grade control is visual. Pure stibnite is about 71.4% antimony, and we endeavor to load only rock that contains economic quantities of stibnite. The ore is loaded directly into the typical tandem highway dump truck 10 wheelers and hauled down off the mountain to the yard of a local contractor where the material is reloaded onto standard highway semi-trailer tractor-trailer 18 wheelers for haulage to a flotation mill in Montana. A more detailed description of our Stibnite Hill operation is available in the October 30 news release posted on our webpage. Production as of 8 AM this morning, we've loaded and trucked 35 loads of 16 tons each off of the mountain for a total of 560 tons. To get an average grade of the material trucked, we have commissioned an independent geologic consultant recognized as a QP, a qualified person, by the SEC under the new SK 1,300 regulations. We commissioned him to sample the crushed material and maintain custody of the samples when submitted for assay at a recognized professional assay firm. Samples have been submitted for assay and results will be reported when received. Each 1% of antimony would mean 20 pounds of antimony per ton for 10% would be 200 pounds per ton or 3,200 pounds of antimony per truckload. So these are expected to be valuable truckloads. I expect a grade better than 10%, but 10% would still total 112,000 pounds of contained antimony hauled to date. Significantly, we had planned a similar operation in Alaska. We applied for permits on April 14. However, we did not receive permit approval until mid-September, so we barely got started before inclement weather hit us. We were able to do some work on the Mohawk Mine Patnaik claims prior to the permit approval. The Mohawk was a former gold producer from underground, which reported significant antimony in the wall rocks of gold veins. Our initial work on Mohawk was site cleanup with the site. The locals had used the property as a disposal area for abandoned cars and other garbage. It's followed by a trenching program that allowed us to map the old workings and identify areas of possible future antimony extraction. After receipt of the Alaska permit, we barely got started on our original plan of trenching beneath antimony in the soils anomalies. Antimony is one of the pathfinder minerals used in gold exploration. The data for the antimony soil anomalies were derived from previous gold exploration work by major companies. Placerdome, Inco, Silverado, etcetera, following the discovery of the Fort Knox 10,000,000 pounds gold deposit that's presently being mined by Kinross. Other activity in Alaska included the use of an exploration contractor at the remote Stibnite Creek property. Work included mapping and sampling, but the major expenditure was in the cleanup of the mess left by former claim owners who attempted to construct a mill on-site. Access to this site was by helicopter, although winter roads have been used by past operators. Presently, we thought that this deposit could be further developed and mined with underground access provided by an adit and drifting along the vein into the mountainside. In the community of Fox, very near to our optioned exploration properties, we purchased a 17-acre site to be used as an HQ location. There are three homes on the property plus a larger storage-type building. We constructed a large reinforced concrete pad on the site just before winter weather hit. So we'll be ready in the spring for staging of stibnite from our trenching operation, sorting, and bagging for transportation to Montana or Mexico for milling and or smelting. We've had preliminary discussions with local prospectors and placer miners regarding the purchase of their production. In Ontario, first, the Iron Mask Cobalt property northwest of Sudbury, fieldwork at the property was completed in late October. Outcrops, stripping, and cleaning of the rock exposures along with geological mapping to provide a clearer indication of the property's geology, which was not properly evaluated in any previous exploration by other parties. There are delays in receiving assay results for samples or progress. 20 grab and channel samples were submitted to ALS Quebec in October. And results are also awaited for an earlier batch of 25 samples. Cobalt mineralization has been encountered thus far only in the Iron Mask ultramafic intrusion. Previous works by others yielded a range of cobalt values from 2.1% to 6.5%. Ontario government records show values of 16.4% cobalt and 8.8% nickel across four feet in a drill core. Mafic, ultramafic, arthritic layered complex was initially recognized at the Iron Mask outcrop and trades for a minimum 60-foot strike length southwest of the copper zone. This zone has the potential for copper, nickel, cobalt, and platinum group mineralization, which we're all on the 2025 critical minerals list. Permits for mechanical stripping are in place for the Iron Mask. At the Fostung, the tungsten deposit, detailed investigation of the main mineralized zone commenced in October. Work here involves hand stripping and cleaning of numerous outcrops followed by selective channel cuts in a transect of more than 100 feet. The cuts were necessary to observe scheelite and other minerals such as powellite with an ultraviolet light unencumbered by fluorescent organic matter that would occur on the weathered outcrop. The channel cut material, which revealed numerous intervals of garnet-rich scarn associated scheelite mineralization, was recently submitted to ALX Quebec for analysis. Further slides were cut from seven samples that will be submitted for electron microprobe analysis. Stripping of additional outcrops south of the road is being undertaken but will soon be supplemented by mechanical stripping. We just got the permit for the mechanical stripping this past week. It is suspected that the mineralized zone could extend 600 meters west of the road and connect with the discovery showing. The ministry has recently issued a permit for mechanical stripping of this area. Metallurgical test work, testing gravimetric separation was completed at Lakefield Research. An analysis of heavy liquid separation was conducted by CPRO Vancouver. Lakefield has been asked to submit a proposal utilizing cross flotation as the next step in metallurgical testing. SRK Consulting Group out of their Toronto office has previously calculated an inferred resource of the tungsten deposit at the Fostung. We've commissioned SRK to do a new report that includes the additional drilling completed by former owners. This report will be done to the new SEC SK 1,300 standard and is scheduled to be completed by mid-January. The company is twenty-seven days to hike. Quality group of geologists, employees, and consultants with many contacts in the mining industry. We are continuing to seek out critical minerals opportunities and to identify properties that we believe are available at low acquisition costs and which have the potential to be enhanced by basic exploration methods which we believe can be brought into production quickly at a low CapEx. The availability of in-house pyrometallurgical and hydrometallurgical expertise and operating experience provides a next-step capability in assessing opportunities. I'll turn it back to you, Gary. Gary C. Evans: Thanks, Joe. And let me make a couple of comments to make sure our listeners understand the magnitude of what Joe is saying. I'll talk about I wanna talk about the two prospects up in Canada. That we are involved in being the cobalt and tungsten. There is no cobalt or tungsten currently being mined in the United States or Canada. Nobody. Just like no antimony is being mined in the United States and Canada until we started it about forty days ago. So we have a contract with the government, have a contract with industrial customers to sell antimony. We want to do the exact same thing with tungsten and cobalt. As Joe mentioned, the work that he's done since we acquired the tungsten property about five to six months ago has been significant to the point where we can now get a reserve report. With that reserve report, we can get federal government funding, we believe, and we know what we have to do on the downstream side to make that product saleable. We hope to duplicate what we've done in antimony and continue to do in antimony with the critical minerals of tungsten and cobalt. We have other irons in the fire related to these two critical minerals and are excited about it. And so we don't wanna be just a one-trick pony, antimony only, even though that is our primary business. We think that we can duplicate what we've done in these other two critical minerals, and those discussions continue with the US government. So I'm gonna now introduce another gentleman by the name of Aaron Tinesh. You've never heard from Aaron before on these conference calls. Aaron has been secretly hiding out in Montana. He is our vice president of the antimony division and has been with the company since July. Aaron's one of our chemists. And I promise he will not get into the mineralogical characteristics of antimony today, which I'm quite sure he would love to do. Aaron is in charge of all of our third-party antimony procurements from various countries around the world. He's going to give you an overview of where we currently stand on all these efforts and the inventory that we have built and are continuing to build every week. And it's quite immense. And it's been a huge project for Aaron and something that I think he's done an exceptional job in. You have to understand, when he's talking to all these various countries and these producers and these traders and these brokers around the world, he has to weed through all the crap. There's a lot of it out there. And it takes a lot of time. It takes a lot of effort. And it takes a lot of work to wind down to find the antimony necessary for us to make the products that we have to make for our various customers. So, Aaron, why don't you tell everybody what you've been up to? Aaron Tinesh: Thank you, Gary. You're correct. I miss the lab from time to time. But on our supply, throughout 2025, USAC has developed over 15 separate supply contracts for materials sourced from 10 different countries around the world. Over 30 other parties are engaged in contract development and negotiation at this time. Primary supplies for ore, concentrate, and metal are being developed in North America, Australia, Africa, South America, Central Asia, and Southeast Asia to diversify supply and support capacities with favorable economics. This year, our smelter in Mexico has received approximately 330 tons of antimony feedstock. Supplies and deliveries continue to ramp up, with roughly 20 tons of concentrates presently clearing Mexican ports. Approximately 275 tons are currently on the water or being loaded for shipping in overseas ports. We are most excited about our developments in Bolivia and Chad. Bolivia is a well-established antimony producer with extensive history and mining experience. Our operating partner and existing associated supply agreement should result in the delivery of approximately 150 tons per month of antimony metal beginning in the next few months. This metal stream will go directly to the smelter in Thompson Falls to support our proprietary antimony trioxide production. Monthly delivery of this volume should commence in 2026. USAC is very interested in the developing mining sector in Chad. The PND conference in Abu Dhabi demonstrates Chad's intent to diversify into the mining sector to attract foreign capital beyond traditional markets such as oil. USAC's strategic engagement is well-timed, allowing synergistic development of the mining sector in Chad that may lead to opportunities in and beyond antimony. To take full advantage of this environment, USAC has engaged a gentleman as our African critical mineral director. Our consultant has dual citizenship in Chad and the US and will provide a regional foothold for immediate outreach and intelligence gathering on Chad's evolving mining sector. It is important to note that we can fulfill our contract commitments with the $245 million DLA award with products produced from either Mandalay feedstocks in Mexico or traditional feedstocks in Thompson Falls, Montana. These supply developments position USAC to continue with growth and facility expansion initiatives that will ultimately support domestic demand and domestic production as it becomes available. Thank you. And back to you, Gary. Gary C. Evans: Thank you, Aaron, for that very good overview. Just I like to put things in perspective because we hear all these numbers out there that we're throwing around, volumes and tonnage and all. When you look at our 10-Q that we filed this afternoon, and as Rick mentioned on the call, we're continuing to build inventory. And that inventory is necessary for us to meet the contractual commitments we have with our long-term customers, the new contracts discussed today. So just to put it in perspective, today, if you look at our financials from September 30 all the way to January year, you'll see we've been averaging about 100 tons a month of production of finished product coming out of Thompson Falls. That is going to change dramatically. It already began changing in the month of October as Rick gave you some new numbers. That's what gives us the comfort to meet our revenue projections that we talked about in the press release today. But what's really gonna change is 2026. 2026 will be a banner year for this company. We will not only have the expansion of Thompson Falls completed, and hopefully, January, we're on target. We're 65% complete with that expansion effort. And everything is going as planned. But Madero, all these new supplies that Aaron mentioned that are coming into Madero, we're sorting through, we're starting to refine, and we're having finished product. And we have consistent new shipments coming in each month of 2026. So you combine that international procurement with what Joe has found up in Montana, and we haven't produced anything yet out of Alaska, and we know that's gonna change beginning in the 100 to 500 to 600 tons a month, which we will have the capacity of doing, it will have a dramatic change in this company's future and financials. So I just feel like it's important for people. You get lost in the numbers to understand what we're doing today and where we're going. So I'd like to now introduce to you our vice president of investor relations. You've heard from him before. His name is Jonathan Miller. He's gonna update everyone on our IR and marketing activities achieved during this quarter and what our plans for the fourth quarter are. Jonathan, you wanna take over? Jonathan Miller: Great. Thank you, Gary, and good afternoon, everyone. The third quarter was one of the most dramatic re-ratings in our company's history. From July through September, our share price climbed from about $3.8 to $6.20, up more than 100% and now trading at $7.62 per share, making it the best-performing quarter in our history. Average daily trading volume nearly tripled, a clear sign that institutional investors are paying attention and that the seeds we planted over the past year are starting to take root. Since the start of 2025, our market cap has expanded almost fourfold, rising from around $200 million to more than $1 billion. Our Russell 2,000 inclusion at the end of the second quarter gave us another tailwind, broadening our exposure to ETFs and institutional funds and firmly establishing US Antimony within the national security and small-cap growth space. And our recent listing on the NYSE Texas Exchange is another step forward. It gives us greater visibility, stronger liquidity, and puts US Antimony squarely in the spotlight of a growing market that's deeply aligned with America's energy, defense, and industrial base. Now none of this happened by chance. It's all the result of a focused, data-driven investor relations strategy we built internally and executed with precision. Over the quarter, Gary and I have met with more than 100 institutional investors through conferences, non-deal roadshows, and direct outreach. Institutional ownership has gone from almost zero just a year and a half ago to about 30% today, one of the fastest transformations among our peers. We also strengthened our research coverage with a new house, William Blair, with a $20 target price and maintained continued support from our existing research analysts being AGP, HC Wainwright, and B. Riley. All have reaffirmed confidence in our growth story. On the media front, we continued the groundwork we laid maintaining strong momentum with Reuters, Bloomberg, and Fox Business and most recently, The Wall Street Journal, securing national TV and print coverage that highlighted US Antimony as North America's only operating smelters and the sole vertically integrated antimony supplier outside of China and Russia. We also leaned into shifting global dynamics to frame our story around supply chain security. Recent reports out of China suggest that the country continues to restrict defense-grade antimony, underscoring why domestic supply is critical. That, together with executive order 14017 under the Defense Production Act, which requires suppliers to the US government to obtain their antimony supplies from US sources, further reinforces the role US Antimony plays in America's mineral independence. And while not a direct IR initiative, our $245 million award from the Defense Logistics Agency speaks volumes about this new management team's ability to execute. It tells investors and the market that US Antimony has moved from potential to performance, from promise to proof. Earning validation at the highest levels of national defense. Internally, we've been modernizing how we communicate. We've started the process of building a new corporate and investor relations website that reflects who we are today. Our multichannel communications approach has strengthened transparency with both institutional and retail shareholders. We've also recognized X, formerly Twitter, as a formal SEC-recognized disclosure outlet, letting us address breaking news and correct misconceptions in real-time. So all investors have equal access to accurate information. In September, we took another big step with an ambitious investor media campaign. Our film crew followed our geologists across the Alaskan frontier, capturing the of historic antimony reserves and later filmed our Thompson Falls expansion groundbreaking ceremony, offering the first real inside look at America's only antimony smelter. The upcoming operational docuseries titled America's Final Supply Chain features experts in geology, academia, and defense, telling a story that's bigger than just US Antimony. It's about America's industrial revival, our capacity to produce, defend, and lead again. You will soon see the story displayed in various media outlets. As we close out the year, we'll be on the road presenting at several more investor events. Including the IDEAS Investor Conference in Irving, Texas next week on November 19-20, the NY Growth Equity Symposium in New York on December 1, the B. Riley Convergence Conference on December 4, also in New York. Each of these will further expand our institutional reach and give us more opportunities to bring our story to new audiences. Altogether, these efforts from narrative positioning and outreach to media engagement and capital markets access drove the significant share price gain as well as the broader recognition we're now earning across defense, mining, and investment circles. By the end of the quarter, sentiment around US Antimony had completely shifted from a quiet micro-cap stock into an internationally recognized critical minerals growth story aligned with America's defense, industrial, and technology priorities. It was one of our most value-creating quarters in our history. Looking ahead, our focus is on deepening institutional relationships, broadening outreach into the European, Canadian, and Australian markets, and sustaining the momentum that's positioned US Antimony as the definitive American story in Critical Minerals. To you, Gary. Gary C. Evans: Thanks, Jonathan. To round up our discussion today, before we go into our Q&A, I've broken down my remaining presentation into five different parts that I think the listening audience would be interested in hearing about. The first is long-term sales agreements. The second is our competitive landscape. The third is our mining our own antimony properties. The fourth is Lervata Resources in Australia. And the fifth is China, which is the 10,000-pound gorilla. So as announced over the last forty-five days, actually, the last ninety days, your company has completed two significant sales contracts that total $352 million. To put that in perspective, this company reported $15 million of revenues last year. So that's a one heck of a big boost. The first contract, as you know, is with the Defense Logistics Agency, the DLA. That's up to $245 million. And we announced a new one just yesterday with an industrial customer for approximately $107 million. So these two most difficult parts of any successful business have now been accomplished. Source material, as outlined by both Aaron and Joe, here today, and sales contracts of significant proportions after we complete the processing that have terms as far out as five years for delivery. We look at the competitive landscape and the antimony business. We don't see any other antimony company, either domestic or foreign, as competition today. We have the only two operating smelters in North America. The time, the cost, the permitting, and industry knowledge prohibit our competition from being true viable competitors for at least three years, most likely four years. I would encourage all investors, whether on this call or looking at the antimony industry, to peel back the onion and do your homework. There are some tremendous promoters out there who have done a wonderful job of salesmanship. For that, I give them 100% credit. But we are, and I repeat, the only vertically integrated antimony company outside of China and Russia. There simply is no one else. Those that profess to wanna be, all I can say is good luck. And you better put your big boy pants on. Because you've got a long road to hoe. So I'm not gonna name names of competitors. It's comical when I listen to them on TV or in newspaper articles. Do your homework. Look at the quality of the material. At how they're gonna get the material out of the ground. Look at how they're gonna process it. Look at who they're gonna sell it to. So it's just it's comical. And so as an investor, do your homework if you're gonna look at this industry. I cannot emphasize enough how important and meaningful our recent mining success achieved in Montana that was outlined by Lloyd Joseph Bardswich today. And I give Joe complete credit for this. This is the future of our company. The timing of these outstanding mining results as he's achieved just in forty days is completely aligned with our smelter expansion efforts in Montana, which are contemplated to be completed in January, just two months from now. US Antimony's gross margins grow to over 60% utilizing our own material versus that acquired from third parties, we're doing, obviously, through all the work that Aaron has outlined. When Alaskan operations restart in April, May, with the spring thaw, we anticipate further increasing. The board of directors of Lovato, just one week later. We continue to own 10% of Lovata's outstanding shares, which makes us their largest shareholder. And that amount, that investment is worth approximately $40 million of value today. Our board and financial advisers have yet to determine what, if any, further action we may take concerning this previously proposed transaction. I'm sure we won't be making some decisions over the next sixty days. China. China is the big gorilla. I always like to say the 10,000-pound gorilla. We continue to see and hear mixed signals coming out of China as well as our current US administration. First of all, we are not involved in rare earths. We are only involved in critical minerals. Too many investors lump these two types of minerals together. That is a huge mistake. So in military applications, antimony is diverse and far-reaching. Antimony alloys play a significant role in making ammunition production extremely difficult to replace. Hard lead alloys enriched with antimony significantly increase the hardness and dimensional stability of projectiles, as I mentioned earlier. So let's talk about go back to China. China's position in the antimony market is huge. It stands out from the competition. China possesses a production capacity that dwarfs all other countries combined. Global antimony production was estimated around 100,000 tons last year in 2024. China alone produces 60 times that much. 60 times. The second point is equally critical for western strategy. China also dominates the downstream value chain. It's not just the mines that China controls, but also the smelting, the refining, processing, which is what we do. Approximately 85 to 90% of global antimony refining capacity is today in China's hands. This means that even antimony ores mined in other countries often have to be transported to China for processing, but you get nothing back. China will not release any finished products back. So this is a form of structural dependency that gives the country immense power over not only the United States but the rest of the world. So the United States finds itself in a position that could be described as strategically embarrassing. As the world's leading military power, with technology advanced at global active defense, this power depends on material the US does not control. The last commercial antimony mine in America closed decades ago until we opened up the only mine producing antimony today in Montana. Dependence is not new. But it has become acute. Historically, stockpiles were sufficient because trade functioned smoothly and China was willing to export antimony. But now with China's export controls, the system has completely collapsed. The US strategic reserves totaling only about 1,100 tons are enough to cover demand for just a few weeks. Or at most a few months. This is not just insufficient. It's absurd. It's completely absurd for a superpower in a time of heightened geopolitical tensions. So we feel like what we've accomplished in such a short period of time is truly significant. All of our employees are working hard to meet the demands of our country. And we're not only bringing this antimony in from other countries, but we're gonna be able to do it right here on our own home turf. And so we're extremely excited about where we sit today. What our future lies, and we welcome the investors that are on this call today and operator, we'd like to now take a few questions. Operator: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, click on the ask a question box on the left side of your screen. Type in your question and hit send. We do ask that each participant limit themselves to one question when submitting. Moment, please, while we poll for questions. And we did have a few questions coming in from the webcast. The first question: we have a five-year contract with a fabric manufacturer for antimony trioxide for $106 million and a $245 million contract with the US Defense Agency. What is the difference between the two types of antimony? Gary C. Evans: There are definitely differences, and I'm gonna let Joe and or Aaron you guys are better suited to answer that question than me. Go ahead, Aaron. Aaron Tinesh: Well, I think that one's pretty simple. The DLA contract is for metallic antimony in ingot form. And the commercial supply contract is for antimony trioxide, which is essentially a white powder in a bagged form. Gary C. Evans: And taking that a step further, the requirements of what we have to do for the DLA are very specific. We make an antimony metal. It's an ingot. It weighs about five pounds. We have to stamp it with a serial number. It's stacked on a pallet, shrink-wrapped, and shipped to the DLA. When we announced that contract, I don't know, sixty, ninety days ago, we also immediately got an order for $10 million that we're in the process of fulfilling. And we're anticipating another order of $50 million in short order. So $60 million coming out of the $245 over the next probably six to eight months. Operator: Okay. The next question. Is management considering building an additional smelter or processing facility? And if so, what would drive that decision on the location? Gary C. Evans: Okay. Great question. Something I think about all the time. The addition of the smelting capacity we're doing in Thompson Falls, we are done. Whatever we complete in January is the most we can do on that footprint. It's got to do with the amount of land we own and the location of the facility up between two mountain ranges and surrounded by US Forest Service. So no more can be done there. We do have some other things going into Montana. We'll be announcing soon that will allow us to do some other expansion efforts. But not likely a smelter. Now Mexico is a different story. We have a large land position down there. We have a capacity to do about 200 tons a month. Once Aaron is able to get that going smoothly and full, we will then entertain expanding that facility. That's the easiest place. There's no problem hiring, and we have lots of natural gas tied to a Pemex pipeline that we helped build. And it's in the area where, you know, we're being left alone out in the middle of a kind of a desert. So that is the area from, I think, my perspective and the management perspective would be the most logical. Now we have looked seriously in Alaska. And the problem with Alaska is that there's no natural gas. Believe it or not, being a state with such fossil fuels, everything's up in the Arctic. North Arctic Circle, and not available in Fairbanks or Anchorage. There's been other companies talking about building a facility at Fort McKenzie. Good luck. You have to use LNG. You'd be paying six to seven times the price of an MCF of natural gas from a pipeline. So we don't see that as economically viable. So if there was natural gas, I think we'd be all over Alaska, but that is not the case. You gotta have natural gas for smelters, in our opinion. So, we do have some other ideas that I'm not at liberty to talk about. Some new technology that Aaron's working on and this Bolivian group that we have actually invested in and are receiving material from here in early January. Has some new technology that we hope to further review. We think that that could be advantageous. So to answer your question, I think if there's any growth in 2026, it will most likely be at Madero and Mexico. Operator: Okay. The next question, congratulations on a successful quarter. My question is, what is the expected production volume ramp for Montana and Mexico? Gary C. Evans: Gosh. Aaron, that would be a good one for you, but I'm not gonna let you answer it. So it's like throwing darts at the wall. Okay? We've outlined today all the new material we've received and are continuing to receive. You know, part of the problem in predicting the output of these facilities is that this material that we're getting from all these countries, there's problems at a port, there's problems on the ocean. As we said earlier this year, we had material held by the Chinese customs for over six months. There's material that has high arsenic. There's material that has high lead. Material has high sulfur, so we're always dealing with these various mechanics. I feel comfortable in saying that 2026, we will see a ramp-up. You already saw it. In the numbers that Rick mentioned today for the month of October. I mean, October almost beat the whole quarter of the third quarter. So you're seeing that happen. And I think you'll continue to see it happen. It's gonna be bumpy. I don't think it's gonna be a straight line. But I hope and pray that by 2026, we'll be at 500 plus tons a month. That's where I really hope we get to. And if we can get our own material coming out of Alaska, the certainty of that goes up significantly. Operator: Okay. The next question. With the expanded processing facility and new furnaces coming to Montana, can you quantify efficiencies expected or detailed technological improvements in processing? Gary C. Evans: I'm gonna answer the first part of that, and then I'm gonna let maybe Aaron or Joe jump in. One of the issues that we've had, I think I've mentioned this before, in prior calls in Montana, was people. It's a small community, about 10,000 people, and I'm, you know, 35-mile radius of Thompson Falls. And, unfortunately, 75% of them are retired and don't wanna work in the smelters. So we made a decision about sixty days ago that we need to find housing. The problem is we find people, but they got no place to live. So we actually have contracted. We haven't closed yet. A little housing development that would house, you know, 25 people. This is at the bottom of the mountain in Thompson Falls. So we think we have solved that problem, and I know from talking to the two key managers in Thompson Falls, just we had a conference call on Monday, that they have been continuing to hire people and we've been able to find new employees and getting them trained. So we're already in the mode of hiring people to get ready for the additional expansion in Thompson Falls. So as far as efficiency, Aaron, you probably better able to answer that question than me. Aaron Tinesh: I can answer that question to some extent, but it's sort of a two-tiered situation. So in a mechanical sense, there is some increase in efficiency in this expansion in that there's a little bit larger equipment, some increases in automation, and sort of the ease and equipment efficiency with new technologies or improved technologies such as modern bag houses and other things of that type. That should see some general efficiencies. But it's also important to consider the type of feed material. And we are basing our own metrics on traditional feed materials, but our efficiency and capacities increase even more than Gary's going to let me say anything about if we get the right kind of feed into that plant. And so it's again sort of a two-tiered approach. Where we do have some mechanical efficiencies, but then the feedstock can also have a very beneficial effect. Operator: Okay. And the next question, how close are current smelting operations to running at full capacity? And what are the bottlenecks, if any, to reaching 100% throughput? Gary C. Evans: Montana is running pretty much at capacity, but as Aaron mentioned, there's some efficiencies that the team up there are getting which will allow it to probably well, you saw in the month of October. We were able to increase throughput. The only the issues at Madero have been the quality of material. We continue to deal with some inferior quality material, but we've gotten some new material from, I think, Peru and even in Mexico that seems to be of better quality. So that's what we're trying to get to. We're trying to get to a consistent supply of quality material from producers of antimony that allows you to run more efficiently. You can imagine when you have this number of different products of raw antimony coming from these different countries, it's hard to be super efficient when you're having to check the quality of each material that goes into these furnaces. So having consistent material, that's what I think Aaron was really alluding to with respect to Bolivia and Chad. We're excited about the quality of the material we're seeing coming out of those countries. Operator: Okay. The next question, you spent $9.2 million on expanding capacity at your smelting ops. Any required spend in the current queue? Or maybe some color even on what you spent thus far given we're halfway through the period? Gary C. Evans: I would imagine we're probably $12-13 million. Rick may be able to jump in here. But the total CapEx is around $22 million. So that will likely get spent all by the end of the year. Rick Isaak: Yeah. No. It's yeah. Probably about $23 million and probably at least $10 million additional from the $9 million we're already at. Will get spent in the fourth quarter. Operator: Okay. The next question, are you able to provide any color on the targeted mix of internally sourced ore versus third-party purchases? And how that might evolve in the coming quarters. Gary C. Evans: Well, the targeted mix is 100%. But I doubt if we'll be there in the near future, I think we'll gradually continue to increase company-owned ore. So it just depends on, you know, our biggest issue, quite frankly, is weather. Our mine in Montana is obviously up in the top of a mountain. They have to deal with snow and cold. The activities in Alaska are completely shut down for winter. And won't start up again till April, May of next year. So, our goal in 2026 if we find the kind of antimony we hope to find in Alaska, is we bought a piece of property in town, closed on it, laid a cement pad before winter kicked in, and that will be a staging area where we'll be taking that antimony from Alaska, and we'll sort it probably low, medium, and high grade. And we'll probably even do some rock crushing there. And then load that material into SuperSacks to ship it to Montana. So we're getting prepared for a very active summer. I know that our geologists up in Alaska are working on getting additional permits filed, so we have no delays there. And can really hit the ground running when they can do. Due to the thaw-out of weather. Operator: Okay. The next question, you recently updated 2026 revenue guidance to $125 million. Does this include revenues from the new trioxide contract? Gary C. Evans: No. Operator: Okay. And the next question, any more government support in the pipeline or grant additional potential contracts? Gary C. Evans: Yes. Operator: Okay. And this does conclude have reached the end of the question and answer session, and I will now turn the call over to Gary C. Evans for closing remarks. Gary C. Evans: Okay. Hopefully, our call today was informative for everybody. We tried to give you some much more detail than what's obviously in the press release or the 10-Q. None of us at the company could be more excited about our future. And we look forward to telling you what all we're doing. Everybody's working hard. The loss we had in the quarter all related to cash compensation, I mean, stock compensation, not cash. It's very important. I mean, I think you want your management team and your board incentivized with stock, not cash. And so that should be a very good positive that you know, all this hard work we're doing, we're aligned with you as a shareholder. We want to participate in the future growth of this company and the stock performance that we hope to be able to provide. And so we're taking that compensation in equity rather than cash compensations. We are trying to preserve our cash. Our goal is to be the lowest-cost producer of antimony in the world. Bar none. And with everything we're doing in this sector, I'm highly confident that we'll be able to accomplish that goal. That ensures our viability in the future. We are in a market that has obviously variants and prices. And if we can control our destiny by being our own antimony miner, then that gives us longevity and certainty. So that's where we're headed. Thank you, operator. Operator: Thank you. This does conclude today's webcast. You may disconnect your lines at this time. Thank you for your participation.
Eduardo Galvan: In a world that's always on transformation, CI&T Inc is your go-to tech transformation specialist, helping you navigate opportunities and co-create solutions at every step of your technology journey. We get things done quickly, efficiently, and at scale. By combining the best human expertise with the power of our very own AI platform, CI&T Flow, we grow and boost your business value. Our mission? To design and develop tech solutions that drive. When it comes to navigating change, we turn challenges into possibilities, leading the way to a brighter future. We are right by your side, innovating together, and pushing you forward. That's what we do. Our deep know-how covers the entire tech development cycle, from strategy to AI, customer experience, software development, cloud, and data services. Navigate technology change with CI&T Inc to reach new heights. Navigate change with CI&T Inc. Eduardo Galvan: Good morning. Welcome to CI&T Inc earnings call for 2025. I am Eduardo Galvan, Investor Relations Director at CI&T Inc. Joining me on today's call are Cesar Gon, Founder and CEO; Bruno Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO. This event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After that, there will be a Q&A session. If you would like to submit a question, please send it via email to investors@cint.com. The presentation is available on the company's Investor Relations website, and the replay will be available shortly after the event is concluded. Some of the matters we will discuss on this call, including our expected business outlook, are forward-looking statements. They are subject to known and unknown risks and uncertainties, which could cause actual results to differ from those expressed on this call. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. During this presentation, we will comment on certain non-IFRS financial measures to evaluate our business. Please refer to the reconciliation tables of non-IFRS measures in the earnings release for more details. Our agenda for today includes an overview of our quarterly highlights, followed by some of our business cases. We will then talk about our people and our financial results. At this time, I will pass it on to Cesar Gon to begin our presentation. Cesar, please. Cesar Gon: Thank you, Galvan. Good day, everyone. As we celebrate thirty years, I would like to highlight our winning operating model built on four pillars: It starts with three decades of experience shaping a world-class talent ground. Our teams use this expertise to co-create AI agents and digital solutions that solve real client problems. We deployed this combination of talent, proprietary technology, and methodology using a unique delivery model to win and expand clients. With every engagement, the learning accelerates, expanding our knowledge, refining our tools, and propelling our growth. And we are amplifying this flywheel by dogfooding AI across our operations. As we look back, it's remarkable how CI&T Inc has evolved through each major tech shift. From the early Internet and e-commerce to mobile, to cloud, and now artificial intelligence. At every stage, we've helped clients adapt and turn technology into business impact. Today, the same spirit continues with CI&T Flow, our AI management system. With an unprecedented level of adoption, we are combining leading large language models with our proprietary tools and data to create thousands of AI agents and prepare our clients for the inevitable agentic world. Across the industry, there is still a gap between AI ambition and real results. Most enterprises have not yet turned AI investments into meaningful impact. A recent MIT study titled the GenAI divide highlighted that 95% of GenAI projects are failing to deliver measurable financial results. That gap created strong demand for partners who can turn experimentation into scalable business value. This is where CI&T Inc stands. Built to help the 5% who are making AI work and to expand that group. It's a challenge tailor-made for our model and a major opportunity ahead. Now let me turn to our quarterly earnings highlights. Revenue reached another historical record of $127.3 million in the third quarter of 2025, representing 12.1% organic revenue growth at constant currency year over year, above our guidance. This also reflects a 13.4% year-over-year increase in reported revenue. Our adjusted EBITDA margin was 18.5%, showing healthy and sustainable profitability. Finally, our adjusted profit margin was 8.9%. This quarter marks CI&T Inc's fourth consecutive quarter of double-digit organic revenue growth. Our AI strategy is effectively bridging the GenAI divide for our clients, transforming their AI investments into tangible efficiencies and high-impact solutions. These AI-powered offerings have expanded our sales pipeline, increased our wallet share with clients, and reinforced our role as a key partner in their digital and AI transformation journeys. Now let's explore some inspiring client stories that showcase the diverse and powerful applications of AI. Bruno Guicardi: Ford partnered with CI&T Inc to expand its Wings platform across South America. Using CI&T Flow, our AI management system, the team analyzed 4,800 minutes of meetings and 50,000 lines of code, cutting delivery time by two months. Rollout in Argentina was completed in just ten months. Beyond speed, AI enhanced quality and accuracy, transforming how the project was delivered and reflecting local market needs. This success shows how deep business knowledge and advanced technology can create real impact at scale. Stanley Rodrigues: CI&T Inc is supporting Terranist Energy, a renewable energy company in Singapore, to enhance the technology behind its solar operations. We are modernizing their legacy systems, building a new Azure cloud platform, and providing real-time monitoring for continuous performance. Together, we are ensuring clean energy runs smarter, faster, and more efficiently, powered by data and innovation. Bruno Guicardi: Porto adopted CI&T Flow, our AI management system that enhances software development. In just a few weeks, development teams became 38% more efficient, reduced task time by 18%, and fixed 79 legacy code issues in one day. Test coverage grew across the process, increasing both quality and confidence. Together, Porto and CI&T Inc show how AI can simplify and strengthen digital transformation. Lucas Lincoln Morison: At CMG Financial, we are rebuilding how mortgage technology gets built. And that requires a fundamental shift in mindset. The traditional model is about output: how many developers, how many hours, lines of code? We need partners focused on outcomes: what actually gets delivered, what business value gets created. CI&T Inc understood that before we even had to explain it. They are not selling us seats; they are delivering results. And that's the kind of partner you need when you are trying to transform, not just maintain. First, they bring us capabilities we do not have, both emerging technologies like their FlowAI platform, deep financial services expertise, and real financial services experience across domestic and international markets. The model that worked in 2023 will not work in 2025. We need partners who are as comfortable with AI-generated code as human-written code, who measure success by outcomes, not hours, and can help us figure out what right-sized teams can look like in an AI-first world. CI&T Inc has shown us they can make that shift. Now, it's about scaling it. Bruno Guicardi: The New York Stock Exchange was packed on October 15 for our biggest Impact AI event yet. Leaders from top global brands shared how AI is driving real results, from scaling beyond pilots to reimagining customer experience. AI is not the future; it's the now. And the ideas born here will keep shaping enterprise transformation. Everyone's talking about artificial intelligence. We asked a different question: who's creating real impact? Together with Funda Sound, Dom Cabral, CI&T Inc launched the AI Lighthouse Awards, Brazil's first index measuring how companies use AI responsibly and at scale. It's more than an award; it's a benchmark guiding organizations toward ethical, human-centered innovation. Backed by data, research, and voice from Brazil's top business leaders, the initiative sparked nationwide coverage, reaching over 600,000 people through Forbes and other top media, and positioned CI&T Inc as a leading voice in Brazil's AI transformation. Eduardo Galvan: Together with the Costa Foundation, CI&T Inc partnered in the charity bike ride 2025 across Wales, turning every climb into a chance to make a difference. Gustavo Farias: Each ride helps children in coffee-growing communities get closer to education, safety, and opportunity. In August, CI&T Inc was an official sponsor of the Lean Summit 2025. On the main stage, CEO Cesar Gon joined Jose Roberto Ferro to discuss what truly transforms organizations: practice. The event also marked the launch of the Portuguese edition of Managing on Purpose, featuring a forward written by Cesar. We joined the Gartner Summit in London. Bruno Guicardi: Where leaders from around the world came together to talk about what's next in tech. On stage, our team shared how CI&T Inc is helping companies turn AI into real business value. With CI&T Flow, our AI management system, we showed how one of our clients in banking unlocked over 200,000 hours in just nine months using AI across their process. Because when AI connects every step of the journey, it stops being a tool and starts driving real transformation. Cesar Gon: Now I would like to invite Bruno to provide insights into our strategy and the evolution of our offering. Thank you, Cesar. It's a pleasure to be here. Bruno Guicardi: We ended the quarter with more than 7,800 scientists, a strong 16.3% growth year over year, ensuring we have the talent to meet the growing demands of our clients. Our people strategy begins with an advanced hiring process. We have built a systematic engine to attract and onboard the right people. It begins with our partnerships with top technical universities, which provide a large high-quality pipeline of young talent. Simultaneously, our reputation as a next-generation technology firm committed to a career-long development makes us a desirable destination for experienced professionals. Finally, we utilize an AI-enabled screening process to quickly identify the best candidates, and we prioritize filling open positions with our own internal talent whenever possible. This creates a robust and efficient hiring model. The direct result of our hiring process is the ability to scale our workforce quickly, supporting our revenue pipeline. Our robust training and development programs drive internal employee satisfaction and retention, leading to a healthy voluntary attrition rate of 10.9%. Now, let me discuss our delivery model, which is central to delivering AI value for our clients. Before extending these capabilities externally, we ensured mastery of AI internally, developing a systematic playbook for driving AI adoption. We have achieved an impressive 85% adoption rate of AI tools across our entire organization. This highlights our capability to effectively integrate new technology at scale. This widespread adoption has significantly fueled the growth of CI&T Flow. Over the past eighteen months, the number of agents our teams have created and are using to deliver value to our clients has increased 15-fold. Today, our system operates at substantial scale, with 4,700 active agents executing tasks across our business, from simple automations to highly complex workflows. Leveraging our extensive network of AI agents, we've developed compelling solutions that address our clients' critical needs. To give you a concrete example, our Data Modernization Studio features a set of AI agents designed to streamline and modernize data pipelines. This end-to-end approach encompasses data assessment, quality checks, and script generation, ensuring seamless integration into modern data architectures. Our solution significantly automates the transformation of legacy systems into advanced data platforms. By utilizing GenAI, we generate code, create technical documentation, and produce visual data lineage diagrams, therefore significantly reducing manual effort and risk. Through our Data Modernization Fast Track, we convert isolated data islands into comprehensive data intelligence systems, expediting the process from assessment to post-migration. This approach overcomes the time and resource challenges of traditional migration, enabling our clients to quickly unlock the full potential of their data. As we continue to innovate with generative AI, we're witnessing a shift in the market towards more flexible, value-based pricing models. Clients are seeking greater predictability and a clearer connection between their investments and business outcomes, presenting us with an opportunity to monetize the value created by our AI-driven approaches. To align with this shift, we are actively experimenting with new engagement models such as fixed price and output-based contracts, which better align our compensation with the successful outcomes we deliver for our clients. We anticipate a gradual transition to these models over time. With our AI management system, we are unlocking entirely new revenue streams. The large scale of opportunities driving our growth today were not feasible just a few years ago. Clients turn to us for our advanced AI capabilities, which empower them to address their most ambitious and complex challenges, whether it involves modernizing legacy systems, predictive platforms, or creating new AI-native business models. The direct result of our AI value proposition is our ability to consistently grow and capture market share. The value we deliver to our clients translates directly into the strong financial performance we provide to our shareholders. To guide you through our financial profile in detail, I'll now hand it over to Stanley. Thank you, Bruno, and good afternoon, everyone. Stanley Rodrigues: Let me walk you through our third quarter 2025 financial performance. Our revenue in the third quarter was $127.3 million, an increase of 13.4% compared to the same period last year, fully organic. On a constant currency basis, revenue grew 12.1% year over year. Looking at the year to date, our revenue reached $355.4 million, a 12.8% increase over the nine months at constant currency. As Cesar mentioned, this quarter marks CI&T Inc's fourth consecutive quarter of double-digit organic revenue growth, demonstrating the resilience and solidity of our business model. In 2025, our revenue from Latin America experienced a remarkable 35% year-over-year growth. In North America, revenue increased by 6% compared to the same period last year. Starting this quarter, we are reporting the performance of our Europe and Asia Pacific regions together under the designation New Markets. We are pleased to announce that both regions have recorded sequential growth in the third quarter of 2025. Focusing on industry verticals, we particularly highlight the strong performance in financial services and retail and industrial goods, which grew by 51% and 11% respectively in the third quarter compared to the previous year. These sectors have been actively pursuing digital transformation and modernization. In the financial services sector, companies are increasingly investing in AI-driven analytics to enhance customer experience, streamline operations, and improve risk management. Similarly, retailers and industrial goods are adopting AI technologies to better understand consumer behavior, optimize inventory management, and enhance supply chain efficiency. Our strategic cornerstone for growth continues to be our disciplined land and expand approach. This strategy has resulted in a predictable and stable revenue base characterized by exceptional logo retention and long client tenure. We have 10 clients each generating over $10 million in revenue. This cohort has seen a reported revenue increase of 19.5% in 2025 compared to the same quarter last year. Another solid indicator of our expansion with our large clients can be seen by the growing number of clients each generating $5 million to $10 million in revenue annually, from 11 clients in 2024 to 15 clients in the last twelve months. This illustrates our capacity to compound growth from within our established client base. In 2025, we achieved an adjusted EBITDA of $23.5 million, marking a 7.5% increase from the previous year. The adjusted EBITDA margin stood at 18.5%, reflecting a one percentage point decrease from the third quarter of 2024. This decrease is largely attributed to our anticipated upfront investment in expanding our workforce, with an increase of over 1,100 employees during this period, supporting our pipeline and revenue growth trajectory, combined with an unfavorable FX rate in the comparable period. We've maintained a disciplined approach towards our operating expenses. This is evident in our reduced SG&A as a percentage of sales. For the first nine months of 2025, we generated $46.5 million in cash from operating activities, translating to a robust 72% cash conversion rate from adjusted EBITDA to operating cash. This strong cash conversion provides us with the flexibility to reinvest in strategic initiatives to foster growth. In 2025, our adjusted net profit reached $11.3 million, marking a 10.6% increase compared to the same period in 2024, with an adjusted net profit margin of 8.9%. Our adjusted diluted earnings per share for the quarter was $0.09, demonstrating a notable 16.4% increase from last year. In summary, we have successfully achieved double-digit organic revenue growth on a consistent basis while maintaining solid profitability metrics and strong cash generation. Additionally, we are actively executing our share repurchase program, further enhancing shareholder value. At this point, I would like to invite Cesar back to the stage to share our business outlook. Cesar Gon: Thank you, Stanley. For 2025, we project revenue to be between $130.4 million and $132.6 million. The midpoint of this range represents a year-over-year growth of 16.8% on a reported basis and 12.5% at constant currency. For the full year of 2025, we are maintaining the midpoint of our revenue guidance while refining our expectations. We anticipate organic revenue growth at constant currency to be between 12.5% and 13% year over year. Additionally, we are reaffirming our adjusted EBITDA margin guidance, which we expect to be in the range of 18% to 20%. This guidance reinforces the strong pace of organic revenue growth reported throughout the year, above the industry average, and positioning us well for continued expansion as we move into 2026. This outlook also reflects the effectiveness of our growth initiatives, a robust commercial pipeline, ongoing expansion with our largest clients, and the evolution of our AI-boosted offerings. In closing, I want to extend my heartfelt gratitude to all CI&T Inc employees around the world. Your dedication to innovation and to delivering exceptional value to our clients remains the driving force behind our progress. This concludes our presentation. We will now open the floor for questions. Thank you. Operator: Okay. Operator: We will now begin the question and answer session. I'll announce each participant's name. Once you hear your name, unmute your line and ask your question. Then when you're done, please mute your line. First question comes from Luke Morrison from Canaccord. Hi, Luke. Please go ahead. Lucas Lincoln Morison: Hey, guys. Nice results and thanks for taking the question here. So I just want to double click on the new engagement model slide that you presented. You know, it first came out at your Analyst Day. You showed it here again. Just maybe help us think, like, how should we be thinking about the scalability of those models from here? Where are you seeing the earliest traction or client readiness, and what needs to happen operationally or contractually for those newer constructs, particularly flow or agent-based consumption, to represent a more meaningful share of your revenue mix over time? Operator: Thank you. Cesar Gon: Thank you, Luke. Great to see you. I can start, and Bruno can complement me. As you mentioned, we see the future of our industry evolving from time and material-based pricing models to more value-based pricing models, with a closer link to the business outcome. But we see this happening in a gradual way. So it's also an opportunity to monetize the intellectual property that will be embedded in every single engagement in the future agentic architecture. So what we are doing now is proactively introducing this approach to our clients and getting encouraging results with our main clients. In terms of timeline, I see this as a midterm opportunity. Gradually, we will translate, and this is an amazing opportunity to translate gradually our superior performance into not only margins but also scalability, and also giving our clients a more flexible, more powerful set of options in terms of pricing models. So we are not giving concrete outlook right now, but I think along the next six to twelve to eighteen months, we will have this as a relevant part of our P&L and the way we are seeing the future in our commercial and pricing models. And maybe just to complement, Luke, on your question around the education that clients require on their side to buy those models, right? So of course, the consumption basis is actually where most of the ramp-up of that education needs to happen, and it's not easy. So it's going to go to procurement, and they have to learn a new way to buy, right? So that will take some time to happen. But there are other models that also tap into that ability to automate work, which is kind of output-based models where we can have a fixed price by unit of software developed. We have even fixed price of overall engagements because of the tools that we have that we can map those engagements and can be really assertive in terms of what we will deliver. So there are models that are very easy to buy, that any procurement area could buy just right now. They do not require any education, right? So when there is this new thread here with the consumption-based, with IP-based consumption, that would take some time. But all in all, I think we will move very quickly in the next, to Cesar's point, twelve to eighteen months towards those models. Operator: Excellent. Very helpful. Maybe just a quick follow-up here. So just regarding your guidance, the guidance for Q4 implies continued sequential acceleration in growth as we exit the year. I know it's early, you're not guiding to next year, but just help us think about the durability of that growth. How do you view the cadence of that sustainable growth as we enter 2026? And are there any factors we should be keeping in mind around seasonality or demand normalization as we enter next year? Cesar Gon: Sure. We are based on our outlook for Q4, I think, basically on the consistent performance of the nine months of 2025, combined with a very solid commercial pipeline. And what is, I think, a good data point is now we are having a strong sales conversion. I grant this to our differentiation based on our AI strategy, CI&T Flow, the kind of efficiency, and even the whole positioning regarding the adoption of AI. So basically, a consistent track record, a solid pipeline, with a stronger sales conversion when compared to last year, for example. Operator: Thank you, Luke. Our next question comes from Gates Schwarzman from TD Cowen. Gates, please go ahead. Gates Schwarzman: Hey. Thanks for taking my questions. Gates Schwartzman with TD Cowen on for Bryan Bergin. Just wanted to touch on gross margin. It looks like it ticked down 30 bps sequentially. Just curious if you could talk a little bit about the underlying trends there. What are the drivers in terms of gross margin? And particularly, how should we think about what levers you guys have moving into fiscal 2026 that you can pull to bode well for margin expansion and support EBITDA growth? Also, any sort of color on the actual underlying FX impacts on EBITDA margin or gross margin would be greatly appreciated. Stanley Rodrigues: Gates, thank you for the question. This is Stanley here. Well, first of all, Gates, we are very confident in our ability to deliver this full-year guidance of EBITDA margin, so 18% to 20% adjusted EBITDA margin for the full year. We've been delivering those robust profitability metrics out of a bunch of initiatives, efficiency gains. Of course, we are scaling SG&A throughout the years. Every quarter we deliver lower SG&A as a percentage of revenue. And that will not change. We will continue that towards the future, right? So combining that with the fact that we are delivering those robust profitability under this benchmark organic growth path showcases our capacity to balance very well this investment in the AI opportunity and also this cost discipline that we've been managing the company. So we're scaling our business in this very solid manner. And this will not change. Of course, we are not guiding 2026 yet, but we do not have any factor that would mean that this will change. Gates Schwarzman: Understood. And just a follow-up, wanted to touch on demand trends. Obviously, tariff-related volatility has brought a lot of uncertainty in the environment. Can you touch on maybe how that's impacting your various verticals and then also touch on the US versus Latin America dynamics? Have clients started to gain any comfort with the tariff-related volatility? And subsequently, have you seen any sort of recovery in terms of discretionary spending or smaller, more strategic spend? Cesar Gon: Sure. Hi, Gates. I can get this one. I think we are growing sequentially in our regions. Of course, Latin America is stronger now, 12.5% growth sequentially, 35% year over year, driven basically by fast AI adoption among not only companies but users. North America is also getting good traction now with 5.4% sequential growth. And even new markets now are growing with 4.8% sequentially. So basically, we see two main sources of demand, and we see the overall environment improving, certainly driven by the evolution of the AI momentum. That is, as I mentioned, very strong in Brazil and more up in the US. And we can see by our commercial activity evolving and giving us a very strong commercial pipeline for next years and giving us a lot of confidence that we will continue in a growth trajectory at a very good pace. But as a way to qualify demand, I see two groups. One is basically a demand for foundational spending, let's say, that's large-scale projects to upgrade legacy technology and accelerate cloud and data migration. I think this is huge now. And, of course, we are extensively using AI and flow agents in this, let's say, foundational engagement. And there is another very welcome source of demand that is direct AI investment. I see relevant budget allocation moving from traditional IT to AI-specific solutions. So around, let's start with the low-hanging fruit of hyper-efficiency in the software development life cycle, but going for customer experience journeys, like how you move for more conversational commerce or AI-boosted chatbots, especially in Brazil, using WhatsApp, for example. And we see more broad programs like AI force transformation engagements. This is when the client wants to design a strategy and a roadmap to accelerate their AI adoption. And finally, we are seeing a growing number of use cases using GenAI to optimize or label-intensive or data-intensive business processes. So it's real. It's an amazing AI momentum, and I think we are very well positioned to continue to capture this opportunity. Operator: Thank you, Gates. Our next question comes from Maria Clara Infantozzi from Itau. Claudia, please go ahead. Maria Clara Infantozzi: Hi, everyone. Thanks for the opportunity here. I just wanted to double click on the improvement of pipeline to sales conversion topic. Cesar, can you give us more color on this? Is there any region that is calling more attention, maybe any specific client vertical that is worth highlighting? And what is the pricing strategy behind those new contracts? Are they all coming from output-based, or do you still sell time and material? And lastly, if you could please provide us a view on how you perceive the competitive environment, it would be great as well. Thank you. Cesar Gon: Sure. Thank you for your question, Maria Clara. I think in terms of vertical, I need to highlight financial services. It's 51% year-over-year growth expansion and 15% sequentially. So it's a combination of landing new clients and expanding our main financial services clients. Also, we see a lot of growth in retail industrial goods, particularly in the auto industry where we are very well positioned and expanding in the US. It's more about expanding our wallet share in this everyday way, do so with a portfolio. And then we also have the good news of tech and telco that were year over year stable, but sequentially now is a 19% expansion. So it's very good news. Other consider our five main verticals, three are expanding and two are stable. We see consumer goods and life sciences stable on a sequential basis. So regarding your question about pricing models, it's a mix. Our strategy is not a radical move from time and material to other models, but to offer our clients a mix of models, and we can combine creatively these models in the best interest of them. So it's more of a mix game of some time and material, some consumption basis, some piece outcome-based, and other models. We are inventing because this is a moment where we are really discovering the best way to play this new game in the AI agent world. So and a lot of engagements also extend from just build for build and run engagements, and we need different pricing models to support this shift. So this is basically, I think, a long-term game. But it's inevitable that AI will reshape the way pricing and business models operate in our industry. And I think it's a major opportunity for us to improve, not only margins but scalability of our business. And your last questions were regarding the competitive environment. Overview, how you see competition? Yeah. I think we did an amazing job over the last three years. Introducing CI&T Flow in July 2023 and transforming every CI&T Inc engagement into an AI engagement. We mentioned a lot the massive reskilling of 8,000 people. And I see CI&T Inc really ahead of our competitors. I know that everyone is trying to figure out how to play in this new moment of the industry. But what we get from our clients is, I think, we are ahead, and in my perspective, we are accelerating. Maria Clara Infantozzi: Thank you so much for your exercise. Operator: My pleasure. Thanks, Claudia. Our next question comes from Puneet Jain from JPMorgan. Hi, Puneet. Puneet Jain: Hey. Thanks for taking my question. Very nice quarter. So this year, you are all set to grow in, give or take, in low teens. Despite significant headwinds like tariffs and whatnot. As we think about next year, I know you're not providing the guidance, but should we expect growth rates to accelerate next year from current levels? Cesar Gon: Thank you, Puneet. Thank you for your question. Unfortunately, we are not anticipating 2026 yet. But as I mentioned, we are very confident in our future growth based on the evolution of our commercial pipeline and better sales conversion. By now, it's more about delivering a strong Q4, and in the next call, we will be very happy to really give you our guidance for next year. Puneet Jain: That's fair. And can you talk about your hiring plans? Like, the skills of people you hire, experience level, and should we expect revenue growth to continue to outpace your headcount growth? And what would that mean for margins over the near term at the EBITDA margin level? Bruno Guicardi: Take this one. Puneet, our strategy has always been to develop our own people. Right? So think of ourselves as a teaching organization, as a learning organization. We're very proud that I think we've learned faster than the average market. I think the achievements around what we are at with Flow and our adoption and the results we're creating for our clients is proof of that. So we continue our strategy to hire from the base of the pyramid and promote from the inside and give opportunities for people to grow with us. Right? So and to invest in our people and invest that give the people the opportunity to develop themselves to, you know, to reskill, to upskill. And to move on to different roles and different profiles. I think that will be an absolutely critical ability going forward as the industry will transform. All those roles will transform. People will do things, you know, in a completely different way. They do now, you know, two to three years from now. So that ability to be always learning and not try to hire for a job description because those job descriptions will be very fluid from now on. It's the ability that we continue to hire for potential, continue to hire for the ability to learn and to grow. That's our strategy, and I think it'll be a winning strategy going forward. Puneet Jain: Good. Thank you. Operator: Thanks, Puneet. Our next question comes from Leonardo Olmos from UBS. Please go ahead. Leonardo Olmos: Hi, everyone. Thank you for taking my question. Congrats on the numbers. Very good revenue beats. Just want to make sure we don't have anything misunderstood here. So you for the full year 2025, you reinforce the midpoint of revenue growth guidance, but you beat Q3's figure. So that could assume, and I'm probably wrong here, but that could assume Q4 is going to be slightly slower than you anticipated. Maybe you advanced some revenue to Q3, I don't know. How should we read this? I know you just said in a previous answer, I'm not going to talk about 2026. I get that, but I just don't want to leave a wrong impression here on this shift between the quarters. Cesar Gon: Thank you, Leonardo. I think it's basically we are guiding keeping the pace, keeping our goal for the year. Last quarter, we raised the midpoint. So we are, of course, leaving some room to beat again the number, and we are very confident. I think it's a strong year with an amazing exit rate for projecting 2026. So it's basically keeping our pace, making sure we leave room to even accommodate some surprising FX moves. We are not expecting, but we need to be conservative in terms of projecting FX. But at the end, we are really projecting a solid Q4. And, again, a very good exit rate for projecting next year. Leonardo Olmos: Thank you, Cesar. Just if I could do a second one. It's another question related to how well you did and what's going to be ahead, okay, that is a risk. Top client, right? Top client now when you round up gets to 12% of total sales almost was amazing right. Congrats on that. I'm sure this is something to celebrate because in the past we saw how large clients can impact all IT service peers. So, do you think about that especially about don't know, should we should you diversify, should you not? And how what do you expect in terms of what we heard in the media a couple of months ago that these top clients supposedly are going to reduce third party? Is that other part of third party personnel? It's good. Talk a little bit about top client. Thank you. Cesar Gon: Sure. I think we are in good shape. Gradually, we have been growing and diversifying our portfolio of clients. I think top one is a massive victor of our value prop. And you saw sequentially it grew 13%. But our top 10 clients are growing consistently too. So we sequentially, 11%. Our top 10. If you exclude top one, it's still a strong 10% growth in our top 10. If you look only at the x top 10, it's a 7% sequentially in growth. So I think it's a very solid evolution. To give you another data point, eight of our top 10 clients are growing sequentially. So regarding specifically our top one, as you know, is a very large financial service organization with dozens of different businesses, and we are very proud to be involved in different parts of their business strategy. And we continue to expand in different areas. I think it's due to our ability to demonstrate efficient, superior results across the board. And we see this engagement will continue to grow, but, of course, at a slower pace. But it's part of what we were anticipating. And we have now a lot of new avenues for growth. So it's part of the game. We work with very large clients, and when they see the concrete results of engaging with CI&T Inc, they tend to concentrate a lot of demand on us. But we manage, I think, in a good way this kind of expansion. So I think we are in good shape. If you look at it in a more long-term perspective, four years ago, we were top 10 kind of 67% of our revenue. Now it's 43%. So it's gradually as we evolve. We will continue to diversify the revenue source, but I think we are in good shape. Leonardo Olmos: Yeah. No. Very good. Point. The numbers talk by themselves, right? Very good. Just a quick follow-up, sorry to abuse my time. How should we think about revenue in these top one clients or maybe top 10 as a whole? How recurring is it? How can we see it so recurring? I get that you maybe won't grow like 70% year on year, but how recurring is that? Cesar Gon: Historically, it's very recurring revenue. Annually, we disclose our net revenue retention, and it's always a sound number. I think the business model, the kind of engagement is the same. If you are investing in AI and in digital and you are leveraging real concrete results, you will increase your investment. So it's an equation of success instead of a project-based model. So as we continue to support our clients to expand their strategy, I think we are in good shape to continue expanding, having a very high level of recurring revenue with them. Leonardo Olmos: By design. Very good. Cesar Gon: My pleasure. Operator: Thank you, Leonardo. So that concludes our Q&A session. Thank you all for attending our event today. I'll now invite Cesar Gon to proceed with his closing remarks. Cesar? Please. Stanley Rodrigues: Sure. Cesar Gon: Thanks, Bruno, Stanley, Eduardo. You all for joining us today. And to all CI&T Inc employees around the world, I'm very proud of what you accomplished this quarter, what we could do as a team. Congratulations for another record quarter. Let's keep it pushing. And a special thank you to our clients for choosing CI&T Inc in such an important moment in the industry. We are helping you, Mr. Client, to co-create the future in this exciting moment of AI-driven innovation. So everyone stay well. See you soon.
Operator: Welcome to the Firefly Aerospace Inc. third quarter 2025 Financial Results Conference Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal remarks. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please note this conference is being recorded. I will now turn the conference over to Michael Sheetz, Firefly Director of Investor Relations. Michael, you may begin. Michael Sheetz: Thank you, operator. Hello there. I'm Michael Sheetz, and welcome to Firefly Aerospace Inc.'s third quarter financial results call. I'm pleased to be joined on the call by CEO, Jason Kim, and CFO Darren Ma as we report for the period ending September 30, 2025. Today's call will include forward-looking statements including, but not limited to, statements the company will make about its future financial and operating performance, growth strategy, and market outlook. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause the actual results and trends to differ materially are set forth in the annual and quarterly reports filed with the SEC. Firefly Aerospace Inc. assumes no obligation to update any forward-looking statements which speak only as of their respective dates. Also, in this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the third quarter 2025 filing. Unless otherwise stated, financial information referred in this call will be non-GAAP. Our earnings press release, SEC filings, and a replay of today's call can be found on our Investor Relations website at investors.fireflyspace.com. Now I'll turn the call over to Jason. Jason Kim: Thank you, Michael, and welcome to our third quarter 2025 earnings call. As yesterday was Veterans Day, I want to kick off today's call by thanking our country's service members for their dedication, courage, and sacrifices in serving our nation. Ensuring we remain the home of the free in the land of the brave, Firefly Aerospace Inc. proudly employs many veterans like myself. And we are honored to continue to serve as we work critical national security missions supporting our warfighters. Firefly Aerospace Inc. is a space and defense company delivering innovative hardware and software to perform the hardest missions in space for national security, exploration, and commercial technology. Built to keep America as the leader in space while inspiring the world. Our hardware is represented by four revenue-generating products: our small lift Alpha rocket, medium lift Eclipse rocket, Blue Ghost lunar lander, and Electra satellite orbiter. These hardware products have a robust backlog of $1.3 billion at the end of quarter three. Our software offerings come through our recent strategic acquisition of SciTech. These capabilities include AI-enabled defense software proven in operations, including missile warning and defense, intelligence surveillance and reconnaissance, space domain awareness, remote sensing and analysis, and autonomous command and control to support diverse spacecraft missions. Firefly Aerospace Inc.'s product suite is strategically tailored to support the growing opportunities in space. Every day, there are new industry tailwinds for the space sector: artificial intelligence development, data center expansion, and an intensifying focus on the strategic and economic benefits of the moon. In addition, we have seen a major shift on defense funding and priorities supporting Golden Dome, with $175 billion planned for the program over three years. We are positioned to meet the call from the secretary of war in his arsenal of freedom address, where he demanded commercial speed and scale, similar to what we delivered on the US Space Force with the 24-hour turnaround Victus Knox launch, as well as our landing on the moon earlier this year at a fraction of the time and cost of previous missions. Before I get into our third quarter business updates, I will provide an update on the status of one of our multiple product lines, Alpha. A few weeks ago, an event during a ground test firing at our facility in Texas led to the loss of the Alpha first stage booster that we were preparing for flight seven. Following a thorough review, Firefly Aerospace Inc. identified a process error during stage one integration that resulted in a minute hydrocarbon contamination which then led to a combustion event in one of the engines during the ground tests. Proper safety protocols were followed, and all personnel were safe. The test stand structure remained fully intact, and no other facilities were impacted. We immediately took actions and implemented corrective measures, including a production stand down day. As this was not a design issue, those corrections included increasing inspection requirements for the fluid systems, optimizing the first stage sensors, and incorporating additional automated awards for testing. We also implemented key process improvements following the stand down day, where the production, integration, and test teams conducted exercises to review and optimize existing procedures. As part of Firefly Aerospace Inc.'s effort to improve reliability and quality, the team will continue to hold regular exercises for sustained process enhancements. Flight seven will now utilize the next Alpha first stage booster from our production line, which is currently undergoing final preparations for shipment to our launch site in Vandenberg. Prior to the event, we had already tested the second stage and fairing and delivered them to the launch site. As part of Firefly Aerospace Inc.'s test campaign ahead of each launch, the team will then conduct a static fire test at our launch pad prior to flight seven launch. Our flight seven launch is targeted between late fourth quarter to early first quarter, depending on range availability. Firefly Aerospace Inc. will have more details to share on the technology demo mission in the coming weeks, and I have full confidence in our vehicle's design, as well as our passionate and dedicated Alpha team to return to flight safely. Additionally, we're concurrently upgrading the Alpha stage test stand at our Briggs facility. These previously planned upgrades are expected to be complete in the next few months. Another key update since the end of the third quarter is that Firefly Aerospace Inc. closed the acquisition of SciTech, in line with our strategic growth plan. SciTech is an exceptional company with more than four decades of operational excellence, bringing game-changing proven software applications and big data processing elements that bolster Firefly Aerospace Inc.'s proven hardware elements. As an analogy, Firefly Aerospace Inc. builds the hardware smartphone such as our launch vehicles and spacecraft, SciTech develops the software apps such as mission autonomy, targeting, and sensor intelligence. Together, we expand from hardware-centric programs into long-term software-enabled revenue. SciTech has operational defense software and big data processing. Their infrastructure is state of the art with classified facilities and of the Department of War, Intelligence Community, and commercial customers. SciTech is differentiated from other defense software companies through its industry-leading multi-phenomenology expertise. Are closely linked with spacecraft and constellations. Together with SciTech, Firefly Aerospace Inc. will be able to provide the Golden Dome program with comprehensive end-to-end capabilities. There are three major elements of Golden Dome that we are pursuing. We can fly and deliver space-based interceptors utilizing our spacecraft, launch surrogate targets and hypersonic tests with our Alpha rocket, as well as integrate data processing from a network of sensors to perform fire control with SciTech ground processing. This closes the fire control loop with an integrated network of interceptors, essentially filling the missing link for the air and missile defense shield for the US homeland. Firefly Aerospace Inc.'s workforce following the SciTech acquisition stands at over 1,300 strong, SciTech's highly technical employees are made up largely of PhDs software developers, 90% of whom have security clearances. Now turning to our business updates. In the third quarter, we completed important program milestones across each of our revenue-generating product lines. Let's start with spacecraft. As the only company to have successfully landed and completed a NASA commercial lunar payload services mission, we were honored to have the agency award us with back-to-back contracts worth $177 million to fly Blue Ghost mission four. Targeting a 2029 launch, this mission will see Blue Ghost deliver five NASA payloads to the moon's South Pole supporting our annual lunar flight cadence. On this mission, Blue Ghost will enable NASA to evaluate the moon's south pole resources, such as hydrogen and water, as well as study the radiation and thermal environment. The moon's south pole is a strategic priority for our nation, as we anticipate a high density of resources that supports the growth of the lunar ecosystem. Another opportunity we are able to provide to our was collecting additional data above contractual requirements during our first mission. In September, NASA awarded us a $10 million contract addendum for Blue Ghost mission one for the acquisition of additional lunar data collected. This stands as a historic lunar economic milestone as it represents the start of monetizing valuable data of the moon to support more science and exploration the understanding of the geographic features of the moon's surface, and to support future human mobility, mining, and infrastructure initiatives. Of note, we continue to pursue additional sales opportunities beyond NASA for our Blue Ghost mission one lunar data. We're in discussions with multiple commercial and international organizations about how the information gathered by Blue Ghost Mission One can benefit future missions, such as how we successfully landed and maintain operations through extreme temperature ranges on the moon. The Blue Ghost data cell also serves as validation for our Ocula commercial imaging and mapping service model, we are debuting with our Blue Ghost mission two. Hosted by an Electra orbiter, Ocula will continue to provide even higher resolution imagery videos, and multispectral phenomenology data that can support NASA, the commercial lunar industry, international entities, and the US Space Force missions on and around the moon. Blue Ghost mission two, targeted to launch next year, is well underway. We built and fit checked the structural qualification models that will support our second mission, as well as performed initial systems level qualification testing on-site in Texas, before delivering to the Jet Propulsion Laboratory in Pasadena, California where further testing is underway. This pioneering multi-mission effort will land on the far side of the moon, which will be a first for a US lunar lander and then perform the NASA Lucy Knight Science Mission to sense radio frequency signals traveling over millions of years that could help unlock answers about our universe. In addition, our lander will deploy the Rashid rover two for The United Arab Emirates Mohammed bin Rashid Space Center. The full stack will also include an electric transfer vehicle, that will deploy the lander as well as a European Space Agency lunar pathfinder satellite. We are excited about the nation, congress, and world's growing focus on the moon. We anticipate the next NASA administrator to further reinforce this leveraging transformative commercial technologies and increasing both the magnitude and frequency of high return on investment programs like that of the commercial lunar payload services program. Moving to Electra, our Mission One team conducted simulation testing in preparation for the spacecraft to ship out for launch. This rigorous testing campaign saw our team perform more than two hundred hours of rehearsals simulating dozens of orbits around the Earth. Back in our hive spacecraft clean room, assembly is underway of our Electra Mission two spacecraft, which will support Blue Ghost Mission two as mentioned earlier. And Electra mission three completed its preliminary design review, maturing the vehicle's high maneuverability design as we prepare for the defense innovation units high priority national security space domain awareness demonstration mission in 2027. And reduce risk for future space domain awareness programs of record. In addition, our SciTech team can enhance the mission with its over four decades of classified data processing and mission operations experience. Additionally, Electra is increasingly supporting more NASA initiatives. We partnered with Advanced Space to support NASA's LunaNet communications relay service. We're developing a mission framework that utilizes our electric vehicle as transfer stage for the relay network. Similar to how we will use Electra on Blue Ghost missions. NASA also awarded an Electra study contract to demonstrate how to meet the need for multi spacecraft and multi orbit delivery to difficult to reach orbits beyond current launch service offerings, highlighting the multi-mission capability of Electra. Shifting to the launch side of our business, we signed an IDIQ and task order for a hyper test mission on Alpha with a confidential customer. We're proud to have Alpha support these critical national security missions which further diversifies Alpha customer base and we look forward to sharing more information when possible. We also signed an agreement with SpaceCatan to study launching Alpha from the Haikaido Spaceport in Japan. Addition to work underway at our coming launch sites in Virginia and Sweden. This potential launch site in Northern Japan offers strategic orbital access advantages provides resiliency in launch pads, and would allow us to tap into the large satellite industry in Asia. While also supporting US allies in the region. Development of Eclipse, our medium lift reusable rocket continued to progress in the third quarter. The build of all first flight Miranda engines is underway. The first Vera development engine, powers the upper stage of Eclipse, has completed the majority of design reviews, clearing the way for manufacturing to begin build. We're on track to begin VERA hot fire testing in the first half of next year. And we've begun final assembly of the launch site hold down release adapter ahead of a fit check with the first flight engine bay. I am so proud of our Fireflies and the Cytecors who are now part of our team. They achieved historical milestones, proven to deliver operational systems, and continue to do the boldest missions in space. And we are just getting started. We are focused on executing our strategic growth plan fostering a culture of safety, quality, reliability, and innovation. We are enhancing our products and with our dedicated and passionate Firefly Aerospace Inc. team, we collaborate with our partners in achieving new category defining missions in space. To help protect, connect, and explore. With that business summary, I'll turn it over to Darren for a review of the third quarter financials. Darren Ma: Thank you, Jason, and good afternoon, everyone. In today's call, I'm going to review the SciTech acquisition, which recently closed, discuss our third quarter financial results, and provide our revenue outlook for the remainder of 2025. I would like to thank the teams from both Firefly Aerospace Inc. and SciTech for the incredible dedication and laser focus on completing this transaction in just a month after announcing the proposed deal. As we noted at the time of the transaction announcement on October 5, the purchase price of approximately $855 million included a combination of $300 million in cash, 11.1 million shares of our common stock at $50 per share. Recently, we upsized our revolving credit facility to $260 million from $125 million. For the cash portion, we used $40 million from our cash balances with the remaining amount coming from our recently upsized revolving credit facility. After careful analysis, we concluded increasing our revolver and minimizing cash usage was the most prudent way to maintain our fortress-like balance sheet that we will leverage to drive our growth objectives. Before reviewing our third quarter performance, I want to reemphasize that operational metrics drive Firefly Aerospace Inc.'s financial performance. Key operational metrics include the number of launches and execution on program milestones across both our spacecraft solutions and launch businesses. Specifically, in our spacecraft solutions business, which will include SciTech going forward, we recognize revenue as a percentage of completion under each contract. For the launch business, we focus on the number of launches, Revenue for our operational Alpha vehicle is recognized at a point in time when the launch occurs. For Eclipse, while in development, we recognize revenue as a percentage of completion based on program milestones as part of the Northrop Grumman partnership. Once the Eclipse vehicle is operational, we will recognize revenue as launches occur. Now turning to our third quarter results. Revenue was $30.8 million. This compares with $15.5 million in the second quarter and $22.4 million in the same quarter a year ago. Within our total revenue, spacecraft solutions was $21.4 million, and launch was $9.4 million. The sequential increase was primarily driven by the Blue Ghost Mission one data sale to NASA. Progress on Blue Ghost mission two development and the ramp of Electra mission three for the defense innovation unit. We ended the third quarter with a total backlog of approximately $1.3 billion. This was up from $1.1 billion at the end of the second quarter. Driven by the NASA CLIPS contract award Jason referenced earlier. Backlog is one of the key metrics we monitor and is a leading indicator of our future revenue performance. Third quarter gross margin was 27.6%. This compares with 25.7% in the prior quarter and 34.7% in the same quarter a year ago. GAAP operating expenses for the third quarter were $70.7 million compared with $58.3 million in the second quarter and $42 million in the same quarter a year ago. The changes were primarily driven by an increase in launch material expenses costs associated with becoming a public company, and one-time expenses, including those related to the IPO, and acquisition-related transactions. For operating expenses, the primary differences between GAAP and non-GAAP are stock-based compensation expense, and one-time expenses. Non-GAAP operating expenses for the third quarter were $61.3 million compared with $55.8 million in the second quarter and $39.7 million in the same quarter a year ago. The changes were driven by the same factors as I noted in the GAAP operating expense comments. GAAP operating loss was $62.2 million compared with a loss of $54.4 million in the second quarter and a loss of $34.2 million in the third quarter a year ago. Non-GAAP operating loss was $52.8 million compared with a loss of $51.8 million in the second quarter and a loss of $31.9 million in the third quarter a year ago. Our GAAP net loss in Q3 was $133.4 million. This compares with a loss of $63.8 million in the prior quarter and $40.8 million in the same quarter a year ago. The sequential difference was due primarily to a change in warrant liability, and a payoff of an existing term loan following the IPO. Our non-GAAP net loss was $51.4 million. This compares with a loss of $57.1 million in the prior quarter and $38.2 million in the same quarter a year ago. GAAP basic and diluted net loss per share was a loss of $1.50. Based on a weighted average share count of 93.8 million. Non-GAAP basic and diluted net loss per share was a loss of $0.55 based on a weighted average share count of 93.8 million. For some additional granularity on EPS and share count, as a reminder, our IPO date was August 7. If you took into account a full normalized quarter as a public company, assuming that the IPO and its related transactions, including the repayment of our term loan facility, occurred prior to the beginning of the third quarter. The basic undiluted non-GAAP net loss per share would have been a loss of $0.33. Based on a weighted average share count of 147.7 million. Adjusted EBITDA in the third quarter was negative $46.3 million compared with negative $47.9 million in the second quarter and negative $28 million in the third quarter a year ago. Turning to our balance sheet. As of September 30, our cash and cash equivalents and restricted cash was approximately $996 million. Firefly Aerospace Inc.'s fortified balance sheet positions us to scale our market-leading products and fuel strategic growth in the years ahead. Capital expenditures in the third quarter were $8.9 million compared with $9.2 million in the second quarter and $8.2 million in 2024. Free cash flow was negative $62 million compared with negative $37.3 million in the second quarter and negative $44.8 million in 2024. The increase in negative free cash flow is primarily driven by Blue Ghost's mission launch prepayments and investments in Eclipse development. With the government shutdown, we are assessing what lingering impact that the closure will have on our financial results. During the closure, there was a pause of many government programs that resulted in delays with some contract receivable payment dates, and customer milestone reviews. As of now, we don't have clarity when the government's normal operations will ramp and payments that were on hold will be made. Now moving to our outlook. We currently expect full year 2025 revenue will be in the range of $150 million to $158 million, which is an increase from the $133 million to $145 million range we previously provided. And for clarification, with the SciTech close date of October 31 and shares associated with the transaction, we expect our basic and diluted weighted average shares outstanding for Q4 to be between 155 million and 157 million shares. I would like to thank everyone for their interest in Firefly Aerospace Inc. I'll now turn the call back to Jason for his closing remarks. Jason Kim: Thank you, Darren. Since the end of the third quarter, Firefly Aerospace Inc. has been pushing forward with additional progress on several items. Recently, we took delivery of Rashid Rover two, which as noted earlier, is a payload we're flying on Blue Ghost mission two. The UAE MBRSC team has been a pleasure to work with and payload delivery was very smooth as a testament to their team's impeccable knowledge and dedication to space and the moon. We are honored to be supporting MBRSC further strengthening US relations with The UAE. Our Blue Ghost Mission three team completed the preliminary design review. As the mission progresses towards its launch for NASA targeted for 2028. As a reminder, Blue Ghost mission three will utilize Firefly Aerospace Inc.'s Blue Ghost lander, an Electra orbiter and a rover from Blue Origin Honeybee to investigate the unique composition of the Grutheissen domes. A part of the moon that has never been explored before. Blue Ghost mission three will deploy the rover and operate six NASA sponsored payloads for more than fourteen days on the lunar surface. And I'd be remiss if I didn't mention that time named Blue Ghost Mission one to its list of the best inventions of 2025. With Firefly Aerospace Inc. spacecraft program director Ray Ellensworth, also named among the world's rising stars on the TIME 100 next list. The planets are aligned with the White House, Pentagon, and NASA demanding speed and scale through transformational change. Leveraging commercial innovation, and investments into technology and production systems. We're delivering on those demands. We've mapped our return to flight path for Alpha Flight seven added alpha contracts via the hypersonic task order, and are expanding our plans. For multiple resilient launch sites. We are pursuing the $175 billion Golden Dome program on multiple fronts. And are clearing operational milestones. Across our product lines. These are exciting times at Firefly Aerospace Inc., as we execute our strategic growth plans and create new categories in space that support our customers and inspires the world. That concludes our prepared remarks. I'll turn it back over to Michael. Michael Sheetz: Thank you, Jason. Operator, we're ready to take questions. Operator: Thank you so much. And as a reminder, to ask a question, press 11 and wait for your name to be announced. To remove yourself, press 11 again. Moment for our first question. And it's from Sheila Kahyaoglu with Jefferies. Please proceed. Sheila Kahyaoglu: Good afternoon, guys, and thank you. Maybe just on visibility into launch seven timing now. How do you think about how that impacts 2026 Alpha launches? Does that put pressure on the rest of the manifest? Or do we think about launch date still a good target timing? Jason Kim: Yeah. Sheila, thank you for that question. This is Jason. So we're targeting in between late fourth quarter and beginning of, early first quarter for our Flight seven launch. We'll get a lot of you know, post flight data from that. But you know, we are still assessing, 2026. And you know, our plans are we get a good flight up get the post data, and continue production. As you know, we have a production line going. So that's how we were able to take the next stage one booster and apply it to our flight seven. So we're just continuing to make progress on production. Sheila Kahyaoglu: Got it. And then maybe if I could ask on I know it's only been a few days since you closed SciTech. So how are you just thinking about gonna next quarter or going into year end moving forward on the integration and the road map there? And just potential revenue synergies. Jason Kim: Yes. Sheila. The integration with SciTech is going very smoothly. We've done a lot of work with our finance and accounting and our human resources and IT and the list goes on and on, especially in engineering. One of the strategic values of the SciTech acquisition was it bolsters our national security pursuits. $175 billion Golden Dome program. And in addition, when we look at M&A, we're looking at strategic fit. We're looking at culture fit. Financials as well, but also synergies. And in the engineering department, there are a lot of synergies with software. Our hardware is defined by the software that goes into it. And so SciTech best practices and software developers the classified software developers, will help bolster capabilities that we already build today. So there's a lot of synergies there. And in addition, SciTech has a lot of capabilities that they could leverage Firefly Aerospace Inc. as well for their programs in particular. There's a lot of you know, forge work that they're doing, a lot of command and control work that they're doing, a lot of autonomy that they're doing, and there's a lot of synergies with what we're doing with our Electra spacecraft in terms of space domain awareness, missile warning, missile tracking, and autonomy that we could synergize with SciTech. Sheila Kahyaoglu: Got it. Thank you. Operator: Thank you. One moment for our next question. That comes from Seth Seifman with JPMorgan. Please proceed. Seth Seifman: Thanks very much, and good afternoon. Wanted to follow-up on SciTech. Know, if how should we think about the growth rate in that business versus know, the the LTM revenue that that you've reported? And and then well, let's just start with that one and then I have a follow-up as well. Darren Ma: Yeah. Hey, Seth. This is Darren. We haven't broken outside tech separately. We've rolled it in and factor in. So our our 2025 number. So, I mean, when you look at 2026, you know, that's obviously dependent on a number of factors. Number of Alpha launches. Have an know, we're making great progress on the clip side. While generating revenue on the development. And on the spacecraft side, we've got know, Blue Ghost missions two, three, and four ramping and fall in parallel as well as Electra missions. Seth Seifman: Right. Okay. Okay. And and for okay. And and so SciTech not not really much color at this point about how that I I think it was one sixty something in the slides for the the LTM revenue. Darren Ma: Yeah. We we've included obviously, I mean, right now, there's some moving parts, but we've included in two months of that into our 2025 revenue guidance. Seth Seifman: Right. Okay. And I guess, when we think about just more conceptually about how this fits into the business, SciTech can provide, and you talked about the analogy with the iPhone and and the apps and having it go into your hardware. Is is the is the intention for this to be something that's exclusively or very much, having the resources dedicated to your hardware or, you know, to the extent there's other hardware involved in in Golden Dome. That you would be pursuing the ability to have SciTech, you know, apps or or you know, SciTech involved in supporting the hardware that's made by others. Jason Kim: Yes, Seth. This is Jason. Thank you for that question. SciTech will be operated as a Firefly Aerospace Inc. subsidiary. And they'll operate under its current business model. So Jim Luszowski is the CEO. So I think he'll report into me directly. We did that for deliberately so that SciTech could continue to provide their best in class capabilities for all their government customers, but also their commercial customers. There's a number of prime contractors that they support with both ground processing and software analytics but in addition, also onboard processing, edge processing as well with the algorithms. And so we want them to continue that growing business, but where there are synergies is, you know, we build our own spacecraft as well, our lunar landers and our Electra orbiters, and so we will be able to leverage their software developers and their best practices and their algorithms to put onboard our spacecraft as well in addition to who they already support. In addition, they also do a lot in ground command and control and ground processing. And that's something that today could help some of our programs that we have. For national security in that they can provide classified mission operation centers as well as classified processing. In terms of Golden Dome, what they add to our offering is know, as you know, Firefly Aerospace Inc. offers our Alpha responsive launch capability to launch targets as well as hypersonic test vehicles. We also have our Electra spacecraft that can serve and is well positioned for the maneuverability requirements for a space-based interceptor capability. But SciTech has the ground processing and fire control element. That is also required by the Golden Dome program. And that's something that gives us you know, multiple shots of the goal for Golden Dome. Seth Seifman: Excellent. Thanks. Thanks very much. Operator: Thank you. Our next question comes from Edison Yu with Deutsche Bank. Edison Yu: Hey, thank you for taking our questions. Wanted to ask about the international opportunity. You cited the Alpha Partnership, and in Japan. What kind of volume do you think of launches is maybe up or grab outside The US? Jason Kim: The short answer is we want to continue building on the relationship with Japan and others in that region. As we build up relationships you know, we'll give more firm numbers in terms of the total available market. But what I would say is in the past, I've heard that Japan has $6 billion for applying to space. So that's a very large market, and they are also looking at their own Space Force that they stood up in the past couple years. So we envision that they'll need the same things that The US and other allies will need. Things like responsive launch, things like know, SciTech ground processing and software. Also things like a constellation launch with Eclipse, and furthermore, orbiters, such as Electra. We're working with, not only Japan, but the European Space Agency. We've been in discussions with The UAE, as mentioned before, and the RSC. So it goes beyond just you know, Alpha launches. It includes all of our product lines. And you know, the success and progress we've had with expansion into other launch sites. That gives us more resiliency of launch and more opportunities to have launch cadence launching from more destinations. Such as Wallops and Sweden, gives us a lot of good experience to support this study with SpaceGatan. Edison Yu: Understood. And then separate topic. On on I wanna follow-up on the SciTech question earlier. Can you disclose any sort of maybe backlog numbers or pipeline numbers around that business? And and I don't know. Kind of not not trying to give out a growth rate, but you would expect this to to grow right. Jason Kim: Going forward in the next couple years. Yeah. Absolutely, Edison. So I give you a little bit more color there in terms of SciTech. SciTech backlog is roughly $170 million, so that'll be additive to the $1.3 billion that we exited Q3 with. Edison Yu: Great. Thank you. Operator: Thank you so much. And as a reminder, if you do have a question, simply press 11 to get in the queue. Our next question is from Kristine Liwag with Morgan Stanley. Please proceed. Kristine Liwag: Hey, good afternoon, everyone. I just wanted to follow-up regarding SciTech on the guidance. You guys highlighted last twelve months, revenue for SciTech is $164 million. You know, if we if we kinda look at that on a monthly basis, that implies $14 million of revenue per month, and it looks like you're gonna own this thing for about two months. So presumably, you know, that's $28 million of potential SciTech revenue in 2025, but you only raised the mid of your guidance by $15 million. Can you talk us through what the moving pieces here are of the changes? Darren Ma: Yeah. Hey, Kristine. So just give you a little bit more color there. Yeah, it includes the our guide includes the two months of SciTech. Not all the SciTech revenue is all linear. So that's one part of it. There's some obviously, some, obviously, some moving pieces there. We've also included in in our revenue guide, and it the updated Alpha schedule as well. So it includes, again, the two month of SciTech and our updated Alpha schedule. So that at at that point, you know, we've raised our we've raised our guide to where it is, the $150 to $158 million. Kristine Liwag: Great. Super helpful. And then, also, you know, just looking back regarding your your launch success, you know, the launch six, you know, was a failure, and then this most recent ground test testing, the anomalous event also was a failure. So when you look at the repeatability of your capability, you walk us through what you're changing in your operational structure to make sure that the subsequent launches here would be successful. Are there changes that you're implementing, and how should we think about your path towards a repeatable, successful launch? Jason Kim: Yeah. Thank you for that question. Yeah. Following the test event, you know, we immediately took action and put implemented corrective actions. Which I mentioned before is includes increasing the inspection requirements for the fluid systems. Optimizing some first stage sensors, and also incorporating additional automated reports. We also had a day-long quality stand down with production integration and test teams. We implemented key process improvements. We conducted a number of exercises to review and optimize our existing procedures. And we're gonna continue to enhance our reliability quality culture. The team's gonna continue to hold regular exercises. For these sustained process enhancements. I will say that safety and quality has been a major focus for me this past year at Firefly Aerospace Inc. After the test event, the team immediately started the root cause analysis. And when initial findings showed the process errors, that's when I immediately requested a full stand down. Of stand down production integration and quality test team, stand down day, required all of the executive leaders also to attend. And this was our moment to utilize industry best practices and reset, refocus, and return us to flight. Kristine Liwag: And do these events with Alpha change the timeline with Eclipse at all? Jason Kim: The short answer is no. We have different flows for Eclipse. In terms of the the test stands, both the structural testing and the engine testing. There are some subject matter experts we have at the company that are supporting Alpha but that's for a limited period of time. We are also staffing up on the Eclipse program per our program plan. And so you know, this should not Alpha should not affect our Eclipse production. I will also say that of the benefits of our common commonality in our product lines is that every time we reduce risk or learn best practices on any one of our product lines. It also benefits the other programs. In terms of carbon composites and tap off cycle engines and test procedures as well. Kristine Liwag: Thank you very much. Operator: Our next question is from Sujeeva De Silva with ROTH Capital. Please proceed. Sujeeva De Silva: Hi, Jason, Darren. My first question is on Golden Dome. Could Can you please go through some of the details of how Firefly Aerospace Inc. perhaps would SciTech would have opportunity here so we can kinda think about what may be coming, as that program starts up. Have, have have, offerings. Jason Kim: Yeah. Thanks, Sujeeva. This is Jason. I think the plan is aligned. As I mentioned, in the call, the White House, the Pentagon, they have strong initiatives for reform for speed and scale and affordability. You've heard that on the Golden Dome program under general Gute Line. You've also heard it from secretary of War Hegseth and others. You know, it's things like the first is only twenty four hour Space Force Victus Knox mission. That they want more of, and we have more of those kinda missions coming as well. Know, they want more OTAs more CSOs. They wanna look at commercial technology first as a default. And so they're very focused on interoperability, speed, scale, strengthening competition in the industrial base. With that, know, we've we've been in communications with the Goldman Dome customers, in terms of know, Alpha Rockets, like I mentioned before, to support test targets for the space-based interceptors. Also, hypersonic test as well because there's a rich backlog of hypersonic test technology that needs to get burned down. So Alpha provides a commercially available capability to launch up to one ton of into orbit and and two tons of suborbital regimes. It's also something that, if you look at Golden Dome, it's got multiple lines of effort, at least this first tranche of space-based interceptors, there's at least five lines of effort. Three are space-based, and two are ground-based. And with the acquisition of SciTech, we're able to go after not only the rocket part of Golden Dome, but also the space-based interceptor part of Golden Dome, with our Electra vehicle, partnered up with SciTech, for some of the discriminating algorithms. And then the ground piece which includes the fire control system and the ground control element, that's something that SciTech does for a living. As you know, they are the prime contractor and software developer for the apps and the the hardware portion of Forge. The Space Force. And if you remember what Forge does, it takes in all the sensor data with high volume at rate from low Earth orbit, medium Earth orbit, geosynchronous orbit, polar orbit, you know, zebras, and know, next generation OPIR systems takes all that data at rate, and then processes it into decision quality information that the warfighters can use to to go and, protect our nation. So it's that type of ground processing and software analytics that can be brought to bear to Golden Dome. Just like you know, other national security ground systems. That the space development agency has and the Space Force has. Sujeeva De Silva: Okay, Jason. Appreciate all that detail. And then thinking about, SciTech and the synergies, I know it sounds like it's a very, you know, feels like it's a very terrestrial sort of value proposition for SciTech, but could it possibly enhance what you may be planning with Ocula? And being able to extract analytics information from LUNAR observation, in the future as well? Jason Kim: You're spot on, Sujeeva. You know, anywhere that you could take sense you know, you know, optical information, infrared information, even radio frequency information, whether it's around the earth or interplanetary or even the moon. And Mars. SciTech has the capabilities with their forty years of algorithm development and continuous you know, tech refresh of those algorithms and apply it know, almost from a library like LEGO pieces mix and match it to apply to different missions such as Ocula. Ocula is gonna you know, debut next we're targeting, late next year, 2026 to launch our Blue Ghost two mission, and that Blue Ghost two mission, there will be an Electra transfer vehicle that will orbit the moon for five years, and it'll do the first commercial imaging and mapping of the lunar surface. It also be tasked to do space domain awareness in cislunar space. And so all those algorithms that SciTech provide today for missile warning, missile tracking, and ISR and space domain awareness around the Earth. Can also be applied to the moon as well. Sujeeva De Silva: Okay. Thanks, Jason. Operator: Thank you. And this concludes our Q and A session. I will turn it back to management for final comments. Michael Sheetz: This is Michael. Thank you so much for joining today's call. We look forward to talking to you next time in our fourth quarter financial results. Have a good day. Operator: Ladies and gentlemen, this concludes our Q and A session. Thank you all for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fiscal Q4 2025 Digi International Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jamie Loch, CFO. Please go ahead. Jamie Loch: Thank you. Good day, everyone. It's great to talk to you again, and thanks for joining us today to discuss the earnings results of Digi International Inc. Joining me on today's call is Ronald E. Konezny, our President and CEO. We issued our earnings release after the market closed today. You may obtain a copy of the press release through the Financial Releases section of our Investor Relations at digi.com. This afternoon, Ron will provide a comment on our performance, and then we'll take your questions. Some of the statements that we make during this call are considered forward-looking and are subject to significant risks and uncertainties. These statements reflect our expectations about future operating and financial performance and speak only as of today's date. We undertake no obligation to update publicly or revise these forward-looking statements. We believe the expectations reflected in our forward-looking statements are reasonable, but we give no assurance such expectations will be met or that any of our forward-looking statements will prove to be correct. For additional information, please refer to the forward-looking statements section in our earnings release today and the Risk Factors section of our most recent Form 10-Ks and reports on file with the SEC. Finally, certain of the financial information disclosed on this call includes non-GAAP measures. The information required to be disclosed about these measures, including reconciliations to the most comparable GAAP measures, are included in the earnings release. The earnings release is also furnished as an exhibit to Form 8-Ks that can be accessed through the SEC filings sections of our Investor Relations website. Now I'll turn the call over to Ron. Ronald E. Konezny: Thank you, Jamie. Afternoon, everyone. Before we take questions, I'd like to reflect on our fiscal 2025 performance and share our outlook for fiscal 2026. Digi delivered a strong finish to the year with record quarterly revenue of $114 million, up 9% year over year, cementing our return to top-line growth. We reported a record $152 million ARR with the inclusion of Jolt software acquired in August, which represents a 31% year-over-year increase. This marks our fourth consecutive quarter of double-digit ARR growth. ARR now represents approximately 35% of total revenue, underscoring our continued transition from transactional sales to multiyear solution subscriptions. For the full fiscal year, we generated $430 million in revenue, up 1% year over year, and $108 million in adjusted EBITDA, an 11% increase year over year. Incredible collaboration between our product lines and supply chain teams drove inventory down, helping our cash conversion to deliver $105 million in free cash flow for a yield of 8%. We paid off all the debt from the Ventas acquisition as promised. Lastly, the integration of SmartSense and Jolt is being embraced by the marketplace with our first cross-selling opportunities unfolding. We have a clear vision of the combined platform, and we have integrated the teams. Digi's broad industrial Internet of Things offerings from embedded solutions to edge solutions to turnkey vertical offerings appeal to a wide variety of industries and applications. This diversity fuels our resilience, durability, and relevance. Digi's unique position in the market allows us to participate in emerging and evolving technology trends such as artificial intelligence, edge computing, and industrial automation. We see a broad-based opportunity in connecting hundreds of billions of devices to the Internet. Our AI journey began with an internal focus, and we have seen meaningful productivity gains across the company. We are now in the process of leveraging AI for our products and solutions. Integrating AI as a search tool within our web applications and exploring the use of tiny language models at the edge are potential examples we are beginning to explore. These types of advancements can enhance our customer experience and unlock additional ROI. Acquisitions remain our top capital deployment priority, and we are tracking a number of opportunities in the industrial IoT space. In fiscal 2026, we expect double-digit growth for all three of our key metrics: ARR, revenue, and adjusted EBITDA. We are confident in our long-term goal of reaching $200 million of ARR and $200 million adjusted EBITDA by the end of fiscal 2028. Additional strategic acquisitions aligned with these metrics may accelerate this timeline. As we celebrate Digi's fortieth anniversary, I want to recognize our team's incredible dedication and laser focus on our customers' success. I'm so incredibly proud to work with these outstanding teammates. Very few companies that went public in 1989 remain independent today. For perspective, the median lifespan for all US companies is seven to eight years; for the current day S&P 500, it's about eighteen years. Our team's ability to adapt and evolve is a testament to our enduring culture and commitment to continuous improvement. With that, I'll turn the call back to the operator. Thank you. Operator: Thank you. To withdraw your question, please press 11 again. And our first question comes from Thomas Allen Moll of Stephens. Your line is open. Thomas Allen Moll: Good afternoon and thanks for taking my questions. Thanks, Tommy. Ron, I wanted to start on the P&S recurring revenue trends, strong growth again this quarter, whether you're looking quarter over quarter, year over year. What can you share about the field-level execution here? Any tweaks you've made in the go-to-market strategy? What's driving some of the success? And if you keep this up, how much of that segment in particular is up for grabs to sell on a recurring basis? Ronald E. Konezny: Tom, a good question. As you know, we've talked about it for several periods here about wanting to sell solutions and having 100% attached. We really are getting closer to that goal. And so you're seeing that progress, and it's a testament to our teams and also our channel partners that have embraced this as well. And it's not all about just the upfront sale. It's delivering on that promise and, of course, contract extensions, renewals, and cotermination, those kinds of things. But it's been great to see the progress, and you're seeing that attach rate really increase. And we expect that to continue in FY '26. I'm gonna ask a multipart question here. On your revenue guidance, just to address some issues that I think will come up in the coming quarters. So to the extent you can answer these, please do. So a few things jump out on the trend for recurring revenue; it sits below what your reported revenue is expected to be. What's driving the spread there between those two? And then separately, how much are you assuming for Jolt? Just so we could have more of an organic view if we want to strip that out? And how much are you assuming for data centers? Is that a theme worth exploring here as a key growth driver? I'll let you answer whatever you can there. Thank you. Ronald E. Konezny: Yeah, yeah. So, I mean, we were very deliberate in the guidance. We're taking two successful teams, SmartSense and Jolt, and we've combined them. We've got some synergies we've captured. So I think we've been just deliberate in incorporating that into our guidance. There's incredible growth opportunities, but there's also obviously some integration we're working through with the teams, with the solutions, with the customer base as well. Jolt just tended, Tommy, to sell a little bottoms up to smaller customers. We're reaching into the enterprise. We've tended, with SmartSense, to be the opposite, selling enterprise. And so we're really moving towards enterprise sales and away from the very, very small customers. And so that's really incorporated in that ARR guidance that you see in fiscal 2026. Regarding revenue, you know, we're seeing really strong contributions from a wide variety of verticals. Data center is certainly one of those. And that's really lifting that one-time revenue, which helps that, incorporated with Jolt too. As you recall from our acquisition, we indicated Jolt contributed over $20 million annualized recurring revenue, so you can kind of add that into the organic growth rates or that's embedded in '26, which, of course, the ARR has incorporated the revenue. We had about a half a quarter that we were able to enjoy in fiscal 2025. Thank you for all that, Ron. I'll turn it back. Operator: Thank you. And our next question comes from Scott Wallace Searle of Roth Capital. Your line is open. Scott Wallace Searle: Hey, good afternoon. Thanks for taking the questions and a really nice job on the quarter, guys. Thanks, Scott. Scott. Scott. Jamie, maybe first, just to calibrate in the September quarter, I'm wondering if you could just break out Jolt so we have an idea of the organic uplift in the quarter. It seems like things accelerated towards the end of the quarter. And maybe bolting on to that, I think in some of our last conversations, over the past couple of quarters, sales cycles had been getting extended, and it seemed like that was kind of starting to go in the other direction. I'm wondering if you could comment in terms of the general pace of business right now and maybe by vertical how you're seeing that demand and those decisions getting made now? Is there an acceleration? And maybe as well, if you could address sort of government headwinds on that front as well. Jamie Loch: Yeah. Thanks, Scott. I think relative to the first question on the Jolt side, back to Ron's sort of comment on it. At the time of the acquisition, we had indicated Jolt had done over $20 million of ARR. The Jolt deal was closed midway through August, so you could sort of envision based on that ARR with a month and a half what the revenue contribution would have been like based on what we had disclosed at the time of acquisition. So that would kind of give you a guide there in terms of how that impacted both Q4 as well as what the impact would be on '26 going back to that press release. I would say in terms of more broader macro kind of conditions, I do think that we're seeing certain verticals are maybe accelerating some of their decision-making. I think others are still taking their time. I think the current shutdown of the government adds to just uncertainty. I would say we're less impacted by, say, pure government shutdown and more just by the continued uncertainty that it drives out the marketplace. And so I think, you know, again, you kind of we've seen over the last several years we're bouncing from issue to issue, whether that's from COVID into supply chain challenges into macro headwinds, into tariff questions, and now into the shutdown. And so that uncertainty, I think, causes delays. I don't think it's as much because of specific end users or, say, programs that we're working with with government entities as much as it just kind of drags it out. Undoubtedly, though, there are certain verticals where you can see a lot of movement and decision-making having to ramp up in order for those customers to be able to meet their critical objectives. So I would say on the whole, things are accelerating. But for sure, the current geopolitical conditions are creating some uncertainty that keeps things a little bit suppressed in terms of normalcy. Scott Wallace Searle: Gotcha. And, Ron, maybe if I could, comments in terms of processing at the edge, and I think tiny language models, I wonder if you could expand on that in terms of what you're seeing from a customer input, desire, I guess, and design activity. You know, where you guys are going on that front, what kind of opportunities that represents, and maybe kind of couple that with some thoughts on M&A. You folded in Jolt in the last quarter. But it sounds like you guys have got some more debt capacity now. In effect, to go out and start to be a little bit more aggressive. I wonder if you could give us your latest thoughts on that front. Ronald E. Konezny: Yeah. On the first one, and I'll provide some context to my comments that, you know, I think AI in the industrial IoT world will be a very long fuse. It will have different durations depending upon industries because the very first part of AI is you've got to get your data collected and normalized and ready to be used by AI. So whether you're a manufacturer of generators, elevators, solar farms, you know, all those different industries and all the different market participants have their own journeys they're going on to get their data ready to be leveraged by AI. But to give you a sort of a crude example, today, most IoT applications there's a device at the edge that's interfacing with some piece of equipment. It's typically talking to the computer board inside that device. It's gathering information. It's then transmitting that data to a customer or an application that then is using that data to make some kind of decision. Do I change configuration? Do I update software? Worst case, do I send a person out there to provide some kind of fix in the field, which is sort of the worst case. Right? If you think about fast forwarding to a day where these edge devices are AI-enabled, the tiny language model you're attached to an elevator, that's all you care about is elevators. Right? In fact, you only care about your provider's elevators. And that dataset is very small, a lot of that decision that is waiting to be transmitted to a centralized decision maker could be made at the edge. So those decisions could be made much more autonomously with changing configurations, potentially implementing or even requesting a software update to deal with an issue without any human interaction. That edge device could have someday, getting a little far out, even dispatch a humanoid robot to fix it. So I think that's the future we have unfolding. It will again, it will take many stages. There'll be some bumps along the roads, but that's the vision that I think a lot of our customers want to be able to realize. And it's an exciting one. Regarding the acquisition piece, the industrial IoT world is massive. And it's incredibly fragmented. It is the perfect environment for Digi and our acquisition strategy. So there are a number of opportunities out there. As you know, we have very specific criteria we're looking for. We're looking for a right to own them strategically. We're looking for ARR to be a big part of their genetic DNA as well as their business model. We're looking for them to have some degree of scale within our terms. So although there's a ton of opportunities, just like in their life out in the universe, you have to be very selective on what teams we want to partner with. So we do think that there's tons of opportunity. As you mentioned, we are generating cash. We're paying down our debt. We've got a bit of a flywheel model as we're getting bigger and generating more profitability and more cash. We're able to pursue larger opportunities or smaller ones, but in multiple frequencies. So we're excited about our playbook and our ability to execute. Scott Wallace Searle: Hey. One last one if I could. You know, in terms of the long-term guidance for ARR and adjusted EBITDA margins, you're well on the path from an ARR perspective, particularly with Jolt now folded in. But I think just from a numerical perspective, adjusted EBITDA was probably trailing that goal and a little more work to be done. But it sounds like you guys are still very comfortable with those fiscal 2028 timeline to double the adjusted EBITDA. I'm wondering if you could just provide some expanded thoughts on what gives you the comfort there, if you're seeing some other synergies, just a general operating leverage now you're expecting to get going forward. Thanks. Ronald E. Konezny: Yeah. Yeah. The ARR, you know, that's an easy one, I think, to envision. Starting fiscal 2026 with $152 million, literally, percent growth annually gets us to our goal by the '28. So that's not much of a stretch, I think, for Digi to accomplish. Adjusted EBITDA, clearly a bigger goal. We've guided 15 to 20. You know, we're gonna need 20% plus growth rates in 2027-2028 to hit that number. So there's more work to be done on there. But I will say as we start growing the top line in addition to ARR, and our margins, as you know, and you've seen our margins gradually improve, you can really start to visualize those productivity enhancements we talked about earlier really allow us to get more scale and more leverage out of that growth that we start to bring into the company. So we're still optimistic on our $200 million goals by the '28. Scott Wallace Searle: Great. Thanks so much. Great job on the quarter. Operator: Thank you. And our next question comes from James Fish of Piper Sandler. Your line is open. Caden Patrick Dahl: Hi. This is Caden on for Fish. Just wondering what kind of tailwinds are you guys seeing on the AI side with some of your larger customers? And then any way to parse out what's going into an AI data center or use case? Thank you. Ronald E. Konezny: Yeah. Good question. The data center has been the most applicable to our OpenGear console server business. We provide a pretty key piece of technology to allow an IT professional to access the equipment that is inside of that data center and to be able to use command line or other interfaces to change configurations, update software, to orchestrate that equipment without being there physically. And we do so with smart broadband connections so that you don't have to use the network to troubleshoot the network. That's really where we're seeing the most presence within our product line and data centers. And, you know, I think we're all talking about how big, how long will the AI investment last. And we're hopeful for longer and larger for OpenGear's sake. But it's unclear because there's a lot of work. You heard here at some of the major providers over the last week and a half talk about power being a critical issue or access to additional data center space. Not as much on access to NVIDIA technology. But there'll be some pacing to this. And then there's the broader question of are we over-investing in AI, and will there be a correction? Which I think none of us quite know. But in the meantime, OpenGear really is the primary beneficiary within our product lines of the data center expansion. I think to a lesser extent, we get beneficiary impacts in our cellular router and SmartSense solution businesses because utilities are spending a lot of money on their infrastructure, and that's a big vertical for our cellular router product line. Caden Patrick Dahl: Thanks. And then just my last one. Is Europe still a wildcard at this point? And if so, what do you need to work through there? Ronald E. Konezny: I'm sorry. Can you repeat that question, please? Caden Patrick Dahl: Yep. Is Europe still a wildcard at this point? And if so, what do you need to work through there? Ronald E. Konezny: Europe. Yeah. Europe, you know, both say most of our revenue is still North American centric. We're 70% plus North America. Let's say, you know, 15% to 20% Europe, and the rest is other geographies. You know, Europe is a country by country opportunity, and we have product lines that play better in certain countries than others. So we still think Europe will be a meaningful contributor. North America will probably grow faster. Caden Patrick Dahl: Thank you. Operator: And our next question comes from Josh Nichols of B. Riley. Your line is open. Josh Nichols: Yeah. Thanks. Great to see just another sequential quarter of pretty significant margin improvement. I know you have a half-quarter benefit from Jolt, but when looking at the revenue and then the sharper increase that you're expecting in EBITDA guidance in fiscal year 2026, is the expectation that you're going to continue to see some potential improvement on the gross margin line from the quarter you just did for a little bit of context? Jamie Loch: Yeah. Josh, it's Jamie. I think we moved our segment of reporting of profitability to op income coming out of the Jolt acquisition. So if we rewind the tapes, we said as ARR continues to expand, we've seen historically that there's that pretty consistent movement in gross margins in that 10 to 20 basis points sequentially. And I would say the story continues to hold the same. Right? ARR will continue to grow. As that continues to grow and adds into the mix, you'll continue to see similar type expansion. So I don't think there's anything really there. We don't guide to gross margins per se. So I really wouldn't be able to get more specific than that, but I would say history suggests based on the guidance that we've provided, we would see a similar pattern. Josh Nichols: Thanks. So then looking here, you've talked a lot about previously how these attach rates have kind of been trending up. That seems to be evident in the results. Any update on what you're seeing today in terms of attach rates or where you think that could be going over the next couple of years as you get to those, like, fiscal year 2028 targets for top line and EBITDA? Ronald E. Konezny: Yeah, Josh. It's a great question. In certain product lines, we're at 100%. In certain product lines, we're kind of in that 50% to 75% range, but we do expect it to go 100%. There are some products, especially in our embedded division, where we don't have those levels of attach rates. They're sold to engineers that are designing our products into a broader solution. But for most of our devices, we do expect to reach 100% by the end of our fiscal 2028 period. Josh Nichols: Great. And then last question for me, I think it was touched on earlier, but just to drill down a little bit further. Is there any context you can provide in terms of, like, you know, in terms of sales revenue? How much of that is actually going into data center if you try to break that out? I know OpenGear has been one of the beneficiaries, with all the increased spend in data centers. But I'm just kind of curious if you could give us a little bit more color on that. Ronald E. Konezny: Yeah. I mean, it's a positive, but we're incredibly diverse. While data center is a meaningful contributor, it's not like a dominant theme across the company's business. We do a lot of work in utilities, medical devices, SmartSense does work in health care and food. So it's an important vertical for us, but I wouldn't say any more important than those other verticals as well. But it is certainly one that OpenGear's business is about half data center, half edge. Josh Nichols: Got it. Thanks for the detail there. Appreciate it, and have a good one. Good catching up. Operator: Thank you. And our next question comes from Anthony Stoss of Craig Hallum. Your line is open. Anthony Stoss: Good afternoon, Ron and Jamie. I want to offer my congrats on the really strong quarter and really good guide for fiscal 2026. Ron, I'd love to hear your view, kind of rank order maybe some of your product segments, cellular routers, OpenGear, etcetera, IoT solutions. What you think might be kind of the fastest growing segment within each for 2026? Then I had a follow-up. Ronald E. Konezny: Yeah. The fastest growing doesn't always equal the biggest. So we expect growth across all of our product lines, which is really good. I think actually our cellular router division will probably grow the fastest of those on a percentage basis. And then our infrastructure management is our smallest product line. It's mainly legacy products with a couple of new ones. So that's typically the smallest of the four product groupings that we have inside of IoT product services. Anthony Stoss: Got it. And is it fair to say that your, in addition to the tariffs gonna be behind, that your customers are growing more confident even on the macro? Hence, that's why things are really starting to pick up for you guys. Ronald E. Konezny: I think so. I think there's a combination of a little bit more certainty. There still is, you know, less certainty than probably everybody would like, but you've got the Fed that's helping out on that side. You've got certain verticals that are really investing, utilities, data centers, medical devices. We still see a tremendous opportunity in point of sale, digital signage. There certainly are some verticals that have gotten softer. Residential solar is a really good example of that. So the beauty is the diversification of Digi. We can kind of pivot towards those areas where there's a little bit more strength in demand and deemphasize those where there's maybe some softness. Anthony Stoss: Got it. Great job, guys. Really appreciate it. Ronald E. Konezny: Thanks, Tony. Operator: Thank you. And as a reminder, if you have a question, please press 11. One moment. And our next question comes from Greg Messinas of Kingswood Capital Partners. Your line is open. Greg Messinas: Yes, thank you. Can you reiterate whatever guidance you gave on the accretion of the acquisition of Jolt back in August? And how have you progressed towards those goals? Have you run ahead of them? Or what? Thanks. Jamie Loch: Yeah. Thanks. It's a good question. At the time that we did the acquisition, we indicated really two things. We had said that Jolt was coming in with over $20 million of ARR, you can envision how the revenue was gonna fold in. We had a month and a half remaining in Q4, so we adjusted our revenue guidance to account for that incremental revenue coming from that ARR. We'd also indicated that by the end of calendar 2026, we would be at an $11 million run rate EBITDA through the acquisition. And that was gonna be through a combination of the profit that was coming in as well as synergies both top and bottom line. I would say to date, the teams have executed well, being into the acquisition now for a couple of months. We've got unified sales organizations. We've got, frankly, unified organizations across the board. As we've wrapped up our fiscal year-end, we've had an opportunity to integrate Jolt in with a year-end process that's a little bit different than theirs. So I would say thus far, we're tracking well. Both in terms of how we are focused on our integration with our people as well as being able to obtain both top and bottom line synergies that we have laid out that we would be achieving by the time we ended calendar '26. I would say to Ron's point, we're already seeing movement in our opportunity pipeline on cross-selling opportunities and where the combination is really making sense for our customers. So I think we've done a nice job. Our teams have done a nice job of coming together as one group. Jolt was a very successful company, and it's great having them be a part of Digi, and it's great seeing the enthusiasm and excitement throughout Digi on bringing these two companies together. I feel like we're executing well towards the objectives we laid out. Greg Messinas: Thank you for that. Operator: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Ronald E. Konezny for closing remarks. Ronald E. Konezny: Thank you, everyone, for joining us this afternoon on the earnings call for Digi. As a reminder, we're going to be at the Stephens Investment Conference in Nashville next week. Thank you to the Digi team, and happy fortieth birthday, Digi International Inc. Operator: And this concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to the Electromed First Quarter Fiscal 2026 Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mike Cavanaugh, Investor Relations. Thank you, Mike. You may begin. Mike Cavanaugh: Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed, Inc. released financial results for 2026Q1. The press release is currently available on the company's website at www.smartvest.com. Before we get started, I would like to remind everyone that some of the statements that management will make on this call are considered forward-looking statements, including statements about the company's future operating and financial results and plans. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management's expectations as of today's date. You should not place any undue reliance on those forward-looking statements, and the company does not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to the company's SEC filings for further guidance on this matter. Joining me on the call today are Jim Cunniff, Electromed's President and Chief Executive Officer, and Brad Nagel, Chief Financial Officer. As on previous calls, Jim will provide operational highlights from the quarter, Brad will then review the financials, and we will close with a question and answer session. With that, I will now turn the call over to Jim Cunniff, President and Chief Executive Officer of Electromed. Jim Cunniff: Thank you, Mike, and thank you to everyone joining our call today. I'm proud to share that we started the fiscal year with strong momentum, delivering our twelfth consecutive quarter of year-over-year revenue and profit growth. This consistency reflects the strength of our business fundamentals, the dedication of our team, and the growing recognition of our SmartVest therapy as a critical element in the effective treatment of patients with bronchiectasis, a non-curable and chronic disease. In addition, I'm excited to announce that we have been recognized by Time Magazine in their inaugural ranking of America's top 100 growth leaders. This list rounds up the top-performing publicly listed companies in the United States characterized by revenue growth as well as financial security. We are proud to be part of the select group of companies across a wide range of industries. Starting with our key financials in Q1, we generated $16.9 million in revenue, representing a 15% year-over-year increase. I'm happy to report that growth was broad-based across our three primary channels. Our core home care channel grew 13% year-over-year, reflecting consistent sales force productivity gains and a continued thoughtful expansion of our sales team. Distributor sales increased 41% with continued demand from our carefully curated home medical equipment partners. Our hospital sales surged 52%, underscoring the early success of strategic investments in this emerging channel. We've long recognized that hospitals represent a critical point of intervention for patients with chronic respiratory conditions, particularly those with bronchiectasis. Hospitals are where many of these patients first present with symptoms and where early diagnosis and treatment decisions are made. As such, we will continue to invest in this market. Operating income rose to $2.7 million, a 38% increase year-over-year, and represented 16% of revenue. A strong indicator of our operational efficiency and disciplined cost management, which helped to drive Electromed's operating leverage. The strength across our P&L enabled us to deliver fully diluted EPS of $0.25, a significant improvement over the prior year. As previously announced in fiscal 2026Q1, our Board authorized a $10 million stock repurchase program. This reinforces our belief that Electromed remains a compelling investment and continues our commitment to returning value to shareholders. With that backdrop of strong top-line growth, I'd like to discuss some of our ongoing commercial initiatives that have helped to drive our strong results. As in previous quarters, we continue to invest in our commercial infrastructure to support long-term growth. In fiscal 2026Q1, we expanded our direct home care sales force to 57 representatives, up from 55 in Q4 fiscal year 2025. This is the team who will continue to make Electromed the leader in the home care market. As we've discussed in previous calls, one of the most compelling opportunities for Electromed lies in addressing the large and underserved market for bronchiectasis treatment. Today, it's estimated that 923,000 patients in the United States are diagnosed with bronchiectasis, yet only 6% are using high-frequency chest wall oscillation therapy. That leaves an immediate addressable group of nearly 800,000 diagnosed patients who we believe could benefit from our SmartVest system. Even more astonishing, it is estimated that there may be over 4 million additional individuals who have undiagnosed bronchiectasis, highlighting the urgent need for education. To address this gap, we launched the Triple Down on Bronchiectasis campaign, which promotes a three-pronged treatment paradigm. Number one, clear airways first with SmartVest to remove mucus. Number two, treat the patient's infection. And number three, help reduce inflammation. The messaging to emphasize clear airways first is a concept that's resonating strongly with both physicians and patients. We've reached over 18,000 individuals with this message, and more than 3,000 have actively engaged with our content. We also continue to invest in clinical education and advocacy to support early diagnosis and appropriate prescribing of SmartVest therapy. In fiscal 2026Q1, we hosted three CEU webinars for medical professionals, including two sessions on the ABCs of bronchiectasis and one session on bronchiectasis overlap syndromes. Additionally, during this quarter, we'll be attending three national trade shows and numerous regional events to showcase our technology and reinforce the importance of airway clearance in bronchiectasis management. In another example, we completed a manuscript based on data from the NTM bronchiectasis research registry, which found that 58% of qualifying patients were not prescribed H therapy despite meeting clinical criteria. This gap represents a significant opportunity for early intervention our team is working to close. Operationally, Q1 was a milestone quarter. We successfully launched a new CRM system on time and on budget, with no disruptions to our sales team's activity. This platform is already improving field productivity, delivering better market insights, and enhancing coordination with our fulfillment teams. On previous calls, I've shared with you our Smart Order e-prescribe solution to support our prescribers, which replaces outdated fax-based workflows. This move greatly enhances efficiency for our clinics by seamlessly providing Electromed with complete prescription documentation, enabling us to ship SmartVest to our patients sooner so they can breathe easier. In Q1, over a third of our orders were submitted electronically, enabling faster fulfillment and improved patient outcomes. We also completed our manufacturing optimization plan that began in fiscal 2025, which was executed flawlessly by our operations team. Among other things, this initiative physically restructured our manufacturing facility with the goal of improving production efficiency. Despite the complexity of the transition, there were no disruptions to patient deliveries. And speaking of manufacturing, I'd like to emphasize that Electromed is a US-based company with our operations and product assembly located in the US. And 99% of our net revenues are generated in the US. Given the concentration of our business operations in the US, we feel we are well-positioned to maintain our strong track record of on-time delivery to our customers and maintain our mid-seventies or better gross margins. However, we remain vigilant for possible issues with our primarily domestic suppliers who may have tariff exposure within their upstream supply chains. Overall, I'm extremely pleased with Electromed's team's execution and expect this to continue throughout fiscal 2026 and beyond. This concludes my prepared remarks, and I'd now like to turn the call over to Brad for a review of our financials. Brad? Brad Nagel: Thanks, Jim. All amounts below are for the three months ended 09/30/2025, for Q1 fiscal year 2026, and compared to the three months ended 09/30/2024, or Q1 fiscal year 2025. Net revenues grew 15.1% to $16.9 million, up from $14.7 million. Revenue in our direct home care business increased year-over-year by 12.7% to $14.9 million, up from $13.2 million. The increase in revenue was primarily due to an increase in direct sales representatives and higher net revenues per sales representative. Throughout Q1, we averaged 57 home care sales reps across 61 territories, and the average annualized home care revenue for these reps in Q1 was $1,052,000, which is within Electromed's target range of $1 million to $1.1 million. Revenue in our non-home care businesses increased year-over-year, coming in at $2 million. Home care distributor revenue of $829,000 grew 41.2%. Hospital revenue grew 51.7%, increasing to $1,047,000. These were partially offset by a 32.2% decrease in other revenue, which decreased to $122,000. Gross profit increased to $13.2 million or 78.1% of net revenues from $11.5 million or 78.3% of net revenues. The increase in gross profit dollars was primarily a result of increased overall revenue and higher net revenues per device. The decrease in gross profit percentage was a result of higher costs, which were partially offset by higher net revenues per device. Selling, general, and administrative expenses were $10.3 million, representing an increase of $900,000 or 9.6%. The increase in the current period was primarily due to the increased salaries and incentive compensation related to the higher average number of personnel in the sales, sales support, marketing, and reimbursement teams to process higher patient referrals. Operating income was $2.7 million, or 15.8% of net revenues, compared to $1.9 million or 13.2% of net revenues. This 37.8% increase in operating income was primarily due to an increase in revenue and gross profit. Net income increased by 44.9% to $2.1 million or $0.25 per diluted share, compared to $1.5 million or $0.16 per diluted share in the first quarter of the prior fiscal year. As of 09/30/2025, Electromed had $14.1 million in cash, $24.8 million in accounts receivable, and no debt, achieving a working capital of $35.8 million, and total shareholders' equity of $44.7 million. The cash balance reflects a decrease of $1.2 million for Q1 fiscal year 2026. The decrease in cash for the quarter was driven primarily by share repurchases of $1 million of Electromed common stock. In conclusion, we are excited by the strong financial start to the fiscal year and continue to see opportunities to deliver on our objectives of double-digit top-line growth and expanded operating leverage in fiscal year 2026. With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to questions. Operator: We will now begin the question and answer session. If you're using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. First question comes from Kyle Bauser with ROTH Capital Partners. Please go ahead. Kyle Bauser: Great. Thanks. Hey, Jim and Brad. Great results here again. Thanks for taking my question. Maybe starting with Jim, you mentioned, you know, like, 55% of eligible patients have been prescribed to VEST yet. So, obviously, a significant opportunity here. Are you seeing that in your growth profile? So, I guess, how much of your growth is coming from kind of improved awareness, new users versus existing prescribers? Jim Cunniff: That's a great question, and thanks for asking it, Kyle, and hope you're well. We feel like adding sales reps, which we've been doing pretty consistently year over year, is part of our secret sauce. We still really believe that this is largely a clinical sale. But I think this is a terrific time and place for bronchiectasis. During this quarter, so our fiscal 2026Q2, as I mentioned in my prepared remarks, we've attended multiple trade shows. Starting to see more and more people, you know, physicians on podiums speaking about bronchiectasis treatment paradigms. We have a new entrant in the market, as you know, on the pharmaceutical side, who's invested a lot of money on market awareness, both for patients as well as physicians, which really augments what we've been doing. And so, I think there's just a great deal of awareness. So I think we're getting some tailwinds from that. But I also think that we're continuing to gain market share as a single product company that's focused on this space. Kyle Bauser: Got it. Got it. And in our checks, it kind of seems like there's quite a significant opportunity in treating patients earlier and, you know, as their disease progresses. I think one doctor mentioned that a lot of patients, many times, are finally getting treated for the disease once the house is already kind of burned down, which you sort of alluded to in your comment. Of course, being able to treat earlier hinges on reimbursement and indications for use and, of course, building awareness and maybe market development efforts are pretty cost prohibitive to try to treat earlier. But, I guess, do you envision pathways to being able to treat the broader patient population, you know, from a reimbursement standpoint, you know, not having to do a scan, etcetera? It just seems like the, you know, patients could benefit from this before kind of crashing. Jim Cunniff: Oh, no. We totally agree with you. I think that is part of the education campaign. And, you know, one of the things that I mentioned in my prepared remarks was the manuscript which we're looking to get published. And yeah, the shameful thing is that, you know, when we took a look at the NTM registry data, you know, 58% of the patients qualified. So all the things that you just mentioned, you know, having a CT scan, having a daily productive cough for six months, and, you know, having tried and failed something, they qualified for that, and yet they weren't put on the HFCWO therapy sooner. And so we think that manuscript and, you know, making more awareness of clearing the airways sooner and the fact that many of these patients already meet reimbursement guidelines, I think, is going to be a real benefit. I don't think that the reimbursement criteria for HFC, whether it's our device or anyone else's, is going to change. I just think that the prescribing physicians are going to be a lot more open to putting patients on the therapy sooner rather than later. I think that's a big benefit, not only to the patients but also to the space in general. Kyle Bauser: Sure. Yeah. Agreed. And I think in the deck, you call out 22% of home care qualified referral volume coming from neuromuscular. Anything to call out there in terms of additional opportunities for growth? Jim Cunniff: Oh, definitely. I mean, there's a lot of ICD-10 codes right now, Kyle, that can't, you know, there will be a reimbursement for HFCWO. The challenge is the reimbursement guidelines aren't as clear as they are for bronchiectasis. And, you know, as I've mentioned time and time again, there's still this just great unmet need. You know, there's basically 800,000 patients across the country today that have the disease, have been diagnosed with it, but they're not on, you know, SmartVest therapy. And so we want to unlock that market opportunity. And that doesn't even include the additional 4.1 million people who have bronchiectasis COPD overlap that have not been diagnosed. And so I think if we can unlock that iceberg of opportunity, you know, we're going to take advantage of that. That's just in the bronchiectasis space. But there's other, you know, diseases like cystic fibrosis, and there's neuromuscular diseases, you know, that patients can benefit from this technology. And so we're going to be, as we pivot into calendar year '26, one of the things that we're going to be doing with our sales reps is really having them bear down on some of those more prevalent disease states where, you know, we can get reimbursed for the technology. Kyle Bauser: Okay. Got it. And maybe just one more. Nice growth in the hospital channel. Do you have dedicated reps for the hospital, or are your direct reps and maybe even distributors going after this channel? Just curious. Jim Cunniff: Yeah. No. Great question. You know, we don't have distributors that are going after this channel for us. Predominantly, as you know, our model is direct to patient. And in the case of hospitals, you know, we've been really probably for the last couple of years, very deliberate about investing in the space. We feel like this is a gateway for getting the patients on the technology in the hospital when they present there, as I mentioned in my prepared remarks. And then, you know, as they get discharged, we want them on our technology going to the home. So we've got three sales reps that are focused on that channel right now. You know, we are looking to judiciously add reps in that space. Yeah. The sales cycle is very different in the hospital market versus the home market. You know, the home market, it's a capitated rental model. It's pretty easy. Not easy, but, you know, when our sales reps are calling on a clinic and they're engaging with the physician, they can work with that physician in identifying patients that would benefit from our technology. In the case of the hospital, you know, it's really a capital sale. And so, you know, the time to revenue can, in some instances, be years, based on the buying cycle of the facility. So we, you know, we're getting a lot of interest as hospitals are updating their fleets and as their capital budgets accommodate, you know, them buying high-frequency chest wall oscillation devices. We also have a contract with Visient, which represents, you know, half the health systems across the country. We feel like we're really well-positioned, with some of the dynamics in the market right now, coupled with the fact that, you know, we have a best-in-class technology that we think the hospitals would benefit from and their staff because it's very intuitive to use. And the patients that we would put on the product. Kyle Bauser: Okay. Thank you. Great results. I will jump back in queue. Jim Cunniff: Terrific. Thanks, Kyle. Operator: Your next question comes from Ben Haynor with Lake Street Capital Markets. Ben Haynor: Good afternoon, guys. Thanks for taking the questions. First off, following up on kind of the hospital discussion there. You know, knowing that there's a longer sales cycle, you know, also implies that you kind of know the pipeline that you have out there. How great, how good is your visibility there? And should investors kind of think about this million-dollar-ish a quarter as kind of a new baseline for that area of the business? Jim Cunniff: That's a great question. And thank you for being on the call. So, you know, from our standpoint, Ben, you know, that's why we're not putting all of our eggs into that basket. You know, our primary focus as a company is still going to be on the home care segment, and that's calling on clinics and calling on pulmonologists within those clinics. Because we feel like that still has not been unlocked. The hospital business is a little unpredictable because you're really at the whim of operating budgets within the hospitals. You're at the whims of standardization committees. You know, you have a lot more decision-makers in the fold. We do think by putting focus there and, you know, in doing so in areas where we feel like fleets are being upgraded or people are investing in new equipment, yeah, that we should be able to continue to have certainly, you know, 20% plus growth in that segment. How it comes, that's a little bit less predictable. But we think, you know, when the dust settles year over year, for the fiscal year, we should be growing that market certainly at a higher rate than what our home care business growth is, albeit on a very small base. Ben Haynor: Got it. So if you're just in the mix there, you got a good chance of something falling out. Jim Cunniff: Yeah. We feel we've, you know, we've got a great product, and, you know, we're going to cover the entire landscape with only a few people. But that's also giving us a lot of knowledge, you know, as we look to expand in that market. You know, we, much like with our home reps, we just don't, you know, we've seen companies add a lot of fuel to an opportunity only for it not to materialize, and then they have to back off. We think the approach that we're taking is the right one. But if, you know, we see the algorithm where we can add more reps sooner rather than later, we'll certainly, you know, be doing that. Ben Haynor: Got it. And then, on the subject of the new pharmaceutical option, discussed it a bit here already. You know, how do you see kind of the stance of clinicians evolving their treatment algorithms to, you know, get people on the drug, you know, obviously, the infection, you gotta clear and bring more folks to your device? Jim Cunniff: You know, Ben, that's a great question. Look, they've brought a lot of awareness to bronchiectasis, which has been fantastic. But what the drug doesn't do is it doesn't clear the mucus. And so that's really where we come into play. And as I mentioned with our Triple Down on Bronchiectasis campaign, you know, first and foremost, for the patient to be able to breathe easier, you've got to remove that mucus, which is the fuel for a future infection. These patients already have bronchiectasis. It's chronic. It's irreversible. And so, you know, as mucus builds up within their airways, we want to clear that out. You know, if they do have an infection, the paradigm today is they get treated with an antibiotic, and then the drug is really to help minimize future inflammation. But it doesn't cure the disease. And so we think it's complementary to what we do. And as far as the prescribing habits, I think, you know, for prescribing physicians, they're excited about it. You know, if they have a patient that has, you know, exacerbations routinely, you know, maybe they'll look to prescribe this. I think there's some that are on the sidelines just kind of taking a wait-and-see approach. I think the other challenge with the drug, though, is it's an expensive proposition, both from the payer standpoint. You know, it's $85,000 per patient per year. Our technology, on the other hand, is, you know, over $10,000 for life. You know? And these are patients who have a chronic illness. So it's early innings relative to the drug, but they have created a lot of awareness. And, to date, they don't have reimbursement from either CMS or from commercial payers. So we'll see. Ben Haynor: So maybe the way to think about it is that the drug is maybe some really expensive snow tires, but there's still other things that you need to be cognizant of when you're driving in the snow. Jim Cunniff: That's a very good analogy. Ben Haynor: Local Minnesota. There we go. Jim Cunniff: I think that's all I have. Thank you for taking the questions, gentlemen. Ben Haynor: Hey. Pleasure. Thanks for being on the call. Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Jim Cunniff for any closing remarks. Jim Cunniff: Well, thank you all for joining today's call. I would think that you should be pleased with how Electromed is really executing with precision across all areas of our business. We're growing revenues, profits, expanding our commercial footprint, and we're investing in strategic initiatives that position us for long-term success. And I mentioned some of those on the call today, including the manufacturing optimization program that we just concluded. We've also implemented a new CRM system, which we're very excited about. And we remain committed to delivering value to our patients, providers, and our shareholders, and we're excited about the opportunities that lie ahead. So thank you all, and appreciate you being on the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Local Third Quarter twenty twenty five Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. I will now hand the call over to the company. I will now hand the call over to the company. Mirele de Aragao: Good afternoon, everyone, and thank you for joining the third quarter 2025 earnings call. If you have not seen the earnings release, a copy is posted in the financial section of the Investor Relations website. On the call today, you have Pedro Arnt, Chief Executive Officer; Jeffrey Brown, Interim Chief Financial Officer; Chris Stromeyer, SVP of Corporate Development; and Mirele Aragao, Head of Investor Relations. A slide presentation has been provided to accompany the prepared remarks. This event is being broadcast live via webcast, and both the webcast and presentation may be accessed through the dLocal website at investor.dlocal.com. The recording will be available shortly after the event is concluded. Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned in this conference call are based on currently available information and dLocal's current assumptions, expectations and projections about future events. Whilst the company believes that our assumptions, expectations and projections are reasonable given currently available information, you are cautioned not to place undue reliance on those forward-looking statements. Actual results may differ materially from those included in the dLocal presentation or discussed in this conference call for a variety of reasons including those described in the forward-looking statements and Risk Factors section of dLocal's filing with the Securities and Exchange Commission, which are available on dLocal's Investor Relations website. Now I will turn the conference over to dLocal. Pedro Arnt: Hello, everyone, and thanks for joining us today. We delivered another record quarter for the first time with TPV above $10 billion and gross profit that surpassed $100 million. Yet another example of our strong growth and continued diversification, all of which underscore the potential and resilience of our business model. TPV, and I'd like to remind you that it's the key metric we continue to manage the business to trusting that long term scale and market share are the critical elements behind our investment thesis. So TPV grew nearly 60% year-over-year in dollars and 66% on a constant currency basis. This marks the fourth consecutive quarter of TPV growth above 50% compared to the prior year, a testament to the favorable secular trends in emerging markets and to our track record of execution with our merchants as they grow into new markets and new payment methods. Gross profit reached $103 million up roughly 32% year-over-year and 36% for the first 9 months of 2025. The quarter's results was driven by strong volume growth across the business with particular strength in Brazil, Colombia and other LatAm and other Africa and Asia segments, partially offset by a volatile macro situation in Argentina, temporary cost pressure in Mexico, potentially also headwinds from tariffs in that market and a full quarter's effect of the share of wallet losses in Egypt that we had already referenced in the second quarter. As anticipated, our investment cycle increased head count expenses. However, our disciplined expense management, sustained healthy operating leverage with adjusted EBITDA reaching $72 million, representing 70% of gross profit. We delivered a robust net income growth, primarily due to lower finance costs following a significant reduction of our exposure to Argentine peso-denominated bonds during the second quarter of '25. And finally, adjusted free cash flow to net income conversion remains at healthy levels reinforcing the cash-generative nature of our business model. These strong results reflect our continued ability to navigate the fragmentation and complexity that's inherent in emerging markets financial infrastructure so that we can deliver value to our shareholders and growth to our investors. This complexity and fragmentation across the global South is not waning, but rather we would argue increasing. In Brazil, local payment methods, driven by Pix already account for more than half of e-commerce volume. We see these trends across all emerging markets. Local payments methods represent the majority of e-commerce volumes and are expected to reach nearly 60% by 2027. Buy Now, Pay Later solutions, one of our newer focus areas although smaller today are growing faster than the overall market, and we believe have enormous potential. Crypto corridors through stablecoins are also rapidly emerging as relevant in the payment infrastructure mix, opening up new business opportunities and positioning dLocal as a key provider of on- and off-ramps between stablecoins and fiat across the over 40 markets where we operate. In the face of this ever-increasing complexity and fragmentation, our core value proposition, one dLocal does nothing but increase in value to our merchants being able to abstract all the complexity away to a single partner who has the widest and deepest coverage. And by that, I mean the most emerging market countries and the largest number of payment methods per country is fundamental. That is why our value proposition for merchants is to be the one-stop shop for their emerging market financial infrastructure needs, offering all card-based, local payment and alternative financial infrastructure in any given country. Last quarter, you may recall, we shared our view on the S-curve of digital merchants adopting payment localization throughout EM. As you can see here, our growth is broad-based within TPV contributions throughout that S-curve. We add new merchants, deepen our share of wallet with existing merchants, add payment methods and accompany them as they go to market in new countries. And throughout, we benefit from secular trends of digitalization and economic growth in our markets and the desire of the world's preeminent brands to expand where growth is, which is across emerging markets. Most of these results are coming from existing merchants, a testament to the strength and size of our current merchant base. For example, our clients include 6 of the Mag-7. The strong volume growth with our key merchants, coupled with our value proposition, results in customer loyalty that we are very proud of. We have leading net retention of revenue when compared to most peers in the payments and software industry, reflecting durable upsell and cross-sell geographies, payment methods and flows. Since 2020, our NRR has always been above 100%, and this past quarter increased to 149%. During the quarter, we continued to partner with best-in-class players from a commercial and capabilities perspective to help them solve financial infrastructure challenges in our markets. Let me share with you some examples of high-profile recent integrations. Our work supporting Western Union's pay-ins across Latin America as they digitize their business. The expansion of checkout options for the ride-hailing service Bolt across Africa, Asia and Latin America, leveraging our unique position to offer on and off ramps for stablecoins with Fireblocks for their global payments network. And finally, partnering with Google on their agent payments protocol, AP2, as we jointly explore the opportunities AI bring to commerce. And as we continue to deliver great work on behalf of our merchants, and therefore, scale and increase breadth, depth and quality of service, our business becomes stickier as we saw in the NRR data I just shared and more importantly, ever more diversified. Last quarter, we highlighted how our country market concentration has been decreasing. Our top 3 markets continue to grow very healthily but at a slower pace than the rest creating diversification and thus, very importantly, reducing the impact of the inherited volatility of any individual emerging market on overall quarterly and annual results. And top merchant concentration, defined simply as the top 10 merchants on any given quarter remains broadly in line with historical levels, but as we deepen our share with existing merchants and onboard new large ones, the composition of the top 10 merchants rotates from quarter-to-quarter. Therefore, when we look at this on a cohort basis of the top 10 merchants of any given quarter, we see that they lose concentration as time goes on. And not because they shrink, but because other newer merchants grow more in most cases. The importance of looking at this in a cohort level is that it shows that actual merchant diversification is actually increasing on a name by name basis, and are dependent on single merchants decreases over time. Our product innovation road map also remains a top priority as we look to diversify our revenue base and drive increased average revenue per merchant. We wanted to provide 2 updates this quarter. First, our APMs-on-file capabilities now cover 27 of these local payment methods across 16 countries and is quickly growing, replicating card-on-file convenience to reduce checkout friction and lift conversion while allowing merchants to benefit from cost, speed and adoption of these leading local payment methods. For example, after rolling out tokenization of Yape, a top APM in Peru, conversion rates on that payment method rose by a whopping 34 percentage points. Second, 2 weeks ago, we launched Buy Now, Pay Later Fuse, our proprietary aggregator for Buy Now, Pay Later solutions, it's now live in 6 countries with 2 more to follow shortly across Latin America, Africa, the Middle East and Asia. This is an important step towards enabling our merchants to benefit from the massive demand for credit in our markets. Although still in its infancy, we are seeing initial signs of product market fit with 2.5x growth in volumes quarter-over-quarter. It's also important to note that we deploy it via a revenue share model with local partners, taking no credit risk and generating a higher take rate payment volume on these transactions. To wrap up this section, the quarter clearly consolidates the positive trends we have seen over the last 9 months, sustained growth, an improving business mix, disciplined cost posture and continued strong cash generation. And with that, let me pass the call on to Jeff who will walk you through a detailed analysis of this third quarter performance. Jeffrey Brown: Thank you, Pedro. Good afternoon, everyone. I'll now take you through a detailed look at the numbers and the main drivers of our performance this quarter. We delivered another strong quarter, again setting records across TPV, revenue, gross profit, adjusted EBITDA and net income while keeping operating leverage at healthy levels despite continued investment. Our TPV reached $10.4 billion, representing significant growth of 59% year-over-year and 13% quarter-over-quarter. In constant currency terms, TPV would have grown by 66% year-over-year despite being impacted negatively by the depreciation of the Argentine peso. This strong result was particularly visible in remittances, e-commerce, on-demand delivery and SaaS verticals. Weakness in advertising is explained by Egypt, as mentioned by Pedro. Performance proved to be broad-based across all flows and products with each one achieving a new record high. This consistency powerfully validates the value proposition we offer our merchants. Cross-border grew 13% quarter-over-quarter and 75% year-over-year, while local-to-local grew 13% sequentially and 46% year-over-year. Once again, this shows the staying power of our cross-border offering. Pay-ins grew 12% quarter-over-quarter and 55% year-over-year while pay-outs grew 14% quarter-over-quarter and 70% year-over-year. Revenue was $282 million, up 52% year-over-year or 63% on a constant currency basis. On a quarter-over-quarter basis, revenue was up by 10%, driven by volume growth. Moving to gross profit. During the quarter, gross profit reached a record of $103 million up 32% year-over-year or approximately 41% on a constant currency basis. This performance was primarily driven by volume growth with notable contributions year-over-year from Brazil, Argentina and Colombia. On a quarter-over-quarter basis, gross profit increased by 4%, primarily driven by volume growth across frontier markets with strong performance in Colombia, Bolivia and Nigeria and Brazil's solid growth across streaming, e-commerce and advertising, coupled with higher share of pay-ins. This positive result was offset by Egypt, as previously discussed. Argentina, reflecting lower interest rate spreads and a temporary increase in processing costs and a payment mix shift towards an APM with temporary margin pressure in Mexico as well as a slowdown in TPV growth, likely driven by increased tariffs on imports as we have cautioned in our last guidance update. The quarter was also impacted by a noncash IFRS inflation adjustment in Argentina. Our net take rate was down sequentially, explained mainly by lower share from Egypt, volatility in Argentina and payment mix shifts in Mexico. It is important to note that take rates in our business can be volatile quarter-to-quarter given the many mix shifts by which they are affected. We continue to demonstrate operating leverage and careful expense management. Our total operating expenses were $48 million for the quarter, representing a 10% increase quarter-over-quarter and a 28% increase year-over-year. On a quarterly basis, the increase is driven mostly by salaries and wages, especially in sales and marketing and tech and offset by a $1 million decrease in impairment losses on financial assets. It is important to note that the increase in salaries and wages includes an almost $2 million increase in noncash share-based payments. Adjusted EBITDA reached approximately $72 million, up 2% quarter-over-quarter and 37% year-over-year. The ratio of adjusted EBITDA to gross profit for the quarter was approximately 70%. Our revenue per employee had a second quarter of strong growth as we realized gains from our investment cycle and reaped initial returns on our automation and AI projects. As Pedro mentioned previously, net income totaled $52 million for the quarter, explained by lower finance costs following the reduction of our exposure to Argentine peso-denominated bonds. Over the next few months, we expect to fully diversify away from the portfolio of Argentine securities generating less volatility from financial results on an ongoing basis. Regarding income taxes, our effective income tax rate for the quarter was 15%. Finally, our free cash flow for the quarter was $38 million. With this, I'll pass it back to Pedro for his final remarks. Pedro Arnt: Thanks, Jeff. Before concluding, we wanted to give you an update on guidance. We reiterate our guidance numbers given where we see the business tracking as of today. However, there are continued important risks to consider that we want to make sure we call out. We currently expect TPV to exceed the high end of the range we shared during the second quarter '25 earnings call. Market share and merchant traction remained very strong. And once again, let me remind you that this for us is the most important metric. Revenue is tracking around the upper limit for the year while gross profit and adjusted EBITDA are likely to be between the midpoint and the upper level. As highlighted last time around, it's important to consider the evolving global macro currency and trade landscape throughout EMs. More specifically, recent increase in tariffs in Mexico for low-value goods have already caused a slowdown in our Mexican business as witnessed this quarter. That, along with potential trade barriers in other markets should be followed closely. Also, shifting fiscal and tax regimes in Brazil, as we also called out last quarter is another potential headwind. And finally, potential for currency devaluations and/or changes in FX regimes beyond Argentina, such as Egypt or Bolivia. Now with that, let me wrap up. As a team, we are squarely focused on continuing to execute on the large opportunity before us, confident that we're building a leading emerging market financial infrastructure company over the next decade and beyond. Thanks, everyone, for your trust and partnership, and we'll now open the line for your questions. Operator: [Operator Instructions] Our first question coming from the line of Tito Labarta with Goldman Sachs. Daer Labarta: I guess 2 questions, if I can. I guess, first on Argentina? I know you've been flagging sort of some concern about the FX. But how much of Argentina was impacted just by the uncertainty around the elections in September and then going into October, do you think now with the market views as a positive outcome to the election, can that subside and can potential growth in Argentina offset some potential FX devaluation from here? And then my second question, I mean you also mentioned changing tax regimes in Brazil. There was some news intra-quarter impacting Netflix and taxes on expecting funds outside of Brazil. If you can give some color on how that could potentially impact your business, if at all, and how that could impact volumes between cross-border and our local-to-local... Pedro Arnt: Thanks, Tito. Argentina, we have seen a gradual pickup in total payment volume post elections as consumers in that market probably sense a little bit more of stability and predictability of the economy. So from a TPV perspective, it has been positive. We now need to observe what happens with exchange rates, right? And I think that was our only note of caution. It's a market that we are very bullish on for the fourth quarter in terms of volume growth and the underlying growth of our business. We just don't know what's going to happen with FX and so we're monitoring that one closely short term. I think longer term, the signs coming out of Argentina are positive. And the spread compressions that negatively affected the third quarter and were the principal driver of weak gross profit. A lot of that has been repriced, so as to improve spreads again. And so that's also positive in terms of potential for Argentina in Q4. On Brazil, the specific tax that our client referred to is one of the many moving pieces in the Brazilian fiscal puzzle. That particular one, not only does it not affect us, but I think potentially with some of our payment structures could become more attractive for global merchants looking for local payment capabilities that don't get subject to that specific tax. But in general, because the ruling doesn't apply to payment facilitators such as ourselves. So that's not a negative. The only things we're mentioning about the Brazilian fiscal landscape, just to be clear here, is we haven't necessarily seen anything that negatively impacts us. There has just been so many moving pieces there that we're just leaving a note for investors to track all the occurrences but there is no anticipation at this point that something will negatively affect us during the next few quarters, given everything that's been determined up to now. Daer Labarta: Okay. That's clear, Pedro. Just 2 quick follow-ups, if I may. On the FX in Argentina, I mean, for now, it seems like the government wants to maintain the band that they have. If that band is maintained at least in the short term, is that more positive for you? So they let the currency float, would that potentially be more negative? Just to understand how the band removing of the band and what happens afterwards would impact you? And second question on Brazil, there have been something about taxing fintechs at a higher rate, which was not passed by Congress. But just curious, would you have been potentially one of those fintechs that would have had that higher tax rate if that had been passed or just curious where your Brazilian subsidiary would fit in that tax regime? Pedro Arnt: So if Argentina remains within their currently informed crawling peg, then that's probably a positive outcome for us. I think what would be negative for us or for anyone with exposure to Argentina. And just to put this in context, right, Argentina was only 12% of our business from a gross profit perspective this last quarter. So I understand it's a complex market, but let's not focus only on that market when we're seeing phenomenal strength across other markets. Brazil, which was a concern has rebounded excluding Egypt, other Africa and Asia continue to perform really well, and the rest of Latin America came in really strong. So just to, I think, take a step back and put Argentina in context, or else we focus on the noise there and not on everything else that's going on. But I think the answer to your question is, if things remain within the crawling peg which the government is extremely committed to and has the significant backing of the U.S. government as well, then that's a positive outcome for us moving forward. If they let it float then it depends on how big is there of a devaluation, if any. So who knows? Brazil, on the potential fintech tax regime, I don't know the answer to that. Daer Labarta: Okay. I could follow up with you on that separately. Thanks for that Pedro. And that's a bit on the things that are concerned, but I just want to make sure the questions get answered... Pedro Arnt: No, no, super understood. Just trying to put it in a larger context as well. Daer Labarta: Of course, of course. I'll appreciate that. Thanks a lot Pedro. Operator: Our next question coming from the line of Matthew Coad with Truist Securities. Matthew Coad: Pedro, like you mentioned, another really strong quarter of volume growth above 50% year-over-year. It seems to me like a lot of the strength has come from the remittances and e-commerce verticals. And I was just hoping that you could kind of like opine on that and touch on the outsized drivers of growth there? And then also maybe talk about how you're thinking about those verticals for the next 12 months. Should we be worried at all about a slowdown due to tariffs, due to tax regimes, due to law of large numbers and tougher comps? Just hoping that you could touch on that a bit more. Pedro Arnt: Yes. So look, these are two of the largest digital payment verticals. Commerce is probably the largest so the fact that it continues to grow nicely in a way is an indexation of the overall digital payment landscape in emerging markets. I'd also point to pretty strong growth across a fairly diversified number of verticals. I mean, hovering at around that 50% average, you have our streaming business, Software-as-a-Service merchants, on-demand delivery merchants, ride-hailing merchants. So almost the entire online consumer digital world is growing at or around that average. And then the one that continues to be soft is advertising. I think looking into 2026, we expect continued strength in remittances in commerce. Let me remind you that remittances is particularly important because it generates outbound flows into the emerging world, and that makes us somewhat unique in that we are one of the global PSPs, if not the one with the best balance between pay-ins and pay-outs, which generate cross-selling opportunities across merchants, but also allows for interesting netting opportunities, which keep the take rate on our businesses more defensible given those netting opportunities where we keep the entire FX spread. And we see no signs of alarm for those business. Now obviously, when you're growing at over 200% like the remittance business year-on-year, you could potentially see natural deceleration but nothing beyond what's expected when you're coming from such strong growth. Matthew Coad: That was super helpful. And then just as my quick follow-up, I want to talk about the take rate. So on the positive side, what I was trying to better understand, you guys provide that nice walk in the deck. And you're pointing to a 4 bp headwind from an others category. I was wondering if you could shine some light on what that was? And if there was anything onetime in there that could reverse? And then the other thing I wanted to ask was in -- on the guidance slide, you guys mentioned the potential risk of aggressive discounting by competitors. Is that just a risk to be aware of? Or is that something that you've been seeing in some of your markets? Pedro Arnt: Yes. So there is a strong one-off nature to that other. So that's not necessarily a continued compression of take rate. I think if you were to call it a normalized take rate, pulling out one-offs, it would have remained above 100 basis points for the quarter. And we've always pointed to the fact that I think the general trend for take rate, we believe, is still potentially downward but with a volatile trajectory and not necessarily at a very fast pace. I mean had this been 103%, then it would have only been down 4 basis points sequentially after having gone up a little bit in the second quarter versus the first quarter. Discounting, I don't think it's that necessarily we're alerting folks to something that's very specific to this quarter. But generally, every single Q4, this is common in the payments industry where you will see more discounting in exchange for volume during the peak shopping season occurring from competitors, we do it as well. So it's simply, I think, part of what we observed in the industry during the peak season is something that's worth pointing out as just to be aware of. Operator: And our next question coming from the line of Guilherme Grespan with JPMorgan. Guilherme Grespan: Congratulations on the results. My question is on Brazil. trying to get together here the pieces that I have on Brazil, a pretty strong rebound sequentially again. And we have our internal tracking here. We saw a very strong performance since May specifically, at least in our tracking. So my question is basically trying to understand the nature. Is it a specific client? How much concentrated is this additional revenues and gross profit you're getting from Brazil. And if you can provide a little bit more color, I also see that the gross profit margin of the country has been moving up. It made a bottom at 38% in the first quarter, now rebounded to 50%, which tends to hint sometimes that this is more FX cross-border. So in summary, long story short, just trying to understand what is the composition of this Brazilian growth pretty strong rebound. Pedro Arnt: Yes. So first one, categorically, it's not driven by a single merchant. It's driven by a strong reacceleration of growth in some of our long-term global relationships, combined with the ramp-up of some important adds that we made in 2024 and then some important wins from more recently that have also begun to pick up steam very fast. So it's very likely that most of the relevant global digital services or e-commerce players that are performing well in Brazil now, we power some or all of their payments. So Brazilian strength has been very broad-based. Brazil does have a higher share of cross-border and also a higher take rate composition than, say, Mexico, which is the next market in size. So that means that there are more cross-border merchants and more ForEx that we do in Brazil and also better spreads than in Mexico. Operator: Our next question coming from Jamie Friedman with Susquehanna. James Friedman: Congratulations on the results. So I wanted to ask you, Pedro, about your comments in your prepared remarks about the relative growth of local-to-local and the expectation of that going forward and the comment about Buy Now, Pay Later in the same context. So first, I want to clarify with those comments. Is that -- were you speaking specifically about Brazil? Or is that more broadly across the platform? And secondly, how could we interpret the take rate conclusions of that? Because it would seem to me like if local-to-local is outgrowing cross-border, that's dilutive to take rate, but local-to-local take rate may be moving higher if there's more about Buy Now, Pay Later, if you know what I mean. So those are 2 questions in there. Pedro Arnt: Okay. So look, I think the cross-border volumes and cross-border mix, so the part of our business that has a local payment transaction, followed by repatriation of funds to the merchant overseas which was a concern a few years back, if that was going to lose mix significantly has had very strong staying power. It's gained share for most of the past quarters and has remained a fairly stable, I think, overall mix for the company. So I don't think anything that we've seen in the recent history leads us to worry too much about a significant mix shift towards local-to-local, which understandably does have a lower take rate. But again, if you look at the percentage of cross-border volume, it has held up nicely. Buy Now, Pay Later, again, early, but what we're saying is, I think it's gotten off the gates to a good start. We're seeing significant merchant interest in looking at the Buy Now, Pay Later offerings. We've integrated a few Buy Now, Pay Later into some of our largest merchants and this is still a relatively small platform in terms of the number of Buy Now, Pay Later options that we're offering. That will only grow over time as we offer more Buy Now, Pay Later players and also in more countries. And as I said in my prepared remarks, the Buy Now, Pay Later offering does have the potential for being higher in terms of take rate because we monetize not only the merchant but also the credit originator by keeping a rev share on the credit that is distributed through dLocal onto the merchants client. James Friedman: Yes, that makes sense. I think we were trained at MDRs overall on Buy Now, Pay Later or higher, so presumably, you participate. I wanted to ask -- I got a lot of questions, but I'll just ask one more and drop it back into the queue. But -- in terms of your comments about alternative payment methods and 25 on-file. I kind of lost the train of thought there. Like my understanding was you had 1,000 or more APMs when I last checked. How is it different that you have 25 on-file, if I heard you right? Like what is that -- what does that mean? Pedro Arnt: Right. I think the on-file solution is a piece of what we call smart APMs. So these are tokenized APMs with additional features that we build on top of them with the objective of making the performance of these payment methods, be more and more feature rich and have performances more akin to credit cards. So the vision with the APM suite is eventually to be able to get APMs to perform in line with credit cards, yet they typically have an advantage of being real time, in some cases, being 24/7 and being a very, very commonly used, if not the most commonly used payment methods across emerging markets. So the differentiation between a normal noncard payment method and a part of this suite of products is that these have tokenization and added features that we're building in, which make the merchant experience and performance better. Operator: Our next question coming from the line of Neha Agarwala with HSBC. Neha Agarwala: First, really exciting new launches and initiatives that you had talked about. Just to clarify, I mean, with these -- the 27 APMs that you just mentioned, if I'm not wrong, the net take rate for APMs would be lower than that for cards. Your gross profit margin might be the same for both products, but in general, the net take rate should be lower for APMs. Pedro Arnt: That's right. They actually have a slightly better margin. They are lower in net take rate because they tend to be cheaper. They also have a significantly lower and cheaper cost basis. I think in many cases, their potential, as you well know, is that their volume increases are significant because a lot of the digitalization and inclusion of consumers across emerging markets, is not really happening on cards or internationally enabled credit cards, but happening through many of these real time networks or digital wallets. So the play there is a significant volume play. But yes, they do have lower net take rates. Neha Agarwala: Yes. So it could also be -- act as a differentiator versus your competitors by giving much better conversions on APMs and gaining a higher wallet share for these particular type of volumes? Pedro Arnt: Correct. But -- and I think more importantly, even than that is that consumers across the emerging world increasingly are adopting and using these local or alternative payment methods as their preferred payment methods. And even from a regulatory and almost geopolitical standpoint, many of these present sort of payment sovereignty for local governments. And so they're getting significant government backing and being widely adopted because of that as well. So we really envision local payment methods as a rapidly, rapidly growing portion of payments across most of the markets in the global south and we want to make sure that we've built the best suite of APMs with the best performance to capture that growing share of payments. Neha Agarwala: Perfect. My second question is on the take rate evolution more in the medium term. So as you mentioned, all of these factors will probably put pressure on the net take rate. And one way to offset is by probably having more embedded finance products and the BNPL aggregator that you launched is one of those products that you could offer but apart from that, what are the other embedded finance kind of products, which some of your competitors are probably trying to focus on for instance, card issuing or the stablecoin on runoff ramp that you mentioned. What are the products that we can think of in the medium term that would offset some of the pressure on the net take rate? Pedro Arnt: Yes. So I think, broadly, there will be a lot of financial infrastructure that we would like to build for our global merchants in emerging markets. The ones we've addressed because we have specific projects are built on, I think you mentioned most of them. It's the Buy Now, Pay Later product. It's our card-present capabilities. So the ability to also attack the largest portion of the payments market across the global site, which is still physical POSs or tap-to-phone solutions for physical global merchants we've mentioned and it's a big area of focus for us, stablecoins. So helping our merchants adopt stablecoins either as a way to move money cross-borders or potentially offering them the on-ramps and the off-ramps from stable to stable across the markets where we are important liquidity providers with competitive FX and liquidity. And we have some solutions that we offer in terms of KYC as a service or verification as a service for merchants who need a one API integration for KYC and verification across the markets where we serve. So those are the ones that either exist as products or we've mentioned because they're rolling out. I think more conceptually, we're getting better at building product and rolling out product. And so as merchant needs emerge, we feel increasingly confident that we'll be able to build product to address those. But we haven't specifically mentioned any of the other things we're working on. Neha Agarwala: Just to clarify on the card present capability that you mentioned. You're not trying to enter the off-line POS business, right? Now your presence is 100% online volumes. You're not trying to go into the offline volumes, right? Pedro Arnt: No, there are use cases where merchants that have a very similar profile to the ones we have today would benefit from our technology, our integration, our scale and aggregation so that we could offer our payment capabilities at physical point of sale. One example is merchants that deliver physical point-of-sale ERPs or other types of ISVs who need an integration between the software they sell and the physical POS. And so we're building a platform that does that integration and performs that payment. And so that would give us access to digital merchants that actually pursue physical clients, whether they be SMBs, restaurants or that kind of thing. Operator: And there are no further questions in the queue at this time. Ladies and gentlemen. This does conclude our conference for today. Thank you for participating, and you may now disconnect.
Shyamali: Good afternoon. My name is Shyamali, and I will be your conference operator today. At this time, I would like to welcome everyone to the PaySign, Inc. Third Quarter 2025 Earnings Conference Call. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being recorded. The comments on today's call regarding PaySign's financial results will be on a GAAP basis unless otherwise noted. PaySign's earnings release was disseminated to the SEC earlier today, and can be found on the Investor Relations section of our website, PaySign.com, which includes reconciliations of non-GAAP measures to GAAP reported amounts. Additionally, as set forth in more detail in the earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding PaySign's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of PaySign's earnings release, and in its recent SEC filings. Lastly, a replay of this call will be available until February 12, 2026. Please see PaySign's third quarter 2025 earnings call announcement for details on how to access the replay. It is now my pleasure to turn the call over to Mr. Newcomer, President and CEO. Please go ahead. Thank you, and good afternoon, everyone. Mark R. Newcomer: I appreciate you joining us as we review our third quarter 2025 results. I'm Mark Newcomer, President and CEO of PaySign. Joining me today is our CFO, Jeff Baker. Also on the call are Matt Turner, President of Patient Affordability, and Matt Lanford, our Chief Payments Officer, both of whom will be available for Q&A following our prepared remarks. I'm pleased to report another outstanding quarter of growth for PaySign. Earlier today, we announced record revenue of $21.6 million, up 41.6% year over year. Adjusted EBITDA reached a record $5 million, an increase of 78%, and net income rose 54% to $2.2 million, or $0.04 per fully diluted share. Alongside these financial results, we achieved meaningful operational efficiencies that Jeff will discuss in more detail shortly. Our patient affordability business continues its exceptional growth trajectory, generating $7.9 million in revenue, up 142% from the prior year's quarter. We ended the quarter with 105 active programs and expect to add 20 to 30 more by year-end, including 13 launched in October. This would bring us to 125 to 135 active programs by the end of the year compared to 76 at the end of 2024, a clear indicator of our sustained momentum and future growth potential. During the quarter, we announced the opening of our new 30,000 square foot patient support center, a major milestone for PaySign. This expansion quadruples our support capacity, allowing us to meet growing demand and deliver an exceptional service experience for our clients, patients, and providers. This facility also supports a growing high-value offering: dedicated patient support representatives, which has become increasingly popular across our client base. Our growth is driven by comprehensive product offerings, best-in-class service, transparent pricing, and our proprietary dynamic business rules technology. By integrating dynamic business rules into the traditional commoditized pharmacy claims process, our pharmaceutical clients save hundreds of millions of dollars while unlocking new revenue streams across the patient affordability ecosystem. Our success in specialty pharmaceutical programs continues to open doors in the pharmaceutical space, where higher claims volumes and multi-product manufacturer engagements present significant opportunities. Expanding our presence in this area remains a top priority of our sales teams. Our pipeline remains robust, fueled by both new and existing clients across retail and specialty. We anticipate activity from new drug launches and transition programs already in the queue, with the sales cycle holding steady at roughly ninety days, a strong signal of consistent execution and demand. Our mission extends well beyond payments. We're redefining how financial support is delivered across healthcare, removing cost barriers to treatment and generating measurable savings for patients and our pharmaceutical partners alike. The continued strength of the patient affordability business underscores the power and scalability of our model. Turning to our plasma donor compensation business, revenue grew 12.4% year over year to a record $12.9 million, despite a net loss of 12 centers, leaving us with a total of 595 active centers at quarter-end. As we have previously discussed, the plasma industry continues to face an oversupply of sourced plasma, which we expect to normalize in 2026. Encouragingly, average donor compensation per donation increased during the quarter, and that trend has carried into Q4. Combined with positive client discussions, we see potential for organic growth at the center level sooner than previously anticipated. We are executing on our strategy to expand our role in the blood and plasma ecosystem, evolving from a trusted payments provider to a technology partner. Our Software as a Service engagement platform, which includes a donor app, plasma-specific CRM, and a donor management system, also known as a blood establishment computer system or BECCS, continues to generate strong interest both domestically and internationally. As we await FDA 510 clearance for the BECCS, we are actively showcasing the platform to the blood and plasma industry, who are eager to find efficient, user-friendly, cost-effective alternatives to the current offerings. The reception has been overwhelmingly positive, reinforcing our confidence in the long-term opportunity for this business line. In summary, Q3 was a stellar quarter of strong execution and innovation. We are scaling efficiently, expanding into new markets, and delivering transformative value across both patient affordability and plasma, two sectors where we're redefining expectations and disrupting the status quo. I'm incredibly proud of our team's continued focus and discipline. Their dedication to delivering results with purpose continues to drive our momentum. Looking ahead, we remain confident in our growth trajectory and firmly committed to building long-term value for our shareholders. With that, I'll turn it over to Jeff for a closer look at the financials. Jeffery B. Baker: Thank you, Mark. Good afternoon, everyone. As Mark said, we had another strong quarter as we continue to build momentum heading into 2026. We had some nice wins in our patient affordability business, from both new relationships bringing us multiple programs to existing customers bringing us additional programs. Our plasma business posted year-over-year growth during the quarter with the additions of the new centers we won in the second quarter. We exited the quarter with 595 active plasma centers and 105 active patient affordability programs. More importantly, we ended October with 118 active patient affordability programs, with additional programs being added weekly. Our consolidated gross profit margins continue to improve on a year-over-year basis despite the new plasma centers weighing on the margin due to their lack of maturity. We expect improvement from these levels as the new centers mature over the next six to nine months. We also expect improvement in our consolidated gross profit margins as we ramp up our new customer service contact center that we opened in September. As our business continues to grow and we continue to make the necessary investments in people and infrastructure to ensure the success of our growing business, we expect our operating margins and adjusted EBITDA margins to continue to expand on a year-over-year basis, demonstrating the operating leverage inherent in our business. In summary, we could not be more excited about the prospects of our business for the remainder of this year and throughout 2026. I encourage everyone to read our 10-Q for more details about our financial results, which is expected to be filed tomorrow morning before the market opens. Now turning your attention to the results for the third quarter. Revenue and adjusted EBITDA results exceeded the guidance we provided last quarter. Third quarter 2025 total revenues of $21.6 million increased $6.3 million or 41.6%. Adjusted EBITDA of $5 million increased $2.2 million or 78.1%. Plasma revenue increased 12.4% to $12.9 million, while our revenue per plasma center declined to $7,122 as the new plasma centers added in the second quarter have not reached full maturity and our legacy centers continue to be impacted by the industry-wide oversupply of plasma. Gross dollars loaded to cards increased 21%, total number of loads increased 19.3%, and gross spend volume increased 19.2% due mainly to the new centers added in the second quarter. Patient affordability revenues increased 142% to $7.9 million and accounted for 36.7% of quarterly revenues. This is a significant increase from the 21.5% of revenue that Pharma represented just during the same period last year. We added eight net programs, exiting the quarter with 105 pharma patient affordability programs and grew the number of claims processed by over 60% versus the same period last year. Gross profit margin for the quarter improved 72 basis points to 56.3%. SG&A excluding depreciation and amortization and stock-based compensation improved by 410 basis points to 32.9% of revenue, while total operating expenses improved by 210 basis points to 48.9% of revenue. Having made significant investments in our employee base over the past year to support the continued growth in our businesses, compensation and benefits increased 20.3% to $7.2 million. We exited this quarter with 222 employees versus 162 during the same period last year. Stock compensation increased 32% to $1.3 million related to the issuance of additional restricted stock units for new hires and employee retention. Depreciation and amortization expense increased 39.9% to $2.2 million due primarily to the amortization of continued enhancements in our technology platform. Net income for the quarter was $2.2 million or $0.04 per fully diluted share versus $1.4 million or $0.03 per fully diluted share for the same period last year. Positively impacting net income was a lower income tax provision resulting mainly from the recent changes in tax code offset by lower net interest income mainly related to the implied interest expense of future cash payments for the Gamma acquisition. Third quarter adjusted EBITDA, which is a non-GAAP measure that adds back stock compensation to EBITDA, was $5 million or $0.08 per diluted share versus $2.8 million or $0.05 per diluted share for the same period last year. The fully diluted share count for the quarters used in calculating the per share amounts was 61.8 million and 56.1 million respectively, an increase of 5.7 million shares. Regarding the health of our company, we exited the quarter with an adjusted unrestricted cash balance of $16.9 million and zero debt as we generated strong operating cash flow and continue to experience operational benefits of our Gamma acquisition. Just a reminder, the adjustment to our unrestricted cash balance reflects the short-term impact of our account receivable and account payable balances related to our pharma patient affordability business. Now turning your attention to our revised guidance for 2025, which now incorporates Q3 actuals. We are raising our revenue guidance to a range of $80.5 million to $81.5 million, reflecting year-over-year growth of 38.7% at the midpoint. Plasma is estimated to make up approximately 57% of total revenue, representing a modest year-over-year growth, while pharma patient affordability revenue is expected to make up approximately 41% of total revenue, representing year-over-year growth of over 155%. Full-year gross profit margins are expected to be approximately 60%. We expect operating expenses to be between $41.5 million and $42.5 million, with depreciation and amortization expense of approximately $8.4 million and stock-based compensation of approximately $4.3 million. We expect interest income to be approximately $2.6 million, our full-year tax rate to be 18.7%, and our fully diluted share count to be 59.76 million shares. Taking all the factors above into consideration, we have raised our net income estimates to be between $7 million and $8 million for the year, or $0.12 to $0.13 per diluted share. Adjusted EBITDA is now expected to be in the range of $19 million to $20 million, or $0.32 to $0.34 per diluted share. With that, I would like to turn the call back over to the moderator for questions and answers. Thank you. Shyamali: You may press 2 to remove yourself from the queue. Our first question comes from the line of Jacob Stephan with Lake Street Capital Markets. Please proceed with your question. Jacob Michael Stephan: Hey, guys. Appreciate you taking the questions. Congrats on a nice quarter here. Maybe just first, wondering if you could help us think through some of the comments Mark made on retail versus specialty pharmacy. Do you have a current mix number you maybe could give us? Or, I mean, maybe you could talk through pipeline mix a little bit as well between the two? Matt Turner: Hi. This is Matt Turner. We don't I don't have that information in front of me. We can you know, Jeff can follow back up with you on that. And we'd probably want to give more of a maybe a percentage there. But we do have a decent mix right now of retail versus specialty. As you look at the pipeline moving into next year, there is the addition of more retail programs I don't know the exact number. If you were to look at overall program count, but it's a higher percentage moving into next year in the pipe and that would kind of be all stages of the pipeline that would have a retail versus a special component. Jacob Michael Stephan: Okay. Got it. Maybe so it sounds like this is a is a little bit bigger opportunity. Maybe you know, higher claims volumes on the retail side? Maybe you could just kind of elaborate on that a little bit. Matt Turner: Yes. So retail products, due to their cost and the propensity are to be prescribed, because they're dealing with a lot more what I would call generic types of ailments. You'll you tend to see just a higher percentage of people be prescribed those drugs. Sometimes it's for acute issues. Sometimes it's for chronic. If you if you were to look at the retail programs right now that we have, we, you know, we have some in the, you know, in, like, the pulmonary space. So some inhalers, things like that. There's a component of people who will be a written inhaler they have asthma and they're gonna have an inhaler every day for the rest of their And then you have people that come down with bronchitis, and they'll use it for a month or two, and then they're off of it. So the the mix that you see of utilization tends to be a little bit higher, so you get a higher patient count. Inside of those programs. Whereas the specialty drug, lot of times, you know, the number of people that are taking that drug is obviously lower because it's a specialty product. And you don't typically get an acute indication for a specialty drug that we would represent or that would have a program with us. So just the ability to onboard more patients in the programs tend to be higher with retail products than it does with specialty. So that's why you'll see the increased claim volumes as well as the offer value on a retail product is gonna be substantially different. So patients will not necessarily burn through their out of pocket max on a retail product like they would on a specialty product. Specialty product is $25,000 and a patient has an, you know, a $7,000 out of pocket max, they can get through their entire out of pocket maximum, you know, in a couple of fills. Whereas with a retail product where the offer value is, say, 2 or $300, they could use that 12 times a year. So instead of only getting two or three claims for that patient on a specialty space, we would get 12 in a retail space. Jacob Michael Stephan: Okay. Got it. That's that's very helpful. Maybe second one. Jeff, you kinda talked a little bit about gross profit margins expanding as you know, the patient success center continues to ramp. I'm wondering if you could kinda help us think through, you know, current capacity utilized and and maybe, you know, where you expect to be with with these 22 ish new centers, online in the second half or in the last quarter here? Jeffery B. Baker: Well, that's this I think you're of mixing the The centers, we didn't say there would be 22. We were saying in the second half of the year on the patient affordability pharma side. Where we would add between twenty and thirty. The centers, we don't really you know, we're going into the end of the year. Don't really expect those to change too much, you know, plus or minus a couple here or there. And but the comment about the majority of those relates to those centers coming up to the average of our our core base. So there are fees that typically don't kick in for you know, ninety plus days afterwards where we start to see the benefit of a fully you know, mature centers. The centers have been open for quite some time, but from our revenue opportunity, it just takes time for it to come through. For example, inactivity, fees and things of that nature. So as those become more mature, as we see, also see a return to growth, etcetera, I expect the gross profit margins in the plasma business to to to improve, from where they were this quarter. Jacob Michael Stephan: Okay. Got it. And then maybe just last one. You know, I I think when you kinda run the numbers as you look at Q4 here, and what you're communicating with pharma revenue growth. You know, it it implies a sequential step down in in average quarterly revenue. Per program. Maybe maybe you could kinda help us think through, you know, what the the difference is And maybe contrast that with what you see this year Last year when it was actually a sequential step up from Q3 to Q4. Yeah. I mean, last year, we had more newer programs with fewer claims. Now this year, we have a lot more programs with claims and the claims will fall off in the second half of the know, year. It's a seasonal seasonal businesses. Matt alluded to earlier. When everything reset. So that's the that's the difference. Know, we just have we have more we we have it's a it's a mixed issue where where the, mix is more geared towards claims versus initial launch. Fees? Jeffery B. Baker: Okay. Understood. I appreciate all the color. Nice work. Jacob Michael Stephan: Thank you. And and the other thing I will say, Jacob, is you can't look but I appreciate you calling us out, you cannot look sequentially at these numbers. You have to look on a year over year basis. So last year, we did $56,700 in the fourth quarter. Revenue per program. That will be up year over year that will be up year over year versus the versus last year. This year, we did in the third quarter, 75,434. Last year, we did, you know, just under 50,000. So you have to look at this business on a year over year basis. Sequential numbers are absolutely meaningless. Jacob Michael Stephan: Okay. Very helpful. Thank you. Gary Frank Prestopino: Yep. Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Please proceed with your question. Gary Frank Prestopino: Hi, everyone. Is there well, of all, could you kind of tell us what a mature program would do in an average revenue basis versus, you know, you say 75,000 now, but you've got obviously got some programs that are just coming into the mix or have just come in the next what does the mature program do? Per quarter? Jeffery B. Baker: Gary, it really it really depends. I don't I don't mean to skip or overlook the question, but I mean we have programs that that do $2,000 a month, and we have programs that do, you know, 20 x that. It's it just it really depends on the program. So when it's mature, I mean, we see it coming into the numbers and there are things that a a drug may do and may get another indication which causes that claim to go up. On a year over year basis. Some some of the programs, it's just, you know, just pretty much flat year over year once it becomes mature. It it's really hard to say. But to to say what a mature program is, is it's it's it's too variable. Gary Frank Prestopino: Well, how about how about this? Is there a difference between a specialty versus just a regular retail program in terms of the average revenues? Matt Turner: Yeah. Hi, Gary. This is Matt. So when you look at the different product suites that those programs would use, We would typically value a specialty program as being worth more money provided it has the appropriate indications. But again, it's all in the mix, right? So I, you know, I can name off 20 drugs right now that you've never once heard of. Right? You've you've never heard of these drugs. Then I can name off five that you've heard of. And you'd be like, oh, if you have that drug because I've seen 500 TV ads it, you've gotta be making a ton of money with that drug. And that could be right or it could be wrong. It depends on the patient population of that drug. How old are they? They're mostly on Medicare? Are they mostly on Medicaid? Yeah. It's it's a very complex thing to look at this and say, okay, well, I've heard of insert name of giant drug, you know, and you you think of golf, you know, the golf people talking about their psoriatic arthritis. And you think, oh, well, that's a great drug. Yeah. That could be because that's not impacting you know, the the lion's share of the patients taking that drug aren't 70 years old and on Medicare. So that could be a good one. But then I could bring up other drugs you've heard about that are cancer therapies. And, you know, or for Alzheimer's. And even though those are huge drugs for their company, right, for the manufacturer, they're not gonna make us any money. So you really have to look at how big a program's gonna be based on what's the patient population, right? What's the cohort of the patient population that can utilize our products. And then what other you know, additional pieces can we stack on top of that? Mark talked about dynamic business rules. That's in the specialty space. We currently don't have that active on any of our retail programs. So a specialty program utilizing dynamic business rules gonna be far more profitable to us and have higher top line revenue numbers than a retail program that could be doing 10 times the claim book. So it's it's a it you really have to understand the drugs specifically, their patient populations, and the cohorts of those patients that would potentially utilize copay inside of the overall eco or, you know, the overall numbers of the patients. Gary Frank Prestopino: Okay. I mean, that's that's helpful on that. You you can't really know, peg a drug to or you you it's hard for us to ask ascertain what's gonna add layer. You just on on a drug basis or a program basis or retail versus specialty as as Jeff said, just look at the average revenue per program quarter over quarter. Right? Yeah. And and I think, look, if we were able to if our client would let us just come out and tell you, we won this brand I think you guys would be in a much better situation. Right? Because you'd say, oh, hey, Seen it on TV. And the people that take that drug are, you know, most of them are gonna be under 65. So, hey. Right. We you know, Payson's probably gonna do really well with that. Or, This is an oncology product and it's, you know, it's tiered towards breast cancer. You know, so in that instance, We're probably gonna do really well with that program. And you can also look at the information coming out of the manufacturer as far as how big is that drug, how much revenue are they generating from it. Unfortunately, we don't we don't we can't do that. Almost every one of our master services agreements requires us to not disclose who our clients are. And the brands that we represent. And it's certainly not for trying on our part to get them to allow us to talk about those, you know, those brands. And I think if you look back at previous earnings calls where we've been able to discuss specific brands or discuss specific clients, If you, you know, you kinda chat GPT some some questions out there, you might, you know, you might be able to get a better indication of the types of programs that we have running right now. Gary Frank Prestopino: Okay. And then just Mark, you mentioned something about this BECCS. Which you hadn't heard of that at all. So could they maybe you could go into that and how that that is gonna help you going forward? Mark R. Newcomer: Yeah. That is what we refer to as a blood establishment computer system or a BECCS. It's really a donor management system and it allows us to place into the plasma blood space. We have a suite of products that we have built out. It's a Software as a Service. That is, you know, we're we're dealing with donor app, a plasma-specific CRM, and the donor management system. And so what that allows us to do is gain a diff it's really an additional business line that is is going to allow us once approved with the FDA. It is going to allow us to start running down that path. Gary Frank Prestopino: Okay. Thank you. Peter James Heckmann: Thank you. Our next question comes from the line of Peter Heckmann with D. A. Davidson. Please proceed with your question. Peter James Heckmann: Hey, good afternoon. Thanks for taking the question. I'm just curious in the plasma business, it's probably hard to disaggregate, but I guess, have you sensed any uptick in donors given some of the issues around, withholding SNAP benefits? As part of the government shutdown and and then conversely, what type of of headwind are you feeling in terms of just the increased ICE activity with detaining immigrants and deporting immigrants in terms of donors? You think on a net basis, do you think those offset each other? Or could you just comment on any dynamics you're seeing? Jeffery B. Baker: I I Peter on the on the latter question. I can tell you, we haven't seen any change. Remember, when you when you give plasma, there you have to present an ID. So so they can track you and do everything else. So people that are here illegally in The States, without the proper identification aren't given plasma. So there's been zero impact related to the change of our our immigration population. As for the the other with the shutdown, the shutdown's only been around you know, a couple of weeks. We I haven't seen, maybe Mark's seen, but I I we really haven't seen any change, in the in the donors on that. Mark, have you what have you seen? Anything? No. We haven't seen haven't seen it. Peter James Heckmann: Okay. Haven't seen it yet. Alright. Mark R. Newcomer: No. And and and not really not really expecting to at this point. Obviously, we've seen in the past, we've seen kind of it looks like it's starting to loosen up a little bit coming into the fourth quarter, and we expect it to loosen up probably the second half of the year. And that is around the the donor that is around the the the donor what we're doing with the donors in regards to payments. So we're seeing the the the payments that we're sending out are starting to go up. And we would expect that to continue for probably the next six to twelve months. Peter James Heckmann: Okay. I see. And then just on that latter question on the on the donor management CRM engagement platform, I guess, any insights into the timing for when that approval might come through? And then in terms of, like, just sizing that opportunity, is is that something where there's you know, hundreds of customers and and and each system could be you know, hundreds of thousands of dollars? Or how should we be thinking about that in terms of the potential benefit? Mark R. Newcomer: Yeah. I mean, we were to get through the FDA approval sometime in fourth quarter. Going into first quarter. We obviously didn't expect the shutdown and we certainly expect it to last as long as it has. Obviously, that will push us back probably first quarter, second quarter. Hopefully, earlier. And regarding how to think about it, no. There's not you know, in The US market, you can you know, it's a readily available number of how many clients are out there. I wouldn't call it hundreds. Of clients in The US market. However, there are, you know, you know, there is a ton of center by center basis that we would would license, but it's early days and I don't really wanna get into the model by which we're gonna go out at this point in time. Peter James Heckmann: Alright. Well, just stay tuned. Appreciate it. Mark R. Newcomer: Yep. You're welcome. Thank you. Shyamali: And as a reminder, if there are any additional questions. And we have reached the end of the question and answer session. I'd like to turn the floor back to Mark Newcomer for closing remarks. Mark R. Newcomer: Thank you. Obviously, we're proud of our progress. Optimistic about the future. Dedicated to delivering substantial growth and long-term shareholder value. And we look forward to updating you again next quarter. Shyamali: Thank you. And this concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to the Third Quarter 2025 Pharma Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11. If your question has been answered and you'd like to remove yourself from the queue, press 11 again. We ask that you limit yourself to one question and one follow-up. I would now like to turn the call over to Chad Fugier, Vice President of Investor Relations at Ascendis Pharma. Please go ahead. Chad Fugier: Thank you, operator, and thank you, everyone, for joining our third quarter 2025 financial results conference call. I'm Chad Fugier, Vice President of Investor Relations at Ascendis Pharma. Joining me on the call today are Jan Moller Mikkelsen, President and Chief Executive Officer; Scott T. Smith, Executive Vice President and Chief Financial Officer; Sherrie Glass, Chief Business Officer; Jay Donovan Wu, EVP and President, US Markets; and Aimee Shu, EVP and Chief Medical Officer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements that are intended to be covered under the Safe Harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to, statements regarding our commercialization and continued development of Skytrofa and Eurvipath, as well as certain expectations regarding patient access and financial outcomes, our pipeline candidates, and expectations with respect to their continued progress and potential commercialization, our strategic plans, partnerships and investments, our goals regarding our clinical pipeline, including the timing of clinical results and trials, our ongoing and planned regulatory filings, and our expectations regarding the timing and the result of regulatory decisions. These statements are based on information that is available to us as of today. Actual results may differ materially from those in our forward-looking statements, and you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change, except as required by law. Additional information concerning these factors that could cause actual results to differ materially, please see our forward-looking statements section in today's press release and the Risk Factors section of our most recent annual report on Form 20-F filed with the SEC on February 12, 2025. TransCon Growth Hormone, or TransCon HGH, is now approved in the US by the FDA for the replacement of endogenous growth hormone in adults with growth hormone deficiency. In addition, the treatment of pediatric growth hormone deficiency in the EU has received MAA authorization from the European Commission for the treatment of pediatric growth hormone deficiency. TransCon PTH is approved in the US by the FDA for the treatment of hypoparathyroidism in adults, and the European Commission and the United Kingdom's Healthcare Products Regulatory Agency have granted marketing authorization for TransCon PTH as a replacement therapy indicated for the treatment of adults with chronic hypoparathyroidism. Otherwise, please note that our product candidates are investigational and not approved for commercial use. As investigational products, the safety and effectiveness of product candidates have not been reviewed or approved by any regulatory agency. None of the statements during this conference call regarding our product candidates shall be viewed as promotional. On the call today, we'll discuss our third quarter 2025 financial results and provide further business updates. Following some prepared remarks, we'll then open up the call for questions. With that, let me turn it over to Jan. Jan Moller Mikkelsen: Thanks, Chad. Good afternoon, everyone. In 2025, we accelerated our momentum towards fulfilling our Vision 2030 with key achievements in three areas. First, the global launch of Eurvipath continues to be strong, with a steady increase in new unique patient prescriptions and prescribers as seen in Q1 and Q2, along with expansion in new geographic markets. Second, we made great advancements towards leadership in growth disorders during the quarter. We saw the US approval of Skytrofa in adult growth hormone deficiency, and following our late-cycle meeting with the FDA, we are progressing toward expected approval of TransCon CNP in the US. Our strong operating fundamentals led to positive operating profit, signaling the beginning of sustained revenue and earnings growth for Ascendis. Now I will provide some specific comments on our commercial and late-stage portfolio. Starting with Eurvipath, Eurvipath continues its strong global launch with revenue of €143 million in the third quarter. Nine months into the launch in the biggest market, the US, patient demand continues growing quarter by quarter. From launch to September, more than 4,250 patients have been prescribed Eurvipath in the US by over 2,000 unique healthcare providers, highlighting the strong steady demand for Eurvipath even during the summer months. In October, the positive trend continued with Eurvipath being prescribed for more than 400 new patients in the US alone. Positive physician and patient experiences are driving a high rate of compliance, and we expect most patients will be on lifelong PTH therapy. We are expanding our physician reach each quarter within the endocrinology community, and we are also expanding to other physician groups who manage hypoparathyroid patients. As an example, at last week's American Society of Nephrology meeting, we presented three years of kidney function data across our combined clinical trials, demonstrating sustained clinically meaningful improvement in kidney function in Eurvipath-treated patients. In addition, we continue working hard to expand patient access in the US. The overall insurance approval rate since the start of the launch is around 70% of total enrollment, and we believe this figure will continue to increase over time. We currently see approval across all payer types, with a majority of approvals within eight weeks. We are pleased by the robust uptake of Eurvipath in our first three quarters of commercialization in the US. Today, less than 5% of US patients are currently on Eurvipath treatment. We see significant room to grow with around 82,000 to 90,000 patients already diagnosed with chronic hypoparathyroidism in the US and 3,000 to 4,000 new patients being diagnosed every year. Outside the US, Eurvipath is now available commercially or through named patient programs in more than 30 countries. In Germany, Austria, and Spain, we have now full commercial reimbursement. In Japan, our partner, Taigen, launched Eurvipath commercially last week following approval in August. We are looking forward to the commercial launch of Eurvipath in additional countries in the coming years. With a broad label covering hypoparathyroidism for all causes, international treatment guidelines that recommend PTH replacement therapy, and Eurvipath positioned as a first-in-class therapy, we expect sustained patient growth and revenue growth for years to come. As we are building this global market, we are expanding our offerings to patients with hypoparathyroidism. We are conducting the Pathway 60 trial to support doses up to 60 micrograms of Eurvipath in the US. We plan to begin a clinical trial for people 18 this quarter, and we are advancing our new once-weekly TransCon PTH product candidate, which we believe would be an attractive option for patients on stable doses of Eurvipath. In the new year, we will share more on our plans to maximize Eurvipath's value and reach even more patients. Let's now turn to growth disorders. Our growth disorders portfolio comprises our once-weekly growth hormone Skytrofa, approved for growth hormone deficiency, and our once-weekly TransCon CNP, currently under review by the FDA in the US and by the EMA in the EU for children with achondroplasia. Skytrofa is approved in the US and EU for the treatment of pediatric growth hormone deficiency. With this single indication, Skytrofa is established as a high-value brand and treatment of choice for pediatric growth hormone deficiency. Q3 revenue for Skytrofa was €51 million. In July, we received our first label expansion with FDA approval for adult growth hormone deficiency, the first of multiple planned label expansions. In Q3, we initiated our Phase 3 basket trial of Skytrofa with a range of established growth disorders, including ISS, shock deficiency, Turner syndrome, and SDA. Turning to TransCon CNP, we recently completed a late-cycle meeting with the FDA and are in the final stages of the label discussion. TransCon CNP is under priority review in the US, with a PDUFA date of November 30, and is also under review in the EU, where our MAA filing was validated. TransCon CNP, once weekly, is well-positioned to become the leading treatment for children with achondroplasia, with a full degree of linear growth outcome that can be achieved with monotherapy addressing the overactive tyrosine kinase gene. In addition, TransCon CNP achieved statistical improvement in leg bowing compared to placebo, increasing spinal canal dimension, a safety and tolerability profile compared to placebo, with a very low rate of injection site reactions and no cases of symptomatic hypertension. We are confident in TransCon CNP's ability to be a leading therapy. While we believe TransCon CNP monotherapy is transformative by itself, we want to further enhance outcomes for people living with achondroplasia. Earlier this year, we presented 26-week results from the Phase 2 COAT trial of TransCon CNP in combination with TransCon Growth Hormone, which showed around three times improved linear growth compared to what had been observed with monotherapies over the same time period. This resulted in healthy linear growth in children with achondroplasia, higher than that observed with an average state of children, accompanied by improvement in body proportionality and without acceleration of bone age. This data has been recognized by key opinion leaders as groundbreaking. Based on this data, we believe over time, the standard of care in achondroplasia will include combination therapy as a treatment option, building on the protected role of TransCon CNP as the backbone therapy. Following our recent FDA end-of-phase 2 meeting related to our combination therapy, we plan to initiate a Phase 3 trial this quarter. We anticipate disclosing 52-week data from the COAT trial in early 2026. With once-weekly growth hormone and once-weekly CNP, two highly differentiated medicines both as monotherapy and in combination, we believe Ascendis is well-positioned to become the global leader in many different growth disorders. Our Vision 2030 also includes creating value through partnerships, and we see that being achieved through the rapid progress of Taigen in Japan, endocrinologists in metabolic and cardiovascular diseases, VISEN in China, and Iconis in ophthalmology. The once-monthly semaglutide program is making fast progress towards the clinic. And finally, the commercial success of Eurvipath and Skytrofa has already transformed the financial profile of Ascendis. In the third quarter, we achieved positive operating income along with positive cash flow. For the near term, the building out of our commercial organization is largely completed in advance of future global launches. For the medium term, label expansion LCM activities have been initiated to maximize the value of our current products. At the same time, for long-term sustainability, our R&D organization continues to advance the TransCon technology platform to ensure a constant flow of new programs and potential new products. In summary, with TransCon CNP nearing potential approval, Ascendis is well-positioned to get approval of its third TransCon phase product in a row. This highlights the uniqueness of Ascendis, the continuous development of highly differentiated products created by the TransCon technology platform and our unique low-risk drug development algorithm. Importantly, our current three rare disease endocrine products position us for durable future growth and give us confidence in our aspiration to achieve €5 billion or more in annual profit revenue in 2030. I will now turn it over to Scott. Thank you, Jan. Scott T. Smith: I would like to reiterate Jan's comments that the positive operating income development seen in Q3 signals the transformation of our financial profile, with sustained revenue and cash flow growth. With that, I will touch on some key points surrounding third-quarter financial results and outlook. But for further details, please refer to our Form 6-Ks filed today. In Q3, Eurvipath global revenue grew to €143.1 million, up from €103 million in Q2, with strong growth partially offset by a €3.6 million foreign currency headwind compared to the previous quarter. In Q3 2025, Skytrofa contributed €50.7 million, with 3% growth in demand offset by a €1.6 million foreign currency headwind compared to the previous quarter. Including €20 million in collaboration revenue, driven by a €13 million milestone related to Eurvipath and increased partner activity, total Q3 2025 revenue amounted to €214 million. Continuing on to expenses, R&D costs in Q3 were €66.9 million, down from €73.5 million in Q3 2024, primarily driven by the completion of certain clinical trials and development activities. SG&A expenses rose to €113.4 million in Q3 2025 compared to €69.8 million in the same period last year, reflecting the continued impact of global commercial expansion. Total operating expenses for Q3 2025 were €180 million, and operating profit for Q3 2025 was €11 million. Net finance expense for 2025 was €60.9 million, primarily driven by non-cash items, including a non-cash remeasurement loss of financial liabilities of €47.2 million. Net cash financial income over this period amounted to €400,000. Note that in our 6-Ks filed this evening, we provide more detail on the components of finance income and expenses. In future periods, we plan to introduce a non-IFRS EPS measure, adjusted for the impact of certain non-cash non-operating items, including those related to our convertible notes. This is intended to increase comparability of period-to-period results. Finally, we ended 2025 with €539 million in cash and cash equivalents, up from €494 million at the end of Q2. Turning to our commercial outlook, primarily driven by the ongoing global launch of Eurvipath, we expect continued revenue growth in the fourth quarter. For Eurvipath specifically, we expect continued growth driven by new patients, stable pricing, payer mix, and contracting in Q4. Longer term, we expect Eurvipath to be driven by continued growth in new patients on therapy, including expansion into additional markets. For Skytrofa, we believe that sequential revenue growth should continue to track growth in prescriptions with stable pricing, payer mix, and no changes in contracting, with offsets potentially driven by currency as we saw in Q3. Longer term, we expect growth for Skytrofa to be driven by geographic and label expansion. With that, operator, we are now ready to take questions. Operator: Our first question comes from Jessica Macomber Fye with JP Morgan. Your line is open. Jessica Macomber Fye: Hey guys, good afternoon. Thanks so much for taking my question. I was hoping you could speak to your expectations for the rate of new patient enrollments on Eurvipath in the US. From here, I think you talked about more than 4,250 as of the end of Q3, putting you at what is that? About 1,150 ads or maybe a little more relative to June 30. Can we think of that as kind of like a good number to work off of from here? Should it continue to kind of drift lower a little bit? Just hoping you can frame some expectations there. Thank you. Jan Moller Mikkelsen: Thanks. Yes. First of all, we see a steady stable number of prescriptions being written in the US. When we, in some way, take away the bolus that we have from the ERP program about the 200 plus patients we have in the ERP program. When we think about Q3, I'm actually pretty surprised positively about Q3 because I was fearing that prescriptions were not going to be written in the three weeks every physician typically takes out of their quarter in that time. And what I saw, we saw nearly the same number of prescriptions being written that we actually had seen in Q1 and Q2. And it's also following up with what we said in the October month. We saw more than 400 prescriptions being written in October. Unique prescriptions being written in October. So when I look at this launch, look at the US, I see a very, very stable launch. And what we're also doing, we're building a fundament like a strong, strong fundament. Because patients stay on lifelong treatment. And therefore, when you start a patient, it basically is continued quarter by quarter. So it's building out a house where you have a strong fundament taking one brick on around every quarter and the house getting taller and taller every quarter. Operator: Thank you. Our next question comes from Tazeen Ahmad with Bank of America. Your line is open. Tazeen Ahmad: Hi, good evening guys. Thanks for taking my questions. I just wanted to get a sense of how you're thinking about the rest of this quarter. Are you expecting to see impact from seasonality, I guess, you can call it just because of the upcoming holidays, Thanksgiving, Christmas, and New Year's? And do you think that the script trends for December would be directionally lower, let's say, than what you're seeing, what you saw for October? And then if I could ask about the TransCon CNP review, you said you're in final labeling discussions, which is good to hear. Can you just confirm whether or not you've had any requests for any type of data from the agency in the review cycle? Thanks. Jan Moller Mikkelsen: Let me take the last question. Thanks, Tazeen. First part, let me take the last question because it's an easy one because just no. Just no. No. No. No. It's really simple. So going to the next one, it's more what Scott Logan didn't read the FLS this time, which Chad FLS this time. But, you know, when I look forward in the future, yes, there are some holidays coming up. But when I look back, I was more worried about Q3 actually compared to Q4 because I actually believe that it's a longer summer vacation than in Q3 compared to basically what you will see in Q4. So I see pretty positive on Q4. I see the excellent increasing our prescription basis from physicians writing prescriptions with more than 500 new prescribers, meaning that having a broader, broader boat where there's more and more that can come in rowing on the ship, and this is where I feel pretty confident about it. So no worries from my side, Tazeen. Operator: Thank you. Our next question comes from Gavin Clark-Gartner with Evercore ISI. Your line is open. Gavin Clark-Gartner: Hey, guys. Thanks for taking the questions. I wanted to focus in on the conversion rate for Eurvipath. I'm wondering why it's only 70% and you noted that you expect it to be higher over time. How much higher do you expect it to be, and when do you think it'll be higher? Just had a follow-up on this too. Jan Moller Mikkelsen: Yeah. This is a question we have gotten multiple times every quarter. And what we have said in the previous quarter, we expect that it's going to be maturing over time. And it will go higher than that. And that is typical of what we have seen in launches. And I actually had a long discussion with Jay about it today. And, what is when we see it mature brand, is that 85% or is it 90%? Or what is really for the mature brand that you basically some way are ending up at that time. And I think from a modeling perspective is that we feel extremely well where we are today. We still have antibodies block taken into the situation. We're getting the patients. We're getting not only the prescriptions done. We're also getting the approvals done. And we're getting it done in a speed. And as Scott also put emphasis on this, we don't expect anything changing in the contracting environment in Q4. So we some may expect the same GCN for this product that we are seeing in both Q1, Q2, and here in Q3, and no changes to it. But, Jay, you can also take a little bit of our discussion about the future about what is really for a mature brand. Is that where we are today? And, also, we see a much higher number for Skytrofa after it got matured. Jay Donovan Wu: Yeah. Thank you for the question. As mentioned before, we're really encouraged about the 70% approval rate that we're seeing now. It's actually about what we expected or guessed at the beginning of the year just based on what we know about the clinical value proposition of the drug, which again, is incredibly positive and has been resonating with a lot of the payer accounts for which we are speaking with. To answer your question, Gavin, directly in terms of what that peak approval rate could be and at what timeframe, that's really hard to say. Right? When you look at some of the analogs for similar drugs that could, in some instances, take multiple years. And the reality is once you get to a certain high percentage, the remaining becomes a little bit more difficult simply just, given the heterogeneous landscape of the payers. Right? It becomes quite fragmented. A lot of the government payers might review it on different timetables. So we are meeting a lot of those timetables where they're at. And, again, we're continuing to talk about the incredible, positive clinical value proposition that we're seeing. And that alone is resonating with a lot of them, which is why we continue to see that approval rate go up over time. Gavin Clark-Gartner: That is super helpful. And if I could just ask a, like, specific follow-up on that. Like, for the 4,250 forms reported through the end of this quarter, are you guys basically saying you expect the conversion on this to be 70% and then trending higher per everything you just laid out after that? Jan Moller Mikkelsen: Nope. That's not what we're saying, Gavin. Because if we go back and look on the early cohort, meaning it's cohort four, March-April, it's much, much higher than the 70%. So this is what you see. The longer time it takes, the more and more are getting approved. And that is basically the element. And this is the question we have, can we really take this tail and shorten down the tail so we're basically getting the higher percentage that we see from the cohort we had in the beginning of the year, which are much higher than the 70%, can we start that to get it in a shorter time frame? Gavin Clark-Gartner: Okay. The point I'm trying to get at is for a lot of the start forms like, let's take the 3,100 you had through June. Maybe you've had close to 70% conversion, but the rest of the 30% is not really lost at this point. Some more still may come through as conversion. It's just a matter of time. Jan Moller Mikkelsen: Exactly. So if you take, for example, going to the cohort from March, April, much higher. If you take the earlier stage cohort now, that is near this month we have is lower than that. So this is how you see it. It's only a question about time. Gavin Clark-Gartner: Very helpful. Thanks so much. Operator: Thank you. Our next question comes from Joseph Schwartz with Leerink Partners. Your line is open. Joseph Schwartz: A question on Eurvipath and then on TransCon CNP. Can you give us your latest views on how Eurvipath has been penetrating the different segments of the hypoparathyroid market as you see it? Where is it gaining the most traction, and where could it do better? And then, you previously emphasized the desire to do more than enhance linear growth in achondroplasia. So I'm wondering to what extent do you think you can obtain differentiated label claims on the TransCon CNP label? Thank you. Jan Moller Mikkelsen: Let me take the last question. As I said in the prepared remarks, we are in the late-stage discussion about the label, and I cannot really comment about what will really be in the final labeling in this perspective. What is really the key element for me in my discussion with patients, my discussion with physicians, Aimee Shu's discussion, our medical affairs discussion with the teams, it's really to explain the benefit they see beyond linear growth. And it's clear unique effect in leg bowing, unique effect in changing body proportionality. And we will have peer-reviewed publications really supporting all these claims that will come out and really give us an opportunity to take and talk with the patient, talk with the physician about this benefit in it. I think this is the key thing for me. We saw and we saw an element once with hypoparathyroidism where it was impossible to get into the labeling our element of patient benefit related to cognitive function, although quality of life, and everything like that. And everyone recognized it. Everyone sees it. Everyone sees that is the best thing. I think this is the key thing from our labeling discussion is to have no restrictions. Have a really safe product really show our efficacy, and safety in the best possible manner in this way. Jay, will you take the first part of the question in this one to Joe? Jay Donovan Wu: Yeah. Could we repeat the first part of that question? Joseph Schwartz: Yeah. Sure. I was just wondering, you know, you've outlined the different segments of the market based on how controlled the patients are. So I was wondering, you know, how are you making inroads into those segments lately? Where are you getting the most traction, and where could you do better? Jay Donovan Wu: Yep. So when you think about the 80,000 to 90,000 patients that Jan had referenced early in the call, I think there's probably a group that we would describe as, you know, highly symptomatic, patients are well aware of their symptoms, articulating those symptoms to a physician. And within those, I would say we're doing quite well, particularly since the patients themselves are likely the ones that are in the offices most frequently and are keeping the appointments on the books to be able to, essentially get some of that information and also be on their way to actually get prescribed the product. I think where we're continuing to work on are some of the patients for which maybe they're not perhaps they've gotten used to some elements of it and therefore haven't been either self-identifying some of their symptoms as being related to the underlying condition and or as motivated to establish care and retain established care with a specialist. And I think that's why as we think about how we can continue to transform this market, there will be an element of patient activation as well. Simply because there is going to be a certain level of disease education required particularly for a space like this where it is about redefining what's possible, and, kind of the status quo for how to manage this type of condition. Jan Moller Mikkelsen: Yeah. If I can add something, Jay, I see it from two different perspectives, how often you come into the endocrinologist. This is one way. And those how we targeted it and defined something that is not defined on medical terms, but only on how often you see an endocrinologist related to being controlled, partly controlled, or uncontrolled. And what I also try to look at is to look on where are they coming from? Are they coming from the post-surgery? Are they coming from the genetic part? Are they coming from the immunological part? I see them coming from everywhere. So for example... Operator: Ladies and gentlemen, please stand by. Again, please standby. The conference call will begin. Please continue. Joseph Schwartz: Where did you last hear us at? Jan Moller Mikkelsen: I think this was Joe, your question about the... Joseph Schwartz: Yep. Sec. Welcome back. So I guess I was wondering about your progress within the different levels of control and where you can do better and, you know, just how you've been able to penetrate patients in each of these segments. Jan Moller Mikkelsen: Yeah. I think, Jay, at least I heard Jay's response to it. And my additional comments were that when we did the targeting of our physicians, we made it out from the claims database where we defined three groups: controlled, partly controlled, and uncontrolled. It's nothing to do with medical terms. But basically, it's an acceleration, how we basically are looking at the patient seeing an endocrinologist. So what I also look at is do we see all patient groups in our patient being coming on Eurvipath treatment? And when I see that it's pretty clear that we are in a position. We see that obviously post-surgical. But when we look at different elements of genetic, or immunological, we also see all different groups of patients, even patients from the ADH1, which are really, really less than 1% in the claim database. We already have about 15 patients on treatment with this symptom, which really gives us hope that we basically see the same penetration everywhere in all different of the hypoparathyroid patients in this way. Operator: Thank you. Our next question comes from Li Watsek with Cantor. Your line is open. Li Watsek: Hi, guys. Thanks for taking my questions. I guess just on Eurvipath, can you maybe just give us a little color on payer mix and potential contracting not just in Q4, but also in 2026? And should we sort of expect, you know, still minimum contracting and sort of stable growth to net for the next few quarters? Jan Moller Mikkelsen: I think, Scott more or less addressed it in his prepared remarks. There will be no changes into Q4. If we look forward, will there be potentially more contracting than we have seen now? And Jay can comment on that. We are in a position where contracting would not anyway change dramatically our GJN in any kind of financial modeling in this perspective. And we see Eurvipath really have all the characteristics of the product. It's a first-in-class. There's only one treatment option. And we see it actually being not only being prescribed, but also being reimbursed to the level that we have hoped for. Jay, do you have further comments on the long-term perspective of contracting? Jay Donovan Wu: Yeah. I would just reaffirm what you shared. Consistent contracting strategy in Q4 as previously discussed. Given the first and only nature of what we have and the fact that the clinical value speaks for itself, we don't anticipate any major contracting that's gonna deviate above and beyond what we've shared before. Which is more minor contracting around ensuring a frictionless patient experience. So, again, nothing substantial or anything meaningful above and beyond what we've discussed to date. Any changes will be minor. Jan Moller Mikkelsen: And when we look at the competitive landscape, we don't believe any of what we see in the competitive landscape will really make us move into a much more highly contracted product as we see really the best-in-class properties compared to everything we see. Li Watsek: And then, you know, just curious about the TransCon CNP and the phase two meeting. In terms of the phase three, you know, trial design, should we assume that FDA would require a one-year data on annualized growth velocity and anything that you can share on the powering assumption? Jan Moller Mikkelsen: Yeah. That is an interesting question because I basically have never seen anything longer than a one-year clinical trial in any growth disorder. I've seen a lot of perception about something that could be taken up as two years, but I've never seen any regulatory packet that has more than one-year controlled treatment in this. We have already what we call long-term data that will be generated from our phase two trial. So I think that is basically the element of what I never have seen in this way. And Aimee Shu went to the FDA meeting, so she can basically just give you the view about what she basically got feedback from that perspective. Aimee Shu: Yeah. So, Li, happy to say that we found our reviewers at FDA to be appropriately open-minded about duration here. But there's obviously a regulatory pathway, and that's usually one year of data. Operator: Our next question comes from Yaron Benjamin Werber with TD Cowen. Your line is open. Yaron Benjamin Werber: Maybe, Jan, maybe a couple of questions. Number one, just on gross to net. When we're kind of we were at around just over 4,200, and we had, like, a 65% approval. But we were getting to higher numbers for the quarter, so I'm wondering whether and we had 18% gross to net. Is it possible that gross to net discounts are higher than that? That wouldn't make any sense because I got the question kind of, like, what am I missing? And then maybe secondly, are you it sounds like you may be very subtly intimating to expect some impact from the holidays in Q4. Are we reading it correctly? Because didn't see much seasonality in Q3. And then finally, US versus European sales for Eurvipath in the quarter, was it like around $4 million or so in Europe this quarter as well? Thank you. Jan Moller Mikkelsen: Yeah. That was three questions. The element of what I will take what we said in the beginning of the year is still what we really are seeing. We said we will expect ex-US to be around €4 million to €5 million increase every quarter because we have not really expanded it more to fully commercial countries, which we did now in here in Q3. But we first see the effect on that perspective in this way. Related to the seasonality on it, I don't expect any to see any seasonality in Q4. That is pretty clear. I expected it to potentially have seen it in Q3 because I expected the physician to be gone for three weeks. And when we not really saw a major impact in Q3, I don't expect to see any impact in Q4. So Scott, he's really the guy with the numbers and everything like that. So he really is good at that. So Scott, can you take the first question? Scott T. Smith: Yeah. So, I think your question was the, the 70% approvals and the time to time to, revenue. We could probably follow-up offline on, you know, how you're thinking about things. But just remember also when there's an approval, it's this isn't the exact same thing as patient on drug. Right? They get approved, and then sometimes, you know, sometimes it's soon. Sometimes it takes a while. But, that's probably the only thing to keep in mind, Yaron. Operator: Our next question comes from Martin Auster with Raymond James. Your line is open. Martin Auster: Hey, guys. Thanks for taking the question. I'll try not to be too greedy and just keep it to a couple. First, on Eurvipath, and I was wondering if you could comment if you've got any sense of early data on what patient retention looks like from folks who've started up on drug this year. And then second, on TransCon CNP, I guess from a commercial perspective, when we look at this market, it looks a little underpenetrated for a rare disease market compared to some other comps. I'm curious if you guys have a sense as to sort of why that's the case and if you think TransCon CNP is sort of coming to market and improve upon that and improve overall penetration rates of treated folks with achondroplasia? Jan Moller Mikkelsen: Thanks, Martin, for the question. The first one is really, really, we spend a lot of time on it. Spend a lot on the analytical. And we are losing very, very, very, very few when they have initiated treatment. Very few percentages. And if we lose them, it's basic in the first four to six weeks. Meaning is that we are now trying to go back. How can we potentially help them in the titration phase? And I think that is always the element where you start on a system where you are on conviction therapy. You start to do it. You need to take it off, and I believe if there is not a good interaction between both the physician, the case where we get case and monitoring and everything like that. It is a more difficult period for the time. This is why the titration. That was why we started all this one daily product because we know we could never get this titration to function with a once-weekly product. So that is where we see. When we see after four to six weeks when we're starting to be stable, we as exactly as I said here, we expect nearly all patients to be on lifelong treatment. This is like building the fundament stronger and stronger. And Martin, I agree with you. When you have a look on vosoritide, it's doing really poorly in the US. They're saying that they're doing really good outside the US. I think they're doing really poorly in the US. That should be much, much higher. And I believe that because they're not really addressing what we really should address. The comorbidities. And I believe this is where we come in with a differentiated product. This is why when I talk with different patient organization groups, and really, they ask me a simple question. Jan, would you have taken the primary endpoint to be linear growth if you were the first product? And I said, no. We will never have done that. We will really have addressed how we're really addressing the comorbidity because we believe that is really why patients should take the treatment. Help them to the comorbidities, really help them in this way. And this is where I believe we have an extremely positive dialogue with all the patients and the patient related to that topic. Martin Auster: Thanks, Jan. Looking forward to November 30. Operator: As a reminder, please limit yourself to one question and a follow-up. Our next question comes from Paul Choi with Goldman Sachs. Your line is open. Paul Choi: Hi, good afternoon and thanks for taking my question. I also want to stay on TransCon CNP and maybe ask on the commercial strategy as you launch it and particularly for next year. Are you primarily going to target de novo patients? Or are you expecting a good portion of the revenue mix to be from vosoritide daily injection experienced patients? And if you are expecting a decent-sized contribution from the latter, can you maybe speak to what your market research suggests the appetite is on potential switch strategies and just sort of what percentage of the existing, you know, treated patient base might you might think ultimately convert? Thanks for taking the question. Jan Moller Mikkelsen: Thanks so much for the question. Yes. We expect that to be a lot of switches. We enrolled patients in the places where vosoritide is commercially available. Free for the patient. We enrolled it there was other treatment alternatives. You call them treatment alternatives. We were in a position that preferred it. Out from the perspective they'll stay not only the once-weekly profile, but the lack of injection site reaction. Really, to be in a position, you need to worry about any risk of hypertension. And anything like that. That was really one of the key developments. And also at that time, we not even have really the clarity of beyond linear growth, the benefit beyond linear growth. So when I look today, it will going to be a large portion on switch patients. When you have therapy being implemented to a high level. Which it is in some European countries. In some European countries, sixty, seventy percent of all patients will be treated today. And there will be switch. They are just waiting for it. We know they are waiting for it because they ask for it all the time. When will it be approved? In Europe? If you go to the US, because of not high penetration, there will be many more new patients coming in because there's not too many to switch off. So this is what we see how we would build up the commercial strategy. Paul Choi: Okay. Great. Thank you. Operator: Our next question comes from Yun Zhong with Wedbush. Your line is open. Yun Zhong: Hi. Good afternoon. Thank you very much for the questions. So the first question on the label extension, to the higher dose, I assume the pricing is gonna be the same. So would you expect any direct impact on maybe the number of patients on treatment and the reported revenue, please? Jan Moller Mikkelsen: First of all, when we look on treatment in a dose larger than the 30 dose, it's only restricted to the US. And currently, when we see in many countries there is a few percentage of patients that really need it in a commercial setting. We accept some patients that really need it, and they are in many cases, already on treatment in the US. By having this trial, the patients that basically will need more than 30 in the US will now have availability because they can join us in the clinical trial. The clinical trial, as Aimee can explain, is a very rare simple. Single-arm study. You can explain how many patients we have. It's basically just a safety trial. Aimee Shu: Yep. So single-arm, 18 subjects who will be titrated as they need based on serum calcium. Using the higher doses. Jan Moller Mikkelsen: So it's basically an 18 patient, six-month trial. For safety perspective. And that will be the triggering point to also in the US having. I don't think it will have a material impact in any way on our revenue. Yun Zhong: I see. Thank you for the clarification. Then a follow-up question on the payer discussion. I believe that initially, you said roughly it takes about eight weeks to get payer approval. Then I think last quarter, you said three months. And then this quarter, just now, you probably, set a month. Was that just a random maybe fluctuation? Or was there any meaningful change in terms of how long it takes for payers to approve coverage, please? Thank you very much. Jan Moller Mikkelsen: We see an improvement month by month, and when we look at the data today, with about the 50% and the eight weeks that is the data we see today. Yun Zhong: Okay. Great. Thank you. Operator: Our next question comes from Alexander Thompson with Stifel. Your line is open. Alexander Thompson: Hi. This is Charles on for Alex. Maybe a bit of a different question, but in terms of the sort of adolescent buckets of hypoparathyroid patients you're looking at, I guess, like, what kind of patient size does this represent in the US, and what kind of growth do you expect to see from here? Assuming there's successful label expansion? Thank you. Jan Moller Mikkelsen: This patient group is a quite different patient group compared to the pool of the patients we talk today in the US and other countries. Many of these young children are coming from more the genetic and immunological part. Anoxamos from head and neck operation. Still, that can be posterior to patient at that stage too. These patients are in a severe case because if you have hypoparathyroidism in such a young age, a lot of developmental part is really affected not to have the right calcium hemostasis phosphate hemostasis, and bone hemostasis in the body today. So I see it as really as high level of severity of disease to have it. Also, in this extremely young age. I even have seen young people that had it from young that already have kidney transplantation in the twenties. Because of the high burden of the treatment that has been available today conventional therapy. And when we look at the number, there will not be a number that ever came come up to the level that you see in the adult population but it's not changing the severity of really making a treatment available for this patient group. Operator: Thank you. Our next question comes from Luca Issi with RBC. Your line is open. Luca Issi: Great. So much for taking my question. Based on the unique patient enrollment, is that a metric that you're committed to report going forward, or are you planning to sunset that metric at some point? And if it is the latter, can you talk about whether that could be Q4, or would that be later than that? And then maybe if I can ask about Novo Nordisk. Can you just talk about how that collaboration is going? Obviously, lots going on in Novo, given, again, new leadership in place. And, obviously, just lost the deal on NetSerra. Wondering if you're seeing any disruption with that collaboration with them or maybe the opposite actually, an acceleration of that collaboration. So any thoughts there. Much appreciated. Thanks so much. Jan Moller Mikkelsen: Yeah. Let me take the last question first. About our collaboration. And when I look at the collaboration, and the look on the once, monthly semaglutide which I believe have a unique profile because of the slowly release from the product system to a level where the Tmax is very late, and therefore, you don't have high slope. So likely, the tolerability as we have seen in animal model really can also be established in the clinical trials in humans in this way. As we are responsible for the last element of the collaboration, there has definitely not been any disruption and there has definitely not been any lack of interest in this program. And this is not one single program. It's as I said in our press release, it's a series of programs that we are working on. So we definitely have not seen any kind of lack of interest and is progressing with the speed which we can do it too in this really positive collaboration as fast as we can do. We believe that when they come to the late stage, sure, the muscle of a company like Novo Nordisk to make a last phase three trial in multiple ways is really unique because they really have the capacity and unique level of expertise to do it. Sadly now, I forgot the first question. Scott T. Smith: Enrollment as a metric? Yeah. The enrollment as a metric is a question that we discussed a lot. And we want commerce on it, when you're feeling that we are in a position that revenue coming to a level that we are reporting now really where you're feeling that it's really coming to a stage where the addition of new patients really are not changing so much of the overall. As I said, we're building a strong fundament quarter by quarter. The strong fundament is building a really tall house. And we're now taking bricks by bricks, quarter by quarter, and we're building this revenue base up more and more. And you can nearly from a just a mathematic modeling, think about it. When we are much more further in the launch, the addition of new patients just are not giving the same impact on the overall actual revenue at that stage and therefore, I believe in one time the number of new prescriptions is not really meaningful for you. You will just see a quarterly revenue growth that basically is just reflecting at the addition of new patients. Operator: Thank you. Our next question comes from Maxwell Nathan Skor with Morgan Stanley. Your line is open. Maxwell Nathan Skor: Great. Thank you for taking my questions. I was just wondering when we can expect preclinical data supporting Eurvipath's potential for weekly dosing? And also, could you share your outlook on Eurvipath's trajectory in Europe? Should we think about a potential ramp next year? Thank you. Jan Moller Mikkelsen: Yeah. Typically, what we're doing is that we will like, in the beginning of the year, there is a conference and likely there'll be typically will come up with data and status on our new product opportunities and we expect to repeat the same element. Year by year. So a good time to expect to see data will be at the beginning of this year. Scott T. Smith: Oh, the if the if he's talking the, the guidance on OUS. Ex-US what we said for this year here is a 4 to 5 million increase. Quarter by quarter. What we said this will further be accelerated when we come into '26. Because we will have an addition of more and more. Countries. When we come into January we will give you the perspective of what countries we expect to add in to the being fully commercial in '26 and '27. Operator: Thank you. And we'll take our last question from Clara Dong with Jefferies. Your line is open. Clara Dong: Hi, thanks for taking our question. And just to follow-up on the previous question and apologize if you've mentioned already, but it will be great if you can the US and ex-US revenue split for Eurvipath. And then in terms of the US launch momentum, is there any specific timeline for any upcoming reimbursement decision in any market and any pricing dynamic we should keep in mind as you expand internationally? Thank you. Jan Moller Mikkelsen: Okay. So we gave you an algorithm basic in the beginning of the year. We said that when you look in Q4, '24, that was about 14 million in net revenue. All this net revenue was basic ex-US. And we expect it to add 4 to 5 million net revenue in '25 every quarter. So you can nearly add 14 plus five plus five plus five plus five, and then you have the Q4. What we saw in here in '25 we got Spain. Full commercial. We are in a situation where we not compromise the value because we have a durable product that basically will be here for twenty years. So for us, it's more important to really have the value being created in the right manner. And what we will give you here at the beginning of the year the perspective of what and how many new countries expect. To add on in twenty-six. Operator: Thank you, and that's all the time we have. Thank you for joining. You may now disconnect. Good day. Jan Moller Mikkelsen: Thanks a lot.
Operator: Good evening. And welcome to Dyadic International, Inc. Q3 2025 Conference Call. Currently, all participants are in a listen-only mode. Following management's prepared remarks, there will be a brief question and answer session. As a reminder, this conference call is being recorded today, November 12, 2025. I would now like to turn the call over to Ping Wang Rawson, Dyadic's Chief Financial Officer. Please go ahead. Ping Wang Rawson: Thank you. Good evening, and welcome everyone to Dyadic International, Inc.'s Q3 2025 conference call. I hope you have had the opportunity to review Dyadic's press releases announcing financial results for the quarter ended September 30, 2025. You may access our release and Form 10-Q under the investor section of the company's website at dyadic.com. On today's call, our President and Chief Operating Officer, Joseph P. Hazelton, will give a review of our Q3 2025 business and corporate highlights and provide a commentary on the strategic direction of the business. Our CEO, Mark A. Emalfarb, will provide an update on our biopharmaceutical programs. And I will follow with a review of our financial results in more detail, after which we'll hold a brief question and answer session. At this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties and other factors that could cause Dyadic International, Inc.'s actual results, performance, scientific, or otherwise, or achievements to be materially different from those expressed or implied by these forward-looking statements. Dyadic International, Inc. expressly disclaims any duty to provide updates to its forward-looking statements, whether because of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Dyadic International, Inc.'s report filed with the SEC. It is now my pleasure to pass the call to our President and COO, Joseph P. Hazelton. Joe? Joseph P. Hazelton: Thanks, Ping, and thank you all for joining today. The third quarter was another pivotal quarter for Dyadic International, Inc., as we continued our transformation from a platform-centric R&D organization into a commercially focused biotechnology company with a growing portfolio of high-value products. At the start of the fourth quarter, we saw our first commercial bulk sale of a Dyadic protein, marking the beginning of a new chapter in our company's evolution. We expect momentum to build with additional product opportunities emerging in 2025 and accelerating in 2026 as we scale our portfolio and expand our global market reach. We've now rebranded as Dyadic Applied Biosolutions, launched a redesigned corporate website to enhance commercial engagement, and strengthened our technology foundation with the addition of CRISPR Cas9 gene editing capabilities through our license with ERS Genomics. This license allows us to accelerate strain optimization, improve productivity, and further increase yields of consistency across our proprietary C1 and DAPIVIS platforms, directly supporting commercialization and profitability. At this stage, Dyadic International, Inc. is no longer just a story about potential. It's a story about execution, commercial traction, and growing product revenue. As we move from transformation to execution, our progress in the life sciences segment highlights how Dyadic International, Inc. is now operating as a product company. We are manufacturing and supplying lab-grade material for multiple recombinant proteins, focusing our efforts on near-term product revenue from markets where the need for animal-free, high-performance materials is rapidly expanding. The cell culture media market represents one of the most dynamic growth areas in biotechnology, supporting biologic manufacturing, cell and gene therapy, and cultivated meat. These markets require consistent animal-free proteins that enable scalability and regulatory confidence while balancing costs. And our protein production platforms deliver on those needs. Our recombinant human albumin program in partnership with ProLiant Health and Biologics continues to advance to a commercial launch in early 2026. Albumin is a cornerstone protein used across diagnostics, research, and biomanufacturing for stabilizing and transporting biomolecules. Transitioning to recombinant production offers significant advantages in purity, safety, and supply chain reliability. We remain fully aligned with ProLiant as they prepare for market entry. To date, Dyadic International, Inc. has received a total of $1.5 million in milestone payments from ProLiant, including a third payment of $500,000 received in October. We expect to share in the profits as the albumin products enter the market. This collaboration exemplifies how our platforms enable partners to deliver high-value animal-free proteins at commercial scale. In October, we achieved an important milestone with the first bulk purchase order for a Dyadic-produced protein. Our recombinant fibroblast growth factor, or FGF, is now being sold into the cultured meat market, demonstrating our ability to deliver commercial-grade material at scale and validating the market readiness of our technology. Looking ahead, in addition to growth factors, our top product priorities are animal-free transferrin and DNase I, which are now in active manufacturing and sampling to prepare for commercial launch. Transferrin is a key functional protein in serum-free cell culture media responsible for delivering iron to support healthy cell growth and metabolism. Dyadic International, Inc. is producing both bovine and human recombinant transferrin to serve distinct market segments. Bovine transferrin is designed for cultivated meat and research markets where cost efficiency and scalability are key, while human transferrin is targeted for biopharmaceutical and cell and gene therapy applications, which demand higher specification and regulatory-grade consistency. Together, these two products position Dyadic International, Inc. to compete effectively across complementary ends of the market. Our FGF program continues to advance beyond the cultured meat segment as we target cell and gene therapy manufacturers and suppliers. FGFs are essential growth factors in cell culture formulations, driving cell proliferation and differentiation. We're now expanding sampling and validation activities with additional customers as interest continues to build as companies look for reliable animal-free sources. In molecular biology reagents, our RNase-free DNase I has completed production validation and entered sampling while we work to secure purchase orders. DNase I is a critical enzyme used in gene therapy, molecular diagnostics, and biopharmaceutical manufacturing to remove unwanted DNA without compromising RNA or protein integrity. Dyadic International, Inc.'s ability to supply DNase I in a high-purity, animal-free form directly supports the industry's move toward cleaner, more consistent inputs without increased costs. These products form a high-margin recurring revenue foundation serving critical and fast-growing life science applications. We're also advancing the development of T7 RNA polymerase and RNase inhibitor products to expand Dyadic International, Inc.'s position in the DNA and RNA enzyme market. To further expand our global commercial reach, we recently partnered with Intralink, a leading Asia-Pacific business development firm, to accelerate market penetration in Japan and South Korea, two of the world's fastest-growing and most advanced markets for cell culture media and molecular biology reagents. Being a lean US-based organization, we look to leverage local expertise and establish commercial networks to effectively reach these important markets without the need for significant internal infrastructure or capital investment. Intralink provides Dyadic International, Inc. with on-the-ground commercial resources and regional experience that allow us to engage manufacturers, distributors, and potential partners more directly and efficiently. Through this partnership, we are actively introducing our products such as transferrin, DNase I, and growth factors, as well as our platform technologies, to new customers in the Asian region, expanding Dyadic International, Inc.'s footprint across key global manufacturing hubs in a cost-effective manner. Building on our momentum in life sciences, Dyadic International, Inc. is also advancing its commercialization efforts in the food nutrition segment, another large fast-growing market where our technology is enabling the transition to animal-free sustainable protein production. The food nutrition market is undergoing a structural transformation as global food producers shift towards sustainable, functional, and animal-free proteins. This transition is driven by consumer preference, regulatory trends, and supply chain sustainability pressures, and it presents Dyadic International, Inc. with a major opportunity to apply its DAPIVIS platform to supply recombinant proteins and enzymes at scale. The animal-free dairy protein market alone is expected to exceed $20 billion by 2035, led by growing demand for precision-fermented proteins in infant formula, medical nutrition, and wellness applications. These markets require consistent, high-purity proteins that replicate the nutritional and functional properties of traditional dairy ingredients, areas where we believe that DAPIVIS may provide a competitive edge. Our recombinant alpha-lactalbumin program advanced meaningfully this quarter. We've entered a new term sheet with a non-animal dairy development partner focused on the infant nutrition market, and we anticipate additional agreements for our alpha-lactalbumin program in 2025. The protein has demonstrated strong performance in product testing and formulation trials, with sampling for research and nutritional applications expected by late 2025 or early 2026. Also in the third quarter, our human lactoferrin program continues to progress with production strain development and yield optimization underway. Lactoferrin is valued for its antimicrobial and immune-supporting properties and commands premium pricing in both nutritional and wellness markets. We expect sampling for research use in early 2026. In non-animal dairy enzymes, we received a $250,000 milestone payment from Enzymes in the third quarter, bringing total license and milestone revenue from this partnership to $1,275,000 to date. Scale-up for the first enzyme remains on track for commercial launch in late 2025 or early 2026, with a second enzyme candidate advancing towards commercialization under the existing license. Importantly, Dyadic International, Inc. is eligible to receive future royalty payments on commercialized products, creating a recurring revenue opportunity and further validating the commercial value of our technology and partnership model. As we expand our presence in food nutrition, we're also applying our technology to industrial biotechnology, where Dyadic International, Inc.'s enzyme expertise is addressing global demand for more sustainable, efficient, and bio-based manufacturing solutions. Dyadic International, Inc.'s bioindustrial segment continues to demonstrate the scalability, flexibility, and cross-sector relevance of our enzyme technology. Using our DAPIVIS platform, we're delivering enzyme solutions that replace petrochemical or animal-derived inputs and improve process efficiency across industrial and emerging bio-based markets. Our collaboration with Fermbox Bio on an enzyme cocktail that converts agricultural residues into fermentable sugars continues to advance and deliver results. Fermbox is a strategic partner for Dyadic International, Inc. with robust manufacturing capabilities across multiple quality grades, which allows us to serve a broader range of industrial and bio-based customers. Initial commercial deliveries have been completed, and sampling is expanding with additional customers in biomass processing, biofuels, and pulp and paper markets. Under this partnership, Dyadic International, Inc. participates in a 50/50 profit share on sales, creating a scalable and recurring revenue model as the adoption and portfolio grow, and we expect to begin seeing revenues in 2026. Our cellulosic enzyme technology is also being evaluated in regenerative medicine and tissue engineering through collaborations with pharmaceutical and device companies. These efforts demonstrate how Dyadic International, Inc.'s enzymes can contribute to the development of biomaterials for the rapidly growing market of tissue repair and regeneration, further underscoring the versatility and commercial reach of our technology beyond traditional industrial applications. In parallel with our commercial initiatives, we continue to advance a select group of partner-funded biopharmaceutical collaborations that extend the reach of our technology into vaccines and antibody production, providing valuable validation and non-dilutive funding while we stay focused on near-term product revenue. I'll now turn the call over to our CEO, Mark A. Emalfarb, to provide an update on our progress of these partner-funded collaborations. Mark? Mark A. Emalfarb: Thanks, Joe. Our biopharmaceutical programs are accelerating and delivering meaningful advancements in vaccine and therapeutic protein development for both animal and human health. Through collaborations supported by the Gates Foundation, the Coalition for Epidemic Preparedness Innovations (CEPI), and our strategic partnership with Dr. Rina Rappuoli at the Fondazione Biotecnologie Comparate di Siena (FBS), as part of the €170 million EU vaccine hub, we're continuing to validate the power of our C1 protein production platform through non-dilutive funding. These efforts are generating strong data that demonstrates C1's ability to rapidly, efficiently, and affordably manufacture high-quality biologics, including vaccines, monoclonal antibodies, and other complex proteins with exceptional productivity and scalability. Our Gates Foundation program focused on developing low-cost monoclonal antibodies for malaria and RSV has achieved key milestones in both productivity and initial biological characterization when compared with the same antibody produced using traditional mammalian CHO production methods. To date, we've received $2.4 million of a $3 million grant. Under our CEPI-Fondazione Biotecnologie Siena collaboration, Dyadic International, Inc. is eligible for up to an additional $2.4 million in funding to support antigen design, cell line development, and cGMP manufacturing scale-up. This project has already begun to generate encouraging data, including the successful development of another C1-produced H5 influenza antigen by FBS. Initial results show that Dyadic International, Inc.'s H5 antigen reacts as expected with human monoclonal antibodies. In collaboration with FBS, we're preparing to provide H5 antigen samples for preclinical evaluation with the potential to advance into a funded Phase I trial. Other CEPI-supported programs, including the UVAX BioMERS vaccine and the Adaptec Consortium for Broad Spectrum Filovirus Vaccines, are expected to further reinforce C1's ability to deliver rapid, scalable, and cost-effective production solutions. Our collaboration with the process development unit at the NIAID/NIH continues to generate encouraging data that not only supports vaccine development but also enhances the productivity and consistency of our C1 platform. The insights and process improvements gained from this and other funded programs strengthen C1's broader capabilities, and these can be applied across both our biopharmaceutical and DAPIVIS non-pharmaceutical platforms. This cross-platform innovation drives future value creation and supports the potential for additional licensing and monetization opportunities in animal and human health. While our internal resources remain focused on generating near-term revenues through high-value non-therapeutic proteins, these externally funded biopharmaceutical programs provide valuable non-dilutive funding and global validation of our technology. With that, I'll now turn the call over to our Chief Financial Officer, Ping Wang Rawson, who will walk you through our third quarter 2025 financial results. Ping Wang Rawson: Thank you, Mark. I will now go over our key financial results for the quarter ended September 30, 2025, in more detail. You can find additional information in our earnings press release and Form 10-Q, which we filed earlier today. Total revenue for the quarter ended September 30, 2025, decreased to $1,165,000 compared to $1,958,000 for the same period a year ago. The decrease was due to decreases in research and development revenue of $183,000 and license and milestone revenue of $1,425,000 from the ProLiant agreement and Enzyme agreement in 2024. The decrease is offset by an increase in grant revenue of $815,000 from the Gates Foundation and the CEPI grants in 2025. Cost of research and development revenue and cost of grant revenue for the quarter ended September 30, 2025, decreased to $2,255,000 compared to $396,000 for the same period a year ago. For the quarter ended September 30, 2025, cost of grant revenue from the Gates Foundation and the CEPI grants was $769,000 compared to zero for the same period a year ago. Research and development expenses for the quarter increased to $572,000 compared to $460,000 for the same period a year ago. The increase was driven by a rise in the number of active internal initiatives undertaken to expedite product development. G&A expenses for the quarter increased to $1,481,000 compared to $1,298,000 for the same period a year ago. The increase reflected increases in rebranding and business development expenses of $176,000, legal and accounting expenses of $83,000, partially offset by a decrease in share-based compensation expenses of $79,000. Loss from operations for the quarter increased to $1,925,000 compared to $203,000 for the same period a year ago. Net loss for 2025 increased to $1,976,000 or $0.06 per share, compared to $203,000 or $0.01 per share for the same period a year ago. As we reported earlier, on August 1, 2025, the company closed its public offering of 6,052,000 shares of its common stock at a public offering price of $0.95 per share. The net proceeds to the company from the offering were approximately $4.9 million after deducting legal expenses, underwriting discounts, and commissions and other offering expenses. As of September 30, 2025, cash, cash equivalents, restricted cash and cash equivalents, and the carrying value of investment risk securities, including accrued interest, were approximately $10.4 million compared to $9.3 million as of December 31, 2024. On October 14, 2025, we received a third and final milestone payment of $500,000 from ProLiant upon meeting a certain productivity threshold, which was not included in the cash balance as of September 30, 2025. For the rest of 2025, we expect to see growth in product revenue in our life sciences, and food and nutrition markets as we launch products in cell culture media and molecular biology while maintaining our operating expenses in line with last year. With that, I will now ask the operator to begin our Q&A session. Each caller will be allowed one question and one follow-up question to provide all callers with an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. I will now ask the operator to begin our Q&A session. After which Joseph P. Hazelton, our COO, will provide closing remarks. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. The first question comes from Matt Hewitt with Craig Hallum Capital. Please go ahead. Matt Hewitt: Good afternoon, and thanks for taking the questions. Maybe first up, and I apologize if I missed this, but earlier this week you announced a new relationship that's gonna grant you access to CRISPR commercial licenses. I'm just curious. What does that bring to your portfolio? How is that going to help you drive incremental growth and sign some new contracts? Joseph P. Hazelton: Hey, Matt. It's Joe. It's a great question. And the license that we signed with ERS Genomics earlier this week actually gives us a more powerful genetic toolbox to accelerate product development, improve optimization yields, both with our internal pipeline but also with our customers. Having access to the CRISPR technology actually helps our partners, for some of them that are in like food and nutrition, you know, CRISPR licensing can be somewhat problematic. So us having access to the technology to use in these development programs gives us a competitive advantage in some of these markets as well as the ability to expand and accelerate our internal programs. So we see this as a great opportunity to enhance the already strong genetic toolbox that we have. Matt Hewitt: That's great. And then maybe a follow-up question. And picking one is tough, but let I'll just go with this one. The DNase I opportunity. It sounds like you're making progress there. How should we be thinking about that opportunity ramping in '26 and beyond, and how big could that ultimately become? Thank you. Joseph P. Hazelton: Again, a great question. So the market itself for DNase I is roughly a $250 million market for recombinant products today. Overall, closer to a $1.5 billion market for DNase I for all methods of production and platforms. So as we look at, you know, what we're looking to, we're targeting distributors, suppliers, and manufacturers for bulk sale opportunities. So we're not gonna be manufacturing or selling to, like, individual institutions in small orders. The goal is and our focus right now is on securing OEM agreements or broader bulk opportunities. So we expect to see it scale rather rapidly. Obviously, we're getting lab-grade material up first. And as we start to expand the quality of the material, so moving up to, like, ISO and even GMP grade, those are very expensive to manufacture. So as we get the initial revenues in, we'll be able to target higher margin segments. So it'll be a slow growth at first. We anticipate it to be steady given the expansion of DNA and RNA products in the market itself. I mean, there's a ton of not just in mRNA still, but a ton of opportunity in cell and gene therapy. As well as other markets where we think we have a great opportunity and advantage given our cost structure in that segment. Matt Hewitt: That's excellent. Thank you. Operator: Next question, John Vandermosten with Zacks. Please go ahead. John Vandermosten: Thank you. So I wanted to ask about the other relationship that you announced with Intralink in Asia. What characteristics of the customers do you think they will be for those products there? The DNase I and the transferrin. Will those be academic centers or labs? Or what do you think those customers will be? Joseph P. Hazelton: John, this is Joe. It's a great question. So the reason we're targeting those markets specifically is that they're experiencing a significant growth in the uptake of these products with cell and gene therapy manufacturers, suppliers, and distributors. There's several new companies and several existing companies that are very large. We're targeting those organizations for purchase orders and bulk purchase orders, and then they would, in turn, supply the end users. We're not looking obviously to become a wholesale distribution network to every supplier or every academic institution, but we want to hit where they're pulling their product from. Mark A. Emalfarb: And I think, John, one of the things you should keep in mind on all these programs is, you know, we're dealing with global markets. And as Joe points out, you know, Japan and Korea are expanding and they're not in turmoil like in the US. So our global presence is paying off. As you know, we are heavily involved in Europe. And now in Asia and Japan. Of course, in the United States. But India and other countries. So we're kind of like in a lot of ways, protected from what's been going on here in the United States to some degree. And because, you know, we really haven't had a global footprint. And we're expanding that global footprint. Joseph P. Hazelton: From Box as well. And that's a great point because in addition, a lot of the companies are worried with regard to the tariff situation. So in Japan and Korea, they are looking to improve their manufacturing capability, you know, in the homeland. So obviously, us having the ability to transfer our technology in the world gives us an advantage. So I think, Mark, you're absolutely right. Mark A. Emalfarb: Well, and they need a lower cost of goods to offset the tariffs to ship back in the US. So it's opening up doors that heretofore might have been closed. John Vandermosten: Would the tariffs apply to your product? I mean, since it's the technology rather than a product itself crossing the border, would that be something that you'd have to worry about? Or would the customer have to worry about in Japan and Asia and other places outside the US? Mark A. Emalfarb: Yeah. I think the tariffs would be on the products coming back in. Not in the technology going out. John Vandermosten: Right. Right. Okay. Thank you for taking my question. Operator: Next question, Robert Hoffman with Princeton Opportunity Management. Please proceed. Robert Hoffman: Yeah. Thanks. I just want to dig in a little deeper on the CRISPR ERS agreement. So is that something you had to pay anything upfront? And I'm assuming it might be modest. And then how does it work going forward if you discover a system within their genomics? Are they gonna get a royalty on sales of that? Can you just kind of, I know you can't do specific numbers, but if you can kind of walk us through how a license agreement like that is structured, I'd appreciate it. Mark A. Emalfarb: Well, first of all, to your point, I think Joe did a great job in negotiating the deal with ERS Genomics. Gotta remember, we're not cutting and clipping out things going into human bodies. We're improving fungal cell lines to make them more efficient, to make them cleaner, to knock out things that might be problematic, improve qualities. And so can't give them the finances to your point because it's confidential. But I can assure you it's nothing like you hear about the CRISPR being used in the pharmaceutical and medical industry. This is really more about engineering cells and making them home at a higher level faster, quicker, and cheaper than they already are. So and as somebody brought up, I think Matt brought the point up earlier, we're expanding the opportunity that our customers don't have to use CRISPR. Have different technologies. We have a site-specific integration, which can allow you to do things repeatedly from a genotype. From a regulatory perspective, in the life sciences and food nutrition, we can do random. In a lot of ways, it will give you the same result as CRISPR, but CRISPR is a little faster and a little more directed. But if you screen more mutants, you might get to the same point. So it gives us an advantage of time and specific ways to manipulate and modify these cells. So I think, you know, I wouldn't worry about the back end because the back end you more than make up for it. You get higher productivity, you can afford to pay a little bit of a payment to ERS Genomics. That's a great deal for them as well because it's opening the door to a whole new area that heretofore they couldn't get into. Robert Hoffman: Got it. Yep. Sounds great. Thank you. Operator: Next question, John Vandermosten with Zacks. Please go ahead. John Vandermosten: Great. Thank you. My follow-up question is on the infant nutrition product. Is that something new that's being launched? Is the customer trying to differentiate it from an animal-based product or something? I want to see if you can help me understand how that product will be marketed to the end customer. Joseph P. Hazelton: I think in infant nutrition and medical nutrition, what they're looking to do is basically mimic human breast milk. That's really one of the key focuses. The other is obviously they want to mimic bovine milk as well. I think you'll see the bovine products be accepted or recombinant non-animal bovine products would probably be accepted first because that's a shorter, I guess, a shorter leap for most consumers and most larger companies to take is, you know, they're currently using an infant formula today. They're using bovine source materials. So when it gets to things like infant nutrition, ultimately, you know, the goal would be to mimic human breast milk. That would be the ultimate goal. But I know having human alpha-lactalbumin, I think you'll see it in, like, medical nutrition sports nutrition products prior to, you know, seeing it in infant nutrition. But that is exactly what they're trying to do. There's only, you know, again, so much like, actually naturally dried human breast milk that can be produced in a given year. As well as, you know, bovine milk as well. Those are, you know, self-limiting or, I will say unsustainable, but they're very difficult to scale to significant levels in certain cases where you're talking about the purity and consistency you need for something like infant nutrition. So the recombinant proteins themselves give them greater assurance of the product quality and better control of the manufacturing process than you get with animal or even human-derived protein. So the goal is there. The roadmap is there. You know, getting past some of the regulatory hurdles and then consumer issues as well. That'll take some time, but we do see this as a great opportunity. Mark A. Emalfarb: And, you know, just to add a little color to that, you know, just like ProLiant, you know, we've got partners that we're talking to and working with and have decades of experience in this industry. So it's not like we're tackling this on our own. We're aligning our interest with people that actually have the knowledge and the expertise to drive this forward to commercialization. If you think about omega-3, which is a, you know, kind of a similar thing, it's used in infant formula, for example. These are multibillion-dollar product opportunities. And DSM paid Martek over a billion dollars several years back. And it wasn't too long ago that we had this infant formula shortage. So, you know, that was a big deal. So this is a huge opportunity and we're addressing it not on our own, but in partnership with what we think are some of the smartest people to have the industry experience for decades. John Vandermosten: Okay. Great. Thank you for the additional info. Operator: Once again, if you would like to ask a question, please press 1 on your telephone keypad. Next question comes from Tony Bowers with Interact. Please go ahead. Tony Bowers: Hi, Mark. Hi, Joe. I know the grant business is pretty much of a breakeven proposition initially. But it's great credibility, great visibility, and validation. What do you think the positive endgame could be from the Gates Foundation and CEPI? Mark A. Emalfarb: Well, the positive endgame could be saving hundreds of thousands, if not millions of lives and getting rewarded for it financially. So, I mean, these people have the wherewithal, the Gates Foundation, to move this to the clinic. And it isn't just about that. This opens up the door for monoclonal antibody production and development of a faster, quicker, more efficient way lowering the cost of goods. If this administration wants to do anything, they want efficient, low-cost biologics because you got Lilly, you got Pfizer, you got Novo. You know, Trump calling them to the office, they're all caving in. But guess what? It's a drop in the bucket compared to what we can do with this platform to drive the cost of biologics down. So there's a huge opportunity at the end. But it's also providing technology and advancements for DAPIVIS. Joseph P. Hazelton: Well, in addition, Tony, what it also gives us some potential avenues for cell culture media. So, you know, one side of the fence, while we have the capability to produce mAbs, producing things like transferrin and growth factors and when you look at, you know, those markets themselves, the growing interest in demand for therapeutic proteins means that there's gonna be growing demand for cell culture media of all types. So, you know, as we're looking to launch, you know, transferrin, you know, very quickly here into the culture media market, not just for cultured meat, obviously, but we're looking to launch into the CHO market, the HEK market, where you need these high-quality, high-purity proteins at a reasonable cost in order to be able to produce some of these more high-value targets like monoclonal antibodies. So it really, to me, it not only validates our platform for biopharmaceutical use, it's giving us potential opportunities for us to get our other products in there as well. Tony Bowers: All three of the products that you're planning to manufacture under your own name, DNase I, transferrin, and growth factor, they're all essentially, they have been derisked in terms of production validation. And the CDMO market, there's plenty of choices. That's not a bottleneck for you commercializing these? Joseph P. Hazelton: No. Not today, Tony. But it's a great question. Right now, there's plenty of capacity with CDMOs. Obviously, you know, from our standpoint, it's the cost of producing at some of these grades that we have to be considerate of. But, you know, today, we're finding, you know, that type of an issue. The other thing we're trying to do is identify opportunities in market, right? So whether it's Japan or Korea, whether it's in the EU or we're adopting or trying to bring CDMOs in all different parts of the world, obviously, to, you know, reduce our tariff implications. And to improve the economics of being able to distribute these products in bulk. So, you know, we haven't seen that to be an issue, you know, as of yet. Tony Bowers: Last question, if I may. Can you comment on the burn and, yeah, how much ability you have to do what you need to? Ping Wang Rawson: Yeah. So he just says Ping. We don't normally give the cash guidance as you know, but as we close out to the end of the year, as you can see, at the third quarter, I think we are still expecting the last quarter to have the recognize the half million cash, we received in October from ProLiant. So that will be reflected in the Q4 financials. And also from a business perspective, I think we are still expecting certain product revenue even though the amount may be not, you know, as disclosed at this point. So it's really hard to give you the cash burn at this point. But we do, like I said in the script, we do expect the operating expenses will be in line with last year. Hope that helps. Thank you. Tony Bowers: Thank you. Operator: Next question, Robert Hoffman with Princeton Opportunity Management. Please go ahead. Robert Hoffman: Yeah. Just to pick up on that question. Moving forward, in terms of like just headcount and expenses, obviously, outsourcing a lot of things, especially the marketing and development, although maybe not the development. But do you see what do you see out two or three years? Are you going to have to expand dramatically? Or is it something that operating leverage is such that you know, you have to, you know, increase your cost structure by 50% while revenue goes up, you know, multiples of that. Can you give us just some sense of how the business model scales? Joseph P. Hazelton: Yeah. Actually, it scales rather easily considering the model that we're focusing on is the distributors, wholesalers, and suppliers. So from an infrastructure standpoint, that's not gonna require significant amounts of build. So even as we scale, it's really about your manufacturing capacity and getting product to those customers. So that we can do obviously through our current outsourced model. So we don't anticipate, you know, significant infrastructure changes, you know, in the next two to three years. Now, obviously, you know, as we continue to move forward and if it makes sense to grow in certain areas, we want to take a look at that. But right now, the quickest path to acceleration is more product that we're able to actually, you know, produce and get onto the market. So that's really the main focus right now. Robert Hoffman: Great. So you don't see G&A expense blowing up as your revenue expands. Obviously, it's gonna grow, but it's not going to keep pace with your revenue. Joseph P. Hazelton: No. Agree. Robert Hoffman: Great. Thank you. Operator: There are no further questions. I will now turn the call over to Dyadic International, Inc.'s President and COO, Joseph P. Hazelton. Joseph P. Hazelton: Thank you, everyone. Putting today's call in perspective, we're very encouraged by the progress we're making. While, of course, we want to see larger gains come faster, the indicators for growth are clear. Our pipeline is advancing, customer engagement is increasing, and the foundation for sustained commercial expansion is firmly in place. Q3 2025 marked a defining step in Dyadic International, Inc.'s commercial evolution. With our first bulk order, additional purchase orders underway, and multiple product launches approaching, we're now executing as a product-driven biotechnology company. With the integration of the CRISPR technology, the commercial expansion through Intralink, and a strong balance sheet of $10.4 million in cash and investments, Dyadic Applied Biosolutions is well-positioned to deliver sustainable revenue growth and long-term value creation. In parallel, our legacy biopharmaceutical programs and collaborations continue to advance, providing validation for our technology and the potential for longer-term revenue streams as those programs mature. At the same time, our near-term focus remains on executing the commercial strategy already taking shape across our core markets. Our near-term priorities are clear. First, to accelerate product sales across our life sciences and molecular biology reagent portfolio, where early commercial traction is already underway. Second, to expand customer engagement in key global markets, including Asia, Europe, and North America, through targeted partnerships and business development initiatives. And third, to advance commercialization in our food nutrition and bioindustrial segments, where our technology is enabling new sustainable solutions and creating meaningful opportunities for recurring revenue growth. Dyadic International, Inc. is now executing as a commercial organization built on validated platforms, established partnerships, and a clear path toward recurring revenue and profitability. Thank you for your continued support, and we look forward to updating you on our progress. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Operator: Good evening. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Surf Air Mobility Third Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now pass the call over to Sam Levenson. Please go ahead. Sam Levenson: Thank you, operator, and good afternoon, everyone. Welcome to Surf Air Mobility's third quarter 2025 earnings call. I'm joined today by Deanna White, Chief Executive Officer, and Oliver W. Reeves, Chief Financial Officer. Our earnings release can be found on the SEC EDGAR website and on our Surf Air Mobility Investor Relations page at investors.surfair.com. During this call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of those risks have been set forth in our earnings release and in our periodic reports filed with the SEC. During today's call, we will present both GAAP and non-GAAP measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued today, posted on the Surf Air Mobility Investor Relations website and in our filings with the SEC. I'll now turn the call over to Surf Air Mobility's CEO, Deanna White. Deanna? Deanna White: Thank you, Sam, and thank you to everyone who has joined our call today. One year ago, we announced a four-phase transformation plan to reset the financial and operational trajectory of Surf Air Mobility. Each phase was designed as a building block to execute on our core mission, to build the air mobility platform that will transform flying. Our goal is to fly people using technology that generates long-term value for our shareholders. The plan was crafted to first strengthen the financial position of the company, then leverage our many strengths into catalysts for the adoption of software and electrification technology. Our transformation plan is proving to be reality, and not just theory. We are executing and demonstrating improvements in all areas of the business: financially, operationally, and strategically. Financially, over the past year, we have improved our capital structure and deleveraged our balance sheet through a series of debt and equity transactions. During the twelve months ended September 30, 2025, we secured a $50 million credit facility and raised $50 million of additional capital through equity issuances. Furthermore, we reduced our debt by $52 million through pay downs and conversions to equity. Subsequent to the end of the third quarter, we announced a pivotal $100 million strategic financing that will accelerate growth and further strengthen our balance sheet. This financing includes $26 million of new capital to drive development and commercialization of Surf OS. The remaining $74 million, structured as a zero-coupon convertible note, will be used to refinance debt, reducing cash interest expense and allowing for further deleveraging of the balance sheet. We will continue to look for opportunities to strengthen our balance sheet and unlock catalysts for our shareholders. Turning to our third quarter results, this quarter marks the seventh consecutive quarter that we have met or exceeded our revenue and adjusted EBITDA guidance. Third quarter revenue of $29.2 million exceeded the company's guidance of $27 million to $28.5 million and rose 6% sequentially versus the second quarter. Adjusted EBITDA loss of $9.9 million was within our guidance range, as the disciplined execution led by our experienced management team once again yielded expected results. With another quarter of improved financial results behind us, we have raised our 2025 revenue guidance to at least $105 million and remain on track for a full year of profitability in our airline operations. Operationally, we have transformed our commuter airline, consistently producing strong results which have translated into our second consecutive quarter of profitability in this business. I would like to recognize the achievements of the seasoned aviation team recruited at our systems operations center, which was relocated to Dallas, Texas, this past year. This team has created a high-functioning operation grounded in performance metrics that produces safe, reliable, and profitable results for the organization. Our operations position us to both become a preferred operator in new markets and to deploy new electrification technology coming to market in the near future. We produced exceptional sales results in our on-demand business for the third quarter, generating an approximate 40% increase in revenue compared to both the second quarter and the same quarter of the prior year. Our on-demand business is executing strongly against our key recalibration initiatives. Third quarter results benefited from a shift in the mix of flying from turboprop to jet aircraft and from domestic to international flights, which resulted in a 14% increase in revenue per flight. At the same time, we reduced expenses of the on-demand team by 36% since adopting Surf OS, generating higher revenues for less cost. Additionally, the team implemented profitability enhancements by securing inventory through volume purchase agreements with operators who are also users of Surf OS. Our on-demand business is well-positioned for profitable growth. Surf Air Mobility is at the epicenter of the air mobility market, not only as one of the largest commuter airlines in the country, having flown over 300,000 passengers in the past twelve months, but also as a result of our relationships with over 400 operators who serve our on-demand operations and who are ideal customers of the Surf OS platform in the future. The Part 135 industry is made up of small businesses with unsophisticated tech stacks and fragmented data. As an operator and broker, we have unique insight into the technology needs of this industry. Our exclusive partnership with Palantir allows us to leverage cutting-edge AI tools and best-in-class data management expertise to build an all-in-one AI-enabled software platform for this industry. During the third quarter, we entered a five-year agreement with Palantir that expanded our relationship to include exclusivity for products developed for charter brokers and operators. We obtained the ability to team with on solutions designed for enterprise customers, aircraft manufacturers, and the FAA. As part of the recent strategic transaction, we added resources from Palantir to further these efforts. In our Surf OS business, we continue to make substantial progress on driving efficiencies in our own operations by adding incremental functionality and expanding our applications. We have successfully implemented multiple applications within our operations and are already seeing significant improvements in efficiency and profitability. In our scheduled operations, we launched an aircraft and crew scheduling tool in our Northeast and Hawaii networks that required parallel testing and FAA approvals. We anticipate that the entire network will be live on this tool by the end of the year. Our Surf OS team also launched additional features within the mobile crew app that increased pre- and post-flight communications and reporting. Lastly, robust CRM functionality was built into Broker OS to streamline customer insights and promote sales efficiencies. During 2025, Surf OS has been in a beta test phase with eight users who have given us valuable insights. We have secured seven LOIs from brokers and operators extremely interested in purchasing Surf OS once we commercialize this product. In October, the company hosted a private event at NBAA, showcasing Surf OS and conducted 18 product demos for a select group of brokers, operators, aircraft manufacturers, and enterprise clients. We are extremely pleased with the progress made in the last year and expect to exit 2025 with strong momentum as we enter the strategic phases of our transformation plan next year. Strategically, Surf Air Mobility is well-positioned to continue optimizing its businesses and begin pursuit of the expansion and acceleration phases of our transformation plan. First, we will commercialize Surf OS and begin full deployment to third parties in 2026. With a recently announced financing, we have secured funding for the continued development and commercialization of Surf OS. Surf OS is AI-driven software powered by Palantir that organizes key stakeholder data into a single platform allowing actionable insights for a business. We intend to launch our three flagship Surf OS products in 2026: Broker OS, Operator OS, and Owner OS. Broker OS manages end-to-end sales and sourcing and will empower charter brokers to automate processes. Operator OS improves efficiencies and the utilization of planes, pilots, and airport staff. Owner OS delivers transparency and optimization to private aircraft owners to generate better returns on their aviation assets. These products can be integrated into customized solutions for enterprise clients. We intend to announce our commercialization plan with milestones in the coming months. Second, we are pursuing strategies to showcase new technology in our airline operations network and in new markets. We currently provide commuter service to approximately 200,000 interisland flyers annually within the state of Hawaii. The length of these flights, ranging from 25 to 75 miles, is the perfect testing ground for electrified aircraft coming online in the near future. We are working with aircraft manufacturers in the state of Hawaii to launch a pilot program within our existing network. Additionally, we intend to launch a Part 145 maintenance program to service existing and new technology aircraft and are scouting potential locations within our network to invest. The high-functioning system operation center we have built positions Surf Air Mobility to become a preferred operator for companies looking to adopt new aircraft technology in their business models. Billions of dollars are being invested across the aviation industry in the development of new technologies focused on smaller aircraft flying shorter distances. With over a decade of operating both scheduled and on-demand short-haul flights, we have flown millions of passengers millions of miles and work with hundreds of operators in this market. This uniquely positions us to deploy these new technologies across a variety of business models and partners. In the meantime, we will continue to add capacity to our network utilizing combustion engine caravans, of which we are taking four new deliveries in 2026. Our work on detailed launch plans continues for new routes we intend to unveil next year. Third, we intend to grow our on-demand business and expand the number of operators in our network through a series of strategic initiatives directed at profitable revenue growth. We will continue our efforts to secure a supply advantage through operator partnerships that provide volume pricing benefits. To achieve our revenue aspirations, we plan to grow our sales team by acquiring seasoned broker talent and book the business. Currently, our on-demand team is working towards the coveted Argus broker accreditation, which will equip our operations with a 100% operator vetting and strong compliance oversight. Lastly, let me update you on our electrification efforts. We have targeted securing a supplemental type certificate for the electrified powertrain in 2027. As such, we have been working with key organizations within the industry supply chain and are evaluating partnership opportunities where we no longer bear the full cost of development. In addition to being the largest passenger operator of such Grand Caravans, we have an exclusive agreement with Textron Aviation, the manufacturer of this aircraft, for us to be the exclusive supplier of electric and hybrid electric powertrains, and for Textron Aviation to provide global marketing, sales, and distribution for these electrified aircraft. As our progress toward this initiative continues, we look forward to updating you as things unfold. Surf Air Mobility has never been positioned as strongly as we are today, and we fully intend to leverage that strength to drive shareholder value over the coming years. With that, let me now turn the call over to Oliver W. Reeves to cover the recently announced strategic financing and our Q3 results and Q4 outlook in more detail. Oliver? Oliver W. Reeves: Thank you, Deanna. In my remarks today, I will address the company's third quarter results and outlook for the fourth quarter and full year. But first, let me share details on our continued efforts to strengthen our balance sheet and secure capital for our technology initiatives that we believe will create significant shareholder value. On November 10, 2025, Surf Air Mobility announced a $100 million strategic transaction that will continue to enable us to achieve our transformation plan. This transaction directs $26 million from new equity issuances specifically to the development and commercialization of Surf OS, shifting this initiative from its beta phase into its commercial phase. A new institutional investor and a Surf Air Mobility cofounder, together with a related party, each purchased $10 million of this offering, which includes common stock and two-year warrants exercisable at a purchase price of $3.32 per share. Finally, Palantir was issued $6 million of new common equity as prepayment for software and additional services. This capital will be used to fund the continued development of Surf OS' three flagship products, Broker OS, Operator OS, and Owner OS, and to enable the scaling of our engineering and sales capability. The proceeds will also be used to invest in the development of new modules and products to capture a larger share of the growing air mobility software market. In the coming months, we intend to publicly share more information about Surf OS products, the sizable and growing addressable market, our distribution and commercialization strategy, and the pricing and business models, which will set revenue expectations for 2026. Concurrently with the equity raise, Surf Air Mobility completed the sale of a $74 million convertible note, yielding net cash proceeds to the company of $65 million. The company will use a portion of these proceeds to pay $51 million due under the company's four-year credit agreement with affiliates of Convest Partners and $8 million outstanding under the company's secured convertible note with Partner for Growth SPY LP. In aggregate, repayment of these liabilities represents a reduction in cash interest expense of approximately $5.5 million on an annualized basis. Earlier in the quarter, a lender transferred $35 million of the outstanding principal under their convertible note to a third party under terms identical to the original note. The new holder of the note converted the entire balance, inclusive of accrued interest, into 7.2 million shares of the company's common stock. This resulted in the elimination of a $35 million liability and a reduction of $3.5 million in annualized cash interest expense. Finally, during the quarter, the company elected to pay down $8.2 million of the outstanding principal of the GEM mandatory convertible security. To summarize, we significantly reduced our liabilities in Q3 and have subsequently provided funding for the continued development and commercialization of Surf OS. As a result of the financing transaction, we now see a path for the company to be debt-free. Let me turn to the results of the third quarter and our outlook for the remainder of the year. As discussed in our earnings release, revenue from the quarter exceeded our guidance, and adjusted EBITDA met our guidance. Strong execution of our transformation plan has driven significant improvement in our key operating metrics in both our scheduled service and on-demand operations, yielding significant and sustainable improvements in financial results. Third quarter revenue of $29.2 million exceeded our guidance range of $27 million to $28.5 million and rose 6% sequentially over the second quarter, driven by a 42% increase in on-demand revenue partially offset by a 4% decrease in scheduled service revenue. On a year-over-year basis, revenue increased 3%, driven by a 40% increase in on-demand revenue partially offset by a 7% decrease in scheduled service revenue. The drivers of both sequential and year-over-year increases in revenue were primarily related to a shift in the mix to larger aircraft and international flights, which resulted in an increase in revenue per departure in our on-demand business, and the exiting of unprofitable routes offset by improved operational metrics in our scheduled service operation. Our adjusted EBITDA loss of $9.9 million for the third quarter was within our guidance range of a loss of $10 million to $8.5 million. Compared with the second quarter and the same quarter of the prior year, adjusted EBITDA loss was relatively flat. Adjusted EBITDA loss continues to benefit from improvements in key operating metrics, including on-time departure, on-time arrival, and controllable completion factor, demonstrating the permanency of our transformation strategies. Our airline operations achieved a second consecutive quarter of profitability, defined as positive adjusted EBITDA. Now let's discuss our outlook for the fourth quarter and full year. For the fourth quarter, we expect revenue to be within a range of $25.5 million to $27.5 million and adjusted EBITDA loss to be within a range of $6.5 million to $8 million. These ranges reflect the exit of unprofitable routes and continued efforts to improve profitability. For the full year, we are raising our revenue guidance to at least $105 million, and we are reaffirming our guidance for full-year airline operations profitability, defined as positive adjusted EBITDA. With that, let me turn the call back over to the operator for Q&A. Operator? Operator: At this time, I would like to remind everyone, in order to ask a question, press 1 on your telephone keypad. Your first question comes from the line of Amit Dayal with H.C. Wainwright. Your line is open. Amit Dayal: Thank you. Good afternoon, everyone. Congrats on all the progress. With this financing, what kind of cash runway do you have in terms of commercializing Surf OS? Deanna White: Hi, Amit, and thank you for your interest in being on the call. I'll turn that question over to Oliver, the CFO, to answer. Oliver W. Reeves: Hi, Amit. As you saw, there were really two uses for the financing. One is obviously the investment into Surf OS, and we believe that that will give us a runway of between eighteen and twenty-four months. Amit Dayal: Okay. That's good to hear. Thank you for that. You have some really interesting partnerships with Palantir and Beta Technologies. Can you talk a little bit about what is happening with those efforts, especially in the context of Beta Technologies, which just went public? How are you potentially working with that company to commercialize the Surf OS offering? Deanna White: We announced in the second quarter working with Elektra and that we had an Elektra aircraft order for their future CTOL. But obviously, there is a lot of really interesting electrification technology coming from folks like Beta, Archer, and Joby that are coming in the near future. As a company, we are well-positioned to be able to partner with all of these folks that are bringing on this new technology. Why is that? It's because we fly in the regional air mobility space, which these vehicles, because they're shorter haul distances, will be able to be perfect testing grounds for those. And we're also in our Surf OS product. We are developing the platform in which all of these types of products can play within our platform, whether they're in our network or if they're deployed in other operators' networks. They can be within our Surf OS commercial platform and be part of an ecosystem for all of these new products that are coming online in the very near future. Amit Dayal: Okay. Thank you for that. Apologies if I got the Beta Technologies thing wrong. From an operating perspective, as you are exiting some of these unprofitable routes, are there opportunities to lower operating costs over the next twelve to eighteen months? Deanna White: Absolutely, Amit. We are still optimizing our airline operations. We don't have all the capabilities of Surf OS fully capable in our operations. There are still more benefits to receive once we do have all of those tools in place. We have the ability to use the optimization, so we can still hit those really great operational metrics that we are today consistently. But in the future, using technology, we should be able to do it with more efficiency and more optimization, which would require, obviously, less resources and less cost in the system. So, we do plan and we do see the opportunity for increased levels of profitability and even operational performance in the future. Amit Dayal: Understood. I'll take my other questions offline. And again, congrats on all the execution. Deanna White: Thank you very much, Amit. Your next question comes from the line of Austin Moeller with Canaccord Genuity. Your line is open. Austin Moeller: Hi, good afternoon. Just my first question here. Are there any features of Surf OS that you plan to make exclusive for your on-demand or scheduled business, or will all of your beta testers have access to all of the features of the stack? Deanna White: Our intention is to have all the features available to third parties. We represent a great staging ground and testing ground because we have a unique ability to be both a broker and an operator. We bring insights into what is needed. So when you're working hand in hand with the tech team and Palantir, to bring insights into the product requirements, we're able to make an amazing state-of-the-art tool that we are using in our own space. And we want that product to be deployed to other folks in the space and bring those people into the commercial and the ecosystem that that software develops for the industry. Austin Moeller: And on the scheduled business, so revenue was a little lower year over year. How many more routes might you expect to remove from the business before adding some of the new tier-one routes? And where geographically are you looking to add the new routes? Deanna White: So we have a few more exits in the fourth quarter. That's why our outlook for the fourth quarter in revenue dropped a bit. But we will be at the end of it, and all of the exiting of the unprofitable routes will be complete by the end of this year. Unless, of course, one of those routes tries to hold us in longer before they can get the new carrier in. As far as the announcement of any specifics on the 2026 launch of a new route, we don't want to do that too soon to give away that competitive advantage or exactly where we're going. But the team is busy developing and has a full business plan on exactly how that will come to play. And, obviously, we've used a lot of really good data that we have on where the demand is. Where are people traveling? That we can take them out of their cars and put them into the air using our service, and we have used that to make our decisions and then down-select where we're gonna go. Austin Moeller: Great. Thanks for the insights there. Deanna White: Your next question comes from the line of David Joseph Storms with Stonegate. Your line is open. David Joseph Storms: Good evening, and thank you for taking my calls. I did want to start, Oliver. You had a comment in your prepared remarks that you see a path for the company to be debt-free. I was just hoping you could speak a little more to maybe some of the variables that you would see impacting that and a sense of a timeline there. Oliver W. Reeves: Well, as you see, the convertible was designed with features that would allow us to gradually delever our balance sheet. So we feel that over time, this is a much better path for us rather than facing high interest or high cash interest debt and then bullet payments. So we feel pretty good about that across the duration of the convert, which, as you see, has a maturity of October 31, 2028. So as that converts and as we succeed, hopefully, before then, we have a great path to becoming debt-free. David Joseph Storms: Understood. I appreciate that. And then I also did want to circle back to the comment around Surf OS, which commercialization, hopefully, within the next eighteen to twenty-four months. The logistics around that, would you expect some sort of soft launch in the twelve to eighteen-month range that would maybe start generating revenue? Or I guess maybe what are your thoughts around that as we get closer to getting Surf OS on its feet? Deanna White: Yeah. So thanks, David. We have a commercial plan. We'll unveil it in the coming months, but we do plan in 2026 to start generating revenue with that product, and we will have revenue guidance that we give out and further discussion of the business model and the commercialization plan for 2026 and beyond. But we are starting commercialization. We're out of the beta phase, and we're doing everything. And this recent financing that we got for the strategic transaction we just announced is the catalyst to be able to start a full commercialization. David Joseph Storms: Understood. That's great. And then one more for me, if I could. Just any commentary around the recent government shutdown. Has that impacted your business model in Q4 here? Deanna White: Yeah. So our company's business is impacted in two ways from the government shutdown. I'll speak to the first because it's most on top of people's minds. It's the traffic reductions that were recently announced by the FAA. None of those traffic reductions targeted us or any of our operations or any of the regional flying. They were more directed at larger hubs in the major airports. So we did not have any capacity reductions, and we continued on operating and carrying our customers without any disruptions. The second area that we can be impacted from is we do participate in the Essential Air Service Program. We do routes in the rural areas under that program. That program includes subsidies to the companies who operate those flights. The DOT did, during the shutdown period, notify those carriers and say that there would potentially be a suspension of those fundings. That has not happened, but even if it was, we would continue to operate until the government came back up. We want to support all the communities in our Essential Air Service program, and we are committed to doing that. Right now, the current letter from the DOT talks about a suspension starting November 18, but, hopefully, the government can get back in this week and not be affected by that at all. So those are the two areas that we would have been affected, and so far we haven't. We've gotten all our EIS subsidies that we have billed, and haven't had any flight cancellations. I will now hand the call back to Deanna White for further response. Deanna White: Hi, everyone. For the first time during this earnings release, we have launched a new retail investor Q&A forum called Say Media. So we had a number of investors who submitted, and I appreciate everyone who submitted questions to that. We selected a handful of the top ones that were voted on by the folks to address and answer. I'll start with the first one. Given the current market skepticism and volatility, what is your plan to gain investor confidence and prove Surf Air Mobility can execute its vision better than competitors? At Surf Air Mobility, we are hyper-focused on shareholder value. And we've come a very long way in the last year. Over a year ago, we launched the transformation plan. So that is the plan that we are executing on to make sure that we can gain investor confidence in our company. The plan over the last year, I have spoken of, has been very effective. We have hit all of our milestones. We have improved and stabilized our operations. We've done a lot of work to stabilize our balance sheet and address our capital structure. And with this recent announcement, we are allocating funds to the higher growth areas of Surf OS, and we have delivered on the development milestones within Surf OS for the last year. You see us proving and performing against that plan. As we've achieved our seventh consecutive quarter of meeting or exceeding our guidance, investors are noticing. In the last six months, we've seen ten times the amount of shareholders in stock, and it's been great to see that many people interested and investing in our company. The second question was, with all the volatility over valuations and pullback from investors in regards to AI, can we expect true and realistic numbers coming from your company? So I'll turn this question over to Sudhin Shahani, our cofounder, to address. Sudhin Shahani: Thank you, Deanna. As you commented on earlier, we're going to comment on the numbers for the software Surf OS business for 2026 later on. And our 2026 is our year to start commercializing. But I'm going to address a couple of key points around our approach and positioning in the AI space. What we're building is a vertical AI product. We're solving specific high-value problems for businesses, using domain-specific data in an industry we consider ourselves an expert. We're not investing in foundational models, and we have a capital-efficient approach here, building core applications and leveraging data infrastructure from Palantir. And I would make a point that there are clear examples of companies in the space providing business solutions and applying AI with high degrees of profitability in these situations. Our partner Palantir is actually a perfect example of that. Deanna White: Thank you, Sudhin. The next question is very pertinent because we are talking to you from the Hawthorne Airport, where we have our corporate headquarters for this call. There was a recent announcement last week that Archer Aviation announced their acquisition of the Hawthorne Airport. Considering the corporate headquarters is there, what changes do you expect to emerge from this? Are there plans to work with Archer considering they're also a Palantir partner? Interestingly enough, we have been talking and highlighting the underutilized and underinvested airports that exist throughout the country. There are 5,500 public-use airports just like Hawthorne that can be used for the future of aviation through advanced air mobility. So we've been ahead of the curve because we play in this space, and we've been talking about this for a while. Interestingly enough, the industry and the investment in the aviation industry are moving from investment in R&D with OEMs that are making these aircraft and starting to move into infrastructure investments. This is going to bring a massive investment cycle change because you've got to now go in and make all the investment to have all the infrastructure needed for all these vehicles that are coming in the near future. So it makes sense that a party and a player like Archer Aviation would purchase such a thing. As far as Hawthorne Airport, and as far as partnering with these types of players, we're someone who flies today in those spaces in the shorter haul miles. And we're developing a software platform for that industry. And so we'll likely work with many of these best-in-class next-generation manufacturers to help bring their vehicles into the ecosystem and to our customers. And our last question is, what would be the main goal of the company to achieve by 2026, so in the next year? We want to continue to deliver execution on our transformation plan. Our transformation plan has four phases. We're in the second phase, moving into the third phase. We will continue to demonstrate stable, permanent operational performance, improving and optimizing our business through the adoption of software and the technologies that we ourselves are developing. The big thing in the next year is going to be our commercial rollout of Surf OS that we have planned. And we have the funding for that with the recent strategic transaction that we announced earlier this week. So that concludes our Q&A. Thank you for tuning in, listening to us, and the continued support of our company. We look forward to talking to you in our next quarter or installation when we start talking more about 2026, and we're able to provide more insight into the commercial details and the plans we have for 2026. This concludes today's conference call. You may now disconnect.
Operator: Greetings. Welcome to Playboy, Inc.'s Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Matt Chesler, Investor Relations. Thank you. You may begin. Matt Chesler: Thank you, Operator, and good afternoon, everyone. I'd like to remind you that the information discussed today is qualified in its entirety by the Form 8-K and Form 10-K filed today by Playboy, Inc., which may be accessed on the SEC's website and on Playboy's website. Today's call is also being webcast, and a replay will also be posted to the company Investor Relations website. Please note that statements made during this call, including financial projections and other statements that are not historical in nature, may constitute forward-looking statements. Such statements are made on the basis of Playboy's views and assumptions regarding future events and business performance at the time they are made. We do not undertake any obligation to update them. Forward-looking statements are subject to risks, which could cause the company's actual results to differ from its historical results and forecasts, including those risks set forth in the SEC filings, and you should refer to and carefully consider those for more information. This cautionary statement applies to all forward-looking statements made during this call. Do not place undue reliance on any forward-looking statements. During this call, management may refer to non-GAAP financial measures. Such non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation to the most directly comparable GAAP measure is available in the earnings release filed with our Form 10-Ks today, and in our Form 10-Q filed today as well. I'd now like to turn the call over to Ben Kohn. Ben Kohn: Thanks, Matt. Good afternoon, everyone, and thank you for joining us today for our Q3 earnings call. This past year or so has been all about transforming Playboy into a high-margin, asset-light business. And I'm pleased to say that the results of that hard work are now becoming clear. This quarter marks our third consecutive quarter of positive adjusted EBITDA and, importantly, our first quarter of positive net income since going public. These results validate the strategy we've been executing to stabilize the business around our licensing foundation and now position us to focus on growth moving forward. Let me start with a quick review of the quarter. Revenue for the third quarter was $29 million. Net income came in at $500,000, and adjusted EBITDA was $4.1 million. It's important to note that adjusted EBITDA was inclusive of $2.5 million of litigation expenses. Excluding those expenses, adjusted EBITDA would have been $6.6 million. Our revenue trend is particularly encouraging when you normalize for one-time items in last year's quarter, so Q3 2024. Adjusting for the 2024 revenue related to the e-commerce outsourcing and Honey Birdette store closures, revenue would have been up just over 4% year over year with basically no investment. So the underlying numbers are even better than what we reported. Licensing continues to be a bright spot for us, with revenue up 61% year over year. We signed six new licensing deals during the quarter, bringing our total for the year so far to 14. We also restructured our China partnership with a subsidiary of Li & Fung, moving them to a revenue-based structure that better aligns our interests moving forward. As previously disclosed, we were awarded $81 million in damages through a Hong Kong arbitration against a former Chinese licensee. We are taking all appropriate steps to enforce that award in China, and while it may take time to work through that process, we remain committed to pursuing recovery in full. We are just as confident about prevailing in our other litigation with a former licensee domestically. Although legal expenses have been high, we feel very good about our case and will pursue this to completion. Honey Birdette continues to perform well, reflecting the hard work we have done to improve the brand and the performance of the business. Comparable store sales grew 22% year over year, and gross margins expanded by 700 basis points from 54% to 61%. We've intentionally reduced the number and depth of promotional events, and that strengthened the brand while also seeing full-price items increase by 15%. Now I'd like to turn to our go-forward strategy, which is all about growth. As we detailed in the stockholder letter, which you can find on our investor website, we believe the next phase of Playboy's growth will be substantial, and importantly, it will be achieved in a measured way without requiring significant investment. The first step in this is clearly defining how we want to leverage the Playboy brand. Over the past four months, we've been working with a third-party agency on comprehensive brand positioning work, and it fully supports our strategy centered around content. Playboy is returning to its roots as an aspirational men's lifestyle brand with beautiful women and compelling storytelling at its core. For more than seventy years, content has been the heartbeat of Playboy. It's what fuels our cultural relevance and drives every aspect of our business. Looking ahead, our model will be focused around three verticals: licensing, media and experiences, and hospitality. First, our recurring high-margin licensing business remains the cornerstone of our profitability and visibility. The new content we're creating will open new doors for licensing opportunities and strengthen our brand across categories and geographies. The last time we invested meaningfully in content, we saw major collaborations and revenue emerge, from PacSun to Saint Laurent to Amiri. And we expect to replicate that success moving forward. Second, our media and experiential business will be driven by new content and monetized through subscriptions, paid voting, community engagement, and brand sponsorships. We've already begun testing new offerings with encouraging results. The relaunch of the Playboy magazine has generated meaningful demand, and our trial of the Great Playmate Search exceeded expectations, with around 16,000 contestants entering, representing a combined social media following of more than 200 million. We've had over a million votes cast to date by over 100,000 users. It's important to note that we have spent almost no money on this contest. The Playmate competition remains ongoing, and we plan to launch the next one in early 2026. Based on what we've learned, we expect paid voting to become a multimillion-dollar annual business moving forward. Yesterday, our winter 2025-2026 issue of the Playboy magazine hit newsstands across the US and Europe. It's a beautiful 240-page issue featuring 12 Playmates of the month and archival images of Jane Birkin on the cover. I would encourage you to go to playboy.com and buy your copy. We've also been developing a bundled subscription offering that combines access to the quarterly magazine, exclusive new content, seven decades of archives, and unique interactive experiences like subscriber-only interviews and voting for the Playmate of the Year. This strategy is designed to deepen engagement and build loyalty within our community. Second, beyond subscriptions, we're expanding into a moderate entertainment and media strategy. We signed two new deals, one with Cooper Hefner for a feature film titled "Dead After Dark," and another with Ben Silverman's Propagate Content to develop the Great Playmate Search into a reality television show. Both of these are structured as licensing-style deals. They provide for a licensing fee plus upside participation in related profits. Over time, we also plan to reintroduce experiential elements as part of our subscription or membership offering that capture the spirit of Playboy, like exclusive golf outings and poker tournaments hosted by our Playmates. Our third vertical, hospitality, will center around membership experiences. We are making great progress towards launching a Playboy Club in Miami Beach as part of our relocation to that city. We signed a nonbinding term sheet with a group of Miami investors for a $25 million investment into Playboy Hospitality, and we're finalizing the selection of our operating partner. Similar to licensing, Playboy will contribute the brand IP while partners contribute the capital. We see hospitality as a natural and powerful extension of the Playboy brand. At Honey Birdette, we're focused on maintaining its luxury positioning and expanding high-margin full-price sales through e-commerce in key flagship locations. We recently relaunched our website with enhancements aimed at increasing conversion, average order value, and engagement. Since we launched, AOV, or average order value, is up 9%, and we will be launching a loyalty program within the next two weeks. With e-commerce leading the way, we're preparing to expand into the Middle East and the Asia Pacific markets. From a retail perspective, we'll continue to invest in our flagship US stores, where sales growth is outpacing the rest of the portfolio with margins exceeding 30%, while evaluating underperforming locations. We are also thinking hard about raising capital at the Honey Birdette level to accelerate the growth there while not diverting capital away from the Playboy growth. As we move into 2026, we're excited to roll out our new brand positioning across every touchpoint of the Playboy ecosystem. This includes enhanced website functionality, subscription offerings, and premium content behind the paywall, all leading to the launch of a redesigned playboy.com. From a balance sheet perspective, we ended Q3 with over $32 million in cash, and we amended our debt facility, extending the maturity until May 2028 and reducing interest rates upon prepayments. With the progress we are making with our brand revitalization, a clear strategic vision, and a business model built to balance strong profitability with meaningful growth, we're entering the next phase of Playboy's journey from a position of real strength. Thank you all for your continued support and belief in what we're building. Operator, I'd now like to take questions. Operator: Thank you. Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Our first question is from George Kelly with ROTH Capital Partners. Please proceed. George Kelly: Hey, everybody. Thanks for taking my questions. Maybe if we could start with Honey Birdette, there was a lot you just went through, a lot of sort of initiatives and capital raising, etcetera, that you went through in the letter. I was curious just what is the goal there? And how should we think about that business growth margin, you know, the store base? Just any more context you can provide over sort of what you're shooting for over the next couple of years? Ben Kohn: Hey, George. It's Ben. Thanks for the question, and I'll let Marc Crossman pipe in as well. Look, I think as we've talked about for the past couple of years, we were all about fixing Honey Birdette and stabilizing the business, and I think we've done that. Right? We've reduced our inventory substantially. We're seeing same-store sales even though we're down seven stores year over year. Right? And we've talked about that as level setting the revenue. You know, the same-store sales are up 22%. We're seeing full-price items up 15%. We've seen 700 basis points of margin expansion. There is significant demand for the business. The issue we have moving forward is, you know, our goal is to continue to delever the company. We see a massive growth opportunity with Playboy. And so any free cash we have, we want to invest in that because we're seeing the data behind it. And so the question is, what do you do with Honey Birdette knowing that we fixed the business, it's on really stable footing, and we know there's growth there. And that leads to thinking about raising capital at the Honey Birdette level so that it doesn't divert resources away from Playboy and allows that business to continue to grow. I think, you know, long term, as we've talked about previously, you know, let's see where that process goes and whether or not Honey Birdette, you know, on the long term, should be part of Playboy as a 100% or something less than a 100% moving forward. George Kelly: And the reason you're considering capital, is it just opening more stores, or is there some other investment you're contemplating? Ben Kohn: I would say, again, you know, it would be some flagship stores that we're seeing 30% four-wall EBITDA margins on. And then, obviously, continuing to grow our e-commerce business. You know, if you look at what we've done since we've taken over the business, you know, e-commerce as a percentage of total revenue, you know, has basically flipped from when we took it on the brick and mortar. And I think we want to continue to expand into new territories. The demand and growth is there. We just need the capital to do it. And, you know, again, growth doesn't come for free. You have to make an investment. Again, we're not talking about big dollars. But right now, given that we still have a desire to continue to delever this business and invest in Playboy, I think based on where Honey Birdette is now, I think there's a good chance we could raise money from, you know, third parties to continue to grow that business. Marc, anything you want to add on that? Marc Crossman: No. I think you pretty much touched on every bit of it. George Kelly: Okay. Okay. That's helpful. Thank you. And then next question is on your licensed business outside of Viborg. It stepped up in Q3 sequentially. And I know you've signed all these new license deals. I think you said fourteen year to date. Are the deals you've signed contributing now? Is that cool? What explained the step up, and how significant are the fourteen? I'm just kind of thinking about, you know, what kind of growth those new deals should drive in the coming quarters? Ben Kohn: Yeah. So go ahead. Go ahead. No. No. Here you go. I would say, look. Again, remember, there's always a lag for when you sign a new deal because we as a business have to use 606 accounting. So you straight line it. So there's always a lag between signing deals and revenue recognition. You know, look. The pipeline is strong. I expect, you know, should the year finish strong, we should be able to sign more deals in the fourth quarter than we signed in the third quarter based on our pipeline today. And so I think we remain optimistic. You know, we put things out there in the past showing sort of the revenue by geography. And we've also put something out there in the past in our previous investor decks and hope to have a new one out shortly. But that shows by category. There's a lot of white space. The thing I would tell you, George, and we did this before. We did this back in 2018-2019 when we invested in content, and that led to, you know, the PacSun and the Amiris and these other deals. Investing in content actually really drives growth in licensing. It gives us new IP actually to somewhat to license, and it leads to brand relevancy. And so that's why content is the center of our strategy moving forward. We'll drive all three facets or all three verticals of our business moving forward. And so I would expect moving forward that will continue to accelerate as we move into 2026 and 2027. George Kelly: Okay. Okay. Helpful. And just one last question for me. Sort of a multipart one. There's a lot of different initiatives that you talked about in the letter and in your prepared remarks. Media and hospitality, all the different stuff. As we think about 2026, what opportunities do you think have the most potential to drive revenue growth? And will any of these initiatives require kind of front-loaded OpEx investments that could pressure EBITDA growth into next year? Ben Kohn: Yeah. So I know there's a lot in the letter, and it's a good question. I want to say that, you know, the biggest investment we're making, and we're doing this in a very measured way, okay? And we already started this this year with the magazine. That is our marketing for the brand. Right? We're not a brand of said this before, that spends millions of dollars, you know, taking out billboards and doing everything else. Right? Our brand relevancy and the marketing for the brand comes to the content. We're just going to monetize that content moving forward. And so it might sound like a lot, and I understand that. It's actually not a lot from an operational perspective because we've already started some of that this year. The tweaks that we're talking about, we're selling the magazine on an a la carte individual basis. We're selling the archives today on an individual basis. It's just not easy to find it. It's not done in a bundled offering. And so moving forward, you know, as we return Playboy to its roots as an aspirational men's lifestyle brand, you know, I think there's a massive opportunity when you look at the data, you know, really around relationships and sex and what's happening to men in society today. Where people are having less sex than ever before. You know, relationships are harder to come by. That's core to the Playboy brand in our brand work and what we got from consumer surveys. That is stuff that consumers will pay for, giving people relationship advice, giving people dating advice, giving people sex advice. That's the type of content that can sit behind the paywall, and then you surround that with four issues in the magazine, the Playmate calendar that is also for sale today on playboy.com, because we did 12 Playmates in this issue. You know, a great example of moving forward, and we are already doing this, is we have 12 Playmates. But instead of launching this January, February, March in the March issue, we can launch this January digitally on a safer work environment leveraging her social media as well as our social media. YouTube, get to know her, Instagram, you know, TikTok lives, all of that. But then to see her photo spreads early and behind-the-scenes content from that photo spread, you would need to be a subscriber on an annual basis to see that. And so those are the low list that we're talking about. And, again, as I said, we're going to be very disciplined in how much money we invest. We're going to do this in small increments. But, yeah, there could be substantial growth based on the data if it works, and we're seeing that with paid voting. Right? You know, paid voting on an annualized basis is already multiple millions of dollars. Right? Obviously, not this year because the contest has only been running for a short period of time. But as we move into next year, I see us not only having one contest, I see us having multiple contests during the course of the year. And what we've been able to do with paid voting when you look at the data, you know, we've acquired over 100,000 users. Okay? And we've had some real tech challenges on this first one that we have now fixed. Engaging those creators. So we got 16,000 creators sign up, but we acquired over 100,000 users with zero CAC. Right? And so last night, we actually started emailing a small group of those users to buy the magazine in the calendar, and that would then lead to emailing those users to actually become a Playboy subscriber or member, however you want to call it. And maybe as we move into next year, the voting packages that people are buying to are integrated into different levels of membership. The hospitality, let me be clear, you know, very excited by the response we've received. We signed a term sheet with a group of investors to fund Playboy Hospitality. Again, it's going to be a licensing deal. We'll take fees out for contributing the brand. We're not putting capital up. That is a longer lead time to get that Playboy Club in Miami open. When we start selling memberships, I don't want to comment on at this point, but it will be a membership club. But the first thing is getting the capital and getting the operating partner, and then you can start to begin to sell members. I don't think 2026, you'll see meaningful revenue from that. I think, you know, I think wise, I think the media and the subscription side of the business, you could start to see real revenue there next year. I think 2027 will be about getting that club going, and you'll start to see membership sales come in then. George Kelly: Okay. Okay. That's helpful. Thank you. Ben Kohn: Thanks, George. Operator: Our next question is from Alex Joseph Fuhrman with Lucid Capital Markets. Please proceed. Alex Joseph Fuhrman: Hey, guys. Thanks very much for taking my question. You know, nice to see really nice free cash flow here in the third quarter. It looks like you're getting a lot of traction with some of these high-margin initiatives. One in particular I wanted to ask you about, Ben, you mentioned paid voting. Sounds like you have a lot of confidence that that's going to be a multimillion-dollar business. Can you tell us a little bit about what you've seen so far that gives you that confidence in terms of, you know, numbers of users and spend and things like that? Ben Kohn: Sure. So, you know, let's just talk about the way we set this up, Alex, and go from there. So we set this up as a licensing deal. So there was really zero capital outlay on our part. There were some technical challenges we had when we first launched this that we have now fixed, and there's also, you know, the partner that we have on this is a good partner, and there are some flow issues that we had to fix in the beginning. The biggest issue we had was actually our SMS provider. We lost in the beginning. And so we had 16,000 people register. We unfortunately couldn't actually take advantage of our partnership with Viborg on this one, who has a large amount of international creators. We lost the ability to actually message the international creators right when this started. The second big thing was because this was our first one, instead of having, like, a rolling vote where someone signs and you're immediately in a bracket and they could share a link, we had a period of two months where we basically went dark with the creator where they would sign up, you know, call it August 1, but they didn't get their link to share in their bio on social until October 1. Okay? So there were some challenges, and then we reengaging them because you lose a lot of momentum. All of those will be fixed for the next one. But if you look at it, you know, we had 16,000 creators. The actual number of engaged creators was much smaller than that because we lost the international creators. And we spent no money on marketing on this. So we actually think it would warrant small investments moving forward to build the momentum here. But we've generated over a million votes. We've generated over 130,000 unique users signing up for this. Okay? On what was, you know, 16,000 creators, obviously, is smaller than that because some of them weren't able to participate in the contest because we couldn't engage with the international creators. So I think the momentum will build on that. On top of that, we've signed a deal with Ben Silverman's Propagate to take the Great Playmate Search and actually develop this into a reality television show. So the way we're thinking about this long term, and again, you know, we're working on that as a licensing deal too, but the awareness like a television show could bring to this overall, the way that you would do the casting is through the digital paid voting side, which then leads to basically the casting for who would be on the television show. And so this is all part of this, like, 360-degree media strategy. Again, we have to execute. It's going to take some time to do this, but I would tell you that, you know, the data alone on the revenue that we're generating, if you look at our days on an annualized basis, and we still have, what, almost a month to go in this contest. There is no revenue in the third quarter from it because voting didn't start till October 1. But when you look at this moving forward, yeah, this is already on track if you annualize sort of where we are through the first month of voting, you know, where it's already annualized out a multimillion-dollar business. And this is on one contest, and I would say next year, yeah, we're thinking about, you know, four to ten different contests that you run during the course of the year. Alex Joseph Fuhrman: I mean, I'll give you an example also. We're working on a where Honey Birdette can do a Playboy lingerie line. We're thinking about running a voting contest to find the next phase of the Playboy Honey Birdette collaboration line. Right? And so not just appear on the magazine, but how could you extend this to other parts of the business? Again, think about the top of the funnel. 130,000 people we have verified emails for zero CAC against that. Now the question is, can we start to market them other products and services as well? Alex Joseph Fuhrman: That's great. A lot of reasons to be excited there. If I could also ask some more questions on Honey Birdette following up on some of George's. You know, that's nice to see really big comp store sales growth and gross margin growth. Can you just remind us the seven stores that were closed since last year, how were those stores underperforming? Are there any other stores that need to be closed before you can really get this brand back to very significant growth? Marc Crossman: Yes. So, Alex, it's Marc. In terms of our store base, what we really look at when we talk about the flagships, it's about our top 20 stores, and we have 51 stores right now. So those stores are running close to 40% four-wall margin. And so we're really looking at, you know, the bottom 20. I'm not saying it's 20 stores that we would close, but we're really focusing on those stores as, alright. We're the ones that we think are underperforming. And don't see that path forward for those stores. But, again, that's a multiyear process, and it is definitely not 20 stores, but I do think the base needs to be rationalized a little bit. Alex Joseph Fuhrman: Right. And bigger flagships could there be? I imagine those are mostly in big markets. Marc Crossman: Yeah. But it may mainly be one in the US, and there are plenty of big cities that we have not hit. We basically hit the Southeast, you know, in the Southwest. And so there's we've got the entire US to tackle. We only have 10 stores in the US. And then there are a lot of other places around the world. You can see, you know, Dubai, Vietnam. There are a lot of different places where you would go in. Korea and have just one big flagship store in that country. And then, you know, one of the examples we can do is if we want to be in the Middle East, we want to be in APAC, because we have a distribution center in Australia, can ship out of Australia, and we don't have to deal with the duties that we're seeing coming into the US. So it's you have the entire world that you can now you can start opening these flagship stores in. Ben Kohn: Yeah. I mean, Alex, I'd also tell you that, like, you look at a market like Miami just because we've been spending a lot of time down there. You know, that's a great performing store for us. But the Miami market is huge and growing. Right? Especially after what happened in the elections this past week. So you look at South Florida in general, Miami could easily take, you know, two to four more stores down there. A question of having the right capital to invest in it, and it's why we're thinking about, you know, now that the business is on stable financial footing, there'll still be growth there. But how do we actually accelerate that growth moving forward? Alex Joseph Fuhrman: No. That's great. Really appreciate the answers. Thank you both. Matt Chesler: Thanks, Alex. Appreciate it. Ben, let's ask one more analyst question before we move on to the retail investor portion of the Q&A session. This one is from James Heeney and team from Jefferies. It's actually a two-parter, and the first one is licensing. With licensing revenue up 51% in the quarter and signing 14 deals year to date, what are the categories or geographies where you see as the next frontiers for growth? Ben Kohn: So, yeah, Matt, I would answer this very similar to, you know, comments I've already made on the call, which is when you look at the geographical dispersion of our licensing deals in the categories, there's a lot of room to grow. Now the question is making sure that we do the right deals. And so I think there's growth across geographies, and I think there's growth across categories as well. It's just a question of making sure that we continue to focus on bigger and fewer deals versus, you know, smaller deals that add more complication from an operations perspective to the business. And so the pipeline is strong. And I think our investment in content moving forward will continue to enhance that pipeline. What's the second portion of the question? Matt Chesler: The second portion of the question is can you give any more details or metrics on, you know, engagement or monetization from some of the efforts you highlighted, such as the magazine relaunch, although, I guess, this launched yesterday. The Great Playmate Search, and then the studio production deals that you talked about. Ben Kohn: Sure. So I think we've, you know, we've commented on the metrics around the Great Playmate Search. You know, the magazine just launched yesterday. Presales were strong. And Books A Million yesterday. You know, it went on sale at Barnes and Nobles. And A million. Then the studio deals are quasi-licensing deals. Right? They are they call for a licensing fee plus a percentage of the profits. Marc Crossman: Yeah. And I'd also want to add that the calendar had the same level of distribution that we had with the magazine itself, and All Doors Books A Million, All Doors Barnes and Noble. Matt Chesler: Okay. Thank you for those questions. Let's now move on to the retail questions. I'd like to say we really appreciate all the thoughtful questions submitted ahead of today's call. What we've done is taken the time to carefully review and group them. We've summarized them into some common themes so that we could address as many as possible during today's session. The first question is also a licensing question. Can you talk about any of the new deals, particularly the land-based entertainment deals? And whether the new China licensees are showing any signs of growth. Ben Kohn: Sure. So I think there's sort of two parts to this question. I think, you know, just to reiterate, we signed 14 new licensing deals, including six in the last quarter. We are targeting to sign more in the fourth quarter than we did in the third quarter. You know, as far as China, that's its own animal. You know, we obviously won the lawsuit there. That was a huge overhang on the business because of what our ex-licensing partner was sort of threatening new partners for us. That they were going to win. And therefore, if they signed with Playboy, you know, they would be throwing their money away. You know, now that that is behind us, and we'll do everything we possible to enforce that award. That, you know, we expect China to return to a more normal market still with issues in the market with high unemployment and, obviously, home values within China have, you know, been decimated. I think, again, you know, investment in content is really going to drive licensing growth moving forward and accelerate that growth. You know, as far as LBE, I think it really speaks to the partnership we're starting with in Miami. You know, we're setting it up as a licensing deal, but we put together, you know, a term sheet with a group of investors that have come to us that want to invest in it, that see the opportunity. Let's get Miami off the ground. And then we'll look at how to expand that to other cities around the world. Matt Chesler: Ben, I'm going to move to a question on digital. If that's okay. Right. So let me summarize this one. It's related to Viborg. A lot of interest in getting an update on how that partnership is evolving, including potential opportunities to collaborate with some of their platforms such as, you know, Vibe Jasmine or new digital initiatives such as Centerfold and Playboy TV. Ben Kohn: Yeah. And if you while you're answering that, if you could also address the questions around whether, you know, when do we expect that the revenue to exceed the $20 million base? Ben Kohn: Sure. So I think let's just level set that this partnership is even though we signed the deal actually a year ago next month, you know, the transition of the sites and the channels to Viborg wasn't really completed until the summer. Right? So it went in different phases. So we're very, very new in that partnership. I think we've also previously commented that, you know, we are not counting on overages in the first couple of years of that business. We're not counting on overages the way we built our organization in the restructuring of Playboy at all. That's all gravy to our earnings moving forward. But they're investing in those businesses, and we invest in the business, you're doing it because there will be future growth. That just takes time, and I think we have to be patient. As far as collaboration, we've already started it. So as I mentioned a few minutes ago, we had some issues in the beginning on the international creators. We lost the ability to message them. But regardless of that, we did some various tests with Viborg, all with good results. So we had Viborg sign up creators send out an email to their universe. We got creators to sign up. Unfortunately, in this contest, we couldn't monetize them. We had Viborg send out an email to their users to vote for the next Playmate. Again, you know, these were good results. And then lastly, we had Viborg send out an email to a select group of their users to buy the Playboy magazine. All again, we're testing everything right now. And, again, you know, we're pleased with the results. So we're beginning that testing on how to work together outside of just the licensing deal that we have in place. Matt Chesler: And now building on the Viborg topic, and where that could go over time, you know, given their significant financial commitment, and the shared synergies that exist between the two companies. Has Playboy considered a potential merger or some sort of deeper strategic integration to unlock additional scale and value? Ben Kohn: Sure. So we can't comment on any corporate transactions. You know, what I could say, and this is all publicly disclosed, is that we have a standstill with Viborg, including an ownership cap of 29.9%. And any other transaction would have to be done through, you know, the proper channels. Matt Chesler: Understood. So now let's talk about other avenues of growth. Beyond these current initiatives, are there other green shoots you see emerging that could drive momentum in Playboy's business? Such as fan voting and licensing. I think you've talked about both of those a bit. Or the revival of the Playboy Club concept perhaps. Ben Kohn: Sure. So, again, I think this is a question George had as well, but we're staying very, very focused. Right? We are making very small bets moving forward, making sure that before we commit real dollars to anything that we've tested it and we know the data supports a further investment. But, you know, to the extent we can set things up like a licensing deal, all the better. The place where really we'll be investing small amounts of money in content. We've already started that this year with the magazine. Now we're going to roll out the second phase of that, which is sort of the subscription side of it. You know, we think the media and experiential business, you know, could be larger than the licensing business over time if we execute it properly. I think on the Playboy Club, we're, you know, we're well on the way to getting that one off the ground in Miami. There's still a lot of work to be done. But we are working on that. And outside of that and growing, you know, investing in content to continue to grow licensing, we are not distracting ourselves with anything else. We have a small team. We have to stay super, super focused. And, you know, we're in the process of making sure that we can bring in the right people with the right skill sets to help us execute properly in these areas. Matt Chesler: Okay. There is an additional question about Honey Birdette. That I'll ask if there's anything incremental to offer here. How is Honey Birdette positioned competitively as the premium lingerie market strengthens, and what are the brand's priorities to sustain growth in '26? Ben Kohn: So, look, the brand's positioned really well. You know, that's what we did, Marc, two years ago, I guess. We started really cutting down the number of days on sale, focusing on brand health. You know, we've seen the results. So, again, we could drive a lot more revenue if we wanted to. Okay? There's the growth is there. But that means I got to take more inventory. Right? We've reduced our inventory to approximately nine and change. Down from, like, 13. Right. So we've substantially reduced inventory because that's cash tied up in the balance sheet. Right? That limits what you can do from a business perspective with the business. The growth is there, but you have to then say, I want to invest the capital to do it. So we focus on brand health because coming out of COVID, you remember, we bought the business in '21. August '21, if I remember properly. It's been a long time. And the week after we bought the business, I think Australia went on, like, a three-month lockdown. Okay? And on top of that, we had a lot of inventory that the previous owner had bought, and so we ended up having to sell that at discounts coming out of COVID lockdowns because on top of that, you already had your inventory plan for, you know, October, November, December in addition to all the stuff you got stuck with. So we revitalized the brand. I think the brand is doing really well. We've improved the margins. There's still growth to be had even with our inventory levels. But to really accelerate that growth, I think we need to raise some third-party capital. Or if we had extra capital, we could do it, but we don't because we want to invest in the content, and we still need to continue to delever the business. I don't mind selling a piece of that business today if I know that my remaining stake is going to be worth a lot more because the growth is there. And so that's how we're thinking about it. Matt Chesler: A different topic here. What steps is the board taking to ensure strong accountability and alignment between management and shareholder interests? Given the stock's performance and investor concerns. Ben Kohn: Yeah. So, look, let me comment first and foremost that I think the management is fully aligned with the board, and we're fully aligned with investors. And I think, you know, the turnaround in the company, we're showing that. I understand the frustration more than anyone. I know people might not think I do. I hate losing money. It drives me absolutely crazy. And I understand how frustrating this journey has been. But we have done the right things and taken the necessary steps. I want to also comment that no one on the senior team has sold any shares for personal gain. I'm actually one of the largest individual shareholders in the company. And I also want to clear up that I've actually invested my own money in this business. On three different occasions. I put almost $3 million of my own capital buying shares. One at the IPO, I bought shares at $10 a share. Second, when the stock was in the teens, I bought stock then. And then I participated in the rights offering as well. So I've invested approximately $3 million in my own capital into the business. Most of our compensation as management comes in the form of stock grants. Right? So in addition to the stock grants, I've actually put real money out of my savings into the business, which is the right thing to do as the CEO of the company. So we are fully aligned. I also think it's important to level set what's happened to us and why we got to this point. Right? So when we went public, in '21, we had a business in China that was doing about $42 million of revenue, call it $32 million and change of net profits to us. After agency fees and withholding taxes. Okay? We definitely have screwed up things. I take full responsibility for the mistakes we've made as a business. There are also things like China that went against us that you just couldn't forecast. We had $32 million of cash flow that basically evaporated overnight. Forget about the accounting treatment of it. I'm talking about cash coming into the business. At the same time, we had just bought companies and taken on a mass amount of fixed liabilities to actually integrate those businesses. And at the same time, our cost of debt because we were levered, being a levered retail play at the time wasn't the greatest thing. Our cost of debt more than doubled. So you should think about, like, the cash flow swing in the business of, like, $45 million between the loss of China and the extra interest cost that we started to absorb. Because of the debt. Right? And no question about it. We made mistakes, but those are things that we just couldn't forecast at the time. You wouldn't have thought that based on the stability of the business beforehand. You know? So we had two options. Right? You either grind it out or you could give the company to the lenders with the debt. And, you know, I'm a fighter. I think everyone on this team is a fighter. There's not a person that has sold shares here. And we did what we needed to do to survive, and it came at a huge personal cost. Right? Seeing the comments, I understand people's frustration with the business. But, you know, there's a human side of this too, which is we had to part with a lot of really good colleagues along the way. But we did what we had to do to survive. And I think now you're seeing the flip side of that. Right? I also had a really good personal relationship based on my private equity days with their lenders. I got them to amend the debt facilities six times with no amendment fees, right, including a $40 million extinguishment of debt. And then rolling another big chunk of debt into a convert. If you actually look at the convert, that we converted, plus the $40 million of debt forgiveness they gave us, it's actually, like, over, like, $4.50 a share if you combine the two of those for what the actual conversion price would be. That hard work that the team has put in, right, and has not been fun, but you're trying to get to the other side of it. Right? You first quarter since, I think, in the company's history that we now have net income at least since we went public. You're seeing sequential EBITDA growth every single quarter. The business is on a solid financial footing. We've reduced the cost infrastructure. But now what's actually becoming fun for the first time is we actually can focus on growth moving forward. So we've invested some money this year. On the brand. That was a first and foremost thing. Obviously, coming out of the mid-2020s, we went way too woke with the brand, etcetera. I've commented on that in the past. We have a really clean mission statement moving forward. We have a really clean vision. We're going to roll that out to investors in 2026. But then you'll start to see us align the rest of the company's properties around that. And I see there's a real opportunity. We know the data on because of when we had the Playboy Plus and Playboy TV websites, of what people will pay for. So we have a real path to actually monetize this moving forward and accelerate the growth with a really stable base of licensing revenue and a much lower cost infrastructure than we ever have before. So are we aligned? I think we're 100% aligned, you know, with investors both through our equity holdings, my personal investment in the company, and the path moving forward. Next question. Matt Chesler: Can you provide an update on the efforts to enforce and collect the $81 million arbitration award related to the former China licensee? And what impact could this have on cash flow on the balance sheet once received? Ben Kohn: Sure. I'm going to be slightly careful on how I answer this, but, you know, what I'd say is first and foremost, you know, we are very happy with the results of the arbitration, and we believe justice has been served. You can't get into all the particulars, but I can say that we and our counsel in China are working with the appropriate local court to formally recognize the award in Mainland China and seek enforcement. You know, we also have another litigation going on, and I understand it's more frustrating for us than anyone of what we're spending with litigation, but it's the right thing to do. We have a domestic case, you know, that we're in the process of. We feel strongly about our case in the other arbitration or the other litigation than we did in the China. And we are going to pursue that one to the end. And believe that we will be successful in that case as well. We are going to do everything in our power to collect as much of that $81 million as we possibly can. I want that money more than anyone. We deserve that money. And we're going to do everything we possibly can to collect that money. And if we collect it, it's going to be all gravy to the business. Because we're in a good place overall with the company now. Matt Chesler: We have two more questions. I promise we'll get through it. Stock buyback. Is the authorization still active? And, you know, under what conditions would management consider utilizing it given the share price levels? Ben Kohn: So let me just say the following. The authorization is not currently active. Our number one priority is to continue to I'll double check it if I'm wrong, but I believe it's not. It's not something that we're focused on right now. Our number one priority is to make sure that we continue to delever the company. You know, lenders were great again. We've extended our debt maturity into May 2028. So, you know, we don't have to worry about that right now. We also have the ability to actually reduce our interest costs by making certain prepayments to the lenders. So we're very focused on that. And then our focus is on making sure that we make smart small investments to fuel the growth of the company. So first and foremost, I want to delever this business because that takes away cash that we could otherwise invest in growth. And so we need to solve that. Once we solve that issue, we invest in growth, then you can decide what to do with, you know, the free cash flow afterwards. But right now, the priority is not to buy back shares. It's to continue to delever the company. What's left? Matt Chesler: Let's end on one final paid voting question, and then I'll turn it over to you for final remarks. Which is, you know, what kind of revenue contribution engagement are you seeing? Are you expecting? And I think most importantly, who's the winner? Ben Kohn: Well, here's what I'd encourage. Is one is all of our investors should go out and buy the magazine on our website. Please do that. Also, please go to the website and vote for who should become the winner. The competition is still going. It will end in the beginning of December, second week. Or give or take in December. So there's still live voting. We'd love for everyone to buy a package of votes. Help us on the revenue perspective. And then we can talk about that in March. I don't know who the winner is. I can tell you that, you know, we weren't sure about the quality of contestant that would enroll. And I would tell you that both us and our partner are very, very happy with the quality of contestant. You know, the contestants represented over 200 million social media followers. Now, obviously, we couldn't activate with all of those contestants because I described the technical issues. Those will be fixed for the next contest, and then we'll also take the contestants and make sure that we reach back out to them. You know, we've also done other things like we've emailed all the contestants the opportunity to buy Honey Birdette at a discount. So there's a lot of great stuff coming out of this. That we're testing, and we'll get smarter as we go. And, you know, to generate what we've generated, it will be definitely profitable for us. Because we haven't spent any money. And I think the real opportunity then is to understand how do we smartly start to spend a little bit of money to amplify this contest. If we do it the right way, this should be a multimillion-dollar business for us as we move into '20 and beyond. And more importantly, it's community engagement. Right? That to me is the most thing. The most important thing is, you know, the question is, how do I take those 130,000 fans that have, you know, actually registered and start to sell other things to them. Not going to answer the exact question outside of the numbers we've already given. Matt Chesler: Okay. Okay. Ben, thank you for taking the time to go through those retail questions. I want to thank our retail investors for submitting them. And so with that, I'd like to turn it back to you, Ben, for closing remarks. Ben Kohn: No. I really, Matt, I just want to sort of echo what you just said. I think we should make this part of our earnings call moving forward. I do this is a retail stock at the end of this day. You know, again, I want to fully acknowledge the mistakes that we've made as a team. You know, I always believe in making mistakes is okay. Just don't want to make the same mistake twice. I think we've learned from those. We're a better, more nimble, more organized management team coming out of this. I think we're starting to finally hit our stride and get some breathing room to focus on growth. I want to thank the investors for staying with us. I know it's not been easy. I will say personally, it's not easy looking at my brokerage account either, but I finally feel like we're in a place where we're taking two steps forward and one step back versus taking one step forward and two steps back. So I feel like we've turned that corner, and there's some good things happening here. And I just want to acknowledge, you know, the frustration because I see it. I do sometimes look at social media comments, and so I acknowledge it and just want to thank people, and hopefully, we can continue to deliver good results moving forward, and we look forward to talking to you guys in the March time frame when we announce annual year. We have a couple of investor conferences that we'll be announcing soon that we're participating in. And hopefully, in the short term, we'll get a new investor deck up on our website that really clearly outlines our strategy moving forward. And then as we get into 2026, we'll start to roll out, you know, this new brand positioning, which is really taking the company back to its roots, looking at that core DNA, knowing that, you know, our core audience is an 18 to 40-year-old male and making sure that we deliver the content experiences and products to satisfy that customer. So I appreciate everyone joining. I know it's been a much longer call, but I think it's important that we took the questions. And thank you all for listening. Operator: Thank you. This concludes today's sorry, ma'am. Good. Matt Chesler: I was going to say what you're this concludes the call. You may now disconnect your lines. Alex Joseph Fuhrman: Thank you.
Renata Couto: Thank you for joining us for Afya's conference call. I'm here today with Afya's CEO, Virgilio Gibbon, and our CFO, Luis Andre Blanco. During today's presentation, our executives will make forward-looking statements. Looking statements can be related to future events, future financial or operating performance, known and unknown risks, uncertainties, and other factors that may cause Afya Limited's actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to the business and financial performance, expectations, and guidance for future periods, or expectations regarding the company's strategic product initiatives and its related benefits. These risks include those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on data as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law. In addition, management may reference non-IFRS financial measures on this call. These measures are not intended to be considered in isolation or as a substitute for the results prepared in accordance with IFRS. This presentation has reconciled these non-IFRS financial measures to the most directly comparable IFRS financial measures. Now let me turn the call over to Virgilio Gibbon, Afya Limited's CEO. Virgilio Gibbon: Thank you, Renata, and thanks everyone for joining us today for our third quarter and nine months conference call. This quarter reflects more than financial performance. It demonstrates how our strategy continues to position Afya Limited for sustainable growth, transforming medical education across Brazil. We concluded our thirteenth semester after the IPO, delivering strong growth, profitability, and cash generation, and keeping 100% occupancy in all of our medical programs in Brazil. Our results highlight the strength of our ecosystem while advancing initiatives that will shape the future of medical education and medical practice. Today, I will cover key strategic developments and operational highlights that drove these results. Then Luis Andre Blanco will provide a detailed review of our operational and financial performance. Starting with slide number three. Let's begin with our main performance highlights and strategic priorities for the quarter. Our revenue for the nine-month period grew over 13% year-over-year, reaching BRL 2.784 billion, followed by an adjusted EBITDA growth of almost 19% year-over-year, reaching BRL 1.292 billion. Adjusted EBITDA margin for the same period reached 46.4%, an increase of 200 basis points over last year. We also reported a new record cash flow from operating activities, ending the nine-month period with BRL 1.292 billion, 11% higher than last year, with a cash conversion of 101.5%. Net income followed the same positive trend as the last quarter and reached BRL 593 million, a growth of 20% year-over-year, with a basic EPS reaching BRL 6.40, 20% higher than last year, reflecting stronger operational performance. Turning to our operational updates in this quarter, we maintain our leadership position in medical education, supported by 3,653 approved medical seats and 3,753 seats as of today after the approval of 100 medical seats in Afya Bragança. Our number of undergraduate medical students has reached more than 25,000 students, representing 6% growth compared to the same period last year. Furthermore, our medical schools' net average ticket, excluding acquisition, increased over 3% in the nine-month period. In the continued education segment, we continue to see solid results, presenting a revenue growth of 11% year-over-year, reaching BRL 208 million. For medical practice solutions, we ended the quarter with an increase in revenue of over 9% year-over-year, reaching BRL 128 million in the nine-month period. Renata Couto: Finally, our ecosystem reached 300,000 active users, reflecting strong engagement and broad adoption Virgilio Gibbon: among physicians and medical students across Brazil. Moving on to slide number four, we will talk about our solid business execution within our three business units, starting with the undergraduate segment. We saw important movements throughout the quarters, such as an impressive gross margin expansion and the successful beginning of operations acquired in May 2025. In addition, we are pleased to share that we received authorization of 100 medical seats in Afya Bragança, bringing our total approved seats to 3,753 seats. The continued education segment was marked by an increase in graduate students, sustained by another round of organic expansion in our medical graduate campuses, with five new operating units in 2025, a strong gross margin expansion. This nine-month period, we saw a significant increase in B2B revenues with 65% over the last period. Lastly, in our medical prep solutions segment, once again, we ended the quarter with a growth in the clinical management Renata Couto: payers. Virgilio Gibbon: In addition, we also saw an increase in B2P, business-to-physician revenues, led by an 11% growth compared to the same period of the prior year. These results reinforce the opportunity ahead in Medical Prep Solutions, which continues to deliver increasing solutions for medical practice. In the next slide, I want to share how our ESG initiatives continue to create long-term value and strengthen Afya Limited's commitment to sustainable growth. Over the nine-month period, we delivered 700,000 free healthcare consultations, including more than 500,000 medical consultations. These achievements exceeded the target set for 2025 and reflect our strong partnership with IFC through the sustainability-linked loan, as well as our public commitment to the United Nations' Sustainable Development Goal number three. I also want to reinforce the creation of Instituto Afya, which represents a new chapter in our journey. This initiative strengthens our focus on sustainability and social impact, with a clear commitment to advancing research, science, and technology for the benefit of society, playing a strategic role in addressing noncommunicable chronic conditions. Finally, Afya Limited's leadership in ESG was recognized by Valor Econômico through the Valor 1,000 award, which evaluates companies based on financial performance and ESG practices. Afya Limited was honored as the top-performing education sector in Brazil for the fourth time in a row. And now I'll be turning the call over to Luis Andre Blanco, Afya Limited's CFO, to provide more insight into the financial operational matters. Thank you. Luis Andre Blanco: Thank you, Virgilio, and good evening, everyone. Starting with slide number seven for discussions of key operational metrics by business unit. Starting with the undergraduate programs, our number of medical students grew 6% year-over-year, reaching more than 25,000 students, while approved medical seats increased by almost 2% in 2025. Considering that expansions of 100 seats were approved last week, the expansions in approved seats would be over 4% as of today. Our medical school net average ticket, excluding acquisitions, increased by 3.4% for the nine months, reaching BRL 9,141. We have also achieved BRL 2.459 billion in revenue, up from BRL 2.156 billion from the prior year, an increase of over 14%, due to higher tickets in medicine courses, the maturation of medical school seats, and acquisitions of FUNIC. Regarding the revenue mix, 86% was derived from medical school students and 94% from health-related courses. On the next page, we'll present our continuing education metrics. We approach continued education through three main journeys. Starting with the residency journey, we saw a 36% decrease, reaching 9,969 students by the end of the period. In the graduate journey, student numbers grew by 26%, reaching 9,180 students. Luis Andre Blanco: Lastly, our other course and B2B offerings increased by 5% over the same nine-month period of the prior year. Overall, due to an increase in the average ticket per student, the continuing education revenue reached BRL 208 million in the nine-month period of 2025, up from BRL 188 million, reflecting a growth of almost 11% over the same period of the prior year. This includes a 7% increase in B2P revenue and a staggering 65% increase in B2B revenue. Moving to slide number nine, I will discuss the medical practice solutions operational metrics. The first graph shows our total active payers, which are the ones that generate revenues in the business-to-physician. The number of paying users reached 195,000, a 2% decrease over the same period of last year. The second graph highlights our monthly active users, which accounts for 228,000, lower than the 249,000 recorded over the same period of the prior year. Lastly, the third graph shows revenue from our medical practice solutions segment, which grew over 9% year-over-year, reaching BRL 128 million. This growth was primarily driven by an expansion in active payers in clinical management and the more favorable product mix. Of this total, BRL 114 million was generated by B2P, representing an 11% increase, while B2B contributed BRL 14 million, a 2.5% decrease in the nine-month period. On the next slide, we also present Afya Limited's ecosystem. We are pleased to highlight that Afya Limited's substantial contributions to the healthcare community in Brazil. By the end of 2025, our ecosystem encompassed 104,000 physicians and medical students using our services and products. Moving forward to slide number 11, I want to discuss our financial overview for 2025. Starting with the next slide. With great satisfaction, I'm pleased to present another strong quarterly performance for Afya Limited. Revenue for 2025 reached BRL 2.784 billion, representing a 10% increase compared to the same period of last year. Revenue totaled BRL 2.784 billion for the nine-month period, up 13% year-over-year. For the third quarter of 2025, adjusted EBITDA rose by 15%, reaching BRL 399 million, with an adjusted EBITDA margin of 43% and an expansion of 160 basis points compared to 2024. For the nine-month period, adjusted EBITDA amounted to BRL 1.292 billion, an increase of 19% over the prior year, with an adjusted EBITDA margin of 46.4%, representing a 200 basis points increase over the same period. The increase in adjusted EBITDA margin was mainly driven by higher gross margins in the undergraduate and continued educational segments, restructuring initiatives within continued education and medical practice solutions, and improved efficiency in selling, general, and administrative expenses. Moving to slide 13, the year's cash flow from operating activities rose by 11%, reaching BRL 1.292 billion, reflecting strong operational performance. The operational cash conversion ratio was 101.5% in the nine-month period of 2025. Net income for 2025 came in at BRL 593 million, marking an increase of 28% over the same period of 2024. For the nine-month period ending in September, net income totaled BRL 593 million, up 20% year-over-year. This growth reflects stronger operational performance combined with the recognition of deferred tax assets, partially offset by the additional taxation provisions related to OECD Pillar Two global minimum tax effects. Afya Limited's basic EPS for this quarter reached BRL 6.71, a 29% increase compared to the same quarter of 2024, with BRL 6.40 per share for the nine-month period of 2025, representing a 20% growth. And now, moving to my last three slides, I will discuss our cash and net debt position. I'll also give you more color on our cost of debt. On the next slide, we will discuss our gross debt. This slide presents a table detailing our gross debt compositions at the end of the third quarter of 2025 and the total cost of debt covering our primary obligations, the SoftBank transactions, debentures, other financial liabilities, the IFC financing, and account payables to selling shareholders. Moving on to slide 15, I'm pleased to announce that we have strengthened our financial positions through liability management. In October, we issued commercial notes totaling BRL 1.5 billion. The use of proceeds was the early redemption of Afya Limited's first issuance of debentures and the repurchase of the 150,000 Series A preferred shares held by SoftBank. We present a comparison between our actual positions as of the end of 2025 and the pro forma gross debt after the liability management. We have extended the gross debt duration to 3.2 years while maintaining a low cost of debt at 106% of the CDI, even after the repurchase of the preferred shares held by SoftBank. Luis Andre Blanco: These actions strengthen Luis Andre Blanco: our financial flexibility to support long-term value creation for our shareholders. On my last slide, we can look closely at the net debt variation. As of the end of 2025, net debt stood at BRL 1.342 billion, a reduction of BRL 473 million compared to the end of 2024. This reduction was achieved even considering the acquisition of FUNIC and the return to the shareholders reflected by dividends and share repurchase. Afya Limited's net debt, excluding the effect of IFRS 16, divided by the midpoint of the 2025 adjusted guidance, was only at 0.8 times. Afya Limited's capital structure remained solid with a conservative leverage position and a low cost of debt. This concludes our prepared remarks. We are proud of the strong performance we've delivered this quarter. Our focus on improving the medical journey through an integrated education system and medical practice solutions remains strong, helping students become doctors, supporting ongoing medical learning, and making physicians more accurate and efficient. Looking ahead, we are excited about the opportunities in front of us and confident in our ability to keep creating value for the entire ecosystem. I will now open the conference for the Q&A session. Thank you. Operator: For those who wish to ask a question, please use the raise hand feature, and we'll call on participants. The first question comes from Lucca Marquezini from Itaú BBA. Lucca Marquezini: The first question is regarding the effective tax rate. So can you please provide more color on the company's current understanding of the tax rate discussion? And also, what do you believe to be an adequate assumption for this line going forward? And then the second one will be regarding capital allocation. So considering this was another quarter of solid cash generation, what should we expect for the company's capital allocation strategy going forward? Should we expect a higher dividend payment or even greater M&A activity in the upcoming years? That's our questions. Thank you. Luis Andre Blanco: Lucca, it's Blanco speaking. I'll take the two questions. First, regarding taxation. We ended the nine-month period with an effective tax rate of 9.7%, which was greater than the 5.1% that we had from last year. The main reason for this increase is the provision that we are making for the Pillar Two taxation that was implemented in Brazil during 2025. And this provision, this taxation, will be disbursed in July 2026. So we are provisioning for this taxation during 2025. The effect of this minimum taxation was a little bit reduced by the provision of deferred tax assets that we recognized during the year. Moving ahead, for 2026 and beyond, we would expect that the effective tax rate should converge to the minimum taxation of 15%. That's the taxation of the Pillar Two. So if we do not gain the Pillar Two taxation, nor by the injunctions that we are discussing or through a change in the current legislation regarding Pillar Two, we would expect that from 2026 onwards, the effective tax rate would converge to 15%. To your second question regarding capital allocation, what we did during this October, we did a big liability event, raising new debt regarding the commercial notes that were issued to the market. And with the use of proceeds from it, we did the prepayment of the debentures, and we repurchased the preferred shares from SoftBank that would be early redeemed in May 2026. So with that, we increased our duration and kept the cash in place to do the capital allocation itself. So we have in our hands the possibility of doing an M&A or even increasing the buyback or even paying dividends. All the alternatives that we have on our hands, we will have the best choice to evaluate the scenario in the next couple of months to take the better decisions to increase value to our shareholders. Renata Couto: One point that I would like to highlight is that when we anticipated the payment of SoftBank's transaction, we had a financial gain. We negotiated with them to have a financial gain that will be proportional to the difference of the interest rate that we would have between this period and the due date of the contract. Lucca Marquezini: That's very clear. Thank you. Operator: Of course. So our next question comes from Eduardo Hezeig from UBS. Eduardo Hezeig: Good evening, Virgilio, Blanco, Renata. Thanks for taking my question. I have two on my side. So first, a double click on the allocation. You highlighted your initiatives for shareholder remuneration. But looking at the effects of the new tax reform and impact for foreign players and investors, I just would like to understand if possible other strategies are being evaluated on this front. So this is the first question. And second, if you could provide any color on the 2026 intake cycle with overall trends observed in the latest entrance exam that you applied at the end of this semester. Any color on this front would be very helpful. Thank you. Virgilio Gibbon: Hi, Eduardo. Virgilio here. So about capital allocation, as Blanco mentioned on the previous question here, we're analyzing still on the M&A front, good opportunities on medical assets, medical school assets in some regions. So still aiming to have around 200 seats per year as our guidance in terms of capital allocation. So and regarding distributing that to shareholders, we'll keep combining the best option between buyback programs as the one that we just launched, the biggest one that we launched in our recent history here, and also paying dividends even considering the 10% additional cost. So we'll be combining two of them, taking the best consideration of the market price of our shares and all the availability of cash that we have on hand. Regarding intake for 2026, it's still very early. We are collecting all the candidates. The only thing that we can anticipate is that, well, the tuition that we are aiming for 2026 is around 5% to 5.2% over 2025. So that's the only information from that. Eduardo Hezeig: Perfect. Thank you. Operator: Next question comes from Lucas Nagano from Morgan Stanley. Lucas Nagano: Hi. Good evening, Virgilio, Blanco, Renata. Thanks for the space here. We have two questions. And the first is a follow-up on the ticket readjustment you mentioned. Which is if we should see any mix effect next year or if average ticket should converge to the 5% growth you just mentioned? Because this year, I think there was possibly some effects related to FIES. That's the first question. And the second question is a more conceptual one. In the last Afya Day, we discussed a lot about the supply side, about competition, and Afya Limited's strategy to offset those pressures. And the question is from the demand side, are you seeing any change, even if it's marginal, in how the applicants perceive the attractiveness of the medical career? If it should be affected both for the sector as a whole or for the worst players? Thank you. Virgilio Gibbon: Hi, Lucas. So the first question about ticket, the 5% to 5.2% across the board is in terms of gross tuition. So it's too early in the process to check how it would be the effect considering the FIES. But what we are aiming here is to keep it stable around 17% to 18% the penetration of FIES on our medical student base. So it's too early to check how the portfolio and combination of them compared to 2025. But for now, we just can say that it will be around 5%. Okay? Regarding competition, the number of candidates that we are seeing in terms of demand is very close to what we had last year. So we are not seeing any difference from city to city. So in terms of average, we are very close to the same figures that we had last year at the same time. Okay? Just in terms of candidates. Lucas Nagano: Perfect. That's very clear. Thank you. Operator: Thanks, Lucas. Next question comes from Marcelo Santos from JPMorgan. Marcelo Santos: Hi. Good evening. Thanks for taking my question. I have two as well. The first question is about the gross margins on medical practice solutions. There was a nice sequential increase. So just wanted to get your comments there. And the second question is the clinical decision software. This is the second quarter of sequential loss of subscribers. Just wanted to also get some color on these trends. Thank you very much. Luis Andre Blanco: Hi, Marcelo. First one, the increase of 2% in terms of margins in the segment was related to the cost management that we do within the products. Nothing specific to highlight on that. It's an ongoing initiative that we have here to gain efficiency. Virgilio Gibbon: Yeah. Just remember, just adding on the first question here, Marcelo. Remember that we launched many new campuses, new sites that we are offering continued education. So we are getting to the second and the third intake process. So it's a kind of dilution of the fixed cost and gaining more synergy with the campuses that we launched over the last eighteen months. Okay? On the second one, I think just to clarify, the question was about the clinical decision solution, the reduction of users that we have in the second semester in a row. Is that right? Marcelo Santos: Yeah. That's correct, Virgilio. Virgilio Gibbon: Yeah. So the clinical decision, the white book solution, we changed our prices at the end of last year. So strongly. So the decision on that was in terms of elasticity study at that moment. And we didn't change the combination about freemium users and also premium users with a much higher price. So the result of that was positive in terms of revenues, we lost freemium users at that moment in the beginning of their career or last year of medical programs. What we are doing right now to resume growth on the audience is reviewing the combination of features that we are offering through the freemium version and also premium version. So this is something that we want to resume the penetration on that, not only benefit in the short term, the revenues on white book. I think the most important in terms of penetration, iClinic on the other side, it's the most important data for all monetization on B2B. It's accelerating and having much more penetration than also we were expecting. Because we have also to compete with other medical records and to substitute clinic by clinic is something that, well, it's not in a short and easy way. So on our two most important digital solutions, one, we need to resume penetration. There is white book. We are launching a lot of features as you may have seen on our Afya Day using adopting AI to change this and also embedding this on our premium version. On the other side, iClinic also embedding AI features. We are ramping up and accelerating penetration over clinics in the country. Okay? Marcelo Santos: Perfect. Just on the first question, I was asking about the margin increase of medical practice solution, the continued education. And what I'm saying is that it went from 66% in the second quarter to 73%. So it's a sequential increase of seven points which was more on this one. I think you gave me the answer on the continued education, if I'm not mistaken. Luis Andre Blanco: Yes. Luis Andre Blanco: But, Marcelo, I would say that's a yes. We are increasing these seven almost seven points regarding 2025. But if you compare with February 2024, it's a 2% below the 2% data I mentioned. So I would say that we have the kind of seasonality on that. And these down of this 2% that was in the twelve months comparison, it's nothing to highlight on that. It's regarding the second quarter, it's something about seasonality. Okay? Marcelo Santos: Alright. Thanks a lot. Operator: Thank you, Marcelo. Next question comes from Mirela Oliveira from Bank of America. Mirela Oliveira: Good evening. Thank you for taking my question. I have two questions here. The first one, it's on the recently acquired unit. If you guys could comment a bit on the expected time frame for the ramp-up of FUNIC and how long do you expect margins to be at the company's run rate? And the second one is on the consolidated EBITDA margins. The company has delivered a significant margin expansion in the past nine months, paving the way for reaching the top of the guidance. So just wondering here if you could comment a bit on if you see room for further margin expansion ahead and what would be the main levers for it. That would be it from my side. Luis Andre Blanco: I'll take the two questions. First of all, FUNIC, it's our first year operating over there. So just 60 seats, sixty-zero seats, 60 seats. So it's just in the beginning of the migrations. We just implemented and launched the first class starting in August. So the first year, you have low margins because of all the implementations of the faculty and just the fact that we have just one class over there. So what we see with FUNIC is it's based on Contagem. Contagem, it's in the greater Belo Horizonte area, and then we're gonna, as the maturation comes, we're gonna reflect the increase of margins according to the increase of the maturation, the increases of the number of students. So it's according to our business plan. The tax decisions. It's a question of timing of gaining operational leverage regarding FUNIC. Regarding the Just to add one point here, is that just based on our track record managing all the greenfield, the new medical school campuses, we can reach a very high margin after two to three years with these campuses' maturation. And considering that, well, we didn't start the internship phase that is in the fifth and the sixth year. So in terms of margin, we can scale rapidly the margin close to 50% to 60% the contribution margin. But remembering that on the fifth and the sixth year, that will converge to the overall margin because we start the internship. Yeah. And regarding the EBITDA margin increase, I would say that we're not doing that in this year. But in the last two years, we have been increasing significantly the margins of it. So it was a question of working with the three segments to gain efficiencies in the undergrads. Remember that in the beginning of 2024, we made the changes in the digital and continued education. We moved all the educational digital assets from the formerly digital segment to the continued educational and the continued education started to offer hybrids, offer on that. And on top of that, we've implemented in the end of 2023 our zero-cost budgeting that helps a lot in SG&A expenses. So for the last, I would say, for the last two years, we've been capturing a lot of these margin expansions. Mirela Oliveira: That's super clear. Thank you. Operator: Thank you. Next question comes from Helena Prata from Citi. Helena Prata: Oh, sorry. I was on mute. Thank you for taking my questions. Super brief here. I just wanted to try to get a sense of the continuing education segment, the number of students on the residency journey, I think it dropped over 30%. So I'm just trying to understand if this is a one-time effect or is something that should expect to continue going forward. Thank you. Luis Andre Blanco: Hi, Helena. Yes. It's a one-time effect here because we decided to join the offer of Mentoria and also the residency prep program. So last year, we used to count twice. So the student that was applying for Mentoria and also applying for residency prep, they were subscribed for both products, counted twice. Now the offer, we are combining Mentoria into a residency prep. So it's a joint product here, and most of them now are buying this program together. So the effect on the number of users, the number of subscribers is lower, but the effect on revenues is not on the same lens. So it's a one-time effect. And just adding on that, because of this change, we are seeing a much higher growth on the intake cycle that now we are in the top seasonality of the residency because of this new combination that we started last year. Okay? Helena Prata: Super clear. Thank you. Operator: So we don't have any other questions. If you still have a question or want anything cleared, you can contact the investor relations team, and we'll be happy to help you. So thank you for having us this night, and see you next time.
Louisa Smith: Greetings. And welcome to KORU Medical Systems third quarter 2025 earnings conference call. Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to Louisa Smith, Head of Investor Relations. Thank you. You may begin. Louisa Smith: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Linda Tharby, President and CEO of KORU Medical Systems, and Tom Adams, Chief Financial Officer. Earlier today, KORU released financial results for the third quarter ended 09/30/2025. A copy of the press release is available on the company's website. I encourage listeners to have our press release in front of them, which includes our financial results and commentary on the quarter. Additionally, we will use slides to support further commentary in today's call, which are also available on the Investor Relations section of our website. During this call, we will make certain forward-looking statements regarding our business plans and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. During the call, management will also discuss certain non-GAAP financial measures. You will find additional disclosures, including reconciliations of these non-GAAP measures with comparable GAAP measures in our press release, the accompanying investor presentation, and SEC filings. For the benefit of those listening to the replay, this call was held and recorded on Wednesday, 11/12/2025, at approximately 04:30 PM Eastern Time. Since then, the company may have made additional comments related to the topics discussed. I'd now like to turn the call over to Linda Tharby, President and CEO. Linda, please go ahead. Linda Tharby: Thank you, Louisa. Good afternoon, everyone. Thank you for joining today's earnings call. I'll begin with some commentary on our third-quarter highlights and strategic progress, and then Tom will review our financial results before we open the call for questions. During the third quarter, we delivered strong results. Accelerating revenue growth, outstanding performance in our core immunoglobulin business, new additions to our PST pipeline, and continued progress towards sustained profitability. We achieved our second consecutive quarter with more than $10 million in revenue, representing 27% year-over-year growth. The key growth driver was our core subcutaneous immunoglobulin or SCIG business, which grew 30% driven by international expansion, continued global share gains, and strong underlying patient growth. While we saw some quarterly shifts in purchasing patterns between domestic and international markets, both underlying businesses remain robust. Tom will provide additional details on the shift in geographic mix. From a strategic standpoint, we advanced several important initiatives this quarter. We recently announced two new PST collaborations underscoring our commitment to expanding our pipeline, broadening our label, and reaching additional patient populations. I'll share more detail on those collaborations during our pipeline discussion. We also made meaningful progress toward our goal of expanding into oncology infusion centers, successfully completing a US-based oncology study that validated Core's value proposition in this market. We remain on track for a 510(k) filing by the 2026. On the financial front, we delivered gross profit growth of 21% year-over-year, achieved positive adjusted EBITDA, and generated positive cash flow. To reflect our confidence in the business and continued execution, we are raising our full-year revenue guidance to $40,541,000, representing growth of approximately 20% to 22%, and we are reaffirming our guidance for gross margins and cash flow from operations. Now turning to our US SCIG business, which represents our largest recurring revenue base. As shown on slide four, external forecasts project SCIG market growth of approximately 9% annually over the next five years, outpacing the IVIG segment. This growth outlook is supported by several key factors. First, an increasing number of new patients are being diagnosed and treated with SCIG as their first-line therapy. With approximately 20% market penetration today, SCIG still has significant headroom for expansion in the broader immunoglobulin therapy market. Second, we're seeing broader diagnosis of secondary immunodeficiency or SID, driven by an aging population, higher prevalence of chronic illnesses, and increased use of immunosuppressive treatments such as chemotherapy and CAR T cell therapy. Importantly, we're also seeing growing clinical activity in the SID area, which could ultimately support new reimbursement coverage and add further momentum to SCIG adoption. Finally, pharma partners continue to invest heavily in the SCIG space through device innovations such as prefilled syringes, a strong pipeline of clinical trials, and label expansions. Our leadership position in this category remains very strong. US end-user demand and sales to specialty pharmacies are at or above market growth rates, reflecting solid execution and the continued health and momentum of our US SCIG business. Now turning to international, which continues to be one of the most exciting areas for our accelerated growth potential. Over the past year, we've grown our international market share from roughly 10% to 15% to 20% of the underlying $60 million OUS SCIG market. We see further growth potential in several key areas. First, the shift to prefilled syringes in Europe. This represented the majority of our growth this quarter. The efforts to convert a market from vials to prefilled syringes, using our Freedom Infusion System, including both the pump and consumables, have been very successful. By simplifying administration steps, our system makes it easier for patients to use and for healthcare professionals to train them. Several additional EU countries are planning similar conversions, and our innovation pipeline, combined with strong alignment with pharma partners, positions us well to further penetrate the top European markets. At the same time, we continue to grow infusion set sales in markets that still primarily use vials. Overall, we feel very confident about our momentum. We are targeting to accelerate our overall market share from the 40% range, representing a $10 million to $20 million opportunity over the next several years. This next slide highlights our progress with IG Pharma Partners. Today, we have seven active collaborations across all four major IG manufacturers, which continue to drive core growth alongside their new drug, device, and indication expansion. Commenting on changes from last quarter, we saw two previously announced collaborations push their launch dates into 2027. We have updated our pipeline accordingly. Importantly, we don't see this as having any material impact on current projected revenue. Highlighted in green on the bottom row is our most recent collaboration, which we announced last week. This is particularly exciting because the relationship with this drug manufacturer expands our potential into the broader patient populations for an IG drug where we currently hold a lower global share position. Overall, these IG collaborations are a key driver of both share gains and geographic expansion in the subcutaneous market, reinforcing our strategy of partnering with pharma companies to accelerate adoption and growth. Turning now to new drugs outside of IG. We currently have nine active collaborations, with four potential new drugs expected to be added to our system by 2026. Recent updates to this pipeline are highlighted in green on the slide. First, a rare disease candidate has been pushed by one quarter to Q1 2026 following an FDA request for additional testing data. We do not expect this to materially impact our timeline or 2026 revenue opportunity. Second, we are seeing expanded commercial potential for an additional Empivalli indication, a prior clear drug, which we are currently supporting in phase three trials. Finally, we recently announced our collaboration with Forecast Ortho, supporting their clinical trials for treatments that address complications from joint replacement surgeries. This marks our first opportunity in the orthopedic space and adds approximately 140,000 potential infusions. We estimate that the non-IG drugs in our pipeline with an anticipated launch date between now and 2027 have a commercial potential for KORU of up to $10 million by 2028. With a clinical pipeline of more than 95 drugs exceeding 10 mls across the pharma landscape, we continue to actively pursue additional assets to expand and strengthen our pipeline. This quarter, we also continued to advance our entry into the oncology infusion space. Currently, there are seven subcutaneous oncology drugs administered in infusion clinics using manual syringe push, which requires nurses to stand over patients and inject highly viscous drugs over a period of five to ten minutes. Following our successful EU study, where 97% of nurses preferred the FreedomEdge infusion system over manual syringe administration, we launched a US pilot study in Q2, which concluded in Q3. In total, five oncology infusion clinics participated, administering two leading oncology drugs. The results were very encouraging. We achieved a 100% success rate in administration and met all safety requirements. We also observed high satisfaction among nurses and patients with improvements in physical strain and patient comfort using the Freedom system compared to manual syringe push. Importantly, 70% of nurses reported the ability to multitask, including treating other patients, adding the potential for improved clinic workflow efficiency. Our value proposition continues to resonate across all sites studied. We are progressing in collaboration with one of the seven oncology drugs and remain on track for a 510(k) submission to the FDA, either in Q4 of this year, subject to federal timing, or in Q1 2026, with anticipated commercial market entry in 2026. The total addressable market for oncology infusion consumables is significant, projected to grow from approximately $60 million in 2025 to $138 million by 2030. We are being very diligent about our market entry and regulatory strategy, ensuring that when we enter oncology, we do so in a way that supports patients, providers, and long-term growth. Overall, I'm extremely proud of the team's execution and the strong momentum we built across our business during the first three quarters. With robust growth in our US and international markets, meaningful pipeline progress, and strategic advances across both IG and non-IG opportunities, we're well-positioned. With that, I'll turn the call over to Tom to review our financial results and share our updated guidance for 2025. Tom Adams: Thanks, Linda. Starting with revenue, we are pleased to report our second consecutive quarter of revenue above $10 million with 27% year-over-year growth, which is a record high for KORU. We delivered 30% growth in our overall core business, reflecting the fundamental strength of the underlying demand for our products and KORU's growing market position. The geographic mix this quarter does require some context, for which I'll provide some additional commentary. Our reported domestic revenues declined 5% while international revenue grew by 230%. There were three specific factors that drove this geographic shift in revenue imbalance across our businesses. First, in the domestic core business, as we discussed and anticipated on our previous call, one of our US distributors reduced their on-hand inventory levels this quarter, which temporarily impacted their order volume and moderated our domestic growth. Second, in the international core business, we had some outsized stocking orders to support the exceptionally strong demand we're seeing with prefilled conversions in Europe. We're encouraged by this momentum in PFS and believe that it will continue to be a meaningful driver of international growth moving forward. And third, one of our international distributors sold product to a US distributor, and that transaction had a dual effect. It inflated our international revenue figures while simultaneously reducing our domestic revenue growth. We have since corrected for this dynamic and do not anticipate it occurring again. Altogether, we estimate that these three factors had an underlying impact of approximately $1,200,000 between the two businesses. The bar chart on the right provides a visual to normalize for the imbalance we saw from these factors in the quarter. The bottom line here is that our core business is solid, end-market demand is robust, we continue to grow our market position, and we are really pleased to have posted 30% overall core growth, which underscores the strength of our business on a global scale. Our pharma services and clinical trials businesses fluctuated slightly year-over-year due to the inherent nature of revenue recognition timing associated with the staging of work and milestones. Moving on to gross margin, we continue to consistently deliver margins greater than 60%. This quarter, we reported a gross margin of 60.2%, a decrease of 320 basis points from the prior year period, driven primarily by a combination of higher manufacturing costs and lower yields, geographical customer mix from the strength of our international business, and tariff impacts of approximately 50 basis points. Looking ahead to the fourth quarter, we expect the cost of manufacturing to improve, and as we have indicated throughout the year, we will continue to see a higher mix of growth in our international markets with lower ASPs and a modest tariff impact from our suppliers. We reiterate and expect our full-year margin to stay in line with our guidance of 61% to 63% as we have laid out since the start of the year. We finished this quarter with $8,500,000 in cash, representing cash generation of $400,000, which was driven by lower net losses from higher revenues and disciplined operating expense spending. Additionally, our working capital was balanced, and we saw lighter investments in manufacturing equipment. Our non-cash items were primarily driven by stock comp expenses and depreciation. We continue to see the benefits of our discipline in our cash flow results. Our year-to-date financial highlights that we are progressing towards profitability. Revenue grew 22% to $30,200,000 compared to $24,800,000 in the prior year's first three quarters, with a corresponding operating expense increase of 3%, demonstrating our ability to run a disciplined capital allocation process. Gross margin remains over 60% at 62.1%, despite some Q3 headwinds with manufacturing costs and tariff impacts. We cut net losses in half from $4,500,000 to $2,200,000, and we have delivered positive adjusted EBITDA this year, showing a 109% improvement. As it relates to the balance sheet, our cash usage has dropped to $1,100,000 year-to-date, representing a 60% decrease from last year. Looking ahead for the full year 2025, we are raising our revenue guidance to $40,500,000 to $41,000,000, representing a 20% to 22% growth, an increase from our prior range of $39,500,000 to $40,500,000. This is driven by opportunities for further growth internationally and a strong SCIG market in which we will continue to gain new patient starts. We are reiterating our gross margins in the range of 61% to 63%, as well as reiterating our positive cash flow from operations. We expect to end the year with at least $8,200,000 in cash. I'll now turn the call over to Linda for some closing commentary on future milestones and our vision for continued growth. Linda Tharby: Thank you, Tom. We are making strong strides across our strategic priorities, setting the stage for accelerated revenue growth. In our efforts to expand the number of drugs on our Freedom system, this year to date, we have advanced four new pharmaceutical collaborations and submitted a 510(k) for our rare disease infusion drug. Upcoming 510(k) filings in early 2026, including opportunities in oncology, position us for meaningful pipeline and commercial growth. In our international expansion efforts, we launched commercial sales in Japan and rolled out our Phase I flow controller. Growth in our top 10 markets will be further driven by prefilled conversions, expanding our global footprint and patient reach. Our core domestic SCIG franchise continues to outpace the market's 8% to 10% growth. With key submissions ahead, including the Phase II flow controller and NextGen IG pump, we are poised to expand our SCIG leadership. Overall, these achievements combined with upcoming milestones reinforce our confidence in meeting 2025 financial targets and sustaining long-term momentum. In summary, I'll leave you with some of the core elements we believe make KORU an attractive opportunity not only now but also in the future. Market dynamics continue to support a shift towards subcutaneous delivery, and our technology is well-positioned to capture the benefits of that shift. Each quarter, we make great strides in executing against our plan. We achieved another excellent quarter with revenue expansion exceeding 25%, driven by steady recurring revenue from our core IG franchise, ongoing patient base expansion, with a compelling opportunity for growth acceleration internationally with prefilled conversions. Additionally, we have a robust and growing pipeline, including 11 new opportunities to bring new drugs outside of IG onto our label in the coming years. And finally, our updated guidance underscores our confidence in continuing to accelerate revenue growth in 2025 and beyond, while maintaining a healthy P&L and improving balance sheet to optimize flexibility and support our growth strategies moving forward. Before closing, I'd like to thank the entire KORU team for their continued efforts and passionate work to further our mission and treat even more patients worldwide. Operator, please open the line for questions. Operator: Thank you. We will now be conducting the question and answer session with selected analysts. The format will be for one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. Our first question comes from Frank Takkinen with Lake Street Capital Market. You may proceed with your question. Frank Takkinen: Great. Thanks for taking the questions. Congrats on all the progress. I was hoping to start with the oncology setting. Happy to hear the pilot's done, and you had some great outcomes there. I think I heard you comment on the nurse feedback. Has been particularly positive, with the ability to service a few patients at once. Maybe a little bit deeper into that would be helpful to understand how that feedback has been. And then as a second part in the oncology setting, can you maybe talk about the reimbursement model, any work that needs to be done there? Or is there currently a structure in place that'd be conducive to adoption in that setting? Linda Tharby: Thanks, Frank. Obviously, we're very excited about oncology being a major expansion into a new market for KORU. So the clinical study that we did was really based in five clinics in the US. We had very large centers and much smaller regional centers. We had good diversity in terms of that. But the outcomes across all the clinics were fairly synonymous. So, you know, a glide quickly past nursing and patient satisfaction, you know, very, very high in the 90 plus percent range. Obviously, the safe dosing of all of those drugs. Your specific question on workflow efficiency was the one that we were really excited about, where 70% of nurses reported the ability to multitask. So right now, they are completely wed to that patient with the manual syringe push administration. So what we were hoping to validate was that by using our pump, the clinic could see improved throughput of patients. And indeed, what we saw was that many nurses were comfortable being able to leave that patient and attend to other patients, do administrative duties, etcetera. So really, huge opportunities for these clinics. On your last part around reimbursement, the great news is we don't have anything to do on the reimbursement front. The reimbursement codes that exist today cover for the administration of these drugs in infusion clinics using a pump. So that reimbursement coverage exists for the products, and so we're very excited about the opportunity. Know, charging ahead now to we've been doing the work to get the submission completed. Provided that everything gets passed, we hope that the FDA will be receiving that submission confident by the end of this year, and we're looking forward to what's ahead for us in the oncology market. Frank Takkinen: That's great. Thanks for that. And then maybe a clarifier on guidance for Q4. Any color you can provide on that? Linda Tharby: So overall, if you look at our front half performance for the business, we grew 19% overall for the business, with back half growth implied at the midpoint of our guidance at 23%. So that's the first thing as everybody should feel comfortable about the acceleration revenues between the front and the back half. As for the splits between business and what you can expect, given the dynamics of the Q3, I'll let Tom go ahead. Tom Adams: Yes. Thanks, Frank, for the question. If you look at our first half of the year and you look at that split, we split around 70% or so for the US business and around 23% to 24% for the international business. So you can assume that's that sort of split for the Q4, the expectation on revenue, with the remainder of that obviously being the PST business. Linda Tharby: Thanks, Tom. And then regarding 2026 guidance, so the first thing I want to say is, obviously, when you post two 20 plus percent quarters in a row, we feel great and excited about the position that we're in. So if you look back over what we've been talking about for pretty much the course of the last year, it's taken the company to this new level of sustainable plus 20% growth. So while I'm not comfortable giving exact guidance for 2026, what I can say is that a number that starts with a two is something we're feeling good about at this moment in time. Obviously, we're looking for those accelerations, which opportunities from pre fills, more international expansion, oncology, those new drugs, all of those things, the 20 plus percent you're seeing today is being done without those things. So, obviously, acceleration, whether that comes in '26 later in '26, early in '27. But that's what I would say that the number starting in the '2 is what is what we're comfortable with. Today. Given what we know today. Frank Takkinen: Yep. Got it. Makes a lot of sense. Thank you. Our next question comes from Caitlin Roberts with Canaccord Genuity. Caitlin Roberts: Hi. Thanks for taking the questions, and congrats on a great quarter. You know, just starting with the EU, I think you noted that several countries are, you know, preparing for the change to PFS. I mean, any more color on the size of those opportunities and potentially the timing of those? Linda Tharby: So thank you, Caitlin. And congratulations on the new last name. Thank you, though, for the course. We're very excited about the international expansion opportunity. As I mentioned on the call, we see international taking our share position pretty much doubling it over the next little bit, and we see that as a $10 million to $20 million opportunity overall. Most of it being driven by pre fills. We have converted just one large market, and why this opportunity is such a big lift for KORU is that the standard of care in Europe has been electronic pumps. Our studies in head-to-head show a 50% reduction in the number of steps required for patients to use our system versus electronic pumps, and also, it's easier for healthcare professionals to train. So I'm not going to give details of what the next countries are. But suffice to say that we've only got one down, and we think we have a lot of headroom in front of us. With a lot of work to do. But it is a major growth opportunity, and we're putting a lot of effort into that today. Caitlin Roberts: That's great. And then, obviously, you know, pay share gains have been a big piece of, you know, the SCIG growth for you. But you know, any color on the just market growth dynamics at this point in the year, maybe with early flu season starting and how you feel about you know, that going into the end of the year and into 2026? Linda Tharby: Yeah. So just overall, what we've seen is the underlying rate of patient diagnosis is going up. I would say we've seen definite acceleration quarter to quarter. It's a little early yet. Usually, the diagnosis lags a couple of months by the infection. So while flu season starts, usually these patients require four, five, six infections before their PID may be diagnosed. So we'll wait and see. But fingers crossed on that one. We've had a strong year thus far. I would say the second dynamic, which I introduced in the call today, was we're seeing a lot more SID, secondary immunodeficiency, with general underlying dynamics like aging populations, etcetera, driving it. But the big one is the cancer treatments. The chemotherapy drugs, the CAR T cell therapies that reduce the immune system by design. So that those drugs can work. Then the patient needs immunotherapy. So we see a lot of the IgM manufacturers now starting trials for SID. Because currently that is not reimbursed in the US. So we see this as being a potential today that's not built into our numbers. That's probably a story that plays more into 2027. By the time they complete those trials. But we're certainly seeing a lot of off-label use of SID today. Caitlin Roberts: Great. Thanks for taking the questions. Operator: Our next question comes from Joseph Dowling with Piper Sandler. You may proceed with your question. Joseph Dowling: Hey, guys. Thanks for taking the question. I'm for Jason today. Just a quick question on gross margin, looking at the four Q and then and then the 26 as well. I know you're probably not too keen on divulging any specifics here. But just directionally, can you provide any commentary on how we should expect gross margin to develop here over the next, call it, twelve to eighteen months? I know there's, you know, international mix dynamics, some manufacturing efficiencies, tariffs, some pricing, new launches, things like that. But any color there would be really helpful. Tom Adams: Yes. Hi, Joseph. Thanks for the question. Yes. So as we mentioned, just starting with this year, we have seen that geographic mix change. And, obviously, the geographic mix change where you think about the ASPs in the different markets as you grow more internationally, you have a lower ASP, you know, driven by emerging markets or established markets. When you think about that dynamic and you accelerate that into the next twelve to eighteen months, you know, we are doing our best to hold our margins. You know, we are always working on our cost and manufacturing with our operational excellence programs to identify opportunities, you know, driven by volumes. Right? Because we're a growing business. So we will continue to work on our margin profile. You know, we have long-range plans to get our margins, you know, 65 plus. So that is our strategy and that we will continue to focus on as we grow international. Linda Tharby: And maybe just to add on to what Tom said, obviously, we started the year with a 61% to 63% margin range. With a couple of manufacturing issues, the growth in international, which we did not anticipate. We knew it was gonna be good, but as good as it is, you know, growing, you know, through the year. I think Tom will probably double that business through the third quarter already. So the fact that we're able to maintain that original margin gain. Also, I forgot tariffs as well. Know, just a huge credit to our operations team who have really done a great job of bringing back some efficiencies, which is why we're still confident despite those things holding on to that 61 to 63. And, you know, continued march towards that 65% range that we're headed for over the next three to four years. Joseph Dowling: Great. Appreciate that, guys. And then one quick one on Japan. Can you just give us any color on maybe like the cadence of the ramp into next year? That'll just be helpful for as we look at our models here. Linda Tharby: Sure. So, on Japan, I would say the great news is we're in the market. We've got sales. I think I said, this year, the sales would be somewhere just 3 to 500,000. I think we're feeling pretty good about that range. Japan is primarily today an in-system. And so we think it'll take a little bit longer for Japan to evolve. But I would say the overarching comment on international that is more than made up for that is the strength of the pre fills. So we're excited still about Japan. And now I would say it's come it's still a growth driver, but it's probably now number three or four on our list versus, you know, the broader presale opportunity is number one by and large. Joseph Dowling: Great. Thanks, Linda. Appreciate it. Our next question comes from Chase Knickerbocker with Craig Hallum. You may proceed with your question. Chase Knickerbocker: Good afternoon. Congrats on the nice quarter here. Thanks for taking the questions. Maybe, maybe just to start on US core. So just to clarify, I guess, a couple of things. So that $1,200,000 was basically adjusting for those ordering dynamics from OUS distributor to US distributor. And then that would make US growth, call it, you know, 14% kinda year over year if we add that 1.2 there. And then maybe just give us an update on what SCIG growth was from a market perspective in the third quarter. Linda Tharby: So thank you, Chase. Yes, excited about the quarter. And appreciate the well wishes. The order dynamics, I think, Tom laid them out well. And you got it perfectly. It's a combination. The only thing I would correct, yes, it's the $1,200,000. That should have been in the US. That was a combination of three things. It was the stocking deceleration from one of our major US distributors and then the order dynamic between the US and OUS. Regarding the broader SCIG market growth, we don't have the numbers yet for Q3. Those usually lag a couple of months behind for us. But we know that from quarter one and quarter two, that that number was in that 8% to 9% range overall. With acceleration between quarters in the growth levels. Being driven by PID, just really strong demand and patient growth. And PID and then also the SID piece that I mentioned earlier. Chase Knickerbocker: Got it. Maybe just you know, you noted some stocking related to the presold conversion. In Europe as well. Can you just maybe speak to whether or not this is a new geography or the same one that we were talking about last quarter? And then I know you don't wanna give specifics as far as the geographies that you expect kind of these rollouts prefilled conversions to take in. But can you maybe just give us your overall thoughts as far as how you see the cadence? Is this gonna be something that's a phase in kinda country by country? And it, you know, happens over the course of the next eighteen to twenty-four months, or just give us your overall thoughts there on the cadence? Linda Tharby: Yeah. So, one thing I should have mentioned on the last call, you said the 14% growth, and I think yes, that that's about right, the number for the US market. So regarding prefilled syringes and the first country, that country was a country that was dominated by pumps. We had very low share positions in that market with our consumables. And they converted very quickly. They delisted their vials completely in that market and went 100% to prefilled. And we were very fortunate to they did that, you know, pretty rapidly. We still see some upside in that market because the pharma company continues to win new tenders based on their pre fills. So that's great news. Regarding the cadence for pre fills, we believe that the manufacturer that we're working with will complete most of the work in the major markets by 2026. They are being, you know, quite aggressive as they see it to be a competitive advantage for them today. And what I would say is that the decision making, though, is done on a country by country basis. So reimbursement is different. How the patient receives the product is different. So we've got a lot of work to do with each of those country leaders to ensure that, you know, we work with them on very specific go-to-market plans to make sure that the patient experience and the healthcare professional experience is what we all want it to be. So we think most of the opportunity will be over the next twenty-four months in total for that opportunity. Chase Knickerbocker: Got it. Makes sense. Maybe just sneak one last one in. Just kinda check the box. I mean, this dynamic with the OUS distributor to the US distributor that kinda cross geography ordering, how are you able to confirm I mean, how are you able to, you know, make sure it doesn't happen again? Linda Tharby: Thanks. So I'll start and then maybe see if Tom wants to add anything. So we and and by the way, right in my career, in this space, it's not the first time I've seen something like this happen. Typically, what we do in all of our contracts is we protect any pricing we provide per the market. And we require tracings to say, where is that product going to? That's why we were able to catch it pretty quickly. And so we've since worked with both distributors to ensure that, you know, we're now ensuring that product goes to the right markets for which the contracts have been written. So we're confident that it will not happen again. And, we were we had it corrected within the quarter. Thanks for the questions. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Linda for closing comments. Linda Tharby: So thank you all for joining us this afternoon. We'll look forward to providing updates on our strategic progress. We've got several upcoming investor events ahead of our fourth-quarter call in March. Have a great rest of your evening. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.
Operator: Greetings. Welcome to the SurgePays, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Valter Pinto, Investor Relations at SurgePays, Inc. You may begin. Valter Pinto: Thank you, operator, and good afternoon, everyone. Welcome to the SurgePays, Inc. 2025 Third Quarter Financial Results Conference Call. Today's date is November 12, 2025. On the call today from the company are Brian Cox, President and CEO, and Tony Evers, Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see SurgePays, Inc.'s most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call. Copies of today's press release are accessible on SurgePays, Inc.'s Investor Relations website ir.surgepays.com. In addition, SurgePays, Inc.'s Form 10-Q for the quarter ended September 30, 2025, will also be available on SurgePays, Inc.'s Investor Relations website. Now I would like to turn the call over to President and CEO, Brian Cox. Brian Cox: Good afternoon, and thank you for joining us. As I mentioned last quarter, today is less about the past and more about what is happening now and what is ahead. The third quarter was that inflection point. During the quarter, we began to see execution across our multichannel growth platform, which yielded strong growth year over year and sequentially. Each of our revenue channels is synergistic, not isolated initiatives, that together strengthen with every subscriber transaction and retailer added to our ecosystem. It consists of Torch Wireless, which is subsidized under the Lifeline program, LinkUp Mobile, our prepaid offering, Hero, MVNE, or wholesale offering, prepaid top-up, and our Clearline SaaS point of sale. We believe our strength lies in our ability to combine cutting-edge technology with a nationwide retail distribution network, bringing telecom and fintech products directly to underserved communities where people live and shop. This powerful combination of technology and retail provides us with a sustainable competitive advantage, positioning us as a long-term leader in a large total addressable market that is very difficult to replicate. Our experienced team has been strategically investing and building since 2022, focusing on integration with AT&T, operational infrastructure, technology, and talent deployment. Today, the platform and development of distribution technology and new products are well established and will support high-margin revenue streams for years of sustained growth. This synergy generates recurring revenue, provides competitive advantages that are extremely difficult to replicate, and lays the foundation for significant year-over-year growth. The 2025 represents our preparation, investment, and ability to execute on a go-to-market strategy once again. Third quarter 2025 revenue totaled approximately $18.7 million, an increase of 292% year over year and over 62% sequentially. Revenue growth year over year was driven by an increase from virtually zero in 2024 to $5.6 million in 2025 from MVNO brand Torch Wireless, under the subsidized Lifeline program. The Lifeline program is a government-subsidized benefit program that provides essential wireless connectivity to those who qualify. Unlike temporary programs, Lifeline remains fully funded and unaffected by the current government shutdown, providing us with a stable, predictable recurring revenue base. Today, we have over 125,000 subscribers and growing. After activating in June with only 20,000 subscribers, what is even more exciting is that we are still well below our current capacity. Many sales channels are still being opened, so we expect continued sales growth. This positions us exceptionally well for continued growth in the months ahead. What excites our management team even more is the new avenues for acquiring customers with little or no cost, completely flipping the front-heavy ROI portion of our model. I will speak more on this exciting development later. While we believe Lifeline will certainly be the accelerator of growth in the short term, we have full confidence that our other revenue streams will scale quickly in 2026. Point of sale and prepaid services, for example, also increased significantly year over year to $13.1 million, a 177% increase. This part of our ecosystem consists of LinkUp Mobile, our affordable prepaid wireless offering, and consumer products like Phone in a Box, a grab-and-go kit for convenience stores, which includes a smartphone, SIM, and thirty-day service. We fully launched LinkUp Mobile in April, activating approximately 10,000 users. In July, we more than doubled that, surpassing 20,500 activations, and today, we are over 95,000 recurring active subscribers. This growth is driven primarily by expanded retail distribution, targeted marketing, and competitive pricing. The grind of market adoption takes longer on the prepaid side of the wireless business, but we are seeing the expected traction. These drivers are sustainable as we continue opening new doors and building customer loyalty. The heart of this model is our proprietary point of sale software. Not only does it facilitate transactions, but it also drives recurring revenue from activations and replenishments right at the convenience store register. It is not just a tool; it is the backbone of our ecosystem and a true competitive advantage. Third-party prepaid wireless top-ups revenue is a key indicator of future revenue growth in our other products. For Phone in a Box, we partner with distributors like HT Hackney, which has mass market reach and services over 40,000 stores. We are in advanced talks with other national convenience store distributors, each with footprints in tens of thousands of community store retail locations like HT Hackney. Our near-term goal is to ramp to 100,000 operating on the SurgePays, Inc. platform, driven by a combination of organic growth and distribution agreements with HT Hackney and other partners. On the wholesale side, our MVNE platform, Hero, is a growing revenue engine with a robust pipeline. As an MVNE, we provide billing, provisioning, SIMs, and eSIMs to other wireless companies. A high-margin model with minimal incremental costs and low overhead. Many MVNOs in the market today are actually sub-MVNOs. We are one of the few with direct carrier access, putting us in a rare and powerful position. To date, we have onboarded three MVNO partners. Collectively, these partners serve thousands of subscribers, and they are looking to grow quickly, providing us with a path to scale our platform and recurring revenue base. In August, we had a successful show at All Wireless and Prepaid Expo with the expectation of onboarding and integrating new wholesale clients over the next six months. Lastly, we have Clearline, our SaaS marketing platform with interactive point of sale and customer engagement tools with offers, coupons, and loyalty programs. We recently announced a strategic partnership with CorePay, a next-generation payment technology provider, to integrate with our Clearline marketing and customer engagement platform into CorePay's cloud-native payment processing solution. This integration brings together two complementary technologies, point of sale payments and digital marketing automation, creating a first-of-its-kind capability that enables retailers to engage customers from the moment of the transaction and beyond. By embedding Clearline's SaaS-based marketing tools directly into CorePay's payment ecosystem, the partnership is expected to create new recurring revenue streams for both companies while offering value-added functionality to merchants and resellers. Our strategy is to layer software and digital engagement tools on top of our existing POS infrastructure to create sticky recurring revenue while adding tangible value for our partners and their merchants. Clearline is active in 17 market basket convenience store locations today. However, there are hundreds of thousands of potential retailers beyond convenience stores, from tire shops, food trucks, restaurants, and salons. SurgePays, Inc. is no longer building the foundation. The foundation is built. Now it is truly all about execution, scale, and growth. Our immediate goal is to achieve profitability with minimal impact on the cap table and dilution. Our strategy is executing precisely according to plan, and I am confident in our highly skilled team that is well-equipped to navigate this industry. We are well-positioned to continue this strategy through the remainder of 2025 heading into 2026. We have proven we can move fast, and with our diversified and competitive moat, we are uniquely positioned to deliver sustainable long-term shareholder value. Therefore, we remain confident in our 2026 revenue guidance of $225 million. We have built a powerful engine that blends technology, innovation, and distribution. Today, we have the products, partnerships, and infrastructure to enter the next phase of high growth. Thank you for your support and belief in our mission. I will now turn it over to Tony for a detailed review of our Q3 financials. Tony? Tony Evers: Thank you, Brian, and good afternoon, everyone. Third quarter 2025 revenue totaled $18.7 million, an increase of 292% year over year, as compared to $4.8 million for 2024, driven by an increase in MVNO and point of sale and prepaid services revenue. Gross profit loss narrowed to $2.6 million for 2025 compared to a gross profit loss of $7.8 million for 2024. We expect to continue the improvement of gross margin in the point of sale and prepaid services segment during 2025. Most of the cost to get Clearline ready for launch has occurred, and we expect the gross margin to be positive by 2025 for this revenue channel. As we continue to expand both subsidized Lifeline and non-products, LinkUp Mobile, of the MVNO segment in 2025, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results. SG&A expenses decreased 32.5% year over year to $4.2 million during 2025 as compared to $6.2 million for 2024. The decrease was primarily due to a reduction in contractor and consultant expense along with compensation expense. Loss from operations was $7 million in 2025, compared to $14.3 million in 2024. Our reported net loss and loss per share for 2025 were $7.5 million and negative 38¢ per share. Turning to the balance sheet, our cash, cash equivalents, and investment balances as of September 30, 2025, were $2.5 million compared to $11.8 million as of December 31, 2024. As Brian mentioned, we are providing revenue guidance of $225 million for 2026. At this time, I would like to turn the call back over to Brian for closing statements. Brian Cox: Thanks, Tony. Before we open the call for questions, I do want to take a moment to discuss the recently announced launch of our new growth marketing and data partnerships division. The initiative marks yet another significant step forward in our strategy to transform our expanding consumer data ecosystem into a scalable, high-margin growth engine. This engine was built by reengineering our legacy LogixIQ system, called DigitizeIQ, which was originally developed for consumer intake and lead generation serving mass tort law firms. Management made the decision over a year ago to close down operations as this was a completely different line of business. We wanted laser focus on our business plan. Our development team has now transformed the DigitizeIQ platform into a powerful intake engine designed explicitly for underserved subprime consumer marketing and data collection. Instead of simply signing up wireless customers, we now operate a platform that connects affiliates and publishers within a unified ecosystem. This capability transforms verified consumer data into actionable marketing intelligence, creating multiple revenue opportunities from each customer relationship. While promoting government-subsidized programs such as Lifeline to underserved consumers, we can simultaneously present a targeted marketplace of complementary products and services to our expanding database. Our ongoing objective has been to reduce customer acquisition costs by generating incremental revenue from adjacent services. We have now reached the next phase: monetizing this data ecosystem to produce recurring high-margin revenue and deliver sustained value for shareholders. In essence, we have built a platform capable of generating revenue during the customer acquisition process rather than incurring a cost to acquire each customer. This initiative is expected to generate high-margin recurring revenue through data partnerships, analytics integrations, and targeted marketing programs. We believe the consumer data for this subprime market is valuable, and the market has ballooned to over 137 million people. As SurgePays, Inc. continues to scale its wireless and fintech operations, the combination of customer intelligence and marketing execution will serve as a long-term competitive advantage. To summarize, Q3 was a significant inflection point for our company. We are now in acceleration mode, and the numbers already reflect it. Our activation growth, expanding distribution, and scalable technology platforms give us confidence that we are on the right path to create significant shareholder value. I would like to thank our shareholders for their continued support and the team for their tireless efforts in making this growth possible. Operator, please open the call for questions. Operator: Absolutely. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, while we poll for questions. If you have a question or a comment. The first question comes from Ed Woo with Ascendiant Capital. Please proceed. Ed Woo: Yes. Congratulations on all your progress that you are making. My question is on the consumer that you are the underserved market that goes to a lot of these convenience stores. What are you hearing from either the convenience store's owners of what they are seeing and whether this customer base is able to, you know, be receptive to these new products that you are introducing? Brian Cox: Hey, Ed. Thanks for the question. The feedback that we get is very similar to some of the, let's just call it, the tough time feedback that we have seen over the past twenty-five years working with convenience stores. At times when there is doubt and uncertainty, that is when people are more open to other values or other products. Or because now they are reconsidering, you know, the life of the rut in the road. They are looking for maybe different paths to make ends meet. So we see this as a huge opportunity for us timing-wise. You know? And we mentioned that there is a research brief that just came out where the subprime market, excuse me, has ballooned from 100 million to 137, 138 million in the past four years. You know, while that could be debated on, you know, the greatness for our country, for our company, it is fantastic because those are the people that we look to provide products and services for, lower cost, better value, and more efficiently than what other companies and our competitors may do because of our distribution model. So the openness from the customer base is fantastic. And let us flip the keep in mind, we have end customer end users. But we also look at those store owners as clients. So those store owners, likewise, are looking for other ways to make money. They are looking for other ways to provide services to their community. So now where you may have had a convenience store owner who is kind of stuck in his way as well, that rut in the road, we call it, now he is looking for ways to make a couple extra $100 a month. So when a company like us comes along that has a point of sale platform, and then has Clearline, and you put those two things together and it does not cost them a dime to launch products through his store. And keep in mind, he will be able to take prepaid wireless payments for any carrier, he will be able to do activations for our prepaid wireless and make a significant commission on that. He will be able to take payments on that. He will be able to also offer anyone that comes in and uses that SNAP EBT card a free wireless service, and he will get paid for that. He will be able to provide those products to his community and, likewise, that foot traffic coming in will increase from the things he is providing his community. So we see it as a win-win-win. Get access to more customers. The store owner increases his revenue and profits through providing more services, and then the consumers who go in those stores who are now more aware, maybe not just in that rut in the road, are going to be looking for other ways to save money and make ends meet. Ed Woo: That sounds good. And my last question is, there has been a little bit of consolidation with the major, you know, convenience store brands. Is that going to impact your business at all? You think that that is, you know, going to be the future of, I guess, convenience stores? Brian Cox: The convenience store market is an interesting one. It is almost a case study in business. You know, the distributors, we have talked about this before. The distributors to convenience stores are usually second and third-generation companies. Quite a few of them, like your H.T. Hackney, Long, McLean, talking about almost 100-year-old companies. So the convenience store business, regardless of what sign is out on the gas pump, or, you know, the coming and going of private equity or acquisition, at the end of the day, even 7-Elevens, it is pretty shocking to see the number of people that actually run that store and have control over the store. And then they have a portion of the store where they can bring in any product they want. And, you know, they have to do the 7-Eleven carry certain products, if you will. But, you know, there is still the autonomy and decision-making of that ultimate store owner, who nine times out of ten is also the clerk. So we work really, really hard to build a relationship with the store owner, the person benefiting from our products. And keep in mind, for those that do not know or do not remember, we are in the checking account. We have a, you know, not just something where people are signing a PO and sending us a check. We are actually integrated with them from a business perspective. We are pushing and pulling money based on commissions they make, based on us ACHing them. So there is a pretty significant trust with that business owner, so we do not see that affecting us at all. If anything, there again, it creates an awareness of who we are and an openness to listen to what we have to say based on what we can bring to the table for their financials. Ed Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Brian Cox: Thank you. Operator: Thanks, Ed. We have reached the end of the question and answer session. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the ICS Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference call, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sandra Carbone, SVP General Counsel at IZEA Worldwide, Inc. Please go ahead. Sandra Carbone: Good afternoon, everyone, and welcome to IZEA Worldwide, Inc.'s earnings call covering the 2025. I'm Sandra Carbone, SVP, General Counsel at IZEA Worldwide, Inc., and joining me on the call are IZEA Worldwide, Inc.'s Chief Executive Officer, Patrick James Venetucci, and IZEA Worldwide, Inc.'s Chief Financial Officer, Peter J. Biere. Thank you for being with us today. Earlier this afternoon, the company issued a press release detailing IZEA Worldwide, Inc.'s performance during Q3 2025. If you would like to review those details, please visit our Investor Relations website at izea.com/investors. Before we begin, please take note of the Safe Harbor paragraph included in today's press release covering IZEA Worldwide, Inc.'s financial results. And be advised that some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. We encourage you to consider the disclosures contained in our SEC filings for a detailed discussion of these factors. Our commentary today will also include the non-GAAP financial measures of adjusted EBITDA and revenues excluding divested operations. Reconciliations between GAAP and non-GAAP metrics for our reported results can also be found in our earnings release issued earlier today and in our publicly available filings. And with that, I would now like to introduce and turn the call over to IZEA Worldwide, Inc.'s Chief Executive Officer, Patrick James Venetucci. Patrick James Venetucci: Thank you, Sandra, and good afternoon, everyone. In Q2, I proudly announced that for the first time in the history of this company, we were profitable. This quarter, I'm pleased to announce that Q3 marks our third consecutive quarter of financial improvement. While total revenue for the quarter decreased 8% to $8.1 million as a result of our choosing to shed unprofitable, nonrecurring project work and some softness in government and retail accounts, the underlying health of our business is strong. Managed service revenue, excluding Hozoo, increased 5%. Total operating expenses decreased by 67%. Net income totaled $100,000 compared to a net loss of $8.8 million during Q3 last year. And cash increased by $800,000 to $51.4 million. Year to date, our managed services revenue is up 14% and net income totaled $1.2 million. Three consecutive quarters of continuous improvement underscore that our strategic direction and transformation towards sustainable, profitable growth is firmly taking hold. Since I stepped in as CEO, our objective has been clear: fortify, simplify, and focus. During the first half of the year, we fortified our business in America, simplified many aspects of our go-to-market, and focused on our managed services. We segmented our managed service accounts focusing on enterprise customers with recurring revenue and high growth potential instead of the long tail of transactional customers with small projects and high churn rates. As we've strengthened and expanded our relationships with enterprise clients, we've been rewarded with more business. Our enterprise accounts are now growing at double-digit rates, that are well above the industry average and a few at triple-digit rates. Our sales and marketing efforts are attracting new clients such as Amazon, General Motors, and Owens Corning. Plus, our pipeline reached a new high for the year with invitations to larger pitches growing. Lastly, we produced new work for Kellogg's, Clorox, Nestle, Danone, and many more clients. To bolster our enterprise growth strategy and momentum, we hired Steve Bunnell, EVP Account Management, who joined us from Publicis Group where he has a track record of rapidly growing large enterprise accounts such as McDonald's and Samsung. We also hired John Francis, VP Marketing and Revenue Operations, who joined our team from private equity-backed marketing services firms where he'd built effective B2B growth programs. Although we have been highly focused on services this year, we continue to invest in our technology platform. Earlier this year, we began simplifying our tech product offerings by focusing on fewer products, consolidating features, and delivering a more intuitive customer experience. In Q3, we infused our technology platform with AI-powered features that provide clients with strategic insights and campaign performance. We will be announcing more about our technology development soon. With all of this momentum and opportunity ahead of us, I am optimistic about the future of this company and our ability to deliver additional value to all of our stakeholders—shareholders, clients, and employees alike. With that, I'll turn the call over to Peter J. Biere, our Chief Financial Officer, for a closer look at the financial results. Peter J. Biere: Thank you, Patrick, and good afternoon, everyone. This afternoon, we released our results for the third quarter and filed our quarterly report on Form 10-Q with the Securities and Exchange Commission. Today, I'll review our operating results for the quarter ended September 30, 2025, with year-over-year and year-to-date comparisons. Highlight key balance sheet items, and provide an update on our stock repurchase activity. Beginning in early 2025, we implemented a new account management model focusing our resources toward larger, more profitable recurring accounts while scaling back selling and delivery efforts previously devoted to lower-value project-based accounts with limited repeat business. Strategic realignment reduced current year contract bookings but has materially improved profitability and strengthened our foundation for sustainable growth. Managed services bookings represent a total of sales orders received during the period, net of cancellations and refunds. They are an indicator of overall demand but are not necessarily predictive of quarterly revenue as timing varies with contract size, complexity, and customer arrangements. As we continue to emphasize enterprise accounts, individual bookings are expected to become higher in value but less consistent in timing, which can impact comparability. For the nine months ended September 30, 2025, managed services bookings, excluding Hozoo, declined 26% to $18.2 million compared to the prior year period and contract backlog decreased from $15.5 million at the beginning of the year to $7.1 million at quarter end. The decline primarily reflects the company's strategic focus on higher quality recurring accounts, along with more cautious marketing spend among certain enterprise and agency clients amid broader economic uncertainty including tariff impacts. Revenue from managed services excluding Hozoo increased 14% for the nine months ended September 30, 2025, compared to the prior year period, while overall growth slowed 5% in the current quarter. Growth in both comparative periods was driven by expansion among enterprise customers, partly offset by a reduction in smaller nonstrategic accounts that we intentionally deemphasized. Our total cost of revenue, including both external creative and internal labor costs, totaled $4.2 million or 51% of revenue in 2025, compared to $5.2 million or 59% of revenue in the same quarter of the prior year. Excluding Hozoo, the cost of revenue declined approximately 5% year over year, reflecting improved margin mix in the current period. Operating expenses other than the cost of revenue totaled $4.3 million for the third quarter, down $8.7 million or 67% compared to $13 million in the prior year quarter. Sales and marketing expenses were $1.1 million, down 62% from the prior year period, reflecting workforce reductions and a temporary pause in certain marketing initiatives. General and administrative expenses declined 49% to $3 million, primarily due to lower employee-related costs, reduced use of external contractors, and decreased spending on professional services, software licenses, and data storage. The prior year period also included a $4 million noncash charge related to goodwill impairment from an acquisition we made in 2019. We achieved profitability for the third quarter, generating net income of $100,000 or $0.01 per share on 18.7 million shares, compared to a net loss of $8.8 million or negative $0.52 per share on 17 million shares in 2024. This marks only the second quarter in the company's history in which profitability was achieved through operating performance, and the third consecutive quarter of financial improvement, underscoring that our transformation continues to be underway. Adjusted EBITDA for the third quarter 2025 was $400,000 compared to negative $3.4 million in the prior year quarter. As a reminder, we revised our non-GAAP definition of adjusted EBITDA in late 2024, excluding non-operating items such as interest income from our investment portfolio and restated prior year's results for comparability. A reconciliation of adjusted EBITDA to net income is available at the bottom of our earnings release. As of September 30, 2025, we had $51.4 million in cash and investments, an increase of $300,000 from the beginning of the year. This modest increase contrasts with an $8.8 million reduction in cash in the prior year period and reflects the benefits of improved operating performance and disciplined cost management. Operating cash flow is positive for the year-to-date period, inclusive of normal working capital timing variances. In September 2024, we announced a commitment to repurchase up to $10 million of our common stock in the open market, subject to customary restrictions, including regulatory limits on daily trading volume and company-imposed share price thresholds. Through September 30, 2025, cumulative repurchases totaled 561,950 shares for an aggregate investment of $1.4 million under the program. No purchases were made during the third quarter. We also earned $500,000 of interest in our investments during the recent quarter, and finally, we continue to operate with no debt on our balance sheet. With cash on hand and liquidity, we remain well-positioned to support organic business growth initiatives and pursue strategic acquisition opportunities. Thank you for your time today. And at this time, we invite our investors and analysts to share their questions so that we can provide clarity and insight. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Ladies and gentlemen, if you wish to ask a question, please press star. Reminder, ladies and gentlemen, if you wish to ask a question, please press star. As there are no questions in the queue, I now hand the conference over to IZEA Worldwide, Inc.'s SVP and General Counsel, Sandra Carbone, for closing comments. Sandra Carbone: Thanks so much, Ryan. And thank you, everyone, for joining us this afternoon. As a reminder, a replay of today's call will be available shortly on our website izea.com/investors. We appreciate your continued interest and support and hope you'll join us for our next conference call to discuss our fourth quarter 2025 results. Operator: Thank you. Ladies and gentlemen, the conference of IZEA Worldwide, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Greetings. Welcome to the CX AI Third Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please click on the ask question box on the left side of your screen. Type in your question, and hit submit. As a reminder, this conference call is being recorded. Now I would like to turn the call over to your host, Khurram Sheikh, Chairman and CEO of CXAI. Please go ahead. Khurram Sheikh: Thank you, operator. Good afternoon, everyone, and thank you for joining us. I'm Khurram Sheikh, Chairman and CEO of CXApp Inc., trading on Nasdaq under the symbol CXAI, pronounced Sky. Also joining me on this call is our CFO, Joy Mbanugo. And before we begin, please note our forward-looking statements as outlined in our safe harbor statements as outlined in our disclosures. We're also submitting our 10-Q, which will be filed with the SEC, and you'll also see a press release that just got launched out there. So let me talk about Sky. You know, people ask me the question, what does Sky actually do? At Sky, we are defining the intelligent experience layer for the modern enterprise. Our platform blends AgenTeq AI autonomous context over agents, spatial intelligence that understands how people actually use the workplace. This combination turns data into decisioning, and routine actions into automation. We're not just another AI platform. We're the bridge between billions in corporate AI investment and the actual human experience at work. When people ask, what does Sky actually do? Here's my answer. We transform office buildings, campuses, and digital workspaces into living, learning, and adaptive environments. Environments that think and act with you. We now operate in 200 plus cities across 50 countries serving over a million users. And all of those users are using us in a very secure manner across all their campus environments, integrating all the enterprise functions into one application. I'm also proud of the great team we have. We have around 65 Willow Sky employees who are all based in multiple offices globally. In the Bay Area where our headquarters is, in Toronto, Canada, and in Manila. And more than 70% of them are in R&D. We're a technology-focused company. And this tells you that our DNA is an innovation company. So let's talk about, you know, technology-wise, what does this entail? And we've been the leader in the first mobile app for this application of workplace experience. Being cloud-first, and now we're AI native in terms of this deployment that we're embarking on with Sky 1.0 going to Sky 2.0. So, and I've shared these slides in the past, but I want to just reinforce the fact that we're building this as a platform. It's not a one-off application. The Sky apps go from all the way from your mobile device all the way to a kiosk or even larger. We'll talk about that today. Also be multi-OS and be able to be adaptive. Our BTS behind the scenes is our rule engine, our brains behind the Sky system that allows enterprise owners and users to control and manage the content as well as provide access control and create all the great things that will enable productivity at the workplace. I want to show you some great examples of that. And then finally, SkyView is our data analytics and ingestion engine that allows you to create your own dashboard, create your own analytics, and create insights and the outcomes that really matter at the end of the day. And all of this is hosted on the cloud. We're partnered with Google, as you know, but we also enable things on AWS and Azure. So we're multi-cloud. We're multi-application across the board, and we're building this as a platform for scale. So I want to talk about the market and what's happening within the market today and the market trends. Across this is a study done by McKinsey. And it's very enlightening to see that across the Fortune 500 where we participate, 88% of organizations say they can when they use AI, they only don't scale it to the enterprise level. So although AI is being used by more than a large percent of enterprises, they're not using a scale. They have the tools, but not the orchestration. That's where Sky comes in. Sky solves that execution gap. By unifying workflows, analytics, and human experience into a single agentic layer. It's what we call agentic orchestration, turning disconnected tools into intelligence systems that anticipate and act. Think of a global bank with 40 offices worldwide. You already have Teams, Zoom, ServiceNow, and multiple space management tools. But no unified experience. OriginChic engine stitches those environments together so that a team lead books a hybrid meeting in New York, the system automatically coordinates rooms, catering, visitor access, AV support across different time zones. It's invisible, autonomous, and measurable. Along with that, you've seen what's happening in the environment. You see a lot of CEOs are mandating return to office in AI tool adoption. Where employees are burned out and disengaged. That's the leadership expectation versus workflow reality divide. As executives, we are pushing return to office mandate employees create flexibility. The result is policy friction. Sky bridges that mandate to execution gap. For a major technology client in Silicon Valley, we used our platform to launch the new campus at headquarters. Right size their campus designs and footprint, allowing for colleague booking feature, to allow selecting where and who they want to spend their day providing an automated check-in process for their users via their internal badging system. This improved on-site attendance satisfaction scores as well as created higher employee engagement. That's productivity, collaboration, and sustainability altogether. That's the beauty of Sky. We enable all of these great capabilities, and the outcomes are coming very clear now with our clients. And, you know, this is not us just talking about it, and the world is taking notice. This quarter, Gartner named Sky as a representative vendor in the 2025 market guide for workplace experience applications. A category we helped define, by the way. We've been working with them for the last two years, you know, educating them on the benefits of AI and the benefits of our capability to enable this transformation. It's a validation that our combination of AgenTeq AI and spatial intelligence isn't just visionary. It's essential to the future of work. And, you know, we've been very happy to see this guide come out. There's also more work coming out from Gartner and their analyst. As we said in our first calls with you guys, there is going to be a new category called employee experiences. And I think the market is headed in that direction. This last quarter, we were super busy also with lots of events and lots of things happening in the market. Amplified our ecosystem presence at the San Francisco Tech Week. Talk about that in a bit here. We were at WORKTEC at the META headquarters in Menlo Park in Palo Alto area on October 9, and then we also attended the Connect Global Summit in Anaheim. Across these events, one theme was constant. AI in the workplace is no longer a pilot. It is a board-level imperative. So it's super important to recognize that as we talk to our ecosystem partners, our customers, our stakeholders, all of them are pretty clear that the AI bandwagon is everybody's gotta be on it, and it's gonna change the way we work. So we are super excited about, you know, the events we were a lot of great new clients that came to us. Our existing clients were there. We hosted a number of networking events. And we discussed and debated and the reality is everybody wants our agentic AI solution. They want it faster. Another strategic collaboration that we announced this week was, you know, our collaboration with a really cool company called Noro. We are thrilled about our collaboration with Noro. It's a pioneer in immersive telepresence. Together, we're merging Sky's autonomous AI engine with Noro's life-size presence portals. Imagine walking up to a wall in New York and speaking naturally face to face with a colleague in London. With Sky's agentic AI automatically handling context, environment, collaboration tools behind the scenes. That's how we're turning presence into intelligence. For most of our global customers, this partnership will allow hybrid project teams to occupy, I mean, occupy in commerce shared spaces in real time, seeing body language, maintaining eye contact, ensuring digital work streams, all orchestrated by AgenTeq AI. That's how Sky makes distance disappear in hybrid work. We're super excited about it. We're gonna have the first unit being installed in our offices. You know, Noro also has locations already deployed to London and New York and then Atlanta and Chicago. And we're gonna be taking to our client. We're putting the road map together in terms of the combined offering. It'll be available to clients beginning in Q1. But we're doing a lot of internal testing right now. So super excited by this opportunity and Tomaso is a great partner, and I've known him for a while. And super happy that we're working together now. So let me talk about other highlights on the product side. You know, innovation continues to define Sky's Edge. Or 1050%, enhancing colleague visibility through dynamic math, delivering a cleaner, faster UI. And this is really important because a lot of our clients this last quarter were starting their RTO plans again. Reengaging with their employees to they wanted something slicker, faster, and our team delivered. For example, one global client used the enhanced booking engine to manage more than ten thousand plus desks across five campuses. They reported a significant percent drop in scheduling conflicts in the order of forty percent or so. A double-digit increase in employee satisfaction with hybrid coordination. That's another example where as our solution, as you can see the, you know, colleague booking where you can see the screens and the people and their images and also look at, you know, the visual representation of all the things around them. It's super amazing and interesting, and it creates that engagement layer. Say, yeah. I really wanna get back to the office. I really wanna interact with these people, and I really want to get my work done faster. Now to enable that, we also have we talked about a VTS, which is our behind the scenes. Oh, by the way, before I go there, let me show you a video jumping ahead of when I talked about this at the conference at the SF Tech Week, where we had Google as our invited guests as partners, but let me share with you something that I've said there. Okay. I don't know if the video was accessible or not, but we're gonna have it available on the platform. Let me try to play it again actually with my volume one. Maybe that'll help. So that feature becomes so important. Our customer said, this is a must-have. You gotta have it. And by the v one pictures. It's like a scramble screen of all these images. Like, don't we wanna see them? Let's see who they are. Right? It's just human behavior. Dash booking is a self-created feature, meaning that there's no need for it if you have assigned desks, which we grew up with assigned desks. It was clear because of the pandemic. So you create a new problem that has now been difficult for an employee to get to the office and find a spot which creates this new set of opportunities which I think agenda AI makes it more easy and simple because you don't wanna go every morning. Where do I have to sit or what do I have to do? Whatever we make it for the recommendations for me so I can make it better. So what we do. Okay. So I think we had some technical glitch earlier, but, hopefully, the audience heard the audio that just tells you, you know, what we see as a really killer application, a killer use case wanting to have this colleague booking feature, knowing what was in the office, where they're sitting, being able to, you know, adjust your daily calendar as well as your weekly calendar based on where it is. You know? And I think it's pretty cool to see this live in motion now. A lot of our clients are using it. It's a great feature. It's a must-have for a lot of our clients. I'm super excited about that. And what enables all of this stuff is the behind the scenes, the brains behind it, and, you know, before we go there, let me talk to you a little bit about one of the big deployments that we did this quarter, which was we were live at 30 Rock. Which is a marquee place, and it's been pretty amazing to have that deployment be live now. And that took a lot of effort from our client as well as us. And as you know, it's a high-profile place, so making sure that everything is working well. Be around, you know, 6,000 users day one on that system. The system did not implode. It actually worked really well. People were super happy. Actually, the clients made some Instagram posts, as you can see there. And there were some really great activities happening. And, you know, as we look at the activity logs, we have our SkyView Analytics, we can show you the things people were doing, and it's interesting. That client actually does not do any space booking. But they were doing a lot of amenities, a lot of content, a lot of events. Most importantly, dining. Dining was the number one feature across the board. We launched not only that one site in New York, we also launched four sites across the country. One is on the West Coast. The other were on the East Coast. And it's interesting to see that, you know, there's a lot of great demand for their capability. A lot of users, we are using it every single day. And some of the sites that we thought were gonna be less using it, actually using it more. Primarily, as I said, the dining feature is a must-have. Everybody loves the dining feature. And then seeing all of the other, you know, capabilities in terms of access to all the different amenities at the offices, all the different events that you can go to, really create that engagement layer. So now all of the ideas we talked about are now in real motion, in real deployment with this client, and they're super happy with the performance. So let's talk a little bit about I mentioned the BTS, which is behind the scenes, and that is actually the key technology platform that is letting enterprise admins manage complex content faster. And now we actually are in beta trials with a full AI plug-in for natural language content creation. These migrations are beginning in Q4. And this will be fully compatible with our legacy apps offering faster administration and granular growth controls as well. And what that means is, you know, if you're the IT guy, you can get to all the information ready to IT. Or if you're an HR manager, you get all the people data. Or if you're an operation manager and you want your team data, you can have that access to that. You can, you know, provide content, notifications, all the things that are necessary for that. So it's super exciting, and this is an infrastructure player that we really believe will enable, you know, supercharge your legacy apps. So I wanna go to the future a little bit. So we've talked about our Sky digital assistant and how it works. I'm gonna play a little video of how our existing new and enhanced Sky Digital Assistant is working in our labs in San Ramon. You know, it's kinda like a Sky digital assistant. It's like an intelligent concierge. It's employees can now book, plan, and act in real time using natural language. With the system proactively suggesting actions based on calendar, location, behavior. It's a living example of AgenTeq AI. Workplace that works for you and not the other way around. I wanna play the video. Hopefully, you'll hear the audio on this. And you'll see our Sky assistant interacting with one of our engineers. Joy Mbanugo: Hi. I'm Sky at San Ramon HQ. Can book meetings, reserve desks, or order food. How can I help today? Khurram Sheikh: I'm on the clinic tomorrow at 2 PM for one hour. Joy Mbanugo: Thanks. How many people including you, will be attending, and will you need a screen? Khurram Sheikh: Oh, yeah. There will be screen people, and, yes, I need a Joy Mbanugo: Yablo Gen with capacity for five and a screen sounds ideal. Would you like me to check its availability for tomorrow, November 12, at 2 PM to one hour? Khurram Sheikh: Yes, please. Joy Mbanugo: Perfect. Let me check if Diablo Den is available for you. Good news. Diablo Den is available. Booking it now. All done. I've successfully booked Diablo Den for Wednesday, November 12. From 2 PM to 3 PM. Would you like to order food for your meeting? Khurram Sheikh: Yeah. That that that actually would be great. Joy Mbanugo: Great. Type of food would you prefer? Do you recommend bamboo sushi for sushi? Both from tallest for vegetarian, or mixed for healthy bowls. Khurram Sheikh: I'll go with mixed. Joy Mbanugo: Perfect choice. I know you love the Dave's Taco Bowl from mixed. Should I order that for all three people? Khurram Sheikh: Yes. Operator: Great. Joy Mbanugo: What time should it arrive? Your meeting starts at 2 PM. Khurram Sheikh: 02:30 PM. Operator: Perfect. Joy Mbanugo: I've ordered three days taco bowls from Next. Being delivered to Diablo Den by 02:30 PM. You're all set. Khurram Sheikh: So that's a gender guide work. Context-aware, proactive, and human-centered. Hopefully, you see how intuitive it was, how easy it was to use, and how context-aware it was to find the right thing for you and making it happen effectively. I know that, you know, if you turn if you put push the video on the screen, you could you could see it in real time. So we'll have that available for you after the call. And for the next video, I'll let you know how to depress it, but, hopefully, you heard the audio on this. And, you know, before I go forward, you know, Q3 was a really good quarter for us. We had a lot of these great customer highlights, deployments, as well as, you know, this new advancement with the Sky. Platform. So we're super excited about that. I'm now gonna continue to our my my partner, CFO, Joy, to give you the financial updates for Q3. Joy? Joy Mbanugo: Thank you, Khurram. It sounds like or not sounds like, but the digital assistant just reminds me of a theme for this quarter, something I've been thinking about in the theme or keyword is momentum. So we're seeing momentum in the AI ecosystem. We're seeing momentum in the speed at which, you know, companies are implementing return to office or the reboot of return to office. So return to office two point o. And then, more excitingly, momentum in our product and think the digital assistant is, super exciting for me. I don't know if I want the whatever bowl I was ordering, but that sounds a lot of great progress there. If we go to slide 18, we can look at our three financial highlights. This was a solid quarter of execution and operating discipline. We maintained strong margins controlled OpEx, and delivered measurable improvement in profitability. Starting with ARR expansion, we closed the quarter with two large logo renewals both in the enterprise segment. These renewals reflect customer confidence in our workplace platform and demonstrate the durability of our recurring revenue base. Our subscription revenue mix reached 99%, an increase from 88% in the same quarter last year. That transition toward pure staff continues to be one of our key strategic levers. Increases predictability, expands gross margins, and creates multiyear visibility into future cash flow. Next, on gross margin, we delivered an 89% increase compared to 88% in Q3 of last year. And 86% last quarter. The steady improvement reflects the benefits of disciplined cloud cost management and more efficient infrastructure scaling. We're continuing to see leverage in our cost delivery as we optimize across multitenant environments and automate provisioning. Turning to cash OpEx, we held steady at $3,200,000 flat compared to both last quarter and the prior period. That stability reflects our ongoing focus on operational efficiency, for maintaining a lean structure while still investing in innovation and go to market execution. Finally, on profitability and earnings per share, we improved earnings per share this quarter to negative $0.13 a substantial gain negative 34¢ the same quarter last year. That's a very clear signal that our cost controls and recurring model are working together to improve the bottom line. We can go to Slide 19, which is our quarter over quarter comparison. Khurram Sheikh: Revenue came in Joy Mbanugo: at $1,100,000 compared to $1,200,000 in Q2. The modest decline reflects the shift in revenue mix. We saw lower hardware-related sales this quarter consistent with our strategy to phase out noncore components and focus on software-led growth. Cost of revenue, decreased from a 171,000 to a 123,000, which drove an improvement in growth profit to 991,000 and lifted gross margin to 89%. That gain was driven primarily by tighter control over cloud utilization and vendor optimization. Looking at operating expenses, total OpEx declined to 4,800,000.0 from $5,200,000 in Q2 an 8% reduction quarter over quarter. Most of that was related to some of that was related to savings in other areas, and you will see an slight increase in g and a, but that is primarily due to stock-based comp. Just because we have a large amount of stock that vest for employees in Q3. So you always see that probably quarter over quarter. Overall, the shift demonstrates flexibility of our operating model. We're able to scale innovation while containing discretionary spend. As a result, law firm operations improved to three point negative three point eight million compared to negative 4,100,000.0 in Q2 twenty twenty five. That's continued progress quarter over quarter as we execute against our goal of reaching breakeven as we execute reaching breakeven eventually. I also like to talk about our cash position. We remain very healthy with our cash position. We ended the quarter or as of right now, today, actually, with $9,000,000 in the bank. And with our equity and debt of fundraising that we've done throughout the year, we have access to cash that should last at the least for the next two years. In summary, Q3 showcased steady discipline performance, improving gross margins, consistent OpEx, and expanding recurring revenue. For managing growth, and profitability in tandem, ensuring Sky's position positioned to scale efficiently while driving durable shareholder value. Back over to you, Khurram. Khurram Sheikh: Thank you, Joy. So I wanna talk a little bit about the future here. You know, at as of tech week, we hosted a panel moderated by Samra Khan, who heads up system integrator partnerships at Google Cloud. She talked about the inclusive and immersive workplaces of the future. It's a very interesting talk. So I'm gonna play a snippet of it. What I ask the audience is please press on the play button so you can watch the video, but you're gonna hear the audio through this as well. So I'm gonna start right now. Joy Mbanugo: Speak if I'm in Foster City, my hologram is going to be sitting here. Those of you who are big Star Trek fans, I drove growing up as a kid. Was like, into it. I always believed that one day that's going to become reality. And if any of you have visited on Executive Meeting Center, we already have a demo of it. I have gone through it. It's I must say it's amazing and scary. All at the same time that you know, the hologram was eating an apple, and I'm like, oh my god. This this kid So I believe, you know, we're going to an in workspace, we're going to enter the world of Panover. There is going to be virtual reality. That's how we're going to do meetings. And I'm not saying that we're going to replace human interaction. I absolutely not. I think there is a need for that. The need for it is always going to stay there. If COVID has proven one thing, it's proven that. That human connections are important. We're going to, you know, we're going to continue to be in the hybrid environment. But I think most importantly, we going to do what what is going to get even more better in 2030 and beyond is that no matter what part of the globe you are in, your employee experience is going to be inclusive, It's going to be culturally adaptable to for somebody who's working out of Alaska versus Silicon Valley. And it's going to be it's going to be inclusive, which I think is very, very important. That's why I think for children, reality is going to be a big part of it. I wouldn't be surprised if I'm talking to around five years from now. And he's like, hey. I've been testing this new app if I've met a person at and you know, I have all of this other stuff. And then he just said going to work for you. Khurram Sheikh: It's pretty exciting stuff. And, you know, these conversations and the other conversation we've had, with great partners at our events, reaffirm that Sky is the partner choice for the world's most advanced AI ecosystems. We were very proud of our partnership with Google. And it's super interesting how they are, you know, aligned with our vision, helping us on the infrastructure side, helping us on the go-to-market side as well. And then, you know, being thought leaders with us as we look at defining future work. So I wanna summarize, you know, what you saw today, what you heard from us today, but you know, as we exit Q3 and now in Q4 moving into 2026, our priorities are clear. Three priorities. Number one, expand within our current customer base. Meaning for Fortune 500 clients, it's only, you know, two or three or four modules today. Every expansion into either analytics or content management, digital assistant that you saw multiplies ARR potential. Number two, accelerate ecosystem integrations. Partnerships, like you heard about Noro and Google Cloud extend Sky's reach beyond traditional workplace apps into immersive and agentic experiences. And third, Joy Mbanugo: maintain Khurram Sheikh: cost discipline while investing in AI leadership. We're balancing growth with responsibility, proving that AI companies can scale intelligently. In short, Sky is the most advanced agentic AI solution for workplace and employee markets. We're not just riding the AI wave. We're architecting it. We're building not just another AI company. We're building a category-defining enterprise cloud platform. The most advanced agent AI solution for workplace experience and hybrid collaboration. I wanna thank our employees, and extraordinary creative mission-driven team and our customers and shareholders for believing in this journey. Sky is more than a ticker symbol. It's a movement to make AI human again. We're super excited about this opportunity. Thank you, everybody, for joining the call. Gonna take a couple questions that came online. And so, Joy, if you have a list of questions, please go ahead. Yep. Joy Mbanugo: There's one from Jackson Vanderbilt Art from Maxim. It's multiple questions, Khurram, so I'm gonna let you decide how you wanna answer all of this. But the question is give me one second. He wants the kiosk update customer feedback, and usage set, how many units deployed today versus pipeline growth, and expansion progress with largest existing customers status of testing before expanding deployments to all locations, It's a couple of our clients and just the status of testing before expanding to large deployments and maybe more information on the thirty rock deployment and how he did that. Khurram Sheikh: Okay. Great. Thank you, Joy. Yeah. That's a lot of great questions all rolled into one. So I'll try to dissect it. So the first one on kiosk, absolutely. That's been a great product launch. We launched it with one client in Silicon Valley. They've deployed it in their campus in San Jose. It's working really well. It's super exciting for them to start using it. For their employees as they implement RTO. And that deployment was our first deployment. That, you know, it gained the traction. They wanna first, you know, ensure San Jose works really well and then deploy it globally. Around all of their 14 plus campuses. So that's an interesting opportunity. And in parallel, we've got three more clients, the existing clients who are already in pilot. And starting to that pilot phase to deployment. And a lot of them really like the fact that it's engaging. It's real-time. It's just in time. Getting actions completing, either it's booking a desk or, you know, or booking a conference room or just navigating to the right person or universal search. All of those are implemented with that, and I think there's a lot of genuine interest. I can't give you exact numbers on units right now, but I can tell you that, you know, for all the deployments in all the campuses, that we have with our clients, when they deploy one, it's obviously gonna deploy in all the different campuses. So we're excited about it, and I think there's a great opportunity, you know, coming in Q1 where we are gonna launch these other three clients. And then from those three will be the next ten. So I think that's the kind of scaling you see. On that product. On the other question in terms of our I think, Joy, was it about the other expansion opportunities. Right? So thirty Rock is an example of a large multinational media company that deployed a marquee site in New York City. It was super, super critical for them to get it absolutely right. And so it was a lot of focus, a lot of hard work. I commend the team, both our team and the customer's team for making it happen. But they not only just launched New York, they actually launched LA, and they launched Miami, and they launched Connecticut. So super excited. Actually, even though they're early customers of the product, they want the kiosk. Right away. So they're actually in trials with the kiosk. So I think all in all, it just shows that it takes a little effort to get into, you know, these clients. But once you're in there, see the opportunity. They're super excited about the potential of it. Then the outcomes, you know, through SkyView will be the test of, say, it actually, you know, really doing a great job for the employees? And I've mentioned before, my success criteria is the adoption. And we've been talking about our adoption numbers in terms of number of users, think it's gonna be number of interactions. If you look at the Sky, you know, the cloud I showed you, you know, in those six thousand day one users, there were 30,000 plus interactions. Right? It's amazing. The fact that they come to the app one time, they actually come to the app five or six times. I think those are the must-have moments that we believe create that affinity for Sky, create their affinity for the value of Sky. Then with the agenda, as you can see, everything can be done within the New York minute. And that to us is game-changing. That's why these clients are staying with us because they see the potential of how Sky with two point zero and with the AgenTeq solution is really gonna be transformative to their business and to their clients. I would tell you one of the there's a new study that I just saw that said that people are spending at least twenty-five minutes or more a day in scheduling conflicts. You know? And with what we showed you, we can take that scheduling conflicts out of the way. So you get your twenty-five minutes back or more. Then you make your life more productive. So I think we're in the phase now of moving into predictable outcomes and showing them the real value of the application, not just the, you know, the fact that the application functions, the fact that it actually transforms the way they work and the way they are productive in their environment. So I think there's a lot more coming, I would say, Jack, to answer your question, and we believe that all of our clients are destined for scale. So alright. Any other questions, Joy, that came in? Or that the only question we have? Joy Mbanugo: That was the only one. Khurram Sheikh: Okay. Well, I wanna close by saying thank you everybody for joining the call, for supporting Sky. I think we have a great future ahead of us as you can hear from some of the partners we are working with. We're super excited for our success, we're looking forward to giving you better and more predictable results in the future here as we start scaling the business. I think the exciting part is now coming with AI now being fully adopted in the enterprise. CIOs are not saying this is a nice to have. This is a must-have. And we believe that we have an exciting opportunity to enable them the future. So we're gonna be making a lot more announcements in the coming weeks and months. In terms of these opportunities. So stay tuned, and we look forward to having our next earnings call or annual call hopefully early next year. But till then, thank you everybody, and have a good evening. Operator: Thank you. This does conclude today's conference call and webcast. You may disconnect at this time. Have a wonderful day. Thank you once again for your participation.
Operator: Greetings, and welcome to the KORE Group Holdings, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Vik Vijayvergiya, Vice President of Investor Relations and Corporate Development. Please go ahead. Vik Vijayvergiya: Thank you, operator. On today's call, we will refer to the third quarter 2025 earnings presentation which will be helpful to follow along with as well as the press release filed this afternoon that details the company's third quarter 2025 results. Both of these can be found on our Investor Relations page at ir.korewireless.com. Finally, a recording of the call will be available in the Investors section of the company's website later today. The company encourages you to review the safe harbor statements, risk factors and other disclaimers contained on this slide and today's press release as well as in the company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. The company also notes that it will be discussing non-GAAP financial information on this call. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results and the reconciliation tables provided in today's earnings release and presentation. I'll now turn the call over to Ron Totton, the company's President and Chief Executive Officer. Ronald Totton: Thank you, Vik, and good afternoon, everyone. For today's call, I'll provide an update on the company's business highlights for the third quarter and then turn the call over to Anthony Bellomo, the company's CFO, to go through the financial results. As we look at our results for the third quarter, we delivered steadily improving operating performance with solid growth and profitability, while revenue held steady. Our revenue for the quarter was $68.7 million. Notably, our connectivity revenue increased 1.7% over Q2 2025, our second consecutive quarter of strong connectivity sequential growth. Adjusted EBITDA rose by 12% or $1.5 million to $14.5 million from Q3 2024, as we stay focused on operational excellence and profitability. Net loss also improved by $6.7 million due to the improved adjusted EBITDA, along with the tax benefit from recently enacted U.S. legislation. Now let's turn to a critical measure of our financial health and operational discipline, our cash flow. In the third quarter, we generated $1.1 million in cash from operations while our free cash flow improved $1.1 million over the same period last year. The steady improvement in our free cash flow profile is a direct result of our disciplined execution and our commitment to building a resilient and profitable business. Our strategy is centered on our 5-pillar value creation plan, and this quarter's results demonstrate that plan in action. On Slide 7, you can see clear tangible proof points on how our focused execution is translating into progress across the entire business. At the heart of our strategy is profitable growth and this quarter, we delivered driving a 12% increase in adjusted EBITDA. This financial discipline is complemented by strong commercial momentum as we secured $11.3 million in new and expansion eARR and grew our total connections to over 20.5 million. This growth is fueled by our commitment to both product innovation and customer intimacy. This quarter, we launched KORE One, our unified customer platform and we completed a limited release of a new connectivity offering, providing proprietary automated switching and enhanced network resilience. With investments in our products, platform and infrastructure and with the launch of a new AI assistant KORE we've seen a greater than 50% reduction in support tickets while continuing to improve our customer E-score. It is this combination of superior products and deep partnership that differentiates us in the market and fuels our sales momentum. Underpinning all of this is our relentless drive for operational excellence powered by our winning team. We're becoming a leaner, more agile company by executing on our facility rationalization plan and aggressively deploying AI tools to boost productivity. Simultaneously, we are investing in our people, launching our internal AI evangelist program and new development tools to build a culture of accountability and continuous improvement. Now let's dive deeper into our KORE IoT Connectivity business on Slide 8. The foundational metric for our recurring revenue model is our connection base, which continued its strong, steady growth. This quarter, we grew our total connections by 9% year-over-year to surpass 20.5 million. This is a direct result of our ability to win new logos and expand our share of wallet with existing customers. Turning now to Slide 9, which illustrates our sales momentum in the forward-looking health of our business. We closed $11.3 million in new eARR this quarter. This is a direct result of our sales team's success in converting opportunities in the committed recurring revenue. This success is well balanced, coming from both winning new logos and expanding our relationship with existing customers and validates our land-and-expand strategy. And looking at our total pipeline, we closed at a healthy $80.3 million in eARR which, as a reminder, is purely connectivity-related opportunities. Our solid eARR closed one and healthy pipeline gives us strong visibility and a growing degree of confidence in our ability to deliver sustained, predictable revenue growth into the future. As we have done previously, here are just four examples from the quarter that showcase how we are winning in the marketplace, highlighting our unique value proposition. First, a major win in fleet management with a leading provider who needed true multi-carrier capabilities and superior economics with our Super SIM technology. But just as importantly, they chose us because we acted as a true strategic partner, building a strong, responsive relationship at both the executive and technical levels. Next, we secured an exciting innovator in the anti-theft space. For their solution to work, connectivity must be flawless. They chose our Super SIM for its resilience and reliability enabling them to remotely access devices for GPS tracking and video transmission across different networks. This is a mission-critical application where good enough connectivity simply isn't an option. Our third win highlights our leadership in the heavy regulated connected health space, a global health care leader selected KORE for their medical technologies initiative. They chose us for our deep expertise our proven compliance framework, including HIPAA and ISO certifications and our ability to provide a complete single vendor solution for hardware, logistics and global connectivity. Finally, I mentioned a win with a fast-growing AI-powered telematics company where they required high reliability for a video telematics and in-cabin sensing platform. While competitors offered lower cost, we demonstrated that the superior reliability, performance and long-term quality of our native SIM technology provided far greater value. They understood that for a mission-critical application, total cost of ownership and reliability are what truly matter. The common thread connecting these diverse wins is clear. These market leaders required more than just connectivity. They needed a global and strategic partner to solve complex IoT challenges at scale. Our ability to deliver resilient technology navigate highly regulated industries and provide a complete end-to-end service are our differentiators. This is why we continue to win marquee customers and it is the engine behind our sustained growth. And now I'll turn the call over to Anthony to cover the financials in more detail. Anthony Bellomo: Thanks, Ron, and thanks for those joining us this evening for our third quarter results. Total revenue for the third quarter was approximately flat year-over-year to $68.7 million. Breaking revenue down by business lines, IoT Connectivity revenue was flat at $56.7 million. Most notably, IoT Connectivity revenue showed sequential quarter-over-quarter growth of 1.7%, which followed the second quarter sequential growth of 3.2%. This sequential growth is a clear indication that our transformation is producing results. IoT Solutions revenue was down slightly to the prior year at $11.9 million, driven primarily by timing of orders from customers. Overall, non-GAAP gross margin in Q3 2025 was 55.2%, down 147 basis points from the same quarter of the prior year. By business line, IoT Connectivity non-GAAP gross margin was down to 59.6% from 60.9% and IoT Solutions non-GAAP gross margin was down to 34.3% from 37% due to revenue mix. Average revenue per user per month or ARPU for the current quarter was $0.94 compared to $1.01 in Q3 2024. The decrease in ARPU year-over-year was due to the recent additions to total connections coming from lower ARPU use cases. On a sequential basis, ARPU was unchanged from Q2 2025. Operating expenses in the third quarter were $42.2 million, a decrease of $1.7 million compared to Q3 2024 due to cost savings from restructuring actions taken over the last 12 months. Adjusted EBITDA in the third quarter was $14.5 million, an increase of $1.5 million or 12% compared to the prior year. The $1.5 million increase in adjusted EBITDA was primarily attributable to lower operating expenses as discussed. Net loss in the third quarter was $12.7 million compared to $19.4 million in the prior year. The decrease in our net loss was due to a tax recovery as the result of recent U.S. tax legislation as well as the same factors that drove the improvement in adjusted EBITDA as described above. Finally, moving to cash flows. Cash provided by operations in the third quarter was $1.1 million, approximately flat with the prior year period. Free cash flow, measured by cash provided by operations, less cash used in investing activities improved by $1.1 million to negative $1.1 million in Q3 2025 compared to the prior year quarter due to our lower level of capitalized expenditures. As of September 30, 2025, cash and restricted cash was $19.6 million. In closing, our solid third quarter performance is evidence that the company's transformation has begun to take hold. And with that, I'll pass it back to you, Ron. Ronald Totton: Thank you, Anthony. As you may know, we recently announced that KORE received a letter from two existing investors in the company, Searchlight Capital Partners and Abry Partners on behalf of each of their affiliated funds. The letter indicated an interest in entering discussions to acquire all of KORE's common stock, not already held by Searchlight and Abry. In addition, KORE's Board of Directors has formed a special committee to review, evaluate and negotiate a potential strategic transaction and any alternative. The potential range and timing of outcomes from the strategic review process, make it difficult to continue to provide an outlook that would meaningfully represent the range of expected outcomes. As a result, the company is suspending guidance for the remainder of fiscal year 2025. With that said, I want to emphasize we continue with business as usual with full attention on delivering innovation and service to our customers and working closely with our partners. I would like to express my deep appreciation and gratitude for our global KORE team. You've demonstrated an incredible focus on execution and innovation, not only by securing key wins but by doing so with a discipline that strengthens our entire business. I'm proud of the work you do every day to serve our customers and move our company forward. In closing, overall, we had a solid quarter. We improved our profitability, produced the second sequential quarter of strong connectivity revenue growth and continue to stay focused on managing operating expenses. Thank you, everyone, for joining today's earnings call. We look forward to updating you next quarter on our progress in the fourth quarter of 2025 and our full year results. Have a good evening. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time.